♪ >> live from pier three in san francisco, welcome to "bloomberg west," where we cover the global technology. apple has hit with a one-two punch with hardware and software issues liking the apple iphone. they pulled the ios update after numerous users complained about dropped coverage, and this comes after users complained about their new iphones bending. how serious are the problems? we discussed. blackberry takes a swipe at apple as it releases the new phone, the passport. this ceo challenged people to try to

bend the passport which is their attempt to get more business customers and gain back market share. i will speak with him, coming up. how has google been so successful? google executive chairman eric schmidt reveals some of the secrets in his new book and stops by to talk about everything from the apple android fight to whether marissa mayer can save yahoo!. and yahoo! confirms it still holds a 15% stake in ali baba after selling 140 million shares in the ipo. in a filing, yahoo! indicates they have a one-your lockup period before it can sell the remaining shares and also agreed to vote for alibaba and softbank. to our lead story, apple is supposed to be shining brightly after its record 10 million iphones in the opening weekend. but the glow is starting to rub off dues to some technical difficulties. today, apple had to pull its ios 8 update after some customers

could not make phone calls. this came after reports that apps work washing -- were 7,shing more than with ios and adding to the problems, a number of users complaining the new ones bend when in your pocket. there was this video showing an iphone 6 plus getting very badly bent. joining me is cory johnson and research analyst, and the man behind that viral bending ipod video. lewis, i am going to start with you, because we spoke to you about the iphone 6 plus which did not fare well after the ben test. you went on to test the iphone 6. what happened? >> the six did much better as i expected it would, the fact that it had smaller form factor. i put as much pressure as i could in the same location and attempted to bend it in the same fashion.

it kind of had a tiny little bent to it, but nothing significant and completely usable. at this point i'm willing to say based on that little piece of evidence that the six is going to be a little bit more durable than the six plus. >> you also compared it to a few other phones. the moto and others. how do the iphones stack up to the other phones? >> even with the standard iphone 6, it feels that there was a tiny bit of pliability there. it started to seem like it would probably give way sooner than probably some of the other devices i tested. the most impressive was this one here, the moto x. the new one. i essentially was not able creaking orind of

cracking or twisting or bending out of it. i can happily -- actually replicate that right here. this phone is just solid and i actually did not know that when i first received it because these tests weren't really a thing at that point. but the moto x and the htc and also a popular aluminum phone, they did well in our test. >> all right, how big of a problem? let's start with the bending. how big of a problem is the bending? >> i think it is topical today, but ultimately, it is going to blow over, and i think if people use the phone reasonably, it is not going to cause any significant change in the overall demand, but let's assume it is a big problem for the sake of argument. we estimate that about 30% of the iphone users will be plus, and ultimately they

, will sell more six's. the software problem gets fixed over time. it's pretty easy to fix. >> let me explain to you why you're wrong. here is why i think this matters. the central brand argument of apple is you do not have to be an expert, you do not have to know how to control things. devices andmple simple software. we take the complexity out of it. you do not have to worry about the downloads. you do not need a service pack. i wonder if a and series of problems with both software and hardware start to erode the brand's value it self. >> i think if they don't get the software issues fixed -- in the past, they do have software pickups. when the five s came out, there was touch id that had some problems. the concept of them trying to work some bugs out is not anything unique and there have been issues of draining power

faster. if they don't get it tightened up, it could potentially be a bigger problem but i think there is a window where people give them the benefit of the doubt. >> a bigger or smaller problem because so many people are eligible for upgrades and phone shopping, literally right now? think it gets magnified, and there just is no place for apple too high when you are selling 10 million units over a short period. out,stuff is going to come but it is a part of developing hardware and software. in one month, people are not going to be talking about this. >> what do you recommend to users right now? millions of people have watched your video. people care about this. >> >> the real-time analytics and

i'm looking at from you to show 16 million views of the last 24 hours. they have not updated that. >> you have had more views than iphone sold the act oh that's hilarious. >> 16 million in the past 24 hours and accumulating close to one million every hour. this is something that people are interested in whether they are iphone owners or not. it's an incredibly high profile company and an incredibly high profile product. people want to know their devices intimately and i suppose that's would it he is like this provide. is this going to be a real issue everybody has? probably not. but it doesn't mean that it's not useful information. people want to buy things that are overengineered and tougher and stronger than they need to be. when i tried the same test on

the moto x, for example, my perception changed immediately. it didn't do anything similar to what the six plus did. ownership comes from recognizing how robust the item you purchased is and the fact that the other models from other brands are so much better is meaningful to me. >> the blackberry ceo challenged everyone to bend the blackberry passport. we tried to do it. himself. luckily, he was not successful. i don't know if that means the phone is strong or that cory is weaker. >> i think he needs to hit the gym, personally. >> i agree completely. to me, if the telling thing. emily didn't care if i grab the passport. >> i cared. i almost had a heart attack.

>> i thought you were more defensive about your iphone, and i think that speaks to this whole relationship. >> the iphone is my primary device. i use my blackberry for more business things. sure, take it, but, really, adding it up altogether, what do you recommend for users? >> i think you have to make your decision and that the end of the day you'll probably feel like the bigger phone even with the bend ability issues, the six plus is still a great phone. >> the man behind the iphone bending video, thank you. that's it. blackberry coming up next. ?

>> i'm emily chang and this is bloomberg west. blackberry is pinning its turnaround hopes on another new phone called the passport.

square shaped screen geared towards business professionals. it is part of the turnaround plan. but with the continuous decline in their share, will it be enough? i spoke with the ceo earlier today, right after they unveiled the new passport, and i asked about why they picked the square shape for the passport. >> the customers, we looked at how they use the device for productivity, and looking at the new style apps, the vertical apps, apps, we figured that the ratio is what everybody would need for achieving more, so that is how we came out with it. >> john, how many do you think you will sell? we expected to be successful. the market will tell me that. , wherehave various ideas

we can use this as a mother-daughter type of approach, so we will have to gauge the response but so far seems to be pretty good. >> so let's talk about the market. you and i have talked about the market, and they are saying that blackberry global shipments are already lower than 1% and that by 2018, market share will be .3%. where do you think it will be ? >> my job is to make sure that doesn't happen, right? i think we have a good plan, a good set of folios. by the way, despite everything we are going through, this is the third phone we have released this year and another coming out in a couple months called the classic. it is now on about 13 countries and seems to be received quite well. and we just announced the porsche designed phone on

september 17 and we are obviously doing it here in toronto, myself, my colleagues in dubai and london. and releasing that phone, so i think we can pick up the pace. we should be gaining market share as we move forward. >> your job, john is also to , make sure the phone doesn't bend. you took a jab at apple challenging us to bend the passport. what do you think of the reports that the iphone can bend? i have seen in a video. >> i have no idea. morning, and is thought it was a little amusing, and you know me. it with a good humor, not to be mean to hand,y, but, on the other our passport is extremely and, you know, it is

somewhat of a challenge. you have to do with the same way. >> seriously, does it pass the bend test? >> we do a lot of mechanical testing. i don't know if we particularly do the bending but i can tell you that we have five players of the phone including the antenna later which is a complete frame inside the phone, so bending that needs a little effort. >> what do you think of the new iphones and the apple watch? >> what do i think? i really don't know enough. i do not know enough to comment on that. obviously, they have their audience, and i am hoping to go to our audience, which is for

people who strongly need productivity, and this phone should appeal to them. >> one thing you do know is that the president is also addicted to his blackberry. did you send him a passport to test out? >> i do not think we gave it to the white house yet. i don't know. wrong, but i would love to have president obama used it. security.xtra >> ok, so how about this. library shares are up almost 70% since you took over, so investors are counting on you. they seem to believe in you. you said blackberry would be profitable by march 2016. what is the timeline now, and what is the likelihood that you could do it sooner? it would be profitable and sometimes in fiscal year 2016, and i am still standing by

it. of thesepending on all phones and the traffic in a couple of months. aboutftware releases in six months. i am expecting to see some growth next year. if it grows in a sharp line, i will be able to make it sooner. >> the blackberry ceo. and a fresh round of funding , and to fixing global education. ?

>> welcome back to bloomberg west. i'm emily chang. apple isn't the only company benefiting in the enormous demand for new iphones.

chips are being used in the new iphones and will be in the apple watch. cory johnson is back with more. >> yes, it is interesting. a lot of power and connectivity to run things like iphones. the tear downs, it shows us broadcom chips inside. the semiconductor company has announced they will be leaving the cellular modem market so what does that mean for broadcom? who would know better than the ceo? good to see you, scott. talk about getting out of the cellular business. how is that fundamentally different than the other businesses you are staying in? >> it is an incredible investment, and we were not able to get as much revenue as we wanted there, and what we are going to do is focus on the businesses where we come to bear, and that is broadband, all of those things. >> in terms of margin? >> we are sitting in a market leadership position in those oninesses, and we will work

that market leadership. better meal -- better yields and better margins as a result? >> we are the goto partner for networking. we are the goto partner if do bluetooths to or wi-fi, and this is about taking those things forward. >> one of the neat things going are doing specific development. you have got google not just buying routers from cisco but deciding they can make a router that meets their needs better than off-the-shelf. >> as ms. is growing so fast these days. i think there is two things going on. one, you are seeing traditional people getting into the business. we are also seeing the large data center guys, like a google or a facebook, do customs, so they can work on their specific

workplace. they have such a large data system need. >> do you have products specifically geared towards that? >> we do, and we have been working on that. these are just things so be on the scale of what we could do before. huge buildings just full of servers, and they only run a couple of applications. when you think about it, they just do search or something. like applications in the past. by issues of cost efficiency and power, or is it about performance? >> it is about growth, but power is an increasing factor with data centers. cost is the electrical cost. they consume like a hydroelectric power dam, and then what about the heat? you can type something quickly and get an instant response, and it uses incredible amount of

energy. how do you increase the power and capabilities at the same time? >> what is this thing question my >> this is a chip. is a really big chip. >> this is a relatively huge chip in our industry. this has over 7 billion transistors in it. that is more than one transistor per human on the planet. this takes all of the data that comes in and reroute it and send wherever, your home, so this is one million simultaneous netflix movies going across the internet and switching all of that data simultaneously. >> who is using this? >> this will go into all of the large data centers. all of the guys that do movies, search, social networking. , do youu project project out that four or five years from now, we will see more single-purpose data centers, or

are we going to see more of the amazon services, any kind of purpose for any kind of company? >> i think amazon is a great example, and microsoft. they are doing a mixed enterprise mode, and they are providing outsourcing, and we will also see things like facebook and alibaba with their own applications. it is not just one application, but it is a relatively small set, and that is it. >> i am not trying to bend this. i am weak, he is really all we have proven here today. >> my heart totally dropped. didn't.lly glad you all right, cory johnson, our editor at large, thank you. google executive chairman aaron schmidt is out with a new book. he stopped by to talk about everything, from the android to

can turnarissa mayer yahoo! around. his thoughts, next. ♪

>> welcome back to bloomberg west. i'm emily chang where we focus on innovation, technology, and the future of business. ever wonder about the inner workings of google? you can get a glimpse of life inside the search giant courtesy of eric schmidt who just wrote a book called "how google works." to help develop gmail and android. they were on market makers with erik schatzker and stephanie earlier. take a listen as he talks about the android versus apple battle. >> if you look at the innovation on the apple side and on the google side, that how petition i think is the defining fight of the computer industry today and

benefits billions of people. x is it as brutal as it ever was? >> it's more so. >> you resolve some of the patent disputes. >> brutal in the sense that the margins are very tough for the operators. for the handset manufacturers and benefits to the consumer of having this product. in china there are $100 he telephones unsubsidized end in india, $70 unsubsidized phones. they give the impact on humanity because those phones are entertainment, education, safety, a window on the world. >> would be better if there is something more than a duopoly? >> it's good to have more competitors but trust me you are seeing enormous racing. >> when you talk about brutal competition, amazon is a competitor as well as a partner. how do you balance the two? how does it work? >> as a competitor they keep us on our toes but as a partner,

they advertise for a variety of products and we work collectively to grow the pie and build the industry as opposed to fighting over smaller portions. >> amazon is an android user. apple is a large google search partner and a very tough maps and phone competitor. >> alibaba? >> they have largely been separated from everybody else because they're primarily focused on china. they had done a fantastic job of anticipating the needs of the emerging middle class in china and china is a very big lace. >> as alibaba expands beyond china, that's very much what he has in mind, what opportunity is

there for you? >> jack is incredibly clever and deserves the credit for building one of the great internet companies in the world. it remains to be seen how the chinese model moves outside of china. most chinese companies have had trouble exiting and this is the next great challenge for them. obviously we will partner them if we can. >> are you concerned about his ability to acquire? he has an awful lot of money to buy really big businesses. >> so does google. >> there you go. and you think you're going to anytime soon? >> i won't comment on that but google is well positioned as are other companies like apple and facebook. >> what is the best way to enter new markets? acquisition or internal development?

>> if i could rephrase the question, you don't enter new markets, you build fantastic new products. and that defines the market strategy. we talk about this in the book and jonathan wrote this very nearly. you don't define the market. you define the products. and about building an incredible product. >> how many companies do it that way ? ? >> huber did that. they took information that was free and conductivity and understood every driver and every consumer has a phone and they can connect their needs of a buyer and a seller and fundamentally change the traditional taxi industry. >> or tesla reinventing the automobile. in every market, someone has reimagined the product in a way that is challenging incumbents. they react by doing their own innovation. >> what product has changed the world the most? >> the internet. 10 years ago, nobody in our audience was sitting there with a mobile phone next to their bed.

10 years ago, internet access was largely offices and occasionally at home. this conductivity has changed everything. text, picture, where my going, what does the app say? it only happened in five years. >> we talked about alibaba and amazon -- >> do you think that has heard humanity? >> i think it is a great benefit. >> that is the question you ask eric schmidt? >> empowering individuals is the best way to deal with what we face as a society, country, and the globe. empower people. human nature is good. given the tools and let them run. >> does your mom think that? >> yes. >> it's a fair question. some people think that a level of humanity has been lost.

>> when somebody said they don't make them like they used to, what products were they talking about? >> the handwritten love letter. >> there was a thing about bowling alone. everybody was going to go by themselves and be isolated and now it is bowling with everyone all the time. >> i don't want to bowl with anyone. >> you have an off button. >> you have been working for 10 years? >> 13 for jonathan and myself. >> can she save yahoo!? >> yes. >> how? >> she is the quintessential smart creative. if anyone can save yahoo!, she can. they are the best -- she is the best they have had in over a decade and she understands the kind of product functionality she needs to build. >> alibaba has been the jewel inside yahoo!. >> but ultimately leadership is around products and not about cash. the fact of the matter is you

can invest and make money, google does this and everybody else. does the product make the world better? >> do you see products coming out of yahoo!? >> i use their weather app everyday. >> that will save the company? >> marissa was the chief designer of the single page that you mentioned. she's a very talented product designer. >> google executive chairman and jonathan rosenberg co-authors of a new book. we will have more of that interview with eric schmidt and his former google partner jonathan rosenberg. ♪

>> welcome back to bloomberg west. i'm emily chang. eric schmidt and jonathan rosenberg sat down with bloomberg earlier today and talked about google's culture and its mission to change the world.

take a listen. >> people actually believe this stuff and we know because we test for it. we talk to them about it. do they understand what we are trying to do? do they care about changing the world? it easier to manage a company framed that way than something where you're telling people you have to work harder to do this and get this extra set of earnings or whatever. if you set an imaginative model and ask people to think better, higher, push themselves higher, you get it. >> if culture is that critical to google's success, is it something you can put a value on? do investors even have a clue

how? >> investors are at the tail end of this process. you set your vision, you hire the people, build the product. investors see growth rates, revenue, and earnings. google is managing to remain, from what i can tell as an observer, a pretty innovative company even though generate $60 billion of revenue. >> a lot of other companies have trouble innovating. google is not verse and foremost about revenue or earnings. and the employees believe that. our goal was to systematize innovation. to make it occur over and over again. it's not just in search. it's been and other internet platforms as well as applications, youtube, and many things. >> i bring up the revenue figure because other companies, it seems to be a size problem.

it becomes difficult after a certain size to innovate in a transformative way. you have the legacy business which is what you build the company on in the first place and they just seem to run out of good ideas. i don't know how much of that is a function of culture or leadership. >> i think you've try to focus on small teams and small teams that are chartered to attack big problems. think 10 ask not 10%. that allows us to attract people that are much more aggressive and interested about solving something grand like a self driving car or giving people all over the world internet access that didn't have it through balloons are much faster connections. >> yesterday we sat down with dennis o'brien, the ceo that says -- i'm going to share what he said. >> the problem with all those guys is that google, facebook, they are having a party in our house. prospectively, they are not

giving us any revenue share for us to connect to customers so we pay all the, the networking. all the telco operators worldwide. and they are having a fantastic party but not bringing any drinks or food to the party. >> he saying that you want the world to become connected and help the developed world, but you're not doing anything to help that. >> on the contrary, we are building balloons that will allow people all over the world who currently don't have internet access to be able to get online and will be doing it with smartphones that they've never had before. >> you need the roads and the mcdonald's franchises to make that happen. these are partners that we need. the mobile revolution is driving because of applications like google and facebook and others

that drive revenue. in the telcos are now seeing fantastic wireless data growth. >> google executive chairman eric schmidt and armor product chief jonathan rosenberg earlier today with our market makers anchors erik schatzker and stephanie ruhle. mark crumpton from new york. what do you have for us today at co >> president obama says the world must reject the cancer of violent extremism. speaking before the united nations general assembly, terrorist groups like islam next day must be eliminated. the president also challenged u.n. member states tanned up to russia's aggression in the ukraine. a software company has agreed to pay to settle accounting fraud allegations. the company is accused of falsifying employee timesheets to help a quarterly financial targets. the former ceo was also ordered to reimburse the company $2.5 million in bonuses and stock rockets. derek jeter's final game in

yankee stadium is in question tomorrow due to heavy rains forecast for the new york area. they could leave people that shelled out big money for the tickets out of luck. the average resale license -- price is over $2600 according to the second -- the second-most for a baseball game since they started tracking. >> the microsoft ceo is walking the streets of india. we will be right back with bloomberg west returns. ♪

>> i'm emily chang and this is "bloomberg west." the massive open online -- cofounded by google cofounders has $35 million in new funding. i sat down with the inventor of google self driving car to talk about it for an upcoming edition of studio 1.0. >> one of the interesting things i read is that all the education that you have, you don't think you could get a job at google today. >> i could not get a job at google today. >> is this what inspired udacity ? >> yes and my entire history of learning. i always believe that you learn

by doing. i want to learn how to start a company so i start one. i learned how to build a self driving car so i do it. >> you have done so many cool things in your career and at google. why leave a great job at google to focus on one of the hardest problems in the world like education? >> the mission of being able to educate people is kind of the biggest thing i can imagine. if i ask myself how do we change the planet, i think we have to admit that the number one thing that matters in the world is us.

the people. empowering people should be a basic human right. there should be a constitutional amendment that everybody has a chance to a full education. >> don't miss my full interview with the google x cofounder and udacity ceo this fall on studio 1.0. in 1992, the microsoft executive told his staff to find a job candidate with three characteristics. smart, gets expletive done and doesn't kiss off other people. he was that candidate and returns to his native india for the first time since becoming the ceo of microsoft. from the cricket pitches to the man in charge of turning microsoft around, cory johnson has more. >> it's a great story and one well told in a bloomberg news profile. it is just a great thing. but that road to silicon valley has been an interesting story. i'm joined via skype by the first guy he followed when he joined twitter. sunday is a former microsoft

executive that has an index of over one billion consumer products. executive that has an index of it has to be an amazing moment to return to india as the ceo. what is going through the mind right now? >> i think he is thinking about inspiring people in india. in india, we have role models from molly wood and the cricket team and now the role models are ceos and entrepreneurs. i think he's very aware he's a role model for the entire country. i'm sure he's thinking about that. >> is there something particular that indian executives are bringing to the world of technology that is unique to indian culture or growing up to india? >> i think that underdog mentality. it's not often that you see people at the top of the world but it's becoming more and more common. humble, being the underdog. >> it is interesting to see

across technology, lots of people in executive positions starting in india, born in india. is there something that is unique that people with that background are bringing to the position? >> it is very competitive. the population makes it extremely competitive to get into engineering or medicine so we are just used to competing with lots of people. i think that hard work that is required to compete, that would be great for jobs in technology now. >> microsoft is a much bigger company than it was 15 or 20 years ago. are the particular characteristics something that helps them bring something together like the disparate parts of the microsoft culture? >> utility is really a strength

of his. he is on the business side as well as technology side. but those things together and i think he is the right person for microsoft right now. >> we don't have a lot of time but i have to ask you, how is his cricket game? >> you know -- >> that doesn't sound good. >> i think he's a little out of practice. >> presumably he has other things to work on. thank you very much. they famously played cricket games for us. not always the best skill. >> we will be following the trip every step of the way. time for the bwest byte, one number that tells a lot. >> 17.

17 months was the duration that the former apple and target executive had a jcpenney and is reportedly trying to make a comeback with the high-end delivery service for gadget. he has recruited a former -- a couple former apple executives for the real-time delivery of gadgets. he's an intriguing guy and got a lot of credit for what he did at target to make it the dominant retailer it is and the apple stores were under his weighing and he got a lot of credit for that as well. >> mickey dressler was on the board and get credit for the retail. >> and gap executive. the success of many fathers, failure is an orphan. >> cory johnson or etiquette -- editor-at-large. ask anything i can bend or break? >> i'm going to hide all of my phones. cory johnson, thank you. thank you for watching this edition of bloomberg west. we will see you later.

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