♪ >> live from pier three in san francisco, welcome to "bloomberg west." i'm emily chang. ahead this hour, apple fires back at critics over so-called bengate. apple says it received only nine complaints from customers about their iphones bending and says it subjects the phones to rigorous tests. that has not stopped the stock from plunging today. the u.s. government is warning of a new security flaw that may be worse than the heartbleed bug.

at least 3000 systems could be impacted by this vulnerability. we will look into how serious this could be for business and consumers. drones are not just for the sky. we speak with liquid robotics. this comes as strong package deliveries are about to start in germany. first, apple is firing back at critics who are pouncing on the company after a series of flaws with ios eight and new bendable iphones. apple says the bending of the new phones is extremely rare, and it has only gotten nine complaints about it from customers. apple also says it conducts rigorous tests throughout the entire development cycle, and that both of the new iphones meet or exceed height all at the standards. but the stock took a major hit, falling nearly 4% today, dragging most of the nasdaq down with it. our apple reporter for tim higgins, and the ceo and cofounder who did his own tear down of both new iphones -- i started by asking him about what he found out in his tear down.

>> when we started taking the phone apart, we found out they designed the phone to be easier to repair. they made some changes inside the phone to make it easier for repair shops or consumers that had problems or need to swap a battery to repair the phone easier. >> i understand you have a phone with you. what do you have? he will tear it down for us, on air. >> i have the iphone 6 plus, on air. there are two screws on the bottom. i removed them already.

i have this handy suction cup tool. to get inside, all you do is pop on the suction cup tool and that pops it open. i will show you the inside of the iphone. >> what does it look like on the inside? >> here we go. this is the inside. this is the iphone 6 plus. they say battery, and then along the edge here, this is the main board. you get the circuit board, and then we have the new chip that apple worked with [indiscernible] to make. one of the reason people are having problems with it ending is because it is incredibly thin. there isn't a whole lot of metal supporting the phone. i think it is an appropriate amount of metal, but you have a big phone like this, there is some torque that can be applied because the phone is so large. >> when you put it back together, is it still usable? >> absolutely. people repair these phones everyday. there are thousands of repair shops across the country that specialize in repairing these. >> when you look on the inside, what's the difference between the iphone 6 and the six plus? >> they did a number of things to make the phone easier to get inside.

the primary difference between the five plus is there used to be a ribbon cable here that you had to get past to open it up. they got rid of that cable. aside from that, it is really an incremental revolution. it is not a dramatically different phone design. it is a little bit simpler inside rate overall, well engineered and very durable. i'm not particularly concerned about the bendgate concerns with these things bending. it's a pretty durable phone. >> i have taken apart some of the older iphones and ipads, and it was a one-way trip. once you've cracked it open, there was not much you could do to put it together again. is there a suggestion they are thinking of this as a component they might want to swap out to provide a longer lifestyle for this phone? >> they are really optimizing for the apple geniuses in the

stores. they are having to repair millions of these phones. 20% to 30% of smart phones have roque and screens. this phone design is clearly optimized for the apple stores and other service technicians to get in and swap the screen quickly, which is a 180 degree from the ipad. >> apple has not responded to the bending issues. they did release a statement about the software updates. how big of a problem is this for apple? how are they responding in general when customers are saying, i have a problem? >> i frankly issued an apology for the operating system issues and say they are trying to get it fixed in the next few days. they can reinstall the old ios 8 software, and that should at least allow them to use their phone as a phone. >> i have not updated the update yet. i just have regular old ios 8. what kind of pressure does this

put on [indiscernible] is he handling too much, in the now he's covering hardware and software and we are seeing all these issues? >> it gets to the apple -- issue that apple is no longer a startup. it is a massive company. any little slipup is going to be trending on twitter as soon as possible. more pressure, more attention, and greater scrutiny. >> this is the biggest release of a technology project ever in the history of technology. >> that is quite a statement. >> we are probably going to see 20 million phones sold or 20 million units sold over a two-week period. what does that come close to, the launch of a game console? these kinds of issues around apple not being as dependable as they once were are a serious concern for the company. >> i would you compare the problems we're having around this iphone 6 and six plus, two generations of the iphone? >> the software problem is a big issue, because it's so awkward to reimburse. it is not mrs. early jony ive's team that made that mistake. in terms of the pending issues,

that is a far less severe issue than the antenna issues we saw with the iphone four a few years ago. the bending issues are a little bit overblown. the iphone 5 can bend as well if you use it in your pocket and apply huge amounts of torque to it. it is a thinner phone. it is going to be a little more susceptible to that. >> give us the numbers you found in terms of the cost for parts. it is like $220 to make the iphone 6, just $15 more for the iphone 6 plus even though it is far more expensive in terms of the sticker price? >> i don't put a whole lot of weight in the bill of material estimates we see. they don't have access to the information from within the manufacturers. nobody but apple knows what apple is paying to get the processor fabricated.

seeing the estimates out there, i don't know how much bearing they have on reality. >> in general, it's a big take away that these phones are easier to repair than previous generations? >> absolutely. there was a significant design intent in this phone to make it easier to repair. for that, we are really appreciative. it is a sign of a new direction for the team at apple, going away from the ipad style disposable design when the battery were out in the ipad, you just bought a new one. with these phones, they are clearly designing them to be serviced. i hope that is a trend for the apple watch going forward. if you have an apple watch with 18 carat gold on it, you will not want to throw it away after a year. >> that's my kind of watch. thanks so much for opening up the iphone 4s on camera. it could be europe's largest tech ipo in years. the berlin-based rocket internet -- details next on "bloomberg west." ♪

♪ >> i'm emily chang. this is "bloomberg west" on bloomberg television, radio, streaming on your phone and tablet and bloomberg.com. the fbi says it is concerned with apple and google's smartphone encryption features. apple said last week that ios 8 is so protective of customer data that he could not comply with government requests if it wanted to. apple updated its privacy policy following the high-profile hacking of celebrity photos from icloud accounts. google said earlier this week it was making a previously optional encryption feature standard on android. the u.s. government is morning of a new security vulnerability that may be worse than the heartbleed bug. the security flaw affects linux and apple's os 10. the bug allows hackers to insert an extra piece of code into the system, enabling them to steal data or crash the affected computer network. atlanta-based errata security discovered at least 3000 systems could be impacted by the vulnerability, and it is

possible for 50 more systems to be uncovered. jeremiah glassman joins us now via skype from hourly. cory johnson with us as well. jeremiah, headlines saying this is worse than heart lead and could break security for years? really? >> that is possible. the past 24 hours have been sleepless as we try to figure out how bad this vulnerability is. it has all the indication that it could be at least as bad as heartbleed, if not worse.

>> what is happening here? >> heartbleed had the ability where we could see into data as it transmits from the browser to the website. shellshocked allows us to execute commands on servers, whether they are on a user's desktop or on the web in general. now we can read it and write. when we compromise using shellshock, you can leapfrog to other systems. >> it's fairly amazing. it sounds like somebody taking over your computer, not just putting something on there. >> that is pretty much the way it works. it is all the units and linux-based systems across the world have the potential of having these issues. >> doesn't it also have implications for cameras, webcams, other connected devices? >> that is the thought. we are still researching that. we think a lot of these internal devices have an operating system called busy box which does not have the same vulnerability. i.t. phones and cameras don't also have a bug. we are 24 hours in, so we have a lot of research to do. >> is this fairly unusual for lennox? >> it is fairly unusual for open

source, something like linux to have vulnerability this bad and widespread. this goes back -- it is quite rare. because it is so old, because everybody missed it, is why it is so pervasive. >> why is it taking so long to figure out what is really going on and how pervasive it is? >> the internet is a big waste. we are still trying to find all the way software wires together. software is built upon more software and build upon more software, and everything is interconnected. we can find places to find cursory examples of places that are vulnerable. >> what are the things that you learn from attacks and recent attacks that you can carry forward into unveiling or uncovering what is behind this one? >> we have had a lot of experience in industry over the

last 10 or 15 years, finding folder abilities and figuring out how bad they are taken advantage of -- how fast they're taken advantage of by the bad guys. we got to see the details of it, how widespread it is. we got command execution, which means we can do whatever we want. it can spread. worse, it's very easy to use. it's very easy to exploit. the bad guys are already starting to attack and use these systems with viruses and worms. >> can we do anything as consumers? just wait? >> that is the tough one. not so much for consumers. right now it is when the patches are released on os 10 -- it's not really a windows bug at this point -- is to definitely patch, but it's really a business issue right now for all the

enterprises out there. >> white house security ceo jeremiah grossman. coming up, derek jeter's last home game at yankee stadium. ♪

♪ >> welcome back to "bloomberg west." i'm emily chang. derek jeter will go down in history as one of the best shortstops to play the game. the final home game is scheduled for tonight at yankee stadium, though it is looking that it may

literally rain on his parade richard shelby holiday is in the bronx outside the stadium right now. how is the weather looking there? >> it's not a downpour right now, but it has been raining steadily throughout the day. the national weather service says we could get an inch of rain in the bronx. people are legitimately worried that jeter's last game could get canceled. it's not just any game. even though the yankees will not be in the playoffs, this is his last game in pinstripes at yankee stadium. people are paying crazy amounts of money to go to it. if the game happens, it could be the most expensive regular season mlb game we have ever seen. regardless of whether it gets canceled, it has already set records in terms of ticket

exchanges. stub hub and [indiscernible] tell us this is the most demand they have seen, and the highest prices they have seen for a regular-season game. people are willing to pay world series prices to see jeter and waved goodbye here in new york. >> 30,000 tickets exchanged, half the capacity of yankee stadium -- what happens if the game gets rained out to all these $500 tickets? >> that's a big question. stub hub refunds ticket holders. these online ticket exchanges will have to reimburse $12.5 million worth of tickets. that will eat into their profit. it's not a good thing. they are worried about the weather. the original ticket holders, the people who bought it from the yankees, will get the ticket back but they will not necessarily get the money they were going to make on the ticket for tonight's game. kind of everybody loses. the yankees want this game to happen. it's a huge deal for new york. we don't know exactly what is going to happen tonight, but they are spending a lot of money. if it does get canceled, people are going to lose a lot of money, but so far people are thinking the weather is looking at little better tonight.

hopefully the game happens. >> what is the scene like there? i have seen stories of people coming from literally all over the world for this event. our people congregating around there because they have made the trip? >> yes. there are a lot of people around here. they are all carrying a burlison wearing rain boots. they're wearing hats. jeter's jersey is the highest selling in the world. people from all over the world are interested in this game. his apparel has sold in 50 different states, 30 different countries. sales within the stadium itself are up 700% this year. there is a lot of interest in this game. people from all over the world are tweeting about it, talking about it, and they will be watching it tonight, if it happens. >> are you a jeter fan, shelby? >> yeah, i have been in new york a few years. i'm not a jeter hater. the more i read about him, the

more i'm kind of hopping on the jeter bandwagon. he has been here for 20 years. if you look at all the statistics, for me, it's hard to hate him. >> the bandwagon is coming to an end. >> better for the giants. >> way better. >> next year, cory. bloomberg's shelby holliday outside yankee stadium. thank you. the next big thing in maritime defense could be underwater drones. we will get why boeing is teaming up with liquid robotics coming up. ♪ >> time for bloomberg tv to go on the markets.

i'm olivia sterns. i will show you where stocks ended today. as a selloff across the board. the s&p dropping the most since july. the dow off 264 points. the nasdaq off by about 88 points as well. ♪ >> you are watching "bloomberg west." i'm emily chang. another $60 million raised in funding today, bringing its total funding to 250 million dollars. the social media management

>> you are watching "bloomberg west." i'm emily chang. another $60 million raised in funding today, bringing its total funding to 250 million dollars. the social media management platform spent an undisclosed amount of that money to buy zeetl. is an ipo in hootsuite's future? cory johnson is still with us as well. is an ipo in your future? >> right now we are a great tribe company. we are putting together a management team. we are building towards what looks like an ipo and public company, but we are not in any

hurry to do this. we are being really thoughtful in terms of how we are growing over the next year and beyond. >> let's talk about hootsuite. i use hootsuite to schedule my tweets, but you can do other things with it. like what? >> if you think about a suite of tools like microsoft office, we are the parallel for the social world. engagement, which is really just listening and response to what is going on in social media. analytics behind what happens. campaigning products, which help you understand and engage with

your customers more. then we are looking at other products we can pull into the suite. >> ryan, who are the power users of hootsuite today and who do you imagine they will be five years from now? >> we are the pioneer in the stake, really. we have 10 million users across the globe. it really spans from small media

to large enterprise employment. we really have achieved a broad penetration of the market. >> how do you guys make money? >> it is free to a large percentage of our users. people can trial our product. they can use it for a year at a power user or small business level. as they need additional functionality, we have a pro-product. and we have an enterprise product, which really roles in a lot of the enterprise type of functionality for clients, workflow, provisioning, security, and other things that large organizations need. >> let's talk about zeetl. what kind of business opportunities do you see here? >> zeetl is a really interesting k-rod feature. what zeetl allows us to do, as we think about how social is expanding, it is your sales team, your support team, and all others need to be involved in social. what zeetl lets you do is it allows support teams and sales

teams to reach out to customers who are having issues, or potential customers, give them a phone number that only they have for identification, and start a conversation. for those people who understand social support or sales, proximity and velocity of response is hugely important. this allows them to quickly connect with customers and potential customers. >> what is the one thing that social media customers could be doing to make your life easier? it seems like your relationship with them is so important to making your product work. >> we have a great relationship with our partners at twitter, linkedin, about 100 other social networks in our system. the thing we are always most excited about is getting new social networks into our system. it is always a problem when a

social network is taking off like snapchat or pinterest or instagram that are on the leading edge, where they are fortifying and building out their businesses. we have to just work with them, explain how we can help their business, and how to prioritize the roadmap to getting there. that is the biggest thing for us, always being on the edge. we of course love our huge partners in twitter and linkedin. >> ryan homes, ceo of hootsuite. big round raised today. thanks so much. competition is heating up in the mobile payment space. our apple and google missing the opportunity to serve customers who still prefer to pay with cash? that is next. ♪

♪ >> i'm emily chang. this is "bloomberg west." the landscape of money is rapidly changing. with services like google wallet, paypal and the upcoming apple paid ignore people who just want to pay with cash. cory? >> we spend so much time talking about these technological innovations around stuff. one in four americans are underbanked, or they don't have bank accounts at all. one company is using technology to make that payment process work more easily. for those of us who have money and bank accounts, to think about the way a good chunk of the world operates without it -- >> in the united states alone, there are 60 million to 100 million people who operate with

cash. now with smartphones, those people are all connected. >> one of the statistics you shared with us was sort of amazing, that people who don't have bank accounts are more likely to have a smartphone the people who do have bank accounts. people who are really technologically connected with a cell phone but yet don't have bank accounts at all and used primarily cash.

>> it sort of makes sense. if you think about it, a smartphone is now the least expensive form of activity you can get. you have to have a phone to live. increasingly, you need to be on the net to live, more than you need a bank account. >> you guys are helping them do what? >> we are letting people conduct any type of payment transaction with cash where they cannot hand cash to correctly to the payee. it's like rent, repaying a loan, paying a government service, paying for your water bills, things that were historically done with walk-up bill payment we can now get done in 60 seconds or less at a 7-eleven or family dollar store by walking in, scanning your smartphone, handing over cash, and having a real-time connection between a point-of-sale terminal and the government agency or business you are trying to pay. >> these are people who would normally go and get in line at the utility company or get in line and pay somewhere. i would imagine there's a big movement towards more of these businesses or government services --

>> exactly right. that's a perfect point. if you have all these people living in cash in a world where there is a massive shift from direct in person to remote -- commerce is now e-commerce. what used to be in person bill payment is now electronic bill payment. even bank deposits is now deposits with your phone, get you have all these people in cash and they can't do any of these things because you can't shove cash into your computer screen. you can easily give cash at the point-of-sale terminal at 17,000 family dollar, 7-11 locations that are wired into our system and wired into all these businesses and government agencies that want to get paid. the interesting thing about our business -- our customers today and that the consumers, they are the businesses that need to get paid. we look to those businesses. we make cash look to them like they are taking an electronic check transaction or credit card transaction. we make cash look electronic to the remote system but letting the consumer live in cash. >> it is an interesting thing. it's a wonderful book. he talks about this cash economy, how massive this world is. [indiscernible]

cash is this world that exists outside of a lot of the technical article at this -- to the logical advancements. what is your sale process to get these companies to work with you? >> generally speaking, when you first call somebody they say, what are you talking about? usually there is somebody in any industry who really cares about the user experience. when you see how radically different this is to pay this way, they implement and their competitors look at it and they want to follow suit. >> what really works for you? >> rent is taking off like crazy. 20% of rent payments in the united states are made with cash or money order. if you think about single-family rents, where you are renting a home but not in an apartment complex, you may have to take an hour or so to get a money order, get on the bus, get to your property managers office, give your money order to the property manager who will get charged by the bank to deposit it, and maybe will mis-key it -- all these problems go away if you can pay your rent electronically at 711 or family dollar.

>> good to see you. thank you very much. >> boeing could be bringing new drones to the high seas. find out one of the worlds biggest defense -- find out why one of the world's biggest defense contractors is teaming up. ♪

♪ >> welcome back to "bloomberg west." i'm emily chang. dhl beats amazon and google to the punch when it comes to drug delivery. delivery. dhl has authorized to start testing drone delivery to a small island off germany's northern coast, the very first time drones have been approved

for real delivery. the drones, called parcelcopters, will deliver medication, urgent goods when ferries operating to the island are not available. tech giants like google and amazon are bringing drones to the skies, but the ocean could become another frontier for unmanned vehicles. boeing announced its defense space and security division is teaming up with like wood robotics. the companies will work together to develop and deploy new products focused on anti-submarine warfare and marine surveillance. liquid robotics' ocean drones have been at sea since 2009. its waveguide or vehicles collect data about ocean conditions and can spend days in the water. what can this partnership mean for the future of underwater robotics? the ceo of liquid robotics joins us. how is this partnership going to work? >> we have been working in the defense space for quite a while. the waverider is a wave powered and solar powered vehicle. you can put any type of sensor on it.

we can swim into areas. you can listen for things. we can detect surface ships, detect submarines. the partnership with boeing is a natural extension. partnering with the top player in the defense industry is a huge company-making event. >> are you sharing technology? >> absolutely. we make the drone that runs on the surface. boeing makes undersea drones, ariel drones. they make aircraft, of course, that have been modified to work in a military context to hunt for submarines, the numerate

surveillance, and that sort of thing. >> there are connections with pentagon officials. is that a principal driver for you to partner with boeing? >> that's a big thing. we are a startup company in the silicon valley. they have reached that we would never have. the vision they have is to connect all these assets in an unmanned way from seafloor to space. they play in satellite. they have aircraft, they have ariel drones, underwater drones. they had nothing on the surface. >> what kind of drones are more advanced, air drones or underwater drones? >> ariel drones. they have been on the market for quite a while. the connotation with an aerial bomb the sometimes negative, because they are dropping bombs. you have the google car, consumers flying quad copters. we make an ocean device that listens for things. we are not armed and weaponize. we are gathering information we can supply to other people. >> what kind of marine surveillance are you talking about? >> surface vessel detection, especially in asia. there's a lot of illegal fishing, human trafficking, drug running and that sort of thing.

we can detect what kind of ship it is. we can also detect things underwater. submarines is a big thing. with russian rearmament, their fleet, chinese submarines, uranium submarines, it is becoming a hot topic to figure out where all the submarines are on a global basis. it is a huge focus. it is a worry. there was something called a substance array which was on the seafloor, and that is pretty much inoperable these days. >> why? >> they did not invest any more. after the cold war, there wasn't a need to keep investing in the technology. now submarine after submarine warfare, and just submarine hunting is a big deal. >> how do other country's technology back up to ours? >> we are way ahead. for anti-submarine warfare spend, it is a $19 billion spend and the u.s. spends $12 million.

we are by far and away ahead of the market. >> what are the interests of google and amazon in drones? how has that impacted your business? >> it helps. unmanned things are being created for a reason. in our case, the ocean is a very dangerous place. waves are huge. it is expensive to put a ship out in mid-ocean. we can control and do things and listen for things in a very cost-effective way. that is similar to delivery for companies like amazon, the google car eventually may be on the roads, and so you will see drones. they are here, they are being developed in all different markets, and i think it will be a big part of our lives in the future. >> you are sticking with us for a drone related bwest byte, one number that tells a whole lot.

>> that number is 55, 50 five pounds is the limit of some drones that have been approved by the faa. the faa is allowing some movie studios to use drones that can reach a weight of 55 pounds to shoot stuff and do stuff for movies. the faa is starting to find ways to let these things get used in business. >> apparently drones were used to shoot sequences of "sky fall." >> 55 pounds -- i'm thinking the plates at the gym are 45 pounds. more than that coming at me from the sky is scary. >> that's right. you don't want one falling on your head. in a controlled environment, it is a fantastic thing. i have a friend who is a drone hobbyist who has seven quadcopters. the imagery he takes with his drones is fantastic. >> these are real, the drone enthusiasts.

you take a selfie of your drone. >> that's right. a couple of weeks ago in lake tahoe we had the drone following the boat and doing the selfies going by. >> should we be worried about the safety of these things? >> sure. ultimately, mechanical things can fail. you have got to make sure it is in a safe and controlled environment. >> like the ocean. >> the ocean is a pretty good pace. if it falls in the ocean, you're not going to hit anything. if you are flying over crowds, you definitely want to be in a controlled environment. >> ceo of liquid robotics, thanks so much. our editor at large, cory johnson. thank you all for watching this edition of "bloomberg west." get all the latest headlines at the top of the hour on bloomberg radio and all the time at bloomberg.com. ♪

>> tonight, on" titans at the table," i will be shouting with a former chief executive. i traveled to spend time with this retired wall street titan. where he owns a vineyard. >> we have a ways to go. --and recounts how it tur how we turned around the company dead. >> i had a company with a value of zero.