>> live from pier three in san francisco, welcome to "bloomberg west," where we cover innovation, technology and the future of business. u.s. stocks extend their rebound with the s&p 500 rallying the most in a year. the s&p closed up. the nasdaq gained nearly 2.5%. the dow was up 1.3%. earnings wereate nude european bond buying fueled the gains.

the company says it is still looking into options for t-mobile, but it can see a future where t-mobile remains independent. sprint and iliad dropped plans to buy t-mobile in recent months. investor is urging a breakup of biotech company amgen. he said they should split into two companies, one with older jobs and one with new prospects. he sold his fun stake saying that sony may 20% on its investment. can hewlett-packard turn its business around now that it is putting into two separate companies? here is former ceo carly fee arena. in an thing we know economy that is ruled by changing ways of technology, the timeframe to turn around its shorter and shorter. sometimes companies run out of time. hpshe also says that current

was handed a company that underinvested in r&d and marketing. now to our lead. it has been an interesting time at yahoo!. the company raked in more than $9 billion before taxes from the alibaba group ipo and it is facing pressure from starboard values to split up or merge with aol. today we got numbers on how yahoo!'s business under ceo marissa mayer is doing. in the third quarter, it reported a revenue of $1.1 billion, up 1.5% from a year earlier. the net income is up more than 2000%. the ipo sale was approximately $6 billion in after taxes to the company. we have committed to return at least half of that capital, approximately $3 billion, to shareholders. >> is yahoo! really on the comeback trail or is it all out about a?

is coryme in the studio johnson. >> there is a third option, which is it is organic growth, organic shrinkage in addition to the acquisition. the company spent over $1 billion in acquisition since marissa mayer's arrived. we do not know how much because they have done dozens of acquisitions but they have not the cause of the acquisitions. only in a few cases do we know how much they spend, most notoriously $1 billion for tumbler. on a year-to-year basis, they see sales increased by $10 million? that is not very impressive. there are other metrics. we saw the 1.5% increase. there was a 45% increase in operating profits after you strip out the alibaba gains, which were substantial. there is a sign of things improving.

after the acquisitions, only 1.5% revenue growth means there is a lot of heavy lifting that cannot be brought. >> i want to bring in tom giles. what is your initial read on these numbers, and the same question, is it yahoo! are alibaba we are seeing? >> sales growth has been very rare. that has been very elusive former is a meyer. a risk -- you are getting that sales growth that you want to have. there is profit growth. she has been cutting jobs. this is not enough to appease concerns long-term. there needs to be substantial movement of the needle. you are just not seeing it yet. it does not hurt that there was a big eps miss as a result of the gains you saw from the alibaba stake sale. you have an activist out there saying, we want you to return more of the cash.

we wanted to be more meaning feel than and half of what we have got. concern about whether her acquisition of strategy is the right one. >> we heard from aol ceo tim on strong -- tim armstrong saying we do not have plans to merge with yahoo!. we have a meeting tomorrow with senior executives and yahoo! is not part of it at all. is it realistic to think that is an option? >> it is the kind of idea that is way out of left field for them. i think they were trying to suggest that a well or yahoo! is more valuable than it seems. i don't know if there is a breakup -- there will be fundamental terms they will have to make. one of the things meyer talked about is that they would make .mart acquisitions suggesting maybe that they were not making them before. when she talked on the conference call, she raised this issue because she knows about the criticism. listen to what she had to say.

>> we have a clear strategy in principle process for reviewing m&a opportunities. we continue to seize opportunities and we will be smart about it. smart enough to say they are not doing -- they are not finished doing acquisitions but cash may be fleeting for the company. newark do you make of reports -- new were reports, things like snapchat? >> that is beyond the realm at this point. another silver lining is mobile is a material contribution. that is hugely important given the way we are accessing the internet. it is not on our desktops and laptops anymore. it is on mobile devices. it is a good step in the right direction for her. it shows progress.

i am a broken record. what marissa mayer and the rest of management needs to do is make yahoo! relevant to the kids, the next generation of computer it users. right now, it is not. >> tom giles and her editor at large cory johnson, thank you both. coming up, is apple too depended on the iphone? it is making up more and more of the company's revenue. that is next. ♪

i am emily chang and this is "bloomberg west." has the dominance of the iphone turned ample into a phone company. million iphones in the fourth quarter and that includes one week of new iphone sales. tim cook calls the demand staggering.

is apple getting too reliant on the iphone? 56% of up 50 fair -- revenue in the quarter, up from the prior period. the phone numbers are great. is there a flipside? done a wholeave show on the information we got out of apple yesterday. it was a fascinating quarter. the iphone, which has long been the product the apple sells the most of, is over half their business. if you look at trailing business, you see how much the iphone dominates business with 56% of the revenue the last fiscal year. maybe that is a "duh" moment. i think it points out how important the singular product has become for this and company. it leaves us issues.

adoption, wene 6 saw the beginning of it and we expect to see a lot of it taste on guidance they gave us for the fourth calendar quarter, what is next? some people are saying, are they ever going to grow like they are growing right now? will that be a serious issue? >> there has been talk of apple creating an ecosystem of product. then i want to buy an imac and i want to buy an ipad, but if the phone is becoming so dominant in that is the only product i really need, does that the remake sense? >> the question is how close is the ecosystem, how many products will be in it? will the services like ibeacon and apple pay drop people across? when you look at how this stacks up to the ipad, which has been the second-asked selling thing in their product lineup, although not in this quarter, historically it is the number of

last fewold over the years compared to the number of ipads, it pales in comparison. >> you mentioned apple pay. it has rolled out, allowing users to make transactions at participating retailers with a swipe of a phone. thecompany proudly claims system is already in place at 220,000 stores. are all the partners ready to roll with apple paid? olivia sterns when out on the streets of new york to find out. >> apple says my new iphone 6 is going to completely replace my wallet. i have decided to put apple pay to the test. let's see how much shopping i can get done. my first stop -- the disney store. ♪ perfect. thank you.

the disney store was easy. one touch and i got all of these. looks like i may not actually need a wallet, but the does not mean i do not need a handbag. i think we have a winner. that took a little bit longer than i expected. apple pay did not work as my visa debit card. it did work when i ran it as a credit card. i've still two for two. a $35 ostrich leg. there is the deal. apple pay works very well.

it worked to so smoothly that it is a little bit anti-climatic. return some things like the ostrich egg, and that went smoothly. apple pay does a safe transaction time. for stores that are mobbed during rush hour, anything you can do to move through customers more quickly will mean a lot more business. thisore stop after all of shopping. my feet are killing me. i need to get some aspirin. all right, that is everything. i'm out of money and out of time. all i need to do is get home and for that, i am going to uber. hi. do you take apple pay? >> i have no idea. >> i can't get it to work. at least uber already has my credit card. >> that is right. >> olivia sterns.

i hope she will share some of that loot. >> do you want an ostrich egg? >> i want a handbag. how did apple pay go on day one for apple partners? joining me, cory johnson and workingigital director with apple pay. what are the numbers so far? >> it is too early to say. we are really excited. i'm still looking at the fun numbers. it is interesting. a good staff for you on the day, seven times more people added their car to apple pay the new customers were getting cards. >> this is a business where you are trying to get people -- i carry a chase credit card or lots of other credit cards. let's say i have a chase credit card and a wells fargo credit

card and an american express card. is this a chance for you to win where the customers card is not their preferred card? towhat it allows us to do is put the cart into their wallets and help them use it in a mobile way. >> i get that you want to use it everywhere possible. can you move the card from the back of the wallet to the front of the wallet with apple pay? is that a singular opportunity? >> i think it is more of a holistic opportunity. chase is a digital centric bank. when a consumer says my stories with chase is better, you give them from options and overall the chase mobile experience is really good. people will start using their card. we rolled out the chase mobile app and we have 17.6 million users using the chase mobile app. 40% of our customers log into app once per

quarter. on one hand, merchants are not getting data out of this transaction because that is how apple has structured it. on the other hand, it is so easy to use. it is one click and i can buy something with apple pay. i wonder if you could boost e-commerce and boost the number you are saying because you don't risk the abandonment you could see. >> that is an excellent point. there are two types of uses. one is the point of sale, which we saw a earlier. you cap the phone and it makes it easy. it is almost anti-climatic. in-apper is the transaction. that makes it simple. , it pops up finger with their credit card of choice, your shipping and billing information, and you are done. >> you want people to experience

the chase experience and have it be better. what are the friction points that may be different from a chase experience and another credit card provider in using apple pay? >> i can't talk about our competitors, -- >> talk about the crummy used one. -- crummiest one. >> we make it simple for you to add your card as opposed to having to go through multiple steps of having to get verified. we have the future, but we use text messages as well as -- >> so many banks have more steps than jpmorgan has? >> some have different steps. it is a consistent experience but i think we make sure hours is as simple as possible. >> you can only use this if you have the iphone 6 or six plus or someday the apple watch. have you had conversations with google? how do you anticipate google

responding? >> we don't talk about what we talk about with different partners. there is a lot of interest in the market. everyone is really excited about the services we offer. part of apple pay is using a system call tokenization, which else remove the credit card -- >> google wallet does not do that? >> they do not use the system that is being used by apple pay. one of the problems i have had with my chase credit card, and i don't know if it is because i use it so much, i have had problems with security and i've had my credit card numbers stolen and used multiple times. do you think this will help with that, apple pay? >> i'm sorry that has happened to you. >> it is very inconvenient. >> i understand. chase is constantly looking and monitoring fraud systems. wewe see unusual things,

will let you know and you can call us anytime and we will be more than happy to take care of anything fraudulent. about tokenization, will it help? we think it will because a single code is used for each transaction. if someone was to intercepted, the number would become useless for the one transaction. are you certain that fraud levels will go down at the jpmorgan level where you will see less fraud? >> i think it is too early to say. not certain, but we are really excited. it looks really good. it just happened today, so. >> thanks so much for joining us. ♪

>> it is time for "on the markets." i'm julie hyman. the biggest rally in a year for the s&p 500, spurred by a couple of things. people looking at last week, was the drop overdone? they looked at earnings from apple and speculation about the european central bank buying bonds. that helping the market. also in terms of earnings, we have numbers from yahoo! closing the following bell. sales have topped estimates,

showing the bristol-myers turnaround efforts are making progress. a busy week ofo earnings is lead broken. those yahoo! numbers were pretty -- lee drogan. those numbers were pretty surprising. there was a lot of pessimism. it was the alibaba, which we did not see. the underlying business was she was not doing much with it. does that show she was not true? >> last quarter they lost 3% year-over-year in terms of declining revenue. almost everyone was expecting that same type of decline. consensus was above wall street this quarter, so it was more accurate. still it was about negative two plus one.e in at they have the big windfall from ali baba, which was not counted into the estimate.

that $.52 is not comparable to the $.33 for the estimates were. overall, not as bad of a quarter as many people thought. >> we will talk to lee again soon. ♪

>> you are watching "bloomberg west," where we cover innovation, technology and the future of business. i'm emily chang. augmented reality can make wales fly and make elephants fit into the palm of your hand. the secretive startup has been working with google and qualcomm. it magically raised in a funding $542 million round led by google. other investors include kleiner perkins. the company says it will use the funding to accelerate product development and commercialize its mobile wearable system. what could magic leaf be working on and why do tech giants want to be part of it?

i will bring in the codirector of the augmented reality sector. have you seen magic leap's technology? what you think? >> i don't think anyone has seen their technology. i have seen their vision and i hope they can deliver what they are promising because it looks fantastic. >> google has $500 million worth of faith in it. what do you make of the interest in this company? >> augmented reality user interfaces will be huge if someone can finally deliver a system that is usable. if google believes that it is going to succeed, that is a great sign. i think the qualcomm investment is a good sign. they have been one of the main benefactors and main suppliers of augmented reality technology for several years.

>> i know this is a very secretive company but how does magic leap technology differ from oculus, what facebook bought for $2 billion? >> magic leap wants to give you a wearable that can go out into the world and augment the world. oculus is not meant to be that. it is meant to be cheap. they wanted to be in home and connected to the game machine. magic leap is going out into the world with some sort of lightweight wearable that will let you have experiences in your everyday life. >> unlike google glass, it projects the image directly onto your eye. what are the implications of that? >> they will be able to make the device a lot smaller and a lot lighter. i think this is always been the direction the technology was going to evolve. google glass was a nice first step but you can look around and

see the people wearing them a year ago, myself included, are not wearing them anymore. the usefulness of it was not sufficient. magic leap is looking to make that step to a technology that users will actually adopt. >> they like to call it cinematic reality as opposed to virtual or augmented reality. what is the difference? >> it is a little bit of a cynical answer, but when i say augmented reality for someone, no one knows what that means. cinematic reality gives a much better and intuitive feeling about the kind of experiences they are trying to design. i love the video of the submarine flying through the sky. i think it communicates their vision better. >> what are the future possible applications of this?

is it purely for entertainment? it reminds me of something i see on game of thrones. >> it is definitely not just for entertainment. we are working on technologies, enhancement for people that have vision deficiencies. i know people working on augmented reality applications for teaching people how to do tasks like repair a vehicle or repair a reactor core where you have a nuclear reactor and you've got to get in and out very quickly. those kind of technology designs have been worked on for a while but what we lack is a nice platform to deploy them which is why you don't see them in common usage yet. >> there were interesting open positions for people with phd's in optics, engineers.

what do those jobs reveal about what they are working on and their approach to it? >> it tells me they will need some custom hardware and objects. they are hiring someone that has experience making high-performance graphics cards. gpu designs, experience making custom integrated circuits and mass-producing them. they clearly are working on some kind of wearable that we'll have custom objects and some sort of laser or diode technology. it will have custom integrated circuits. it sounds like they are in the process of building a whole bunch of very high performance specialized technology to make this work. they will not be able to take off-the-shelf parts and assemble a device.

>> when facebook bought oculus before there was a product on the market, there were skeptics out there. in terms of the future of augmented or virtual or cinematic reality, how ubiquitous do you see this kind of reality coming in our daily lives? will we be walking around with virtual reality glasses on or is it going to be something occasional? >> i think it is possible that everyone will have one whether we wear it every minute of every day, i would not expect that but i would expect it to at least be as common as game boy or at least as common as the tablet. i think it is going to give you possibilities that you won't have any other way and it will open up applications and entertainment that people are going to want to be involved in. it's a question of making the technology work and getting the price down. i really think people are going to want this.

>> what kind of research are you working on? what work remains to be done from your perspective? >> the biggest part of the work is that what you have a technology platform, what are the great uses for it? we all remember how terrible webpages were when the web first came out. people didn't know what the web was good for. we are going through that same thing now. a lot of what my research group focuses on a strike to develop applications that are really useful to people. we don't just want to build a prototype, write a paper, and throw it away. i have a student that is presenting an assistive device for people that are colorblind. we have a prototype that we are working on that will allow first responders to see around corners in a building. we send in a fleet of little camera drones and the person has a headmounted display that lets them look around and explore the environment without having gone

through it. we will see a ton of applications and we are at the stage of figuring out which applications make sense and which ones don't. >> thanks so much. what happens when you combine technology with wall street finance? we take you inside a startup looking to disrupt the brokerage business, next. ♪

>> i'm emily chang and this is "bloomberg west." your investment strategy might be good but what if it could be better? that is what betterment, the start up disrupting the brokerage business is aiming for.

the company uses an approach driven by technology to deliver results. shelby holiday takes a look in part two of our series "new hack city." kitchen old board , games -- >> executive decision, finance, wall street -- people say it looks more like a second-grade reading room. i am ok with that. >> silicon valley culture meets wall street finance. >> half of the company has a tech background. this whole side of the floor is engineers. >> the startup is trying to rewrite the rules of investing with user-friendly technology and low fees compared to what traditional money managers charge. clients pay as little as 0.15 percent for managed portfolios and dts.

>> we use technology to automate a part of your life that previously you had to spend a lot of time doing. >> john stine quit his job in financial services and launched in 2010. >> i build this product for me and my peers because i was getting ripped off by the financial services industry. >> they use software and algorithms to manage their money. >> rebalancing, tax management, dividend management, better than you can do them on your own. the result is you get a better return on your money in less time with more peace of mind. >> disrupting the brokerage business is not easy, but that is in -- betterment expanding rapidly. they manage nearly $1 billion in assets and expect to grow or times a year. >> no one has really reinvented the financial services from bottom to top and that lets us provide a better customer experience. we have our own statements,

our own tax integration, your money moves faster because we are managing that process. >> they are expanding the new york office space to add to its roster of 70 employees. >> this is a great place to attract tech talent. a city where people want to be and it makes it easy to attract great engineers. this is obviously an exciting company for them to work as well. >> shelby joins me from new york. you are out there on wall street. is betterment really disrupting the financial industry yeah co industry? do they have some thing to worry about? >> they announced they are partnering with fidelity to let old school investment advisors use betterment technology. they are bridging the gap

between brokerage firms and chnology. instead of wiping them out, they make them more efficient and manage the process. it is like with television. computers may help us do our jobs but i will always want to see your beautiful face, emily, on the television. >> thank you so much. >> they are not a limiting people, but they are utilizing technology to make it better. >> all week long on bloomberg television. the senate judiciary committee oversees mergers and antitrust issues like comcast bid to take over time warner cable. a chair that committee has advice for comcast. ♪

>> welcome back to "bloomberg west." i'm emily chang with cory johnson. senate judiciary committee chair patrick leahy is asking comcast to strengthen its commitment to net neutrality by pledging to never create internet fast lanes on its network. paid prioritization is the practice in which netflix pays comcast to obtain preference for it its data on the provider's network. off pulver is the cofounder

fawn edge -- vonage and a pioneer over voice over internet protocol, he joins us from new york. first of all, comcast says it is reviewing this letter about fast lanes but has no plans to do so. how do you see this actually playing out? >> for comcast and netflix, it is a business issue. netflix raised the ante by making their consumers outraged and going to the consumers. we are dealing with a business issue. netflix they are trying to , leverage rules and regulations so that they look like the good guys and everybody else looks bad. at the end of the day, the issue a hand, while netflix as issue about net neutrality, i don't think you will find anyone against neutrality the solution that netflix is pushing for is that if they have their way, it will happen overnight and it

will be silicon valley's fault. everybody becomes regulated. the internet becomes regulated. 11 years ago, i went to washington with a law that said voice communication on broadband is not to be regulated as a telephone service and for 10 years we have seen great innovations and communications. things like facetime and they don't want to be regulated as a phone company. all of these go away overnight if the internet gets regulated. >> i think this is sort of a fundamental issue, a political issue about philosophy and whether or not you think that these businesses should have to carry services at their cost for the benefit of society or not. even though you have created one of the great businesses and telecom history on the backbone of this open internet, you have suggested maybe there should be favored players?

>> that's not fair. ever since there was this is telephone service people have , paid different amounts of money for different types of services. i remember growing up with a 110 baud modem. i now have 50 megs in my apartment. we all want an open and free internet and to be able to allow people to connect in a meaningful way and embrace communication of that entrepreneurs can develop innovative services. if we fail to do that, we will have a really bad time in telecom markets and in america. in terms of whether or not people pay for the opportunity for better service, in 1996, i would've had dial-up internet but i chose to have broadband and paid extra. we'll would have that choice for better connectivity but it doesn't mean other connectivity should be discriminated against.

>> but this is not about getting faster access to everything, it's about certain things getting put to you faster when you pay for equal access. you are not getting equal access of a product. not the overall service. >> that is perspective of the people providing that service. in the case of netflix if their , pipes are not big enough and they choose to increase the size of the pipes, they need to develop a relationship with the providers. there is an issue of business logistics about how to achieve that so everyone is happy. and as long as they are paying for it on both sides, there should be enough room to make a business transaction happen. i am all for open standards and the open internet and open communications. at the end of the day, the more people connect, the better. i want as little friction as possible but and it comes to commercial services, the tould have the opportunity

figure out the best possible way using commercial technology to use those services. how you do that is up to the businesses and i don't think it's fair to try to leverage rules and regulations intended for something else. >> if they don't happen, what are the options for the businesses? what path do they go down? >> there is several. no one says the sec knows everything. the internet happened because the fcc stayed out of the way and allowed innovation to continue to happen. if the fcc were to do nothing, that would probably be the best thing possible. if they were to listen to what netflix is pushing for, to use title ii regulation and turn your phone companies and cable providers and the public utilities, it would be a disaster for the telecom markets and innovation in america. nobody wants to wake up in a regulated business when

yesterday they didn't have to be. it will be terrible. i have to invoke something i learned from star trek. the needs of the many outweigh the needs of the few or the one. trying to solve this netflix issue as a one-off will have a dramatic negative effect bringing the united states internet under regulation by three people that are not elected and i think that's a mistake at this time. >> vonage cofounder, thank you so much. a complicated situation and a complicated issue that will continue to unfold in washington. we will be watching. it is time for the bwest byte where we focus on one number that tells a lot. what you got? >> 12%. the odds las vegas sports books gave the san francisco giants. they were given a 12% chance to make it to the world series this year and tonight they will indeed do just that. >> what team got the most?

>> their third appearance in five years. the dodgers, a great group of players, many of which i can't stand. >> too bad. on the royals? it was 6%. sports pundits did know better. none of them picked the giants. >> you do complicated modeling. what odds you give the giants of winning the world series? >> the royals are tough, they beat the giants in the middle of the summer. the royals nearly blew their season because the team was addicted to clash of clans, the videogame. great story in the kansas city newspaper, where putting down clash of clans saved their season because they were able to focus on the next opponent better. video games nearly took them out. >> can't wait for game one, i'm giving them 100% odds of winning. >> homer. >> thank you for watching all the latest headlines on bloomberg.com and bloomberg radio. see you later. ♪

>> the following jokes are for adults only. >> no one threw a better party, a better black tie, hilarious