>> welcome to the best of bloomberg west where we focus on technology and the future of business. every weekend we will bring you the top interviews of the top players in global tech and media companies that are reshaping our world. to our top story. apple crushes top earnings for a pivotal time for the company. a 12% gain net income $8.5 up 13%. the company sold 39.3 million i phones in the quarter including about a week of the newi phone 6 and 6 plus but sales are down again.

our editor at large spoke with bloomberg intelligence analyst starting by asking if apple should be worried about the ipad. >> the ipad were meant to be weaker than expected there's a product refresh coming. been getting sale. stablet growth has been slowing. people are starting to figure it out. there's a phone with larger screen, pc that can do a lot. and this stuck in between. the pad refresh. sort of helps reinvigorate that trend. >> i think that there are a lot of things interesting. the quarter really strong for the biggest company in the world like we've never seen great big companies grow. >> ahead of the holiday quarter. >> they would have had every excuse to say we only had the new i phone for one of the 12 weeks or for one of the 13 weeks of the quarter for quarter.

and the old product was old because the consumers knew it was going to be old but we saw a slowdown in sales. they showed you, 56% of sales. not only the largest percentage of sales of the things they sell. it's most of the company. >> should we be worried about the ipad numbers? >> down third quarter in the row. and down 13% overall business. i think it is worrisome for the company. it's reasonable to wonder now we've seen nine months of declining sales to say is this

as big as the ipad business gets? because it grew so fast are we already into replacement cycle territory, not growth territory for the tablet. i find that hard to believe but everything about the ipad's growth is so hard to believe because it was so spectacular right out the gate. >> let's talk about the picture for apple globally. one of the things i said demand was higher for every country than it was last year and higher than expected. >> one of the things we ought to do is take a slowdown, take a step back and look at it a sort of holistic perspective. if you look at the activity of these different products, there's a little bit of something in there for everybody. but one of the things that apple is very good at is promoting this intercon activity between different products.

so as you might move from an i pan to i phone to a mac there's seamless integration. so maybe in 2015 the year ahead we think about what the use case are. what do we use a pc for, a tablet for, and phone and what screen size do we use? if you look at that entire product spectrum there's an apple product for every price point. all premium prices relative to the competition. >> all right. let's talk about the other thing the mack. >> the prices of macs. so the mac numbers were really strong and the average price is as low. my model goes back to the late 90s and there's no quarter where it was as low as the 1200 that it was in this price so much closer to the competition, more so than ever before. the idea that the mac is finally being pulled along by all this other stuff i think is awesome. >> as you know, i also cover the pc and it made a lackluster start. the mac surprising on the upside. back to school sales helped them. on top they saw sales in china

where if anything pc demand has been weak and all the makers have been weak. so this is actually a very noticeable uptick relatively different from the competition. >> i can't live without my laptop but that's just me personally. and what are we looking for in the coming holiday quarter? what should we be watching? >> i think you want to see the products as a whole work together. i want to see some intercon activity between these different products. i want to see one dragging the other, connecting to the other. i want to see apple pay take off. i want to see i phone 6 and i phone 6 plus sales. this is the first full quarter of those products so that should

be very, very strong. and i want to see i'm curious to see what happens to the refreshed platform. >> another note on apple for an upcoming edition of my show, i sat down with hollywood screen writer and producer aaron behind some of the biggest hits, including a few good men, the west wing, the news room. the next product is a bio pick of steve jobs. in an exclusive interview he revealed that christian bale will be playing the role of jobs. >> we needed the best actor. it was the n.f.l. draft. there are some people who make a science out of exactly where we need to draft a middle inside linebacker who can do this and others say who is the best athlete on the board? we needed the best actor on the

board in a certain age rank and that's chris bale. >> so you're excited about him? >> i couldn't be more excited. >> why? >> he really is a phenomenal actor. this is a >> tell me about the audition. how good was he? >> he didn't have to audition. it was well, there was a meeting. the role is an extremely difficult role. he has more words to say in this movie than most people have in three movies combined. there isn't a scene or a frame that he is not in and there's a tremendous amount of language. so it's an extremely difficult part. he's going to crush it. >> my full interview will air in early november on studio 1.0. besides that news about the steve jobs movie and apple's earnings, apple also released apple pay. will it change the way we pay for everyday stuff? that is next. ♪

>> welcome back to the best of bloomberg west. apple pay is here. apple rolled out its long awaited platform on monday allowing people to use their new i phones and i pads to pay for items at retailers including mcdonald's, walgreene and whole foods. not everything has gone smoothly. a blitch at bank of america has caused retailers to be charged twice. for more on apple pay we spoke with the cofounder of google wallet and coceo of retail start up index, as well as vice president of product. i started by asking jonathan how successful apple pay can really be. >> i think it has a lot of potential. they control distribution of the handsets. they have the program if all their phones.

they did a great job with partnerships on the banking side. i think on the whole is valueadded services. so it's very clear they can do tap and pay for terminals that are already enabled. but the question is where is the value at, where is the improved customer experience? i think that's the big question mark. >> you've used it. is there an improved customer experience? >> for our users it's faster. so it's all about making it fast and easy to book a hotel room. so now it's three taps and a thumb print and you can be on your way into your room really quick. >> what was it before? >> three taps and we've got our signature swipe, our swipe that the rest of our users will

continue to experience. but from a user perspective it's easier to raise your thumb tap and go. >> do you have any idea how many customers? >> we usually our biggest problem is not ultimately getting through that funnel but the faster the bester it will be. >> the comparison to google wallet is that google captures all the credit card information, protects it as well as they can and thus far that's been fine but they do a lot of customer analysis so they know if i'm using my card, they know me, where i'm using it, and they're learning a lot about me and finding a way to market to me. apple is not allowing that. as a user i can see that's much more attractive. but obviously there are tradeoffs. apple can't market to me. >> i think there's effectively some concern that this will limit the valueadds that apple can provide. i think that's one of the reasons you'll see reticence to accept apple pay. apple pay right now only accepts

credit cards. >> so target won't know that i moved into a new ap. and shopping for wall paper and kitchen stuffs. >> i think it will impair their ability to figure those out. some of the bigger like target also has a red card. there's no way for them to put the target red card into the wallet. >> google wallet the impression it didn't really break through. what were the challenges that apple pay is going to run into as well? >> so i would say at least for google one of the big challenges was carriers. made it very difficult for google to get broad distribution. one of the challenges apple has is they control the handsets. but the challenge is going to be the adoption side. convincing merchants there's a value add for them. if you think about it in the form of passbooks they have potential,. they have royalty cards. if you can figure out a way to

have passbook be part of the experience you'll see retailers willing to play ball. but until then it's not clear how this is a slam dunk to the retailer. why move to something new if it's not going to help them? >> from a software writing standpoint how easy was it to work with apple pay on the apple side and software side? >> apple's been great to work with. we have been able to get the integrate done by last week. >> our team was down there and were helpful and we were working hand in hand with the developers. when we came up with issues working together, we made it possible. >> what were some of the issues? >> just little cases or things you don't think about. or sometimes when you put software into product you learn new things. so working together we made sure all the seams tied up before we launched this week. >> one of the things i was talking about in our same conversation last week is he

said apple pay isn't that innovative. it actually uses a lot of existing systems and just sort of brings everything together. would you echo that? >> the trick is where they go from here. they took existing standards, they worked with visa and mastercard. they're using some cool new tech. that improves the security of the solution, the touch id improves the security. i think those will come in incremental steps. what probably mark was calling out is the lack of a breakthrough value add proposition. >> there's thought they'll get up to 25 basis points of the transaction. no one wants to give up huge dollar amounts like that. >> i think they did and i think it's actually kind of amazing they did. >> why? >> this is the issuers this is their bread winner.

for them to give some of that up they had to be pretty afraid of missing out of the experience. >> they felt like they were backed into a corner and felt they had no choice. >> i think that's probably the case. >> why does apple have that much power? >> because they do completely control their eco system and it is a powerful system. the hardware, software, end to end of the handset. so if you are forced to either par take on their terms or be left out of their system, i guess they felt they didn't have a choice. >> why didn't google do it the way apple is doing it? >> they have a different philosophy. look at android it's an open system where the rising tide lifts all shift ships. maybe google will come back to the table and push in that direction. >> do you think google is coming back to the table? how much of a chance does it stand? >> it's still very early. i think that >> so many more phones. they've still got a chance to

say we've got the marketplace. >> what do you think google is going to do? >> i think they have to answer this. this is too important. i think apple is going to say we're protecting your privacy. i think google is going to say we're helping these retailers from these experiences and a huge number of handsets. >> google wallet cofounder. and amanda of hotel tonight. is marisa meyer doing enough to fend off her critics? next. ♪

>> welcome back to the best of bloomberg west. an interesting time at yahoo. the company had a $6 bl windfall

after taxes. and activist investors is urging yahoo to break apart or consider a merger with a.o.l. yahoo reported third quarter earnings that showed improvement. revenue is up 1.5% from a year earlier. net income, $6.8 billion, up more than 2,000%. so is yahoo really on the comeback trail or is it all ali baba? we spoke with our editor tom. here's their take on whether yahoo really is making a comeback. >> it's organic growth, organic slinkage in addition to the acquisition. so the company has spent over $1 billion in acquisition. we don't even know how much they've spent because they they've done dozens of acquisitions but they haven't released the actual cost.

so only in a few cases do we know how much they spend. $1.1 billion for tumbler but think about that. and on a year over year basis they see sales increase by $10 million? that's not very impressive. there's some other metric that is look better. we saw 1.5% increase in sales. so a 45% increase in operating profits after you strip out the ali baba games which were substantial. so there are signs of thing combs proving. but fundamentally after all those acquisitions only 1.5% revenue growth means a lot of heavy lifting. >> now, i want to bring in our editor tom in new york. what's your initial read on these numbers? and very same question. is it yahoo or is it ali baba that we're seeing? >> here's the thing. sales growth has been very rare. that's been very elusive. so as cory pointed out at the risk of sounding too much in agreement with him, she's absolutely getting some of that sales growth that you want to have.

there's also profit growth. she has been cutting jobs. the fact is this is not enough to appease concerns long term. there needs to be substantial movement of the needle and you're just not seeing it yet. it doesn't hurt that there was a big ups miss as a result soft gains that you saw from the ali baba stake sale. but you have an activist out there saying we want you to return more of this cash. we want it to be more meaningful than just half of what we've got. and there's a lot of concern about whether her acquisition strategy is the right one. >> we heard from a.o.l. ceo, saying we don't have any plans to merge with yahoo. we have a whole meeting tomorrow with our senior executives and yahoo is not part of it at all. is it realistic to think that's an option? >> it seems like the idea is way out of left field and i think they're trying to talk up their

book to make it suggest that they're more valable. >> what about the idea of breaking up the company? >> look, there's some fundamental turns they're going to have to make. one of the things she talked about when talking about the acquisition strategy, they're going to make smart acquisitions, the suggestion being maybe they weren't making them before. when she talked on the conference call she raised this issue because she knows about this criticism. >> we have a clear strategy and a principled process for reviewing the opportunities. we will continue to seek opportunities here and we will be smart about it. >> so she's of course smart

enough to not say they're done doing acquisitions but i think she recognize that is critical and that cash is a fleeting thing for this company. >> we still don't know yet the 1 billion plus acquisition that they made is going to pay off. but what do you make of new reports out there, things like snapshot? >> well, that's probably a bit beyond their realm at this point. one thing that another silver lining in these results is mobile is now a material contribution that's hugely important given the way we all are accessing the internet now. it's not just on our laptops and desktops any more. >> just a quick note. yahoo has closed its funding round with snap chat valuing the company at $10 billion. scooter braun is the man that famously discovered justin bieber and turned him into the pop star he is today. how did he find him? i sat down with him. take a listen. >> what happened when you saw the video of justin bieber? >> i thought a 12yearold kid who had i think eight videos at the time. and he was singing at a contest at a church. i was consulting for acon on a

different artist and i was watching you tube videos of that artist telling him what i thought of it and they were singing aretha franklin, respect. i thought it was the same person. when i clicked on it was a 12yearold kid. >> so it was an accident. >> stumbled upon it, my gut went crazy. i saw him singing neo so sick. when i saw this little canadian kid with so much soul i just knew there was something there. >> you were the first believer. you flew his mom and him. >> illegally i think. >> down to live next door to you. >> they were canadians so i definitely brought them over illegally and put them in a townhouse around the corner for me in my name so no one knew they were there. >> you paid their bills. >> and got a tutor and did the whole thing. they became like my family. it's been a rough year for me

watching him because i really care about him and you don't want to see anyone going through stuff. but to see him coming out on the other end of that right now and knowing the plans for next year and the fact that he's a kid. i've had to learn that it's ok to let him step on that rake and let it hit him in the face. he's learned from those mistakes. and he'll be a better man for it. he gets it. he said to me, i went shopping in france and all i wanted to do was walk down the street and just shop. i didn't want to bother anybody, i just wanted to shop and there were 14 cameras around me and 200 people surrounded and i came to the fact that don't get angry, this is your life. and i'm ok with it and there are blessings that come with it. and he's becoming a young man. i'm proud of him. >> lately scooter braun has been making films. you can catch my interview with him on studio 1.0. up next, big trouble for big blue. the shift to the cloud forces ibm to give up on its fiveyear earnings goal. we'll look at how serious the problems are for ibm.

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>> welcome back to the best of "bloomberg west." i am emily chang. ibm is struggling in the age of quad computing. they just gave up on a five year earnings goal. ibm is actually paying global foundries $1.5 billion to take its index of its hands. cory johnson i spoke with david kirkpatrick. i started by asking david how much trouble ibm is really in the. >> if service is going down, that is the biggest news item despite having to pay somebody $1.5 billion to take the chip business off their hands. the reality is, this is a giant and old conglomerate and an

industry that is changing really rapidly and players are becoming specialized. that is a lot of challenges altogether. >> what did you say? is someone he left holding the bag here? he took the ceo spot. >> i am always quoting warren buffett. when a manager's reputation meets a business with a bad reputation, it is the reputation of the business that survives. >> he has lost a big share. >> ibm is in a crummy business and they are trying to get out of it. they have been undertaking -- they were trying to double profits. we have seen, when you see the net income, the actual profits of the business, it has been

getting worse and worse for long time. it continues to get worse with this company. they have been trying to make that look better through shared by back. they have been buying money to do shared by back. now they have $14 billion in debt due in the next four years. they say they won't have cash flow problems. it will impede their ability to buy back shares and pay down the debt. more importantly, by lowering the free cash flow and having promised to use the free cash flow to buy back debt and to buy back shares, they are unable to get into the business that they want to be in and invest where they want to be. they have made that worse by borrowing money. >> how wrong was warren buffett about ibm?

will they pull through in the long run? >> this is for the longer term more than that. all of the gains that he has had, his investment has been erased. you start to look at that. ibm has a long way to go. they need to transform the services business. their software business, they need to get that into the era of cloud computing where they arm moving so much more quickly than i have in the past. they have to get up to speed. they are calling for more m&a and more deals. now that she is out from under this roadmap, she needs to figure out with the next steps are for ibm going forward and how they can keep up.

>> we hear a lot, the industry is facing change. i hear a lot of buzzwords from her. cloud. a social. mobile. are they really making the right choices to manage that transition to the cloud? >> they have bought some little companies that are clearly good decisions. you just did a great interview. 145,000 people came to the conference. that is indicative that we have crossed a chasm faster than old technology companies like ibm thought we would to the in of cloud. that is a serious problem for them would have such high costs to build their hardware. the infrastructure is expensive. that is why they are paying people to take off their hands the chip business. they have a lot of costs to keep maintaining their hardware businesses, which are not selling as much.

people just want to buy it as a service. >> twitter ceo dick costolo is stored into win back developers and he is making a shift while doing so. details are next. ♪

>> welcome back to the best of "bloomberg west." i am emily chang. twitter just hosted its development conference right here in san francisco. they launched a set of new tools to make it easier for developers to develop apps. they unveiled digits, a phone number login. i asked how these new tools will help twitter in the long run. >> we set out to build an amazing suite of mobile services for app developers. it was the result of some key

acquisitions that we made. one builds services like crash reporting. that is in use by thousands of applications and over one billion users. the other is the mobile advertising platform. >> what kind of developers are you targeting? facebook is doing it as well. >> it is useful for everyone from apt of a in a garage starting a startup to the biggest corporations in the world. we brought together twitter, mo pub, and this new identity offering into a single modular. it helps app developers develop more stable apps and apps that get more users and monetize more efficiently. >> the ideas for twitter become more of a mobile services company. how does that work? >> it is an evolution for twitter. twitter has been synonymous with the consumer application. that will still be a major focus of for us. at has not changed. the application meets every

corner of the world and we build a business around it. this is the next step. this is us becoming a key player in the mobile ecosystem going forward. mobile changes everything. we about mobile company for ever since we started. we are bringing our scale and expertise in helping other app developers build better mobile apps. >> twitter famously cracked down on a third-party users. how can developers be sure that they can trust you again it? how can they be sure? >> there been great business is built on our ecosystem. fabric is about helping out developers build more stable, better monetizing apps. it is helping every app that you use on your phone be better. it is a brand-new offering.

>> is it long term? how long can they be sure that they will have these tools? >> it is a huge new focus for us. we had this idea that we could really help at developers build better apps and play important role of a mobile ecosystem going forward. we've been developing all of these ideas. you can expect that this is just a 1.0 from us. you can expect a lot in 2015. all of these tools are free and one of them makes you money. >> what is a revenue model? >> this is not revenue. it is easy for developers to add monetization platforms to a net. we do make revenue through that. there is value there. that is not the success metric. our success metric for this launch is building mobile services that are so valuable that that is the first thing they embed.

>> you are on the business side of the team at twitter. over time, what is the business model for this? >> if we achieve what we set out to, and every developer builds an app, if they integrate fabric, that is going to afford us a lot of opportunities longer-term. >> there has been a lot of question about google advertising, how big of an opportunity is it for twitter? >> we have been mobile since day one. one of the big powers of our platform is the advertising is native to twitter. promoting tweets live within the timeline. wherever used twitter, our business model follows. you're consuming tweets and we

can place relevant tweets as well. whether it is desktop or mobile, our business model flows of our product. >> kevin wheel, the vp of twitter. we will take you inside some of new york's biggest startups next. ♪

>> welcome back to the best of "bloomberg west." i am emily chang. silicon valley may be the heart of innovation and technology, but it is by no means not the only place. this past week, we looked at the new york tech scene to see how new companies are disrupting old-school new york industries like retail and finance.

this is shelti holiday with a look at two companies. >> a kitchen, old board games, and themed meeting spaces. >> people say it looks like a reading room. i am ok with that. >> at better mins new york headquarters, wall street finance meets silicon valley. >> this whole side of the floor is engineers. >> the start of his trying to rewrite the rules of investing with user-friendly technology and low fees. compared to a 1% fee that traditional money managers charge, they pay as little as 0.1%. >> we use smart technology to automate a part of your life that previously had to spend a lot of time doing it. >> john stein quit his job in financial services and launched

the company in 2009. >> we thought we were getting ripped off by the financial services industry. >> the use software and algorithms to manage people's money. >> we do tax management, dividend management, all better than you could do them on your own. the result is you get a better return on your money in less time and more peace of mind. >> disrupting the brokerage business is not easy. they are expanding rapidly. manage $1 billion in assets and will grow four times per year. >> no one has reinvented this from top to bottom. that lets us provide a better customer experience. we have our own statement comes from us. we have our own tax integration that comes from us.

your money moves faster. >> they are growing in size. they are expanding the office space to 70 employees. >> i think this is a great place to attract tech talent. this is a city where people want to be. that makes it easy to attract those great engineers. this is an exciting company for them to come work at. >> what happens when successful tech entrepreneurs take over a boring warehouse just outside of new york city? you get box. >> the future of shopping will happen on mobile devices. we are just trying to get ahead of the curve. >> what they have built is the e-commerce answer to sam's club. buying in bulk minus the membership fee. >> this is about shipping and saving time and money.

>> prices are on par with other wholesale clubs, nearly eight in 10 orders qualify for free shipping. the boxes are filled in warehouses in new jersey and las vegas. they are strategic locations. >> 80% of our packages arrive in two days a less. it seems like we are very traditional. behind the scenes, we are a technology company. >> i key the orders, had i find out what's in them? >> once utep on the side, you have put it in our software. >> what is going on here? >> even if you look at the robot, we are trying technology out and trying to get better. >> embracing technology is second nature. he sold his previous company in 2011. >> you came from the gaming world, what made you want to sell toilet paper?

>> there is no overlap at all. i think when you dig it deeper, there is quite a bit. people like to interact with names in different experiences on their mobile device. we brought that knowledge into building a smooth and beautiful experience on mobile. this is a shopping experience is that of a gaming experience. >> with eight half-million dollars in funding, boxed has experienced rapid growth. they have eight figures in revenue after launching. >> commerce is something that we do very well. >> that support will be needed as they try to take a bigger bite out of the $600 billion grocery business. >> we are going to get some of the biggest retailers and companies on the face of the earth. it is not an easy task. we will get there. >> shelti holiday with a look at to new york areas startups.

it is a secret that they just raised $542 million in huge names like google. what is a potential of this new technology? that's up next. ♪

>> welcome back to the best of "bloomberg west." i am emily chang. magically can make wales fly and elephants fit in the palm of your hand. now the startup raised $542 million in a funding round led by google. other investors include qualcomm. they'll use the money to accelerate product development. what could they be working on? i spoke about it with the codirector of the reality center

at miami university in ohio. has he seen their technology? >> item the anybody has seen it. i've seen their vision. i hope they can deliver what they are promising. it looks fantastic. >> google obviously it has half $1 billion worth of faith in it. what do you make of the interest in this company? >> i think that augmented reality interfaces are going to be huge if someone can finally deliver a system that is usable. google believes that magically biz going to succeed at that. i think that the qualcomm investment is a great sign. they have been one of the main of benefactors and suppliers of augmented reality technology for several years. >> as far as you can tell, how

does magically leap technology differ from oculus? >> magic leap wants to give you a wearable that can go out into the world and augment the world. oculus is not meant for that. oculus is meant to be cheap and everybody can have it in their home. magically biz about going out into the world of presumably with a lightweight wearable that will let you have experiences in your everyday life. >> their glass projects the image onto your eye. what are the implications of that? >> i think they are going to make the device smaller and lighter. i think this has always been the direction that the technology was going to involve. google glass was a nice first

step. you can look around and see that people that were wearing them a year ago are not wearing them anymore. the packaging and the usefulness of it was not efficient. i think magic leap is going to make that step to a technology that users will actually adopt. >> they like to call it cinematic reality. what is the difference? >> that is a cynical answer, when i say augmented reality to someone, no one knows what that means. i think cinematic reality makes a more intuitive feeling about the kind of experience they are trying to design. i love the video with the submarine of flying through the sky. if they could communicate the vision better. >> what are the possible applications of this? is this purely for entertainment. it reminds me of something i

would see on "game of thrones." >> it won't be just for entertainment. we are working on technologies that will enhance people with vision deficiencies. i know people are working on applications for teaching people how to do tasks like repair of vehicle or repair a reactor core or you have a nuclear reactor and you have to get in and out very quickly. those technology designs have been worked on for a while. what we have lacked is a platform to actually deploy them. that is why you don't see them in common use. >> they have some open positions for people with phd's in optics and computer vision experts. what do those jobs reveal about what they are working on it? >> this tells me that they really think they are going to need some custom hardware and optics. they are hiring someone who has experience making high-performance graphics cards. they are hiring people who are making circuits and

mass-producing them. they clearly are working on some kind of wearable that will have custom optics, some sort of laser or diode technology. it will have custom integrated circuits. it sounds like they are in the process of holding a whole bunch of high-performance and specialized technology to make this work. they will be able to take off the shelf parts and assemble a device. they will have to customize. >> that does it for this edition of the best of "bloomberg west." you can catch us on monday through friday. we will see you next week. ♪

>> welcome to "your medicare, your decision," the program that guides you through the medicare options available from humana. there are many different medicare choices available but, are you sure you have the right medicare plan? are you with the right company? do you wonder if you could save no matter what kind of medic