>> live from pier three in san francisco, welcome to "bloomberg west." i'm cory johnson. here is a check of your top headlines, is there trouble ahead in the housing market? sales of previously owned homes fell 6% in november from a rate of just under 5 million sales.

thanks some of the santander .ack funded by the ok'd >> it is no early christmas for comcast. a $45 milliones proposal. the deadline was pushed back by three weeks. they need more time. will set an additional 31,000 documents for review. starbucks is scaling back its partnership of square.

it announced a deal. they now say they will not use the replacement. giant has been testing its own order ahead of application. the u.s. is turning to north -- tries tocap learn more about the massive hacking up sony picked trees. china started its own investigation which claims north korea used facilities in china to attack sony. china's foreign ministry has condemned the cyber attack and says there is no proof north korea is behind the attack. it was inobama says it couldber vandalism get more complicated once a china is involved. joining us from new york is gordon chang, you have written a

lot about this relationship between the u.s. and china and the u.s. and china and north korea. what do we think likely happened? >> these attacks originated in china. sources have been telling media organizations the tax did not --attacks did not originate in north korea. if they started in china, that would be consistent about what we know. right now, we don't have enough evidence to say 100%. what we do know is these attacks were routed through chinese ip addresses and that means china had to know what was going on because china has a great firewall, the most sophisticated set of internet controls. they know everything that goes out and comes back and we know of the sony attacks, the north koreans took at least 100 terabytes of documents. clearly the chinese knew what was going on inside the borders.

>> it is amazing the infrastructure north korea has put together. a paper, from a former hacker, who worked in china, said that the facilities north korea has cobbled together are all over the world, not just in china, also in the uae, and in germany. >> four or five different countries. most of them are in the people's republic of china, including the luxury hotel that has gotten all of the publicity lately. when you have more than 100 or 300 cyber hackers in china on a permanent basis, the chinese authorities had to know what was going on. the chinese are involved in cyber hacking of their own. and we know these north korean attacks on sony are more sophisticated than what north

korea did last year attacking south korean businesses. most people think the technology came from the chinese, the russian, or iranians. given the other circumstances, it is probably the chinese. >> wait, north korea is acquiring hacking technology from china? >> yes. this has been documented many times that the best cyber warriors are trained in china and russia. the information and the packets of information we have seen are modeled on stuff the chinese have. so clearly north korea has been able to launch state-of-the-art attacks. they were working with outside sources. this means we have all sorts of issues because obama said no other countries were involved, consistent with the fbi report. which did not involve china.

>> i think of israel's unit 8200 involved in cyber security. they looked at what happened with the iranian nuclear development program. unit 121 in north korea. i find it interesting this country that can't get power or food to its people can be on the cutting edge of cyberattacks. how complicated is this relationship with the u.s. and china such that the u.s. can't ask for help? >> because we have issues with beijing of our own, as we know from the indictments of five chinese officers in may. the chinese have been going after intellectual property. the amount of theft is staggering. when you look at the report of last year, american companies lose technology each year on the order of exports to asia.

last year, u.s. exports were $475 billion. let's say it is only $100 billion. we're talking about a lot of information that is being taken by countries like china, russia, and iran as well. >> obama in his departing --parting interview, interesting he chose cnn to not call this cyber terrorism, but cyber vandalism. i wonder if that had something to do with the u.s. needing to go to china. does that have something to do with that nuanced phrase? >> i think you are right. the president is trying to keep the china connection undercover because he wants to go to beijing to make sure the chinese turf out these people. this is a diplomatic answer, not really what he thinks.

whether we call it an act of war does not matter. the question is, what do we do about it? i think it is important our response be effective, whether proportional or not. so far we've not had an effective response to north korea or china. >> is it notable that china has done a lot of surveillance of u.s. companies through its cyber capabilities and this was an attack on a company? >> yes. that does complicate his diplomatic initiative because while he is talking to the chinese about north korean attacks on an american business, he's got to talk about their tax on our businesses and that the chinese in a difficult position because they can't say this is really bad because they know they are involved in it and we can prove it because we have attributed those attacks to one building in shanghai.

a particular floor of the building. so the chinese can't say it was not us. >> undeniable. gordon chang, author of a terrific article on the subject. thanks a lot. xiaomi has raised another billion dollars in investment. xiaomi is now the richest valuation of any private tech startup in the world at $45 billion. how can a cell phone baker be maker be worth that much money? that story is next on "bloomberg west." ♪

>> i'm cory johnson. this is "bloomberg west." coca-cola on the cutting-edge of

dumping old technology. it has done away with nearly all of its office voicemail. starting in atlanta and a tech center, callers are told to use alternative method is to contact an employee such as text or e-mail. the move will save $100,000 a year but a spokesman says it is more about simplifying work and making the company move faster. employees could have kept to the old technology, but 6% opted to retain their voice but lines. few startups have gone as quickly as the chinese smartphone maker xiaomi, founded in 2010, just like "bloomberg west." it is now bigger them bloomberg west as the largest smartphone maker. it raised another billion dollars in funding bringing it to evaluation of 45 billion dollars, according to sources familiar with the matter.

john butler joins me now from new york. i know you've followed this company for a long time. not really a long time, because it has not been around a long time. this valuation for a company that is not profitable is a fairly amazing. >> it is, but so was their growth. they are on track to ship 60 million smart phones this year. you look back at 2011, they were just a start up. talking a quarter of a million units shipping back then. so the growth has been meteoric. one of the keys to their success is they have tapped into the young culture in china. they have resonated with of them. it has earned them the nickname the apple of china and it is well deserved. they have an online only model. they are big into software. they are getting into apps and gaming and video and they have done a superb job.

hats off to them. >> what is interesting to me, it tells us a lot of their strengths, and also suggests how variable the market can be. they have grown to this big market share globally. 15% overall within china. that is a strong thing. that also suggests they could lose it as fast as they got it. >> may be. at this point, they have the brand strength to hang in there and continue to grow. one thing i will say about them, they hit the sweet spot in china. they really came to market with these fully featured high quality phones for the price and they kept the price point low,

between $100 u.s. and $300. being home-grown, they recognized where the sweet was developing and answered it with a portfolio of great phones. >> price is an issue. we don't know xiaomi's financials. when you look at companies like lenovo that are doing 2% operating margins, if they have a price point like that, they are not making a lot of money. i did a search of other companies that are publicly traded growing revenue over 50% that have a valuation of $40 billion. only four companies like that. one is a biotech, and the other is alibaba, gilead, baidu, they have over 35%.

xiaomi's is surely no where near that. >> they may or may not be. i don't know the financials. one thing to keep in mind, i touched on it before, they are taking a strategy where they are not focusing on hardware. they are developing a software ecosystem built upon the growing base of phones. so they have a terrific app store. they took android as a base operating system. they really build upon that and put their own stamp on it. so as they get more into gaming, more into apps, and into video and have made investments, that is going to help the margin tremendously because there is higher margins in software than hardware. >> you look at the low

interest-rate environment and you see how investors chase any kind of topline growth. i would posit that a low-cost cell phone maker, whose primary operating system they do not own and don't control the application, is never going to get the profits that would value the company at the current private value because the profits me never be there. >> again, i have not seen the financials. i hate to comment on that in particular. but the growth is there and the strategy. pardon me. when you think about where they are headed, where they are focused, it is not the u.s. or canada, or western europe. their new beachheads are in india, latin america, they really have the right phones at

the right time in markets that are craving those low-cost devices and they are laying on the content on top of it. so i think the business model is spot on and in line with the strategy that is likely to work well. >> certainly that means we will be watching them in deed. thank you very much. next, nfl teams are using the surface tablet to get in edge on the competition. so was the competition. we will talk to russell wilson and how he is using the surface to program his plays. maybe another super bowl. hard to imagine. on bloomberg.com and amazon fire tv. ♪

>> i'm cory johnson. this is "bloomberg west." technology innovation on the sidelines is a big reason why this isn't in the nfl is faster, quicker to adjust than ever before. i went to seattle ahead of the 49ers lost to the seahawks, which hurt me. it was a great thrill. the nfl gave us a first-time glimpse secured photos that help teams plot the mid-game adjustments. >> every time russell wilson does this -- >> touchdown, seahawks. >> the nfl is watching, and so is microsoft.

the nfl with a custom surface tablet on the sidelines. way up here in the catacombs is where the cameras captured the images. they are controlled by the nfl. the teams approved the image instantly and send it down to the server and it shows up on the surface tablet on the sidelines. last year, slow print caps on a crummy printer. outs on a crummy printer. >> has not been evolutionary. it has been revolutionary. >> today, a digital transformation. >> my rookie year, we used paper. flipping through the pieces of paper. you only had two pictures. he's going to cover him man-to-man. with this, you have a lot more views. >> it is a bureaucratic process.

a guy sits here in this booth. he has a computer where he manipulates the images and then you used to print them on a laser printer and hand them off to the coaches. now it is all digital and sent to the surface where the players can work their magic on the sidelines. the players come off the field. they've got that image taken before the snap and after the snap and they can download it onto here and make the adjustment and compare it to other plays and make whatever notations they want and throw this think on the ground, rugged for nfl use. taste. >>ly a microsoft is planning for more seasons. >> the players and coaches have given us feedback. they want more. they want video. >> when the game is on the line, and you're playing the san

francisco 49ers, you need to know what to do. so that really helps a lot. >> the tablet is working better for seattle than arizona. they can wrap up home field advantage with a win against st. louis at home next week. the clock is ticking for holiday shopping. how can you make sure your package arrives in time and how is it changing the nature of the shipping business? we will talk to a ceo about that next on "bloomberg west." ♪ >> 26 minutes after the hour which means bloomberg television's on the markets. let's get you caught up. after the biggest three-day rally since 2011, stocks are gaining and shares are plunging

along with oil. ♪

>> you are watching "bloomberg west." i'm cory johnson. crunch time for last-minute shoppers. of course. hoping to cash in on procrastinators is an online shipping service trying to bring convenience to delivery, wrapping up a partnership with banana republic stores. joining us now is the cofounder and ceo. tell me how your business works. >> shyp is the easiest way to ship everything. >> easier than a paper airplane. >> absolutely.

what it is, it is an iphone app that literally if you want to ship a sweater to your knees, --niece take a picture of it, enter in the address, and we will pick it up in about 20 minutes, we will take it back to our warehouse, and then we will ship to the lowest cost carrier. we use ups, fedex, and the great thing, it is just a five dollar fee plus the retail cost of the shipping. >> we mentioned banana republic. do you need to have those agreements or can you send a shopper in? >> we are about sending out. we don't have to be inside a store. it is really the time for consumers. yourself, gifting, and that is from your home, your office, anywhere you are. e-commerce. one third of all orders are returned. the last one is casual selling.

ebay. >> the return issue, you think they are returned because the item is not what people thought it was? >> i think the biggest driver is apparel. a lot of these items, you get to see and try them on before you know if you're going to keep them. companies like zappos. they changed. the only reason i look -- >> making returns happened, what do you do about returns? >> today we work within the existing infrastructure. you could give us a prepaid label. we use it as a customer acquisition. we want to be able to change that and make it so you take a picture and it is gone. >> what are your fulfillment costs?

>> this is a volume game. when we first started it was expensive. supply is people. we have people around cities and also warehouse is we lease and also people packaging. we need to be up and running. that is a big cost. >> so the notion of sending a shopper to pick up the sweater at the store, you really want to that shopper to pick up six things because that lowers your cost. >> that is what it is all about. for a single item, it is hard to make the economics work. people that are doing 5, 10 items, and selling online, we have people doing 50 items at a time. that is where we make a lot of money. >> the customer is part of the value chain. one of the things being online is track the customer better.

seeing where they live, what business they do, you are stepping in the middle of that relationship. >> we really enable people to ship. so many times they would not have gifted otherwise. >> the retailers are competing with other online merchants. does that create a disadvantage? >> i don't think so. what we are doing is we are moving all of the barriers to do that, packaging is a huge thing. you don't have to wait in line. we're just trying to remove all of the friction. >> you want to start to concentrate. how do you pick the region where you are going to expand? >> we are focused on consumers. we are taking populations. san francisco, new york, miami.

we want to expand to laces that have a lot of people. we are based in san francisco. >> people who like to download a new app are the ones who are here. is it similar in new york? >> absolutely. new york is similar. for them, they have a lot more people. the coverage area, that is important. >> how do you know? is it anecdotal? >> there are a lot of studies. >> miami is interesting. it will be a boutique. they have a center in their store that are shipping items.

instead of that, we remove that and enable them to focus on their business. >> in other words, maybe your ideal story is not a banana republic or williams-sonoma, but a one-off boutique. a great clothing store where i go. that is the kind of thing. they have an online presence, but really going in and sing the --seeing the random wonderful things that works best for them. >> banana republic was an opportunity to get in front of their customers. what the partnership looks like is we have a presence in 19 stores. san francisco, miami, new york. you will get free shipping from shyp and we have a physical presence in their three stores. instead of having to go home and actually request a pickup, you can do it in store.

this is something that is not our core business. that is doing it from your home and office. with banana republic, it was a great opportunity to get in front of their customers. >> you've got a chance to reach a lot of consumers. interesting stuff. we will keep watching shyp. thank you very much. remodeling platforms just announced from uplands. the ceo is with us next on "bloomberg west." ♪

>> i'm cory johnson. this is "bloomberg west." an online platform for remodeling is looking dominant. i see it all over the place. 25 million users. they've had successful launches this year. now it is planning to take on the rest of europe and asia. joining now is the ceo and cofounder. i was at a friend's house a couple of weeks ago. he is redoing his kitchen. this is a guy who has built many homes and all over the kitchen were the images of houzz. i said what is this? he said it is a giant. you guys are having an impact on this market of remodeling. >> yeah, this is a great opportunity for us to help friends like your friend all over the world to make the process more fun and productive when they remodel and design are

--their homes. >> i have done both. you know there are ideas. the ability to understand what you are looking at has never been good. what is the problem you're trying to solve? >> houzz has created a platform where all of the different players, the homeowners, the renters, the professionals, the designers, they all come together and the make the process different. you have it very visual, whether on the web, and you can get ideas and then you can go down the line from inspiration to execution and get great service providers and find great materials from one place, one source. that is the magic. >> when i built my house, the kitchen, the bathroom, those are the two? >> they are definitely big.

in different countries, people do different things. in the u k, additions are very big. germany is into outdoors. france, the largest country in europe into pools. >> really? that is interesting. the process we went through, i bought a bunch of magazines. we are looking for a certain style. i sat down with the architect and went through page by page and showed him the things we liked. we gave him the stuff we wanted to do. he did some drawings. a lot of back-and-forth and a lot of paper, books, and not very fast. >> this is how we started. you spend a lot of money on these books. there was one picture my husband or i liked. that is not helpful when you need to make 5000 decisions. so i think i bringing it all

under one roof, it was helpful to people. now they could see a lot of ideas and also get all of the data that comes with it. we provide a lot of data about where, how, who did it, the dimensions, where you can get these products. >> give me an example, the kind of data. >> you look at a picture of a kitchen and you say i want to see how it looks from the other side. i want to see the rest of the house. you can. now you know who built it and who designed it. you can ask questions. you can get all of the materials. one click of a button. it is amazing. >> this is the kind of thing, pinterest would promise to do across a lot of different verticals. why do you need to be focused on this? >> what we do is different from any other destination because we

provide everything from educational pieces coming from the industry and the inspiration is very big. it comes with all of the metadata. and then people actually build and execute. it is important to have reviews and resources and service providers. we have 600,000 that are collaborating every month to build homes. this is meaningful and the ability to get all of the product and material from all over the world. it is really a different experience for people that are trying to build. >> in terms of design, something wonderful about design is that it is weird and different. i wonder, do you find there are certain designs that 30% of the people go to?

>> it is important to build a destination different people with different styles and budgets would be able to find what they want. some things you are going to love are not going to be my cup of tea and vice versa. so we made sure we had different styles on how different products -- and it is interesting to see for every service provider and style, you have people that like it and others want something else. >> houzz's cofounder, adi tatarko, thank you very much. the youngest entrepreneur ever joins us. next on bloomberg west. ♪

>> i'm cory johnson. this is "bloomberg west." this 13-year-old was so shocked when he found out about the cost of braille printers. so he used to some tools to build it a braille printer, reducing the cost from $2000 to

$500. intel took notice of this project and invested around for his new company. brago labs. he joins me now, because school is off. only a kid in silicon valley would think, i'm going to turn my legos into a business. this is wonderful. >> first of all, thanks for having me. that is the first braille printer i made back in last december. >> you were in the seventh grade. >> yeah. >> you made this out of legos and stuff from home depot. when did this happen? >> in december, i came back from school and i sat down and did my homework. and then i went to check the mail. i came back in i was looking through the paper and i saw a

flyer asking for a donation for the blind. that is when i had a question. i asked my parents, how do blind people read? they were busy, so they said don't disturb me. google it. >> your dad is a nice guy. they sent you to google. you find out about rail. --braille. >> how much printers cost and i found out it is $2000 onwards and it can get to $80,000. so i thought that was high. especially in developing countries. there are 50 million blind people in the world today and 90% are living in developing countries. so i thought that was high. and then my science fair project was approaching fast so i thought he could do something and that is when i try to hack together a braille printer. >> and the lego aspect, lego has robotic stuff they do.

>> some kits that are made on robotics that are really useful, it's especially for young inventors. >> you have codified this into not just a printer, but also a business that intel has back. >> right. after i was done with 1.0, i went on to real consumer products after i got feedback from many people, youtube, google hangouts and stuff like that. after all of that feedback, i decided to make a consumer product. that is when intel wanted to incorporate their new chip into my project. that is when i started working with them and that is how this project came together. >> it is fascinating. what is the next?

building a business is a challenge. what are you learning? >> there are a lot of interesting people out there. there are a lot of more mature people who have several companies, several startups. right now we are working on the main design house, the design for the real one because this is just a prototype. >> fascinating stuff, and what a story. we are following a developing story north korea. internet access is off-line today, completely black after experiencing problems over the weekend. this comes after president obama vowed to the u.s. will respond proportionately to north korea's attacks against sony. jordan robertson joins us now. jordan, you have written about this a lot. there is one trunk of the internet that is dark right now? >> that is right. north korea has very few

connections to the internet. only four networks. you can compare that with over 152,000 for the u.s. when all of this tension started, it is very likely the united states or some patriotic hackers, took a look at those networks and said there are only four of them. we might take those out. >> i guess you're saying seth rogen did not do it. i wonder if this is the kind of response the president might be talking about, or if this is a permanent thing. if they are going to abuse the internet, we take that power away from them completely. >> it is saying we are going to kick you off the internet. that is a real disadvantage for north korea, having so few outbound connections. one security expert pointed out north korea's infrastructure is not interwoven into the fabric

of their daily lives or even government operations. north korea launches many cyber warfare attacks from outside the country. they have to. >> you wrote a story to that effect, saying it was in germany, china, all over the world. >> yeah, so the person we talked to said this may be nothing more than symbolic. as a proportional response, it is pretty much in line. this does not harm citizens. they don't have access to the internet. this is kind of a black eye for the north korean government and is very low impact in terms of the impact on the common individual. so you could see the u.s. launching this or some patriotic hacker. >> interesting stuff. interesting response to warfare vandalism, whatever it was. thank you very much. you can get the latest headlines

all the time on your phone, tablet, and on bloomberg radio. ♪ >> here's johnny.

>> from the moment he stepped on stage to the day he said goodbye -- the king of late night was johnny carson. >>we