>> from pier three -- from pier three in san francisco welcome to "bloomberg west." hearsay check of top headlines. french police are surrounding -- looking for the charlie hebdo suspects. here is former nsa director chief -- keith alexander. then i think law enforcement in the intelligence agencies are going to be expected to do more. they can't do it without tools. we have to come up with a reasonable way to do it.

i think the question you are asking is the heart of what we are going to do in the future to actually stop terrorist acts like this. whether it is domestic, whether it is home-grown, or whether this had some part from another set of actors around the world. >> the lights at the eiffel tower were turned off in tribute to the 12 people killed. france also held a moment of silence. back in the u.s., stocks rallied for a second straight -- second straight day. the s&p 500 and dow above -- up about 1.8%. are you sick about hearing about patent battles? so are the battlers. patents fell 17% last year. that's courting -- that's according to a tech advocacy group. 63% of patent cases last year involved hardware, software, and

networking companies. and apple is raking in more money from its app store. apple says it sales are up percent last year, generating over 10 billion in revenue for developers. they have created more than one million jobs in the united states is 2008. samsung electronics is forecasting a 37% drop in fourth-quarter profits and a 12% drop in revenues. smartphone sales continue to stall. maybe there is a silver lining here. samsung is still the world's largest smartphone maker with 8% market share. sam some semiconductor business is booming with $15 billion in the new fabrication plant for semi conductors. samsung has made a huge push into the internet of things. a spokesperson spoke earlier

this week at ces. >> in 2017 90% of all samsung products will use these devices. that includes mobile devices and intelligence. >> has samsung found new revenue streams as its cell phone business is contracting? joining us is brian blair. glad to see you are surviving ces. apparently razor is not surviving. that is the first casualty. you look great. i think it is really interesting, samsung is reducing the number of phones they sell as they try to remain the most important company in cell phones. >> look at that apple model,

apple has just one phone. they really have three a few think about the different sizes. there is something to be said about simplicity. at one point no kia -- it is a lot of work to manage the components and makeup too many skews. a lot of these chinese players have been eating their lunch for the last nine months. >> you can see the market share coming down quarter by quarter. it is gradually still impressive and every other cell phone maker would like to have that kind of market share. i was doing some sort of envelope calculations on the numbers they put out last night. they're operating profits are tiny compared to apple. they might not sell the most phones but they make the most money. >> one of the reasons for that is the -- a lot of samsung's

business has been at the mid tier. as you have seen more competition from xiaomi and yahweh over these past few years, samsung has had a come down in price. a lot of their phones are really expensive to make still. they are not getting the same profit margins apple is when selling $800 plus phones. the high-end iphone 6 plus with 120 gigabytes is almost $1000. you get a much higher margin on the selling prices. >> they have announced a huge capital list expenditure project. i've always thought of that as the canary in the coal mine for them, where they are going in the direction or letting the other cell phone makers what they want so samsung can design their phones around that. is it possible we see a change in focus where the shift will be

the main thing, not device themselves? >> they need that ship business to be strong in the years ahead because of this decline we are seeing in their smartphone business. they were the -- they were the exclusive manufacturer of apple's eight series chips. it's only been since 2013 and took a lot of that business away. now we understand samsung is trying to get that act. the volumes are obviously substantial from just apple alone, who a couple of years ago was 70% of their business. they have to find some new areas of growth. the internet of things connected appliances is a huge trend for them. they are showing a huge competitor to the oculus rift.

in this virtual reality thing, i think samsung is looking for new areas of growth. it would be nice if the foundry business could be a grower for them as well. >> what does it shift costs -- what are the revenues on an iphone chip? making random guess. 85 bucks for and i'd -- $85 for an iphone? >> i think of it like $30. it is probably five dollars for an internet of things chip. the difference is if we do see connected devices throughout homes over the next two years, the number will be bigger than this 1.5 billion units smartphone market. the asp are small but the opportunity is substantial for the next several years.

>> they would have to sell 600% more of those ships than the phone chips they are selling right now. is the center of samsung going to be chips, not devices? >> it could shift to chips. they are hoping it is going to be both. they are showing connected dishwashers there. think of it in this way, you have maybe one or two smartphones in your home. how many different appliances and things do you have that can become connected? if we do have connected devices throughout our homes over the next five years, then the internet of things will be bigger than smartphones and it will be a substantial opportunity for samsung. >> i need someone to load my dishwasher, not run it with a chip for me.

i saw the oculus rift thing and it really was just a device that was made by samsung, it wasn't any sort of special samsung stuff. did you see anything that was ridiculous over at the samsung booth? >> the connected dishwasher is one thing i find. i wonder about the utility of connecting some of these devices. i'm not sure that my refrigerator -- my fridge could be good. i haven't seen anything that ridiculous. everybody is doing curved screens and they are beautiful but i'm not sure it is an enhanced experience that will drive huge demand over the next several years. a lot of these panel companies are making a bet that that is the next big thing. the oculus rift and samsung's version of it, it sounds ridiculous until you actually use it. it's really amazing how good it is. i think that could end up being huge.

obviously facebook feels the same way. >> it is pretty crazy. they have a thing that was meant to look like a mongolian -- i put the oculus rift on. one was making soup and one was playing music. as i turned my head there was someone behind me and some of next to me. it's startling. >> if you look behind you and it feels really real. until you try this, i think it is hard to understand why this could be big or why facebook paid millions of dollars for it. you quickly become a believer. >> thank you very much. one of the federal communications commission's -- one of the toughest decisions. we will talk with one of the five commissioners who will

determine how the u.s. will regulate the open internet. that is next on bloomberg west.

>> i am cory johnson and this is bloomberg west. the federal communications commission chairman tom wheeler announced the date for the latest proposal of an open internet. he also said he may be in support -- the stock -- take a listen to what wheeler had to say. >> the wireless industry has been monumentally successful. hundreds of billions of dollars

of investment as a title to regulated company. there is a way to do title right -- title to write. >> do you have clues about what that might look like in a proposal? i know you can't talk about it yet. >> it is an important issue. >> the timing will be what you cope >> i expect to see the proposal in early february. and that i anticipate the commission will vote. >> you can tell us right now if you want. it's fairly amazing. the reaction we have had on bloomberg west the reaction

john oliver had, i think it shows how much people are passionate by what they get on the internet. the ucp -- do you think people understand the issues? >> from our internet economy this is the envy of the world. we are getting a lot of attention right now, but that is a good thing. >> you see where all this stuff became popular in the late 90's now resulting in a hold of them kind of product. i wonder what you so when you go to the electronic show. , it is gadget keep -- >> it is gadget the heaven. we have football fields worth of new devices and technologies. all you hear over and over again is mobile, mobile, mobile.

what i hear his spectrum, spectrum, spectrumco. >> there is an auction going on right now that was expected to be good. it has already raised $45 billion. before this only $50 billion has ever been raised. why this amazing success? it is none -- like a spectrum that can go through buildings or is not in the best urban areas? >> we have more mobile phones that people. more than half adults have tablets or d readers. those devices are using our airwaves like never before. some of the most important infrastructure in this country is invisible. >> this auction goes for how much longer? >> i believe in the next few weeks.

>> the spectrum is the beginning of the capital expenditure for the carriers. what you get the feeling from carriers and what they want to see echo >> given that the -- it becomes apparent that more spectrum in the marketplace is important to power those devices and carriers are willing to spend quite a bit of money in order to have the spectrum they need. >> when you see the spectrum you have another auction coming up which is thought to be the big valuable one, the repurpose of the television spectrum. i'm always struggling with ways to explain to people who call this a struggle. >> this is a traditional auction. we sell off licenses for our airwaves. in 2016 we are slated to hold an auction for the 600 megahertz band. that has been the television spectrum. >> that is the place people want

to be, spectrum's that can go through buildings and connect phones in the offices. >> it goes really far and it doesn't require the construction of many towers. that low band spectrum is super valuable. in the aftermath of this auction, which features some higher band spectrum, i think it has become apparent that the 600 megahertz option will be really big. we have an elegant solution the congress helped us come with. that is offering any incentive to any broadcaster who chooses not to be in the business of broadcasting to return their license to the fcc and my colleagues, and then we will take those licenses and repackage them and offer them up to the wireless carriers interested in purchasing them. as an incentive to the broadcasters we will pay them a cut of those proceeds.

>> is that expect to be complicated? it is expected to be a complicated process. how is that looking from the broadcasters who want a chunk of that? >> i think many broadcasters are going to take a look at the possibilities for revenue in that 600 megahertz auction. >> $45 billion isn't anything. who are the beneficiaries and where will it go directly? >> congress actually assigned purposes for that money. i think there are two that are noteworthy. it needs deficit reduction and this is really important, it helps constructs of the call the first responders network authority, which is designed for police and firefighters having access to high-quality spectrum and every community in this country so they can communicate when the unthinkable occurs. >> what happens in vegas stays

in vegas. i'm glad you decided to join us here. we will be right back.

>> a former wired editor chris anderson says joan development for companies like amazon, google, and facebook are leading a consumer resolution. emily chang left us for studio 1.0 this week. she started off by asking what the timelines of package deliveries and drones might be. >> how likely is it that drones are going to be delivering my amazon packages? >> your amazon packages to your home? that is a ways off. >> how long? >> a decade? but delivering to a center where you can pick up a package --

warehouse to warehouse, we can do that today. delivering to rural areas as easy as well. >> is there any reason it won't happen? >> regulation. >> i know the faa is considering changing the rules. how are those conversations going? >> they're going. the faa's mandate is the safety of the national airspace. it was designed around man aircraft, relatively large aircraft human pilots and passengers. what we have here is a completely different kind of problem. >> emily also asked chris anderson about buying parts from alibaba. >> this is where you buy wholesale parts from china and i need to buy electric motors for an autonomous blanket. 10 days later this great shows up at my doorstep. there are 5000 motors made it to my custom specs and i was stunned.

i got chills that basically i had gotten robots from china to work for me and they took paypal. >> that was emily chang with 3-d robotics ceo chris anderson. what a difference a few years makes for dells. dell came back to win seven ces awards this week. we will show you why next. ♪ >> time for bloomberg television on the markets. let's take a look at this big day for stuff. major rallying, around 1.8% or better. this is the second straight game for major stock averages and all three of them wiping out in

their declines in early 2015.

>> i'm cory johnson. the massive manhunt for the suspect behind the massacre at the charlie hebdo magazine continues in france with focus on the northeastern part of the country, which is where the two specs were reportedly seen robbing a gas station. nine people have been taken into custody for possible involvement. glad to have you on. we have seen rallies all over the world. >> the plans have are to started to take place and that is candlelight vigils. this is a city lit by candlelight tonight.

we have one earlier, a second rally. a big rally brandishing pencils. and interestingly today a group of muslim leaders came here and paid their respects to this vigil. and they also condemn the violence. now in addition to the manhunt trying to find these two individuals, there is going to be a difficult political conversation. she called have a national referendum to reinstate the death penalty. it is the beginning of a long and difficult commerce a should.

>> what we know, how do we know it? >> what we know was these two brothers appeared to be in this town northeast of paris about 50 miles away. there is quite a bit of chaos in paris because in the south of the city a police officer was shot, she ultimately perished. police have not made a connection between this shooting and what is happening in the manhunt for the two brothers up in the north. in addition we have some scattered reports of a tasks on mosques throughout the country. that is the other elements we are trying to tie together here. we are hoping for more information in the coming hours. >> the horrible news has not ended. there is some powerful stuff from john stuart and conan

o'brien. i will put that stuff on twitter so you and everyone else can see it. thank you very bloomberg international correspondent. you can see a whole lot different dell from two years ago. brad stone caught up with dell's vice chairman and asked him about the latest and greatest from dell. >> our best ever consumer portfolio products we are pretty excited about that. one of them is the most prestigious that's of innovation, which shows that innovation is right. >> a 13 inch notebook. >> tell me why this is different? >> what is unique about this is

this is a world's smallest 13 inch notebook. >> this is a's green -- it has no border, a 13 inch screen. we took all the air out of the product and built the world's smallest 13 inch notebook without comp remise in performance with high resolution display, and we increased the battery life to 15 hours in doing so. this has the distinction of being the smallest 13 inch notebook in an 11 inch form factor with 15 hours of battery life. quite an innovative project. we broke through a new price point rid of -- price point. demo how is the velocity of sales going on?

>> for us it has been quite a good run. we have had seven consecutive quarters now. the market grew two point percent -- .2%. you can see the momentum we have had. we see stabilization in the pc business. >> this is an android tablet. tell me why this is special. >> this product won the 2015 innovation show this week. what you see as many of the world's first. it is the world's thinnest tablet at six millimeters. also it has the best display.

as to edge the lead -- edge to edge oled screen. what it does is it will invite you into interact with the product. it also has the world's first 3-d camera. it allows us to refocus. we can refocus the picture from the individual now to the bridge. >> how is going private allow dell to innovate faster? >> we make decisions that are the best long-term interest of their customers. and looking at the long-term interest of our customers. you can see the product coming

from that. the world's smallest 13 inch notebook the world's thinnest tablet today. i think it demonstrates innovation is thriving at the dell and really showing what was unleashed in the past 16 months. >> that was jeff clark and brad stone from bloomberg businessweek. marissa mayer is taking heat from activist investors over her plan for all that alibaba cash. is her job on the line? that is next on "bloomberg west." ♪ ♪

>> i'm cory johnson and this is bloomberg west. google is the undisputed search king. some crack's may be starting to show in its armor. google fell from 79% to 75% last year.

that is the biggest drop since 2009. if yahoos a share jumped from 7.4% to 10%. let's not insulin continue games just yet. -- not pencil in continue games just yet. the heat is still clearly on yahoo!. activist investors are ramping up pressure on yahoo!. the firm wrote a new letter to marissa mayer, urging her to disclose the plans to their ali baba stake. we spoke to yahoo! for a statement, they declined to comment. someone with lots of comments surely is erik schatzker. do the pieces of aol's search business mill dwell with the pieces of yahoos programmatic search business?

>> i think the programmatic platform they have been investing in would meld with anybody who wants to be a player in online video, particularly mobile online video. yahoo! is a major player in online video. what they have not done is developed a good mobile business. investors are skeptical about the viability of that going forward. >> star board is in a position most public -- is in a position -- >> it is hard to argue with the logic that star board layout on september 26. its first letter to marissa mayer illustrates numerically

how much trapped value there was in yahoo! by virtue of the alibaba and yahoo! japan stakes that were not being fully valued by the market or the operating business that may not have been fully valued by the market. either way, no matter how you do the numbers you come up with a higher number then yahoos current mark. that holds for most of the people who own yahoo! shares then star board has power as much as it is driving the dialogue forward and making it impossible for marissa mayer talk only about things other than unlocking cap value. >> i spoke to marissa mayer and steve goldman, chief financial officer, both off the record. what i will say is they have a lot of advice in this issue.

every tax attorney has offered an opinion for them. his star board putting new ideas on the table? do they think they bring something new to the table? >> i don't think they needs to bring anything new to the table. what he is concerned about are the signs that he perceived that marissa mayer is going to do something other than a tax efficient spinoff of the alibaba and japan assets. yahoo! and its lawyers choose to structure it -- however yahoo! and its lawyers choose to structure it, what it needs to be is a spinoff so the shareholders benefit from that unlocked value and not marissa mayer. what they perceive is happening is two things, on the one hand or a semi or is compromising big in the day transactions, which is scaring the differing -- big and the day transactions, which is scaring the living daylights. the other, she is going to do a

split off which means she somehow exchanges the value of the alibaba and yahoo! japan stakes for some kind of consideration, whether it be cash or stock which he can use for her discretion for other purposes, presumably acquisition. they are scared to death of those because she believes she is squandering shareholders money. >> maybe find some way to swap out the asset, rather than cash out the asset, which is a tremendous investment back in the day. do we get a sense that some of the acquisitions -- marissa has been a crummy acquirer in all of the acquisitions they have done in her tenure. >> when you look at yahoo! and maybe the efficacy of all the acquisitions that they have done -- is it contributing to any topline growth, which is the

number one operational challenge for this company. we have not seen any topline growth since marissa has taken over. one could argue the honeymoon is approaching its end between investors and marissa mayer. they want to see a strategy that will result in topline revenue growth. this is a business that is growing at least 15% per year yet yahoo! was unable to post any topline growth, and that is really the challenge. it is one thing if you spend money on tumbler or make small acquisitions that bring in talent, but investors need to see the results in all that. >> director of research paul sweeney and market makers co-anchor erik schatzker. up next he took on amazon but ultimately selling to the e-commerce giant. now mark is back trying to remake the wholesale club business. look up posco, look up samsung

we are going to hear from him next. ♪

>> this is bloomberg west. founder mark lori started a company called jets.com. he sold the business can see for diapers.com to amazon in 2010. he insists his new company is not an amazon competitor. he spoke to lori about his wholesale business model. >> any company at any time can decrease prices paid the business model we have put together at scale is suited to bring low prices. it is not amazon or walmart. they have already set the prices

that give them profit margins that make sense to them at scale. we are able to bring low prices because we don't make a profit and we have this innovative technology. >> does that mean your margins are quite small? how do you protect those margins? >> similar to cosco bj, sam's club, they make all their money through a membership. you can still build quite a business. >> you raised $80 million? one of the biggest fundraising's for an early start up, how are you deploying -- logistics is one area. but tell me how you are to employing this money? >> a lot of it is to build out the technology and to advertise the business. we have a pretty substantial budget slated to get the word out and bring awareness. >> how did this idea,? >> it has been in the e-commerce face for a long time and i

recognized there was a big opportunity. i think the market is focused on surface. if you look at the product -- at the players, it is about chip speed, faster delivery time, and convenience. >> what did cosco think about this? >> i'm sure there are a lot of people thinking about this. it's a matter of getting the capital, getting the right people at the right team. i think we have an amazing team. >> that is mark lori, ceo of jet.com. time for the bwest byte, where we talk about one number that tells us a whole lot today. shelby joins us from graceland in memphis, tennessee. >> the huge fight for the day is for. four dollars is the amount of money elvis presley paid to record his very first song.

he left the actual record at a friends house. more than half a century later his friend's daughter found the record and she is putting it on the auction block for the very first time tonight. it is expected to be sold for around 100,000 dollars. she pretty much hit the jackpot. how has eldest managed -- how has eldest managed to stay so popular into the afterlife? he has a managers managing his music, managing graceland. in honor of his 80th birthday they are launching a whole new album on itunes. they are giving to wars in graceland where they use beacons to show you around graceland. -- giving tors in graceland where you can use ipads with ipad begins. they have a hologram show in las vegas. they are keeping elvis alive literally with technology. >> i saw him pumping gas today

is. -- pumping gas today. >> he's making money. >> he's added an exxon station right now. there's a great book, last train from memphis, about the rise of elvis presley and talks about how new technology of that era allowed him to make these new records and created a new kind of tour that made elvis a national thing. >> they said he is on the cuttinge of technology. i love graceland. thousands of people come here. more than half a million people come here every year. they spend a lot of money and guess what, we got sucked in spending a lot of money on the souvenirs. >> thank you very much. you can get the latest headlines on your phone, tablet, and

bloomberg.com. we will see you tomorrow. ♪