>> light from. three in san francisco, welcome to "bloomberg west." where we cover innovation technology, and the future of business. i'm cory johnson. stocks rallied in the close. apple and yahoo! both jumping 2.5% or the day. airlines also soaring. delta reported earnings that beat estimates. because of a loss in hedging. 11 straight quarters ibm has posted falling revenues. down 13% year-over-year in the

fourth order profits down 11%. maybe there are positive signs. of 60% for the full year. t-mobile and business analytics they get bigger and bigger. online travel companies exploring possible sales. the owner of orbitz reaching out to poor tinsel -- potential suitors. and music app shazam just raise $30 million in a new round of funding, pushing all you asians asked billion dollars. -- pushing past $1 billion. and starting with $409, it is the largest funding round ever.

and despite a collapsing bitcoin currency. now to the lead, get ready for netflix in all corners of the globe. the streaming service has a global expansion program going so well that it will be in 200 countries by the end of the year. generating material global profits into 2017. no profits in the fourth quarter but 4.3 million subscribers. the revenues were up and there was no cash flow. net income on $83 million. that stock is aiming after hours. -- zooming after hours. i say the stock not for the business, but that subscriber number. are these from previous quarters? >> it is definitely international.

it came in pretty much in line. margin expansion, they have provided more than ever before, a very strong outline for earnings. invisibility by 2017, as you alluded to. >> the thing that always jumps out is content cost which is harder to figure for a lot of reasons. they advertise overtime. what do they say about content and the conference? >> it is pretty much consistent with what we expect, which is that content costs will continue to grow. and i think they try to justify that.

it is obviously a large number and they expect that to continue to grow. but as long as they continue to deliver those kind of results that they are delivering on the original content i think investors can tolerate those kind of expenses. >> those cash flow losses are dramatically accelerating but nobody seems to care. i'm always alone. it's not fair. >> those value questions investors continue to ask. they try to ease some of those concerns. you can expect them to be spending expense content. adding the international expansion will continue to be a constraint as well as investment in original programming.

which is why believe it when he 15 will provide an inflation point where beyond that, you will likely see the curve of free cash flow beginning to stabilize as international expansion tapers off and hopefully this will be more control over content spending. it should reach a point, a tipping point for sustainable and positive free cash flow. >> what about marco polo? >> there is a lot of talk about that on the call. not surprisingly because it generates a lot of attention and they try to justify that as having performed to a respectable level. i don't think that any given show is going to move the needle in the long term business but

it's not in the league of shows like house of cards. but from my understanding, i don't think it was such a failure as some critics have hinted that it would be. >> maybe it wasn't a failure. but they spent a lot of money so the content cost are going up. they haven't launched a new hit in a couple of years. orange is the new black is more than one year old. if they hit a dry patch which we have certainly seen in the history of entertainment does that put them at significant risk? >> there is always risk with being a content producer. that's an inherent part of the business. but so far, they've done pretty well. they have provided a schedule of their content lineup coming up for the next several years. >> did they? >> did. you can see, pretty much, a

layout of how the shows are lined up. they are catering in a large part to their audience of different genres. i think they have done a fairly decent job trying to ramp up on content. >> i wonder what they think works. there was a suggestion that what amazon is doing do whatever you want. we won't bother you but it can suggest a smaller audience. >> i think that they will try to diversify into various genres. it can cater to different audiences. it is clear that any given show is going to try to fill certain gaps in their offerings. i think that the movie that they

will be launching this summer crouching tiger, they have a disney movie set to kick in. the content lineup is fairly well diversified at this point. >> thank you very much for that look at netflix. spacex. at $1 billion more in the bank. selling a 10% stake to google and fidelity. this kind of cash, the kind of thing that blows up. next. ♪

>> google may have taken a major step in controlling the future of the internet. they just invested $1 billion in the spacex, the rocket company founded by elon musk.

they combined stake of nearly 10% and the $10 billion valuation. they have advantage over rival facebook that was planting an internet aerial assault of its own. about what google and spacex cn each other -- see in each other. >> we have a ground war or air war trying to get more internet access over the world. google once more people on the internet no matter who they are or where they are. elon musk has interesting things going on. why not team up with them? >> lacing the world with low orbit satellites has been done before. but back in the day, there were competing satellite -- trying to

offer cell phone service to the world. they really failed at that massive adoption. what might have changed since then? >> it has changed since the 1990's. it wasn't just the satellite technology. you need a big terminal, you need to follow satellite across the sky. and what you have to build at that point in time was tracking that satellite and those are expensive for the consumer. today, we see that is still the target. getting the price down to a couple hundred dollars before that market is addressed.

>> when i met with elon musk they were talking about launching satellites for other companies. they had a window and maybe there was a thought of manned flight. a.b. this is technology in search of a business model. or might this have been the plan all along for spacex? >> i think spacex is looking to move into adjacent markets. obviously, very good at building rockets, building on that to build bigger rockets. it's got a lot of government funding to do that sort of work. i think this is the obvious next step as they work on going to mars. there will be decent communication. there is a lot of synergy with google's ambition. they have the expertise and communications technology.

they have been working on a lot of things like drones, balloons. elon musk has a lot of expertise in making productions to build satellites and hardware at low cost. it is a natural fit to some degree. >> i know they try things in their laps but for the corporation to make an investment is not a little experiment or a self driving car. >> google loves spending money on whatever they are interested in at the time. to your point, if this works great. if it doesn't, we will move on. they see something here. a billion dollars, even for google it is a serious investment. >> is this something about

wiring the world through wireless? has that been a google project? >> balloons in the air, they've talked about other things that they have acquired. this is something that google needs. they just need more people on the internet so they can use their services. it plays right into their core business. >> as it relates to spacex and their technology, this is a company that the video came out a couple days later and it was very exciting to try to land this thing on a barge in the atlantic ocean. it was a very dramatic crash where it skidded off the barge

and landed in the ocean. >> they have 4000 satellites. if you are thinking about 50 or 60 satellites, clearly, they need to step up. in terms of the launch race, the reusable rockets it's an early stage with that. it will be interesting to see the cost reductions that can float and the future of this project. that launch is not going to be the dominant cost for this system. it's really about getting down the cost of manufacturing the satellite. if they can make the satellites for a couple million dollars each it starts to be plausible.

the mission to go to mars eventually, they've got a lot of people lined up. it is the launch right there. and what we will see this year it is coming down the pipe. >> "bloomberg west" will be right back. ♪

>> i'm cory johnson. this is "bloomberg west." uber's never-ending battle with local governments heads back to new york city. they put a cap on rate increases. the search pricing will be limited. their practice of hiking prices telling us that dynamic pricing ensures we will be a reliable ride. they indicate the pricing repeatedly before a trip is requested. david, talk to me about why uber shouldn't be allowed to charge whatever the customers agree to

pay. >> effectively, they are ripping off their customers. what they call economic pricing we call price gouging. in every major city of the world, it's for three reasons. safety, predictability, and we want to prevent the kind of rice gouging currently happening. >> new york city, a fixed rate on the cars with all sorts of surcharges. and when there is insane demand like new year's eve,, they hit the off duty sign and charge whatever someone is willing to pay and customers seem happy to get in the car. >> the drivers doing that are breaking the law. >> what is the statute of limitations? i do that when i was a cabdriver in new york. it was just the way it was done.

but because we jack the race, we get more cars on the road. >> trying to find the right balance. we want customers to have those cars but we don't want them to get charged too much. the taxi driver is unequal in their ability to charge whatever they want. he turned to the cabbie in the cabbie says what time is your light? -- flight? it's in 30 minutes. so he charges you $500. we think we are going to get many more cars on the road. also tech consumers, it's very important in a place like new york city. >> does this bill have a shot? >> i think we have a lot of support. not only from the cabs industry but regular new yorkers who are very frustrated. i feel like they are cutting their nose to spite their face because this moves support.

on nights like new year's eve where they can pay up to 15 times more for a regular cab ride. >> the competition with taxi drivers and uber makes the argument that the fixed number of medallions just shows the market isn't dynamic. it suggests the commission and taxi drivers and owners are just trying to maintain a monopoly. >> we are not trying to do that. what we're trying to do is connect the consumer. if you let people charge whatever they want, you ultimately could get really crazy pricing.

uber likes to argue that is what the market will bear but it's not true with dynamic price. stock market is true dynamic pricing. it sets a limit on bottom-line pricing. they will never fall before a certain amount so they are making a wish argument. >> it can only go up but it can't go down. >> they like the concept and they think that it does make sense. they would like to see some tweaks to the legislation specifically on who would have to pay penalties and fines. we agree with them, so we will make those changes and build more support for this legislation. >> the medallion price has fallen because of uber and lyft? >> i think it's part of it and also part of the change in new york city where a lot of folks are environmentally conscious. they are riding bikes and taking

trains more. >> new york is not the only city where this adders. europe is also fighting and we will have that story next on open bloomberg west." "bloomberg west." ♪

>> you are watching bloomberg west where we focus on innovation, technology, in the future of business. i'm cory johnson. president obama gives his seventh state of the union address tonight. the president started what may become a new tradition. sitting down for interviews with three youtube stars. phil is in washington. is youtube star and oxymoron? >> i don't think it is. there is a recognition as much as the white house press corps

would love to be sitting down with the president, it makes sense for them to get their message out with people that are not going to ask ethical questions and have tens of millions of followers. we have seen it the last couple of weeks, the white house trying to figure out a way to get an address that no longer gets the millions of viewers out to the general public. >> is this the equivalent of a barbara walters interview where they get the softball questions and the person tears up? or could there be serious questions here? >> it's not fair to underestimate the types of questions. they could come at him on syria policy, health care exchanges. i don't think it's likely. i haven't heard anybody say that the questions are going to be screened. there are no limits on what they can or can't ask. the bigger issue is that the white house has been looking and

has looked for ways to get around the regular media. to get their message out, particularly on social media. here is a way to do it and target a group of people that they feel like would be supportive and push those proposals forward. >> we will know it has jumped the shark when they get questions about the dog bo. how ticked off our traditional media? >> to be honest, it has just become the norm. you recognize this is the way the dynamic is shifting. different platforms, things of that nature. the white house is doing the same thing. it gives them a lot more opportunities to present us with

information. we are seeing it on capitol hill as well. i think it is frustrating for people that are used to covering the white house day-to-day. you kind of get left behind. >> maybe they will have their own statement about this. phil mattingly, thank you. don't miss full coverage of the state of the union tonight at 8:00 eastern with a special edition of "with all due respect." president obama's address is at 9:00 on the east coast, 6:00 here in the west. across the pond, some of silicon valley's biggest names are in munich speaking at the deal the conference -- dld conference. regulation is a big topic. they touched on laws to be

updated to deal with technology like uber. attendees were warned before arriving that uber was u navailable. >> we had a good set of rules that protected people, but then a whole new set of rules that protected and industry. for example, there are 13,000 -- were 13250 taxis in the 1950's. we are 60 years later and there are 13,250 taxis in new york. how does that happen? the existing industry made sure that it happened. they created artificial scarcity. >> the commission for a digital

economy used the long-standing troubles with european antitrust to explain why companies need to do more to comply with existing laws. >> it is a main player in our digital economy. google has huge competition. and everybody, european companies they have to accept the objective miss and duality. we have some concerns. it should be decided. >> he was there and so is the linkedin cofounder. they suggest silicon valley needs to work with lawmakers better than i have in the past. >> they are bad at lobby in washington and bad at lobby in

brussels. what we do is we try to build the best possible product that works globally and we are slow and late to understand the right way to interface with government. >> cyber security is going to be a major theme at the state of the union address but do business leaders care? might they change their strategy? will talk about what he might say, next. ♪

>> i'm cory johnson. this is "bloomberg west." microsoft says they may have found the answer. microsoft says the fbi data related to the charlie hebdo investigation just 45 minutes after they were asked, contents from two e-mail accounts to the fbi after proper requests were filed. this shows that microsoft's

system can work. extra snooping should only happen if it is strictly regulated. president obama will address cyber security concerns. the president recently pushed new cyber initiatives with british prime minister david cameron last week. it seems to be the top priority for the president that business leaders may not feel the same way. cisco says that 75% of security officers feel their security officials tools are very or extremely sophisticated. how come washington is convincing executives that they have to do more? why do these companies have to think that they are good when you think they are not? >> a couple of elements. the first is that an industry

that is only 25 years old, we look at experience that hasn't been built through all the companies. our data is starting to show there is a perception and a reality gap. and the operations teams will be concerned that they haven't gotten over the goal line. >> is this bravado? or do they not want to dare tell anyone that their systems are weak? >> even there is a little bit of confidence factor where you say we've got it all wrong. i think it's just a matter of where the gaps have to be closed. there are widening gaps between a whole series of things. the understanding at the top versus the understanding in the operations groups. >> the boss didn't get it last year? >> it's partly that more bosses get it at all. is turning into a place where the boardrooms is having

conversations about cyber. which is relatively new. >> the sony hacked changed a lot. the embarrassment factor that the corporation became the target of a powerful nationstate. they invested a lot of money in going after attacks like this. it must've scared that the jesus out of the boards. >> there are certainly ongoing investigations but i will say it this way. there are a series of elements that corporate directors have talked to boards about. the sec has said that it is a particular risk factor for businesses and it is increasing the number of companies in the number of situations we are seeing in the press. and that we are having additional dialogues about it tells you that boards are getting more -- >> it talks about threat intelligence.

what is the nature of the kind of threats we are seeing now. do most of them look like this? >> most of them look like this and there is the small one that is heavy with a high-impact situation. and we all experience this in a day to day life. the technique being used to deliver it actually changed last year and it went up by 250% which changed the entire modality of getting to use the user. >> don't geek us out here. it's bloomberg west. >> we see the tools protecting companies is when you just get volume, tons of it thrown and a lot of it sales but if one got in, it was great. reputation systems very clearly have those kinds of e-mails. >> we know that it is spam and we rejected all.

>> and if you see e-mail coming from very particular sites you block it. what happened last year is the idea that i'm going to send three or four e-mails from 1000 different sites. they are not hitting that volume attack and they are not hitting the bad addresses or sites that are typically generating it. once they get to the user, it's game on. might be able to involve you in an attack against the organization. >> it seems that the goals are changing. it's not annoyance or denial of service it's getting what? >> it's an economic discussion all the way. i have been very favorable to say this is money. money in multiple forms.

it can be taking intellectual property, stealing credit card numbers any characterization. there can be the embarrassment factor like you mentioned. there can be the disruption of business against banks, denial of service attacks in france just the last couple of days. those just try to interfere with you doing the normal job you want to do. in the last is that i want to be able to change the way business operates. >> these are interesting times. we like having you on, thank you very much. more mobile phones are getting hacked. it should you be worried? should your business be worried? next. ♪

>> i'm cory johnson and this is "bloomberg west." mobile threats rose 75% according to security firm lookout. ransomware. i spoke to the cofounder and ceo about the most dangerous threats to mobile phones. >> the largest threat is downloading bad apps. they can take your data, take your money and make you pay to get your phone back. the u.s. went from 4% annualized risk to 7%. >> 7% of smartphones are

infected or attacked. >> we have 60 million android users around the world. we measure that in the last year, 7% of our users got some sort of malware on their phone. it has often been seen in pornographic at seen outside of the app store. the bad guys are rational economic actors and are targeting them. ios had its first major piece of malware starting in china. we see risk right now like android in 2010.

>> in china, people are breaking their phones and getting around protections. >> consider downloading from the app store, they download the laptop and also the app store protection. >> there is big business on the other side of that. there are actors and how big is that industry? >> is very big and very wide. crime can take many different flavors. the risk is bad guys either stealing their data or trying to get them to pay money on a phone bill or for ransom to the businesses. >> they don't care about people. they care about business is. it's a big part of that. >> there is a separation between enterprise technology and consumer technology. people bring their personal

phones to work more than ever. their biggest concern is people bringing malware that they might have downloaded a nap on their personal phone and bringing it for the internal corporate network. and you have just one phone that is brought in. >> in your own device problem. we have seen it dramatically in the last few weeks the north korean attack on sony. and it was really targeted at that business. are we seeing a changing threat across the board? >> two major actors are cyber criminals. sometimes they blend together and it's really hard to tell. so in the case of google, they widely reported that they were hacked by china as part of a

state-sponsored attack. you have anonymous and banks being targeted. anytime this is a large amount of research, i'm targeting them. we see a lot more threats to the average user. if there is a targeted attack they can find them there. >> and it also changes the history of the places where eastern europe and the old soviet union, how they essentially got their power with the blending of politics and crime. it's not a small thing. >> when people have skills like that, they will find ways to use it. on the defensive side, many companies are hiring hackers to defend themselves or governments hiring hackers because cyber war

is a different part of engagement. >> the cofounder and chief technology officer. time for the bwest byte, one number that tells a whole lot. it is what? >> 2.9 million. that is how much apple spent last year on lobbying. >> $2.9 million in lobbying? >> is not as much as google, which is nearly 14 million but it is on new pace for apple. >> it gets apple out. the world's largest company they get new issues like the smart watch and health data. >> the hype might have suggested at least in the first few months?

we could see it later this year. >> what did they say? it would be first, the beginning of the year? than the first half? >> the excitement is building. you can tell that. >> is it the main focus of this lobbying effort? >> it used to be six agencies and now they are more than 13. they're going to the ftc and talking about data, privacy, and that sort of thing. kind of showing them the devices. being more proactive. >> thank you very much. it you can get the latest headlines on your phone, tablet, or bloomberg.com. see you tomorrow. ♪