>> welcome to bloomberg west where we cover innovation, technology in the future of business. i'm cory johnson. president obama has proposed opening an area from virginia to georgia for offshore drilling, brushing off concerns by environmentalists. the plan would take effect -- would not take effect until 2017. band drilling in portions of the seas near alaska. the effects of the u.s. dollar being felt across the board. proctor and gamble's sales fell

10% in its second quarter. the ceo saying the exchange rate fluctuations hit sales to the tune of five percentage points. pfizer, reducing its forecast due to the dollar. the new york metropolitan area, slowly getting back to normal. the historic storm was not in new york. here's mayor buildable audio -- mayor bill the blog seo. >> we have an old saying that we live by prepare for the worst and hope for the best. we were spared the worst of the storm. >> new england, not so much as much as two feet of snow falling.

twitter is tweaking its products as it tries to boost revenue. video clips that can last as long as 30 seconds. twitter says the product will make the service easier to use during news events. twitter also changed its direct messaging at a lower in conversations with as many as 20 people in a group. if you thought the storm in the northeast would cause a muted training day -- trading day scarlet fu has been watching the details of a big selloff. >> we opened with losses and we never looked back. dow industrial, coming off its worst levels. at one point, it was at its worst decline since june of 2013. the dow off by almost 300 points. within the s&p, nine out of 10 industry groups are lower. the nasdaq is seeing its first

decline in seven days. you're seeing a shift into safe havens. you can see the dollar, losing value against the yen, 11787. there is a bit of a -- microsoft is the worst performer in the dow. and of the 100 biggest companies in the nasdaq 100. disappointing earnings. the effect of the stronger dollar on china licenses was a big reason why. intel and hewlett-packard are down in sympathy. i want to point out one stock that is managed to buck the trend. this is netflix. you will see a re-rating of the stock after netflix reported earnings are jittery 20th. that move is right after netflix said it is on course to post global material profits. by 2016. this is a spike in volume as well. netflix, getting a lift and

tesla another momentum name we are keeping an eye on. >> thank you very much. how well the larger screen iphones so? what about the ipad's? we were find out. typically apple's biggest quarter. you may remember back in october, tim cook expected the fiscal first quarter to be the best ever of revenues as high as $66.5 billion. joining us anti-hargraves. -- andy hargraves. it is not so bad -- the snow is not so bad on the west coast. apple earnings, this is going to be the biggest quarter ever from the biggest market cap company ever. what do you expect? >> a lot of iphones to be sold. we are expecting really big revenue numbers, driven by iphone. a solemn -- a solid bottom line

number. >> what is your iphone number for the quarter? >> we have not changed our number. we are still at 64 million. clearly, expected upside to that. as much as 70 or more. >> talk to me about the dynamics between the ipo to six the iphone six plus -- the iphone six and the iphone six plus. >> the iphone six plus, higher gross margin. incremental screen size does not seem to be opposite the hundred dollar pricing increase across the skews. it should be a higher gross margin -- gross market product. it seems like demand is two to one, maybe more than that for the six to six plus.

you will get a benefit from what was a price increase. we have skews that are priced higher than anything we had before. the lift top line in the profit number. -- that will lift the top line and the profit number. >>6 plus supply in the states was slow to get to markets. some people had to wait for months to get their phone. does that mean supply was allocated to china and that big chinese sales -- what does that mean for you? >> supply was partially allocated to asian markets. you are also seeing quite a bit of chinese nationals lining up in stores in the u.s. and other countries and sending those phones back to china. the demand was stored in that way too. it is hard to say. not have good insight into the demand in china or a lot of the

emerging countries. some of that is left for what they put up in the print. >> ipad, kind of surprising. to give them credit, the fact that the ipad has become such an incredible device in five years in terms of changing the way people compute. then, sales falling off three quarters in a row without taking that away. what you make of what happened in the last quarter? >> combination of a few things. the ipad was too good. what people mostly use it for our internet services. for that purpose, the original ipad still works well. people hold them for a long time . the other issues we have seen are you are starting to have competition from higher end phones. and competition from summer notebooks.

the market is giving cramped -- slimmer notebooks. the market is getting cramped. you cannot get the replacement phone -- replacement volume you do on a smart phone. >> it makes me wonder if the world has yet to discover the killer app for the ipad or if the future of the tablet might be the kindles. >> it is reading, watching netflix, checking e-mail. doing things that do not take a lot of computing power. where people tend to do those, in bed, on the couch, place where you will not damage your iphone. -- your ipad. they last a long time. that is great for consumers and not so good for ipad sales. >> thank you for that imagery. [laughter] yesterday, we saw microsoft --

among the things that may be impacting shares is the notion that they will stop at their share buyback. apple has taken on herculean buyback of shares. a dividend, god for bid, coming out of silicon valley. >>i wonder if you expect them to do more with the more cash they've created. >> i do not expect them to do more on a relative basis. i expect them to continue to do a lot, meaning, continuing to issue the dividend. our expectation is for them to raise it 10% every year. i expect them to continue buying back $8 billion per quarter in stock. i do not think you will have the magnitude of accelerated share repurchase as we've seen over the last 18 months, in part because we are running out of cash in the u.s.. it puts onerous requirements to raise debt around the world if

you're going to keep that level of buyback. we expect that to come down. or to stay at a high level relative to most companies. >> we will -- andy hargraves -- thank you very much. what will yahoo! do with its stake in ali baba? >>we will look at mercer mayer's options -- marissa's -- marissa mayer's options, next. ♪

>> i'm cory johnson. facebook and instagram were hit with an outage overnight. it was not the snowstorm. facebook -- facebook says it is due to a technical error. they say it was not a cyber

attack. i can only imagine if it happened if they were changing internal systems. yahoo! reports fourth-quarter earnings later today. the big question, what is marissa mayer going to do with the $48 billion stake in ali baba and yahoo! japan? how can yahoo! avoid the tax bill seemingly do? ue? crawford, i will start with you. what is yahoo! to do? >> what got needs to do is keep their investors engaged and keep their investors happy. what that means is that they have to figure out a way to limit their tax exposure to this transaction. whether that tax respin out or some things do it ali baba if they can exchange their shares

for cash. they need to make an effort here to limit their exposure. if they do not do that i think you are going to see massive shareholder callings for change. 35% is a big number. there are ways around this. >> as i often say, provine, i do not care about the stocks. it is intriguing that this has been the thing that is overshadowed everything that yahoo! has been doing for the last couple of years. >> i think one look at this is they have had the last couple of years, people focused on the ali baba thing. it will be interesting. how much faith the board places in the management structure to turn around this business. what portion of those proceeds at the end of day of the going to retain for organic growth. >> we have a full-screen the

gives us a map on what yahoo! is looking at in terms of enterprise value. it is shocking when you look at the total enterprise value of the company. usually an enterprise value, use of tract cash. you have these asia holdings. it values the company either at -$14 billion or the tax bill will be whatever yahoo! is worth plus $14 billion, which seems implausible. provine, what you think of that math? >> i like to look at it, tax adjustment asus. if i were to take a 35% tax on the asian receipts -- we look at the core business valued at $3 billion. that makes it a smaller company to manage. i think the $12 billion is against -- is a good cash work to start with. god is in a difficult position

because -- yahoo! is in a difficult position on the front end, a lot of consumer products are coming out now. they're dealing with people like -- >> let's imagine they hit their deadline. a magical world where it happens today. they had this alibaba asset spun off you're going to have a company valued at $3 billion the business itself valued at $3 billion. ford have billion dollars in revenues. $800 million in free cash flow. that is a strange capital structure. >> it is an odd capital structure and it will put pressure -- the pressure point is moved away from the last couple of quarters on growth. what this would do is move the pressure back to, how are you going to grow this company?

they're starting to grow mobile but it is insignificant in terms of the overall business size. other parts of the business have been declining. how do you accelerate growth? they've have to do it in organically or do some kind of a deal -- in organically reducing kind of deal. you have to pay a huge multiple -- you have to pay a lot for the cash that would be on the books. it means they would have to get inquisitive rapidly. a tough place to be because what do you buy in order to accelerate mobile in a way they have not been for the last two years? >> i think they should open a bank. we will know they haven't great plan of can goldman -- can goldman going to the warriors game. thank you very much. bit coin got a boost with the opening of a first license

exchange, backed by the new york stock exchange. house is going to change the trading of bit coin -- how is is going to change the trading of bit coin? ♪

>> tim draper is not giving up on bitcoin despite big declines this month. draper bought 2000 bit coins spending roughly 400 -- $400,000 to get them. he also bought 32 thousand bitcoin's last year government auction. the value of bitcoin did more than 30% in two days this month. it has recovered a little bit since then.

one of the reasons for the resurgence has been the opening of the first regulated bitcoin trading exchange in the united states. it is run by coinbase. joining us is brian armstrong. i love this bitcoin story. i was one of those people who was dismissive. bitcoin seemed like a smart mechanism to remove the money in one libertarians while it and put it in another. there's something going on. >> bitcoin is a powerful new technology. it is going to make payments more efficient fast, cheap and global. the exchange we lost -- launched yesterday brings stability to the ecosystem. >> let's talk about why that would make transfer cheaper. >> it is not chance for but the stability of the ecosystem will be improved. a lot of people have not been able to trade bitcoin in a safe manner yet.

they've had to use a variety of exchanges all over the world. now, if somewhere in the u.s., backed by the new york stock exchange. we are based in the u.s. so they can keep their funds on shore. >> bitcoin is fascinating because it raises new issues. talk about why insurance is important. >> quite a few cybercrime incidents. hackers are try to get their hands on bitcoin. having cyber crime insurance policy like we have a coinbase is a great way to bring confidence to the ecosystem. >> do you imagine a world where we will see people at currency desks trading bitcoin the same way they are trading swiss francs? >> yes. it is already happening. we launched it yesterday. we were trading millions of dollars of bitcoin in the first day. a lot of those people were traders on wall street who spent their day at a desk and then went home at night and started trading bitcoin.

nursing hedge funds -- we're seeing hedge funds trading bitcoin. >> do thinks price -- do you think price stability starts to happen right away? why is it necessary to change the dynamic of what has been a volatile market? >> getting more people into the ecosystem. it will make it less volatile if you have a larger group of people participating in the system. there were too many market ups and downs, given speculation on which provider is going to be up. now that coinbase is here, we will hopefully be a bedrock for the industry and help people give more confidence to it and >> the new york stock exchange backing is interesting to me. >> they want to have a portal or visibility into this trend. you can see the similarity in their business and hours.

they decided to give us a chunk of money. >> the notion of all the things the block provides. the information that goes along with every bit coin trade. is that part of this business that would benefit from it trading platform? >> you will be able to see all the activity on the bitcoin ecosystem happening on the block chain. it is a way to transfer digital assets between two parties without a trusted intermediary. what it means is that if you are in the business of being a financial intermediary, you might start to see pressure. >> like the new york stock exchange? >> not exactly. they're facilitating. we are in a similar position to them. >> brian armstrong congratulations on the deal. >> thank you.

>>lyft is losing the mustache. a new look when we sit down with the company's ceo. ♪

>> you're watching "bloomberg west." i'm cory johnson. lyft is getting a new look and momentum in the battle for the ridesharing market. the number of rights offered by the service off -- jump fivefold. that is a lot. lift is rolling out a new campaign -- lyft is rolling out a new campaign. they're giving the cars a new look. dropping -- dropping the pink mustache for a close --. -- a glow mustache. i'm joined by logan green.

>> the pink mustache made the company in a lot of ways. grace the cover of every news article about lyft. it has been a symbol of the community. last summer, we brought on jesse mcmillan, the creative rector at virgin america and we said, the mustache has been around for two years, let's work on what is next. >> they get dirty after a while. >> they did not weather well. >> talk to me about how you look at your business in a world where it is you guys and uber. how do you define your business against uber? you can tell me that you do not care, but i do not believe you. >> very competitive space. the way we look at it is, there is the bread and butter fast

pickup times. we need enough cars in every city to have a few -- to have a one a few minutes away from you. the brand in the experience. lyft is focused on having the most will coming and memorable ride. we're developed a system for scaling up the lift community. lyft community is at the core of what makes it special. drivers who care about making everybody's day better. we've developed an interesting system for scaling this community across the country. we have a mentor program where our top drivers in each market on board each new applicant. >> how does it work? >> as an applicant, you hit a button and in 30 seconds, you are matched with one of our top drivers. they will meet you in person. they do your test ride with you. they tell you about the lyft community. what it means to be a driver and

how to be great at it. that has what is allowed this community to scale across the country. >> i drove a yellow cab in new york. they are sick of the stories in the control room. i'm remembering when i took the tests hate all the knuckleheads i had to pay bribed dispatch got to give me a car. got behind the wheel and thought, i know how this is supposed to work. people would give me simple directions and i would be at fifth avenue and 40 eight st and saying, how do you want to go? what are the kinds of things -- i'm sure i gave crummy rides. that is not what you mean when you say memorable. why is -- what you mean by memorable and why is that important? >> we mean, having a fantastic experience. whether that is conversation with the driver.

with some of the most amazing drivers on the road. we recently did an impact study and we found in l.a., 50% of our drivers work in a creative industry. artists actors, photographers. the use lyft as their primary income source to support going after the dreams. >> is a function of l.a. oracle of your business? >> both. in san francisco, the industry is entrepreneurial ship but they're using lyft to fund their business. you get a lyft in any city, you'll get somebody with an interesting ambition or life story to tell. if you ask her driver, why are you driving for lyft, you are about to get an interesting story. >> 500% growth last year. is that about new cities or growth in existing cities? your oldest city is san francisco? >> that is to it half years old.

the second is l.a., two years old now. >> what is the growth in your oldest market in san francisco? >> it was on track with the rest of the country. >> why? >> this is a massive market. the thing that was misunderstood by a lot of folks when we launched was lyft and uber they're going after the taxi and limo market area lyft's ambition was never to create a new taxi. we are going after the consumer transportation market. lyft is out there to compete with personal automobile ownership. we want to create a better way to get to work every day. a better way to take -- >> a communing alternative as opposed to the occasional special function? >> exactly. that is why the growth -- we have blown past the sizes of the

taxi and limo markets. we're taking on every trip. >> what is your -- what do you think was the purpose of licensing drivers and cars when these things first came up? i understand the argument that says this is meant to keep incumbent players -- there was a reason those laws came into place. do you think those have no effect? >> i think they are incredibly important. we're working with regulators across the country to create a new wave of regulation. lyft is a t and c in california. -- a tnc in california. we have to do a criminal background check, a record check, a vehicle inspection. those are core ingredients to on

boarding a driver in any city. -we do that in every city. the regulations that protect public safety and require stringent on boarding are important to read what took a bad turn in the taxi industry is when they started fixing prices and limiting the number of drivers on the road. that is crippled the taxi industry. >> it is hard to defend a bad taxi ride. i'm sure they're up at lyft rides out there. -- there are bad lyft rides out there. very informed taxi drivers in the city that know some of the history of what is going on. you jump into a cab and other cities, nothing like that. the regulations work differently from place to place. >> london has the best taxi drivers in the world. it takes years to become a black cab driver in london. >> do to keep your people on

long enough? it seems i at transient employment for a lot of people. >> 50 has a mix of drivers. some are doing it as a career. -- lyft has a mix of drivers. some are doing it as a career. others use it as a stepping stone. there's a great mix. >> give me one compelling reason you think your business will be bigger than uber in the long run. >>uber is a great majestic's company. i think it is a great car service -- logistics company. it is a great car service. they are not going after every ride. where going after this $2 trillion industry and we will continue to drive the price point down so that every time you need to get from point a to point the -- point a to point b you get the most memorable ride.

>> coming up, the wireless market may be saturated. that has at&t looking at south of the border. big plans for mexico, next. ♪

>> i'm cory johnson. this is "bloomberg west." at&t is buying another mexican wireless provider. nextel mexico from its bankrupt parent for $1.9 billion. it looks to build its first north american service area covering both the united states and mexico. what could it mean to threaten mexico's king of telecom? john butler, joining us.

john, these are big moves by at&t. is there going to be one at&t wireless service for everyone on both sides of the border? >> i think so. to me, this is a big move for at&t. it is the first time a u.s. carrier has stepped outside of u.s. borders to grow. what at&t has talked about for a while but did not do until it moved on mexico is they talked about looking at other markets and getting into markets where they saw the kind of head room where they could grow that 4g service. grow the data side of the business. i think mexico represents all of that and more. >> average revenue per user's does not seem like it is what this will do -- boosting average revenue. >> most of the mexican market is

prepaid. i think it will take time. once at&t gets into that market and they begin to sell additional service, they can get that average revenue per unit up. particularly, if they do a good job penetrating the enterprise side of the business, really selling mobile into companies. honestly, that is where the money and margin is. >> tell me the mexican -- tell me other with the mexican market is different from the u.s. market? >> i think the big difference is it is predominantly a prepaid market so you're not signing that two your contract. instead you are signing a month-to-month contract. you are also dealing with a sizable dominant carrier. in the u.s., we have a duopoly with at&t and verizon. in mexico, it is dominated i carlos slim and american mobile.

they have over 50% of the market. i think at&t has the size to reckon with them. to me, if nothing else, i think to slim this represents a threat. albeit small at this point. >> to american movil 59% market share last year. i wonder if we are looking at a situation where at&t is holding a minor asset like a t-mobile or a sprint. it is tough to beat 69%. >> think about this. the regulators are making slim, slim down pun intended, to less than 50% market share. they're going to have to spin out properties. as we've seen, at&t seems more willing to buy them build.

you have a willing buyer. i'm sure there talking to carlos slim. they can grow quickly through the purchase of properties from him and upgrading the network quickly to expand. >> some of the other players, verizon sprint or t-mobile to try to expand its network south of the border because of their inability to expanded north of the border? >> telecom south of the border is right for the picking. they were behind the yet -- behind the u.s. in terms of smart phone penetration, data services, average rates, all of that. there is a lot of headroom for growth if you can get a foothold . i think at&t has made the right move by taking that step outside the u.s. into mexico. >> john butler, senior analyst of bloomberg intelligence.

mark crumpton joins us with a sneak peek. mark, what if you got? >> on this day after the blizzard that wasn't we are seeing a sharp selloff on wall street. what has the equity market sounding the retreat? i will be joined by tony dwyer. purchases of new homes jumped to the highest level in more than six years. will that momentum continue in 2015? annika can't look at the numbers for us. --anika khan. charles ettinger will join me from washington. i will see you at the top of the hour. lori, back to you in san francisco where it is not snowing. -- corey, act you in san francisco, where it is not snowing. >> that trend is going strong, what you need and when you want it. my interview with the ceo of

saucy and at that can deliver a bottle of scotch to your door in under 30 minutes. next. ♪

i'm cory johnson. this is "bloomberg west." alcohol delivered straight to your door to -- be a saucy, and on demand liquor store in your pocket. the app lets customers order and pay for alcohol with area liquor stores as partners. i spoke with chris vaughn about the business of mobile booze. >> all of us came from a company called text plus. we were around in the social mobile space. we wanted to pursue something that was new and connected to a traditional market. the alcohol space is hundreds of years old. reasonably untouched by technology. we saw an opportunity in being

able to unlock different facets of that market. >> when you look at the numbers, it is amazing how giant enormous -- how enormous the booze business is. >> over $105 billion of alcohol sold the retail stores in the u.s. alone every year. a little over $90 billion that go through on premise restaurants, bars that sort of thing. >> what are the regulatory issues? >> alcohol is an old industry. the government set up a three tier system of alcohol that separates producers, descriptors and retailers. the regulatory environment right -- varies state to state. we make sure to work with the local -- >> what does that mean fundamentally? do you have licenses to make these kinds of deliveries? >> the way saucy works, we are

dispatch and delivery network for retail liquor stores. we partner with retailers in any given city. when customers are purchasing they are purchasing from those stores and we're making sure those orders are routed to them quickly. we have been able to start working with larger brands like the anheuser-busch possible to introduce -- anheuser-busch's to introduce them to new campaigns. one of the partners we're working with his anheuser-busch. we've been working with them for about two months. >> dimmick budweiser. >> -- they make budweiser. >> and others. some of the things we've been able to do for them is unlock their digital campaign. it is the first time and anheuser-busch ad can be clicked directly to a purchase. that will bring a customer into saucy with the product pulled up.

they can purchase it and it can be there in 20 or 30 minutes. >> how do you get paid? >> we partner with stores, we're driving up volume to help them run this delivery system. once every two weeks they're paying us a fee based on how much volume and traffic we're driving their way. >> let me ask you about competition. you feel like you are differentiated from other competitors? >> it had to come back to the platform we were building. most people went after seamless web or grub hub of the alcohol industry where they send in order to somebody. we felt it was important to build the dispatch and delivery infrastructure to control that experience more tightly as opposed to taxi magic, you have uber. for us, it was important to have that infrastructure.

>> that is chris vaughn, ceo of saucy. one number that tells us a lot. sarah joins us with more. >> 3.8 billion. a big number. that is how much revenue analysts are expecting facebook to announce in its earnings tomorrow. intech, it is all relative. that is to slow down from the prior year's quarter. the fourth quarter in 2014. it is a slowdown from earlier quarters this year. the question for facebook is can they prove that these new things they are investing in can actually deliver revenue over time? >> i guarantee you analysts will be wrong. >> they always exceed expectations. >> or, underperform. in the case of facebook, they almost always beat it.

to me, that is the analyst getting it wrong. the analysts are supposed to figure out what the company is doing. >> the company is supposed to set low expectations. >> that is why the whole thing is ridiculous. the growth of this size, to be growing at 50% -- >> is like 40% anyway. 46% growth from the prior year. it is still slower. >> every quarter, except for the first one, they exceeded the analyst expectations. >> it is all a game. >> it will be an interesting quarter from facebook. good stuff as usual. thank you very much. latest headlines. more of "bloomberg west."

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>> from bloomberg world headquarters in new york, i'm mark crumpton. this is "bottom line." the intersection of business and economics with a main street view. to those of you around the united states and around the world, welcome. we have phil mattingly who has details on president obama's trip to saudi arabia. chief washington correspondent peter cook examines the latest numbers from the congressional budget office.