>> from pier 3 in san francisco, welcome to the best of "bloomberg west." we bring you the top interviewers and power players in tech and media companies that are ruling the world. revenues rose to a record $74.6 billion in the first quarter, up 30% profit.

18 billion,. >> interest in apple products is at an all-time high with half a billion customer visits in the first quarter. demand has in shattering our high expectation driven by the unprecedented popularity of iphone 6 and iphone 6 plus. >> staggering is right. iphones are flying off the shelves. maybe the only negative note was a decline in ipad sales. the biggest development is the success apple has seen in china, opening another potential growth area. i asked about the whopping iphone number. >> i wondered what was the catch, if there was some sort of channel fill in their or some explanation. it just could not be that good of a number.

it turns out that it was a clean number, that they did not fill the channel. even though expectations were for high $60 million. that $74 million number was well above that. i do not know what the right number was, but any way you cut it, it was impressive. >> we were on live tv and they were talking to somebody else and i saw a number go by. i was waving frantically to the producers to come to me because that was the number. but there were so many other numbers in this quarter. it seems to me that the margins suggest that it wasn't just big iphone sales, but big iphones, the iphone 6 plus. >> some of the geographic mix, they said overall they sold more iphone 6 than any other ones. it sounds like in the emerging markets, the 6 plus has been the winner. that has been a suspected. a nice impact on growth margins. guidance for march was better than expected and would have been even better if not for the

fx impact. anyway you look at it, it looks optimistic. their gross margin guidance would've even been better. >> 46% unit growth on a year-over-year basis on the biggest quarter they ever had a year ago, it is interesting also that the numbers were so strong and the market reacted to it as if it was going to continue to happen. will this continue to happen with the iphone? >> they talk about that, the sustainability. that is the core question for investors. at some point, they will have to start comping these incredible numbers. we are already working through that question. some of the comments from tim cook is that first-time buyers were at an all-time high. suggesting they are gaining share. they have been tracking the switch rate from android two iphone for three years.

it is the fastest market share from android which plays into the theme which is the product cycle will have more legs than investors expect. and then the iphone watch, whatever the expectations are for that, that was not in the march guidance. you put all these together there is still the big elephant in the room, which is what do you do with the big comps for next year? but overall, everything for march looked good. >> average selling prices $687. if that stay somewhere in there -- but the price of the components could come down in -- and the margins could get better. >> they could. without the impact of the fx they should be inching about 40%. they did have a peek margin of 47% a year ago. that is obviously unrealistic.

but it say for investors to think about margins inching higher in march and in june. if you are a believer that stocks follow margins, that would suggest that shares of apple will move higher in the next six months. >> ipad, however, kind of disappointing. they introduced an upgrade. maybe the results suggested that maybe they knew it wasn't going to be that big a deal because the ipad sales are down now four quarters in a row. >> it has been a big disappointment. there seems to be a trade-off between some of the ipad and the mac sales. i think what you actually see is some people going back to your phone and your computer, your

desktop and portable. they talked a little bit about this on the call in terms of the business side and ibm having a positive impact. bloomberg reported about a larger screen ipad which is also in the works in 2015. that may be some hope but i don't think it changes the broader scene, which is the ipad is probably a low single-digit grower. >> i have to say this anecdotally, fred hickey is a high-tech strategist. i look forward to getting on my ipad. i am reading on my new phone now and i wonder if users are finding that the killer app for the ipad isn't there. there is nothing to differentiate it once we have big phones and skinny pcs. >> the ipad unit growth numbers suggest that is exactly what is happening. >> we have seen four quarters of this. the phone has only been around for one quarter. could the tablet be a fad?

>> i don't think it's going to be a fad. there is clearly a place for it. there needs to be more applications that are optimized to get it to grow again. the other piece that plays into this is the replacement rate is a little bit longer than typical phones. i think having -- i think it hasn't grow -- it hasn't normalized the growth yet. >> facebook may be starting to look a little bit like amazon. mark zuckerberg says he has a long-term vision. in the short term, he is doing pretty well.

>> this is the best of "bloomberg west." facebook is cranking up big time gains, especially on mobile. net income and profits up to $696 million, up 34%. the percentage of ad sales for mobile was 69% in the quarter, up from 66% of the prior quarter. that growth rate of sales and users is slowing. expenses rising big-time. here is ceo mark zuckerberg. >> 2014 was also a year big investments in our future. this year, we made big debts on the next generation of communication and computing platforms by acquiring whatsap and oculus. we focused on raising the quality of content out, improving our search and video

product and our mobile apps. >> for more, i spoke with alli rosenthal. and david kirkpatrick. >> day is almost boringly predictable. they have beaten nine or 10 quarters in a row. i thought it was so interesting the way zuckerberg answered a question or just now about how aren't a really putting the wrong emphasis on building up use in the world. he takes such a long-term view. he said, well, if you are the kind of investor we want -- >> i heard that. i love that. it was an amazing moment. i never heard a ceo saying you are not our kind of investor if you do not subscribe to our viewpoint. >> if you really want short-term, don't invest with us. we think really long-term and that has paid off. the one thing than to most blows me away is that to less than three years ago they went public

and everybody was saying, don't get mobile. this is a big problem. they doubled their mobile ads in the last year in revenue. they have turned on a dime. somebody said today, one of the great analysts, i forget his name, this is a historic thing in business that they achieved this mobile ad result. >> it really is amazing. you can change a fan belt while the engine is running but it's not preferable but that's what they have done. it's really amazing. my boss -- >> it is remarkable. when i left facebook, we were not even close to monetizing mobile. it was more of a growth product. very much a growth hard -- growth product, i should say. consistent with the marks comments about trying to reach and connect the whole world. we were really focused on reaching users and new year's servers via mobile devices

because it was probably the only device they had access to. so we were really focused on mobile as a product that could reach the ends of the earth and not monetization. i'm blown away but not surprised at facebook's ability to blow away their numbers in this category. >> now that are 526 million mobile-only users in i lifted a percentage of mobile users. it was 37.8% of the users, well over a third of the users now nearly 30% only on mobile. -- 38% are only on mobile. >> yeah. >> was there a belief in the early days of facebook that that is where the world is going or that we should at least debt our -- dip our toes into these waters and see what happens? >> it was a culmination early on of initial inbound demand. people hearing about corporations, other users hearing about facebook growing in the u.s. and wanting exposure to the product. so some of it was in down

-- inbound initially. but a lot of it was an early recognition on the part of mark and the management team that this was the way users outside the united states, and canada for the most part, would first be acquainted with facebook. it really blew open with the advent of the smartphone, the iphone, and the developer platform. >> what is it that mark said he wrote in the letter in the s1? >> yeah, i heard that. it's remarkable. even if you look at the new ad unit, the video unit they have developed, the phones being used today, the network infrastructure that allows you to watch native content in this experience is really remarkable. the fact that mark wrote this letter on the phone was not surprising. the hardware is there. the software is there. and facebook has been there every step of the way.

at least over the past couple of years. >> facebook spent $1.1 billion in r&d in a quarter, 29% of revenues. both those numbers are near records for facebook. what does this tell you about their plans for the future? >> again come long-term, long-term, long-term. if they are really thinking, for example that virtual reality is the potential next interface for computing, that takes a lot of thinking, spending experimenting to understand. i mean they bought oculus but , that is one of the ton of things they are doing. i think a lot of money is going to projects for a nonprofit business. internet.org it is the kind of thing that has some quality to it. they have a lot of things we don't hear about, i'm sure. >> up next, we head to the campus of alibaba. this is an inside look at office romance, alibaba style. ♪

>> welcome back the best of "bloomberg west." alibaba is a weird company in about a thousand ways that one unique way is built around love. candy chang traveled all the way to alibaba headquarters for a look at love alibaba style. >> when you enter alibaba headquarters, it is a lot like walking into any tech campus in silicon valley.

there is a starbucks, yoga classes, and three cafeterias. but the perks don't stop there . alibaba takes it one step further, helping employees find love, marriage, and even start families. it may look like any other tech company, but the culture here is unique. employees refer to each other as ali people. and many assume nicknames taken from kung fu novels. >> one of the impacts on jack ma's life were writers of martial arts novels. in the early days as they were starting taobao, people took on names from these martial arts novels. >> that has attracted young

people to work at alibaba. the average employee is 30 years old with a start he -- a starting salary of $33,000 a year. that is more than seven times the average urban worker. >> alibaba tracks young chinese at the top of the field because it is an exciting corporate culture. people feel they can break down barriers and do new, cool, innovative types of things in their work life. >> jack ma is also unlike any tech company founder. ♪ from serenading employees to playing matchmaker. the cafeterias full of photos and names of employees looking for love. right on campus. exit jack ma is so revered every year, on ali day he marries employees and they have ali babies' photos on the wall of those born to employees. >> those new families can get a

lower interest rate for their first payment on their new home. over the years, alibaba has also given birth to a whole new generation of chinese internet companies. former employees have helped start more than 145 new businesses. >> they have attracted people who believe they could do something different, individuals who were dreamers and felt they could change the chinese economy through alibaba. >> this close-knit culture has been a critical part of alibaba's identity and keeping it all in the family has helped the company grow into a global powerhouse with over 24,000 employees. that's more than facebook and yahoo! combined. >> for more on alibaba, betty liu spoke with joe sigh. topic number one, mobile. >> this shift to mobile is obviously two sides to the coin. on the monetization rate, it has

been trending up over the last few quarters. the one thing to remember about mobile is we have now 200 62 5 -- 265 million monthly active users. that is very good in spite of -- in light of the net ads. we believe, as long as you continue to attract users on mobile to buy things, to engage on your platform, at some point, monetization will follow. one thing i would like everyone to remember, in the fourth quarter, alibaba generated $1 billion u.s. in mobile revenue. this is a substantial number. >> on other developments speaking about mobile, yahoo! saw some good mobile revenue growth a day ago. marissa mayer has now spun out her alibaba shares into spin co.

would you have any interest in buying all or part of spinco? >> we don't anticipate buying into an agreement with yahoo! or spinco. this is their right to do. the board obvious. they decided to do the spin off. from our perspective operating , the business day today, we have a 15% shareholder in us. that's yahoo! after the spinoff, we will have another 15% shareholder, that is spin co.. it really does not change anything from our perspective. but i would like to just take this opportunity to thank mercer

-- marissa mayer and also jackie greases. they have been great partners over the last couple of years. >> i know you are a great eel -- dealmaker and you have made lots of deals for ali baba. is yahoo! on your radar at all? can i just ask that? >> we are very focused on our business in china. if you look at the deals that we do in terms of investments and m&a activity, over 90% of them are focused on how we grow our user base, how we increase user engagement, and how we expand our categories in china. with the limited activity that we do outside of china, it's very much focused on the cross-border trade, always with one leg in china.

that is how to enhance our ability to serve small businesses to sell, chinese businesses to sell to overseas consumers. and more and more so now how to help small businesses from around the world, including the u.s., to sell into chinese consumers. our platform has 334 million active chinese consumers. >> i mentioned earlier about the fight you have had in recent days -- i'm sure it's not something you wanted to talk about or that you would want to talk about on a day like today -- but the fight you had with the chinese regulators on alleged fraud at alibaba. the fact of the matter is that is one of the risk factors here in buying me into your company. so what exactly are you doing to combat fraud on your online marketplaces? >> so the underlying issue is an issue that we take very seriously. alibaba runs retail platforms that trade $370 billion a year on a last 12-month basis. that is a lot of transactions. in a way, we very much reflect a very significant part of the retail economy in china.

the issue of fake products counterfeit products, are really a matter for all of the participants in the economy. they involve both online efforts and off-line efforts. let me just say this, for us, there is nothing more important than the trust that consumers have on our platform. that means they should feel comfortable to come to our platform to buy things and trust our vendors are selling them high-quality goods. so we take a very draconian approach toward counterfeits. we spent a lot of resources and money and people to combat this problem. >> alibaba executive joe tsai. redmond washington to the sidelines of every nfl game including this weekends super

bowl we are going to head out , onto the field next to show how microsoft surface is changing the way coaches play. next. ♪

>> you are watching. "the best of bloomberg west" where we focus on innovation, technology, and the future of business. i am cory johnson. it's super bowl weekend. patriots back as the defending champions -- back against the defending champions the seattle seahawks. i had a chance to talk with russell wilson about how the microsoft surface tablet is helping change the way the team draws plays. every time russell wilson does this, the nfl is watching and so is microsoft. this season, the nfl introduced digital, the custom microsoft surface tablet, on the sidelines.

way up here in the catacombs are where cameras capture the images but the cameras are controlled by the nfl. the league takes the image. the team approves the image and 70, sends it to the server, and then shows up on the sidelines. years ago, black-and-white on a crummy printer. today, coaches and players are cheering on digital transformation. >> my rookie year, we used paper. with the old system, you only had two pictures.

>> he's going to have him in a flat and cover him man-to-man. >> with this, you have a lot more views. >> but it's a bureaucratic process negotiated by the league and the techies. a guy from nfl films sits in the sidelines in this little booth. he has a computer where he manipulates the images, captures the images, and press them on a laser printer and hands them onto the coaches. but now it is all done digitally, sent to the surface where the players and coaches can work their magic on the sidelines. the players come off the field. they have the image taken before the snap and after. they can make the adjustments, compare it to other plays, make whatever notations they want to make, and throw the thing either in there or on the ground for nfl use. >> but this is only a taste of what the technology could do. the league limits the use of video of different camera angles. microsoft is already planning for more next season. >> the nfl players and coaches are giving us feedback. they want more. they want video. they want to be able to put their playbooks and it. >> the san francisco 49ers in an nfc championship, you need to

know what to do. i think that really helps a lot for me. >> that was russell wilson from the seattle seahawks. up next, 70,000 fans heading to the stadium, thousands were hanging around the phoenix area. can the nfl provide enough bandwidth to deal with those selfies? ♪

>> i'm cory johnson. you know how to find out if your

friends are going to the super bowl? you don't have to find out. they will tell you. this year, it means a lot of selfies. the nfl is taking on the big technological challenge to get the stadium ready. the nfl is stepping up with a new plan for the league wide requirement for all stadiums. i spoke with the chief information officer who joins us from scottsdale, arizona. >> all of our games present a big challenge as far as connectivity goes but nothing quite like the super bowl when you at all the fans along with the amount of media, etc. it differently treats a -- create a challenge for conductivity. >> i want to take you back in time, all the way back to 2008. it was a very different technology world. the iphone had just launched. it was a few months old. there was no instagram. the best selling phones were made by nokia. it's a different tech world now. what do you do to take the stadiums that are not settled already into rewire them?

>> no, you just have to work really hard to make sure they are continuing to reinvest in them. if you compare it to 2008 and what connectivity we did have, it was primarily focused on downloadability. so if you wanted to do something, you downloaded it. and now you see fans creating their own content and wanting to publish that themselves. that's all about upload speeds. so that is what it is all about it's just making sure that all , the clubs, particularly when you are hosting a super bowl that you have the latest and best connectivity. from a wi-fi persuasive through -- pervasive throughout the whole ball as well as a data system for all carriers. >> mark cuban said he would wire all the seats in the new american airlines arena and it sounded crazy. but he was leading not. -- that. the nba was not doing anything in that regard. talk to me about why the nfl is trying to create some sort of wi-fi standard for its stadiums and what that standard is. >> if you look across our stadiums in the country, they are in varying stages of age or

some have recently been open like the 49ers' new stadium that has the latest and greatest. for planning purposes, we wanted to make sure clubs knew what the standard base expectation would be. that's primarily to make sure our fans get what they want. they want to be connected. we know the at-home expense has gotten amazing. it's awesome to watch a game at home on your sofa and surfing the net and getting all your data. though we know the best place to watch an nfl game is in an nfl stadium. we want to make sure that fans are not at a distant the vantage

-- a disadvantage from a conductivity standpoint. we wanted to make sure that all clubs understood there was a minimum requirement and work hard through many partners to help them get to that standard. >> i have been looking for someone to blame for the crummy 49ers season. here's what i'm thinking. the new stadium is a lovely place. but after halftime, nobody is going back to their seats and the home field advantage isn't happening. i wonder how you think about putting the butts in the seats instead of having this great experience that does or does not involve the game? >> at the end of the day technology should be about augmenting the game experience and not replacing the game experience. so we not only give standard conductivity guidelines but we also work closely with all the -- connectivity guidelines, but we also work closely with all the clubs to make sure the in-stadium experience creates an awesome game experience for fans and for players that are on the field. and it obviously plays much better for fans on television when they are in their seats

cheering and not in line or doing something else. i think it calibration has to happen so the game stays at the center of attention and you do not get too carried away by all the cool devices and other things it you can do. >> i was up at the seahawks centurylink field. those fans are so passionate. it was an amazing experience >> oh, my gosh. >> and so freaking loud. it was incredible. when you meet with these teams how does this integration happen? what form does that take? are there ceos of every team as well? >> yes, there are. each team has a leader of technology and usually a leader of game day presentation, a producer of sorts that produces the live game day experience in the stadium. there is good coordination between the technology available along with what will happen. using the super bowl as an example, we programmed things that will be happening within the super bowl that is well or

coordinated with the in-stadium game. the coordination has to be tight because it should enhance and augment the game experience. >> it's a sad day in stash land. lyft is losing the fuzzy pink mustache. they're going for a new look. we will sit down with the company ceo ins talk about that. next. ♪

x this is the best of a bloomberg west i am cory johnson. lyft is getting a new look and new momentum.

revenue land rides offered jumped fivefold. they are dropping the iconic fuzzy pink mustache. for what they are calling a global stash. -- glow stache. >> the pink mustache was an incredible launch device. it is what made the company in a lot of ways. it graced the covers of every newspaper article on it. but last summer, we brought on jesse mcmillan, the creative director at virgin america. he said the mustache has been around for two years now. let's work on what is next. >> they get a little dirty after a while. >> the mustache has had some issues. they did not weather well. >> talk to me about how you look at your business in a world that puts you and uber out there in the lead. >> obviously, it's a very competitive space. there is the bread and butter of fast pickup times. we need enough cars to have them minutes away from you. but it's about the brand and the experience.

lyft is focused on having the most welcoming, affordable and memorable ride. we have developed a system for scaling the lyft community. it's at the core of what makes lyft specialty and it is a core of drivers that makes everybody's day a little bit better. we have developed an interesting system for scaling the system across the country, what we call a mentor program. we have top drivers. they onboard each new applicant. >> how does that work? >> you hit a button and in 30

seconds you are matched with one of our top drivers who will meet you in person. they do your first test drive with you and they tell you about the lyft community, what it means to be a lyft driver. how to be great at it. and that is what has allowed this very special community to scale across the country. >> i remember being in a yellow cab in new york. i drove a yellow cab in new york. the public is probably sick of these stories, but i took the test the commission had and i paid all the knuckleheads i had to pay and i've arrived the dispatch guy -- and i bribed the dispatch guy to give me a car. i would get somebody in the car and asked them how do you want to go. i had to learn all those things. what are the kinds of things

what makes experience, because i'm sure i gave some crummy rides. what do you mean by memorable and why is that important? >> when we say memorable, we mean having a fantastic experience. whether that is a conversation with the driver -- we have some of the most amazing, phenomenal drivers on the road. we recently did an economic impact study. we found in l.a., 50% of our drivers work in the creative industry. they are artists, photographers, act there's -- actors and they use lyft as their primary income source as they pursue their dreams. each city is different. in san francisco, the industry is entrepreneurship and people are starting businesses. but they are using lyft to fund that business. in any city, you will get some be with an interesting ambition and an interesting life story to tell. if you ask your driver why are you driving for lyft, you are bound to get an interesting story and what they are saving

money to do. >> is that for onboard new cities or growth in existing cities? your oldest city is san francisco? >> it's two and a half years old. second is l.a. it's two years old now. this is a massive market. the thing that was misunderstood by a lot of folks when we first launched was lyft and uber was going after an $11 million taxi market. we weren't turned to create a better taxi. lyft is out there to compete with personal automobile ownership.

we want to create a better way to get to work everyday, a better way to take every trip -- >> a commuting alternative as opposed to the occasional special function or whatever. >> exactly. that's why the growth has just -- we have blown away the the taxi and limo market. >> what do you think was the purpose of licensing drivers licensing cars when these things first came up? i understand the argument that

says this is just meant to keep incumbent players, 13,500 medallions in manhattan or in new york city, i should say. but there was a reason those came into play, safety and so on. do you think those have no effect or are not needed anymore? >> they are incredibly important and we are working with regulators across the country to create a new wave of regulation. we have done in dozens of jurisdictions already. in california, there is a government-prescribed program. we have to do a criminal background check, a dmv record check, a vehicle inspection. those are core ingredients in any city. we were doing this and we do this in every city whether there is regulation requiring us to do it or not. >> logan greene, lyft ceo and cofounder. when will you be able to stream your favorite shows midflight? we are going to sit down with satellite developer the future in talk about the future of wi-fi in the skies next on "the best of bloomberg west." ♪

x this is the best of "bloomberg

west coco. i am cory johnson. -- coming up on coming up on -- >> this is the "best of bloomberg west." i'm cory johnson. as the government decides whether to allow in-flight cell service, airlines are racing to bring wi-fi to their fleets. but having wi-fi and having fast wi-fi is an entirely different thing. >> there is a lot of confusion about what makes wi-fi good. it's not just by going by satellite, but what kind of satellite. we talked about this before. we launched a satellite a little over three years ago that had more bandwidth than all of the rest of the satellites.

it's all that bandwidth that makes it so fast. >> it was described as the most powerful satellite ever launched. >> that's right. what makes internet access slow is its congestion, too many people trying to use the same amount of bandwidth and interfering with each other. what you have to do is measure the total amount of bandwidth that you get and that is the design criteria that we did with satellite 1. >> and where is the coverage going to be? >> we just covered the continental u.s. with wi-fi 2, we go from the tip of south america all the way to europe. jetblue has been our launch customer on the in-flight wi-fi. and the caribbean is a big market for them. one thing we wanted to do was cover their markets in the caribbean and cover the atlantic side to connect with our partner in europe. we can provide coverage from mexico city to dubai with that same quality of service. >> what is it about the ability

to send all this wi-fi? it's not just more but the way you do it. the bandwidth that you use. >> the first one had about 41 gigabits of capacity. if you look at the conventional satellites people are using, they literally have 1% of that amount of bandwidth. so that means people are just competing to get access to it. so all that bandwidth that we have is what makes it fast and responsive and also allows you to do streaming. for the first time, people can do netflix or download videos, able to watch live sports.

>> there's no reason to get off the plane. [laughter] suddenly, there are a lot of companies, a handful of companies, spacex and google facebook, all talking about the way to get wi-fi to lots of people. >> transmission conductivity is an essential business. it's one of the three legs of information. you think of processing, storage and transmission. transmission requires facility. you have to have things that are cost-effective. we are tried to make the most cost-effective satellite and we think that is the path we are on. these otherwise, they are interesting technology. i don't think they will be as cost-effective as we can be in that timeframe. >> why not? why can't facebook solution to provide internet and google's plans, why can they not be as cost-effective as yours? >> one, there is an amount of bandwidth you can put through a satellite and there is a capital cost that goes with it. our mantra is how many gigabytes --

the other is providing that bandwidth on target. you don't want to have tons of bandwidth over the ocean and have lots of demand in bangladesh or certain parts of africa. not only do you have to create that bandwidth effectively, you have to deliver it on target. one thing you have to work on with low orbit to is one of the big problem is the bandwidth is fairly uniform delivered over the world. what you find, if you look at any measure of business or economic activity, it is very concentrated. so you can look at concentrations of people, flight routes, minerals, economic activity.

so the bandwith in the world is very focused and that is what we can do. >> that does it for this edition of "the best of bloomberg west." we will see you later. ♪

>> welcome to bloomberg's davos debate. can the fed raise interest rates? will quantitative easing work in europe? currency wars, are they the biggest risk do business? we have a cracking panel.