cory: live from pier three in san francisco, welcome to "bloomberg west" where we cover technology, innovation, and the future of business. i'm cory johnson. here's a check of your bloomberg top headlines -- federal reserve chair janet yellen says patience. that remains the fed's watchword. in testimony today janet yellen says there is still room for economic improvement before the fed hikes rates. >> i don't think we are back to conditions i would associate with maximum employment or nor bowler -- normal labor market conditions. things have improved normally

but we are not there yet. we want to see a healthy recovery continue. cory: yellen also strongly criticized congressional audits saying it would close eyes the process. she even held up the fed audit look, saying most of the operations are subject to audits. greece wins a reprieve as eurozone finance ministers improve an extension of the greek bailout. it sent greek bonds and stocks hires. greece will sell assets consolidate pension funds and revamped tax collections but the imf manager and ecb president say that the greek minister needs to be scrutinized to be believed. president obama vetoed a bill for construction of the keystone pipeline. it is only the third veto of mr.

obama's entire presidency. the senate will vote to override the veto no later than march 3 but right now, the votes don't appear to be there. two thirds are needed to override in both houses. the pipeline would run to montana, south dakota and nebraska. the fbi is offering a $3 million reward for information leading to the arrest of a fugitive russian hacker. he is the mastermind behind the hacking of a campaign known as game over zeus, a virus that affected hundreds of thousands of computers and resulted in the theft of 1 -- of hundreds of thousands of dollars. he's believed to be in russia and is known to take his boat out on the black sea. espn is taking keith olbermann off his show for the rest of the week after olbermann had a tense exchange with penn state hands-on twitter. he called penn state hands, the students at least, pitiful and continued his tweet barrage even

after being sent a story about a long time for the -- longtime program for pediatric cancer. after criticizing their difficulty with the english language, he apologized and espn called the exchange completely inappropriate. now to the lead -- hewlett-packard ceo meg whitman says the company's turnaround remains untracked, but first order earnings tell a different story. overall revenue, down 5% and profit down 4% to $1.4 billion. dig deeper into the numbers and some think it looks even worse -- enterprise group revenue was flat service is down 11%, pc revenue is flat, printing revenue down 5%. you know what else is down? hp stock. is meg whitman right? is the turnaround on track or are things just spinning around?

my guest joins me now from new york. missing analysts estimates -- that always says more about the analyst than the company but this company, 13 or 14 quarters less in revenues despite the acquisitions. >> it was a challenging quarter. you did have margin improvement, but across the board, revenue growth remains challenging to say the least across all the different segments. we see the same pattern this quarter as we did last quarter. the enterprise side of the business remained more challenged than the pc side of the business. the pc side of the business sees mixed trends, but the pc segment doing ok. the enterprise segment still strongly challenged. on top of the execution and operational issues, you have the currency effect which was pretty substantial and likely to

be there for the remainder of the fiscal year. >> currency is a big deal for this company but there should be some kind of benefit in terms of the cost of goods. a lot of goods are supplied in japan. the yen is a lot lower to the dollar. they've got a hedge built right into the business. >> the rolling hedges can only protect you that much. and the services business, you are a little bit more protective, but when you sell a good, you can't dramatically change pricing to meet the currency swings or else you will scare off the customers and give the competitors in upper hand. it is a lot more difficult that it -- then it seems and that impacted them substantially this quarter. cory: i feel a little guilty like i am ripping on hp too much but the shift away from

pcs, the shift toward enterprise -- the opportunity and enterprise might be greater in the margins might be better, but is it still possible are we seeing that hp might have a better opportunity but can't rise to the opportunity the enterprise business? >> is a very structurally challenged industry. selling servers and storage and networking gear in a fast, commoditizing world where the cloud is the de facto model of doing business and companies like facebook and google are dramatically undercutting the ran name vendors and going with unbranded gear is a big deal. the tech spending from the traditional enterprise segment is only going -- only growing about 4% the year. in that environment, you have to compete with grander gear and along with the likes of cisco, lenovo and ibm, so it is not easy. they have their own execution

challenges as well. but the two together, add the currency effect overlay and it does not paint a pretty quarter. cory: operating margins are a little better than they were a year ago, but with the top line shrinking so much it's not going to make this a bigger or better company. do we need to accept the notion that the shrinkage at this point is just going to be -- it's not going to be the big business it once seemed like it was going to be? >> meg whitman is certainly betting against that thesis in that you continue to see margin improvement and cost reductions helping the company. we will wait and see if you do split that in your off of a smaller place, a fortune 50 company is nothing to sneeze at but whether you can extract the

same kind of cost savings number one and, number two, you -- can you become more agile that's the bigger challenge, to be honest. cory: this morning, the announced a big deal for deutsche bank. they would not say how many aliens, but it seems like the kind of thing that would give them a big boost but no. >> those are the kinds of big deals you want to have many of. that's a testament to the private cloud is there and the financial services industry which is a fifth of tech spending. those are the kinds of deals you want to have many a number of. cory: thank you very much for the pre-and postgame show. "bloomberg west" will be right back. ♪

cory: i'm cory johnson and this is "bloomberg west."

here are some of our top stories. police 28 people are hurt after a metro link train collided with a truck in oxnard california. no one was killed. the driver of the truck was taken into custody and is being questioned. google chairman eric schmidt will meet with the head of the european union's antitrust division. they will talk about the four-year antitrust investigation into google's business practices. it's the first meeting with google's executives since she took office in november. layoffs are coming at viacom. parent company of comedy central and mtv -- people familiar with the matter say will be companywide and they are determining the exact size of the cuts. five comments shrinking -- dealing with shrinking audiences thanks to streaming and youtube. existing tack, bills and whistles are increasingly driving car sales. our automotive expert joins me

now from princeton, new jersey. people are not waiting for the hovercraft from tesla? >> really, what is happening is there was so little investment in new technology through the bankruptcy for g.m. and chrysler, all of that pent-up technology is hitting the showrooms. an average vehicle age eating at 11 plus years, people drive it on to the show room and looking at these data, they are fascinated by the new tech that is out. >> talk to me about that dynamic. there are so many dynamics at play. there's the economic state of the union, there's the state of the debt market and a super low interest rates, but the collapse of the subprime markets in 2007 and 2008 -- what happened there? even when you look at a company that did not go bankrupt like ford, you can see a significant collapse in their tech investments at ford in terms of

the billions they spend on r&d. >> even with ford's near miss -- the writing was on the wall years before that. they started to rain in the tech spending well before the bankruptcies and what you wind up with is no tech spending going in to post bankruptcy. profitability search to come back in 2011 or 2012 and as the spigot opens in investment spending that is the products we're seeing in the showrooms now. we have basically a lost generation of technology where, if you think about a noticeable difference in automotive technology in an eight year window we have compressed that into a four-year window. people driving onto a dealer lot with a 2010 model year completely different tech from what they are seeing. cory: it is fairly interesting.

every year when i go to the ces show they tell me this is the best and the brightest and this year's model has all kinds of new bells and whistles, it sounds like you are saying we are about to enter an age of significant technological innovation from all the automakers because of the downturn from r&d spending in 2007 and 2008. >> if you look at it, safety is a good example. safety, fuel efficiency and engine efficiency in general. the other would be infotainment. if you look at the safety side, we have almost leapfrogged over collision warnings. we went from protecting you after you have a crash with airbags and side curtain airbags and then we go to collision warning. we have skipped right over that and we are going into collision avoidance where we have automatic raking, adaptive cruise control, lane keep assist

where the vehicles will steer themselves to keep them in the lane. we've almost totally bypass the effort that says of the vehicles going to warn me, just fix it in the first place. speaking of autonomous driving and self driving vehicles, this is the technology that is the incremental steps to getting there. little by little, we search realize we can make the machines better drivers and we are and they probably already are in a lot of cases. cory: at the same time, there has been a significant increase in the price of cars that seems irrespective of the sales and vehicles overall, blowing right through the recession. i wonder if that's about easy credit, subprime lending, which is such a dominant part of the car business now it wasn't 10 years ago. >> if you look at the price chart, you have a 29,000 dollar

average transaction, now of over $32,000 for the rough 2014. that is additional tech in the vehicles but that additional monthly payment increases being offset by lower interest rates in terms of a payment. that if you think about total cost of ownership, the lowered gasoline prices play into that as well. what you are seeing is consumers go to dealerships and see new tech and they are willing to pay more because what you're are paying for in tact, you're getting in your lower interest rates. you can lower your negative interest rate into your equity. cory: i was thinking about janet yellen telling us that there is no inflation but i guess what you are telling me is it's all netting out with interest rate payments coming down. but once interest-rate go back up, there could be a rapid turnaround. >> that is interesting. the other area of new vehicle sales they're having an effect

on his least -- lease penetration. if you take about a traditional three-year lease term probably some are around 2017 and if rates stay low beyond, we will get a flood of off lease vehicles coming back into the market will stop if they are 2015 model year vehicles coming out of lease, they will have a fair amount of technology and what you'll get is good quality off lease vehicles competing with the 2018, 2017 model year. so now the used car market is going to look like a better deal . right now, it's so close in terms of the affordability gap everybody just buys new. cory: i will keep my power drive for a few more years and see how much i can get for my old accord. "bloomberg west" will be right back.

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cory: this is "bloomberg west." i'm cory johnson. these are big days for comcast -- the net neutrality proposal and the time warner ceo saying the fcc will approve the deal and soon. the reporter -- reporting fourth quarter earnings, the company reported profits up 1% year. with the growth of do not been customers slowing, the company says it needs the merger.

my guest joins me from new york. talk about this order for comcast. it was interesting on a lot of levels. what stands out to you? >> to be honest, it's a stock covered by richard reid. i think comcast talked about the wi-fi strategy which might be adjusting to talk about as well. cory: when i look at the subscriber numbers from comcast and dish, it's interesting for both because this is trying to go after comcast customers but they might need comcast to do it. >> i think what dishes trying to do is with their spectrum the challenges they face the pay-tv business with people doing more over-the-top services put a certain timeline on how far you can grow the business or how you can sustain the ebitda.

they've been in the wireless business before and are talking about the wi-fi strategy. other companies have done something similar but comcast will have to rely on an agreement to handle the traffic that they cannot handle on the wi-fi hot thoughts. it's a different approach for two companies that face different challenges in the pay-tv businesses. cory: customer seem like they are looking for something different. my next guest also covers comcast. when you look at what is going on with comcast and dish, is there a common line about what subscribers are showing they have a preference for? >> subscribers are showing they have a preference to watch what they want to watch when they want to watch it and that has created a lot of challenge for the industry. they are going about it in a little different way.

they are just trying to address the people who say i don't want the big bundle. comcast is trying to address broadband and trying to make the video project better. >> when i look at the quarter comcast just reported, one of the that's was betting on content, not just the form to deliver. but that business only grew about 1% year-over-year. is that a trend or just a bad quarter for programming? >> it's a little of both. there are clearly pressures on the overall tv ad market. they've been a decent job executing and have improved cash flows there. i don't think you can look at that collection of assets and think the growth profile is going to be any kind of low or mid-single digits on a go forward basis. cory: dish has been criticized

the fcc commissioner's about the process in which they acquired licenses and pretending to be a small is this when dishes nothing of the sort. do you think that's going to hurt their position negotiating with the fcc, posing the comcast and time warner merger because it ticked off someone at the fcc? >> it ticked off one of them. one of the guys who was ticked off was a republican, so if you look at what really happened from dish's participation is they raised $61 billion, of which $30 billion went to paying down the debt. there are studies out there that if you don't use designated entities, the sums they would have raised would have been far less. i'm not sure if the government was worse off for better off from their participation. more important, those rules were set and approved by the five

commissioners, including the commissioner who did not like it so just like at&t and verizon use those same rules and the last years. cory: thank you very much. "bloomberg west" will be right back. ♪

he's out there. there's a guy out there whose making a name for himself in a sport where your name and maybe a number are what define you. somewhere in that pack is a driver that can intimidate the intimidator. a guy that can take the king 7 and make it 8. heck. maybe even 9. make no mistake about it. they're out there. i guarantee it. welcome to the nascar xfinity series.

cory: >> you are watching " bloomberg west." does edward snowden regret his whistle blowing? he says he wishes he blew the whistle sooner. he said the program would be less entrenched and the nsa would not be as a custom to abusing its power. snowden and the film makers of the documentary "citizen for" held day for him after winning the oscar for best document

refers. snowden is still releasing information about what the nsa has done. a report from the intercept based on snowden documents says one company was hacked by the nsa and a british spy agency. this is the world's largest maker of mobile some cards. such a hack would give the government access to the very keys that are supposed to encrypt every smartphone. the story is amazing. spies apparently broke into the personal gmail and facebook accounts of employees at the company and wireless carriers and employees of google and yahoo!. by mining those accounts analysts were able to figure out who was passing information and what information they were passing the stop my guest joins me now from washington to them. this is a fairly amazing, focused effort. they are doing the things you expect spies to do, but if reports are believed, they are spying on employees at yahoo!

google and wireless companies trying to figure out who might have the codes that would get them in the front door. >> that's right. good to be with you. the basic idea according to these reports is that the nsa and its rich counterpart were in essence, fishing through all of these areas, saying they would go after all the different parts that pertain not only to the sim cards themselves but the encryption protocols these were made by and that becomes critical. once you get into the encrypted piece, everything else becomes open for those going after it. if these reports are correct, it was a pretty extensive operation. >> the intercept article uses a clever metaphor saying that it was so clever, it was like using a key to go in the front door instead of breaking the door down. >> that's right. encryption is all about the keys. in this case, very complex

algorithms to note the most modern encryption systems and it is very hard by themselves for agencies like the nsa to go them break the more modern encryption systems. that is why they are constantly looking for things like backdoors or other ways to get in there so they can read traffic when they need to and the whole idea is to get after a target when it's necessary to get after that target. but the basic elements pertain to everyone who uses some cards in the entire population that uses a cell phone. cory: one of the documents indicates that the brits got access to 300,000 cell phones in somalia and said we don't need to use these, but we gave them to the nsa and they were appreciative. the notion they would go after 300,000 phones they didn't have reason to want suggests this is

a vacuum cleaner and not a target of terrorists. >> this is the entire problem with collection as it is this right now. intelligence agencies have to look at do i approach this from a vacuum cleaner perspective or do i go in and have targeted collections? the targeted collections piece where you're going after specific people, entities and phone numbers is a much better and efficient way to do it. the problem you have is that if you don't understand the general landscape of the environment you are operating under, you will not have a way of finding the proverbial needle in a haystack. the target of interest won't become evident until you understand the background behind it and that is the difficulty intelligence agencies have and that's why the vacuum cleaner approach is still being used. cory: the company responded to

the article saying the intercept indicates the target was not us, and attempt to cast the widest net possible to reach as many mobile phones as possible with the aim to monitor mobile communications without consent. so they are essentially saying that is what was going on. an approach to try to get everything without letting everyone know. in holland, they are ticked off about this because the u.s. is supposed to be a cooperative partner. is this the kind of thing that goes on all the time or is this a change on what has happened in prior decades? >> in prior decades, you cooperated with all of the different intelligence agencies. when you are dealing with a partner like holland or other western european partners it was normal decades ago to tell them what you were interested in and they would assist from their

local law enforcement agencies or intelligence agencies depending on the country. so there are a lot of things that are different about this. in many ways, the business relationships that global companies have complicate this because it's not just a dutch company, it is a global player and as you pointed out they are the largest producer of sim cards in the world. they have a vested interest in maintaining security. the nsa and other counterparts have a vested interest in trying to find out how they can go after certain signals and encryption algorithms so they can track people they are interested in. getting back to the somali piece, there were at least 300,000 targets. there are targets of interest in somalia with al-shabaab and other terror groups, using that as a place as a base.

but what happens there is need to understand from an intelligence perspective what is out there before you can go after each of the targets you are truly interested in. that is why there is that different and inherent trouble that inherent dichotomy between going after specific target and the big vacuum cleaner. cory: it's an amazing technology story and amazing is this story. thank you, very much. "bloomberg west" will be right back. ♪

cory: i'm cory johnson and this is "bloomberg west." google is lying parts of soft car that will be preinstalled in the new wallet app on new android phones. it used to be called isis, but

they change their name to soft card. my guest is the ceo of zip mark a payment that form that helps businesses except mobile payments. talk to me about what this means for the world of contact less payments. >> the biggest thing it means to the community and industry is that apple pay has the first real competitor. if you look at the way apple pay had been approaching the market, they approach it in a holistic way. they lined up the banks they lined up the hardware, because that is what they do. the consumer experience, and then they launched and they are adding issuance or support for mastercard. google wallet is an early entrant into the space but did not approach the market quite that way. what you are seeing now with this deal with soft card is the capitulation of the model the

mobile carriers are going to run with. now you see the model being exited and having a full stack competitor with google at the helm to compete with apple pay. cory: google may have been a pioneer, but you can judge the pioneers by the arrows in their back. tim cook said two thirds of all contactless payments are going to apple pay. suddenly they are the one to beat. >> that's more of a statement on how the adoption has -- how poor the adoption has been for the other players in the market not to take away anything from apple, but it speaks more to the velocity of adoption on their side as opposed to overall market share. cory: the requirements of merchants to except liability after october 1, if they don't have new cash registers, is that

going to drive a big cycle? >> i think that it will because in order to incentivize these kind of these too reaching the staff, change their hardware infrastructure, a lot of these merchants have lots of locations to do this and. when you put something in place that has a functional money value to it, that decision can be made and the other players benefit from this as well. cory: is this a marketplace business where one company ends up dominating or will there be dozens of payment platforms? >> i think there is room for a couple of winners. with this move and google lining up with mobile carriers and disturbing by default on all of the phones, more innovators can enter more easily and it will be

interesting to see if google does what apple did with the banks and line them up. we know how important it is to have good relationships with tanks, so it will be interesting to see how they bring the system in line and that will determine how much of the market they control. cory: is the fingerprint only as an option on the iphone or iphone 6 -- for the five and six plus, is that a significant differentiator or will customers continue to engage in unsafe activity with payment systems and phones? >> i think biometric identification will become standard as it becomes cheaper and cheaper. whether it will standardize on a fingerprint, and i scan or -- an eyescan remains to be seen. cory: thank you very much.

let's get you up to speed with some bloomberg top headlines. the golden parachute of botox maker allergan, if things don't work out with his new boss, he stands to make $100 million if he is fired from a company once he is fired. it would be cash and stock. they say they plan to replace most of allergan's executives with its own. how about a fire sale at boeing question mark to have buyers for early 787 dreamliner's that had problems during final assembly. boeing is selling them for less than half the list price about $100 million each. original customers refused to i them has they were too heavy and could not fly as far as expected. ethiopian airlines is expected to buy eight of the dreamliner's. home prices in 20 u.s. cities appreciated faster than the year

before. the case schiller index rose 4.5%. the biggest gainer is right here. san francisco's home prices grew by 9% and second that was miami. "bloomberg wes" will be right back. -- "bloomberg west" will be right back. ♪

cory: i'm cory johnson this is "bloomberg west." ebay still dominates the marketplace online but businesses like etsy are focusing on specific businesses. they're using special technology to authenticate items and it's getting to be a big business. i sat down with the ceo and cofounder and started by asking to describe how the niche e-commerce market works. >> primarily, secondhand jewelry and watches. we authenticate every item leveraging our system which leverages through photo recognition on the site and the pricing engine that takes data factors to price these items in real time.

80% of the folks out there don't know the prices of the jewelry and watches that they own and are only getting $.15 back on them and they seldom. cory: where are people selling them question mark >> the usually go to traditional jewelry stores or they try to sell them on ebay. the problem is there most of the shoppers are not trusting the sellers because they feel why are prices all over the place? if you take a rolex yacht master, that same watch what 20 different prices on ebay and no one knows why and no one knows what is authentic. cory: these are beautiful items and some of them are expensive. like this yacht master, what makes this -- it's beautiful to see it in real life but when you snap a picture, it does not look as impressive as it is to actually see. >> absolutely. if you show a reasonable price and then this one is $11,000

retail and its on our price for six to $500 -- we take into account what year the watch was made how avidly is the condition and when you leverage those factors and the demand factor -- how avidly is the condition and leverage those factors, we are able to give you real-time pricing. number two, everything is photographed in house. we have a system that cleans it and makes them much more beautiful. cory: i was interested -- not just your business but i've seen a handful of marketplaces creep up that are very specialized. reverb for guitars or at sea -- etsy for craft makers. i wonder if there's something about the internet that allows such specified businesses where it wasn't possible and everyone used to go to ebay for everything. >> it's interesting because you used to have just ebay and it

wasn't that controlled. what we have started to see over the last three to five years and what we will continue to see is vertically integrated marketplaces that require specific customer experiences that a broader marketplace like ebay just does not offer. in jewelry, when you go jewelry shopping, you require specific services like appraisal refurbishing, you need to trust the seller -- these pieces have stories. a place like ebay does not offer that. we have seen this happen in handbags peril, shoes and we believe there is a lot of vertically integrated marketplaces to be created. cory: it is interesting ebay would not use all of its financial strength to develop that. they've developed a system around cars that different than the rest of ebay and is enormously successful. cracks -- >> correct. but ebay -- certain verticals

require more manual operations than others. it requires manual operations. when the items sell on her site, nothing goes to the seller unless it goes through our appraisal office in new york city. it has to get checked before it goes onward. ebay takes all of the millions of pieces and sends them forward because it is not annual. cory: do you have the scale to get big? >> we have the scale now and we also have photo recognition technology that processes items in real time. taking the watch again, we look at the face and the serial number -- >> you can see this here -- how much is this watch worth question mark >> this watch worth about $22,000. cory: you actually take pictures and scan it to see how real it is? >> yes. the inside of the watch, the

back, the face, scan the serial numbers and we are integrated with different industry databases and other off-line and online databases and we are able to tell if it is a fake. using that scanning technology, we are able to authenticate items and leverage technology and our pricing engine, what are transactions going for in this watch. giving the seller the best price back and giving me shopper the best value and everybody is winning in that situation. cory: the bwest byte -- the time when we focus on one number that tells us a lot. alex joins us from new york. >> the bite is 300. those are the number of new emo jis included in the new apple

update. this will give users a range of skin colors and different things to address some of the diversity criticism apple has gotten since it introduced emojis back in 2011. cory: the world is not just full of white dudes? >> the world is not full of just white dudes. they are using the fitzpatrick scales. they have picked five colors and there is still criticism that there is not -- that they are not doing enough, but it is a step for them in terms of integrating some more look into these emojis. i will be a half feel a need to see some of these new characters in my feet. cory: i look forward to deciphering your lengthy emoji texts. i can't wait for that to the bloomberg terminal. you can get the latest headlines all the time on your phone tablet and on bloomberg radio. more "bloomberg west" tomorrow.

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