>> >> live from pier three welcome to bloomberg west, where we cover innovations and the future of technology. janet yellen defended the central bank against republican accusations she is too cozy with the obama administration. here she is testifying about a question about her meetings with jack lew. >> the federal reserve is independent. i did not discuss monetary policy or actions. we are going to take with the secretary, or the executive branch.

we can for about the economy and the financial systems on a regular basis. we participate jointly in many international meetings including those g7 and g-20. we confer on matters that are coming before those groups. >> republicans have proposed bills to put feet that under more public scrutiny to. greek firemen and's -- >> millions are flowing back into greece after the euro bailout deal. millions of dollars. we spoke to erik schatzker. >> we had a deposit. $700 million. >> 700 million euros came back. >> and the use of this i haven't checked the numbers but it will be there. >> you are still down. >> once you turn the tide you

are up. >> he says he is counting on the european central bank to help avoid default when it runs out of money. salesforce loses $66 million. subscription and support revenues are up. salesforce is pushing data analytic services. it is not helping them make profit. investors like its shares rising. morgan stanley agreed to a two $.6 billion settlement with the justice department to resolve claims tied to mortgage backed securities. they boost their legal reserves for the settlement by $2.8 billion for the settlement will cut 2014 earnings per share.

there are a lot of deals going down. drugmaker cyclic's is based their attracting sales. they impact as much as $17 billion. they make a fast-growing drug for blood cancer. aruba networks they may be bought by hewlett-packard. after reporting lackluster earnings hb is in talks to buy a rube the. -- aruba. they make hardware and software usable wi-fi networks. for typically hotels, shopping malls. why would they do a big acquisition? alex sherman broke this story. this is interesting coming when it does.

the company is a question mark. >> the first acquisition, first major acquisitions and's baton of me -- autonomy it comes now after the hb reports earnings. we will have a chance to hear from aruba's management point blank. management is going to be asked. hp is going to be under the microscope. no matter what they did they would be under the microscope. aruba is the first stake in the ground from meg whitman's turnaround. it is interesting hp would theoretically move before splitting the company. perhaps that is because they

want aruba networks. if they are selling they may think we need to act now or risk losing them. >> hp has talked about improving operating margins they talked about it bumping up by a percentage point rate it was 15 basis points. buying money doesn't help you make more money, it helps you lose more money. what is it that they like? >> hard to know. we need to hear from hp. you can only guess. we can guess hp wants to add on their network businesses struggle down 11% annually. the enterprise wi-fi is hot. huge growth. hp would like to make a bigger footprint in that to challenge cisco, which does a lot of work.

the idea is they have the growth moving in that direction. it doesn't matter if they don't make money now if they make money in the future. aruba may be a simple integration. this may be a good first acquisition for hp to make post turnaround because it is digestible and it is not too big. >> you take on stock options trading 18 times earnings. it is high for the group but not crazy high. they have a services business. you wonder if this is the thing where they could add to a rubles potential because they have so many be on the streets. >> that is possible. there is no reason aruba and hb acquisition surge, meg whitman say we are prepared to do acquisitions. they could make another acquisition before the split

takes place. if it really wanted to. we will have to see exactly the direction hp goes. >> i'm sure the bankers are knocking on the door. thank you. earlier i talked to jason nolan for a dive into opec numbers. i asked what surprised him most? >> the biggest surprise the free cash flow. for eu billion dollars -- $3 billion came down. a big component was the cost of separation. legal fees, consulting fees, there is a lot of work that has to be done to separate these companies. i think it is the right move but that was a big surprise. i did not expect 1,000,000,000.3 -- one billion dollars. >> there is a lot of

back-and-forth that goes on that least that. the free cash flow guidance sounds like it did not include the cost of layoffs. >> that is right. earnings today hit. they priced in local currencies and foreign markets. that is a function of math. this free cash flow thing when you lay people off you pay severance. it is a huge cost upfront and saves the company money. we have argued hp needs to become a smaller and more focused company. some of that is lower headcount. >> the free cash flow at hewlett-packard, for the last year or two, they have had the benefit of factoring. it is barely mentioned in the quarterly reports. they have been selling their receivables. these aren't hp customers.

they have been selling that boosting free cash flow but are they running out of those tricks to boost free cash flow? >> they have extended payment to these customers. now it is more of a working capital and cash convergence cycle play. they can only take that so far to your point. that 10-12 day range is as far as they can take it. we have seen very good cash management over the last couple of years, and there has been a little bit of a step back. >> if you look at the way they have boosted that by selling receivables, maybe i am conspiracy there is. i look for the bonus pay based on free cash flow percentage of earnings. then they are selling the receivables. in my crazy to look at the profit motive? >> not at all. you can only do that for a certain amount of time. the company was obviously overly enthusiastic when they gave that

$6.5 billion guidance raft they had a separate the companies. they should have been more forthright. people were caught offguard by that. >> we can talk about this forever. in a price services, the businesses, which i think of those consultants marching that should be a great business for them. that was horrible. down 10%. >> that is another one getting smaller profitability certain to come back. they inked a big deal with a large investment bank. that is where hp can come in and self-service news sell software, be better at selling the breadth they have. they need to stitch that together. >> that was jason nolan. bloomberg west will be back. ♪

>> i'm cory johnson. this is bloomberg west. stuart gulliver his bank helps clients avoid taxes as the product of a different error. his own account hasn't been to do with dodging taxes. >> it was purely about privacy. privacy from colleagues in switzerland. it had no tax purpose whatsoever. >> gulliver says he is de-risking the firm after reports they sheltered money for tax invaders in the 2000s. sim card maker jim alter -- were probably behind the hacking attacks on its networks. comments came after report and intercept blames the hacking. it is a great story. it was based on documents leaked

by edward snowden. no products were affected. there was no significant active data. that story would argue otherwise. radioshack's name is going on the auction block. the biggest shareholder has offered $20 million for the name and other end an actual -- other intellectual property. they are trying to buy 2000 radioshack stores. the drumroll beats for the sec vote over open internet rules. the boat is tomorrow. today the house energy and subcommittee gave its two cents. joining us, larry down to testified this morning. what did you tell them? >> good morning. what i told them was the hearing is no longer really about the

open internet rules. what the fcc is doing is going for title ii, this reclassification of the internet as a public utility. that is more worrisome to many of us than the rules themselves. what i did with along with a former democratic congressman, urged the committee to act as congress only can do and pass bipartisan legislation that would solve the problem without resorting to these crazy legal theories. >> is this a crazy legal fairy? >> no. i think the big isps have their small machines out to befuddle and confuse the media and people. let's start with the basics. we do have a lot of time. the question issue today is whether an agency in washington dc is going to have the authority as it has had since the 1920's over tele communications to make sure there is no discriminatory

actions by the providers, to make sure now in terms of the internet that a favorite few aren't going to be able to throttle content or block content or prioritize content or determine what news you and i are going to get. the fc's he has have this authority. the question is going to reassert the authority for the communications infrastructure of the 21st century. >> i wonder, the isp argument aside, the argument is that title ii is not the best way to do it. are there problems with title ii? why is the best way to pursue this? >> title ii is the best way because it is the only solid legal foundation. the courts have told us that. if you want to do not neutrality

rules, which the courts indicated something the fcc is authorized to do, you have to do it under the right legal foundation. when the commission in 2002 voted that cable brought can -- broadband was not tell them atomic telecommunications center, it wiped out that argument. nobody can predict the outcome of what happened when these decisions go to court. we are going to court, i want to go with the soundest legal foundation there is. clearly that is title ii. >> we know the lawyers are going to be paid for this. someone is going to go to court. why is title ii not the right way to pursue this goal that most everyone has for an open internet? >> i would have to disagree with the commissioner about this. what the court told the fcc, and with the chairman acknowledge

through the summer was what the court said section 706 is solid legal authority. he said that was a roadmap an invitation to reenact the rules under that authority. the problem with title ii is the supreme court agreeing with the fcc has said it does not apply to information services, does not play to the internet. that means for the fcc to pull off this gambit it is going to have to fight a much stronger uphill battle in the court. >> i want to read a quote. this is, in the hearings about secrecy. there was a quote from congressman that are arm in arm. they said together for presented to of 10, so long as the chairman continues to insist on secrecy we will continue calling for more transparency and accountability. chairman wheeler is not above congress.

i wonder if you can help me understand why the fcc has not made the proposal public before the vote. >> i think number one, they are following the terms of the administrative procedures act. they have put out a fact sheet and we will now a lot more about it very soon. but you have to realize this proceeding has the most complete record of anything the commission has done in years and years. i reference that 2002 vote. the commission has been compiling a vote ever since then. we have asked every question. every issue that can possibly come up has been vetted. you could not get a more complete record. there is no need to delay this. people who talk about other alternatives like legislation, my goodness. when has congress passed substantive legislation anyhow? can you imagine? net neutrality has been put out

on the sidelines too long. it is time to do it and do it now. >> i want you to sit tight. i want to continue this conversation. it is a good one and you know what you are talking about. back after this. ♪

>> this is bloomberg west. i'm cory johnson. we are talking that neutrality. larry downes, we were talking about the secrecy issue. is this a big deal? it may be as open as the fcc has ever been but is it open enough? >> i agree. he knows more about the secret workings of the fcc than most of us could ever possibly know.

it is not traditional for the fcc to circulate its orders ahead of a vote. they may still be making changes to them. i would like to see the 332 pages that are allegedly in the report we understand we have to wait until the vote. given the magnitude of what is happening, and the size literally of what is coming you can understand why members of congress and others are increasingly agitated about what is coming. >> is the interest over this issue something you think we are going to see since technology is as important in ways it has never been before? >> i think so. is an amazingly fed had 4 million people contact the fcc force mainly arcane is net neutrality, which is not an organizing terminology and going beyond that to title ii. that is because people really

understand that what we are talking about is their communications infrastructure. their platform to talk to one another to find jobs, to do jobs, to educate themselves, to take care of their health. it is integral to their lives. this is the infrastructure of the 21st century. of course they have an interest and that is going to grow. i think is the media gives it more attention, like you have through the years and other media starting to do, people are going to be more involved and they have been before. i think that is good, that is democracy. that is the way policy should be made. >> larry downes, do we need more interest from congress as a result? >> i think so. congress even a year ago undertook this committee a starting point look at the communications act as a whole. it has not been updated since 1996. that is a process that could take years to do. obviously we need 21st century regulation and that is up to

congress. >> larry downes, thank you very much. we appreciate it. bloomberg west will be next -- the back. ♪

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out there. i guarantee it. welcome to the nascar xfinity series. >> you are watching bloomberg west. we focus on innovation and the future of business. snoop dogg, mark zuckerberg, they have so much in common. not least of which is there enjoyment of phil's coffee. $15 million funding round led by snoop dogg, jonah hill and maynard webb. i'm joined by maynard webb and the ceo of phil's coffee. glad to have you both here. this is -- there is something

going on with coffee and technology. i don't get it but the success bluebottle has had, the success you have had locally, i have seen it in virgin america what is it about technology that is coming together? >> part of the big reason is that we are in silicon valley and we have most of our stores in the bay area. there is a lot of technology folks who come in entry gave a lot of coffee especially the engineers to keep going. that is a big part of it. >> y for you? >> this is my first venture outside of technology. i will tell you my story. i love coffee. i am one of those tech guys that love's coffee. i have a problem. i can't drink anything caffeinated anymore. i have decaf. that is being a loser. nobody has a lot of choices.

my son told me about fills -- phil';ss, and he brought me a copy to a meeting. i said you put cream in this. he said i did not. wow. that is good. >> the quality of the product. there is more about the connection between technology. >> it is disruptive. >> what is disruptive? >> i think we possess a lot of similar values that some technology companies do. our philosophy is the best coffee is the one that comes to your tastes. >> comes to your taste? >> it comes to each person individual taste. we have a platform for customization. we don't even do espresso because it is what you doubt do. we want to focus on doing a few things well. every cup is handcrafted. we convert drinkers into phil

drinkers. >> one problem, it takes too long for me. i am always running from place to place. i go in there and have to wait. >> decaffeinated people can be in a hurry. >> it does not take that long. it can take 3-5 minutes. there is a long line. it may take longer than that. there is opportunities for efficiency. we optimized for quality, not efficiency. some folks don't have time. what we had his an app where you can order ahead or preorder and prepay for you are getting out choose the blend you want choose when you pick it up, and you walk into the order ahead counter, you walk out. it is a two second visit. >> now i need a runner to do

that. >> it is interesting, you watch the explosion. my favorite coffee, no offense a limited number of stores and so on. you are blowing up. bluebottle is having the same sort of movement. you see this explosion in coffee that i personally think is crummy, the greenmount stuff, machines are selling like crazy. toss in freeze-dried folgers and that is the biggest chunk of the markets. more people are drinking instant coffee as opposed to the slow coffee that you are a of. >> no doubt there is a shift in the coffee industry. it is defined into waves of being the maxwell house, the folgers. the third wave being some of the

folks you have mentioned, intelligentsia and bluebottle. we are sometimes in that category. the big differentiator between the second wave and third wave is an elevation of quality and care for quality. it is not about efficiency. the other thing that is more transparency. >> how are you going to scale? is that works when you are [indiscernible] and starbucks felt they were in that excellent era at one time and then they scaled. how do you keep that as you get big? >> there is a fundamental difference between us and those folks. by those folks i mean second wave, third wave. the difference, what we believe we are in is in the people business. while we possess the trade of quality and care with the beans the craft, the people, it is about the experience. is friendly and welcoming.

we -- it is not about demographics. it is about psychographics. >> i wonder if it is about what customer experiences we get and the technology speed thing. i wonder if the weight is a part of the good part of the experience. >> we love technology. we have a digital department that is innovative. we have a great roadmap of ideas. we never star technology. technology is a tool. we start with people and we may come to the point where we decide technology may need to help us optimize a certain experience for the customer. we treat tim andrews like our customers because they are the most important people. if to sell it in before you can sell it out. we focus heavily on trading a great experience for our team members. >> jason jaber. thank you.

bloomberg west will be back. ♪

>> on cory johnson. this is bloomberg west prayed lending club reported a strong quarter. revenue doubled to 69 point $6 million. the online lending platform posted a loss of $9 million in its first quarter. i asked what to make of this quarter. >> for our standpoint, we grew 108% revenue year-over-year. that was a fast growth we had planned for. we beat our own expectations. we also saw a lot of good marketing efficiency. better operating efficiency.

it is increasing. and it gives us the confidence to put guidance that would cause us to facilitate $7.6 billion in loans in 2015. that will be roughly the same origination as the previous eight years combined. it is a fast growth. we are looking forward to it and to continuing to have a great experience. >> you required a company called spring stone. what did you get with that acquisition? >> we launched two new products. one was a small business lending platform. the had organic growth.

the other new product was the acquisition of spring stone. it had diverse if i'd into education financing and elective medical financing. it was an attractive area for us. with spring stone we have inherited a great team with a lot of knowledge into these areas. eight years of track records delivering great customer satisfaction and a great product. then net were -- network of financial and medical providers, mostly dental offices, thousands of providers, they are giving us a great head start into building up a bigger distribution network for these products. >> you talked about a no interest loan that is common.

you felt it didn't fit well. it helps define what a lending club is. can you talk about what that is? >> thank you. what we did, it is an example of how we think about being customer friendly. a typical product and medical financing and retail finance in general is a deferred interest product. a promotional of six months. if the customer has a balance outstanding at the end of the promotional interest rates get charged retroactively. that could be misunderstood by customers. it is not the type of product we tend four. after rebranding spring stone we wanted to make product improvement.

we terminated that product and launched a no interest product that has no deferred retroactive features. for the first six months or 12 months, you just won't be billed any transfers. that is a type of product we want to continue to have on the market. it is a great experience to our customers. >> what is the customer getting? why is that so different? it is something of a trick or a surprise to them? >> that is right. what we sent for is transparent product that is well understood by consumers in a straightforward way. the new product is considered easier to understand than the old one was. >> that was the lending club ceo.

now for a check of top headlines. themillions flowing back into greece. 700 million euros flowed in yesterday alone. >>/year the economy managed despite rumors to having achieved the primary sampler, it came to 1.5%. we believe given the state of the depression we have, the state of the banking system occurred in seconds, that we have faced low levels of investment in this country we have negative investment. under those circumstances, to arrest of this negative spiral anything beyond the 1.5% surplus for the next five-eight years

would be detrimental to the recovery. >> he is counting on the european central bank to help deferred -- diverge default when it runs out of money. apple has been ordered to pay $533 million in damages to a company called a smart flash. a federal jury found the iphone infringed on copyright. millions of people who are not customers of anthem may have been affected by the cyber attack of the company. anthem believes hackers access social security numbers and addresses of 79 million people. among those, 50 were customers. they could be the those that use

blue cross blue shield in states that have partnered with them. ♪

>> smartphones and tablets of transform the way television is watched. many are watching her show now on those devices. it is change the way television is made. tonight's episode of modern family was filmed on apple devices. >> it wasn't -- that is funny. that seems to be the story people are focusing on. that was a minor part of it for me. the bigger story to me is the fact that the entire episode takes place on clears computer screen. i find that to being the most interesting part of this. we wanted to do in a way that seemed as real as possible. so we just use the devices that one would use in real life. >> speaking of the devices, it is easy to do. it is extremely simple now with

all the technology we have. i have a feeling producing this episode and directing it may not be so simple. what challenges did you run into? >> there was a lot that went into this. the hardest part was coming up with the story line in which we could feature all 11-12 actors and still have one person computer screen. once we have the original idea things fell into place quickly. the problem wasn't so much how are you going to fit every -- how are you going to feature everybody, but how are we going to fit this in one episode? originally we would have the actors shoot themselves by holding up the camera like one would do in real life. then there were other considerations about framing things properly and not shooting off the set. we quickly devised a method where the cameraman, we use the camera people to shoot them with the phones, so it didn't like

the phones were floating in space. the actors were instructed to always keep their hand on the cameraman's hand. that is how we did it. it was a romantic date. >> was their product placement involved? >> other than providing the products that we used for the episode, no. this was done -- this was purely a creative decision on our art just like the eye had episode -- the ipad episode was. i happen to be tacky and i like this stuff. we just needed a reason for phil to be waiting in line and it so happened to line up with when the ipad was coming out. it was a natural sense. i was faced him in with my daughter in college and looking at my screen. there was e-mail and a script i was working on. i could see her and myself and

my wife behind me. some webpages opened. i thought this really paints an amazing picture of my life. you can tell a lot about me from this one screen. that is where the idea started. >> this is not the first time you have featured apple devices in your show. we see them all the time but we don't necessarily think about the collaboration between technology companies and television. how important is that relationship? >> well, listen, you want -- it is a fine line. we are not here to sell apple products. that is not our goal in terms of this episode. they may advertise with us and that is wonderful. i know steve jobs was a big modern family dan. that was meaningful to me. i know many of the people at apple are fans of the show. we are very big fans of their products. really, this is much more of a personal interaction than it is

a business relationship. >> how impressive are these cameras that can capture an entire episode on television? >> i think the smartphones today and not just apple but other companies cameras are amazing. most viewers would be hard-pressed to tell a difference. we have snuck in some footage from iphones in the past in our episodes, just because we needed a quick shot. it is hard to tell the difference. it is amazing. it opens up a whole new world for amateur filmmakers and budding filmmakers who are just beginning. you don't need that initial huge investment anymore. you can make a compelling moving -- compelling movie on your phone and computer. all you really need is a great

story and great characters. off you go. >> speaking of great characters shelby holliday did the interview. you did that with facetime? >> we had to keep with the theme of the episode. >> i love that. when we were talking i thought, before when we were sitting at the interview i was wondering, 30 minutes of watching somebody's computer is amazing, watching their screen, but how are you going to do 30 minutes watching a desktop? then we saw the clips and the show actually looks hilarious. it is amazing how fast things move around. where is using face time. -- claire is using facetime. it moves around. there has been buzz on the internet. people are excited. >> they will watch the show for the first time. thank you. we appreciate it. you can get the latest headlines all the time on your phone and tablet, bloomberg west tomorrow. ♪