♪ cory: live from pier three in san francisco, welcome to "bloomberg west," i'm cory johnson. with a check of your bloomberg top headlines, u.s. stocks posted big gains today. after two days of losses. bank shares rallying after they passed the stress test. the dollar fell from a 12-year high against the euro. one of the upswings, poor retail sales in february which bolstered the case for keeping interest rates low. people of interest in the shooting of two cops in ferguson, missouri have been questioned. no one charged so far. >> these two officers took a very hard hit. any time you're shot in the face and have a bullet lodged in your

head, any time you have a through-and-through wound where the bullet enters your shoulder and comes out the middle of your right back, those are hard hit. we're lucky, by god's grace, we didn't lose two officers last night. cory: the officers have been released. state police are assuming control of ferguson tonight. protests rose again after the police chief resigned following a scathing justice department report that showed extreme bias. -- accused the department of extreme bias. disney shares took off after they announced they are working on a sequel to the blockbuster film "frozen" and there are three "star wars" films in the works with ceo bob iger announcing details of two more today. >> the first of the films will be released in december 2016. oscar nominee chris withes is writing the script, and we're thrilled to have oscar nominee

felicity jones in a starring role. i'm also very pleased to announce, drum roll, please, that the title of the movie is "rogue one." cory: disney says it will release 11 more marvel films in the next four years. charter communications in talks to acquire brighthouse networks. according to people with knowledge of the matter. both sides agreed on an outline of an all-stock deal, not expected to be announced until regulators clear if regulators clear it. starbucks will introduce cold brew coffee starting march 31. cold brew is different than traditional ice brewed coffee because it's steeped in cool water for 20 hours. the latest cybersecurity bill takes a step forward after hacks

of companies like sony and j.p. morgan chase. in a 14-1 vote, the senate intelligence committee advanced the bill that encourages companies to share threat information with each other and the government. in return, they will be shielded from lawsuits. the bill is still up in the air. peter cook joins us now. talk to me about what happened to this vote. 14-1 sounds like it's bipartisan. what are we going to hear? peter: it is bipartisan, and that vote total is a big deal here in washington. this is a significant step forward for this bill. we've been fighting here in washington over cybersecurity legislation for several years now. democrats and republicans agree there's need to bolster the nation's digital defenses but haven't been able to agree on a bill to do that. this bill may be the single best chance in some time to be able to do that. this vote reflects that. this bill would allow the private sector to share threat information with the government in realtime and vice versa. the government could share

information with companies and there would be legal protection for the companies for the first time. that's the single biggest component for this bill for the business community going forward. there have been concerns about privacy going forward. some of those have been addressed to the satisfaction of some democrats on the intelligence committee. the question will be in the full senate, in the full congress whether or not this bill meets that test and of course the president as well. the white house did get information on this bill other -- over the weekend, and dianne feinstein said she thought there would be white house support for this bill but we're not clear yet where the white house stands on it. cory: how strong is the bill itself? peter: according to supports of the legislation, including the co-author, chairman of the intelligence committee, richard byrd of north carolina, it's a strong bill. not the bill he would have written had he done it on his own but it will provide defenses the nation hasn't had before collaboration with the government and private sector we haven't seen before. and i asked him if this bill would have prevented the sony hack or the anthem hack that we saw recently.

here's his answer. >> they would have happened but we might have minimized the loss because of the response time that we could have provided to those companies but more importantly, the fears that existed with other health care data companies or with other financial companies. they would have also been clued in by the federal government. peter: again for richard burr, a strong supporter of the legislation, this is a big step forward. but there are still questions down the road. at every turn, cybersecurity legislation has been blocked. cory: i'm going to call this a a "kum ba yah" moment, peter. i will pretend like everyone in washington is actually working together and trying to get stuff done. peter: well there is bipartisan legislation. cpry: box -- cory: box reporting

earnings for the first time. it was a rough one. the ceo said some analysts use a different share count when predicting earnings per share. a report came out that they had 168% revenue increase but also saw a loss of $47 million in the quarter regardless of how many , shares you divide that into. i spoke earlier with the c.e.o., aaron levie himself, and asked him about the mixup on the per share numbers. aaron: we released financial numbers, and quickly realized there was a diversions between the thomson reuters constellation a lot of reports were using, and the other numbers. those numbers, we beat. cory: and the bloomberg numbers. >> they were right also? cory: they were, yes. >> very good. so quality institutions here. unfortunately what happened

some of the share counts analysts were using to estimate eps for q4 were incorrect, and that led to a very different consensus number for thompson-reuters. we got that cleaned up but we had a little bit of distraction in the news yesterday and obviously kicking off the call. other than that we thought it , was an incredibly strong quarter. there's obviously more we need to be doing and that's what we're working on now. cory: i think e.p.s. is a dumb way to look at it -- well it makes sense to look at earnings per share but it's become a confused metric with share buybacks, especially right after a company goes public, and you had warrants that were converted and convertible shares that were converted. what do you think is the metric that will help us understand box? aaron: the metric we talk about is our revenue, top line, the growth rate, our operating income, our convergence toward cash flow break even which dylan, our c.f.o.

announced yesterday were guiding to eight quarters to get to cash flow even. billings, which we will update on a quarterly basis is an important metric. those are things we think will be meaningful to the health of the business. cory: and the revenue did slow down. admire on -- am i wrong? year over year. i also model it out sequentially. it fell to 9.8%, still double digits, but the lowest it's been, part of it because the growth has been fantastic leading up to this. is your business seasonal or is it fair to look at it on a sequential basis? aaron: the seasonality gets a little blended in so deals we close in q4 don't necessarily show up in our q4 gap revenue. from the impact standpoint. it's hard to look at it from that standpoint. billings is a way to look at that quarterly trajectory. we think that that is showing

strong quarter over quarter sequential growth. overall, another thing i should have mentioned is the number of deals above $100,000, we reported at 57 deals in q4 that were new, six-figure transactions, up year over year from 41 deals in q4 of f.y. 2015. that's things that when you look at where we're trying to shift the business, more toward the enterprise, those are the kind of metrics we think will be important to the health of the business. cory: and the marketing sense, -- expense as percentage of revenues, it's the lowest it's ever been, it's still really freaking high. do you -- explain to me, try to do -- you try to do this in your statement, show cohorts, there are different classes of customers, can you talk to me about giving that idea again and maybe talk about what this quarter shows further along those lines?

aaron: we tried to illustrate two concepts in our s1 and road show. first was the net retention rate of our business. we have a unique model, we'll go in to a customer and sell maybe 1,000 seats of our product but we actually expect that to grow over time. many years later we might have 5,000 or 10,000 seets of an organization we sold only 1,000 seats to only two or three years prior. one metric was a continued counter to show the growth rate of our customer sets year over year. the other metric is really around how we break down the profitability of our sales and marketing kind of motions. you have the cost to acquire a new customer and that is -- that's unprofitable in that first year, in that first transaction. you have the cost to upsell a customer which is marginally profitable, we have to pay sales reps' commissions, we're doing marketing activities to do that. then you have the contribution margin of just the retention of

existing customers or customers we don't necessarily upsell in that quarter. that's where we see significant profitability. cory: that was box c.e.o. and co-founder aaron levie. "bloomberg west" will be right back. ♪

♪ cory: here's some top headlines. cme group has ended off-hours trading of the largest dow and nasdaq futures contract.

they are returning to trading etf's. they are cheaper, therefore easier to trade. they will still trade electronically after toyota is hours. recalling 2500 rav4 e.v. models with tesla drivetrains due to a software glitch that could cause it to shift into neutral while driving and lose power. they ended their partnership last year. ride sharing company lyft has gotten a huge funding round, $530 million from investors including tech giant rakuten in japan, investing $300 million for 11% of the company. they're trying to take on their rival, uber. which apparently has a $40 billion valuation. turning to another startup, this time in health care.

23andme, the google-backed genetic testing startup is now announcing plans to invest in drugs themselves. richard sheller who led genentech for years has been hired to lead a new therapeutic unit. why is 23andme getting into pharmaceuticals? ? caroline 23andme getting into -- broke the story last night. this is fascinating to me. this is a very big change for them. >> in some ways you could argue it's the natural evolution of the company. first they get genetic day tark -- data and start partnering with pharma companies to do startup and now they want to turn those that into drugs. caroline: they just got approval and now they're like, let's make drugs.

this is moving rapidly. cory: ann's comments to you were hilarious. caroline: she was joking, she was like, we got that test approved, what's next? cory: start a drug company, why not? what advantages does 23andme have when it comes to drugs? caroline: a lot of discoveries are based on a single discovery by a scientist, but 23andme has data from 650 test that they've -- 650,000 customers who consented to let them use data for research. they can look at the data and say, are there genetic components leading to these diseases that patients have, and use that to start finding drugs. cory: they might be able to discover new things that no one has known before first because they have the data. caroline: and not only do they have your genetic information,

whenever you log back in to 23 and me, they have a question box. they'll say what did you have for breakfast? do you smoke? what's your bra size? cory: didn't ask me that question. [laughter] caroline: but they do get this information about customers that goes beyond just their d.n.a. they're hoping to draw ties. cory: it's always been a big data play, but i wonder if this changes the requirements, what they need in the back end if they need a whole different level of computing power to understand what those results are now if they're going in this direction? caroline: it's so new and this happened so fast, richard scheller who they got from genentech announced his retirement in december and instantly went onboard with 23andme. they don't know which to these areas they are going after. i said are they doing rare , diseases or large diseases? they don't know yet. how far are they going to take this up to before they start looking for partners because running big clinical trials may

be beyond their scope, they don't know yet. cory: did you do the test? caroline: i have not because they stopped being able to do it for health analysis. cory: stay with us, we're going to dig a little deeper in what this deal means and how the world might change. ♪

cory: welcome back to "bloomberg west." 23andme is transforming itself to a pharmaceutical business. let's take a little deeper to talk about what this means for the drug industry. you invest in tech and pharma it's all coming together, this is an interesting development. >> it's big news.

a surprise to us, that's for sure. cory: why is it big news? jay: you know, you don't really think of 23andme as a company that's going to go into drug discovery. they have an interesting business on their own that's unique. cory: is this a direction we're going to see, jay, of companies that are doing raw tech stuff with electrons and big data and explaining that or is this really a specialty that 23andme is unique in being able to exploit? jay: i think there's lots of ways to solve this problem there's a lot of nonprofit entities that have a lot of genetic data they can use and a lot of great discoveries in terms of the genetic mechanism disease comes out of a variety of academic and nonacademic institutions. cory: caroline is this a unique approach, to start with massive piles of data and try to find drug information in it? caroline: it is, there aren't companies that have massive

piles of data. ones that have taken the approach of working with pharma companies already, selling chunks of genetic data to pfizer and genentech and others but now they're doing it on their own. cory: do you think their business of selling to pfizer and the like will be hurt because they'll be a competitor and not just a partner? jay: i doubt it. there's so many paths to success and so many different targets, it seems unlikely that whoever their customer would identify the exact same target base odd -- the exact same genetics, and then be competitive. cory: what is the hardest part for them, do you think, starting this new venture? jay: i think it will be raising the money to support drug discovery. it's extremely important, you know, this industry, i think it's unique in the world in that it takes between 10 and 12 years from a target to actually launch

a product probably costs on the order of $1 billion or more per product. and 95% of the time you fail somewhere along the way. i think, you know, aggregating the capital to really drive a discovery forward, you know, is a challenge for anybody. we're in a good environment good marketplace to raise money for biotech so they probably will raise the money. that will be difficult. cory: caroline, do they think, at 23andme, that their data will help them have a better success rate and a better speed to market? because they know, might know, think they'll know, how the drugs will react before they're tested? caroline: far total newcomer on the pharma market they are very confident and feel like they can do it better and faster than traditional pharma but also because they say they have connections with consumers.

they are saying other big pharma , goes out and finds patients to use as lab rats but they say they have a relationship with patients, to say, you can help with this research with this discovery. they are hoping to appeal to patients that way, to say, come along for the journey. cory: is that an advantage they have? is that an extensive part of testing and -- expensive part of testing and designing drugs? jay: you spend a lot of time waiting for food and drug administration getting back to you when you request to start a trial or if they need to review data and they could ask for more data. even just the final step of submitting your new drug application to f.d.a., they have nine months to review it and get back to you. and i don't know if this is going to speed that up.

cory: thank you, jay and caroline. "bloomberg west" will be right back. ♪

cory: you are watching "bloomberg west" where we focus on technology. russia has expanded its presence in latin america in ways that signal, quote a clear return to cold war tactics, end quote. that's according to the general commanding u.s. southern forces john kelly. in a statement to the senate armed services committee he said that russia is stepping up efforts to gain influence in the americas. president putin accuses america of meddling in his backyard by backing the government of ukraine against pro-russian separatists. iran's supreme leader likes that letter from the republican

senator about as much as president obama does. ayatollah al ali khamenei said it makes him question whether the u.s. can follow through with any deal. >> these gentlemen, the senators who openly announced when the current administration is no longer in office the deal that america is agreeing with you and the commitments it is making will be null and void. this is the ultimate degree of the collapse of political ethics. >> those talks are set to resume on sunday. two secret service agents are under investigation after crashing a car into a white house security barrier. the incident happens on march 4 as the agents were returning from a party. they have been reassigned to other jobs. one of those agents is mark connally, second in command of president obama's security detail. lumbar liquidators is projecting lower fourth quarter sales after its reputation suffered after a "60 minutes" investigation. they say sales will be $20

million lower than what analysts had predicting. here is the ceo discussing the consumer impact of the report -- >> we came into it with extremely positive brand sentiment with only 4% having a negative view of lumber liquidators. since the broadcast approximately 8% of consumers say they would not consider buying from us at this time. we have brought in additional resources to assist us in responding. cory: he said the company is unable to offer sales or profit forecast for the year. a sign of trouble in the pc market. intel has just cut its first quarter sales forecast, saying that -- the old projection buzz -- was between $13.2 billion and $14.2 billion. now it's down about a billion dollars. the chip maker says corporate demand has been falling. it's been critical in stabilizing p.c. ales. the tough global economy in europe is also hurting intel.

former secretary of state hillary clinton thought it would be easier to carry one device for both personal and work email, and doesn't everyone. but could she have done differently, and what solutions exist to solve that common problem of having a job and a life and e-mail for both? this coalescing of technology and politics, particularly interesting, a lot of people look to hillary clinton and said, duh, you can have two e-mail accounts on one phone. can you when you're in government? >> yeah, you can. there was a video of a 13-year-old showing this. the state-of-the-art 2008 22012 was a little different. perhaps an indictment of what you can do on a blackberry. the product of you to do that came out only in 2013.

cory: on a blackberry at that time you could not do two accounts? sanjay: you probably could. but the first product to do it came out in 2013. she admitted my primary phone is an iphone, i also have a blackberry. in the iphone world and samsung world it's so much easier and we in the business world have been very good at making security management for the containerized life, you can sand box your private life and personal life and have security. cory: -- you say sand box, describe that to me and what the security requirements are to have really separate, private and really separate work. sanjay: we acquired air watch, a leader in mobile security. we work with the highest levels of security of federally regulated industries and government and banks. this is department of justice, white house and several others. in essence what we're able to do is create a sort of personal

space for you where you can have all your personal life, facebook or email, and then a secure place for your email primarily it starts with email, but also other business applications, higher security that is then corporate managed and corporate controlled. cory: let's listen to what hillary had to say about this when she was asked about this. this is hillary clinton. hillary clinton: i thought it would be easier to carry one device for work and personal emails instead of two. looking back it would have been better had i simply used a second email account and carried a second phone but at the time this didn't seem like an issue. cory: is this unusual? was it unusual at the time because of the limitations of the blackberry? sanjay: possibly. i still think there were probably ways that you could have done it. i'm not going to comment on the security of having a private server and so on. there are ways, if you're a high ranking person -- cory: bloomberg news did a story

that said it was a highly unsecure way to run an email server, especially one with such important information. hillary clinton said she only sent one classified e-mail to a u.k. official, which in itself seems incredible in a government that classifies everything. but when i look at the particular requirements of the purchasing in the state department, white house and defense department, how are their needs different, besides the obvious? sanjay: it's not very different from banks. banks also have high security. a banker, what do they want to secure? customer information in a private e-mail. they have been crating security around that. that's why we have been focused on understanding how you can mix those lives in this post-pc even post-blackberry world. that is a solid science. i suspect today she wouldn't make the same mistake. what happened between 2008 and

2012, i'm not going to talk about the political hot potato we're talking about a woman who might be the next president. nonetheless, if you were looking back today secretary of state kerry said what he's doing there. i suspect all the government people if they're using iphone or samsung have the separation of church and state, to speak, between their work and private life. cory: others said, colin powell did the same thing, governs did -- governors have done the same. i wonder when you look at this , business, how big is the industry for you guys of what airwatch is addressing? sanjay: we talked about this almost exactly a year ago. here's the landscape of how big that market is. at least 7 billion people in the world, at least one billion work for some company, and have at least i have three devices. one. cory: three devices? sanjay: yes. i do use a number of them.

what happens, as you think about that device landscape, every one of them needs to be secured and managed for these reasons. it could be a high security thing like a bank or government used, or one not as regulated. we think that the entire landscape is an opportunity similar to what symantec and mcafee did in the p.c. world. airwatch is a leader in that market and we think we're on the verge of exploding that. cory: is the byod trend of users wanting to bring their own device choosing the device does , that exacerbate the problem of insecure emails? sanjay: there's two policies a corporate-owned policy where the company brings phones and bring your own device. you have to be on the forefront of having a byod policy. in the u.s. and europe, they want certain privacy

restrictions. most of that is becoming a solid science. we're able to advise our clients about how to have the best security policy with a byod. cory: thank you, sanjay. "bloomberg west" will be right back. ♪

cory: welcome back to "bloomberg west." the work force of many tech companies is overwhelmingly white dudes like me. now aol and the interactive advertising bureau are teaming up to bring more diversity to digital media, technology, with a new nonprofit called the i.a.b. ducation foundation. designed to recruit and foster diverse talent. the executives behind it -- aol ceo brian armstrong and the iab ceo. talk to me about why you are taking this big step here? randall: the digital technology media, advertising marketing industries require just a better

and higher performing workforce and a continuously improving work force. in order to get that continuously improving work force we have to be more open to the constituencies that make up our marketplaces, our audiences here in the united states and abroad. you've got to represent the people you work for and we don't. and so if we're going to have a better work force we have to be open to higher degrees, much higher degrees of gender diversity, ethnic diversity and also kind of economic advantage and disadvantage diversity. cory: talk to me about that, we want to provide opportunities for people, hiring is hard and you want to expand your talent pool. but there's the issue of how your business changes because you understand the people to whom you're trying to advertise. >> the big -- the big thing is how do you have your work force diversify.

most companies are not representing the consumers they really are touching or need to touch. as much as diversity is a social and cultural challenge inside our industry, i think it is one of the biggest business opportunities in general. one thing i love to see at my own company, how we make our products and services more attractive to more types of diverse audiences. that comes with diversity insight first. -- inside first. cory: and the notion of how hiring works, it's interesting how these issues come up in a way that the hirers are not always aware of. you were doing a presentation on this that was fascinating. like people being passed over just because their name looks different. when i think the example was when lakesha jackson apply farce -- applies for a job and emily smith applies for a job, just, the number of callbacks is half for lakesha jackson. randall: we've been doing a lot

of work with frida klein and she has some of the best research i've ever seen on unconscious bias, and it is breathtaking. it's so astonishing, you can't even be depressed by it. cory: examples? randall: you mentioned one changing the names on top of resumes so that they're identifiably hispanic or identifiably african-american or seemingly white. and the difference in callbacks is a three or four x. there was one she showed today i have never seen before. which is kind -- it kind of blow yours mind. she headlined it crossing while black. that drivers will stop for a white person in a crosswalk, i think it was three or four times

more frequently than they will stop for a black person in a crosswalk. but it's over and over and over again. she had this wonderful piece of the presentation where she had a student with whom she was working who was completely natively fluent in spanish. cory: and english, right? randall: his real name was vaughn baker. they sent him on video job interviews under his real name vaughn baker, and i think under the name alejandro diaz martinez. some of the interviews, there were four skews, some were totally fluent unaccented english, some were hispanic accented english, and again on the spanish side and the difference on callbacks on video interviews was like night and day. cory: we know there's a problem. we knew there's a problem.

when you're hiring people, what are you doing -- the one that got me was the discussion of the berkeley computer science class. when it was computer science 101 it was mostly dudes applying. when they changed the name to the joy and love of computing there was more women than ever before. what do you do when you are hiring to get away from bias? tim: one thing we're doing is making sure diverse talent is involved in the recruiting process. if we're trying to recruit diverse people it's different than if they're sitting across the table from somebody who is diverse. the research studies showed even at university campuses, if that diverse person comes onto a campus, if they don't feel the diverse community is available to them, they have higher attrition rates. companies have the same problem, even if you hire diverse people if the culture is not around , more types of diversity or understood how diversity affects the culture, you end up with more diversity issues.

cory: but if you send the black woman to the career fair, then you say, don't forget about your real job. like it's probably difficult as a manager or a c.e.o. of a company to say, this is the real job. tim: at aol this year, my personal goals for the company we're trying to get a 30% increase in the diverse pools we recruit from. at my management table said we're going to put a diversity metric in and we talked about a bunch of different metrics. people in diversity area are worried that if you put a metric out there it's going to change how we recruit but we came up with a metric that we thought would put physical train tracks for us to get more into diversity road map in general. i think as a leader, in my position, i can affect how we do diversity inside our of our company and i can help randy , with industry level things. my goal ss a manager is to make our company as strong as

possible with the best talent in the world. i think you'd be kidding yourself right now if you looked at where the internet is going, if you don't go out to diverse populations and look forward three, four, five, six, seven, 10 years, you're going to regret it. my management team made a physical change. the company will get paid this year on how well we do on our metrics, revenue and profits, user growth, but also how we open up more diversity and bring more talent into the company. cory: getting paid for it probably helps. tim and randall, thank you. we'll have more with tim in a minute. but first some headlines. united technologies -- its aircraft unit will be spun off if they cannot find a buyer. they make the black hawk helicopters for the military, and the choppers that carry u.s. presidents. they say the company probably does not fit in their portfolio.

nba says their referees are getting it wrong. nba referees made the wrong call or non-call more than 14% of the time in the last two minutes of the game this month. they're reviewing it in an effort to be more transparent in explaining officials' decisions. one of the biggest fights in boxing history. champions floyd mayweather and manny pacquiao finally coming up. they met with the media yesterday. >> this is a fight the world can't miss. this is an unbelievable matchup. action-packed fight. co ticketsry: -- cory: tickets to the fight are $1500 to 70,000 -- $7,000. be right back. ♪

cory: welcome back to "bloomberg west," it's time for the bwest byte, one number that tells us a lot. tim armstrong has the bite for us. >> 4%. cory: that means what? >> there are two 4%s that are important. one is 4% of the global $600 billion advertising industry is basically run on machines. 96% is not. 4% of video viewing and watching of videos or tv is on mobile phones today. 96% isn't.

when you think about it, if this were a baseball game we'd be two outs in the first inning and the other team hasn't gotten up yet. we're excited about the future of the 4% going into the 96% and it's a huge opportunity. cory: randall, will we get it to the 100%? will we get nine inoffings the -- nine innings of this game? how big will programmatic be in billboards? billboards won't be programmatic will they? , randall: they actually are. the advertising in taxicabs. lots of billboards are programmatic now. tim was the first to speak about this, he called it the barbell strategy. it is a good way of thinking it through. there will be a big chunk of advertising that will be priced, placed, optimized through automated mechanisms but we're already seing the opposite take place. there's a big chunk of advertising that is increasingly

customized, specialized, really designed to fit very specific environments and very specific consumer bases. native advertising in many ways is like that. that's the barbell that tim has talked about for years. it's both-and. it's not either-or. you're going to have mass advertising that increasingly will be, again, price placed and delivered through automated means and much more highly customized marketing program. cory: we've heard this from the internet for forever. really quick, do you think we're going to see this adoption really spike this year and next year? tim: i think we will. movie viewership in theaters has reached a five-year low. people are really going digital. when you think about the spike, newspapers and tv, the same thing that happened, will happen in that marketplace. cory: we appreciate your time. "bloomberg west" will be back tomorrow.

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