emily: live from peer three in san francisco, welcome to "bloomberg west." i'm emily chang. treasury secretary jack lew, will meet with the greek treasury from minister -- primus or, with greece trying to unlock money from its creditors. secretary lew: is no doubt that if this leads to a crisis like greece leaving the eurozone, it will cause an enormous amount of disruption in greece.

i have said consistently that no one should think all of the risk of a change like that is predictable in advance and even if the contagion risk is much less now than it was in 2012 and earlier, it would not be a good thing in a world economy just recovering from a deep recession to have that kind of uncertainty introduced. emily: meanwhile, he called for other economies around the world to strengthen, saying the strong u.s. dollar simply reflects a stronger u.s. economy. japan overtakes china as the world's largest foreign holder of u.s. government debt, snapping china's six-year reign at the top. japan's holdings fell, but china plastic line was a bit larger. those countries hold roughly $1.2 trillion in u.s. treasuries. the u.s. capitol briefly locked down today after a man landed a gyro copter on the capitol lawn.

the man flying the helicopter was arrested. reports identify him as a florida mailman protesting corruption in campaign finance laws. authorities inclined to say how he was able to land so close to the u.s. capitol. nokia may have to pass a deal before it merges with alcatel. combined, a would be the world against maker of networking equipment. etsy has priced its ipo at $16 a shares, the top end of the range. that means etsy raised $267 million. etsy starts trading tomorrow on the nasdaq. and a high-frequency trading firm is set to price its ipo at $19 a share, at the top end of the range, according to a person

with knowledge of the matter. the company is raising about $330 million. the ipo was delayed last year after a book claiming -- claimed high-speed trading was reading markets. now to the lead -- in europe google faces the biggest threat to its business ever as the eu slaps the search giant with a formal antitrust complaint. how did it come to this? it all started five years ago when the eu began investing search practices after rivals like microsoft and expedia complaint. google tried to settle three times to no avail. now the eu has filed formal charges called a statement of objections, accusing google of being anti-competitive and abusing its dominant. specifically, they claim google favors its shopping service over its rival. when you search for a lap top, google shopping results come up first and are prominently displayed. leading the charge is the eu

competition commissioner, a top danish politician. >> today's statement of objection on comparison-shopping is of course limited. it is also the first place where we got a complaint. the first place we got a complaint that google is favoring its product in search for the longest time. however, we will continue to look at google plus conduct in other areas. emily: there was also a new probe opened into android, google's mobile operating system. she is also still investigating search results for hotels and flights. google controls 92% of the search market in europe, compared to 75% here in the united states.

google is not backing down meaning the case is likely going to trial. google's head of search says while it may be the most used search engine, people can access information in numerous different ways. allegations of harm have proved to be wide of the mark. if found guilty, google could be fined as much as 10% of its revenue, which would amount to $5.3 billion for last year and face severe restrictions on how it operates. legal experts believe such a fine is unlikely. joining me in the studio is our editor at large, corey johnson. what is your reaction to this?

guest: this is not a new revelation and the statements, i have not seen the statement of objection -- we will see what comes out. i think a lot of it will come down to is google dominant and are they abusing that dominance? if you just look at how people shop for hotels and consumer electronics, credit cards, etc., they increasingly use vertical specialist sites and google is not part of that process. for example, yelp says 40% of their users come through their app with no use of google whatsoever. are they abusing it? my observations are that google does the experiment and says how do we give consumers what they want? i don't think they would ever say let's place our

products first. they would have said consumers seem to like vertical specialist search. let's change our search format and see if they like it. the final thing is every time google makes audit searches and -- every time google makes product searches and algorithm changes, it knows the price people have complained . emily: how serious is this allegation against google and how serious is it that it has been ratcheted up to rubble -- formal charges? guest: it is important to emphasize this is only at the interim stage. it's only the first stage of the investigation where the commission looks at the preliminary point of view. it is basically a short surmise of where it has got to in its investigations and google will have the opportunity to put it side of the case in more detail.

it's important to emphasize there's no finding a liability. it's the direction of travel and the commission's thinking. we don't yet have a conclusion as to whether there should be a fine. if there is, it could be of to 10% of google's worldwide turnover. i think it's fair to say it is serious and google has been trying to settle this through some form of commitments. unfortunately, it hasn't worked. unlike the ftc investigation, it has not been able to close that channel. emily: in the worst case, how much could this heard google? cory: there's obviously $5 billion at stake. the real issue is what has google promised to do as opposed to what it said it would do. the company says our searches

are unbiased. people believe google is giving them the best search results. if you were to go search for flights from trolls degaulle airport to jfk or sfo, you will get these results across the internet. i did that this morning. i compared a google search and kayak search and i found cheaper flights on kayak. that says to me that the real risk for google is the information that they are sometimes biased in favor of google-favored results and that could hurt this company even more than $5 billion. emily: what is your reaction to that? guest: not so much that google is biased, but that they are not doing a good enough job. they could become irrelevant. as proven with lots of data on

desktop and especially on mobile, less and less consumers, especially consumers with a lot of money, they are starting their search with google. google has an obligation to its customers and shareholders to try to improve its results. that means improving the format which means having more choice more images and more ability to select, filter and sort the way kayak does and amazon does otherwise they will become irrelevant answer declining at some stage. kayak is still winning, so why would they worry about finding better offers? google needs to keep improving its offering, which probably means it wants to do more of the same. coming back to the $5 billion fine, it's far less worrying to google than saying you cannot do

vertical search or something like that or you have two separate and run it separately. that would mean the google experience would get worse and worse compared to the vertical search specialist overtime. -- over time. emily: paint the most dramatic scenario for google. could google have to breakup in europe? paul: i don't think it could come to that, under what we would call the behavioral investigation. it could be that google would, in search of a concession, and this is an unlikely scenario could offer some form of breakup to placate the commission's concerns. but as your guest has said, the most worrying aspect is that google will be forced to comply with a legal precedent which drives the coach and horses through the way it does business.

there are other aspects of what has come out of the commission today, which is very interesting. looking at the android case, it is talking about the way in which google licenses with manufacturers like motorola and samsung, saying it is obliging manufacturers to exclusively preinstalled google apps. this is interesting from an antitrust lawyers perspective. it's reminiscent of what happened with microsoft windows media player and microsoft back in the 90's when windows was an important a gateway -- important a gateway to several markets. quite frankly, the market share of android is quite impressive particularly against apple which is a strong market player. google has done well to get itself into a good market position. emily: coming up, netflix

profits slide, but the stock is surging after hours. we will tell you why. plus, close but no cigar for spacex. how difficult is elon musk's rocket catching mission? ♪

emily: this is "bloomberg west." i'm emily chang. secretary of state john kerry flew to germany to tell his fellow g-7 foreign ministers that the iran nuclear deal would hold up under scrutiny. secretary kerr: yesterday, there's a compromise reached in washington regarding congressional input. we are confident in our ability for the president to negotiate an agreement and to do so with

the ability to make the world safer. emily: the white house has signaled it would accept revised legislation, giving congress the authority to review any nuclear deal with iran. samsung is trying to deepen its ties with arch rival apple. they have created a standalone team of 200 employees to work exclusively on screens for apple products. samsung display already makes screens for ipads and matt looks and is this -- and is relying more on screen making as its own smart phone sales stall. netflix, the home of new shows reported record subscriber growth in the first quarter. the streaming company adding 4.9 million total streaming subscribers. revenue grew 24%, but profit fell to $24 million as the strong dollar trend overseas gains. they haven't planned -- they

have plans to expand into japan this year and they are seeking shareholder approval for a stock split. the news sending the shares much higher in after-hours. cory johnson is here with me. cory: i think is a case with a managed expectations very well. they sent a letter to shareholders saying these are actual internal numbers. it's hard to believe companies have their goals and stretch goals and much lower goals they announce to wall street. i think that surprised even the bullish people. emily: breakdown subscriber growth for us here and abroad. cory: subscriber growth here was good. up to 41.1 million users here in the u.s. and internationally as well, topping 20 million, which they got to 20.9 million.

international growth is a number people are looking at the most to see how big this business can be. adding new zealand and australia at the end of the quarter was a big deal for them. the market is a lot larger and got a lot larger by adding australia and new zealand. emily: let's talk about original content. it's a huge part of their strategy and seems like everyone's strategy lately. are we getting more information about how this -- how much this content costs? cory: estimates were lower than they had been and they said that was a surprise to them. they don't break it down show by show, which you can imagine they would not do, but accounting-wise, it's interesting they spread out the cost over these shows -- cost of these shows over a long time. i think a hot show is a hot show for a short time, but they have had some success with "daredevil." what do you watch?

emily: iwatch "orange is the new black" and a lot of kids movies. cory: what kind of things are successful in the u.s. -- they were not singing the praises of "marco polo." that was panned by the critics and they hope it will play well in china and some foreign markets. it's not clear if it is doing so. emily: we have talked a lot about amazon studios and how they have not had a hit. but now they do with "transparent." now other companies are seeing success. how much competition is that for netflix? can they keep it up? cory: netflix and amazon have a very interesting relationship, not least of which because netflix is hosted on amazon web services. amazon web services likes to see light -- likes to boast that if netflix can trust us, anyone can trust us.

but amazon is not going away and they see this as a market they can be in. they won an emmy award this year, so they are not going away yet. emily: what about hbo? that's the opposite model of netflix. on hbo, you have to wait every week and they are fighting piracy -- the episodes that were leaked online. as one model better than the other? cory: it is challenging their traditional business very directly and we will see how much the cable operators still like having hbo as a partner when hbo is competing with them directly by going over the top. emily: coming up, stan druckenmiller took a big hit in the tech area. what does he think of valuations now? ♪

emily: this is "bloomberg west." i'm emily chang. stan druckenmiller has one of the best records and history of investing. his son was returning 30% annually. he sat down with stephanie rule in an exclusive interview and discussed the pressures ceos face. stan: i think it's the reason a lot of these tech companies are staying private, so they can look at their businesses and run them long-term and not short-term. stephanie: what do you think about tech valuations right now? ira number one mistake was getting emotional -- take yourself back tonight teen 99 and you look at the guys buying these ipos and you are jealous and excited and you got your

head blown off. stan: it was 2000. i wish it was just 99. i think tech valuations in the private market are crazy. snapshot -- stephanie: you loved snapchat. stan: they don't have any revenues yet. i think is a great company and i think evan has a great vision. it's a fancy price. uber is a fancy price. it's certainly not like 2000 because we never had networking effect before. you can have companies get customers they did not have three years ago in the monetize it. i think it's all part of a product of zero interest rates but i don't think it is outrageous the way it was in 2000. stephanie: you're not that concerned? stan: i don't know if i would go that far.

emily: coming up, spacex successfully launches its cargo capsule but ales to nail the rocket landing stop and later, is there a tech double in china? ♪

emily: this is "bloomberg west does quote more we focus on innovation, technology and the future of business. let's get a check on bloomberg top headlines. china's economy grew at the slowest pace since 2009. new figures point to a slowdown. here's the spokesman of china's national bureau of statistics. >> the new impetus is showing momentum, but in general, it is still small in size, although it is growing fast. we are still relying on a traditional growth engine and that is declining and has a huge impact on our economy in the short term.

emily: earlier this week, the imf maintained its projection for a 6.8% expansion in china, slower growth than india for the first time since 1999. a new bloomberg politics whole find there's a deep partisan split on iran and israel. in a nearly three to one ratio democrats were more optimistic than pessimistic that and iran deal would make the world safer -- make the world safer. republicans were more pessimistic. 67% of republicans say they are more sympathetic to benjamin netanyahu while 76% of democrats say they are more similar than it to president obama. delta airlines is cutting seating capacity on its international flight. the strong dollar and oil prices are hurting overseas demand. it includes a 20% cut to japan africa and the middle east and a halt to moscow flight. delta gets about ready percent

of its revenue from international flights. this scooter company segway has been acquired by its chinese competitor. they started as a crowd funded company and now sell what they call personal transportation robot. their backers include shall me and sequoia capital. -- xiame. spacex successfully launched a rocket into space, but the attempt to reuse the rocket by landing it on a barge l just short stop elon musk live tweeted the whole thing. looks like alton nine landed fine, but excess lateral velocity caused it to tip over. i'm joined by a former acid a -- nasa deputy director. cory johnson is still with me in the studio.

give us an idea of what you think might have gone wrong and why this is so hard to do. guest: people have been trying to take advantage of the reusability of rockets for decades. i think this is so incredibly close that we are just going to be able to see this happen in one of the next couple of lunches. i cannot regulate anymore than elon musk has. the fact that twice in a row within a couple of months, they have found the drone ship and have been able to land on it too hard for survival, but still it's a huge success. let's not forget that the rocket launched successfully and will be docking with the international space station on friday. emily: in case anyone is worried about elon musk, he tweeted if it works, he's treating himself

to a volcano layer -- volcano lair. cory: my trip and fall, remind me of my excess lateral velocity. everyone out there should get a volcano lair. for all the criticism we give on the financial side, this is in or mislead ambitious. it's very important for the government in particular to have a us-based space company because with nasa out of the game, there are in or miss pillows of military and by satellites that don't get into space, so it is important to have it. they can trust a rocket launched by a foreign government. emily: what kind of oversight is necessary to make sure what

spacex is doing is actually safe? lori: i would say this is very similar to how we have been going into space or years. i take issue with nasa out of the game. they are in the game. five years ago, president obama stood at the kennedy space center and outlined this new way of partnering with the private sector to advance space transportation, similar to how we have in all other ways. we would be spending much too much money and no one would be going if we threw away the engines in an airplane every time we flew and we can be doing that in space transportation either. the government has been using the private sector to launch a satellite -- launch it satellites, even very important military satellites and scientific payloads for decades. the space shuttle that was retired a few years ago was $3 billion to $4 billion a year and

helped us develop the international space station and now being able to get there with the private sector for pennies on the dollar is the right task. these vehicles and competitor vehicles will be carrying people from the good old usa shores in just a couple of years. emily: give us a better idea of what kind of its elon musk is grappling with here. a kind of technology to land the rocket safe the and make it reasonable and say that money? lori: reusability has been the holy grail. that's what it takes to reduce the cost currently and sustain space activities that will take more people and things to orbit. we had nasa had been working on it more than 15 years ago with a different vehicle. it was going to lead to a fully reusable vehicle and the investments were just too high. the investments in materials and propulsion were not yet advanced enough. the private sector and elon

specifically is innovating to do this on a ship in the ocean because they can't get the capability to get licenses to land on land and this is a great innovation. so, of course we reused the space shuttle engines. we refurbished them to fly again, but the spatial took a number of parts -- the gas tank, the solid mark -- the solid rocket motors, the cost continue to be too large to be sustained for these long-term lands we haven't space -- we have in space. emily: you think it's only a matter of time. how much time? lori: i bet within a year, he will have landed successfully. they've got six launches now and they are in on a 12 launch contact. i think people will be going on dragons and the competitor

vehicles with boeing in the next two and a half three years. maybe he will get that volcano lair after all. coming up, our chinese tech stocks getting too hot? we break down the soaring valuations and look at the rise of messaging apps. ♪

emily: this is "bloomberg west." i'm emily chang. still to come, a look at the explosive rally in chinese stocks. and where vapor chat sees itself in the crowded market for messaging apps. walgreens is freezing pay for it

senior u.s. executives. it's part of a $1.5 million cost cutting program. they are closing stores and reorganizing corporate offices and revamping its technology following the purchase of a swiss drugstore chain. ali baba founder, jack ma. is expanding into the health care market, moving its online pharmacy business into a publicly traded affiliate. today's deal years the company to move into prescription drug sales if it is permitted by the chinese government. and other chinese tech company is doing expanding of its own -- they have launched a new service that lets chinese consumers by foreign products that might not be available on the domestic market by expanding deliveries expediting deliveries through china's free trade zone. the service gives international suppliers a chance to sell to china without having to establish a formal presence -- formal presence there. they have seen their value soar like other chinese internet companies.

some relations have lived -- have risen 220 times the reported profit. compare that with 156 -- the price to earnings ratio of u.s. tech stocks when the nasdaq peaked in 2000, the year of the. -- year of the dot com bubble. my guest has been in china for many years. what do you think we are seeing now? nothing gets more -- get investors riled up more than the word bubble. guest: if we compared to 1999, there is more earnings around then there were back then. there were not any earnings in 99 and 2000. we should not compare it with 99 and 2000. there has been a massive appreciation. i think we should look at which kinds of soap we are talking

about. they're different brands of soap in this bubble. we have the china shares and we have the hong kong shares and we have the new york listed companies. you have to look at what you are talking about but there has been a big run-up for sure. emily: what about kinds of technology? are there kinds of company where you see valuations shifting out of control? duncan: we talk about i do -- about baidu and ali baba -- they are moving into areas like pharmaceuticals, potentially. we've seen them in transportation, media and finance. you are really expecting them to disrupt other sectors. can they consolidate and be the leader?

i think you have to break it down. emily: and the rest are in the danger zone? duncan: the interesting thing is that they are actually buying companies, as we just saw with the pharma example. there was no m&a and china, but that has changed. one reason we have seen this huge equity investment is that you are not just going for an ipo. you are gunning for an exit with one of the big guys. but not everybody can win. what will happen if there is a downturn is the valuations will drop off quickly for those third, fourth, fifth place people. but will the deal be done with the bigger guys and will they be able to list? the question is how long does it continue?

emily: that is my next question -- how far are we away from a bubble bursting? duncan: as we heard earlier, the chinese macro situation is getting more difficult. it's the lowest for many years. but there is excitement about these new economy in place. some of them are really profitable. in a sense, we may see a shift away from the companies that are hit by a downturn. the state companies, and a shift into these large tech challengers. ultimately, there will be a connection if the economy continues to slow and consumer spending, which is what this is all about, is hit, then they would take a hit. we still see a rising tide and continued urbanization, but the price of getting into these companies is getting a lot

higher. if you are a private equity investor, that is a concern. emily: duncan clark, who happens to be writing a book about alibaba. thanks for joining us. a new contender has entered the field of sms chat. that's next on "bloomberg west." ♪

emily: this is "bloomberg west." i'm emily chang. messaging apps are all the rage. facebook spent money on whatsapp. but now there's another one coming to market with a focus on business. cory: vapor chat has been live for four weeks and think of it as snap chat for business.

joining me right now to talk about this is the ceo and founder. the messaging space is quite crowded, but this is intriguing, taking the relation of snap chat and the idea that them user can conjure -- can control the message. what is that bringing? guest: this supplies much more than businesses. the way people text is flawed. the second we send a message, we lose control over that message. if i text you right now, you can take that message and do anything you want. you can post a picture on facebook, copy the message, save it to your camera, whatever it may be. we created some innovation in that space and for the first time, users can have control over their messages after they send it. you can vapor a text after you send it and immediately remove it from your phone and the other persons phone.

cory: what are the uses you imagine? guest: we all say things we regret sometimes. texting has become such a popular form of communication, it's what we do all day long. a lot of times, we send texts we regret. with vapor chat, you have that control back. there are many different uses for it. everyone knows how annoying autocorrect can be. simply vapor it and it is gone stop or someone might send a selfie to their mom by accident instead of a girlfriend -- just vapor it and it is gone. we are seeing many applications for this, and this is targeted to everyday people, not just businesses. businesses can use it in a business capacity. whereas maybe before, people

would be afraid to have a conversation on i message, they can do one on vapor chat. it's better because you can take it back whereas if you say something, you can't. we are seeing tons of different applications, not just in couples, businesses, teenagers using it, etc. cory: explain to me how it works. guest: both people have to be on vapor chat. you match within the app and the vision here was to bridge two worlds. on one hand, you've got the large, regular chatting apps like whatsapp. on the other hand, you have ephemeral, self-destructing apps like snap chat. we realized there was a chance to bridge these together. people are using vapor chat as their everyday chatting at, just to chat normally.

but now i fingertips, you have all of this option analogy of protection. you can chat regularly and all of a sudden, if you want to take a text out or we have great copy settings -- you can determine which texts or photos can be saved to your camera roll. we build a lot of attention we think people deserve. cory: interesting stuff. thank you very much. emily: i can't keep track of the chats. cory: there's no reason for lack of communication anymore. emily: somebody should tell that to people -- cory: that we don't connect it with. emily: the b west side is a number that tells us a lot. when we got?

cory: $56,500,000 -- that is the cost for spacex to launch a rocket. spacex says if they can pull off the reusable rocket, they can lower that down to about $7 million. emily: that is why reusability is the holy grail. cory: it really changes the economics of everything. what we do in space could change dramatically with that cost going so much. emily: that is how elon musk can afford the volcano lair. thank you so much and thank you for watching this in addition of "bloomberg west." all the latest headlines on your phone, tablet and on bloomberg radio. you later. ♪