cory: from pier 3 in san francisco, this is “bloomberg west.” we cover innovation and the future of business. i'm cory johnson. president obama says he takes full responsibility for a january drone strike that accidentally killed two al qaeda hostages. it killed an american hostage held since 2011 and giovanni, an italian held since 2012. president obama: we believed that no civilians were present and that capturing these terrorists was not possible. now, we do believe that

operation did take out dangerous members of al qaeda. but we did not know, tragically, that al qaeda was hiding warren and giovanni in the same compound. cory: the president has ordered a review to find out what happened. the senate has confirmed loretta lynch after a five-month holdup. 10 republicans joining democrats in support. the first african-american woman to head the justice department. the nasdaq now higher than it was during the dot come bubble. the valuations are not as bad. 30 times earnings, 27.8 in the last five years. deutsche bank could decide as soon as tomorrow whether to sell

all or parts of its consumer banking business. it is under pressure to be more profitable. it was fined $2.5 billion. regulators in the u.s. it and u.k. accusing them of manipulating interest rates. when pleaded guilty to wire fraud charges. starbucks says revenues are up 18% as well as an 11% rise in the americas. expanded menu brings in more customers. shares are rising in after-hours trading. kleiner perkins is asking ellen pao to pay up. seeking $900,000 from pao to cover their leading cost in fighting her lawsuit. a jury perfect -- rejected her claims.

now to the lead, the cable deal of the decade. comcast stopping the deal in its tracks deciding not to go through with this purchase of time warner cable. comcast backing away from the deal after regulators and the fcc suggested they would oppose the combination of the number one and number two cable companies. for comcast, a reminder that money can't buy everything. comcast is spent $70 million on the lobbying last year, more than any other company. 128 lobbyists try to seal the deal. another lobbyist paid a role in shutting the deal down. right now matt wood of the free press policy director is in washington and heralds, let me ask you, you were out against this deal early on.

is what happened a sign of the fcc resisting big bucks from lobbyists? harold: you are asking me? cory: what do you think? harold: i was not against the deal. i think you have me confused with someone else. cory: what do you think of the decision not to go ahead with it? harold: it is a bad day for the american consumer and not the antitrust authorities or the fcc . what we have is a deal that has been pending 14 months. we have had a series of leaks from the agencies about where they are going. no official word. they are highly confidential. it makes the american government to look bad. antitrust regulators watch what we do. it is open season on targeting

american companies, whether in china or europe or the united states as well. cory: matt what do you think about this decision? matt: we are glad. i think you are talking about us being out early. the last time i was here was when it was announced. i can't disagree more. this is not targeting companies. this is saving consumers and saving every company that relies on broadband and communications because we saw no discernible benefits from this deal and we are glad regulators took it seriously and did not let money by the deal and walked in on all of the harms the deal would cause to competitions. cory: as it relates to this deal, i was giving a talk in oakland about half an hour ago and i said something about a bigger comcast would be a better comcast.

there were jeers in the audience. i wonder why you think a bigger comcast would be better. harold: i don't know whether a bigger comcast would be better. i have seen no credible evidence there was any antitrust harm to the american consumer from this merger. from all appearances, this is an arbitrary decision by a government agency and we may never know exactly what the thinking was. it looks like comcast is going to withdraw the application. i would be surprised if the justice department would have been able to defend the case in court. cory: do you think the justice department -- there is new logic. the old the logic was as long as there is not overlap, there would not be a monopoly. this is a new era. digital boundaries are different. harold, is there something new out of the justice department?

harold: well, if there is a jake, we would like to see a written decision from the justice department about what it is. you are right. in the past, if there were not overlapping markets, it would be hard to tell a story about merging two companies leading to some increased market power. consumers in san francisco will have no greater or lesser choice of video providers if this had gone through or not. cory: matt the statistics about the merger and what the combined company would have controlled 57% of u.s. broadband. i wonder when you look at those numbers, if you think there is a new notion of boundary or what kind of control a company would

have even if it was not about choice. maybe choice further up the pipe. matt: exactly. people who saw no harm were not looking for the harm. there is a nationwide market for ron band. -- broadband. you would have had one company that has life or death control over the content we can see online and the fate of all of these video competitors who are offering a more affordable offering. about 50% of subscribers would have been the only option available for high-speed broadband. cory: i've got to push back. didn't the net neutrality decide they could not control the content? maybe comcast to sports or espn but not what internet content. matt: not thus be or the grade

of the speed or throttle back on people. that is more a technical discrimination. the kind of economic powers comcast would have had would have been undeniable. they could partition out bandwidth when it suited them. that is the story of this deal. even though the biggest margin is broadband, it is their fastest growing segment. most of the revenue comes from their traditional cable-tv properties and subscribers. they do well with broadband and they do better when they choked it back and don't let the innovation occur. cory: matt wood and harold, thank you for joining us on this important story. early emily chang sat down with sheryl sandberg and richard branson for an exclusive conversation. here is a sneaky. >> what will motivate business

and companies to take diversity seriously is when they realize not taking it seriously is harming their performance. cory: don't miss it, 8:30 p.m. "bloomberg west" will be right back. ♪

cory: a quick check of headlines. eric schmidt -- and amazon.com. conflicting reports at how much elon musk was paid last year. he earned $35,000, but according to our index $102 million thanks to options. the company said he has never accepted his salary.

the stock options, he will accept those. pandora shares are down after the service reported listeners fell from the previous quarter, which is bad news. a new loss of $.12 including some items. the company's are going customers away from traditional radio. royalty costs are rising. amazon on cloud nine today. it is a cloud joke. they reported earnings with sales top 15% and profits down a bunch. a loss of 57 million dollars. it was the first quarter the cloud business broke out services from amazon web services which contributed $1.6 billion in sales for the quarter, up 50% from the year before. joining me now to talk about

this, jack clark in new york. and has really close ties. the last time i saw you in person was at the amazon web services conference. what do you make of the business? >> the world is starting to appreciate what a big deal it is. it is the fifth biggest standalone software company in the world. it was really under the covers at amazon. 6.3 billion dollar run rate. interesting that is the same rate being claimed by microsoft. it is an apples to orange comparison. cory: what do you think of the numbers? jack: the surprising thing was it got a profit for that segment. people i've said amazon is just a commodity business. it does profit margins

equivalent to walmart. what we are learning is it is very lucrative for the company. cory: it is surprising. i would have expected, i mean they announced the price cut constantly. 30, 40 price cuts last time. i assumed they were running at a 2% profit margin. jack: here is the confusing thing, there was a huge price cut by google that prompted reprisal cuts by amazon around 40%. if you go through the numbers operating income dropped the next quarter. then he climbed back up. they have sustained the huge price cut and they are still managing to make the margin come back. matt: i think jack is right. the amazing thing is how big of a profit there is in all

enterprise technology, hardware and software. amazon is being aggressive. they are still able to make a profit. the other thing that is interesting, while this is accretive for amazon, if you look at microsoft, 23% this would not be accretive. that arian -- therein lies the challenge to try to compete, even though amazon has bigger profits in the cloud business. cory: the apples to apples comparison, sales growth, you've got 20% last year on an annual basis. it is really coming down for amazon. what we did not know was you had a business growing at a 2% clip. does that suggest amazon's business of selling stuff to people is actually slowing down more than we got? jack: you are talking about a

business 10 times greater than the size of aws. maybe there is room for it to grow. selling stuff is a more traditional business. it is probably more competitive. amazon had a seven year head start on the cloud. these rates are a manifestation of a bunch of perplexing occurrences. it is now turning into profit. cory: it is suggested microsoft 's web service is apples to oranges. ibm, their number how are these things different? matt: two big ways. most of amazon web services is true infrastructure. the things i used to buy in the form of servers and storage but microsoft is counting on their

commercial cloud business. it is a combination of azure and software applications like office 365 and their other software services they sell to commercial accounts. those are different things. the other thing that is different, microsoft is moving a lot of their revenue that used to be non-cloud revenue, office on to office 365. although they can say they grew their cloud business over the last 12 months, that is also apples to oranges because a lot of that is business shifting over. cory: i would like to talk about this more, but we are out of time. it seems there are some software in there for amazon. so glad to have you on an jack clark, all the way from new york city.

we appreciate it. google sales climbed thanks to a jump in mobile advertising. more on those results after the break. ♪

cory: this is "bloomberg west" and i'm cory johnson. emily chang has an exclusive interview covering everything from ellen pao trial to who sheryl sandberg is backing for president. >> i'm supportive of hillary clinton. i would like to see her as president and more women presidents all over the world. cory: the entire conversation is tomorrow night on 8:30 p.m. google reports a gain in sales. that is good. $13.9 billion.

google makes investments to keep people using its services and use them for longer stretches of time. youtube was a key player in driving the volume of clicks. it is also seeing momentum in mobile advertising. paul sweeney joins us. i have not looked at the quarter yet. what do you make of this? paul: i thought it was solid. there is some issues from them. the numbers came in line or better than the street. some of the metrics remain very strong and i think one of the things investors are looking at is the youtube business you mentioned. we see time and again across the internet online video usage in terms of billions of minutes, in terms of advertising, is one of the growth areas of the internet

and youtube is front and center. that continues to be for most investors an intermediate driver for them. cory: what about clicks? we are seeing the number of clicks increasing on the hold. it suggests people on mobile devices were not consuming as many ads. paul: google is trying to manage the migration of their usage and users from the desk top to the mobile environment. when you look at google's metrics, you see a good growth in the number of clicks, about 13%. however, a continued negative, a decline in the cost per click the pricing of the ads, which was down 7%. so clearly what is happening, the good news is, people are mark grading -- migrating to mobile devices.

that is good for google. we see that in the number of clicks. google has not been able to monetize their mobile inventory. we think that will change over time as more advertisers embrace the mobile environment and once that happens, you will get volume and pricing in the right direction. cory: cost per click was down 7%? i thought 2% or 3%. this is a bad change. paul: it is. part of it was on the currency translation. clearly every day if you are managing the inventory for google, you are managing the amount of interview -- inventory for the price you sell. as we saw the priceline, they are doing a decent balancing act when you look at the results. clearly it is a challenge for all internet companies, media companies, as they migrate their inventory from the desktop to the mobile world. cory: paul sweeney, interesting

stuff. thanks for joining us. tomorrow night, our sitdown with sheryl sandberg and richard branson. more "bloomberg west" after this. ♪

cory: this is "bloomberg west" where we focus on the future of business. i'm cory johnson. u.s. drone strikes killing an american and italian held hostage by al qaeda. president obama says he takes full responsibility. president obama: i directed the existence of this operation be disclosed publicly. i did so because the families deserve to know the truth. and i did so because even if certain aspects of our national security efforts have to remain secret in order to succeed, the united states is a democracy committed to openness in good

times and in bad. cory: two americans linked to the terrorist group were also killed. senate leaders are preparing legislation that would extend the government authority to collect telephone data. it would continue the surveillance authority through the end of 2020, otherwise, set to expire june 1. meanwhile, the house has passed a second cyber security built -- bill urging companies to share information with the government. the bill received bipartisan support and gets companies protection from lawsuit. it will be sent to the senate. parents of michael brown suing ferguson, missouri. michael brown was the unarmed black teenager shot by a police officer, sparking national debate. both federal and local authorities declined to prosecute the police officer. spain rejected u.s. request to

extradite a former jpmorgan banker from london. he is accused of hiding the losses, which surpassed to $6.2 billion. spanish courts turned down the request because martin is not a spanish citizen and the events occurred in london. tomorrow is the day for apple fan boys and the rest of us. the apple watch could arrive tomorrow for some consumers who ordered them off the bat. delivery times have been moved and some have been moved up since preorder started. customers who bought the pre-ordered watch would not ship until june. tim higgins here to discuss this. tim, let me start with you. these changes in the order dates, i bought my wife one of the new macbooks and i ordered it the very first day and they said it would not come until may, but this morning i got an e-mail saying it was on the way.

is this a promise to deliver or a sign that this is not what we thought? tim: during the big preorder time it arrives earlier than expected sometimes and customers are starting to receive e-mail saying it is coming earlier than you thought and that could suggest they will get it as early as friday. cory: let me ask you, when you look at what is going on with the apple watch, is there a sense that the demand is fantastic? is there a sense that it is wait and see? guest: i think it is more about functional product than fashion accessory. this is the first time apple is using the build-to-order approach and they put that in the delivery date. it looks like they are doing better than what they expected. cory: why do you think that is? shahid: i think the negative view of this is the demand is lower, but i think demand is still consistent with what the

forecast. i think it is more about supply chain efficiencies been over delivering on where the promise is and delighting the consumer. cory: is there a sense of where the demand is coming from? we talk about apple fan boys and ordering anything -- but thinking of the analysis over apple, he links it to a phone. he says it is a phone accessory and he is trying to capitalize on the iphone users who want his this iphone accessory. tim: you have to have the iphone to use it, so it will drive that. what we are seeing when it was being able to preview in stores, we got mixed response. a lot of stores, nobody was there. i have done inspections on stores and i have seen people lined up, so i have seen people in hong kong, i have heard people in new york.

it is a global product. in a way that iphone 6 was not rolled out in a global way, it will be in china on the first day. the six was delayed for various reasons. it is interesting that the watch will be in boutique stores for sale. you can walk in and buy one. most stores tend to get a lot of global tourists, high-end tourists. cory: i heard about the department store in london and paris. tim: london, berlin, tokyo, and authorized resellers in china and japan. some of these places are high-end and they attract a lot of asian, particularly chinese tourists that are traveling. cory: what are the numbers you are seeing? estimates are earlier work all over the map. as low was one million. as high as 10 million. tim: apple will not be clear on

how well they will be doing with the watch. in some ways, they don't want to tip off where customer preferences are. the estimates are, in some cases, maybe 300,000 at the beginning or one million in opening weekend. several million more in the first year. cory: what is your expectation in terms of numbers sold in this first period? shahid: i think by the end of the year, especially christmas season, about 20 million watches. cory: 20 million? what is that based on? shahid: a number of different forecast we have bred and -- read and triangulated. from an apple consumer point of view, in interesting product and a new category of available devices to a pretty big market. once it is out and people are developing more functional applications, you will see a lot more usage. cory: tim, you alluded to the fact that apple will not tell us a lot about who is buying it.

they don't break down any products in terms of any one product and how much they sell. except for very rare exceptions. they don't say mac sales were 18% of mac sales were to europe or anything like that. do you think they will give us numbers after the first weekend of sales or first week? the iphone, the first time out they did not tell us right away. they waited until one million before they got to any numbers. tim: the signaling is there won't be any numbers on monday. it is hard to say, but monday will also be there earnings. i expect some color during earnings. maybe them saying -- i haven't got one yet. cory: am i supposed to get one as a reporter covering the company? tim: you need to know what time it is. cory: there is a big clock under the camera or somebody yelling in my air.

richard is yelling at me right now, tim higgins -- thank you very much. we appreciate it. coming up, tesla, my favorite company, big plans to bring power to your home. don't miss our special. a balancing act, a conversation with sheryl sandberg and richard branson. the struggle of finding a balance between work, life, and family. ♪

cory: this is "bloomberg west.” i am cory johnson. a battery expert on tesla's grand plan. radio history in norway. the country is turning off fm radio and we will tell you why. first, check of top headlines. nokia is trying to drum up money and they're losing maps

business. their target is alibaba and amazon. nokia's seeking more than $3 billion after purchasing the app for more than $8 billion in 2008. honda has designed their first ever jet plane. it does not look like a civic. it made it first flight from japan, landing in tokyo. honda has put the jets' engines on top of the wings and they say it increases fuel efficiency by 15% while allowing more space in the cabin. they're waiting to get approval from the faa. it is planning deliveries later this year. americans still love dunkin' brands and domino's thanks to expanded menus. duncan cited the croissant donuts. domino's introduced chicken bites covered in chicken toppings. gross.

whatever. shares of companies climbed. donuts. next week, tesla will make a push beyond the car business when they unveil batteries for homes and businesses. big businesses have signed up like the likes of walmart. how much do they rely on the proposed giga factory to build the batteries? his company create technologies that wirelessly charge electric cars. i asked him what the potential for the giga factory is. andy: what that factory can do is push down the price of the cell -- the battery so so low that it becomes a commodity. that is something we have not done yet and needs to be done. if he does that, it will go into homes, cars and it will change the paradigm completely. cory: what is the business model? andy: there are two.

one is direct production. the other is second life. you can take a battery where it is not as functional as it ought to be for a car or truck and put it into great stores where it is used less frequently in less intensive ways. a battery may be good for six years, seven years, or eight years in a car, but for every year of use, it fades. after the eighth or 10th give, it may have faded so much you need a new battery. today's technology implies that that battery still has life left in it, but put it into -- cory: so a five-year-old tesla needs the whole battery to come out because -- andy: i wouldn't say five years on a tesla but they are doing better than expected. cory: not like mercedes with engine doesn't have to come out for eight years. andy: that's true, but the engine may need to be replaced and the transmission rebuilt. you may have an offset. the battery of any electrical vehicle today has a limited

lifetime. you can extend the lifetime to wireless charging but you can also extend it by giving it a second life in which it has secured value. cory: so that is putting into the home? andy: putting it in the home storage centers. utility grid storage centers. cory: the power that comes from the grid, while we tend to think of it as having the cost at all hours of the day, the cost of production is much greater and the scarcity and cost of power during the day can actually be much higher? andy: it is a very complex equation. they all have different factors, cross factors. transmitting it is pretty expensive because of the maintenance and cost of the infrastructure. distribution is even more expensive because of all the things you need to put in the ground. those things that are ones that will be overloaded first.

it is not the generation capacity. it is the micro grid. cory: having power at the very end of the node and having batteries takes the toll off of that generation? andy: exactly. you can store energy which we cannot do today in great amounts. you can level off the peaks and chop off the peaks by having energy back in the system and getting demand when it is next. -- maximum. cory: therefore, with the beneficiary being the power company more than the user? andy: that beneficiaries are multiple. cory: let me explain. the power company might say, hey, we are looking at a $500 million pullout to raise the capacity of this new community or this old community using more power. instead, could we spent 400 million to buy batteries for all those people? andy: it is very possible that i can be the case. it is also possible that the way

we produce energy will change and this will favor renewable energy sources that can be stored. since the problem with renewables is that they don't produce when you need them to. if you can use a battery to store energy and then release the energy when you need it, you have favored the occasion for -- the equation for renewable energy. cory: you talk about the giga factory as making a commodity or commodity pricing battery. i see two things problematic. first, the commodity pricing of batteries is that aren't there inherent limitations within the science of the battery type that tesla has decided on? you can only get it so cheap. andy: for the time being, true. they will adapt and put new chemistry in. when the silicon anodes really take form and pushed into the market, they will adapt and produce those. those can probably be produced less expensively than today's batteries because -- cory: the factories will have to be modular. andy: and that is not as hard as people think.

cory: andy draga. coming up, norway is going to turn off its fm radio stations. we will take a look at what is replacing it. ♪

cory: fm radio is going off the air in norway in 2017 in favor of digital radio.

audio innovation is the future audio. is this the future of radio? paul sparrows joins me. is norway making news? tell me, can you describe what digital radio is and what the differences between fm and digital? paul: digital basically uses the frequency spectrum's differently than analog radio. it allows you to put multiple channels on a narrower bandwidth to get more broadcast opportunities and more content in a smaller bandwidth and that is why part of the reason they are switching over. people in this country that use sirius xm radio is a broadcasting of that. norway will eliminate that. -- eliminate fm radio. they were the first country in europe to experiment with digital broadcasting. it has been around for 20 years.

in a gallup survey this year they said about 50% of the population in norway have these radios. there are still more than 8 million units not able to receive digital audio signals. what that means is that as they make a decision to turn off fm radio, many people will be left with devices that cannot receive the digital audio and they will have no access to radio. cory: the way i think of it is an analog radio sort of last -- blasts signals and you hope you are close enough for perception that you can pick it up and listen to it whereas digital is chopped up in pieces and can get any kind of reception. reassembled pieces give you a clearer signal. is this being done for the notion of a better sound quality or it is this about offering more stations? paul: the truth is it is not better sound quality despite what you heard. if they squeezed bandwidth and

do the broadcast at a lower rate to get more channels into a smaller bandwidth, the audio is actually worse than on fm radio. but those channels on a smaller spectrum and that frees up other spectrums to be used for cell phones, data transmission. the truth is that the nature of the quality of your audio is determined by the bandwidth you dedicate to that. cory: is this the future of the u.s.? are we going to see fm radio go away in favor of digital radio or digital on the fm spectrum and more spectrum available in places where we are desperate for spectrum like cell phone service and data? paul: i think would be difficult to do with the way the norwegians are doing it, even with their fairly high penetration. only 20% of the cars and -- in norway have digital audio podcasting capabilities. 80% of the cars on the road will not be able to pick up the digital signal, in particular,

older cars. it's almost impossible to upgrade them. a transformation like this really impacts the poor and elderly disproportionately because they are the most likely to not be able to upgrade. it has social connotations in terms of making these decisions. if you think back to 2009, when the united states made the transition in television, they spent over $100 million in public service campaign to try and educate the public and offered coupons to convince them to get the converter boxes you needed to get digital signal and make it visible on your standard analog televisions. still, millions and millions of people were unprepared without -- for that digital transformation. in the future, you will see digital audio becoming more prevalent in the united states but i doubt you will see in a limitation of fm for at least one decade, maybe longer. cory: paul sparrow, senior vice

president for broadcast at the newsueeum, thank you. sarah frier is here with the bite. sarah: 500 million, half a billion. good job. cory: new york university, thanks. what have we got? 500 million what? sarah: the number of tweets that happen every day and twitter is now working to have a better show of those tweets to people who care about them. instead of having to go to twitter and follow everyone as we are aware, they have a new product called highlight where the best tweets every day get sent twice a day to your phone. cory: will these be the tweets from my feed or will they be whatever tweet twitter decides is the best even though -- sarah: it will be what twitter thinks is relevant to you. cory: interesting. thank you. you can get the latest headlines on your tablet, phone, and bloomberg radio.

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>> from our studios in new york, this is "charlie rose." charlie: welcome. we began with a conversation about the ted talks, a story i did for 60 minutes sunday night. brian stevenson was the person people wanted. he spent years trying to reform the criminal justice and system. he said yes. then he remembered a serious conflict on his calendar. brian: it was before i had an argument at the