♪ ♪ >> live from the 3 in san francisco, welcome to "bloomberg west." i am cory johnson. a check of the bloomberg top headlines. time is running out to find survivors from the devastating earthquake in nepal. the army is now searching 19 separate sounds looking for anyone who might still be trapped. governments of the u.s., china and india have rushed to provide assistance to rescue, recovery and rebuilding efforts. the cost to rebuild the country could exceed $5 billion.

tension in baltimore as protesters clash with police. according to the baltimore pd twitter feed, protesters were throwing rocks and other objects at the police and refused to leave. quite this afternoon, a group of outrageous officers attacked our officers. we have seven officers with injuries, including broken bones. one officer is unconscious. we will do whatever is appropriate to protect the safety of our police officers and ensure the safety of the people that live and work in the area. cory: the protests are over the death of freddie gray, a 25-year-old who died in police custody from spinal injuries eight days ago. deutsche bank investors are not big fans of the bank's strategic plan. shares fell today after they reduced targets. here is the co-ceo -- >> you will see a us build on the

momentum we have had over the last two years. you will see us considerably stronger in global finance, but you will probably see us as a smaller fixed income house. less transactional and more advisory. cory: he says the bank will be able to maintain profit despite rising legal costs, including a $2.5 billion fine for attending to rate interest rates. the battle for a cheaper, smaller cable option is heating up. espn has sued verizon over its custom tv service. verizon says its use of the channel violates a contract. custom tv gives users a base package of channels based on certain categories. nbc and fox have expressed opposition, but have not sued. facebook is adding video calling to its messaging app.

they compete with facetime google hangouts, and more. facebook accounts for 10% of all voice over internet calls may globally already. now to the lede. apple reports and other huge quarter. revenues up 27% year over year. profit of 13.6 billion dollars, up 33% from last year. apple sold more phones in china than in the u.s. they expanded their capital return program to $200 billion boosting share buybacks by $50 billion and hiking the dividend 11%. wonder -- one concern, ipad sales fell again. the big deal -- tim higgins covers apple for bloomberg. there are comparisons to analyst

estimates. these are largely in line. what do you make of this quarter? >> this quarter shows apple can continue to defy the laws of physics. with a product people absolutely love, and an ecosystem that gets stronger and stronger every single day. when you go through this, the gross margins of 48%, and the gross margin guidance, that basically says that we have a premium for our products, and people will continue to pay for those products over time. this speaks to the power of the ecosystem which gets stronger and stronger. tim: the importance of this quarter was for the iphone to have a strong quarter. that would suggest they can go into the second half of the fiscal year and perform well and go into a second year. cory: this is the second quarter of the iphone 6. one might have expected something of a slowdown. it was an exciting product to

launch. i was breathless. tim: there was lots of breathing going on. [laughter] it was a good quarter because of china. chinese new year is like christmas in the u.s. a great gift-given time. what we see, this quarter has become almost as important to apple as the holiday season here in the states is, for the first quarter. cory: amazing, 40% year-over-year growth or crawford, -- 40% year-over-year growth. crawford, their other businesses are doing better. what do you make of china in particular? crawford: i think they will continue to see growth in china. i would argue they are going after the most amending customer, and winning the customer proving it is not just a small slice in china. this is a common aspirational product, all the way down to lower and models they have --

lower-end models they had. it is tough for me to see a time where china is not their biggest country going forward. cory: let's talk about the ipad. i wonder here is my iphone 6. did this thing kill the ipad? tim, ipad numbers were bad. tim: tim cook admitted on the conference call that they are seeing cannibalization in ipad numbers from the iphone and mac sales as well. cory: that is a significant decline. tim: how soon can apple get the larger-screen ipads, which sources tell us are in the works? they should start production later this year. cory: crawford what do you make of it? crawford: the larger phone is hurting the ipad. with the larger-screen ipads they will see more moves into

new markets, new use cases potentially more adoption into vertical market applications. but they need to rethink it more. experiment with different form factors. i want to .1 thing out -- the ipad is dropping faster than -- i want to point one thing out the ipad is dropping faster than the broader tablet market. it is getting hit by pent up demand for the larger phone. cory: we had a graphic. it demonstrated this for my model, so let's hope my numbers are right or last quarter, the average price of the ipad -- $419. more ipad minis than the bigger ipads. this quarter, it is not insignificant, dealing with the size we are talking about, and 11-dollar per unit increase. i wonder, crawford, if you think that maybe the bigger ipads or the ipad mini is hurting more

than the larger ipad, which is what we see in the increase. crawford: you are absolutely seeing that. i think that is also why you saw the drop off in sales, right? the ipad mini, a low-end product, is hurt more than the larger ipad. that is the kind of transition you are seeing. going forward, the larger-screen ipad will save it but you will still see lackluster union -- unit numbers going forward. cory: let's talk about the macintosh. the macintosh that was released, which just hit the streets on friday. i wonder, if you look at these numbers, the pc business anywhere else stinks. around the pc business. but apple's pc numbers look better and better. tim: students are rushing out

and buy new laptops for the school year. it is a positive sign, going into the second half of the year when we get to the new school year. cory: you will have these new macs available. there were delays when they first launched these things. the last quarter, 10% year-over-year growth, in industry, they are coming out with 10% year-over-year growth. those growth rates are declining, but new products just hit the street. dell, hp, they would kill for 10%. they would kill for 5% pc growth. tim: we are seeing an interesting moment here. we are seeing a moment where the mac platform is a computing platform that is expanding far beyond people who have been interested in the platform for a long time. we are seeing it now bleed into business in new ways. we are seeing it bleed deeper into the consumer in new ways. it is not just the premium slice of the market.

when people think about the pc market, they think about the market with windows. we are starting to see the ecosystem move beyond that for macs, moving into new areas. cory: crawford, tim, thank you very much. "bloomberg west" will be right back.

♪ cory: this is "bloomberg west." loretta lynch has been sworn in today by vice president joe biden. the harvard law graduate becomes the nation's 83rd attorney general and the first black woman to hold the office. >> if a little girl from north carolina who used to tell her grandfather to lift her up so she could see way up high could grow up to be the chief law

enforcement officer of the united states of america, we can do anything. [applause] cory: lynch takes over for eric holder. she called for restoring fairness, strength, and trust in the criminal justice system. applied materials has dropped a bid to take over rival tokyo electron. this comes after the justice department expressed opposition to the deal, which would combine them into the number one and number two makers of chips. mthey will be meeting -- teva will be meeting with mylan shareholders. they rejected the deal today calling it too low. we want to bring you the latest on violence in baltimore. right now, hundreds of people are clashing with police after

thousands gathered this morning following the death of freddie gray, mourning the death of a young black man who died of an unexplained spine injury while in police custody. julie: at this point we are still seeing some looting in the city of baltimore. earlier, we saw pictures of protesters, rioters, whatever you want to call them at this point, throwing bricks rocks other projectiles. that is video of what appeared to be an abandoned police car which was attacked by the protesters. we saw police vehicles set on fire. the baltimore police department says seven offices have been injured. various broken bones. one of them is unconscious or was when we got the last update. various places have been closed in baltimore. the university of maryland at baltimore, as well as the maryland institute college of art, there have been closures there.

all of this is occurring in the wake of the memorial for freddie gray which occurred pretty close to where these protests began. baltimore police are saying to parents, find your kids and take them home. they say there's a large juvenile presence among the protesters. cory: last -- lest anyone think this is all about what happened last sunday, there's a long history of problems the baltimore police department has had with the community. two people in the last 11 years have been in custody of police and came away with spinal injuries, and got multimillion dollar awards from the city. the city itself has paid over $7 million over the last couple years for actions taken by the police. julie: of course, there is the national backdrop as well. various incidents of police violence, people being injured while in police custody. all of that adding to the tension we are seeing in

baltimore. baltimore, it should be mentioned as well, is a city with a relatively high crime rate versus other large cities. i'm also looking at some of the stats, it versus ferguson, missouri, where we saw a similar instance and similar protests that devolved into violence. by way of comparison ferguson is a very small city, only about 20,000 folks. baltimore is a city of more than 600,000, and more than half of the population there is african-american. just to give you an idea of the different demographics and different size of what we are talking about here. cory: also 127 people have been killed by police in baltimore over the last 20 years. clearly some tension to say the least. julie hyman, thank you for the breaking news. we appreciate it. "bloomberg west" will be right back. ♪

cory: this is "bloomberg west." target and sony breaches have given big businesses a reason to

fear hackers, but many companies are learning to trust hackers. facebook, google, pinterest, they pay security experts thousands of dollars to break into their systems and find vulnerabilities. they are known as "bug bounties," but some companies don't get around to pay them. bug crowd is trying to help them. kimberly has more. people who don't know this world , it is a shocking thing. explain where it all came from. kimberly: originally there were security researchers who found vulnerabilities and products and reported them to vendors. there was no remuneration, just advisory credit. but in the brave new world of online services, people are doing a lot of really good research work where vendors and network admin's felt, it is time to start incentivizing.

let's get more vulnerabilities reported, and let attract the best researchers to do that. cory: it takes a certain amount of confidence for them to say, hack us. i'm thinking of houdini who had people punch him in the stomach and then died of a burst appendix. kymberlee: the websites are online every day, so the targets are out there, whether there encouraging the good guys to find phone abilities or not. you would much rather incentivize the white hat hackers to find vulnerabilities and report them than resolve open. cory: i first saw it with google and facebook. i don't know who did it first. maybe you can tell me. kymberlee: netscape, back in the day -- cory: which was based in google' s current headquarters. what's interesting -- what has been the problem with the

administration of these? kymberlee: managing a bug bounty program is time-incentive. cory: why? are there so many bugs to report? kymberlee: there's also the issue of managing noise. there are a lot of self-taught researchers who are very enthusiastic and they don't always submit valid vulnerabilities. so we work with them both to clean out those invalid reports and make sure the customers only get the balanced -- valid vulnerability so they can stay focused on the stuff that needs fixes, but we also help those researchers get better. we are investing in them, to increase their skills. cory: how do you get paid? kymberlee: we are a service that our customers pay a fee for. cory: the companies pay you, or the bounty hunters pay you? kymberlee: the companies pay us for the service of matching them up with our crowd of over 16,000

researchers. cory: i have to think that the companies doing this at a high level are pretty stoked to see the way the hackers work. they did not design the systems with intentional holes but maybe the hackers work in such a different way, they understand the methodology. kymberlee: one of the things our customers frequently say is that this is a great addition to our defensive program. a lot goes into secure development. from threat modeling to vulnerability discovery. the crowd generally specializes in finding logic errors that a scanning tool and automated analysis is not going to find. these are the vulnerabilities that a malicious hacker would exploit. cory: what is the relationship like between the hackers and the companies? is it a contentious one? are the hackers trying to get jobs at the company? what's going on? kymberlee: it can be both.

it depends very much on the customer and the researcher. that's one of bugcrowd's other skills, managing that relationship and helping customers understand the researcher mindset, but also helping researchers understand what the realities of developing enterprise software really entail. cory: why is it contentious? kymberlee: typically it comes down to timeliness and responsiveness. if a customer takes too long to patch something, researchers don't necessarily understand what is involved in patching what third-party dependencies there might be, and they see it as a sign they are not interested in fixing, when that may not be the truth. cory: interesting stuff. thank you for coming down from seattle. kymberlee: thank you. cory: coming up, the challenge of getting an entire nation back online after catastrophic events like saturday's earthquake in nepal. we will focus on that country's infrastructure when "the west"

continues. ♪

ology and the future of business. bloomberg top headlines -- the united states and japan have bolstered their strategic alliance in almost two decades. new guidelines expand cooperation around the globe. the goal, countering china's growing influence. the japanese prime minister visits the white house tomorrow. british prime minister david cameron tells small businesses not to give up the fight even as conservative party poll numbers are stuck. prime minister cameron: when i

hold receptions and i get people who got startup loans telling me what they have done, giving up a well-paying career, taking a risk, having a go, that pumps me up. that is changing our country. there is an entrepreneurial business -- entrepreneurial revolution taking place in britain. cory: ed miliband promised to promote british property ownership by raising taxes on foreign buyers. corinthian colleges has shut down its remaining 28 schools. they are looking to other colleges to place the 16,000 students at the for-profit institution. corinthian is accused of falsifying grades, attendance, and job placement rates. google will get a patent -- will

have a patent shopping spree to see if it can cut down on lawsuits. they are accepting applications from patent owners willing to sell intellectual property. the program is designed to keep patents out of the hands of patent trolls, who then use them to sue corporations like google. in the wake of the devastating earthquake in nepal, tech giants like google and facebook sprang into action. google opened its "person finder" tool, and facebook activated its safety check which allows people to call families and let them know they are alive. they said, if you are in one of the areas affected by the earthquake, you will get a notification asking if you are safe and if you want to check in on your friends. joining us right now is sarah who covers facebook for google

news. sarah, a lot of friends, connections of people are trying to climb everest, and a lot of them expressed their love of facebook, finding out that their loved ones are ok. sarah: that's how i found out about the earthquake. i had a notification that my friend jenny was safe to it she was on a hike in kathmandu. this is how facebook is trying -- this was released after the earthquake and tsunami in japan. facebook has been releasing it after big disasters. cory: how does it work? sarah: if facebook sees you are in the radius of the disaster they will send you something saying, are you ok? click on this if you are. it will let your friends know. there is a counter that shows you, here are the friends who say they are safe. here are the people who have not

responded yet. cory: there is also fund-raising happening, on facebook and elsewhere. talk about facebook first. sarah: facebook is agreeing to match donations up to $2 million. they will have notifications to users saying, if you donate, we will match it. google, it is a little different. it will tell you if other people have heard information. it can't always be the person who is in the situation who can say something. cory: thank you very much. i want to stick with the news out of nepal. the internet, so important to the way people are finding out what is happening, helping in the recovery. but the essential infrastructure of the internet has been hit hard. what is the state of nepal's internet today? i am joined by doug, via skype from hanover, new hampshire. doug what was the state of nepal's internet before the earthquake? doug: a small market, as far as

asian nations go. it was fairly undeveloped. it sorry, sorry -- cory: i wonder what the connections were like? doug: in general, and apollo is primarily reliant on connections through india -- nepal is primarily reliant on connections through india. we saw outage is happening after the earthquake. those international links for the most part have stayed up but that is a different question from how people access the internet. there is an access layer, also called "the last mile," of how people reach the telecoms. it was off-line for a little while yesterday. and it was -- for the most part it stayed online, although people's ability to reach the

service has been impaired, in some cases pretty dramatically. the reasons being there are -- if they are accessing the internet via mobile, the service is already not great in nepal. but with the earthquake, there were a lot of roof-based mobile towers that were downed by the shaking of the earthquake. cory: i'm trying to picture these. are these hardwired towers on top of roofs or satellite connections? doug: there is a fixed line coming out of the tower. that may have survived. if the tower, due to being physically on top of the building, got shaken off then that tower is not available and the service -- if another tower can pick up the service, perhaps some people can stay online. but there will be some degradation to the mobile service there.

in addition, you have fiber-optics through the town. like any developing world they are not wired in a way that would survive some catastrophic event like a major earthquake. so you have tables strung along -- cory: is the difference above ground, versus underground? doug: if some he knocks down a telephone pole they are gone. in more developed countries, you buried at infrastructure -- barry -- bury that infrastructure. they run it above ground which makes it susceptible to damage that occurs at that level. cory: it is interesting to see the companies trying to offer different services. so people can use cellular connections to make connections to the internet, and so on. do we expect recovery --

recovery is so urgent, but getting information out so help can get in seems just as urgent. what are the steps for the recovery of the internet in nepal? doug: i would expect it to take a while. there's a lot of damage, and a lot of other priorities. loss of life. the internet connectivity may not be number one that is out there. the importance of being able to coordinate relief activities via the internet. it could take a while. it was in bad shape to begin with, and it is in much worse shape today. the last couple days you have seen additional outages, additional impairment due to aftershocks or there's backups. power is an issue. as backup generators run out of fuel, you have other outages. they are in rough shape right now. for the most part, the country did not drop off the global internet, but people's access to

internet service is fairly spotty. cory: doug thank you very much. we appreciate your help to understand what is going on in nepal. coming up, time warner cable's proposed mega-merger with comcast is toast. could charter conditions succeed where comcast fails? and a vision of the future of work. ♪

cory: this is "bloomberg west." i am cory johnson. let's check on bloomberg top headlines. the government accountability office says the engine of the f-35 is poor.

the fighter jets are already the costliest military program costing $390 billion. a major shakeup at volkswagen. after two decades of leading the company, the ceo and chairman has resigned. the move could help volkswagen expand business in the u.s. vw was the only large-scale carmaker that failed to boost sales last year. tesla shares flying today. the electric carmaker is expected to announce a large youth to the -- a large utility battery next week. comcast's takeover of time warner is not happening. the deal fell apart amid concerns customers would be stuck with fewer choices and even worse service.

there is already a new suitor in the picture, charter communications. the company has tried to buy, warner -- time warner cable before, but said the new offer would be sweeter than the last offer. the merger is less likely to be hampered by regulatory issues. alex sherman has been breaking lots of news on this. why would this be subject to less scrutiny? alex: the main reason, charter is a smaller company than comcast, and it is not own this anonymous media asset in nbc universal, which comcast does it charter is a pure play cable company, buying another pure play cable company in time warner cable. a smaller company buying a larger company, and the end result would be fewer subscribers with high-speed broadband service than if comcast were to buy time warner cable. for all those reasons, a deal would theoretically be an easier sell to regulators. cory: i'm going to break this

into three issues. the first is the size. at what point should we imagine because when the first time warner-comcast deal was proposed it did not seem like size would be an issue, because they were not overlapping. when does size matter? what is the limit for the fcc, or the ftc i should say? alex: so you are saying size matters? cory: i was not going to do that. i'm much more grown up than you. [laughter] alex: we don't know when size matters. we were not given a great answer, even out of the doj and ftc. it's not like they said, 50% you are good, 55% and you are not. we don't know. charter would have to go through the same sort of regulatory approval, and regulators would have to make a determination if the company were too big. at least in this case, we have an idea. comcast has 22 million subscribers.

combined, charter and time warner cable would have less than that. charter million -- charter has a little under 4 million. even if the deal with bright house goes through, they would have less than 6.5 million. it would still be smaller than comcast. you have to assume, if they were ok with comcast at their current size, they would have to be ok even if those three companies come together. cory: an open question, whether they are ok with comcast's current size. point number two. it seems the title two fcc rule about an open internet no throttling, no control over what content appears for users, makes it easier for these companies to say, we can't decide what content is going to come down what pipe, so antitrust should not be an issue with the mergers of simple cable providers or broadband providers. alex: i think you are right. i think that's a fair explanation of what you would

think would be the repercussions of title two. the question has been it was with comcast and continues to be will we actually see title two? a lot of these media companies wireless companies broadband companies are going to sue to block title two. we don't know if this is going to stick around. it needs to go to the court system and be passed into law. even if it is passed into law, really the biggest thing with title two is rate regulation, when it comes to broadband providers. they might be ok with everything you just said, as long as they can still raise prices on people. cory: it did not have any rate regulation in it. last point because we are almost out of time. my third point, it was not discussed a lot, the content issues. comcast was an owner of nbc universal, and they have their own on-demand service that in some way competes with hbo and netflix. maybe that was the biggest

issue. the comcast negotiation, they could really control what content everyone gets everywhere, even beyond comcast-time warner, maybe content was the biggest issue after all? alex: it certainly was a big issue, from what we have heard. i guess that makes some sense. in a new world, where all your video programming is being transferred over the internet if contest -- comcast owns a large swath of content and broadband, they could theoretically take some content exclusive. that is a really big chip for comcast to have, and regulators were a little hazy on the future there, saying, do we really want to give this much power to one company? cory: alex sherman of bloomberg thank you very much. you have done a great job with this story. "bloomberg west" will be right back. ♪

cory: this is "bloomberg west." i am cory johnson. tomorrow, i will try to blow your mind at the bloomberg businessweek conference. top designers and business

leaders will gather with some really trippy ideas about how to make business and design work. tim brown shows us what office spaces might look like in the not so distant future. check this out. ♪ tim: good design is designed that makes a positive impact on the most possible number of people's lives. in some ways, the most creative step in any new design problem is the question you ask at the beginning. because if you frame the question too narrowly, or in a way that everyone else frames the question there's a good chance that the answers you come up with are the same as everybody else's answers. we are really interested in the future. as designers we are interested in the future. when it comes to the future of transportation, we are interested in how that will play out, how that will play out in

the city, and how that technology will maybe lead to unexpected things. what does it mean to be moving spaces, rather than people or things, around in our environment? the work on wheels concept really addresses this notion of us kind of inverting the commute. rather than going to a fixed workplace every day, we might as a creative team have a variety, the ability to work in inspiring places that happened to be five minutes or 10 minutes away versus half an hour or one hour away inspiring you to kind of think differently. we are effectively removing the burden on the system of commuting. >> what we tried to do with the automobility project was to step back. instead of just thinking about the car, let's think about how

the car and transportation and people move through the world, and what the world is like when you bring this new technology to play. that is breaking out of the box if you like, by stepping back to another level. we are looking at the system of the city now not the system of the car. for me personally what's exciting about a taunus vehicle technology the ideas we explore, is that it might allow us to explore on living in our cities instead of moving through them. i think it could be pretty special, if every so often you got to work on a pier looking at. i know i find that inspiring. other people might find it inspiring, also. cory: that is tim brown. we have full coverage from the bloomberg businessweek design conference. i promise you watch tomorrow you will get some huge idea that will change the way you work. ev williams will be joining us tomorrow. also cool, the bwest byte, one

number that tells you a whole lot. lucas shaw. lucas: you are not used to be being in new york. cory: neither is new york. lucas: 770,000, the number of the scrubbers for tidal, the number of subscribers for the -- the number of subscribers for tidal, the music service jay-z and beyonce on. that is more than beats music ever got. cory: that is impressive. he went on a twitter rampage this weekend. lucas: he decided some people had been insulting him, deriding tidal. he published a series of tweets one of which had the number of subscribers. he talked about the royalty rate, talked about how critics were slamming him in the press. cory: we have more "bloomberg west" tomorrow, from the design

conference. it will be tomorrow regular "bloomberg west" time, special "bloomberg west" show. ♪

>> from our studios in new york city, this is "charlie rose." charlie: russell crowe that are remarkable career as an after. he was nominated for his roles in ron howard's a beautiful mind and the insider. he then his hand at directing. the movie trailer.