cory: from pier three in san francisco, welcome to "bloomberg west" where we cover innovation, technology and the future of business. i'm cory johnson. we bring you the best interviews, global players in technology and media which lead to our sales. for more oracle executive has received a takeover offer and looking to financial advisors to vet the offer. the largest takeover in the history of technology. the choir has not been

identified but the top list who can afford to buy the company is a small list, oracle, microsoft, ibm. but who once the behemoth sale? we will talk to brent. >> the board has to make a decision and their decision is to evaluate that decision an offer on the table so that is why they engaged the experts to look at offer. the business that shows tremendous topline growth and also a business that has zilch for-profits, zilch over the last five years of cash flow and if you look at what we know, you look at growing the business they do it by expensive acquisitions and spending a boat load of marketing and that's why there's no markets or historical cash flow. they will want topline growth at the expense of a lot of earnings and a lot of money. >> you have covered sales for a long time and you share my skepticism.

>> i think it's going to be tough to pull this off. this is the largest deal every tech. we also know that mark has done a great job and i think coulter is a big thing to him. we already know that oracle is basically, we think, has said no. we think microsoft could be there. there are only a couple that could consume something this large and the historical precedence of this happening hasn't not happen. emily: we are going to dig through some of the possibilities, but you said large text doesn't work. hp compaq, oracle, would this work at this even happened? >> everyone is running to the cloud and people who might -- are behind my think this is a way for them to get ahead. having said that, i kind of agree that the math has to work and it will be very tough for large legacy tech companies to explain this to their

shareholders and how the synergies are going to work and how the bottom line will not get impacted by this. emily: let's walk through some of the possibilities and discuss. cory: an analysis of what the growth rates are for these companies and what they would be if you believe the chief analyst, like brent, who will predict what sales forces will do next year. looking at next year's numbers, for example, oracle is supposed to grow 1% topline year. no one is going to buy a salesforce because they don't want more earnings. it salesforce does what it is predicted to do which is slow

down and grow 20%, the merged company will grow it 18% on the top line. the earnings per share would fall by 17%, so oracle would have to be really to dilute itself by nearly one quarter to earn less money to see the topline increase. emily: it sounds like oracle is not interested party. >> we don't think they are there. it would take $55 billion to $57 billion to get this done. they won't have cash for anything else. emily: what about microsoft? cory: is someone going to raise debt to do this with companies that have the cash to do this, will it be some combination, what price? my calculations are based on the current cap it as raised on salesforce and i'm not going to guess. emily: let's talk about microsoft because microsoft, to me, makes the most sense. >> what kind of company would want this? they don't have a big cloud business, maybe they would want to change the landscape of they -- of the way they discuss things. right now, microsoft is projected to grow at a percent.

if they added salesforce as revenues against a slower rate which is another reason they might want to do a deal, but 15% sales growth is what the combined company might show. earnings per share is going to take a big hit and fall 60% for microsoft and it would dilute the company by at least 12% if they did in all equity deal. >> microsoft makes the most sense. they have the cash, number one. number two, i think, coulter early in makes sense. i was at the conference yesterday -- emily: we are at the same ceo conference earlier this week. >> a lot of ceos share the same view that he is doing the right thing. i don't believe that marc would show up if he did not believe in these things so i think the way they are going to make a lot of

sense. emily: ibm? >> in the case of hp and ibm, to companies that are similar businesses which are slinking hardware, selling services and selling a good chunk of software. you've got companies that want to say we want to be in the software world, so hp is going for the split of the company and there is no way they can do a split and an acquisition. they probably can't afford an acquisition like this anyway. it would be something like hp compaq or a marriage of equals or something like that. that is hard to imagine happening but it would help them grow topline or not shrink topline as much as they are supposed to. i think ibm is interesting. when we look at ibm, it is a company that talks endlessly about cloud and they went all kinds of things for the cloud business and they like to make the argument in press releases that their cloud business is huge and bigger than salesforce is an bigger than anyone's. their sales growth is it supposed to decline by 10% but it would only declined by 3% and the earnings be worse because

they have declining earnings. it would take one third of ibm to buy a salesforce. emily: this seems to ambitious or bold. i don't know. >> i don't think hp or ibm are in the next. cory: ibm can't do it. they can't are of money to do this. they don't have the cash to do this. we spent so much money -- emily: by process of elimination, microsoft is the only real contender. is that what we decided here? cory: we have seen it deals that are hard to imagine in the past and we will surely see another one. projection probably has gone pretty well with the exception of the role. hp compaq -- we saw time warner by a well. emily: that did not work out too well. cory: bloomberg intelligence

brent joining emily and i. we will be right back talking about twitter's disastrous earnings report. ♪

cory: i'm cory johnson and this is the best of bloomberg west. if twitter in trouble after a rough earnings report? they have struggled to maintain their strong revenue growth and stalling user growth. twitter thinks they will address some of the anxieties of the instant timeline is something called, why you were gone. dick costolo was asked when we will see results from these new initiatives.

>> the reality of software development is even launch something and you reiterate and he gets to a better place sometime down the road. our advertising targeting which are highlighted on the poll yesterday is something that when we very first launched in a few years ago did not work spectacularly. it has got to mend a sleep better and i think the same and have every confidence it will happen here. cory: i was just reading a bunch of tweets by a venture capitalist arguing that twitter is hitting the biggest problem of helping people tune their feeds. tuning your feed and helping people get over that were twitter really becomes invaluable and he was saying that he thinks algorithms do that. that twitter being able to use the service more effectively. do you agree with that?

dick: first of all, there are a variety of opinions and what you really need to do is x. when i think about instant timeline and we think of it solving the, how do you use twitter russian mark instead of seeing a blank screen when you login, there is a collection of tweets that we collect based on what you are interested in. i don't know how to use twitter challenge -- we love that strategy and we believe in that product and we love the engagement we are seeing with the first launched, we just a two reiterate on it and we are confident we will do that. i do think there is a place for duration. human driven duration of moments. -- duration -- curation of

moments and events. i think that plays works for logged out users. for example, two nights ago when the events of baltimore unfolded, they were people live broadcasting that on paris scope so you felt immersive week in the streets of what was happening in baltimore. across twitter, there were local authorities, of religious officials, people on the street talking about what was happening. and you think about manually curating experiences and bringing that content together and showing people quickly this is how you get value from twitter, i think there is a place for manual duration -- curation.

>> let's talk more about periscope. the company is based in san francisco and you said one million users -- how big does it scale? how do you get beyond that group of journalists, public, people inclined toward exhibitionism? dick: we are already seeing crossovers from some of the all -- online platforms which i think is great. frankly, one of our hypotheses when we bought the company before it launched -- one of my favorite things about periscope is it you have these pre-launch hypotheses about what is going to happen and how things will unfold. for example, at least when we bought the company, we thought

we knew there would be all these cases that we can't even imagine that will start to unfold and we are already seeing them. for example, we are seeing fine -- vine stars starting to collaborate using periscope to broadcast. that kind of crossover is great that brings together two video assets. when you think about those in projection with niche, our service business, and it helps build online career and you have a great ecosystem of assets that you can build audience for across the twitter ecosystem. i think the future of native mobile video is nasa's and we love -- is massive and we love the way we are positioned. >> let's take a step back. it really did feel these past few months you all were building credibility and momentum with

wall street with great addict announcements. let's yesterday a setback? do you feel like you and your team lost credibility? dick: i don't think we lost credibility. we have been very forthright on all of our calls and investors with what is happening, what we're doing and how we think about things over the long-term. you have to have a long-term plan and stay focused on executing it. if you start trying to constantly over correct and you have to do this crazy thing in the next few weeks that is going to take us off of our long-term plan but get us to tuesday, i just think that is where you lose your weight and that is where people -- your way and that is where people think you are not focused on the long-term or strategic plan for the company. that is no way to run a business, so we have a strategy, we are sticking to the strategy, we like the strategy. everyone is on a needed to the board, to my leadership team -- they are all behind it, focused on the same thing can we have to keep investing on it. >> do you feel any pressure as ceo? dick: if anyone tells you the ceo of a company with any number of investors, private or public, that says they don't feel pressure is lying to you. of course you do. >> do you worry about job security? dick: no. the board and i are totally aligned. the pressure is from the team. an entire group of people looking to you to lead them and you want to be successful and rally everyone together and articulate the motivation of why you have to be successful and show them that those efforts are paying off, so that is where the pressure comes from. >> last question -- yesterday, other than the lead, which sounds out of your control, is there anything you would have done differently to lessen the surprise on the revenue and forecast for next quarter? dick: i think that we constantly talk about how we are communicating with investors and the market and about the product and what is happening. i was supportive and 100% behind and led the way of the way we did that and i think we made the right decisions.

cory: dick costolo with bloomberg business. twitter's earnings were reported about 15 minutes before the close of the market. the company called celerity circulated the numbers after they were published early on and asked that website. they got the numbers next to a data crawling program. the program that scrapes and for more about this searching technology, i talked to ceo of -- former chief scientist. >> it's actually a fairly trivial technology and probably about timelines and code and something for programming student could write. what a clever about this is that the folks who wrote it looked at the url structure and able to figure out what the likely structure of the next press release would be. just a number incremented, so they wrote a little bit to explore. the bot does essentially what you do when you load a page in

your browser, a goes to a new web address and simulates that at much faster than doing it by hand. cory: so, basically if the url was investor relations/twitterq2, relations investor -- investor relations twitterq3, with the results come up? >> exactly. i think it was the release id and some numbers and they were able to increment that number, something like less than 400 visits to get the new press release. cory: is this work something like the cracker programs that hackers use when they throw word and number combinations to test whether a password is going to work? >> a little bit like that in the sense you are exploring, but in this case, the page was public and had been published to the website. it has not been linked to get. it is not the same weight as

cracking programs are. cory: how -- i want to phrase this question carefully and i can think of how to do it -- on a level of stupidity, how stupid was the nasdaq for publishing this early? or is this a really great program and almost any company could have caught off guard by this? >> i think in the fact it is not that stupid but it is something people should be aware of in the design of the applications. if they use sequential id numbers or and ideas better incremented, they are likely to be vulnerable to this kind of thing. a lot of companies do it. cory: hilary mason, the ceo of fast-forward labs. we will be back with one of twitter's cofounders. ♪

cory: this is "the best of bloomberg west pickup by cory johnson. the former twitter ceo evan williams. in stark contrast with twitter williams is focused on simple design aesthetics to medium users. we sat down with williams at the design summit this week in san francisco to discuss the secret of beautiful design. williams: we tried to look at this, what some people consider solving a problem with how you publish text and pictures on the web and we looked at it from a fresh perspective and said, how do you do that for today's world which will be global focused. we have better browser technology with apps in multiple places and we just built from the ground up. it ended up looking different than most of the web does today. >> was that in any way to reaction to the designs of the things you have created before? for example, it behaves and looks in a much different way

than medium does. evan williams: twitter is about real time, very short blips of content that was originally designed around -- medium was not necessarily for longform stuff but for longer form stuff. we wanted to create a great reading experience and a great writing experience. >> the white house has experienced medium as a way for president obama to speak directly to constituents. how did you find out about that for the first time? evan williams: that was surprising. we have been really fortunate with that and a bunch of other high-profile people who have found 80 him to beat the best place to share their stories and ideas. -- from people -- from what we heard from people at the white house, they -- there are lots of

places to publish online and there are very few where your ideas and words stand up above the navigation and likely the advertising that is crowding out the experience. >> folks like president obama, elon musk, professional writers feel comfortable publishing on medium. what are you doing to make it more accessible to everyday folks who may feel a little self-conscious about expressing themselves? evan williams: the original idea was medium was open to everybody. we knew that not everybody had the inclination to publish anything longer than a tweet but we wanted to really create the best place for those who did have that desire. really, lower the barrier. you don't have the overhead or the commitment required to publish a blog, which is pretty much the other alternative that people have if they want to do something more substantial than social media. the point was really to create the easiest and simplest store for everybody. we have had a lot of high

profile people and really professional content. but the vast majority of it comes from normal folks. a lot of people who are unknown and become really big on medium. we are really trying to span the gamut and i believe is the whole becomes greater than some of the parts. it is one of the few places where president obama right and he wrote this message to millenials and how millenial came on and broke the response. on edm, a response is not just a comment that is below, it lives on the same level. response got a lot of pickup. >> one of the other areas you are focusing efforts are on the business side. it is a traditional cpm model to focus on what matters with time spent of an article. what kind of response are you getting in the advertising community? evan williams: it's going great so far, mostly experimental. we are helping brands publish on

the platform and instead of measuring by region or number of eyeballs, which is really -- we are measuring by the time people spend reading which is not the perfect measurement at the value delivered, but we think it is a much closer proxy to whether or not people are really getting something out of a story than just whether or not they saw it or loaded in their web browser as you know, can be for two seconds before they move on. >> on twitter, your cofounder -- you are a cofounder, on the board of directors, and perhaps, not the best day in twitter's history in terms of the early release of the financials and subsequent decline in the stock -- are you disappointed? evan williams: well, no one likes to see a stock fall like that, but honestly, i have the utmost faith in a long-term business of twitter and it usually gets caught up in ups and downs of stock markets but the team and business are building right now and optimistic.

cory: evan williams with brad stone. we will be right back with more. we will talk about apple -- there he interesting earnings report. -- the very interesting earnings report. ♪

cory: you are watching "the best of bloomberg west" where we focus on innovation and the focus of business. another huge quarter revenue, up 27% for apple. the $58 billion in the second quarter, profit is 13.6 billion and up 33% from the previous year. for the first time, apple sold more iphones in china than in the u.s. the company is expanding their capital return for over $200 billion. on concern remains at ipad sales falling again. >> this quarter really shows

that apple can continue to defy the laws of physics with a product that people absolutely love and an ecosystem that gets stronger and stronger every single day. to me, when you go through this, the gross margin at 40.8% and the gross margin between 38 percent and 39.5 percent, that basically says we had a premium for our products and people will continue to pay up for those products over time. a great quarter and release speaks to the power of this ecosystem that just gets stronger and stronger with every passing quarter. >> the importance of this quarter was for the iphone to have a strong quarter because that would suggest that if you go into the second half of the fiscal year and continue to perform well and is saying it could go into a second year and have a two-year lifecycle. cory: this is the second quarter of the iphone 6, six plus, and one might have expected

something of a slowdown. it was an exciting product launch. i was breathless. >> lots of breathing going on. it wasn't really a good quarter because of china. chinese new year's year is like christmas in the u.s. and it is a great gift-giving time. really what we are seeing is this quarter is becoming, in a way, as important to apple as of the states is for the first fiscal year -- quarter of the year. cory: kind of amazing. i also note that china was not the majority of revenues but it was the majority of iphone sales. so other businesses are doing better in the u.s. what you make of china in particular? >> i think they will continue to see growth in china. i would argue that a are going after that most demanding customer and they are winning that customer. they are proving that it is not just a small slide in china but the common aspirational product all the way down to some lower end models that they have. i think that their footprint in

china continues to expand and it is tough to me to see a time when china is probably not the biggest country going forward. cory: interesting. let's talk about the ipad. i wonder if -- here is my iphone 6, right? did this thing kill the ipad? tim, ipad numbers were bad. tim: yes, they are seeing some cannibalization in ipad numbers from the iphone and from mac sales as well. cory: we are showing growth that 23%, a significant decline. tim: it raises the question on houston apple can get their larger screen ipads and sources tell us they are in the works and should start production later this year. cory: carl, what do you make of the ipad? karl: i think it is in trouble. the larger phone is hurting the ipad. i think that with the larger screen ipads, what they will see is more moves into new markets new use cases and potentially more adoption. an interesting vertical market kind of application, but i think that they really have to rethink the product line for little bit more. probably continue to experiment with different factors to breathe life into it.

i want to .1 thing out -- -- i want to point one thing out -- the ipad is dropping which dropped between 5% and 6%. this is a product in transition getting hit by demand for the larger phone. cory: the average selling price of the ipad was $419 and that is the lowest. that suggests more ipad mini's and the bigger ipads. this quarter was $430 and that is not insignificant when we talk about the size. we are talking about and $11 per unit in grace. i wonder, crawford, if you think maybe the bigger ipads -- i should say that ipad mini is hurting more than the larger ipad and that's what we can see in the asp increase? >> i think you are absolutely seeing that. that's also why you saw the drop-off in sales, right? the ipad mini which was a nice entry and low end product is probably getting hurt more than the larger ipad. i think that is the kind of transition we are seeing and i think going forward, that larger screen ipad will say -- will be saved, but you will associate lackluster unit numbers going forward for the category until something dramatic happens.

cory: let's talk about the macintosh that just hit streets friday. the golden one that particularly stands out to me, but i wonder if you look at these mac numbers, the pc business anywhere else tanks. around the pc business, intel, but apple's pc numbers look better and better. tim: it is a quarter where students are rushing out to buy new laptops and it is a positive sign going into the second half of the year when we get to the new school year. cory: they will have these new macs available with four to six week delays. the last quarter, 10% year over year growth and this has been in they are coming off 2114 -- 21-14. new products hit the street and dell, hp, they would kill for 10% pc. they would kill for 5% pc growth. >> i think that we are seeing an

interesting moment. we are seeing a moment where the mac platform is the computing platform that is expanding far beyond people that have been interested in the platform for a long time. we are seeing it now lead into business in new ways. we are seeing it bleed deep or the consumer and new ways. it is not just a premium size of the market. cory: crawford and bloomberg's tim higgins. the man responsible for the look, the feel, and the experience and beauty of the android. ♪ cory: we are heading back to bloomberg businessweek design conference right now and we will get a chance to speak to some of the leading technology designers. among them, -- this is medical the vice president of design for android. josh joined me to help with this interview and it was pretty cool stuff. check it out. >> we are always trying to make things more simple and more beautiful at google. basically, that is the

philosophy of how google involves their products and make something really wonderful for the user. even the original search page, it's just so simple and fast. there is kind of a beauty in that simplicity. >> it's different now. design was not a focus of google.

cory: we are heading back to bloomberg businessweek design conference right now and we will get a chance to speak to some of the leading technology designers. among them, -- this is medical the vice president of design for android. josh joined me to help with this interview and it was pretty cool stuff. check it out. >> we are always trying to make things more simple and more beautiful at google. basically, that is the philosophy of how google involves their products and make something really wonderful for the user. even the original search page, it's just so simple and fast. there is kind of a beauty in that simplicity. >> it's different now. design was not a focus of google. it was not there at google in the past and it is there now, i wonder how you see that difference. matias duarte: one of the things we have been really feeling over

the last digital products in the last five years is how important every detail of the experience is. that is not different for google than any other company. >> to that point, it is -- you are so huge now and you are in so many different regions and apps has become a product that is the core to the experience. even if you have an iphone, they don't use apple maps, they use google maps. it is a better map project. the slightest change can really go off literally tens of millions -- hundreds of millions of users. matias duarte: it totally can. >> how much are you worrying about how those changes are going to affect the user? matias duarte: of course we agonize about that. design a google encompasses more than just design for the google products. we design android that so many other products live on. we designed material design which goes beyond android, beyond google products to the web and i was products. we take this responsibility of not just trying to push a particular style or what our

idea is very seriously. we are trying to make sure that everything we design is objectively as good as it can be and that requires inspiration by getting the best designers and empowering them to do great things that also a lot of validation. a lot of testing, monitoring. cory: everyone says that they care about the work and starting to do the best they can and hating the result. matias duarte: that is the curse of a designer. cory: the curse of work. you always want it to be better. i wonder, when you look at android, one of the reasons it is ubiquitous is because there are so many flavors of android. it's not a product you absolutely control from stem to stern, what do you think is the fullest android experience? matias duarte: i think the fullest android experience is actually all of those different facets of android you can get. you can choose and android that

is well-suited to you. perhaps you like the bigger screen, the customization from the product. josh: i am in the water all the time, but the reality is you guys have gotten tighter about control of how android looks feels, and works with your partners. or instance, the new galaxy x -- s six, they are much posted to the core android experience when you go back a couple of years -- matias duarte: absolutely. think about design as though you were designing a car, right? you want to have everybody be able to choose what kind of car they want. someone a catalog and some wanted to be escorted coupe. some people need a minivan or they want a station wagon or pickup truck. whatever it is. there is a lot of room for the functionality and for the style that you will have in that car. there are some parts that need

to work the same. they all need a steering wheel in front of you, the brake pedal is on one side and the gas on the other. if you don't conform to some common standards, it's going to be a mess. cory: you use of the word flexible versus atomic. can you describe what that means? [laughter] matias duarte: actually, i'm not sure when i would have said that. [laughter] cory: just some designs it need to be a complete thing in and of itself like cars there needs to be a focus point.

as opposed to something flexible which is what you described -- something that can be a pickup sometimes a golf cart. matias duarte: we did things like cars or the structure and material design because we think these things are tools. they are like building blocks, right? and we want all of those tools to be used at the right place and right time. so cars are great when you have a lot of different kinds of things. they give you a clear sense of where one thing ends and where the other thing begins. cory: so i can maps and you get a result and you are looking up sushi restaurants, you see it on the map and it pulls over and social the phone number and maybe a picture and directions. matias duarte: exactly, that card is like an icon for the restaurant except it contains so

much information than a single picture could. and that is atomic. what's great about it though is that in it -- in its little modular nature, it can take you other places. if you open up google now or glance at your watch because some thing has been suggested, we can present that same format, that same card and take that restaurant out of the contacts you saw before and transform it -- make it into a different format and put it somewhere new. what you recognize it is the same thing. cory: andrew design -- android designer. next, the man who helped design beats by dre. ♪

cory: i am cory johnson this is "the best of bloomberg west." from apple to android, robert bruner was at the design conference and he had his own designs called ammunition. he helped design beats by dre. that company was purchased by apple, check out this interview. robert brunner: the old model was designed with stuff that went in and there were manufacturers. today, design is the topic of

conversation from the very beginning as to what something should be to some -- to how it is made to how people use it and experience or service it. all those things. all that should be designed and there are really great companies that understand -- cory: so the conversation starts earlier -- if someone says i had a widget to solve this problem and it looked rate or is it more than looking great, is it about function? robert brunner: everything. when people use something, they experience everything. how it fits in their lives, how it looks, how it feels, how it does. it is not just a moment in time. like i like to say about technology companies, technology is important but it is designed that establishes it and makes it worth it in people's eyes and attracts them to it, so it becomes to enabling technology.

cory: that i could do business at stanford and not take the design class but i had to take three classes on accounting and four classes of management theory. robert brunner: that is changing. you are seeing more and more design integrated to these schools and design thinking and understanding and why it is important. not just for art school. cory: a fascinating group of products -- i wonder where designs fit into the evolution and what did that company come from? robert brunner: the initial -- as we thought about a wearable technology, right? something you wear on your body and most headsets, prior to that, complicated and mechanical. cory: the great ones. robert brunner: yeah, they are driven by function which is important. but they are things you where and as more and more people, smartphones became the primary way people got their music and wore it, what you where and how it looks and how it feels is --

becomes very important. cory: was there a notion that the product would be so much better because the design would be integral to it and that was what was missing? the design was slapped on top and a different pattern slapped on top that something existed as opposed to something you thought about from the very beginning? robert brunner: i think it's just thinking about it differently. anytime you create something you are designing. you are thinking about where you want to end up and how you want it to fit. which becomes important. beats was very focused on bringing a younger audience into high-quality sound and we were building products that understood that and understood what they were about was very important. cory: why do you think this focus on developing businesses around design as opposed to adding on design, why do you think that is happening now? what other drivers of that design be more central in the business process?

i think it has a lot -- robert brunner: i think it has a lot to do with success. they come -- a lot of companies point to apple cory:. i wouldn't say the just point to apple -- robert brunner: well, you have a lot of people come in and we work with assets you have and make it great. people see that success of design from not just the business point of view but from customer loyalty, experience all of these things that they can trace all the way back to the design of the product. success causes business to look at how are we designing and are we designing effectively? are we designing to our advantage or we putting stuff up -- out there to see what happens? cory: robert brunner. why companies are hiring hackers to break into their systems, next. ♪

cory: i am cory johnson. the target and sunny reaches give big business reason to give hackers, so are some of the biggest companies in tech elite hackers rewards? tech giants like facebook, google. they are paying hackers thousands of dollars to break into their networks and find the holes. these programs are known as bug bounties. managing these bounty hunters is not easy. kimberly price the senior director of operations told me more. kimberly: originally, there were security researchers who found vulnerabilities and products and reported them to vendors. there was no renumeration but advisory credit. the brave the world of online services, there is no advisory credit and people doing -- are doing a lot of good security research work network

administrations and it is starting to incentivizing visit discovery and getting more discoveries and vulnerabilities reporting and let's attract the best researchers to do it on our platform. cory: it takes confidence to get companies to say, hack us. i am thinking of houdini by punching people in the stomach until he died of a burst appendix. kymberlee: the reality is these websites or online every day. whether they are encouraging the good guys to come and find them and report them, and you much would rather incentivizing a white hat hackers to find those vulnerabilities and report them then just leave yourself open to the black hat hackers. cory: the first companies i heard were google and facebook. kymberlee: actually, netscape back in the 1990's -- cory: basically google's current headquarters. to that point, i guess the administration -- but has been

the problem with the administration of these? kymberlee: the bug bounty program is time intensive. cory: why? i do so many to report? kymberlee: there is the issue of managing. there are a lot of self-taught researchers who are very enthusiastic and don't always submit valid longer abilities. vulnerabilities -- valid owner abilities. -- and don't always submit valid vulnerabilities. we work with them to clean out those invalid reports and make sure the customers only get the valid on her abilities so they can stay focused on the stuff that reproduces and needs fixes. we also help researchers get better and we are investing in them to try and increase their skills. cory: how do you guys get paid? kymberlee: we are a service that our customers, they pay a fee. cory: so companies pay or bounty hunters? kymberlee: the company's pay is

for the service of matching them up with our crowd of over 16,000 researchers. cory: i've got to think the companies that are doing this stuff at the high level are pretty stoked to find people and see the way the hackers work as they did not design these systems with intentional holes but maybe the hackers work in such a different way than they understand the methodology and broader that more than one hole has been discovered. kymberlee: one of the things our customers say is it is a great addition to our defensive poker. -- program. there is a lot that goes into security development. the crowd generally specialists -- specializes in finding logic errors that is scanning tool and automated analysis is not necessarily going to find. these are the types of vulnerabilities that hacker would exploit. cory: the senior director of the bug crowd. that is it for this edition of "the best of bloomberg west." you can get to our regular program monday to friday at 1:00 and 6:00. we will see you next week. ♪

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