and other problems at the school must be fixed and that the state-appointed emergency manager must be fired. they have been protesting since the start of the year. bernie sanders releasing a new goldmancritical of satch's role in the financial meltdown. however, it made no mention of clinton. clinton's campaign accusing sanders of breaking his pledge not the run negative advertising. tightening sanctions against north korea. calls for that of anyone developing weapons mass destruction. and brazilian president is nations in latin america and the caribbean to discuss ways to cope with the spread of the zika virus. declaring war on the mosquito

it. carries a meeting is set for next week in uruguay. global news 24 hours a day. more than 150 news bureaus world.the bloomberg news. i'm corey johnson. >> this is bloomberg west. coming up, amazon tanking trading as the profitseast misses on and sales. plus, full steam ahead for microsoft. software giant reported a strong quarter. the day,iggest win of facebook stocks surging after a record report.

first, to our lead. delivers its best earnings ever but shares getting slammed in after-hours trading. surprised investors who might have been hoping on more profits in the quarter. coming in at $1. shares of $35.7 billion, fourth sales. but those sales are 22% of the big numbers from a year ago. the question is whether amazon can readjust its investments. joining us right now, a senior research analyst in minneapolis and new york. columnist shelly. gad fly is our fast commentary oughtn which you really to be checking out. and let me start with you. it seems that at least the wall street sell-off, that this has been one of the biggest gainers major markets, whether it's the s&p 500, the nasdaq, you name it. but these numbers are not the kind of profitability that investors may have hoped for at the third quarter.

>> that's right. if you look at the stock, it looks more like ebay. are muchundamentals different. the fundamentals did not produce the same yield it had on that nine-gap operating margin. in the september quarter, they out.the numbers they were up 60% ahead of expectations. i want to emphasize the reason they didn't blow it out is they had higher-than-expected unit growth, 26%, adjusting for prime day. it was 24. so an acceleration in the growth basically dipped margins in the december quarter. >> wait. so they made less because they sold in volume? >> right. the incremental units that come expensivey end are for them to fulfill. they've got to put their own logistics to work. that incremental cost of delivering that hurts them. >> so capturing market share them a little bit in profitability, as they capture the customer. see?y, what do you

>> like we were talking about earlier, you know, this is a great quarter for amazon. not what analysts were expecting. starting to see this sort of topsy-turvy, we're going profit,little bit of growth. and analysts were thinking, once they showed a profit, they're with thateep going profit. and amazon never really made that promise. to insult thet analysts, since none of them are favorite.ybe one, our but shelly, i think you're right. i think you look at the operatingn of profits. net income doesn't mean anything to amazon. clearly don't run towards trying to turn a profit, maybe not the least because they taxes.ant to pay but that's the best we've seen in memory from amazon. is the first time, you know, this year -- every quarter, they are actually make a profit. and they're saying that the reason that their profit was around wastime

because they increased higher shipping costs, because they're more of more things for their marketplace sellers. so that's kind of pointing to whereture growth for amazon is going. >> and i think that you share convictions about operating margins. i wonder, when i look at profit web services may be not quarter.able as last you know, pointerring towards -- pointing towards the run rate right now, which is pretty fantastic, i wonder what you we learned about amazon web services. >> the growth slowed slightly, 69% of high 70's to 68 or in the december quarter. the reason is that they are coming up a little bit more difficult accounts. things investors look like. it's 10% of the business. what we were expecting was for growth to be kind of 60% to 65%. so actually, the growth was good. that to us is more important

than the operating profit nascentit's such a business. i would say everything is spot what the stockte is saying in the aftermarket. >> have you talked to any yet?tors probably a couple called to scream at you for being bullish today.stock >> yeah. we get that. we also just get e-mails typical during the conference call. i think one of the things that again,ittle bit -- investors generally see that amazon is doing all the right things. but one topic is they had a of chances on the call to really comfort investors about to trendns are going over 2016 and they were vague in terms of how they answered that. i think that'sy, kind of one of the things investors are scratching their head and going over the right now.about >> and shelly, for you, amazon web services, i keep telling it's the mostnk important business in the world right now and yet we don't ton fromnd out a amazon in the quarterly call

about how the business is going. >> i think gene is right. not do a very good job of being transparent at all. but this is amazon. they're not really known for that. but, you know, they said, you going to ebb and flow. those are the words they used. so i think that's really tough analysts, for investors to follow, because they're not -- they're saying we don't really what our profits or what our sales are going to be next quarter. thethat's really tough for market to digest. >> i just feel we've got 20 years of history from this company. we know that they don't manage towards profits so that any wall any slightrise about variation of profitability is schizophrenic, because amazon it's a top-line story, not a bottom-line story. right.ink that's where gene makes a good point is also about aws. expecting a profit from them yet or should they more nascent business where we're going to

expect more growth, more investment, before we start profit? it took, you know, almost 20 years for them to start doing a profit from the retail side of things. so for aws, you know, it is the growth that's more important on business.of the >> right. >> last word. gene? >> it's a great story. you've got an opportunity to own it lower today. they're going to end up taking the retail world over the next decade. >> senior analyst, always glad to have you on. it's been so long. well, maybe a day. shelly, good to see you! out oner stuff bloomberg.com and on the terminal. the video maker is sliding more than 7%. like 8% to me. weaker than expected. overshadowed the fact that the quarter looked pretty good. sales of the star wars game, surging past 13 million companies. that means they're looking at the biggest calendar fourth

quarter they've ever had. we're going to pick this up comes,w, when the c.e.o. at 1:00. you don't want to miss that interview. talking to will be him. he's a fascinating guy. when we return, we want to dive into microsoft. have really managed to revive the company and maybe compete with amazon web services. ♪

>> all right. xerox putting itself in two of to drugging companies, set announce plans to split into a separate hardware company and a company. carl icon will receive three

split.eats with the the shiers -- the shares were undervalued, he said. essentially unravels the 2010 purchase. $6.2 billion they spent a few years ago. after-hours.res up the company delivering a very strong quarter. 78 cents aarnings of share, above the expectation. alsonalysts, wrong again, on revenues. the company reporting $25.7 billion. of those analysts, my favorite, at least my favorite in the room right now -- >> thanks. one of myy, favorites. you've been covering this company for a long time. the great benefits we have, to have you looking at this thing. expectations on what they did, how is the business working? >> it's going great. at the topat job line, amy hood on the bottom line. officer.ief financial >> that's correct. it's been a pretty consistent

message that the move to cloud is happening. got in front of this. they're trying to catch amazon. but everyone else is trying to microsoft now. they really got out in front and invested, reset the margins. margins are actually up on a year to year basis. it's a new thing for microsoft, up.ins going >> march gins going -- margins across the board? >> on the overall business. showing presidentia really goodt in their personal computing business. so that margin structure is really improving. overvenue is down year year in the personal commuter cr business. windows,sentially right? >> and that includes other items. that's clearly still an issue. rewind, five years ago, windows was 30% of revenue. in thes somewhere mid-teens. job.ve really done a great >> so office on top of os, windows right there.

ofind that, the sort computer support system, azer. want to stick with windows. then i want to go back to cloud. quarter,ast unexpectedly wrong. there was a question about what inventory looked like. into saying we're going to go back to normal inventory levels. happened. that has >> i think with windows, you have that surge. but i don't believe that anyone os that theybout take out of their pocket. they're thinking about their system. when adele was trying to think through this, this isn't the windows company anymore. the cloud and infrastructure company. windows is an enabler. my thesis and anyone on wall street, it does not hinge on windows. they do on productivity apps and with server and with azer? doing fantastic around the fringe there.

>> so azer, we did not see -- services, weon web saw a little bit of a compression in terms of profitability. keep wondering why microsoft decided, what do we want from this business? we want market share. anyone else who wants to get into this business and start to own it. >> so microsoft thinks about azer very broadly, a collection of 40 different services. they're never really going to the margin structure out but i think it ties into a lot of things they are doing. will match amazon on pricing. we haven't talked about google. their coming. getously i think we'll stronger here. so we think the market is taken formation. microsoft is the challenger. and google is the up and comer. >> what's the -- 140% growth.it's they don't break their revenue up but we think it's somewhere around $2 billion, relative to what amazon picked up.

amazon iser of what doing. maybe a quarter ago, it was an what amazon was doing. >> there's a market for each one of these. if you don't care for your apps, go to aws. if you care about raw compute, into the going to come picture. many executives have said, if us, we would be ready to do business with google. but they haven't yet. >> if you're uber, you go to host yourcause you own stuff. but in compute, maybe not the thing.portant if you're proctor and gamble, you're -- apps.rosoft you can run them. as a developer, and i was a microsoft developer before i got business, you can say i want to run on cloud. thatey give you flexibility. so -- >> what does it leave for google. google right now has a great opportunity in small and mid. people want raw compute. we'll see where they come with their apps.

does his homework -- on google apps. i think there's a tremendous opportunity for google. to says theyalked can get in the game. they just haven't shown up with formally. plan they're building it behind the scenes. so i'm really excited to watch what google can do. i think right now the market is going to take three and ibm aren'toracle and even in that conversation. >> very interesting. the --ee if they take always glad to see you. right. the aerial founder whose first attempt to shake up the industry was quashed in the supreme court. he's taking aim at privacy and packages. internet.ing there's no legal process -- >> i was going to say. lawyerscheck with your ahead of time and say, we're not going to be at the supreme court

again with this? not., we're >> you're sure about that? >> yes, pretty sure. >> ha ha! callednew service is starry, a new way of delivering internet. he mentioned using high-frequency waves rather than broadband networks. fraction of the cost. he suggested targeting price of $80 a month. coming up, alibaba, strong earnings report this morning. are shares of the company falling? we will discuss it, next. ♪

>> a big comeback in the trading session today. julie has the news from new york. >> corey, like the other two major averages, the nasdaq sort of vacillated throughout the day, although it did have a better consistent performance than the s&p and dow. we have, of course, see seen the worst performing

of the three benchmarks. part of the effect we saw today was that big tech rebound. led byse, it was facebook, after that companies earnings estimates. growth in mobile users, among other metrics. rest of bigsaw the tech rise. amazon and microsoft rose ahead of earnings. well. apple do all of that contributed to those gains overall. but, of course, facebook wasn't only company reacting to earnings. we got numbers from ebay and seemed to perhaps validate their split last summer. coming out with numbers that beat estimates. the c.e.o. said the company is holding up well in a crowded marketplace because of its strong brand. flip side, suffered from competition and marketplace down by 5% in the fourth quarter. i also wanted to mention qualcomm, as that company was also a lagger in the biggest single drag on the

nasdaq. the chip maker said second mayter profit and sales estimates.of analyst there is increasing competition from hardware makers, now making chips as well. in addition to that, there's generally slowing smartphone market hurting qualcomm too. >> julie in new york. all right. alibaba, big quarter, 32% revenue gains. the chinese economy slowing down. to offset that, expanding into more and more recordreas and setting a from back in november. in new york. bloomberg reporter chen. so early, it up want to thank you for that. tell me about what is happening in terms of the regional expansion of alibaba. >> well, on the whole, it was a quarter for them.

you say their revenue grow by a third, beating estimates. profits doubled. the mobile rates were a highlight. 68% of the company transactions. in terms of expanding in rural the company did grow in 12,000 rural villages. go.l a long way to but they have held to their promise, which is that they are expanding in china and also tapping into that growth for middle class chinese consumers the valley chain. >> interesting. brian, when you looked at this we talked on bloomberg radio this morning, but tell me sort of your big takeaway. plenty of time to look at this now. >> absolutely. it was a great quarter for alibaba. it really pushed against the prevailing sentiment and the prevailing mood around china. we saw growth across the alibaba businesses. i think the rural story is an important point. in really, they're growing

urban markets, successfully challenges,w driving up the rate of their customers. expanding butly getting better at their business quarter to quarter as well. >> so explain that to me. what is it they're getting better at? monetizing better off of payments, suddenly more higher-merchandise- -- selling more high-end merchandise. that's a piece of it. the second is they're increasing peruseral purchase rate on the site. and then third, they're growing the overall merchandise value the entire platform. a heunl part of this -- a huge mobile.this is mobile growth for the quarter, 300%. that's really monumental. prevailings sentiment that mobile is really about showrooming, about looking but not necessarily about buying. what we're seeing is alibaba start to crack the code in terms thatbile commerce in a way

no other company globally, other in theiraps ten cent own backyard, is really starting to conquer. given the nature of the chinese consumer and their state of technology adoption, i can't imagine there's ever been much of a desktop business. most alibaba users, are they mobile first? >> well, in terms of trying -- seeing, of what we're alibaba is really trying to grow its user base, moving from pc to mobile. ways they're trying to monetize this is sending targeted advertising to the customers. advertisement is action-driven, where the user take a response based on very targeted theiration delivered to mobile screens. as advertisers cut their spending budget, actually it gives their money better spent and they can actually track how the users are looking at the

advertisements and also what items they are purchasing. thisian, i still look at as a schizophrenic company. they do an ipo saying we want so you can buy our shares. stock goes down. actually didn't want your money. you can buy your shares back. we are an e-commerce company. yeah, we're going to make investments in hollywood, buy a newspaper. >> it's important to remember, corey, that many schizophrenics can be geniuses. i'm kidding. but what we've seen with alibaba -- >> enough said. thank you very much! you are watching "bloomberg west." ♪ the only way to get better is to challenge yourself,

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we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. >> this is bloomberg west. 3:30 here in san francisco. we are joined now for the latest

stories in asia. what is up? thehe bank of japan bond up first policy making later and while most economists don't expect any expansion of the stimulus program, the feeling is that something will happen by summer. since the last meeting in december, oil has fallen to its low and the yen has surged. japanese stocks have stumbled 10%. that adds to the case for more stimulus. -- maybe the latest company to be hit by the slump in iphone sales. --stair is looking out for image census. ignoredident has remarks from the u.s.. visiting the largest of the in the taiwanese territory -- he intends to prevent the islands from being taken away. taiwan and china claim about 80%

of the resources. there are others. japan's economy minister has resigned amid allegations of corruption. apologized for the apology -- apologized for the scandal. he denies any wrongdoing but said he had to claim responsibility. they're accused of taking more than $100,000 in unclaimed donations from any construction company. >> that is the little bit. day, whatster all will he do to put this behind him? as they sensitive time for japan because of the global market selloff. nobody really wants cracks in their inner circle however, it seems that he may have learned from his previous administrations failures. resignation should not

change the framework of abenomics. a recent poll showed the public backing for his backing of the cabinet remains under 50% so this scandal has been able to be of ministration but he is unlikely to face any threats to his hold on power at this time. from thefar cry revolving door of japanese prime minister's we saw before abbe regained power. a glass half-empty or glass half-full, depending on how you look at it. from the bloomberg newsroom, i am cory johnson. ♪ facebook's fourth-quarter

results were terrific by all accounts. they continue the dominance. 80% of revenues come from mobile. emily chang was with david fisher earlier, the vice president of the business and marketing partnership. >> what we are seeing overall in digital is it big move towards video created and consumed digitally. and the numbers use on facebook were more than 100 million hours consumed each day of video content by more than five and 2 million people around the world. the results of the business success where resulted in the stocks today. eight hours today -- look at that. more than three times twitter's market value. think i treated this stat that facebook has added more users in two years than twitter has added

in its cumulative entire existence. >> and that isn't even counting instagram, whatsapp, messenger -- the other companies they've amassed that they haven't even started to monotype. instagram mayday huge quarter. is an experimentation year for them and that is fine because the company is in the money right now. they are using their advertising powerhouse on facebook, all of the advertiser connections and technology -- anything that you see powering news feed ads and applying it to instagram so it was very easy for the company to ramp up advertising. cory: so the lesson learned for facebook and facebook mobile, they knew this would work smoothly. we had to target the right kind of people. >> and they can use the target data from facebook for

instagram. the secondshow you set in eight series of ads after you first seen it on facebook. it is totally streamlined. they know where you have been on mobile and desktop because when you login, that is your identity. advertisers saying that they like the results or they saying that this works better all the time. even with they bidding process that we have seen with google? >> it is all in the eating style. are reallyvertisers looking at right now on facebook is the video at which really contributed over the last quarter. facebook hasat increased the percentage of ads in your newsfeed which they can only do so many times until it is too saturated. cory: so they have put more ads on the page. you can only do that so much.

but they have been doing it gradually over the past couple of years and people have not turned away from facebook. they keep using it just as much as ever. cory: the engagement rate has gotten better. it really couldn't get any better. right now we are watching for walgreens. they are telling the blood testing company to stop using the lab. there is a severe deficiency at that location. walgreens has paired up and partnered for the last testing. coveringchen has been this and joins us with an update. caroline: thank you for having me. cory: tell me what happened? you were at the walgreens that had the test? caroline: i just happen to be working in palo alto and it is the only place where they have

it wellness center in the walgreens store. they have about 40 locations in arizona but only one in california. has impacted the store here. i decided to walk down and see what was going on and there is they sign on the door that says now until closed for further notice. and i tried to talk to an employee who was leaving the building who had the there are notes -- the theranos badge on her of it. she had it imported on her jacket and she had her bag and was leaving.

so i guess she came in this morning and was told that we are not in business. cory: are you sure she wasn't shopping for toothpaste? caroline: it said it on her shirt. impact decision does not any of the stores in arizona. is one setback after another for the company and of course the big question now is what will walgreens do about the arizona branches. cory: amazing story, it keeps getting worse and worse. that was caroline chen, thank you very much. -- yahoo!outs have layouts have begun again. they will cut costs due to an underperforming market. in mexico andng argentina. it doesn't say how many employees were affected. -- 30ummer day in history years since the challenger space

shuttle disaster which some of us are member all too well. if you minutes after takeoff, it exploded killing all of the crew members. among the crew was in first ordinary person to be on the spacecraft. up, two guys who built the ultimate gift search engine. check it out. ♪

cory: something weird geeking out about is the delorean. the 1980's is back

in business. replicas of the story -- of the car -- it was made famous by the movie actor the future and the maker whorrest of the was busted in a cocaine deal that eventually led to the company going bankrupt. but the delorean is back. they plan to release new models in 2017. $100,000 per car. 1980's, -- has been around since the inception of the decade. it is not debatable. and the growing importance of in the market. when i use them in my text messages.

texts -- it makes me aging yes. it is aimed low tech and stupid thing. no offense. [laughter] >> they were really popular in the 1980's, it's what you use to make your website link. all of the technology that was available to chop up movies into short segments and once it was shareable online, now you see the resurgence of them as people embrace pop culture. and with social media they can send them out to their friends. cory: you say people embrace pop culture now, i mean, something 's is unique about why they are happening now. i don't know if it was technological? alex: it is just they seen in him movie. anyone has ever quoted in funny scene from anchorman or any

other movie, they are essentially doing a gif. andwith text messaging social media we were the first search engine. that is kind of why you see them take off. they were always popular. he will have been quoting movies since the beginning of movies but now you can share it with your friends. cory: you talk about it as they methodology to capture things from movies or the torilla secret fashion shows or game of thrones but i wonder about the capturing of the original gifs. what is that? that is me with glasses. in way you can express yourself. it allows you to make any type you want. it allows other people to express themselves. few -- this isa

my attempt at warby parker. i wonder in this political year whether there might be great opportunities. came upe new york times with a great article explaining how this year, the soundbite is eight gif. the hillary clinton campaign uses it all the time to explain what she is talking about. we saw a lot from the benghazi hearing about her brushing it off. so you will see a lot of political activists using them to express campaigns coming up. cory: how do you make money? we will express our numbers pretty soon. but we do tens and tens of billions of gifs. we have trillions of them. we make money the same way at google does. traffic. when you are serving 100 billion gifs, if we wanted to we could

turn in her ads on our website at we are going for it larger audience. cory: does adding ads slow down the audience growth? alex: maybe. our growth is exponential so we -- hanging back and letting and finding out how big the market is. and only this year, facebook and other companies haven't been -- companies have been embracing it on their platforms. when we see how big the market is we will turn on revenue and we will make the same amount that google did back in the 1990's. cory: after the show i will text you some of my more hilarious gifs. alex: totally. cory: dallas alex chung, the

ceo. thank you so much for your time. -- will benes questioned by the u.k. government on february 11. she says she is investigating the deal. this comes days after google in -- to pay $185 billion 185 million dollars in back taxes. the search giant makes billions of dollars in year and it should be paying more. you would have thought that more tax was it good thing for the public. this inflamed the international debate because $185 million is too low. thatave to remember research engine has been criticized for years for pain just they fraction of the taxes in the u.k., even corporation taxes down to financial

engineering. now the european union has gotten involved with the chief saying she is ready to investigate a deal if there are complaints. italy has also got in on the act and will look at them for evading taxes. those are back from 2009-2013. sue google now finds itself ensnared snared in the same sprawling investigation like amazon, apple and starbucks. they may also find themselves caught up in this. the competition chief has the power to call back unpaid taxes if she can prove the deals have been unfair. so google has continued to state that the company paid taxes in all companies -- in all countries and complied with the law. cory: dallas caroline hyde. -- that was caroline hyde.

uber is claiming they will break even in 2016. -- groep taxi -- grab taxi says they will break even in 2016. they have it loose alliance in china and india. the partnerships are going well. they are spending aggressively in asia. coming up, amazon shares continue to slide. report is it rise? we will dig into those numbers in little bit deeper. and tomorrow, john kamas is guest hosting. we will have more bloomberg west next. ♪

cory: dell ceo just joined in bloomberg panel moderated by vonnie quinn. check it out. bullish on china, long-term. the path in the next 30 years we all of theing to be don't go on akets straight path upwards. but when you look at the enormous number of people and the incredible opportunities that are there and the use of technology, it rapidly has

the country to sell our products outside the united states. and while there is volatility. -- volatility and arms, we are long-term on china. 13%: amazon shares are down after surprising investors who were not ready for the profits. we go to the coverage of amazon. you and i have talked about this before it happened and after it happened. what did you make of it? >> if you look at the top line miss, it is ace likeness. the main thing here was managing expectations. cory: they seem to think the same thing.

there was it crummy job with expectations. >> absolutely. the last couple of quarters when we put it in terms of profit growth and you look at the numbers, this is the highest it has been reported in 15 years. look at the other profit margins, the best i can remember. in the fourth quarter. sentiment wase that the investments now are slow and it will be more about managing profit in a new way. managing profit or topline growth to make it get bigger? is eight pathetic operating margin. come on. they are still managing progrowth. >> right. that is what we used to focus attention on. but now the sales growth is at 28%. thes still strong but

perception that the profit growth is going to happen in it much more predictable manner going forward, that perception got hammered today. cory: do you think they wanted that? i have it on good knowledge that someone put in number on the whiteboard about where the stock will open at this morning. and they are wildly off all the time. was that --ise here the program they have that is gaining traction. it is supposed to be in big profit driver going forward. clearly the whole prime thing has not reached that scale yet. i've done these live shots for them on cyber monday and it has been an amazing thing to see when you get a sense of what the

shipping and packing logistics are. it is hard to imagine. then when they asked the prime now service and the delivery time -- the delivery time is the biggest hook for amazon prime members. going to be the impact on margins going forward? there are a lot of content things that will come up going forward. they are media revenue growth is not star. it is more towards investments. on investments, they used evidence low. cory: thank you very much. that does it for this edition of bloomberg west. we have more tomorrow. ♪

♪ studios in new york city, this is charlie rose. begin with hugh hewitt. he is the radio host of his radio show. two recenterated republican debates and we are pleased to have him back on this program. welcome. >> thank you, it is good to be back. size of this confrontation between donald ?rump and fox news is it about what it seems to be about?