kong.n here in hong ted cruz wins the iowa caucus ahead of donald trump and marco rubio. a tight contest for both parties, as the first-time voters have a say, with almost all the democrat votes counted, we are pretty much neck and neck. yes trillion central bank maintains a record low. -- the australian central bank maintains a record low. borrowing costs are down by 2% since 2011, all industries outside of mining. google's parent elbow that is

said to leapfrog apple and become the world's most valuable company. it is their first earnings report under the new structure. headlines,ok at the powered by over 2400 journalists in 150 bureaus around the world. a quick look at the market. we have hong kong and china close to the lunch break. this is how they were trading a mixed bag. this is a picture for singapore, tokyo, and mumbai. it's time now for bloomberg "west." ♪ emily: i'm emily chang, and this is bloomberg west. coming up, leapfrogging apple is the world's most powerful company, topping investments and letting investors take their first peek.

will our data centers of the future be lining the ocean floor? we will talk to microsoft about the first server pod underwater. now to our lead. alphabet surging in after-hours trading, up as much as 9.4%, surpassing apple as the world's most valuable company in extended trading. after the company top there estimates, fourth-quarter revenue passed on to partners and rose 19% to $17.3 billion. up year overre, year. this is the first time the company has reported earnings

under a new structure, separating google's main search and advertising operations from riskier investments like artificial intelligence, self driving cars, and health technology. here to discuss the results is our analyst, joining us from new york. with me, adam burke, and cory johnson. the big deal is that they separated the core business from the other businesses that account for some of these riskier parts of google. up.core business is operating income up. on.r bets, up -- hang they're losing money, and they lost $3.5 billion this last year. cory: this other bet is a way to way to lower a expectations, they're just bets.

to other thing they did lower those expectations as to have a fantastic quarter for their core business. the core of the business, their core advertising business is increasingly mobile, showed 24% year-over-year gains. growth inally strong one of the biggest business as the world has ever seen. all these underlying numbers not as exciting. emily: is it coming out too much of a cost, james? what do you think? >> look, this was an excellent quarter matter how you slice it. we are hearing buzzwords like prioritize resources and capital. this is not something we are accustomed to. the things that's about to be where mobile -- this used to be an albatross, but now it is a tailwind. two, they are focusing on the things that make them great, which is machine learning, programmatic automating systems. this is a technology company.

saw --i think what we even though we saw improved profitability, when you strip out the other bets, the profitability on the core is accelerating. a valuation multiple on that and go for another google, which i don't think is that far-fetched when to think about health care and so forth, i think it makes for an incredibly compelling story, even more so than yesterday. emily: on that note, we have been listening into the call with the cfo who recently came in and had this to say about other bets. >> you can expect that results or the other bets may be uneven in the near term, so it is likely to be more instructive to an annualem at basis to assess their trajectory. emily: adam, what is your take on how much were information we

got with this call? >> the -- stripping out the other bets part place more to what google wanted to communicate and what they wanted to learn about. side, ithe advertising don't think we got a lot more insight into what makes that machine tick. there's certainly a question around increasing clicks and decreasing cost per click. you'd expect video to be higher, and that doesn't seem to be netting out. it's exciting to see, with braod billionokes, how that or so is being spent. but to really dig into the mechanics, i don't think they shared a whole lot more. emily: investors are excited, cory. if you look at extended trade, they are the most valuable company just like that. chart show that people

were clicking on a lot more ads, 31% year-over-year. it's an increase for google, and that is fantastic in a very mature business. yet at the same time, the value of a click had gone down. those should be negative numbers. , whichago, it was -3% was bad, and now it is -13%. >> and they need to share more about why that is happening. in q3, they added another mobile unit. ade above the fold is unite lower value clicks. james, you have been differentiating between search and shopping. shopping in particular seems to be doing well. >> right. only saw in the fourth -- what we saw in the fourth quarter was that it was one of the primary drivers of the clicks.

mobile have a bigger shopping holiday. period for the first time. they are clearly capitalizing. but on pricing, we know that there are pricing dynamics in the mix. thersre are waned, but if you take a longer-term horizon, you can see a lot of the ad units starting to reach parity. desktop was a bright spot during the quarter, so it laid out a much more promising outlook for the company because of the tailwind on mobile. of thethe ceo of google, core business, just said this. take a listen. >> global search was particularly strong in fourth-quarter. season, we found that shopping moments replace shopping marathons. they turned to their mobile devices to purchase gifts online

in spare moments throughout the day, all season long. emily: you know who is not on the call? larry page. at least he's not talking. cory: and that he knows every word being said. emily: he has had problems with his health, but -- what message does it send that he's choosing not to be part of this? cory: one of the things they want to do is put a report at their in charge of dealing with wall street -- i would rate anything with various into that. he was in plenty of conference calls. he has no problem. emily: james, what are your thoughts? >> i agree with cory. don't read into it. clearly sundar is at the helm. they want to make that clear. and ruth is taking charge of discussing all things other bets. it's that tagteam that we can expect to see. emily: all right.

we will be watching closely to see where google opens in the morning and how it compares apple. james, adam. cory, thank you will. -- thank you all. whatsapp officially hit one billion users. that has more than doubled since facebook bought it for a staggering $19 billion in 4014, but it has only -- in 2014, but it has only just started thinking of making money. the social network sales rose 62% last quarter. coming up, twitter shares have dropped almost 7% after reports it is nearing a deal with silver lake. is there any truth to it? , we will drill down next. -- we will drill down, next. --oo!, gopro, and linkedin what are investors focusing on? we will discuss. ♪

emily: a changing of the guard. not only alphabet surpassing apple, but facebook also inching past exxon into the number four slot. facebook end of the day with a market cap of $327 billion. twitter stock is popping on reports of an investment deal, shares finishing up 7% after mark andreessen and silver lake partners have considered some sort of deal with the struggling social network. since then, they have reported that silver lake has no interest. or to break it down, alex sherman. -- here to break it down, alex sherman. is a deal happening or not? >> [laughter]

well, with twitter, it is always up in the air. there have been rumors and rumors about deals with twitter. this one said it's not totally clear whether this is going to be a buyout or something that is just a slice of the company. of course, it would be a huge conflict of interest, because marc andreessen is on the board at facebook. [laughter] emily: makes it hard. alex what is your take? >> sarah was pretty diplomatic but i will more straightforward. . this deal is not happening all the sources i have, silver lake has no interest in buying twitter. some of my sources told me they thought the story came out of nowhere. y goodaid, she has ver sure thises, and i'm

was at least thought of as a possibility. a lot of these private investments of the public companies, or pikes, have become en vogue again, particularly as funding for private equity firms becomes more scarce. a lot of private equity firms may look at twitter, which even though the shares have declined, is still more than a $10 billion company, and think it might be a little much. that said, i still think that if twitter eventually gets sold, it is a lot more likely, that a large strategic player will be the buyer. we have no knowledge that twitter is interested in selling or working with advisers. my sources indicate they are not. that said, if shares fall long enough, the same sources tell me it they get out of twitter's control. if a company like google or facebook or legacy media company givesches them and

an offer well above market value, twitter is not family controlled, not individually controlled. there is no dual class share structure. it would be their fiduciary responsibility to play ball and police contemplates on the company. emily: let's talk about that point. shares have dropped by one third since jack dorsey took over. we're not expecting any significant changes in user growth or engagement. at what point does this story get out of his control? >> i think a lot of people were looking to jack dorsey's some kindt as ceo as of magical solution to their problem, with the work is really getting started. they still have the same issue with monthly active users. they still have the same issue with making the product is a to understand. they're taking baby steps to resolve these things, but it takes time, especially when your

head of product, head of engineering, a couple other executives went out the door. it just gets really difficult to have any sort of stability of and twittermentum, will have to figure it out. emily: speaking of questions surrounding social networks, snapchat -- you just wrote a story. snapchat is holding again by 63%. that sounds like a lot. >> it is a lot. below fidelity does is they have a committee that thinks about factors then they go into evaluation that may not just be what the company is telling them. they are thinking about market factors, competitors trading in post market. we just talked about twitter stocks going down. that may have factored into fidelity's valuation of snapchat, and snapchat has not been totally open, so they need

to make decisions based on -- even the funding environment. emily: sarah , thank you. alex, hang on. reports of another company looking for a deal -- barracuda networks working with morgan stanley to seek potential buyers. provides cloud computing and data storage services and has lost more than 2/3 of its value after disappointing earnings. at friday's close, they fell a whopping 59%. morgan stanley is evaluating interest, which has a market value of $571 million. so far, no buyers have emerged. alex, what more can you tell us? >> barracuda hired morgan stanley a little while ago. it could be months. one source told me it was a soft process. they reached out to a few companies. that their stock really plummeted earlier, in january,

after their earnings results. i think the combination of not finding any buyers immediately, close as you mentioned the stock falling 35% in one day, may be putting the sales talk on paul's simply because there is too big of a difference on the spread. as i mentioned, they weren't able to find a virus to begin with. this data wouldn't surprise me, if barracuda state independent a while longer. emily: interesting. all right. keep us up to date. alex sherman, thanks so much. coming up, investors are anxiously waiting burress of myers's new turnaround plan. newaiting marissa mayer's turnaround plan. ♪

emily: uber is getting pushback

from drivers following is 50% fare cuts. drivers protested the price cuts outside the company's new york offices. uber claims it will increase rides and earnings, but the drivers aren't buying it. hundreds stood outside, chanting and holding signs. a trip from midtown to laguardia is now about $37 compared with $44 before. yahoo! squiggly performance of marissa one mayer's key policies is being challenged. the rating system was manipulated to achieve the company's's financial goals. the lawsuit comes as yahoo! morale hits new lows. more than one third of the company's workforce left voluntarily or involuntarily. over the last year this morale will be fed at center when marissa mayer unveils another turnaround effort for yahoo! on tuesday.

she promised to outline a plan to cut costs and boost growth. the company will be announced, along with quarterly earnings. what are investors looking for? i am joined by bryan womack. what expecting to hear? >> there is a lot of stuff on the plate. we had the earnings coming out, and we will have an outlook. people are looking at this idea of the new reset, a new turnaround plan. we expect some new vision -- how much of an affected has,. we don't know investors are looking for a lot more. emily: exactly. investors want them to sell the company, right? >> there are a lot of saying that, saying to just sell it and move on. that the end the day, larissa has a vision. she wants to drive it forward. she will have to make her case. emily: you reported that a big restructuring is coming up,

potentially layoffs. what do we know about how they are planning to streamline the business? >> we know that yahoo! gets a lot of criticism from being bloated. compared to a lot of companies, they have a lot of employees. emily: she claims she has already -- >> [laughter] well, she has also said she is cutting more. some recognize that while she has made reduction, it is time for more. they have taken down employee numbers by hundreds, of thousands in the last few years. that the revenue has not been growing. when revenue shrinks, it makes the employee count look worse. emily: what about the mobile revenue she talks about so much? is n't that's growing? >> yes, but desktop has been the bread and butter, and it has not done well. it's trying to make up for legacy declines with this new stuff.

mavin has some promise, but it hasn't been enough to offset these declines. emily: talked to me about this lawsuit. sued by a former employee, saying she was unfairly fired, along with hundreds of people, and that they manipulated evaluation metrics? >> i can't get into the details, but i do know this much -- she is among some folks to step back and say, why am i part of this group of people being reduced? why am i suffering? i think what marissa has been doing -- let's cut costs, bring things back, and we will see what happens. emily: this is -- they've threatened to proxy fight. they say they will go all the way. >> look, tomorrow is an important day. we will say what yahoo! wants to do, but they are not happy. a proxy war is something they

are not afraid of using. emily: exactly. they have said that they are closing mexico and argentine offices. ming,ey've been trim making cuts here and there. these companies -- some countries have been cut back, and we will see if there is more, but she has a big task to persuade a lot of investors. emily: i know you will be all over yahoo! earnings on tuesday. thank you so much for giving us that preview. coming up, what the data centers of the future look like? we will talk microsoft's top-secret pilot of an underwater server pod. you can now listen to us on the bloomberg radio app, and on sirius xm. ♪

an update of top stories. ted cruz has won the iowa caucuses ahead of donald trump and marco rubio. theys a tight contest, and were all given a direct say in the presidential race, with almost all democrat votes counted, bernie sanders and hillary clinton are tied. say there will be a decision on thursday. chart must choose between a bid $5.4 millionound

and one worth roughly half that from japan's state backed innovation network corporation. -- says it will appeal against fines. was hundred fined -- $182,000 each. pictures of the staff did go viral at the time. those headlines from bloomberg news, powered by 2400 journalists in 150 bureaus around the world. let's have a look at the trading day. asia-pacific is fairly volatile. here's david ingles. a little more risk aversion that has seeped in over the last 30 minutes. the equities benchmark down 6/10 of 1%, a session low.

flowing backoney into the warm embrace of the japanese currency. 1% against the u.s. dollar, really playing fairly clearly, with all these exchange rates. aussie dollar up. euro's stronger. as far as that is concerned, we are still seeing a little bit of strength. ththat's what the equities space is looking like. a part from the airline, health care stocks in japan, spread across the region, every single sector is down. roughly speaking, 60% of the 1000 biggest stocks. that is how asia looks on

individual benchmarks, and most stocks are lower. of course, we are counting down to the reopen in hong kong and china at the top of the hour. ♪ of data is exploding as the stream movies and music, keep in touch, and manage our lives from our smartphones. and companies are racing to grow their cloud services as demand grows. the microsoft says it has in reimagining the data center in a more fundamental way. it has taken the servers of a lot of of the ocean, cutting down on huge costs like air-conditioning. but is such a thing really feasible, long-term? and to tell us more about the top-secret project is microsoft's corporate vice president of research, peter lee. thank you so much for joining

us. how long have you guys been working on this? >> we have started this project over two years ago. the first concepts for this came to us from a paper written by one of our data center operators about four years ago. emily: what are you actually trying to accomplish? what is the endgame? >> as you said, we have just had explosive growth in data centers. every month we are adding more machines to our data centers. to keep up with that growth, we are having to find new ways to have growth, to bring data centers where we need them, when we need them, in the most sustainable and efficient way. emily: take is underwater in talk to us about how you actually accomplish this, the challenges of deep-sea versus shadow water, the mechanics of bringing this to life. >> some things underwater are actually a little easier.

when you design for something underwater, one thing you can do is pack machines a lot closer together, because you don't need room for people. that can have a simplifying affect. all the other engineering we do -- imagine taking something the shape of the soda can and making it large enough to hold hundreds or thousands of servers. deep oceanvive in depths under those kinds of pressures. on the engineering we bring to we bar of from summaries and other things we do under the ocean. emily: how do you handle maintenance? how to upgrade parts? >> part of what we do is to take an osha of lights out data center operation to a new level. we've study the ways to use mechanical engineering of data center racks, of disk drives, have very,lves to

very long-term operation. emily: so given the results so far, how far away from you are doing something like this for real? a real production producing data center? thing is our first test, which we just completed, was running so well that it ran for 105 days before we took it out of the water for a friend that analysis. days, we were able to transfer real customer cloud workloads and run them in this submarine. in that sense, it is already showing practical benefits for us. but in the future, we really want to have a full assembly-line. imagine instead of having custom construction projects, having a that, under controlled

conditions, can mass-produce these things in a very sustainable way. emily: what laws are you subject to an international waters? >> there are of course legal issues, but really they are no different when you are operating under the water. the main reason is that for the for seattle future the data connections underwater will have to be done by cable. those cables will have to come ashore in some jurisdiction or another. in the end, the legal issues are very similar as what we have for land-based business centers. emily: looking into the future, what percentage of data centers do you think could be underwater? is this something you think could be used on a really broad scale? >> you know, it's hard to say. but here's one thing to think about. today, we are managing over 100 data centers. and yet the vast majority of the business interests we will invent and build have yet to be invented and built. we are just at the very beginning of this, given the

current growth rate. looking ahead, whether it is underwater or in some other modality, i think there is a very good chance that it will be different from what we have today. isly: and i know microsoft eating up important research on particular projects, focusing on research that can have an impact rather than pure research. you are spearheading a number of these efforts. but how do we balance this r andjust an idea, reality,. >> the way i think about it is a pipeline. you need long-term research and out-of-the-box thinking. that inspires researchers to be more innovative. but it also feeds into shorter-term ideas. even though you might think of an underwater data center as being a far-out idea, we learn

things. we learn how to make disk drives last longer, and that learning is equitable even in today's business centers. that is what creates a pipeline, with near-term spinoffs while we go for the really long term disruptive concepts. emily: interesting. fascinating story. peter lee, joining us from seattle. you have to bring us an update when you get your next advancement. thank you. >> thank you, emily. emily: here's what we are taking out about today. u.k. regulators are allowing scientists to genetically modify human embryos to see if deleting certain genes improves the chances of survival for early-stage embryos. to be clear, these embryos will never be implanted into a womb. researchers will study them after conception, and the cells are not allowed to survive more than 14 days, amid fears it could lead to "designer babies." the scientists studied approval

from an ethics board. if approved, they could begin just a couple months from now. coming out, the big screen movie giant imax is getting its feet wet with tv content. then, do not miss an exclusive conversation with the oracle ceo. 6:00 p.m. new york time. ♪

emily: so what is the most powerful brand in the world? according to the london-based researcher brad finance, it is disney, and they can thank the that. far away for

they rank brand strength based on familiarity, loyalty, promotion, and point out that "star wars," the brand, is worth about $10 million. "star wars" toys have so far generated $700 million, and disney is dethroning the toymaker lego, who refused to sell bricks in bulk to the artist ai weiwei. you know i've exports prices on the big screen, but the company is laying out smallscreen ambitions as well. is getting into television by partnering with the discovery channel to distribute up to 10 documentary films, marking its first tv distribution pack. the ceo explained the deal to betty liu earlier today. >> in general, when you look at content, it's really harder to stand out in the pack. it has become much were difficult. but imax is one content that really stands out. it means something. when people think of imax, they

think of an immersive experience. we have our documentary film teams making a number of movies, and they are anything from space to the environment to wildlife. but it seems to us that producing content just for a narrow window of documentaries doesn't make sense. if we could take that content and give it a second life on television, it will benefit us and discovery. we have a phenomenal relationship with discovery. it will also include when it run theatrically, discovery promoting the movies. they'll help market the movie. betty: but they will be promoting the same film. >> they will, but first when we have a theatrical window. then they'll take it after we are done with the window and distribute it through the discovery network. as you know, with the bundling of the cable industry, it will prevent a lot of opportunities for content creators. for us, it is our first for a

into the -- first foray into it. i think it might be a model for other things. eventually you might see us do more original content and then partner with downstream partners through a secondary window, across the internet or cable television. betty: so why do want to get more into original content? >> you look at interesting models -- and i'm taking a high bar deliberately -- hbo and netflix. they both started by distributing hollywood films. betty: that is generally the business you have. >> but now we have over 1000 theaters all over the world, $100 billion in box office. why not take that brand awareness and translate some of that into original content? we have always been known for our documentary content and that

has always been part of our business. many of our movies have had big numbers. iss deal with discovery consistent with what we have done in the past, but now we have another film in china. we're partnering with an original production, and i would be surprised to do something similar in china, where we monetize downstream content. betty: you mentioned to china, and you work so closely with chinese studios and chinese content creators. do you think this turmoil in china is going to affect hollywood? they have been financing so many films here. >> the movie business has been terrific in china. box office wass up 50% from the year before. the moviey -- business is sometimes a beneficiary when economies slow down, and we see no problems in china. it's ironic -- in order to lower

our volatility, one thing we did was take our chinese company and bring it public on the hong kong stock exchange. we have grown 59% from the ipo. the market in the u.s., they say we are worried about china, but shareholders in china are not worried at all. a story we are from m.i.t.teens and the university of wisconsin are advancing to the next round of the competition to test the hyperloop transportation system. than 1000eekend, more students travel to texas for the spacex sponsored competition. each team had 20 minutes to present designs to a panel of judges. the winners will get the chance to build and test their creations in california this summer. hyperloop is a proposed transportation system that, in

theory, would whisk passengers from san francisco to l.a. in half an hour. on that note, one note for today is tesla. shares rose 3% despite a note from morgan stanley issuing caution. the firm cut their price target to $333 from $450, citing lower volume expectations for the model x and increased competition. turning now to the broader markets, u.s. stocks closing the day. little changed as tech helps overcome an earlier selloff. we have to wrap from new york. major nasdaq was the only u.s. index to close in the green on this first trading day of february. the info tech sector was some of the biggest gainers. the s&p couldn't hold onto gains and closed back in the red by the end. looking at specific stocks, afterx showed a 6% hike

speculation that apple could make an offer for the tv content business. no sources were cited, but both companies are in need of a kickstart. western digital appears closer than ever to winning unconditional eu clearance for its yeild. wd rose 12% intraday. tesla shares were an interesting story today. morgan stanley was bold, cutting its price target on lower volume expectations, including the model x and model 3. traders didn't seem to care and pushed the stock higher. morgan stanley also expects more competition from the likes of ford, vw, and alphabet. tesla reports earnings next week. facebook rising higher for the

third day in a row, of 2.5%. -- up 2.5%. the mobile targeting platform doubles the number of users. their market cap is now larger than oil major exxon by $10 billion. tomorrow, earnings season for dow chemical and serious. emily: bloomberg's radio since you. as we had to break, a check on that shares in after-hours trading. if it has overtaken apple, all the details, next. ♪

emily: we mentioned that whatsapp has one billion users. , well gmail has that bragging right now too. that is one of the details we learn from alphabets earnings. shares are searching after the google parent company beat estimates under its new structure. for more, i want to bring in

jack clark, who covers google it bloomberg intelligence. you have both been taking a close look at the company. jack, lay it for us -- what are the highlights? >> the highlights are that google keeps on making more money on ads, along with facebook, while the rest of the global economy seems to be mired in difficulty. it seems like he can't lose. emily: let's take a listen to that earnings call, some of the tough calls that have had to be made to prioritize between different businesses. weas part of this process, establish technical and business targets for a number of businesses. we made necessary choices with those efforts that maximize the potential for long-term value creation. prioritizing certain efforts while making tough calls in others. is costing more to invest in these other bets, and they are making less money. right? >> that will probably cost more

in the future. what it shows is that cost you was talking about. if you look at the core business margins, the flexibility seems excessive, but the more interesting part is that she said quarterly losses will be lumpy. there will be little to predict, how wide swings the earning results could be. looking at the numbers, the capex is 8.7%, pretty consistent with its 2010 strategy. i think it will be more about the faith in the system, or her plan to continue this discipline that will drive these exportations. emily: on you to that particular, we got a little more color. take a listen to what sindar had to say. >> we will have ai in a form in which it benefits a lot of users in the coming years, but i still think it is early days.

there is a long-term investment for us. emily: that's ai. now take a listen to what he had to say about youtube. ok, we don't have that, but i will read it to you. not only does youtube on mobile reach more 18-49-year-old son any cable network in the u.s., but time spent watching youtube in the living room doubled. >> youtube seems like google's silver bullet. it is driving a lot of their revenue growth, and it is popular among demographics. they have a new ad format which is helping them make more money from ads in what seems to be a tight market. emily: quickly, ai was going to be my last point, but it is something he said -- investing. >> it will be longer-term from there, the right now the focus will be on increasing ad revenues. when we talk about ai short-term, it is all like, how do we fix the cpc problem, that

has been declining. how can we use that to bolster? emily: ai with respect to their core business. ok. jitendra, jack. thank you both. for today's edition of the best day ever, today is alphabet executive larry page and eric schmitt. shares surged in after-hours trading after they beat estimates, and according to the bloomberg billionaires index, larry page is up almost $2 billion today, ending with $41.6 billion. eric schmidt is up $400 million. sergey brin ended with $40.8 billion. enough for him to overtake larry ellison of oracle as the world's .10th richest man .

themorrow for coverage of earnings update from yahoo!. plus our exclusive interview with mark hurd. ♪

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