♪ ♪ emily: this is the best of "bloomberg west." we have compiled our best interviews of the week. coming up, apple introduces a smaller, cheaper iphone. how are investors digesting it? we discuss. we remember andy grove, a founding father of silicon valley and a mentor of the biggest minds. i check in with shopify as reports swirl of an acquisition by google. first, to our lead. apple unveils the iphone se with a smaller screen and smaller price tag.

starting out at $399, it is the cheapest new iphone ever. they are appealing to those loyal to the iphone 5 and new buyers in high-growth markets like china and india. investors initially were not crazy about the reveal. shares dipping as the event got underway, but investors are typically slow to digest apple product announcements. looking back since steve jobs died in 2011, shares rose 1.5% after product launches, but retreated 1.8% three months later. right after the event, i spoke with gene munster in minneapolis. i started by asking, how will investors look at apple? >> investors are concerned. that is already priced in. they should take away they are being more aggressive. maybe appropriately aggressive

with pricing that should be more resonant with emerging markets. this is a great price point. it will be more attractive, but not at the cost of their margins. investors should feel good about that. the march guidance they gave, many investors believe that included the anticipated lower on phone. that is a sign that it will not be out until march 31. the quarter ends on march 26. that means the march quarter doesn't benefit. investor, one of their takeaways should be to feel better about the march guidance based on the timing of when the phone is available. emily: this is the lowest priced iphone ever. will this help reinvigorate iphone sales? >> i think iphone sales are doing well, just not growing. let's be clear, there are one billion devices out there, not all of them iphones, but we are looking at a huge audience that

will expand. perhaps slower than we are used to, but one billion people potentially using apple devices here. how much faster can they grow? how many users are non-consumers of iphone? probably most of them will have smartphones in the next few years. out of 7 billion people on the planet. there will always be the green opportunity. i do not know if this is it. we will see more iteration. they will keep improving this product. emily: who will buy this phone? is it for people in emerging markets? for people who have not upgraded yet? people who already have an iphone but want the smaller screen? who are they targeting? ben: when we look at intent to purchase and the installments, we see a portion of the base that has not moved. it is not always price-driven. 20% of our panel said they wanted to upgrade but are not sure about the size.

they will upgrade at some point. which device will they choose? do they like the small? i think the existing base, the holdouts that are adamantly set, that is relatively small. if our panel indicates correctly, that is 10% to 15% of those owners. the important thing is they are bringing the platform to current generation technology, but they were very intentional in saying that a first time buyer buys in at this screen size. it also has to do with the price. if you look at china, india, indonesia, it is the price point. this is indicative of a maturing middle. consumers, as they grow and mature, saying i'm drawn to apple and like the apps, they are willing to pay more and

apple is meeting them at the middle with this price range. emily: is apple looming against the tide? there's an economic slowdown in china and a potential economic pickup in russia and brazil. the smart phone market is saturating. to what extent is this outside of apple's control? >> a lot of it is. they're doing well in emerging markets. in china, units grew at 18% year-over-year, and deceleration since december, but better than overall industry growth of smartphones in china, close to 10%. yes, they are up against the headwind. everyone is against the headwind. shares reflect that given the multiple it is trading at. this should be a mid-to high single-digit growing business with the benefit of emerging markets. even with the headwinds, it should be a growing business.

emily: we are seeing a low priced iphone and iwatch cut, lowering the price by $50. could this impact the brand? >> my thinking is not on the price of the device purchased, but the per day basis. if you work out how long they stay in use, are upgraded, you get to an interesting figure. i used to say that an apple product is $1 per day. i have refined that, and now it is $.70 per day. on a per product basis we saw $17 for the lowest iphone and up to $31 for the most expensive -- not the most expensive, but the high-end model. $30 a month, it is $1 a day. $15 or $17, that is $.50 a day.

that is how we should think about these products and think about how many of those customers there are and how many services they add. we're looking at $20 a year of additional service revenue per device. it can be boiled into one model and reduced to how many users you have, how much they spend on each device, and you get a valuation. emily: you have done a lot of work on the watch. you are wearing yours. my two guests earlier have them but do not wear them. we are now seeing a price cut. can this be more than a niche product with an update or redesign? >> there are a couple of ways to think about the watch. one thing is that this was not something preceding it that gave us a frame of reference. the iphone, most of us had feature phones and understood

cell phones. the ipad was successful because we were familiar with the iphone. this is such a brand-new category of product, it takes time to get your brain around it. we see higher levels of consumer satisfaction within the mainstream markets, every day buyers who are finding value. this is just version one. we are optimistic that this product goes. again, the question is how big is the size of the market? we will have this are all new categories, how big is the opportunity for the markets? the research continues do suggest there's something there. how big that goes will be the debate. they will continue to evolve the product. putting a modem in it and unbundling it from the iphone would make sense, better improvement of native apps. that will come as it matures. what we are seeing in the market is positive.

there's something there, but it is in its infancy. emily: that was gene munster, horace and ben. coming up, we remember one of silicon valley's founding fathers. intel's former chairman andy grove who died on monday at the age of 79. we will look back at his legacy. that's next. ♪

emily: this week, the tech world has been mourning the death of andy grove, who died on monday at 79 years old. he played a central role in the creation of the semi conductor business, on which the internet age is built. he was a mentor to steve jobs, larry ellison, and mark zuckerberg. i spoke to tech leaders who knew him, including craig barrett, who took over as ceo of intel. he told me about the impact andy grove had on him personally.

craig: i worked with andy for 35 years. i greatly respected his insight, his wisdom, his strategic thought, and how straightforward he was. i think he was the most direct human being i've ever met. you knew exactly where he was coming from, and he always had a great strategic idea of what to do next. emily: intel was known as the world's best managed company, yet he was also known as a ruthless leader. yet, people still followed him. what would you say were the hallmarks of his style? craig: i do not think "ruthless" is the right word. he was straightforward and practiced constructive confrontation. that is an intel buzz word. you always knew where he was coming from. he would not tolerate shallow thinking. he wanted every strategy well thought out and considered.

he did not mind challenging anyone in the company or the industry. emily: what was it like trying to fill his big shoes? would he continue to try to influence you even when you were the ceo and he wasn't? craig: intel has had such a tremendous history of leaders -- icons in the industry. bob noyce, gordon moore and andy grove. following those three is a daunting task for anyone. i worked very closely with andy in a consulting basis after he left the ceo position. i followed him. he was helpful. he was respectful of decisions i made. so, he was a wonderful mentor. he did not overstep, overreach. he respected the next generation of management coming into play.

emily: young ceos revere andy grove. his book on management is like the bible. i wonder, do you think his leadership style survives generations, or can other styles be just as successful? craig: certainly, there is not one way to manage a company. andy imprinted his style into the culture of intel. they indoctrinate all of the new hires into that style where strategic thought is important. constructive confrontation, addressing issues, running communications up and down the company -- the lowest level employee feels free to contact the ceo at any time with an idea. all those were things andy put into the company and into play. they are all alive and well. emily: craig barrett.

when we return, i will speak with one of the men andy grove mentored. ben horowitz of andreessen horowitz. we will hear more about andy grove and his extraordinary life. i will sit down with a ceo discussing the issues facing the world of cyber security. ♪

emily: as we remember a pioneer of the tech industry, former ceo and chairman of intel, the late andy grove died on monday, i spoke to ben horowitz, cofounder of andreessen horowitz who had his own special relationship with andy grove, a beloved mentor and teacher. he talked about his role in shaping silicon valley. ben: not only did he build the foundational company, and to get to the microprocessor intel was in the memory business.

that is usually the end when you get to 13 years. he faced brutal competition from the japanese. including subsidies from the japanese government to his competitors, which forced him to switch the business that late in its life to microprocessors -- something he foresaw might be a big market, but at the time was tiny. as a result, the u.s. ended up being the center of the microprocessor market and the pc industry, which led us to be the center of the internet. he was the foundation for the u.s.'s leadership in technology. that was a really big thing. beyond that, he was also the cultural foundation of silicon valley.

in that his leadership in turning around once he achieved what he did, and making sure others knew how to do it, was unprecedented. really, nobody has done it as well since, but we have lived off of it and it has made every company that has read the book or followed andy grove better. emily: the idea of a turnaround is still elusive to most big tech companies out there, with perhaps only apple truly turning itself around. now, we are seeing yahoo! and ibm going through difficult times. what do you think andy grove's advice would be to them? or, what did he think about them in his final months? ben: there's probably some things that i should not share. i will say that the thing that andy and steve jobs had in common was that they had the

courage to take the company in a direction that maybe nobody at the time thought was a good idea. i think what you see in leadership now is what i would consider more followership. what do the shareholders want us to do or what do the analysts think is a good idea? and you look at what steve jobs did with apple or andy did with intel, no one reported on it. no one was an armchair strategist. neither would have sent them in the directions they took. they knew what the right direction was and were ok with whatever happened then. they were ok with doing what they believed was right. i think that defined andy as a leader. the thing that people who follow him take away is that courage and determination to do what is right.

emily: it seems like so many young people want to be entrepreneurs, come to silicon valley and live the silicon valley dream. what was his take on young entrepreneurs who might be called overly arrogant or naive? what was their take on andy grove? ben: he continued to believe in people. even the young people that some consider arrogant. he spent time with a lot of the younger ceos. drew houston of dropbox, mark zuckerberg, if you look at mark's career and what he has done with the company and philanthropically, you can see that he has learned a lot from andy. he knows the importance of giving back. andy's career was so influenced by how grateful he was that this

country took him in as a refugee. at 18 years old, he had nothing. he came over on a boat. he got a few dollars from us and we let him be a citizen. he never, ever stopped trying to repay that. he paid it forward to all of us. it is an amazing thing. that level of gratitude and belief in humanity is what we all try to take from him. emily: ben horowitz, speaking to me about the death of former intel ceo andy grove. now with me to discuss, our intel reporter, ian king. i want to touch on something that ben mentioned, how he became this way. how did he become so great? share a little about his story. ian: he wrote a moving book about that process, his childhood growing up in europe during the war in eastern europe. being jewish, what happened to

his family when the nazis occupied hungary, and when it was fought over by the soviets when they took it over. how his family was persecuted and he had to escape. emily: you met him many times. what was he like? ian: scary. inspiring, but scary. everyone talks about his intellectual honesty, love of the truth. that was absolutely what he was like. you cannot have a flirty and flattering conversation. he was not interested in his own celebrity or power. all he cared about was getting to the truth. he would push people's buttons until he got what he felt was useful out of them. emily: david, i'm sure you have your own stories about andy grove, having covered silicon valley for so many years. how do you remember him? david: listening to all of these wonderful comments, one thing that has not been mentioned is that he played a key role in building the ecosystem that is

silicon valley now. this complex relationship between microsoft and intel that led to the incredible success of the pc, of which he was a great champion. bill gates is not a pushover. andy grove was a formidable match for him. it was necessary, in those years, that both companies were led by super strong, super intelligent, rational, but feisty leaders who wanted to win and push each other around. in the end, they knew they had to win together. he was not mean, but he was gruff and straightforward. he was an incredibly nuanced thinker. there are so many wonderful things about him. he was generous, too. when i first started covering tech, he got to know me and gave me pointers on what i should think about. emily: your profile of andy

today opened with this amazing anecdote about a conversation with steve jobs and larry ellison. share that with us. ian: they went to his house on his birthday to celebrate. they both thought, by way of tribute, they would tell him that he was the only man in silicon valley that they could work for. his response was that he would not have hired either one of them. he thought they were flaky. david: that sounds very much like andy. he was not going to sugarcoat anything. he wasn't mean, he just told it like it was. you had to be braced for unpalatable truths when you hung around with him. he was not going to waste your time. he wanted to make a great company, industry, and he was ultimately a great american that wanted to build the country up. emily: that was ian king and david kirkpatrick.

up next, we will speak to the adobe ceo about the areas of focus beyond products like photoshop. we head to las vegas, next. if you like bloomberg news you can listen on the bloomberg radio app on bloomberg.com and in the u.s. on xm. ♪