Live from san francisco, welcome to the early edition of "bloomberg west." i am emily chang.
Our focus is on innovation, technology, and the future of this miss.
The pressure is going on apple and tim cook to unveil the next generation of hit projects as it faces its roughest patch since the iphone.
Shares are down seven percent today.
Iphone sales missed estimates in a key holiday quarter.
This amid more competition and possible saturation.
Apple says revenue could also fall in the current quarter.
Tim cook insists the company is growing and new products are coming.
Cory johnson joins me now from new york.
I know you love apple metaphors.
Has the apple gone sour?
How is it tasting to you?
Perspective is in order.
We had a company that was near bankruptcy when steve jobs takes over.
And now they have the biggest quarter in its history ever.
Selling more except for ipads than they ever have before and also the highest revenue before even after the selloff today.
The lodges -- the largest market cap.
So things look great but the question is what is going to happen in the future?
We saw a sales rebound that looked like it was good news.
A six percent increase and we saw three consecutive quarters of those increases and we saw a return to profit growth here the company is profitable year-over- year profits increased a little, one percent.
When we look at what is going on with this business, we see them guiding toward a world where they are not selling as many phones in the current quarter as we might have expect them to.
So the shine is still there is what you're saying.
It is luminescent.
Let's talk about the iphone 5c. apple missed the market, they were peppered with questions yesterday about this particular thing but tim cook did not lay blame.
Are they not saying something?
I think the 5c underperformed . they really thought there going to have a lower market entry but it was not cheap enough.
Something we pointed out.
He did not seem like it was substantially cheaper than the iphone 5s. we saw strong sales of the 5s, and that tended to help their margins.
The average selling price picked up at we also have much lower sales of the 5c. one wonders if apple is going to consider a different strategy.
You could even wonder if they would want to bother.
Why not have 18% market share but 70% of the profit rather than go after that cheaper phones and the smaller margins?
You are talking about iphones at the low end.
What about the idea of a bigger iphone if they come out with it, will it be enough to keep the momentum going or back to where it was?
Or does apple need new product categories which we have not seen since the ipad?
This is the amazing thing with this company.
I was talking earlier today, this is a company that invented the macintosh, invented the iphone, the ipad, to expect something else that amazing or that big, it is really hard to conceive of.
We know they are talking about tvs and potentially a wearable device.
That might be a controller for the phone.
We will not know.
It is hard to imagine anything moving the needle.
People are reassessing what apple could be.
Maybe it is not this massive growth engine.
Maybe it is more about managing margins and managing a steady growth and replacement sykesville -- replacement cycle.
We have been talking about a connected tv.
It has not happened.
Samsung has a connected watch, they do have a connected home amp.
They have smart appliances.
Google is buying him pennies like a nest.
-- is buying companies like nest.
Is a passing them by or on the different road?
I don't know that the samsung watch is taking off.
It almost seems like it was a reaction to rumors.
They may let the market develop or not do anything all.
Apple has been active on the acquisition front to make their products more robust, whether which its maps product, or with their phones and ipads and computers.
We will see if they come out with something that is different.
With the scale and scope this business has grown into, it is hard to imagine any and that could be as massive as the ipad and iphone business.
Cory johnson, thank you.
Next, kleiner perkins co-finder tom perkins arced a firestorm after comparing treatment of wealthy americans to persecution of the jews in nazi germany.
Here to explain himself next.
? welcome back to "bloomberg west," streaming on your phone and bloomberg.com.
I am emily chang.
Tom perkins is apologizing for comparing the war on the rich in america to the persecution of jews in nazi germany but the founder is defending his message saying wealthy americans are being demonized by the 99%. he originally wrote it in a letter but sat down with me yesterday to further explain himself.
I asked him if he regretted the comparison.
I talked to the head of the anti-defamation league this morning, following up on a letterhead sent over the weekend apologizing for the use of the word "kristallnacht." it was a terrible war to have chosen.
I have tried to understand the 20th century and the incomprehensible evil of the holocaust, it can't be explained, even to try to explain it is questionable.
It is wrong.
It is evil.
I'd used the word because during the occupy of san francisco, they broke the windows in the wall -- the wells fargo bank.
They marched up through our automobile strip on venice avenue and broke all of the windows.
I saw that.
I remembered the police stood by frozen.
I thought, well, this is how kristallnacht began.
So that word was in my mind.
I don't need to read from this letter but if you are interested, i can.
I deeply apologize.
This is the letter i wrote to the anti-defamation league, i apologize to you and any who have mistaken my reference to kristallnacht as a sign of latent anti-semitism.
This is not the case.
My late partner fled hitler from austria and fought in the u.s. army.
We became the deepest of friends during our long association and he taught me "never imagine the unimaginable can't become real." he was never comfortable with extreme political current and america and never took our freedom for granted.
I believe that he would have understood my letter and would have agreed with the warning.
And then i apologize for using kristallnacht, as i said before.
And i had a pleasant discussion with abe foxman before a came here and i hope that part is put to rest.
So more than 90 jews were killed in kristallnacht.
What were you going for?
The jews are only one percent of the german population.
Most germans have never met a jew.
And yet hitler was able to demonize the jews and kristallnacht was one of the earlier manifestations.
There had been others before it and of course we know about the evil of the holocaust.
I guess my point was that when you start to use hatred against a minority, it can get out of control.
That was my thought.
Now as a messenger, i have been thoroughly killed by everybody.
At least read the message.
You mention the word hatred.
Do you feel threatened?
I do not feel personally threatened but i think a very important part of america, namely that creative one percent are threatened.
I am friends with al gore, who tells me that inequality is the number one problem in america.
I'm friends with the jerry brown.
I voted for him.
I will vote for him, even though he raised my taxes 30%. he tells me the number one problem in america is inequality.
That is probably true.
I think president obama is going to make that point tomorrow night.
But the one percent are not causing the inequality.
They are the job creators.
Silicon valley, i think kleiner perkins itself, over the years, has created close to one million jobs and we are still doing it.
It is absurd to demonize the rich for being rich and for doing what the rich do, which is get richer by creating opportunity for others.
How do you feel threatened?
I do not feel personally threatened.
I feel as a class, i think we are beginning to engage in class warfare.
The rich as a class are threatened -- i think the rich is a class are threatened to hire regulation.
And so forth.
So that is my message.
If this is the kind of persecution that is happening to the one percent, what is happening to the 99%? i think the 99%, i did not come from the one percent.
I grew up as one of the 99%. so i am your classic self-made man, if you will.
I think the 99% is struggling and really struggling to get along in america.
I mean, we have ever-increasing regulation.
Higher costs caused by more government than we need.
Small business, it is difficult to form and prosper these days.
It is difficult to hire.
And that's, in my view, is what is causing the inequality.
So, i think the solution is less interference, lower taxes, let the rit to do what the rich do, which is get richer but along the way they bring everybody else with them, when the system is working.
You are a multimillionaire.
I am not a billionaire.
I said multimillionaire.
I have created billionaires but i am not one.
You have owned fancy yachts, cars, and underwater submersibles.
It is an airplane that flies underwater.
Do you worry that you are divorced from reality?
Are you divorced from reality?
I don't know if anybody can answer that.
I don't think so.
I given have given and will give millions of dollars to a long list of charities.
I have in mind some more shares -- to give.
I want to leave my children something they can have, even though the government will take about 45% upon my death.
So i think i'm connected to reality.
I have a lot of friends that are younger and this whole web- based, twitter-based world.
And i think i know what they are talking about.
What about silicon valley, is silicon valley divorced from reality?
You created billionaires.
You have kids making six-figure salaries, getting perks at technology companies.
Taking shuttles with wi-fi access down to the peninsula, which regular residents don't have access to.
Is there something to be said for this idea silicon valley really is living in its own bubble?
Yeah, i think there is something in that.
On the other hand, it is a bubble that has created, that has changed to the world and has created incredible wealth.
Around america and around the world.
Maybe you have to put up with a little bit of air against to get the results of those sort of -- bit of arrogance to get the results of those sort of folks.
How do you see this divide playing out?
Well, now that as a messenger i have been shot, read the message.
You just said you regret the way the message -- i you regret the use of that word.
It was a terrible misjudgment.
I don't regret the message at all.
What is the message?
Any time the majority starts to demonize a minority, no matter what it is, it is wrong.
And no good ever comes from it.
What is the solution?
First to understand the problem.
Be aware of it here that is why i wrote the letter.
I don't apologize for writing the letter.
I should not have used that awful word but the later says what i believe and i believe we have to be careful that we don't demonize anybody and we certainly don't demonize the most creative part of our society.
Tom perkins, founder of kleiner perkins.
Daniell steele inspired him to speak out.
We will find out why.
? this is "bloomberg west," streaming on your phone, your tablet.
I am emily chang.
In tom perkins's original letter, he mentioned novelist danielle steel saying she has been unfairly treated by the local newspaper.
She also happens to be his ex- wife.
I asked him if this was personal.
Yes, i think the inspiration for writing the letter came from the most recent attack by the san francisco chronicle on danielle steel.
It all started with complaints about the heights of the hedge around her house and then got into that she writes potboilers and as a snob and so forth.
We are no longer married but we are very close.
I felt sorry for her.
I felt she was being victimized.
She is the number one author in the world, over one billion books in print, finally outdid agatha christie.
She was awarded the french legion of honor.
None of that was reported in the chronicle.
So i thought since i am a knight, i would get on my horse and charge forth in her defense.
So we can see all of the blood i have spilled in that process.
I'm going to ask tom perkins about the backlash she has gotten from the very firm he founded.
But later today, the illegal immigrant who inspired mark zuckerberg to push for immigration reform.
Jose vargas will be joining me and also joining me will be the head of the organization, joe green.
Great-looking -- very much looking forward to this conversation.
It is now time for on the markets.
Mark crumpton has more.
Let's get you caught up on the markets this afternoon.
Stocks rising today, snapping a three-day decline.
We saw yesterday stocks in that range of part of the day, they looked well and then toward the afternoon, trying to recruit some of those losses.
Let's highlight a couple of the movers, american airlines, shares -- the company was combined with us airways last month.
They beat estimates thanks to hijack -- higher average fares.
Cheers of rent a center following.
The company reported earnings that fell short of analyst estimates.
Its net income fell 72% compared to 47 million in the year ago period.
It said competition hurt its business.
Again, this afternoon in new york, the markets are trending higher.
We will continue to follow wall street and we are on the markets again in 30 minutes.
? welcome back to "bloomberg west." i am emily chang.
In the next part of my interview, we talk about the reaction from the firm he founded, which has distanced itself saying it was shocked at his views and does not agree.
I asked him if he understands why.
Yes, first of all, my letter was not about kleiner perkins.
I did not mention kleiner perkins at all.
They did not need to say anything but they chose to throw me under the bus.
I did not like that.
They said they were shocked.
I sort of feel like the guys are saying, look, don't go swimming, there are sharks in the water.
If you are shocked by that, you don't understand the warning.
I was presenting the warning.
I don't think they got that.
And they made a point of my not having been involved for some years, and that is true.
I think as i did a -- have distanced myself from the firm, there has been a corresponding decline in the firm.
But i will not go further than that.
In a way, i miss them.
I hope they miss me.
And we will bury the hatchet over this one.
Your name is on the door.
So when you say something, it does reflect on them to a certain extent.
Or do you worry about it?
I did not have them in mind when i wrote this piece.
It was not about them.
It had nothing to do with them.
But they are right, their philosophy and strategy has diverged from my own.
And that's my name on the door does not mean very much, if anything.
Should your name be on the door?
Some people say should not.
I think that is an issue for them to decide.
I do not care whether it comes or goes.
Do you think if you had been involved, it would be different?
That was implied by what i said but i'm not going to enlarge upon that.
Let's talk about the solution.
You mentioned your friend, the late eugene kleiner.
He fled austria.
To you think he would have agreed with you?
I think he would have.
I was not talking about the nazis, i was talking about the persecution of a minority by the majority.
And kleiner always distrusted those sorts of trends in american politics.
Not income much in -- not in collection with anti-semitism, but in general.
So i think he would have understood my message and approved of it.
You have conservatives like marc andreessen calling you the leading "a-hole" in the state.
It was not a very nice word.
I don't think he is entitled to his opinion.
If he knew me, perhaps.
Paul krugman called me crazy in the new york times.
He also pointed out that rising income inequality can have negative economic financial consequences in the sense that if there is, if it leaves us economically vulnerable, the people who are rich can't pay for stuff, everyone suffers.
Just what you said is such a contradiction of interment ideas . he won the nobel prize in economics.
I can't argue economics with him but to demonize the job creators is crazy.
To demonize the rich, who have spent and buy things and stimulate the economy is crazy.
I heard on the news hour with -- gosh, his name escapes me.
They got into a discussion about the idiocy of rolex watches and why does any man need a rolex watch, and it is just a symbol of a terrible values.
Well, i think that is a little silly.
This is not a row locks.
I could buy a six packs of rolexes but so what?
The rest of my interview with tom perkins, founder of kleiner perkins coming up.
What is the solution?
How can we heal the divide?
? i am emily chang.
So what about that and watch tom perkins said could buy a six packs of rolexes?
I find out more about that watch and the man wearing it.
It was a gift.
What is the brand?
It was a gift because they built a big boat.
You are from the 99%. this is something you never expected he would one day be able to wear.
Tell me about where you came from.
I am a nerd.
I went to white plains high school, which was not big good high school -- which was not a particularly good high school.
It was athletically oriented and then i got a scholarship to m.i.t. where he became captain of the swimming team.
I went from being a geek in a school of jocks to a jock in a school of nerds.
You have made millions, you have created billionaires, created billion dollar companies.
What is the responsibility of those companies to the city is san francisco, to the people who live in the city?
We are talking about the leadership of the companies.
I don't like the idea of companies giving money to political campaigns, even though it is legal.
I do not like it.
What about the policies they create?
I'm not talking about ceos giving money away.
I am talking about the companies themselves.
Free perks, for example.
It is a competitive industry and i don't know what they have to offer to keep employees.
Obviously free lunch keeps people working during the lunch hour and so forth.
It is not all just love and honey buns.
But somebody says i don't want to offer too many free things because i want my employees to spend their money on market street.
I think that is a good sentiment.
I don't disagree.
But i think the leadership of these companies should be political and engaged in politics.
John doerr, my partner, has been very political with the obama administration.
He has been on his task forces and committees.
I think that is great.
Politics is very important.
We can't ignore it.
He can't ignore the direction it is going.
I think the 99% across america should pay attention to politics , follow where it is going, read the newspaper, don't try to get every in over twitter and facebook.
It is not there.
And worry about the future.
Because right now, i think america faces a troubled future.
I sometimes feel that we have gone past the point of no return.
I hope i am wrong.
Do you feel their frustration?
Of course i do.
I have members of my own family that live in trailer parks.
Not my immediate family but relatives.
Of course i do.
You are called the king of silicon valley.
How would you describe yourself?
I certainly have enough arrogance to be royal.
But i am an old man.
I look back on my career with happiness.
I think i have accomplished a lot.
If i had to do it again, i do not know what i would change.
And i am at peace with myself and the fact everybody now hates me is part of the game and i am sorry about that, that is not what i meant to do.
My interview with tom perkins, cofounder of kleiner perkins.
Cory johnson joins me now.
I can't wait to hear your thoughts on this.
When he walked in here, and to his credit, he did say you can't test this, he said ask me anything.
He was open to criticism.
He was willing to debate.
And i think we can all agree it was a bad choice of words but the message him in this message about income inequality, is being debated.
I posted about this and there are dozens of comments, raging comments about the difference between the one percent and the 99%. there is class warfare, quoting warren buffett, and it is my class that is winning.
I think this really touches a lot of core american values about pulling yourself up by your bootstraps, the american dream and what that means about responsibility, corporate responsibility.
I think income inequality today, we know it is at an extreme level.
It has been moving in that direction, the rich do what the rich do, get richer.
Something different is happening.
The poor are getting poorer.
That is a very big change and that has some big consequences and i think in particular in california, california, only two states have a greater gap between those in the highest 20%. i think it is acute in the bay area where a lot of wealth seems possible with things like stock options and the idea that these technology companies can come out of nowhere.
I think it resonates there.
I wonder how this will play out in san francisco because he said let the rich get richer but here the jobs have gone to the most educated people, leaving the least educated shout out.
They are burning buses, something needs to change.
The notion of trickle-down economics has been debated but i think the results are clear, the way the society is functioning, it is not working right now.
We are seeing this tremendous cap.
One statistic of people in the lowest, the poorest people, the richest people have added three dollars.
There is a widening gap and he creates not just economic problems but also risks.
The conversation is not over and of course the president will be addressing income inequality in the state of the union tonight.
We will be right back.
? welcome back.
I am emily chang.
Be sure to tune in our special coverage of president obama's state of the union address tonight, 9 p.m. eastern time and one guest who has been invited to sit in the first lady's box is intel's newest intern.
He first shot to fame when he attended the white house science fair and showed president obama how to use his invention, the extreme rush mello cannon.
Take a look.
-- marshmellow cannon.
Take a look.
Here we go.
I will angle this so it does not have that.
[laughter] i think that is good.
Let's go look at the marsh mellow.
Joining me now from washington, d.c., what was that like in the east room?
It was amazing.
It was terrifying at the same time.
I was hoping the machine was going to work rapidly.
You are 16 years old.
Right now, yes.
How did you get invited to the white house?
How did this come about?
I was going to these fares and another company teamed up and they told me about the white house science fair and they chose me to represent them.
So the extreme marshmellow canon, how did you come up with that?
I was in school one day and i was bored and i had an empty pencil and a gatorade bottle and i put them together and the inside of the pencil flew across the room.
I wanted a way for it to be done by itself so that is how it came about.
And you are one of 25 people sitting in the first lady's box tonight.
How are you feeling?
What are you looking forward to?
Just meeting all of the other people and seeing what they have and having a good time.
The president is going to be talking about a lot of things tonight, income inequality, immigration, is there any in you are hoping to hear from the president?
I'm hoping to see him get more making into schools and more of that type of stuff.
Speaking about the maker movement, you are the youngest intern hired by intel.
What are you doing at intel and how did that come about?
It came about, i was doing a speech and i went around after my speech to the intel booth and the ceo of intel came around and offered me a job and within the month, a job application was sent to me.
Right now i'm working in product development.
What are you hoping to make?
What is next?
Right now i am focusing on school right now.
All right, joey hudy, we will be looking out for you in the first lady's box this evening.
Joey hudy, intel's youngest intern.
We will be back with more of "bloomberg west" after this.
? welcome back to "bloomberg west." i am emily chang.
Coming up, we look at the impact of immigration on technology with filmmaker and activist jose antonio vargas.
That is ahead of president obama's state of the union address.
We have some breaking news.
Trish regan has just spoken with carl icahn.
I know that apple has been trading down today.
Did he use that as an opportunity?
He sure did.
He bought another $500 million worth of stock, bringing his stake up to more than $4 billion and buy some of my calculations, one of the largest shareholders in apple right now.
There has been a lot of criticism about his plan.
He has been outspoken.
He had with dinner -- dinner with tim cook and has pushed for this buyback.
He would like to see $50 billion a year in a buyback plan.
It is something that has come under criticism with a lot of people saying that is too much.
There are better things to be doing with the money right now, including buying new companies, investing in people and in tech knowledge he.
I asked him about it -- in technology.
I asked him about it.
He said that criticism is ridiculous.
With the amount of money flowing in and with the cash towards, $50 billion should have no affect on the money available for new products.
Keep in mind, new products are incredibly important to this company.
Everybody has talked about the potential for an apple watch, apple tv.
Carl would like to see what they can deliver.
Deep in mind, and the last time they talked about delivering new products, they came through with the ipad.
The hope is that in fact there will be something innovative in the company's future.
Aside from that, what carl icahn is looking at is the finances of the company into him, you have heard him say it, and on twitter, this one is a no- brainer, a buyback makes sense.
And indeed there have been no new product category since the ipad in 2010. there is talk of a bigger screen iphone bet is that going to be enough to keep apple's momentum going?
I'm curious, what is his fascination with technology companies?
Obviously we know what is going on with apple, he took a stake in ebay, calling for them to's been paypal.
But why technology -- calling for them to spin off paypal.
But why technology?
They are in the news and some of the others but he has been invested in so many sectors.
Technology is interesting as of late but he is just looking for a way to maximize his opportunity and maximize shareholder opportunity.
In the case of ebay, you're talking that a company with a billion dollars in revenue, of which ticks billion dollars is coming from paypal.
You are right.
-- $6 billion is coming from paypal.
You are right.
You are hearing it from somebody that is noisier than the rest so it gets more play.
But carl's always looking for the best opportunity, whether in technology or in industrial companies, he's going