Apple Hires Burberry CEO: Bloomberg West (10/15)

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Oct. 15 (Bloomberg) -- Full episode of "Bloomberg West." Guests: RBC Capital Markets Managing Director Mark Mahaney and Bloomberg's Stephanie Ruhle, Sam Grobart and Brad Stone. (Source: Bloomberg)

Live in san francisco, welcome to the early addition of -- early edition of bloomberg west.

I am emily chang.

Our focus is on innovation, technology, and the future of business.

Two big announcements out of apple today, invitations are sent out for an event next week or new ipads are expected -- next week where new ipads are expected.

How did become the everything story e we dive into -- everything story e we dive into a new book -- everything store?

We dive into a new book.

And what does jack dorsey have to say about who came up with a new idea -- with the idea for twitter.

Hear what he has to say about it.

First of want to get the latest in washington, the effort to crack the compromise plan to end the government shutdown and the threat of a u.s. government default is in jeopardy.

Peter cook is on the hill with the very latest.

Peter, are the prospects of a deal commission now?

The prospects for a deal before the october 17 deadline art and edition.

-- october 17 deadline are diminishing.

We have heard strong words from both republicans and democrats about what is playing out here.

The big news was house -- was house republicans be behind closed doors.

John boehner pitch to his members a new proposal that would, as the senate bill is currently being worked on, would kick the debt ceiling to february 7 of next year.

It would fund the government through january 15. house republicans would add some additional provisions that are unacceptable to democrats, including a two-year delay in the medical device tax we have heard so much talked about in as well as a ban on members of congress and administration from getting a taxpayer subsidy for their own health insurance.

Those changes, according to harry reid, unacceptable.

He accused republicans of trying to torpedo the compromise.

House republican leadership -- people can take a look at it.

It is a plan to advance a piece of legislation and do nothing more than a blatant attack on bipartisanship.

That from harry reid after some very positive language in recent days about negotiations with republicans.

The other curveball came from the speaker himself -- he did not commit to putting this new pozo on the floor.

He may not have enough votes among the republicans for his proposal because it is not strong enough to read we we like them to make even more changes.

To some extent it is on hold until the republicans make up their mind.

If we are back on square one, what is the next move?

The next move this afternoon will be houston a crack going over to the white house to meet with president obama to get a sense of where they stand on all this.

It is really in john boehner's court.

Does he decide to bring this to the floor knowing full well it will be rejected in the senate and then the two sides can once again get down to negotiations over a final piece of legislation.

Either way, there are real chances that this entire fight will move past that october 17 deadline set by the treasury.

Thank you.

We will be back at 2:00 on money moves with an exclusive interview with house minority leader nancy pelosi.

The invites are out.

A special event on october 22 where new ipads are expected.

That is according to a person familiar with the plans.

Apple will release a full sized ipad as well as a new version of -- a new version of the ipad mini.

The ceo of fashion labels will be apple's next senior vice president of retail and online stores.

It was a whole a -- hole left by -- johnson released a statement to bloomberg, saint angela and -- saying angela is a perfect choice -- she partnered with the iphone maker at this year's fashion week, using the five s model.

Here is the collaboration back in september.

Click the collaboration was really fun.

All from the iphone 5 among that is pretty revolutionary.

For more on what she can do and bring to apple, i am joined by sam.

Obviously apple has made a mistake when it comes to hiring for this position.

Why higher her and what did she bring to this job?

It has had a touch of the ejector seat to it.

Ron johnson had left and the successor left in only six months could i think what she brings to apple is a continued focus on the high-end.

They want to take the high road.

They want to remain a luxury product and certainly hiring someone like her continues that trend.

Does hiring from a high-end retailers suggest that apple wants to continue to consider itself as a luxury brand?

I think it absolutely confirms that.

Tim cook spent a great deal of time talking about how the tech market moves toward cheaper devices.

It usually is a space for a higher-priced, higher end product.

Apple would like to be there.

Steve jobs famously said we have the bigger market share than bmw or mercedes has in cars, what is so wrong with being bmw or mercedes?

It seems this would bolster that position.

This is a time when being a woman high up in the technology industry has become quite a flag point.

Twitter has been criticized for not having a woman on its board.

Apple has one woman on its board.

Up until now it did not have any women in the most senior executive ranks.

What is the significance of that?

Cooks it is true.

If you look at their pr page and click on apple leadership you will see nine lovely gentlemen, i am sure, but they are all men, add a link -- all men.

Adding her to the ranking increases participation, considering it had been zero for many years.

Silicon valley talks about being a meritocracy in some ways.

It still has a lot of work to do good when it comes to representations from different genders, different races, different sexual orientations.

The us is one more step in that process.

You have pointed out the have more color so -- more colorful sides.

She is extremely stall that externally tall and very -- externally tall and very religious.

You think being a ceo would mean that she came from privileged backgrounds.

She grew up in indiana, attending -- she is a very active christian.

She is 6'3". she was a tennis player in college.

She continues to have a very folksy demeanor.

We are anxious to see what she does with apple.

We will see if she is at the event on october 22. thank you so much for joining us.

For more on apple's massive retail footprint i want to bring in jon erlichman.

Give us some context for the importance of apple stores and the big job that angela has ahead of her.

The numbers really matter.

They give us context on how big a job this really is.

If you start with the number of apple stores that there are around the world now, as of last quarter it was more than 400. a few years ago it was over 250. from 2000 and nine through 2013, we are looking at the stores they have had at the end of their third quarter.

That is double digit or centage growth in the number of stores every year.

That means more revenue being generated from all of those stores.

As of the last quarter, which was the fiscal third quarter, here is a company that was generating more than $4 billion from all of those stores, up from a comparable amount of around $2.5 billion in 2010. you think about the foot traffic at all of these occasions -- all of these locations.

These are great pr engines for apple.

The company has said that at the end of the last quarter there have been 80 4 million visitors during the third quarter to apple locations, up from around 16.5 million in the same time in 2010. that translates to 16,000 people visiting per week.

This is a huge business and it starts to help you understand why a current ceo will take an executive position at apple.

Obviously china is a huge part of apple's growth.

A lot of people say apple is not stronger in china because it does not have a lot of stores.

She is going to have to open more stores in china, isn't she?

Yes, it is going to be a very busy couple of years.

Apple has already told us they plan to double the store footprint in china over the next two years.

You think about the importance of the messaging with each of those new stores that opens, whether it is on things like warrantees, which became in a -- which became a big issue in china, and often times apple explains how the pricing of its different products works in the store locations.

They just unveiled two new iphones, one very specifically focused at the lower end for the chinese market.

China is a market where she has some experience.

Jon erlichman, our senior west coast correspondent, thank you.

Coming up, who really came up with the idea for twitter?

We will hear from jack dorsey and his very own words, next.

Who really came up with the idea for twitter?

That question is getting a lot of attention as the company plans for an ipo.

The new york times reported an upcoming book claims that jack dorsey came up with the idea after a night of drinking.

Jack dorsey told bloomberg back in 2011 a different story.

Here's what he had to say.

Twitter spans from an idea that i had a long time ago.

It has allowed that idea to resurface and take on its time.

The simplicity really stems from that technology.

We built a system into being able take a message from iphone -- from a phone.

It can go out instantly to all your friends in real time.

Dallas jack dorsey giving his take on how the idea of twitter came to be.

-- that was jack dorsey giving his idea -- his take on how the id of twitter came to be.

Some people are iffy about using twitter, including top marketing executives charged with spending billions of the ad dollars.

What is new here?

We know that twitter is a very different platform than facebook.

Instead of sharing things with your friends you are sharing them with the world.

A lot of tweets and the being heavily scrutinized.

We want to know what that would mean for the overall advertising business.

On madison avenue, ad executives are buzzing about the company behind the little blue bird.

Twitter advertises products and increasingly gets a seat at the table alongside tv spots and newspaper ads.

All of the advertisers want to have something on twitter just because it is the latest and greatest thing out there.

That is helping their sales surge in the first half of the year.

Its ad business generated more than 220 $1 million, a 119 it percent increase from last year -- $221 million, a 119% increase.

Many of their chief marketing arcus -- and many of the chief marketing officers do not have their own twitter accounts.

Procter & gamble spent more than eight billion dollars on u.s. add some -- more than $4.8 billion on twitter as last year.

Coca-cola also told us its cmo is not on twitter efficiently will, while america next rest and jpmorgan -- american express and jpmorgan claim their cmo's do not tweet.

And may not be for them.

It does not necessarily say that the medium is not of value.

It does highlight that this is probably a niche media more than anything else.

Some heavily right related industries are still getting comfortable with twitter.

Pharmaceuticals spend a lot of money in advertising.

They don't really fit into 100 40 characters because they have these massive proclaimers.

-- massive disclaimers.

Twitter has been rolling out more at products, like twitter cars that can attach video, allowing advertisers to go beyond 140 characters to get their message across.

Is a message of exploring how the medium is best used.

We did reach out twitter but do not hear back.

Jon erlichman, thank you.

How did jeff bezos seal his empire?

We will take a look at the early days of amazon and demand behind the company.

-- and the man behind the company.

Welcome back, i am emily chang.

We have breaking news about blackberry.

The private equity firm is said to be considering a bid for all of lack.

. -- the private equity firm cerberus is said to be considering a bid for all of the company.

The person told the person views blackberry as a viable turnaround.

But various taking out full-page ads in newspapers worldwide today in the form -- blackberry is taking out various full-page ads in newspapers worldwide today.

In other news, yahoo!

Will report third-quarter earnings after the close today, giving investors another look at how well ceo marissa mayer is faring.

Or more on what to expect from yahoo!, i want to turn to the managing director at capital markets.

Marissa mayer gets a lot of attention.

She gets rockstar welcomes when she goes anywhere.

Is it fair?

Not yet.

She is doing the right things.

We have seen the fruits -- have we seen the fruits of our labors?

No we have not.

We have no real growth in this business.

The core of this business is display advertising.

We are projecting almost a 10% decline in display advertising for the business.

We have not seen the turnaround.

That is not a damming indictment.

This is going to be a three-year turnaround.

As long as the financial markets know that that is ok.

It is up 115% over the last year.

Is that because of her?

Clock's it is probably because -- it turns out one of the best investors in the internet space may have been jerry yang.


Still owns 24% stake in ali baba.

How could impact things?

There could be an opportunity to still stake in the ipo.

Alibaba has risen in the press over the last year.

Yahoo!'s stake in that rises.

Is yahoo!

A good business without alibaba?

Can they live without them?

It is uncertain.

They have a large installed base.

We have seen other turnarounds in the internet space.

There was a lot of work that went into that.

They have the base to it -- based to do it but there's nothing in the result yet.

What would you like to see with the products?

If i had the answer i would be there working.

You want to see products that get you and me and every user out there to spend more time with yahoo!. we have seen things like the yahoo!

Weather app read it is a very nice app.

She needs to constantly refresh those products.

You cite tom wheeler integration as a risk.


It is a large acquisition, the largest one they have done in at least three or four years.

Mercer mayer has paid to take appropriate risks and she is never done a billion dollar acquisition, that would have been a negative.

Whether or not humble or works it is too early.

Look for a couple of key metrics.

To the company's credited provide many metrics.

The most disturbing over the last two prints have been displayed advertising were ad sold declined year-over-year.

That is what we are looking for.

It would be the first's of this fundamental fixed point we have seen in a while.

We have seen very healthy year- over-year: -- year-over-year growth.

We need to see that reversed.

We will be watching.

Thank you so much for giving us all the things we need to know for earnings later today.

It is time now for on the markets, a look at what is work -- oh look at what is moving.

How are the markets reacting to washington?

There has been bad news and good news.

What we are seeing is a pretty choppy session of trade down here on wall street.

We have seen stocks swinging between gains and losses.

The latest comments i senator henan -- senator harry reid suggests proposals are tried to torpedo their yield.

What we are seeing is the s&p down by four points.

We are seeing the dow down by 52 points.

The nasdaq off by six points.

The white house is saying they are hopeful we will get a deal.

Two stocks i want to highlight, it seems investors are tightening their belts.

Potbelly saw values more than double on its first day of trading.

We are also watching the world's largest social network letting people targets them.

We will be back with more bloomberg west after the break.

You can catch us at our later time.

For your top headlines, dozens of flights have been canceled in japan as the country braces for a major typhoon.

It could be the worst to strike tokyo in a decade twins currently topping 120 miles per hour.

The stock exchange expected to operate as normal tomorrow.

Many schools and businesses and train systems are closing.

The u.s. supreme court says it will hear a challenge to settle the in missions rule.

Rules in question were enacted by the obama administration to fight climate change.

The key question is whether the epa was justified in setting up new permit requirements for power plant, factory, and other stationary sources.

Bob filner is now facing charges relating to the sexual harassment scandal that forced out of office.

He was charged with one account of assault, felony, and imprisonment, and two accounts of misdemeanor battery, involving three women.

He resigned in august lest the nine months into the job.

We are just two days away from the debt ceiling deadline.

It is the day when the united states loses its borrowing authority create the treasury will then begin to prioritize payments to be made with the cash it has on hand.

Phil mattingly joins us now from washington.

It sounds like it is scary.

What are they looking at behind closed doors at the treasury?

The treasury department has been cagey about what they can or will do when we passed the deadline.

A toy 12th treasury inspector general report on the 2011 contingency plan for a similar situation invites a window into what they are looking at inside hamilton.

A large-scale selloff of assets and property, this would include gold, mortgage backed securities, tarp investments, perhaps even a student loan portfolio.

The conclusion, completely we on workable.

Tarp investments would be adverse to the interests of taxpayers and potentially jeopardize economic recovery.

He also looked at across-the- board reductions in spending.

It was something that will keep them under that debt ceiling limit.

Besides the economic and political implications, treasury systems were not even capable of implementing such cuts.

What about prioritization?

Number of market participants say treasury has to take in order to pay bondholders.

If they look at that?

They did.

He looked at the 80 million payment or months they have to make.

Those are all authorized and appropriated by congress.

Their conclusion, legal questions were problematic.

Congress did not prioritize which of those payments first.

It also goes back to their system.

They are designed to make each payment in the order it comes through.

The whole infrastructure is very complex.

There is no process to pay certain obligations first.

Quest -- was there any treasury they could pursue?

They appeared to settle on what appears to be the least harmful option.

That is according to that report from the officials that spoke to the ig.

This option would delay the payment in full before made by a day by day basis.

Wait until you have enough money to make each chip payment to cover all the obligations at once.

Officials made very clear that they thought this was -- once again it is extremely complex.

Officials made clear that the final decision would have to be made by president obama.

According to the report it never got to that point in 2011. we are not sure if we are there quite yet.

Two days away.

Thank you for that and we turned to amazon.

Jeff bezos has skyrocketed to the largest -- amazon has skyrocketed to the largest commerce company.

What has made him the right person to build amazon?

That is the subject of of the new book called the everything store.

Gladstone is the author of this book.

You left no stone unturned when you left this -- when you wrote this book.

You talk about his elementary school, you track down his biological father, who didn't even know that jeff bezos was jeff bezos.

We will get to that in a moment.

One of the things that struck me is when you brought the idea of this book to jeff bezos he said it was too early to write anything about amazon.

How did you convince him otherwise?

I am not sure i did.

That is his reflective response would any journalist has asked him about doing anything regarding the company.

It is really revealing.

It shows what the ambitions are even though he believes he is only a small part of the way of fulfilling amazon's potential.

I begged for forgiveness.

Ultimately i believe i did get further with amazon than anyone else has in the past and i talk to senior executives, i talked to his family members and friends.

What we have here is one of the incredible stories of these -- of this age.

What is the one thing you learned about that surprised you most?

He is such a jovial presence in interviews and public speeches.

I did not have a great appreciation for how relentless he is inside the company.

It is very much like apple cofounder steve jobs.

He does not tolerate any less than his employees best work.

He is brutal to work for it is probably one of the reasons why there's so successful today.

They have one of the higher turnover rates in technology.

Employers do not get the kind of perks they get at facebook and google.

Is it because he is ruthless?

No, it is because he is a retailer.

Really to walmart, to nordstrom's, to cosco.

All of those companies have different cultures.

When your margins are that low and you're basically in the business of selling items for a little bit more than what you buy them for, you have to run an approval company.

He pulled that from sam walton's autobiography.

Amazon is frugal to the bone because they are trying to pass all of their savings off in the prices to customers.

He has been quite proper get -- quite problem gets -- he invested heavily in amazon web services, all of these devices that are profitable, like the kindle fire tablet.

He is just very frugal because you build a low prices on top of a low cost structure.

That is what they do at walmart and with a try to do it amazon.

He added new business like the kindle.

What did you learn about what he decided -- about what he decided to do with the kindle?

Probably mid-last decade they were watching as apple kind of scooped up the entire music market.

Amazon was very identified with books.

They had to protect that franchise.

They basically went ahead and did an ipod for books.

This has become a huge part of their business.

Almost every technology uses amazon web services in some way, shape, or form.

You have the innovators dilemma, which really informed the kindle.

Same time frame, mid part of last decade.

The company is not making much company.

That making much money.

They found that their own developers were not actually that successful in testing their products inside amazon.

He is starting to think about how you can build a service that allows developers and employees to come and test things.

At the same time he was writing a book called creation by a videogame designer him a which kind of identified this philosophy of creating primitives.

Basically building blocks that you can build services on top of.

Stick around, he can continue this conversation after this quick break.

We will talk about jeff bezos's childhood and how it shaped the career path led him to amazon.

Brad stone is back with us from new york to discuss his new book about amazon founder jeff bezos read it goes on stale -- jeff bezos.

It goes on sale today.

One of the most fascinating things that you discovered is you found his biological father and his men had no idea that his son was jeff bezos.

What was his reaction when he told him that?

Let me take a quick step back and say that when anybody changes the world like jeff bezos has, you want to ask where to -- what drives them?

I discovered that he did not know his biological father, the man who met his life when he was three years old.

I went to look for him.

I found him running a bike shop.

He had been a unicycle performer and he was surprised.

He thought about it his whole life, did not hit that did not know his son what's a billionaire.

It was probably the surprise of his life.

In talking to him, did you see similarities?

Not really.

The biggest one was that he had bezos's famous to laugh -- famous laugh.

A startling similarity and idiosyncrasy that he is known for.

Bezos has been secretive about his own personal life.

Did you tell him he found his person and how did he react?

I did ultimately try to warn the family.

His biological father was a very sweet and nice man, wanted to get in touch.

There was some communication but i don't really know much about it.

With a figure like jeff bezos, as it's -- as successful as amazon is, you wonder if that were killed your circumstances of his childhood have yielded the relentless character he has become.

You mentioned steve jobs.

Larry ellison is also adopted.

Do you see anything in this relentless pursuit of success?

Here we get into matters of maybe child psychology or sociology.

I do not want to venture near it.

It is an ingredient.

You have the fierce intellect, he is demanding, he wants amazon to succeed, he wants to create a lasting company.

Perhaps, probably we will never know.

It is interesting in some ways that amazon's business has not changed in years.

Back then it was slim margins, running the business for the long term, nobody understood how big amazon could be.

He said i am running the business for the long term.

The difference is now people so implicitly trust it because he has hit the marks over the course of the years.

Amazon loses the quarter, loses money annually, and the shareholders do not blink.

He is one of the ceos that has earned so much trust and is an incredible founder.

He has a lot of runaway to bring in -- it is a fantastic book.

Brad stone, bloomberg business senior writer and author of "the everything store." it is on sale today.

We will be right back with more bloomberg west.

Martha stewart has been -- stephanie ruhle sat down with degree -- with the queen and dished about technology, her gripe with bloggers, and her love of twitter.

Stephanie joins us from new york.

Didn't martha recently tweet about dropping her ipad and the tweet went viral?

Steve jobs gave her her first.

When you think about the high priestess of the home, that is martha stewart.

She talks about the ipad but she gushes about twitter.

She really engages with her followers and talks a lot about interest.

Let me tell you, when it comes to what russells this woman's vertically basted turkey, what ruffles her feathers, it is bloggers.

She does not believe their pacemakers, both -- it has been a good place for me to take instant surveys of my followers.

I instantaneously, within a matter of seconds gets -- start getting responses.

I also try to play around with twitter as i did last week with my ipad.

Twitter is a place where you can research, impart instant information, impart instant news, -- has the lifestyle business gun to saturated?

Is it too much?

I think it is every single part of our lives as we to oversaturated.

We are the most pain the lifestyle company.

We have more pictures pinned than any other magazine.

That is extremely flattering and extremely valuable for advertisers.

They like the idea that we are reading -- we are being pinned by so many millions of people.

Is there an argument be made that social media is a little bit in poor taste?

I have a minor gripe about that.

Who are these bloggers?

Bloggers are writing recipes that are not tested or a very good, or are copies of some things that really good editors have created and done.

Bloggers create a kind of popularity but they are not the experts.

She is a little po to bow to.

Martha stewart is putting in a design, the money and effort to take his photos.

Every tom dicken harry is pinning them.

If she is putting the money and, she wants the credit.

Thank you.

We will be right back.

Coming up at 3 p.m. pacific, 6 p.m. eastern, yahoo!

Will reap or two third-quarter earnings.

The stock has been on the rise.

Is the company seeing sales growth?

It is time now for on the markets.

56 past the hour, we will get to bolivia star in new york.

Let's get you caught up on where the market is trading right now.

Stocks are falling.

It does seem unlikely there will be a vote today to end the government shutdown.

Right now the dow is off by 57 points.

The s&p is lower by 4.5 points.

The nasdaq is just over five points.

Take a look at what is happening on the bond markets.

. the shutdown and it's -- shutdown enters its third week.

We had an option this morning that saw six month bills selling at a lower than average demand.

Not surprising what is going on in d.c.. the dollar is gaining against the euro.

Basically it is trading at pre- shutdown levels.

Some mixed messages across the different asset classes.

One market where we should know the truth about how investors feel about the possibility of a government default, it is the cds market.

I want to bring in merry child.

You have been following the cds market.

What does it tell you traders are expecting?

They are the contracts that cover u.s. treasuries.

That tells you that people are not looking for a default anytime soon.

I am hoping they get their act together.

What kind of default probability of a pricing in the?

Right now it is looking like 3.4. it is not great.

Before we reach 3.7% -- nobody is ringing any alarm bells.

Is that surprising?

No alarm bells being run and two days away from when the government loses authority to borrow money to pay bills?

I think people look at these contracts, they are very liquid.

It is hard to source them.

I think the difficulty is one point and there is no real guarantee that if they miss a payment or whatever deal they construct may not turn out well for the contracts.

There was a chart that caught my eye this morning that i want to pull up.

These explain to me what on earth the cds markets have to do with the kardashian's. it was a joke i was making.

In many cases you have people who really love talking about u.s. cds and cardassians.

There is a lot of noise, able want to know what is going on, but then there is not that much content or trading.

It is pretty liquid paid at the end of the day people get annoyed that people are still talking about the kardashian's or u.s. cds.

Perhaps the take away is that they are losing... but of relevancy.

Tell me more about what impact the shutdown is having on corporate bonds.

We have had a lighter.

Of -- over this shutdown it has been a shutdown in the issue market.

People have gotten used to that state of being.


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