BlackBerry CEO John Chen: Bloomberg West (03/28)

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March 28 (Bloomberg) -- Full episode of "Bloomberg West." Guests: BlackBerry CEO John Chen, Stanford's Jonathan Koomey, Andreessen Horowitz's Scott Kupor, Fitbit designer Gadi Amit and Strava CEO Mark Gainey. Bloomberg LP, the parent of Bloomberg News, is an investor in Andreessen Horowitz. (Source: Bloomberg)

Live from pier 3 in san francisco, welcome to "bloomberg west." we cover innovation and the future of business.

I am emily chang.

His blackberry heading in the right direction?

I will speak with john chen as they report their lowest revenue since 2007. we go inside one of yahoos nerve centers to find out how they are making apps more personal.

First a check of your top headlines, tesla has resolved its dispute with dealers in new york over its model.

Tesla can keep its five new york stores open and can open additional stores under a strengthened either franchise law.

Other states like texas and new jersey have banned tesla direct sales.

Microsoft is once again changing its policy for accessing user e-mail.

The company will not investigate the private content and will turn the matter over to law enforcement if it expect -- suspects wrongdoing.

It said it would consult with an attorney beforehand.

This stems from a case where microsoft admitted to scanning any mail to see if he was receiving trade secrets.

Charter communications is not going to let comcast get time warner without a fight.

It is urging shareholders to reject the takeover offer saying it is vulnerable to regulatory issues.

It's 37 billion dollar offer to buy time warner was rejected this year in favor of comcast's $45 billion offer.

Blackberry's earnings showing some small signs of progress, sales were down 64% in the fourth quarter.

The first time it slipped below one billion cents 2007, but profits dropped 532%. much better than a $4 billion net loss.

Yes, but it is worse than a year ago.

Chris johnson here, by the way.

Yes, one a look at these results, a lot of them are about stemming the losses.

So things looked better, but the company lost a lot of money, and cash, half $1 billion in cash.

So they are running the risk of getting shorter.

John chen has to make changes.

And yet he says they will be profitable by 2016. they had some things go their way.

They got a big refund from the canadian government.

He is selling off canadian real estate.

We do not know how much money they're going to get for that.

He has done this before.

That carries a lot of weight for people who have when watching the company.

The last time they were not getting better, but he gets a lot of credibility with that statement because he has done it before.

He is a convincing camera -- convincing, charismatic guy.

I asked him if he was crazy to take the job in the first place.

Shares are up, but i asked him how confident he is today versus when he took the job that he can actually train the company around.

Take a listen to my interview with john chen earlier today.

I feel better every day.

The results show that.

All of the indicators are doing well.

The cash burns are doing better.

Inventories are doing much better in terms of the reduction of that.

We are losing less money, the cash as editions are good.

Products are being development, i feel very good about our chances going forward.

How about morale?

How is it doing?

It is probably one of the better stories.

I think in the last four months, , we had to go through a lot of ups and downs.

We had to do some very difficult things that affected employees.

And so forth.

We are at the tail end of that journey and are looking forward for growth.

For profitability and looking forward to our engagement, not only the outside but inside the company.

I did a town hall meeting.

Things are starting to gel but we still have work to do.

People are feeling better.

You laid out some key areas for growth, what about hardware?

We know market share has dropped below one percent, how can you change that number?

I don't know where you got that number, the numbers keep bouncing around.

We still have quite a healthy business.

From our release, we sold over 3 million handsets in the last quarter.

Multiply that on an annualized rate is about $12 million.

I would not -- i mean it's not a , humongous number but it is not small.

We have a number of relationships out there like with foxconn that will push some of the phones, the lower end phones into the emerging market and we are designing some really high-end phones here in waterloo and ottawa in many different places around the world.

Those will do well i expect them , to do well especially in the enterprise space.

We will come back.

I was looking at q4 numbers from idc in terms of market share numbers.

What about the white house?

We understand they are testing android but the president has been a longtime black every -- blackberry user.

How much are you lobbing them to stick with blackberry?

I don't lobby the white house.

We just make sure they know our roadmap and understand where we are going in terms of boosting our security, productivity, profiles and the technology behind it.

I cannot comment on the white house testing any other devices because this is obviously their choice.

I'm sure the white house will want to know everything there is to know out there, different types of variations and i respect that but i still believe that blackberry is the choice.

A couple of days ago it was announced that we one sort of vacation to run on the dod network.

We are the first one to have that.

I am comfortable in our positioning in the government.

What about becoming a google android for mobile business users but only software and services and hitting rid of the hardware completely?

Wouldn't that be more profitable?

We are an end to end solution.

We have to see how the market develops.

Right now, it's important to look at all the resolutions.

We are not only on the handset side and the server side, we are also in the messaging side and we also have our own nocs which makes us the most reliable out there and we have the embedded technology that we literally have the market -- the lion share of the market area there is a lot of good technology.

When you string it together it , is an end to end solution.

That does not mean we can apply the same technology to other people's devices but that remains to be seen.

As of today, we have uniqueness in our handset that our customer likes.

You have introduced a more secure version of bbm and lots of stuff is going on in the messaging space.

Facebook buying whatsapp.

What do you see as the future of bbm?

Will compete in banking and chat rooms?

Why wasn't bmm whatsapp?

We are very focused -- bbm, there is a lot of security built around it.

I believe the government and the regulating industry love using it so we are creating more features, more communication and collaboration features.

We see a good future of bbm in enterprise.

That will go hand-in-hand with our server strategy.

That will make us a very big differentiation among all the social messaging systems out there.

How about cars?

You have a strong foothold in cars and apple and google and microsoft are there as well.

How do you see that playing out?

I know you have an interesting vision for the future of the internet of things.

The long-term strategy is to be the internet of all things and everything connected.

Yes, we are doing phones today and it's about the device talking to different devices.

You asked about cars and that is the other end of the spectrum which is the connected car.

We own the lion share of the market in terms of infotainment, car management systems on the dashboard and all that.

We have a technology called qnx which is a secure technology where over half of the industry uses it.

It is compatible with the other devices like the apple play, car play, what google is working on as well as microsoft.

There is a consortium out there.

Which we are one of the leading providers.

I am very comfortable about our position on the connected car position.

That should give you a hint that we would like to branch out to adjacents like connected homes and that will become all things internet.

John chen, ceo of blackberry.

Coming up, facebook is pushing boundaries, now trying to connect the world with drones and lasers that can they find a scientist that needs to make these dreams a reality?

That is next.

? welcome back.

Facebook is at it again, on a huge buying spree.

First it was whatsapp and then oculus.

Now a british aerospace company that makes drones.

Why wouldn't a social media company -- they think drones and lasers and satellites will help them connect the world.

Perhaps.

I wonder how much of this is mark zuckerberg looking at his stock price and thinking it is too high and thinking about the bubble word and he wants to acquire things now with shares.

Maybe this was rumored to be a relatively low-cost acquisition.

That would be the cynical perspective.

The optimist perspective would be it's a big part of his internet.org plan to get the internet to every single person on earth and this is a huge focus for him.

Google is trying to do with raw -- with broadband balloons, and facebook is taking a different approach.

They are trying to beam broadband to remote corners of the planet.

It is a google-like approach that anything that grows the internet will be good.

It is a very intel-like approach that anything that expands computing will be good.

It sounds like facebook feel secure about its market share goals and will continue to dominate social media.

Getting more people on the internet.

The interesting thing is the talent they are looking for . rocket scientist, basically.

They want to get them to work at facebook, not your typical facebook developer.

It is rocket science.

It is a hiring competition with a different class of people.

They are no longer going against google and apple but looking at lockheed in nasa and trying to get people or will need to get people to compete on those levels.

They have announced their facebook conductivity lab where this will be happening.

We will keep our eye on this and see if it is just a billionaire's dream or something more.

From potential facebook employees to the people behind yahoo!, it is all about personalization.

Marissa mayer said that is her big thing.

We got to go inside yahoo!

Labs to find out how it works.

I am ron brockman, the chief scientist for yahoo!. our focus in the lab is what key scientist used to support a wide variety of products in yahoo!

We've technology to understand what new stories users like to read and apply that in the product on the yahoo!

Homepage and that gets one billion clicks per month.

One of our greatest emphasis is in mobile technology.

You are probably familiar with the yahoo!

Mobile weather app.

In order to find photographs from our database, we need underlying strong computational thinking to figure out how out of a vast array of millions of photographs, to find the ones that match the right time and place.

This is part of the general theme that yahoo!

Labs has around personalization.

It could be news stories that are important to our advertisers , it could be matching a high-quality delightful ad and a user who just needs to see that at the right time and place.

We help our product people create exciting products but we don't flash yahoo!

Labs in the front.

We don't do flashes in the pan.

We do personalization at internet scale to one billion users.

The yahoo!

Chief scientist taking us inside yahoo!

Labs.

We don't always get a behind-the-scenes look like that.

We have a cool story coming up about power and energy composition and usage and tell you how ebay completely transform the data operations there being more energy efficient.

It is an interesting story on the effect technology is having on the power industry next on "bloomberg west" ? welcome back.

I am emily chang.

We are talking about ebay.

It may seem like a seamless experience when you are browsing have a million items but behind the scenes, there is a very complex web of data centers and makes all of that possible.

It takes 20 megawatts of power -- that's what it takes to power a city, to power ebay.

It's an immense use of power and is not always been efficient.

Efficiency is the key to this.

Joining us now is jonathan coomey.

A stanford research fellow.

You have been working on data centers since the late 1990's? yes, that's right.

You know this inside and out but why focus on ebay?

There have been many companies who have tried to use information technology to become more efficient but not before now wanted to talk about it.

When i approached ebay last year, i was teaching at the stanford business school and was open to having my students come in and interview their managers about how they transform their it i.t. operations to become vastly more efficient.

The energy consumptions of data centers is like two percent nationwide.

That will not get smaller and we are pushing toward more use of these data centers or enterprise computing as well as for your consumer application.

When you access data on your smart phone, you are using a data center.

How did ebay compare to other companies?

We looked at the way that they design their management.

I will talk about that because the differences are important.

When you do this from a strategic perspective, you need to think about the whole system.

You need to think about the total cost of delivering computation and most companies that's not how it is.

It usually works at the facilities pay the electric bill and they build the cooling equipment and the i.t. department buys the computers but they have a separate budget and don't care about the others.

So they buy all the stuff but they don't give a second thought to how much juice they will use and might run up the cost of the company?

Exactly right.

The silos get in the way of thinking about the whole system.

Ebay has started to think about the whole system which was their first step.

They saw the power bill going through the roof and they saw also that changing the way they provision enterprise i.t. would help them become more agile as a business.

It's not just the cost story.

It is a profit story.

How did the ebay power bill compared to amazon or google or other big tech companies?

The big ones you named, almost all of them have made the management changes that need to be made to become more efficient.

The data centers you don't hear about, the enterprise data centers, companies whose main companies are not computing are where the deficiencies are.

Give us some examples.

Give its manufacturing or retail, everyone uses data centers.

This is the age of i.t. there is a rate and scope of change by i.t. being more rapid than any time since the industrial revolution.

Do their unexpected costs drive more business toward the amazon web services and those that manage data centers?

I think what you will see is that the companies that do cloud computing, the hyper scale data centers, they will start pulling enterprise i.t. business from these companies that are now managing their data centers in not an efficient way.

That will be a big transition because that is not the way cio's think of their job.

They think of themselves as keeper of systems but in fact, they should be arbiters of information services.

They should help broker within the organization -- how do we get this information service in the cheapest way.

Jonathan koomey, thanks for breaking it all down.

Coming up, andreessen horowitz new fund.

We will be speaking with scott kupor coming up.

? we focus on technology and the future of business.

I am emily chang.

Some people are crying bubble.

One silicon valley top venture capital firm just closed its fund at $1.5 billion.

It is an investor in the hottest companies, facebook, many more.

Joining us now to discuss it is managing partner scott kupor.

Scott.

Tell us about this fund raise.

How was this environment different from previous funds?

There seems to be ridiculous amounts of capital right now.

What was different for us, we had more time with our partners.

We could show them the investments are working and we have had some cash back to them.

That was the biggest difference and that was helpful.

We have in lucky to have a great set of limited partners.

So it was really nice to help us build out the fund.

It is all return investors.

That is interesting stuff.

From the last fund?

We have had a number of guys with a sense five years ago when we started and then we had a few new investors and they came back as well this time.

We are really lucky to have a great team around us.

We have seen some companies go public and we have seen rounds of funding.

There have been 11 nine figure fund raises so far this year and we are only three months in.

Do you worry it is getting too hot?

I don't. here is why.

Investors are looking for, they are willing to pray -- pay a premium for true leaders and those that are fundamental franchise companies.

What gives me confidence, looking at the ipos this year, investors are discerning the between those criteria and so you see some companies like -- where the growth is not what people had expected and the market has not been those companies up.

I think there is a separation between the companies building franchises and those guys deserve a premium valuation.

Let's talk about facebook buying oculus.

You were an early investor.

But this market does not really exist yet.

I can't i oculus.

No consumer can.

It is not out for consumers.

What is facebook thinking?

Mark zuckerberg is a smart guy.

I'm not going to try to question his judgment.

The other thing to remember, there is no product, but they have and in the market for a while with developer kits and they sold north of 40,000. those are, that is the early adopters using these to figure out what it will be useful for.

It has been great.

The other thing is nobody has seen the second generation of technology they are working on.

Only a few people have seen it.

The experience is remarkable.

Once facebook understood the potential, that is what got them excited.

It has to be great for you funds to promise he same returned you have seen for all future investments.

Exactly.

Don't tell anybody that.

It is a crazy time in terms of returns and the duration of investments.

When you had hundred stations -- had conversations, was very discussion about approaching this market differently than five years ago?

What is interesting, you are right, you have these different dynamics.

You have had some m&a deals with short holding time a lot of venture capital firms, where it was short for sequoia.

When you look at how long it takes companies to go public, the average is nine and a half years now.

That is more than double what it was 15 years ago.

And for the past 25 years as well.

You have a little bit of eye flirtation in the market.

It will be some m&a deals that will happen.

But i think most partners realize that if you're going to invest in venture capital, these are 10-year funds and they have to expect that.

M&a stuff, we are trying to look for ip a -- ipo activity.

That is going to require nine years before they are ready.

There was a thought the jobs act would change that.

That it would lead them to ipos.

Some think that is not going to happen.

The jobs act has been great.

Or is an area we have not addressed, what does the small-cap market look like and do you actually want to be a small-cap company?

This is something i have been involved with.

The fcc is looking at a pilot right now.

It would change the trading structure for the purpose of actually trying to see if we can get small-cap ipos.

Most of the ones you have seen have been relatively mature companies, billion dollar in revenue, what we think we need to see, we need to see more 750 sub ipos.

The only way to get that is if the fcc moves forward with this pilot program.

Mark zuckerberg is excited about virtual reality.

What platforms is andreessen horowitz excited about?

What is next that you are focused on?

A couple of things.

One is enterprise generally.

I do not think it is unique among venture capital community, there is going to be a turnover in the infrastructure, databases, networking companies, storage companies, we had a company we did an acquisition on that was a networking space.

We continue to see interesting things happening.

That is number one for us.

And something that chris dickson calls the full stack startup, let me give you an example.

A company like left, one of the companies in our portfolio.

In the old days, they might build the technology to help people figure out how to optimize traffic patterns and pick people up and they might license that technology to other companies to better do their jobs.

If they are not doing that, they are in the business of being a car sharing service.

They are trying to integrate and two and the customer experience, using the technology and entering into the actual business and we're seeing more and more companies like that.

That is an interesting trend.

You heard us talk about bitcoin.

We think we are at the early stages.

You should expect to see us do many more things with the bitcoin for a lot of industries.

I am loving mark andreessen tweeting.

Why is he tweeting so much?

He discovered it.

It is great.

He found it is a great outlet for him.

We love it.

We are trying to keep up with him.

It is virtually impossible to do so.

I don't think anyone can keep up.

He is on a roll.

Scott kupor, thank you so much.

Bloomberg lp is an investor in andreessen correlates.

-- andreessen horowitz.

Now a fit bit for babies.

We will talk to the designer.

Next.

? welcome back.

I am emily chang.

Shares are rising as the billboard company goes public and getting more digital advertisements as a focus for cbs outdoor.

The ceo said the company plans on adding 100 new digital billboards every year.

The great thing about digital is you can be so much more creative.

You can change across the u.s. based upon who has scored in a football game.

This is a lot different from outdoor in the past where somebody was going out with a ladder and a bucket.

Cbs corporation owns about 83% of cbs outdoors.

Now to our special weeklong series on the role of design in technology, we are talking about wearables.

You love wearable technology.

Your job own -- jawbone.

I have downsized to only one.

You are wearing all of them.

I have downsized to just one but i am a big fan of fitbit but it's an interesting experience to see the differences.

We have the guy who designed the fitbit, and you designed the whistle which is a fit bit for dogs.

Also the one for babies.

It is more than a baby monitor.

Babies actually where it?

The notion is that you can be more aware of the baby's situation, fever or not, movement or not and so on.

I understand there is some you sharper and your calf.

Yes.

What goes into the process of designing something you're going to wear every day?

The biggest issue with designing things that are on the body is that you need to fit onto a lot of different bodies and there is a huge variety and big size and small size people.

Many of these pieces of technology are quite cumbersome and you want to soften its and make sure you are comfortable wearing it a long time.

That makes it even more complicated.

The last thing is a lot about yourself imagine how you feel your sense of comfort but sense of psychological comfort as well -- when you wear these devices, you where more than anything including clothing and jewelry.

You wanted to be an expression of you.

What do you try to do as a designer?

Particularly with the fitbit?

There is an issue of variety and an issue of making other people feel you've got the coolest thing around.

You don't want it to be invisible.

It depends.

Some people want to flaunt it and some people want to hide it.

People thought it would be more introverted but i think it's a matter of person to person.

They thought people would hide it but this is different.

Right, that is one of the solutions.

Wrists will be very populated, maybe overpopulated and we need to look for other places.

There is a whole bunch of new sensory technology that will not fit on the wrist.

We will probably be fitting technology in all sorts of laces around the body and people will sometimes expose it or less.

What about google glasses?

I think it is a laudable experience to create a new type of device.

It is quite typical from a -- difficult from a social and psychological perceptive.

We are humans and like to lock eyes and we want to make sure the guy we are talking to is actually locking eyes with us.

I know some people have the glass but are embarrassed to wear it outside.

It is a difficult topic.

I'm not sure in the long run it will succeed but it's an important experiment.

That is showing the difficulty of the psychological demand where designers excel in sorting these things out.

People are getting rashes and there has been a recall.

Talk to me about how designer recovers from that issue?

Do you need to redesign it?

I don't know much about that specific issue and i would rather not talk about it directly.

We are dealing with a lot of new materials, some of them have been used for years and years.

I think we need to be cognizant of human sensibilities and sensitivity and deal with these very cautiously.

Gadi amit, thanks for sharing your vision with us.

The activity tracking app strava lets users collect and share their exercise data.

We will show you how it works.

It is pretty cool stuff.

More "bloomberg west" in a moment.

You are like he-man.

Never been said ever.

? welcome back to "bloomberg west." i am emily chang.

So many apps out there to help you track how fit you are.

I don't use any of them.

Cory johnson uses them all.

I have downsized my strava which is an interesting app.

I have tried many out.

There are a lot of companies, there was an acquisition by the clothing maker in portland.

A bunch of other companies as well.

This company has $25 million and lots of users of this thing.

The cofounder joins us now.

This is an interesting arena because the sensors are out there and so many more ways.

You have to focus principally on the phone?

Is that fair to say?

Actually, if you look at the strava model it is cross-platform.

We have web services for someone who is on the tablet but if it we also have mobile apps when you are riding your bike or running.

Part of our focus is to create the network or platform so that you would have access to your information regardless of where and what you are doing.

You have partnerships with google glass and jawbone?

We are on dozens of devices.

We have our app or you can track your runs, but there is everything from google glass to double to garmin devices and we just launched on samsung.

The idea is we want to take the data and divide some context.

We want to provide motivation.

Do you find any device works better than another?

Is a wristband better than glass?

We understand our specific athletes.

Strava is refocused on a particular area of the market.

We support runners and cyclists and triathletes.

Based on that, we can create a tracking device that meets their needs specifically.

Versus the other end of the spectrum, people who need something to track calories.

I have personally found that i am the most fit when i am completely anal about checking my workouts whether it was the swim team in high school or triathlon training.

That is how i learned to do microsoft excel.

Now i can do it in different ways with these devices and your app.

Is that typical of athletes?

I feel there are people just work out and the geeks like cyclists to want to measure everything.

We, our cofounder and i met on the crew team at harvard and we had this built in motivation from competing every day against other teams and your own teammate.

You graduate and the motivation was gone.

In many respects, when you look at our mission, it was to simply motivate and entertain that athlete want to -- once you have a busy life.

By having that data available on that connection with other athletes, there is a social component that is important.

How can you get someone like me to overcome this gigantic barrier of being too busy to exercise?

How do you get someone like me on your platform?

We recognize there is a way in which we can find your friends.

You often have social groups yourself and would pull those together.

We did not make a new committee but recognize that communities already exist.

You might be part of a gym or a club and there are opportunities to access that.

And then we integrate with instagram.

Those photos will show up on strava and then there is a community and you are actually out running and training you had not realized it happened.

Cool stuff.

It is time for the bwest byte.

Jon erlichman is in l.a. speaking of running around, $125 million is the byte for this friday.

There have been studio executives running around because of the big movie this weekend, "noah," the epic film which takes certain liberties with the original story.

Darren aronofksy, the director of this film is known for films like "black swan" had back and forth with paramount the distributor.

We will see but it is still supposed to be the big performer at the box office this weekend.

What kind of reviews is this getting?

We don't have time for that.

The biggest issue has been whether or not you are a purist or you are ok to go to the movie theater to see a movie.

On that front, many people will think there will be great visual effects to watch for.

I read the book but it did not expect the movie.

You mean the bible?

[laughter] i said the book, i meant the book.

The book.

I'm curious.

This is the year of the bible of the box office.

I think that there is a belief that everybody knows the stories but once you start producing these movies, you think what story are we telling and who are we going to offend as we do this?

That is some of the contentions rounding this one.

"the bible" has done pretty good at the box office.

My favorite moses is less charlton heston and more mo brooks.

That was a good moses.

But onthat on top of the top five movies from last year i need to watch.

Thank you all for watching this edition of "bloomberg west." we will see you next time.

?

This text has been automatically generated. It may not be 100% accurate.

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