Google Loses Top Exec: Bloomberg West (08/29)

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Aug. 29 (Bloomberg) -- Full epsiode of "Bloomberg West." Guests: Canalys' Pete Cunningham, Bloomberg Businessweek's Brad Stone, author Gordon Chang, the San Francisco Chronicle's Julian Guthrie and Bloomberg's Tom Giles and Michael Riley. (Source: Bloomberg)

"bloomberg west" live from san francisco, welcome to "bloomberg west." we cover the global technology and media companies that are reshaping our world.

I am emily chang.

Our focus is on the future of business.

Let's get to the rundown.

It is beating apple in the world's largest market, china.

Already claiming a larger share than apple.

It is a deal that has fallen apart in the past.

The rise in bank is trying to buy tryingvodafone -- trying to buy out vodafone.

Dropbox makes sure its employees have plenty of perks on the job.

We go behind the scenes.

First to the lead, the smartphone maker in china has replaced a top executive.

The android executive is leaving to join xiaomi.

The news was announced on the barra google plus page.

The google founder is separating from his wife.

The company is expected to unveil two major products.

Here to explain how big xiaomi is corey johnson.

What can you tell us?

The company launched with $40 million in funding in 2010. they launched the mi1 in august of 2011. the company got a lot of attention after the new york times suggested they wanted to be that apple of china.

There are counter arguments on the web suggesting there were not a lot of chinese articles to back up the same thing.

They have had limited success.

How did xiaomi become a dominant player?

They sell directly from their web site and use android software for their phones.

When they launched their second phone, the mi2 -- one wonders if they will get to mi6 and sell it in britain.

I doubt ift.

There was a scarcity marketing tactic of saying they were sold out, when they were not.

What does it mean for apple.

There has been reporting that apple is working on a cheaper iphone.

Apple's biggest revenue stores are the stores they have in china.

They have had limited success in china because they are not on the biggest carrier, china mobile.

To have the great success they would like to have, they would have to be with the big carrier.

Corey johnson, our editor at large.

Thank you.

According to research, xiaomi holds the sixth spot ahead of apple.

Apple is still in second place.

Pete joins us on the phone from london.

What do you think of this hire by xiomi?

-- xiaomi?

We are talking about a significant figure in the mobile industry.

He has tremendous experience in the mobile industry.

Back in the days when the android market share was the same, now they have 80% market share on a global basis.

He has a tremendous amount of experience.

This is a huge higher.

It is a chinese company that many of -- many people have not heard of.

Tell greater than greater thanxiaomi.

-- tell us about xiaomi.

Is it doing so well?

If you look at the cellphone makers, you have samsung, motorola, they have a hardware approach to market growth.

They took it as a services play a total -- a totally different approach to the market.

Xiaomi believes the profit will be in services.

They have smartphones and are selling them almost at cost.

That is why they are doing so well.

The ceo of xiaomi has been branded the chinese steve jobs.

He is very charismatic.

He is a fantastic presenter.

He is not a typical asian ceo.

He created a really cool brands.

Yuan over investors.

The one -- he won over investors.

The ceo is known as the steve jobs of china.

Xiaomi is having a huge event on september 5. we have been invited to it.

We hear they may be unavailing two new products.

What do you think it will be?

There are reports it could be a television product and will be apple to the punch.

I think the thing is there will be significant products.

The important thing is that we are talking about a company that has not shipped a product outside of china.

China is the largest smartphone market in the world.

They are not playing on the international scene.

That is what this appointment brings.

He brings fantastic experience.

He has relationships with international carriers.

He has relationships with ecosystem partners.

If these products are domestic products, it is a clear sign that this company has ambitions to move internationally.

At the same time, this has implications for apple.

What about the other android players?

Xiaomi can drive down the price and other android players will struggle.

These companies are going to be major forces in the future.

They are already beginning to shape how the mobile industry is going in the future direction.

The internationally established names we all know, the samsungs , the htc, are strong in the u.s., but not strong internationally.

They are beginning to feel the pain on a global stage.

The chinese vendors will be dictating the future of the mobile industry as we go forward.

P. cunningham, thanks so much for joining us -- pete cunningham, thanks so much for joining us.

Xiaomi plans to unveil two new products on september 5. "bloomberg west " will be there.

Sergey brin has reportedly been separated from his wife and is having an affair g for anoogle staffer.

-- google staffer.

? today's bond market update is brought to you by pioneer investments.

Today's bond market update was brought to you by pioneer investments.

We searched the globe for value, navigate with knowledge.

This is "bloomberg west." sergey brin is facing a story right out of the gossip column magazines.

He and his wife have separated.

It comes amid reports that brin is having an affair with a google staffer.

That same employee was also linked washugo barra.

-- with hugo barra.

This is a hugely personal story.

Could have business implications because brin reportedly had an affair with a google employee.

It is terribly unfortunate for sergey and his family.

Does it hurt bluebell -- google?

I am not entirely sure.

He has been working on driverless cars.

It does hurt his credibility a little bit.

He has been the public face of google, weighs one of the more idealistic faces of -- always one of the more idealistic faces of google.

It makes it hard for him to talk about high minded things when he has this personal issue.

Could there be losses because he works together and he is in a powerful position.

His sister is the senior vice president.

Her husband works as google.

We do not know.

They are claiming it is somewhat amicable.

The face of android has left the company to go to xiaomi in china.

Already, there have been some repercussions.

If it is related, hugo is hugely important to android and the future of mobile.

If that is a consequence of this, it could have a negative impact on the company.

Right now, we do not know.

It is an awkward time to be in senior management.

This has happened before at companies.

Mark hu rd had an inappropriate relationship with a contractor.

Could this go down bad path?

Mark hurd was accused of sexual harassment.

Brian dunn had to resign.

Sergey 0 16.9% of the company.

He is not going anywhere.

. sergey owns -- sergey owns 16.9% of the company.

He is not going anywhere.

Facebook is addressing key issues surrounding privacy.

Facebook is working to provide clear and simple language on how it may use a member's name and picture for advertising purposes.

This also includes having minor s and verify that a parent has approved of them being part theman ad.

This came out of a class- action lawsuit from 2011. our bloomberg news editor.

Good to see you, as always.

Facebook has so many privacy stories, i cannot keep it straight.

This is a class-action lawsuit about sponsored stories.

American samoa facebook looks for ways to use the information that we supply to them to help them sell advertisements, part of that is including images in newsfeeds.

If you are scrolling through a newsfeed and see that my friends like this product, did bake consent of having their newsfeed use in an ad.

Did they consent to that?

Of course they'd be.

They are trying to make it more clear that you know what you are consenting to and what you are not consenting to.

Minors will have to show that, i ran this by mom and dad or by a guardian, to show facebook that you can use this stuff.

I am giving you the commission.

What facebook needs to do is take the extra stock -- step to make it abundantly clear to the user.

You hit the nail on the head in the beginning.

The facebook user is the product.

Supplying the products to be marketed, it changes the rules when they use products in a way that cannot be marketed.

You raise a really good point.

The fact is, we signed into social media all the time.

Even with all of the attention to privacy and all of the house -- hot water facebook kids into, when was the last time you went back and check your privacy settings for various social media.

? i do it all the time because i am paranoia.

Will this impact their business in any meaningful way?

The more you learn about how facebook is using data, the more guarded you will become.

There is no sign that these clarifications are going to be what makes the difference.

Remember, they have 1 billion users around the world.

These people are already signed up.

The likelihood of you going in and saying, they just clarify this for me and i will check my user settings.

Paranoia is good for you.

A lot of people are not paranoid.

It is hard to say there will be this wave of people who will go back and say, i will not let my image be used in this advertisement.

The chances of that are pretty slim.

We do not have any evidence that there will be a rush of people changing their settings.

Thank you very much.

Silicon valley has long been known for its crazy perks.

Could the dropbox headquarters be the craziest of all?

We will be right back.

? welcome back to "bloomberg west." dropbox is one of the leaders in cloud storage.

It is also one of the leaders of something else, boasting one of the most perk-filled headquarters in technology.

We got a look at all the all actdropbox headquarters -- at dropbox headquarters.

There is a lot of stuff like this around the office.

The office is pretty fluid.

We can do what we want.

It helps getting around the office.

Can you do it?

I cannot do it.

It seems like everybody is offering pretty good perks these days.

We are probably maybe the best.

If you want to take a break, we have the music room.

If you have a meeting and you want to chill out, there is the lego room.

It seems like a san francisco startup.

Does this all makes sense to you?

It is a strange world.

They have a lego room?

From inside, it all makes sense.

Hwat is halp?

-- what is halp?

It is an expression like, help me.

What takes place sunday hanging bed?

>-- on the hanging bed?

It is a chill out space.

We have swinging bench and this love seat thing.

Do you have a favorite rahm?

-- room?

Most of the stuff is not dropbox be selling on us.

It is more like a community.

We will be speaking with the dropbox head of business and mobile on september a 11. it is time for on the markets, a look at what is moving on the markets.

Olivia sterns is in new york.

Stocks are climbing for the second day in a row over concerns -- as concerns over syria continued to dissipate.

Retailers surging after reporting second quarter profits.

Seaworld shares bouncing back today after nosediving yesterday.

The stock fell to its lowest level after going public.

There was a drop in attendance.

More "bloomberg west" after the break ? . . this is the early edition of "bloomberg west." i am emily chang.

You can also watch at our later time, 3:00 pacific, 6:00 p.m. eastern.now, for your bloomberg top headlines.

More rye grass being made against the rim wildfire in yosemite national park that is threatening the bay area water supply.

The fire is now about 30% contained.

Firefighters expected have it fully contained within two weeks.

About 192,000 acres have burned.

Vice president joe biden says the obama administration is committed to passing gun-control laws.

He swore in new atf director todd john spirit he also announced to executive actions on guns.

One closes a loophole regarding weapons registration, the other seeks to curb the import of surplus military weapons.

Fast food weichert -- workers are walking off the job today calling for higher wages.

The nonunion workers at restaurant like mcdonald's, wendy's, and kfc, are demand the right to organize and want wages of at least $15 an hour.

According to the federal government, the average fast food worker makes about nine dollars an hour.

We turn back now to our top story.

Chinese smartphone maker has poached egg top google executive as it looks to expand its business beyond china.

-- is leaving to go to xiaomi.

How much of a watershed moment is that for the chinese smartphone company, and put more pressure on apple to exceed in china?

Joining us is gordon chang who has been following xiaomi's growth in china.

What is xio aomi, and what we need to know about?

It sold its first smart phone and 2011. it has not even been two years.

This company is probably going to have somewhere between $15 million and when he million dollars in sales.

Ogle global next year.

It is following some chinese companies that are doing very well in the u.s. zte is a company that has either a third or fourth place in the u.s. depending on who you look at, which analysis you except.

Also, zte had 85 .7% growth in the first quarter of this year in the u.s.. this really is a warning that it is not just zte, it is also xiaomi.

You have an interesting analogy when it comes to apple.

Why should apple be worried, and tell us about the comparison that you like to make.

The comparison i like to make his gm and toyota because gm stated the barn puddle -- ceded the bottom part of the car make it to toyota because they did not think it made sense to sell low margin cars.

Toyota was able to use its expertise and experience.

It now has attacked gm at the top appeared as as been a fundamental mistake for gm.

It is the same as apple which is unavailable in a smartphone.

Essentially the problem here is that you have toyota selling both at the top and the low end, and they are really eating gm up.

I think it is very important right now for us to look at this whole thing and say this is not just a car phenomenon, this is also a smartphone phenomenal.

Apple should really see what is going on in the car market.

Xiaomi only sells in china, but could this have broader implications around the world if xiaomi start selling world ride?

-- worldwide?

The face of android right now is working for a chinese company.

Xiaomi only felt outside of mainland china just hong kong and taiwan.

Next year, they will be all over the place.

As they sell more, their manufacturing costs are going to decrease.

I think that they will probably be the low-cost manufacturer eared that is going to have enormous implications for apple, which is having so many label problems -- labor problems in china right now.

So while apple is dealing with all of these unsavory labor practices on the flying under the radar, zte, you long, and of course xiaomi.

What should apple do you go what a cheaper iphone bd solution?

-- do?

What a cheaper iphone bd solution?

And have got to compete with xiaomi in their home market.

Right now, apple is probably in seventh place, maybe six place according to some analyses.

Really it has been dropping fast, losing almost half of its market share in a year.

With a new offering, it will probably get some back, but apple's marketing tactics and china are all wrong.

You know, xiaomi is not just going to give apple time to sort of catch-up because xiaomi and the rest of them are going to go after apple in all of these markets, including the u.s. what you say apple's marketing check meath and china are all wrong gekko -- techniques in china are all wrong?

It is not have cross marketing.

Xiaomi has cross marketing.

It is offered on q zone.

It has like 710 million resident users.

This gives xiaomi an easy path to expand fast.

Apple does not do this.

It hasn't stored of shunned all of these in social marketing techniques, or at least onto the same extent that chinese companies have used to them.

Clearly you look at xiaomi and say the savings have been working in china.

Apple should probably take a page out of them.

It is not competing in the united states, xiaomi it is competing in china with xiaomi right now.

-- in the united states with , it is competing in china with xiaomi right now.

It will have an upper limit and let the changes the way markets are like they were for the smart phone market, gordon chang, thank you so much for weighing in on "bloomberg west." as tension between the u.s. and syria heats up, the u.s. is gearing up for a potential wave of hack attacks.

You can also watch us streaming on your phone, tablet, and at bloomberg.com.

? this is the early edition of "bloomberg west." i am emily chang.

You can also watch at our later time, 3:00 pacific, 6:00 p.m. eastern.-- is poised to exit the best investment ever make, potentially pocketing as much as $130 billion from its 45% stake in verizon wireless by letting verizon buyout its share.

My partner, cory johnson, back with more.

This is a huge deal, emily.

Telik on a mystery -- the telecom industry is a big deal.

Blumberg analyst joins us right now, john, this is a huge issue.

The vodafone, the airstream, this is an import and part of the verizon for a walk what word wrong in this deal -- for a while.

What went wrong in this deal?

I would not say anything went wrong percent.

From vodafone's standpoint, they do not have any control when they get paid a dividend heard from a perspective of the verizon wireless, or verizon, pardon me, the wireless division is its crown jewel.

I think divorce if you will hear makes perfect sense.

At this point, they're probably just trying to work out a fair price.

And divorcing to be a theme on our show today.

In terms of that fair price, with a metric are we talking about here?

A different kind of metric applied, or not is a higher one, what are they looking for, what is verizon thinking about in terms of the value of the asset?

First of all, verizon would never pay vodafone a price where it would not be a creative overtime if not right out of the blocks.

I think verizon has the price in its head.

Voted --vodafone is kind of an acquisition growth story in a no growth market.

They're currently focused on africa, which is a frontier markets with high growth potential.

They are also looking at acquisition.

They did one recently in cable, they are now looking at some fixed assets.

For them, getting $60 billion in cash immediately to go towards acquisitions would be great for them.

Would they have or would they be prohibited from going up against verizon in certain markets?

With that kind of cash, the debt that is afforded telikecom companies, they could go anywhere.

I do not see it.

They could.

Vodafone has had their play in the states.

It seems they are done with that now.

The domestic carriers have really consolidated within the u.s., but have not really diversified geographically like we see with vodafone and its european peers.

All right, blumberg analyst john butler, thank you very much feared emily?

-- bloomberg analyst john butler, thank you very much.

Like the u.s. preparing for a retaliation from hackers.

The national security agency has tapped packers computers in the middle east to see if they would be able to disrupt u.s. power grids by financial is the -- financial assistance or critical if a searcher.

These respirations become even more critical as the "know your times" -- " new york times" website went down.

I go rightly joins me now from washington.

-- michael riley joins me now from washington.

What do we know and why should we be so worried?

Back in the day when the u.s. did a military strike in the middle east or anywhere, they had to be worried about terrorism as a possible reaction.

Now, they not only have to worry about terrorism, but they be increasingly have to worry about cyber attacks, which is a different kind of asymmetrical warfare.

As they go into the planning process for a potential attack, a strike on syria, they're looking at all sorts of players in the middle east and what they can do.

There is a lot of action going on at fort meade, the headquarters of the nsa right now, developing intelligence profiles of these hackers.

They have to worry about not just syrian hackers, who are probably near the bottom of the latter in terms of their skill level, but also syria of the allies, which include the iranians, who were much better at this and potentially have been -- have a possibility of attacking utilities or electrical grids or even possibly russia, maybe now with official sanctions, but russian hackers are really good at this.

And they are up for higher purity syria could hire some of this stuff done.

What companies in particular might be targeted?

We saw the "new york times" targeted.

What other companies could be hit?

It is a lot of image they want to do and how far they want to escalate this.

The most serious concerns would be critical infrastructure companies, utilities, electrical generation companies, you know, anything -- water plants -- anything that delivers critical services.

That would be a really serious escalation in this battle.

It would possibly invite some retaliation.

Apart from that, what we have seen is an ability and a willingness to go after companies that are either brand names or have some connection to sort of destabilize markets.

So the iranian hackers, for example, have gone after the banking industry by doing pretty certificate -- sophisticated attacks.

These things have lasted over month.

The consumer only sees they can get to their wells fargo atm or website.

Over a period of time until the bank can restore services.

But it really doesn't shake the baking -- it really doesn'shake the shake the banking industry.

They are on high alert dirty go after brands.

Twitter, to one of the targets of the syrian armies, or a media company like the "new york times ," who covers appeared quite alright, bloomberg news michael riley, something we will be following.

Thank you very much.

We'll be right back with more "bloomberg west" it is a moment.

Welcome back to "bloomberg west." i am emily chang.

Technology is pushing the sport of sailing to no limits as we approach the sears america's cup races right here on san francisco they.

Here what oracle ceo larry ellison has to say about his lands to defend the oldest trophy in the history of sports.

We have the best rational sailors -- professional sailors who are incredibly fit athletes driving these unbelievably fast boats to their limits.

So it is the limit as to what technology allows in the 21st century sailing.

Can sailors safely keep up with these high-speed technology changes?

Our editor-at-large cory johnson is back with more.

Assailing have come a long way since the original america's cup.

The original schooner america one in 1851. julianna goldman th -- julianna goldman for guthrie is an author.

I have been america's cup deke for a long time.

That is great to hear.

Long before cnn and ted turner was only known to me as a sailor from atlanta.

This is been really interesting to watch growing up around san francisco.

The story in your book is really interesting about how larry brought this here and really forced it into places including yachts that did not really wanted.

That is exactly right.

The story of his 10-year struggle and the losses in 2003 and the loss in 2007 and being called a chump and sell servicing -- soul-searching about what he had done wrong, and then finding the secret weapon, this winning recipe to come back and win in 2010. he ordered again with this unlikely, nor of the golden gate yacht club.

It is a big, fancy yard club.

-- yacht club.

St.

francis yacht club wanted nothing to do with him.

Well, i think it was really over control.

Larry ellison is in a position where he can obviously have control.

He is fond of control.

Yes, by his own admission he has ocd, and he is definitely used to control.

He is a perfectionist.

Favorites is al -- st.

Francis also wanted control.

He found the marriage made in hand -- and heaven with the golden gate yacht club.

There has been so much drama from the start of the america's cup to the state, as you are referring to.

The technological the lines -- designs have been amazing.

But then this is the cheating game, team oracle illegally waiting some boats.

The judges may force them to forfeit races, kick sailors up the team.

Which is astounding to me and perspective -- perplexing because the oracle racing team have some of the world's top sailors.

They don't need to do anything like this.

I spent a lot of time with these guys.

I spent a lot of time with the larry ellison, and they are an ethical group.

We're going to take a quick commercial break.

Julian guthrie, welcome back" --"bloomberg west" will be right back.

Welcome back to "bloomberg west." i am emily chang.we're talking about the technology of sailing and pushing innovation of sailing.

I will get back to my partner, cory johnson.

Julian guthrie and i are talking about the cheating scandal that is going on.

It is a very strange thing.

Among the worlds top sailors.

They don't need to do anything like this.

I know these guys to be very ethical.

So the jury is out.

The jury will -- quite literally.

Hopefully we will be able to move forward and have a fantastic america's cup finals.

On the other side, the technology problems of the boats, a number of phrases where boats could not finish, which makes for an unexciting finish.

But the technology of these boats is really -- obviously tragically one of the sailors died, and an oracle boat capsized losing a $10 million book, but what is the big take away from the technology decisions made about this race?

I think there are cool things about the america's cup.

I did not start out being a fan, but now i am a total of devotee.

You have the technology, the boats, the seven-time boats which are typically flying on the water.

You have the hard wing above, like the week -- the wing of a jetliner.

And they are going faster than the speed limit on the golden gate bridge.

They're going 50, 54 miles per hour.

You have got the great stories of the sailors and the builders and the engineers.

I think you're going to see a really exciting race.

There is great drama behind it.

I think once you move past this controversy, get past the latest controversy, there will be some really neat things to behold.

Flying above the water, as you say, julian guthrie, really neat book, it is 56 minutes happy hour, and that always means it is time for bloomberg television's on the market.

Bloomberg's olivia stearns has more.

Stocks are rising again for a second day as concerns over serial do appear to be dissipating in the markets.

-- oversteer yet do appear to be dissipating -- over syri a do appear to be despairing.

Shares of campbell soup cooling- off even though the company expected a better-than-expected quarter profit.

They have intensified competition.

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

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