Live from pier 3 in san francisco, welcome to the late edidtion of "bloomberg west," where we cover the global technology and media companies that are reshaping our world.
Our focus is on innovation, technology and the future of business.
I am emily chang.
Let's get to the rundown.
Apple's 85 million dollar man steps down.
He is one of the highest-paid executives in america and the key to the tech operation.
What is next?
The biggest ad agency is created, but combined, on the common publicis brought up -- had less ad revenue than google.
Stacy smith tells us what she looks for in a job candidate.
We are following two major stories involving apple this afternoon.
First, apple and its supplier say they are investigating after a report from china labor watch claims dozens of labor rights violations at three pegatron sites.
Apple says they have been in touch with china labor watch but the report makes claims they had not heard before.
Apple says they will take action, saying they will investigate the claims thoroughly and make sure that corrective action is taken where needed.
They will not tolerate g-v -- deviation from their code.
Apple points out it is the only technology company in the organization and they are committed to protecting every worker in the supply chain.
Here in california, the major -- second major apple story involves the departure of bob mansfield, who is stepping down as senior vice president of technology and he will instead focus on special projects, reporting to ceo tim cook.
He ran wireless communications and the long-term chip strategy.
I am joined by the founder of digg -- giga ohm.
We are hearing bob mansfield wanted the change.
He has stepped away from day- to-day executive duties and he is focusing on new things.
I think special products is a euphemism for new products and i am pretty sure they can not talk about it.
This is part of the process at apple.
They keep working on new things all of the time, and as a result, he is saying i do not need to travel to asia as much, do a lot of the things.
I just need to focus on the next wave of innovation, which is extremely vital.
Otherwise, there is no apple story.
Tell me about bob mansfield.
He tried to retire.
Tim cook brought him back.
What is so great about him?
A lot of people love him.
It'll work for him love him.
He -- people who work for him love him.
He understands things at a deep level, semiconductors and how they interface with society and he understands the apple philosophy.
More importantly, he understands the apple way of doing things and working with other apple people.
There is a lot of love for this person.
That is why he might be worth the $85 million.
Since steve jobs passed away, ron johnson, scott forestall, both left apple.
Is there any connection?
I think ron johnson had a great shot to be the ceo of a retailer and try to prove himself as a retail genius.
He took a shot and it did not work out.
He moved on.
Scott forstal had persona issues.
He was a political animal and that ran against the apple way of doing things.
He was shown the door politely.
As far as mansfield is concerned , he has been at this for a long time.
It is not related.
Let's talk about morale.
One analyst put out a report that morale was low and people were thinking about moving elsewhere.
It is silicon valley.
People move elsewhere all the time.
There are people that are not happy because their options are not worth anything anymore.
They are not making the kind of money they were making when apple was still a $25, $30 stock.
Stock has declined, and that causes a morale issue, but i do not think it is as much of an issue as we make it out to be.
The bigger issue for the company is there is a narrative of negativity around the company.
We choose to believe everything negative about this company because it is the way that names are.
You bring people up, bring them down, and build them up.
I think the narrative is definitely shifting.
Yes, they have more competition.
People are coming up to them more often, so they have to deal with these things in a different sort of way.
It is not just one product, one company.
Speaking of people leaving, zynga is a company where more people than usual seem to be leaving, and you had some strong words about zynga with the new ceo.
You wrote "of course things are not going to work and this time zynga's board will have the perfect fall guy, mattrick boy.
It is what it is.
It is very clear that this is a company that is in deep trouble.
I do not think that don or anyone else can save the company could the company has to do -- company.
The company has to do a cultural overhaul and drafting new dna.
I do not think it is possible.
If they wanted change, mark pincus should have been out of the company, that is change and that is complete overhaul of the company.
Then i think they have a shot.
Don will be the fall guy.
He will not make things work.
At the earnings call he said it will be at least one other quarter before they review everything, and then let's say they start making creative, long-form games for this new world -- i am not sure who the new world belongs to because they have no mobile play or ideology behind creativity.
I do not see anything happening for at least one year and things will get progressively worse.
The pressure will be on someone.
I do not think mark pincus wanted to take the hit.
He wanted someone else to take the arrows.
Do you think zynga is doomed?
Is there any chance they turn around?
I would not say they are doomed, but they are climbing a glass wall with nothing but their nails.
That does not, it will be easy to do.
Model s, --om malik , thank you for joining us today on "bloomberg west." -- to advertising giants are combining.
You can also watch is streaming on your tablet, phone and bloomberg.com.
? this is "bloomberg west." i am emily chang.
To traditional ad companies are joining forces.
Omnicom and pulleys -- police group is burgess in -- merging.
It will create the world's largest advertising company if approved.
Both ceos joined "market makers peter cook that -- "market makers." the don draper guys are not going away.
They are important.
Big data is also important.
Google is sometimes competitive with us, and other times not competitive.
Most times they collaborate with us.
We want to give people the tools so that the don draper of the future knows who to write the spot for.
Once the merger is complete, the ceos will serve as co-ceo's. while the merger of omnicom and publicis could dramatically alter the ad industry, that expected dominant might not play out like advertising -- as advertised.
Editor-at-large cory johnson explains.
How is today different than it was before?
First, the alex -- the outlets to which advertising companies will place advertisements are very different.
It is not billboards, magazines, daytime television.
Omnicom is a business that grew up with traditional media.
They are now facing a world where there advertisements are going on places like facebook, google and mobile devices.
It also requires different kinds of creative.
What you have seen from these agencies is -- first of all, it is a massive merger.
The combined revenue, $23 billion, so much further than where they were three years ago -- six years ago.
It is simply amazing.
The growth rate has slowed quite a bit, and even as the economy is picking up steam, we see the revenue for these guys slowing down.
It shows you they are having difficulty adjusting to this new world order.
How will this juggernaut phil -- fit into the broader long -- landscape?
This would be the biggest monster globally in the world of advertising, they are also facing new places where the ads are going.
When you hear them talking on day one about big data, they are looking at ways to look at facebook, google, and figure out what information they can know about a consumer, and how they can put the right advertisement in front of the consumer that takes place in the microsecond that the page is downloaded.
They are trying to get the advertisement ready for the new trend that emerges.
If you look at the competing media properties -- cbs, time warner magazine, the old time inc., the time warner net tv network, they fail in comparison to facebook and google.
This is the new advertising is this.
The shows we cover on "bloomberg west." facebook, google.
It is a new way of advertising and they say they will use the new technology to put the advertisements in front of the right individuals.
Cory johnson, thank you.
Can the merger help the traditional ad business catch up to google and facebook?
We are joined by a long time at executive who worked at chrysler and walmart and is now the senior vice president of marketing at sap.
Julie, you worked in some of the fiefdoms under the umbrella of omnicom and publicis.
What is your take on the merger, given that they come from different cultural places and they have been so competitive with each other for so long?
I was not terribly surprised that it happened because it was a bad idea, but to the your point that -- to your point that they had been so separate so long with big businesses and lots of competition.
But it makes sense in that there is so much opportunity in the big data, the analytics.
It is fortuitous to be here and to be working for sap because we see this happening to a large degree in the media world, the agency world, with mergers.
I think it is a good opportunity for them and their customers.
If they can merge the companies, use the culture to an adventure -- advantage, where they can use the scale and efficiency to the customer in terms of media buying and the access to a larger pool of talent -- if they can take those efficiencies and reinvest them into the right software, predictive analytics, and use the big data to find actionable analytics that would not only help them create better creative, but they would have a large impact on placing the media in the right areas, targeting the customer with the right message.
Suddenly, that becomes a big deal and with $23 billion revenue, half that of google, suddenly it is an interesting landscape and it will be adjusting to look at potential acquisitions by the agency giants forbade, emerging companies like snap chat or even twitter.
You say this is an opportunity for creative.
I was speaking to an advertising executive who said it would be worse, less competition, less creativity.
There are a lot of ways to skin this cat.
You have heard from customers saying there is a conflict, maybe it will be too big and we lose some of the nimbleness that you get from independent companies.
I tend to think that when you merge these large groups you are able to -- and, again, they are made up of dozens and dozens of agencies within these holding companies.
You're not talking about two companies.
You are talking about dozens of companies.
When you can streamline and take the best talent and take them forward, you can get the best creative and that helps them address the need they have going forward.
Again, mobile was discussed and it is a huge opportunity -- $10 billion within the next two years.
We have already seen wall street give high marks to facebook for starting to crack that code, and unfortunately, very few companies have crack that code and the digital landscape is right for businesses with scale.
They could start to do that in a way that platforms like facebook and google may not be able to.
They will use creative on the digital side, merge it and create a perfect storm, if you will.
There are a lot of its, but if done well, this could be a huge game changer.
And there are regulatory hurdles.
Julie roehm, is there an impact on facebook or google?
Will they get less ad dollars because of this or will it be about the same?
It should be that if it is done well they will get more advertising dollars because you would see a greater shift to the digital landscape, but it is a development with some of the innovation on these platforms, or even the connections from them to other digital and social platforms in the titular that might -- in particular that might create a benefit for the big agencies.
Again, they are representing lots of customers, and what we are striving for, more than anything these days, is to have a strategic mindset from agency partners to help determine where they should go, get ahead of the ball, quoting wayne gretzky, go where the puck is going, not where it has already been.
Julie roehm, with sap.
Thank you for weighing in.
If you are a time warner subscriber in dallas or new york, you could lose cbs programming.
We will explain why next.
? i am emily chang.
This is "bloomberg west." in today's new hollywood cbs and time warner cable cannot seem seem to be resolved differences over broadcasting fees.
They had a deadline of 5:00 p.m. eastern to reach a deal and it has been extended to 8:00 p.m. and if the situation is not a, subscribers might not have access to cbs.
Lessman does address the difficult -- les m unves addressed the talks today.
Jon erlichman, what will happen?
It is not the first delay.
The reason we have these in place is because people pay fees to carry programming, the deal expired, and that left them in this situation.
Nobody wants to turn off cbs, leaving cbs viewers angry and cable customers angry, but it is because there are two different opinions.
Cbs wants the same kind of deal that many of the cable channels get.
It is interesting that broadcasting find itself in a position that is not as enviable as cable.
From time warner's perspective, they are concerned about high cable bills already.
It is not the best time to be boosting cable packages when there is all of this talk about cord cutting.
Mun ves addressed the rise of amazon and netflix.
What did he say?
There are two sides to this.
"under the dome " was a showed a renewed today and they are making it available to amazon.
At the same time, cbs is tailoring content -- they used to be focused on shows that would be great one-off, and now they are shifting toward a hinge viewing -- binge viewing strategy that we have seen successful with netflix.
Jon erlichman, thank you.
Here what it takes to get hired at intel coming up in our schools of interview with cfo stacy smith.
? you are watching "bloomberg west ," where we focus on global technology.
I'm emily chang.
Carl icahn has written that dell would be worth far more if michael dell were ousted as ceo.
In an e-mail to bloomberg, michael dell says will not raise his offer for the company of of the current $13.75 a share.
The senior vice president of central technology and yahoo has resigned from his post but will stay on as an advisor.
He had been responsible for running all of technology operations.
His departure comes one week after media had mickey rosen left.
Amazon is hiring more than 1000 new workers for its fulfillment centers.
They plan to open five new fulfillment centers this year closer to customers to reduce cost and speed up delivery.
The improvement also contributed to a loss in the recent quarter.
Zynga has lost three senior vice president this month, coming on the heels of former microsoft executive don metric replacing mark pincus as chief executive officer earlier this month.
The social game maker has lost more than one dozen manager since going public in 2011. jon erlichman has more on the story.
We just had model s -- om malik talking about the deep trouble zynga is in and he thinks mattir ck will be the fall guy.
What is the latest?
Mattrick will have some time.
He is coming in to right the ship.
What you see is a trend of executives leaving the company since the ipo.
What is interesting to highlight in the story that comes from bloomberg's doug macmillan, is you are talking about that came in when zynga was flying high in 2000 and nine, and right now, it is very challenging.
Morale is low.
We have highlighted surveys on the type of approval rating mark pincus as at the company, and it has declined.
There is a challenge to keep the company focused on what they did best, make these groundbreaking social games, and that is one of the reasons that don mattrick has said let focus on real gaming.
The casino division and vice president of games, who doug macmillan understands all resigned over the past month.
What is interesting is the employees are not just leaving, but they are starting their own game shops and competing with zynga.
How does this make it even more challenging?
It is complicated.
With these executives, it looks like they are going to other shops, disney, for example, but we have seen examples of former zynga employees who have started similar businesses in the san francisco area.
On the conference call last week, zynga highlighted that one of the best things they have going is some very well known games, their big in san francisco and the ability to attract some of that talent.
But the people that were leaving before, some are starting up their own shop, taking advantage of the challenges for zynga.
Thank you, jon erlichman.
The new intel ceo has made big changes as the chipmaker tries to push into mobile, the what kind of talent are they looking to hire?
Cory johnson caught up with cfo stacy smith and this is one of the things they talked about.
They are not looking for former zynga employees, are they?
There are more available every day, it seems.
Think of intel, 7.9 in free cash flow but their prime is this is slowly dying, so integrated into all of their plans to turn this around this financial management.
Listen to how chief financial officer stacy smith described it to me.
I am curious about the role of finance closer to the center of the company.
What does that mean?
There is a traditional finance function that is closing, keeping us legal, capital structure, those kinds of things.
Reporting on results.
Reporting on results.
Increasingly, the role of a world-class finance organization is to be a business partner and drive the business forward.
That is something we have done well at intel.
Professionals see their job as coming to the table, hoping to come up with is this plans, driving results -- helping to come up with business plans and driving results.
But sometimes in silicon valley there is the crazy notion -- sometimes in silicon valley there is a crazy notion of build something awesome, and then figure out how to make money later.
Free cash flow would be further down the list, but it is really about the business model.
How do you take a great technology that we make, and at the end of the day we are about inventing stuff and getting great products to the marketplace -- how do you get that stuff to solve people's problems and creating is this model around the technology?
That is the core role for a finance organization in a technology company or a financing -- finance organization anywhere.
That is more like business planning and understanding the numbers.
When you look at the majority of our hiring, it is more focused on getting top-tier mba's to solve those business problems.
We have great accountants as well, but the heart of what we do is being in the business partner with the operations.
What you think is the biggest misconception of being a cfo?
I do not know.
What is the consumption of being a cfo?
Part of it is dealing with wall street.
The company should be making stuff and making money, but not quarters.
People look at the quarter, but that is -- and i think that is ridiculous, but that is what wall street looks at.
One of the key functions is to talk to the owners of the company, and when you talk to wall street, that is what you are doing.
Or a public company, it is important to have that transparency, that trust, tell them where you are going, and have people make the decision if it is an appropriate investment.
I am not one of those people that does not value the time that i spend talking to wall street.
I do think you have to be real careful of the company and the cfo -- as the company and the cfo to not get consumed in the short term at the expense of making long-term investments.
For us to build a factory, starting with a piece of ground and building from scratch, it is more than two years and $6 billion.
If i am focused on a specific quarter to minimize cap next, i might be under-investing in what we need to run the business and bring the kind of technology we want to bring to the market.
I would imagine if you have those finance people involved in every sort of new business notion that are so many years out, you have to prepare as the owner of the company, and it is difficult to build business plans around things that do not exist yet and will not form a years.
-- many -- for many years.
We have to hire people that understand the technology, the markets and then go to a great is this plan.
When the things we do well is we have a rotation plan.
Every two years-to-three years, people will move from one area to another area and we build a broad pace of what we do, ringing -- bringing skill sets together and allow people to grow their careers that way.
Intel cfo stacy smith with cory johnson.
You can catch the full interview on your phone, tablet and bloomberg.com.
Mf, more of "bloomberg west." ? i am emily chang.
This is "bloomberg west " streaming live on bloomberg.com, your tablet phone and now any windows phone as well.
The beacon was went to a fire on a dreamliner.
As many as 1200 aircrafts had been fitted with the devices, including the boeing 777, which is one of the most popular aircrafts in the world and demand has not slowed down.
How it boeing -- how is boeing handling the increase?
Bloomberg's rachel crane has more.
? really a fundamental shift in the way we are starting to produce our airplanes.
It moves the production system forward to where we needed to be and you have to start bringing in the modern tools.
Boeing is taking some of the elbow grease out of finishing an airplane and they are turning to robots.
They have invented an automated system that does everything from prying to cleaning -- priming, to cleaning and painting the wings.
I am ready to see this in action.
Will you retire.
-- grease fire -- refriire?
What is the advantage?
They will do a more consistent job.
It is difficult to achieve when you are spraying gray for four hours.
The robots are ok with that.
And they can work in the dark.
They do not need bathroom breaks.
They are consolidating and there are high-tech upgrades.
We designed a movable roof.
They are always working as much as possible.
There is another roof, and the robot works on both wings.
The track on the other side.
The real gain in the weight savings is with the airline.
You are saving 80 pounds.
What is that?
It varies with millions of dollars.
Right now, the technology is only being implemented with the 777. do you see that changing in the near future?
I think it will dramatically reduce the cost of producing aircraft.
He will see some of these technologies get applied.
Asked how much are you saving right now using the automated -- how much are you saving right now using the automated method?
We seek 10%, 20%, 30% improvement.
Will i ever fly in an airplane that will be completely made by a robot?
Probably within the next decade.
That was rachel crane.
Comment tomorrow on "bloomberg west," we will be writing the ravens -- we will be riding the waves as we take you inside of a new surfing film that will use cutting-edge technology to take you closer to the action on the early edition of " bloomberg west." companies are moving to work their workflow to the -- moving to move their workflow to the cloud but that can cause problems.
? welcome back to "bloomberg west." i am emily chang.
Moving to the cloud can make things easier, but it can also be a nightmare -- the problem, the servers and businesses that help businesses function the old-fashioned way can become unmanageable and not secure enough to handle the new workload.
Cory johnson has more.
Interesting times indeed.
Companies that do not deal with these kind of problems faced these risks.
Enter this interesting company that looks at how companies are using their software, update their software and helping them to manage the info on the cloud.
Describe your business?
-- we are joined by the ceo.
Describe your business.
We have the capability to give companies the ability to produce new innovation and become very effective.
They can cut costs and lower risks.
You started to tell these horror stories.
The things you discover when you look under the wires, you are not naming any clients, but real-life examples -- you said a fortune 100 company had 50 data centers all over the world that are in underutilized.
You brought that down to how many?
23. -- to three and, by the way, we call them success stories.
We found they had 10,000 servers.
8000 were from name brands.
The remaining 2000 were from 27 different vendors.
You had a little group making these purchases that were not being used.
It was the same thing for printers, storage and devices.
This is what people do not know about their i.t. department.
It is not all seamless and perfect.
You talked about a company that was updating everyone to windows seven manually.
An i.t. guy was doing it by hand?
They had people trying to figure it out manually and the error rates were 50%. we did it in two weeks and they migrated their entire infrastructure.
They were doing it in a boneheaded fashion.
Speaking of boneheaded, what about government?
The most sophisticated i.t. -- what have you found?
Here is a success story.
You call it a horror story.
A big government agency, we also did a vulnerability assessment for them, and they were actually very good, however there was a secure building that had 10 wireless hubs, which was a no- no.
I also imagine areas like healthcare and nonprofits have the same situation with people setting up their own thing out of the infrastructure.
Let me give you another nonprofit healthcare companies.
They were trying to figure out what to outsource.
We are doing all of the assessments, and we find out three locations where about 30% of the desktops and servers have antiquated semantic antivirus.
They were installing the viruses.
Not only that, it was not available to those looking to help.
Constantin delivanis, thank you very much.
Thank you, cory johnson.
Do not go anywhere.
It is time for the bwets byte.
, one billion, $332,000. that is the free cash flow for omnicom.
You have a business that is banging out the cash flow and paying a decent dividend.
You wonder seeing that number whether or not they felt compelled to do this deal, or felt they had to do the deal.
I like how sir martin sorrell said it was a merger of unequaled based on the revenue for omnicom.
What i love is you have pepsi and coca-cola represented under the same roof, which is pretty cool, or maybe not cool.
It will be interesting to see how that plays out.
Cory johnson, can you give us any indication of how that number looks for publicis?
Crocs they are also generating free cash flow.
I can not remember what it is at the moment, but a big heart of their business is just finding ways to place media.
That is a very a good is this in a changing business environment and that is what they need to confront with this deal.
I would agree with that and i would just say the hardest thing for any of these players right now is putting all of that money to work, for sure.
Jon erlichman, or a johnson, thank you.
Thank you for watching this edition of the show.
We will see you back here tomorrow.