Judge Rules in Favor of NSA: Bloomberg West (12/27)

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Dec. 27 (Bloomberg) –- Full episode of “Bloomberg West.” Guests include Chegg’s Dan Rosensweig, Opensky’s John Caplan, Engadget’s Brian Heater, Horizon Media’s Brad Adgate and Bloomberg’s Peter Cook and Julie Hyman. (Source: Bloomberg)

Live from pier 3 in san francisco, welcome to "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.

Let's get straight to the rundown.

The nsa gets a win in court as a federal judge rules that the own surveillance program is legal.

This after a different judge called it differently last week.

Amazon has kept its number of prime users secret.

Some holiday stats offer clues as to how popular it really is.

And from wearable devices like google glass, the ipad is in the classroom.

We debate the top ads of the year.

But first, to the lead.

After a week of setbacks, the obama administration gets a victory in court over nsa surveillance.

A federal judge in new york ruled that the collection of phone call data, including numbers dialed and duration of calls, is legal.

The judge threw out a lawsuit against the program filed by the american civil liberties union.

The judge writes that the technology allowed al qaeda to plot attacks remotely.

The program represents the government counterpunch.

Another federal judge said the exact opposite last week, ruling that the collection violated the constitution.

For the latest, let's had to peter cook in washington.

Different judge, different outcome.

That is exactly right.

You have two federal judges into different jurisdictions.

One is in new york.

The other is here in washington.

They have reached to different conclusions.

This tells you that the debate is not yet over.

This is likely heading on to the u.s. supreme court.

Judge pauley is a clinton appointee.

He handled the imclone case and a case on unpaid interns.

He is ruling in favor of the federal government.

It is a big win for their supporters in congress as well.

Peter king, the congressman, gave his reaction to this.

He says that preserves a vital weapon for the government in the war against terrorism.

He hopes that judge polly's decision will ease the adulation for edward snowden which has become so pervasive.

One judge, one outcome.

Different from what we saw in d.c. on the 16th.

To clarify for anyone who does not follow every bit of information on the story, outside of the courtroom, the obama administration has been looking to make changes.

They have looked to put their voice out on how they feel about this.

How do the stories come together?

You have a couple of different tracks.

You have the legal track that will continue up to the u.s. supreme court.

Then you have the president responding to all of the criticism and calls for change.

He told us before he left that he would announce some of his own changes in january.

He will follow-up on the recommendations of the panel.

They offered him ideas.

It is not clear that he will adopt all of their ideas, but he says the changes are coming.

You have members of congress proposing their own changes to these programs.

This is going to complicate that debate in congress.

There are strong feelings on both sides.

The nsa has gone too far here.

This ruling only complicates their efforts.

The president will be back in january.

President obama has spent time meeting with many of the tech leaders, from here in silicon valley.

We have followed how they have reacted to this.

Where does this leave them?

It leaves them, right in the middle.

That is where they have been before.

They are in legal limbo where the government is asking them to provide records.

They are not in a position to oppose that.

The big question is this idea put forth by the president panel.

What is the company's hold on to this information and not the government?

The government could ask for later.

Does that create a greater distance or make it more tolerable from a constitutional standpoint?

That is the debate that will play out.

The companies have been quiet about that.

That is one solution.

Thank you so much.

Joining us with the latest on nsa surveillance.

Now to amazon and new clues about a part of its business a usually does not talk about.

Amazon prime.

It released stats about the holiday shopping season and revealed that it added more than one million new prime members during their week of december -- the third week of december.

They had to halt sign-ups.

Jeff bezos says that amazon prime now has tens of millions of members worldwide.

To talk about this, our guest host of the hour.

He is an educational platform and offers homework help.

Julie hyman is also joining us with the latest.

Let's start with you.

The take away from the numbers that amazon has shared with us.

That tens of millions number that jeff is those mentioned in a statement -- a lot of analysts have extrapolated that to mean that they have in the low 20's range of amazon prime members.

The good news is that those members tend to spend a lot more on amazon.

I have seen estimates that they may spend six times as much as the average user.

They pay $70 for that annual membership.

It amazon pays their shipping cost.

Amazon is eating the cost of that.

These are attractive customers for them.

They have also said that on the peak shopping day, which was cyber monday, they saw a 39% increase in the number of orders.

I was just looking at enough -- a note that says that the increase year-over-year is higher than anticipated.

Analysts are looking for $26 billion in sales.

They say there is a little room for amazon to meet that.

Dan rosensweig, let's bring you into the conversation.

Happy holidays.

Talk to us about the power of prime.

How important is this membership program for amazon?

Historically, it was probably even more powerful than it is today.

Historically, there was a power -- a battle between walmart and anybody online.

The power of free shipping was a huge money-saving.

Going forward, as products become more digital, we will see.

I think it will become more expensive for amazon.

A lot of people use it that would have used it anyway.

We will see if they will start weaning people off of that going forward.

You have seen them try to do other things.

I think it was genius early on.

They built a loyal audience base.

Most of those people who are buying all of that through amazon would buy it anyway.

If their investors let them keep losing money, i think they will keep doing it.

I do not think it is as important going forward as that was.

Tooley, what do these numbers tell us about the broader online shopping season?

There is a lot of optimism that has been surrounding the season.

They predicted we would see sales go up 15%. the latest numbers say that the holiday season through december 22, we saw a 10% increase.

That was focused on desktops.

That does not include mobile.

We could see a few more percentage points added.

These amazon numbers do seem to show that there is a lot of demand.

Keep in mind that amazon's numbers are about the number of orders.

One of the big questions coming out this holiday season is are we going to see the same trend in online shopping that we have seen off-line?

Lots of discounts.

Are we going to see that increase in traffic at the same time that margins are going to be squeezed and sales might be compressed because people are paying less for the stuff they are ordering.

All right.

Thank you.

He will stick around because 2013 was a big year for tech ipos.

45 technology companies went public.

His company was one of them.

Dan will be back with us.

? welcome back.

That data breach at target may have been worse than we thought.

Target says that strongly encrypted data was also stolen in the breach.

The numbers can only be encrypted by independent payment processors.

Target says that the numbers are still safe and secure.

The breach affected shoppers that went to target between november 27 and december 15. 2013 ended up to be a take year for technology i the o's. -- ipos.

45 companies came from the tech sector.

That is the most technology ipo since 2000. among the big names, twitter.

Back with us as our guest host, dan rosensweig.

You moved in the last couple of months.

We sold a house and move to a house.

My daughter came home from college.

My wife did everything.

Our data -- our ipo is reaching an anniversary.

That is anniversary it of itself.

You were doing your ipo roadshow the same time that twitter is doing it.

Talk to us about the process.

Shed some light on why this is the year for tech ipos.

The process is grueling.

You're on the road for nine straight days.

You meet with 65 one on ones.

You tell your story.

It is exciting to represent your company and employees.

It is a grueling process.

It is a process that needs to be read visited.

I do not understand why with all of the technology that exists that you cannot do the things electronically.

The reason that a lot of companies went public this year is that they were right to go public.

They have been around for a long time.

The company was seven years old.

If you look at the successful ones, facebook, twitter -- they have reached the age where revenue growth is strong enough.

Profitability is strong enough.

There was a gay reception for ones who had come out earlier.

Pandora and others who have been successful.

Also, your job is to raise capital.

At the best rate that you can raise it.

It turns out that the public markets were much more willing than the private markets to give companies the value that they deserved.

What you saw was just the beginning.

Wendy 14 will be even bigger.

What changes when you are a public company?

Facebook and twitter have gone company.

How does that affect the flow in the valley.

Does that change anything?

It changes a lot of things.

A lot of ceos will say it changes nothing and they're not telling the truth.

You have a whole constituency of public investors.

They do have a voice in your company.

They own your company and you run it differently.

If you think about all the companies that we like, most of them spend their time talking about modernization.

Facebook started to focus on mobile and modernization.

Now video and video ads.

These are things they probably never would've heard about before.

Twitter is introducing new ads.

All good for the business.

Even google.

When they went public, they moved their engineers off onto search modernization.

Priorities change.

At the end of the day, it all equals out.

These are great companies trying to build hundred year companies and tear out the right balance.

Coming out of the gate is not the easiest thing.

Another theme was leadership changes at older technology companies.

The obvious one is microsoft.

The company is still looking for its new leader.

What do you make of their situation?

When i make of it is what we have seen.

There is probably -- companies that have been public for 100 years, there are not many of them.

There's one from the west coast, wells fargo.

Technology companies, ibm is probably the only one that has been public more than 100 years.

Technology companies have not been around that long.

They have to learn to go through this leadership transition.

You're seeing a lot of companies -- my former company, yahoo!, struggled with change for years.

There are two models at work.

Ebay under john donahoe.

And adobe -- these were older companies that went through model transitions and leadership transitions.

You start to see the beginning of that with meg whitman.

Microsoft will be a difficult opportunity or challenge for whoever takes it.

You mentioned yahoo!. do you think the microsoft board has observed at the yahoo!

Scenario and what has happened with morris the?

I think that microsoft goes on its own angle.

They have a view of what they want.

Marissa has done a phenomenal job.

A lot of the benefits outside of yahoo!

Is alibaba.

I am excited about the guy who did that deal.

It is a wait and see whether the core business will actually change.

They're looking more at the ebay's and adobe's in terms of mapping the model.

Stick around.

We have more questions for you.

We want to know about your thoughts for 2014. dan rosensweig is joining us.

We'll be right back.

? welcome back.

I am jon erlichman.

You are just now getting your christmas presents, you're not alone.

A surgeon must minute orders left the livers scrambling.

Retailers had to offer gift cards in exchange.

We're talking to john from open sky.

Some people are blaming fedex and ups.

Some are blaming the retailers.

We could probably blame ourselves up we are pushing the buy button late in the process.

What do you think?

There is enough blame to go around for everybody.

You had consumers waiting around to the last minute.

You had ups who should've gone out sooner to communicate.

You have to message her audience when they need to order to make sure the packages get delivered.

On open sky, we have thousands of merchants who agreed to fast ship products.

If you ordered by the 22nd, they would guarantee delivery.

They would live up to that.

I really think that there's enough blame to go around.

Consumers need to order earlier.

Ups needs to communicate better and retailers need to not squeeze in the last order when they know it will not arrive in time.

What about where they are ordering?

For example, if they are ordering on their phone.

Amazon shared wild stats.

Five and -- five toys per second were being ordered on mobile devices.

Anecdotally, what do hear about what people are buying on their phone and when?

The second fuse matters?

This is the year that the phone dominated the e-commerce landscape.

We saw more than 60% of our activity on mobile and tablet devices.

One of the things that you see is that nobody -- people are buying 24 hours a day.

They're not just waiting for cyber monday.

What i think the phone purchasing relates to is that people are looking to discover more interesting product.

They go to open sky or pinterest or other platforms like ours and find interesting goods.

On open sky, we have one unified card.

They can buy from thousands of merchants.

Consumers want to shop not just at the top 10 retailers.

They really want to discover more interesting products.

A lot of angry shoppers can now take their frustration to social media.

How fearful are the brands of the twitter haters?

You are catering to a lot of smaller retailers as well.

I would imagine that a few things that are negative could be detrimental.

The average item on open sky was shipped within 14 hours of the transaction.

If you are one of the big retailers and one of their systems candidly are complex and robust, they do not have the ability to move as quickly as the small and medium-sized businesses.

Their life but -- lifeblood is serving customers.

Your question is a good one.

When someone has something bad to say, how do you handle it?

You have to apologize and solve the problem.

Make sure that you are human.

If you do not take care of your customers, they will tell their friends.

They will not be your customers for long.

15 seconds left.

The whole amazon crew -- drone conversation.

Will this open the door for drones?

No way.

No chance.

Never going to happen.

It is incredible pr, but it is not relevant.

The last thing people want to see our drones flying around their neighborhood.

John donahoe of ebay suggested something similar.

Take you and happy holidays.

Time now for on the markets.

A look at what is moving on the markets every hour.

Olivia sterns is here.

Stocks are moving sideways.

They are edging lower.

You can see that the dow was off by 11 points.

The s&p 500 is off as well.

The nasdaq is down by about 11 points.

That is being dragged down by twitter.

More in a second.

Let's get a check on the treasury markets.

We saw yields up -- up above three percent.

This is the first time they have been up at that level since september.

The second since september 2011. all in speculation of improving economic data.

We may see the fed taper a bit faster.

We're are also watching shares of twitter.

Chairs are dropping after a 180% rise from its ipo price.

Perhaps it is because they were downgraded after the surge.

The stock has climbed too far too fast.

That is it for on the markets.

? // this is the early edition of "bloomberg west." you can also catch is that are later time.

3:00 to pick it now for the top headlines.

More severe weather is hitting the united kingdom.

Rains and winds over 100 miles per hour are battering parts of england and wales.

Storms have left thousands without power and caused severe flooding.

They have also shut down trains and caused numerous airport delays.

A merger in the aviation industry.

Textron has reached a deal to buy beechcraft 41 $.4 billion.

Beechcraft emerged from bankruptcy earlier this year.

Both companies had struggled with the downturn in orders due to the recession.

And dallas cowboys quarterback tony romo officially out for the rest of the season.

Coach jason garrett says he underwent back surgery after being hurt in sunday's win over the redskins.

Kyle orton will start for dallas against the eagles on sunday.

The winner is headed to the playoffs.

Now to our special year-end series.

The top five.

As we wrap up the year, we look ahead to next year.

We are talking about the top five gadgets we will see in 2014. our guest is dan rosensweig.

He is with us, along with brian heater.

Brian, thank you for joining us.

Interactive learning told is your number five.

Tell us why.

I think they are ready.

The percentage gdp that is spent on learning is huge in this country.

15% of all of our -- everybody in this country is in higher education.

Parents are going to start using their dollars toward told that help their kids to learn math and science and other things.

If you look at what just happened in the last month, or all of those hours of free cod ing time -- there will be a push to give their kids something of value.

This is stuff that you know very well.

Brian, i would love to get your reaction before we get to your number five.

We have seen -- it is really stunning.

We're seeing a lot of interesting initiatives in schools.

Code.org has been huge.

We're teaching kids new coding.

We're seeing them reframe the way that they do education based around these devices.

Ok.

we're going to move on.

Brian's number five is google class.

It was kind of a 2013 thing.

We may see more adoption in 2014. why is this on your list?

This is really only the beginning of this device.

Everybody that we have seen our developers or reviewers.

To actually get these things onto people's faces and get developers really excited to see what sort of third-party they could create, this will continue to be huge.

They will be huge in the next couple of years.

Google glass is leading the way.

Dan rosensweig, are you a google class guy?

I am not.

The next three or four years will be an enormous market for it.

It will be more of a professional market first.

People who spend all of their lives in front of a screen.

They will ultimately use it.

It is a consumer product.

A small group of people will think it is cool.

As a new yorker, it is a challenge.

Let's get to dance summer for.

-- dance number four.

-- dan's number four.

Snap chat.

You think the theme continues in 2014. i think there is a lot of underground apps that people are using.

My theme is less the gadget and more what people will use.

I have seen some really cool snap chat wannabes whom i go past it.

They will do videos and text.

I think there will be a lot of usage and conversations.

Particularly ones that are not stored.

Brian, you could make an argument to one of the big tex stories of this year was snap chat saying thanks but no thanks to facebook.

Would you agree?

It was absolutely huge.

That was a tremendous amount of money.

Everyone at google was shocked.

At the same time, i would've taken the money and run.

I guess it is important to stay in charge of your company and actually be able to manage what the company is doing.

In the future, we will see a lot of sites like instagram and facebook and twitter that are utilizing that ephemeral capability.

Brian, your number four gadget for 2014 list -- you have a gaming theme.

Oculus.

Tell us about it.

This really feels like a virtual reality that we have all been waiting for.

I did not really believe it until i had a chance to play around with it.

We have seen various builds over the past year.

It is really incredible the technology that is finally coming home and they are really doing it a fantastic way.

You can see it all around you as you are moving around.

This is the immersed it gaming experience that everyone has been waiting for.

Dan, i know you know a lot about gaming.

Your number three is back on the education subject.

Tablets.

A big gadget theme.

Your number three is tablets in high schools.

I wish they were going to college is faster.

The reality is that higher education -- the professor gets to determine what they teach and how they teach it.

High schools are more rapidly jumping on the bandwagon.

We need to get these kids skills to get jobs.

Outcomes are a much bigger deal.

Interactive learning and the ability to teach individually.

The ability to teach multiple leg which is without knowing multiple languages.

You see this technology being brought in.

You will see two kinds.

Subsidized and -- people spend money on new technology.

You will see a combination of subsidized and people using their own.

There is no doubt that high schools will push it faster.

A lot of great ideas.

Brian, back to you with your number three.

Hp makes its way into the conversation.

You lead motion devices.

Tell us about that.

Elite motion made its way into the conversation.

This is one of the early companies.

They have already come out with a product.

We're talking about all-in-one laptops.

This is a completely different way of interacting with your computer.

This is about as close as you can get to touch.

It is fully gesture-based.

You can swipe around and control of your hands.

I do not think we will see the end of the mouse anytime soon, but it is nice to think that we're kind of heading that traction.

All right, stick around.

We will have more gadget talk.

The top one and two picks for 2014 are coming up here on bloomberg west.

? i want get back to our special series.

The top five.

We're counting down the top five gadgets.

Doing a little forecasting.

Here again are dan rosensweig and in new york, brian heater.

Dan, let's go to your number two.

It is the tesla x. this is kind of their suv, minivan blend.

It will hit the market in 2014. teslas on your list.

It turns out to be.

They have to be on your list and senate -- silicon valley.

That is what everyone is driving.

The brilliance of the engineering and the design and the experience.

The ability to fix the cars and improve the cars and give them longer life over the years.

Somebody has figured out a way to take the beauty and experience in technology and blended together there's nobody else doing what he is doing.

It is probably the hardware that i love.

It is gorgeous.

There's a more family-friendly model.

Will that open up the market on who they target?

The first one is a very small segment.

The second was a sudan.

It competed in the luxury market.

His vision to make them more family-friendly and less than $30,000 is something that i inc.

Is scale he can achieve.

This is the next step.

Brian, your number two tech gadget -- we will see if that happens.

You are saying the apple smart watch.

We're speculating here.

These are the top gadgets of 2014. the smart watch is definitely going to be a huge segment.

We will see a lot of companies make a big push their.

We have already seen samsung and sony and microsoft in the game at one point.

Couples are pretty popular in a small segment of the population.

Nobody has done it quite right.

I have not given us that super compelling reason to wear one.

I do not think anybody has made a really beautiful device.

If one company is capable of doing both of those things, it is apple.

Staying with the wrist, your number one is jawbone.

What they are doing in terms of combining elegance with quality and low prices -- what they're doing is allowing you to get more out of the things you already own or have.

I'm a big fan of sharing.

There are speakers and sound that project video.

People who have netflix or other content are getting more value out of it.

Particularly the things that they're doing in the health category.

They're focused on getting more out of your body.

You are able to learn things about yourself and do things with it.

I think that the big trend will be how to get more value out of what you have as opposed to spending more money on something that does the same thing you already do.

Before we go, brian, your number one pick in what has been a very hot category in 2013 and likely will continue.

3-d prints.

Tell us what your thoughts are.

There are a ton of companies out there and a lot of startups.

They have gotten into the consumer space.

Prices will continue to come down.

These will become more user-friendly.

We're seeing a lot of scanners.

It will be easier for people to get the 3-d objects to print out.

2014 might be the year that he's really hit mainstream acceptance.

Certainly in the next couple of years.

It is pretty amazing technology.

Brian heater, thank you for sharing your list.

Dan rosensweig, if we could make copies of you -- you know what i mean?

This is a great hour.

Thank you for joining us.

It has been a fun year.

2014 will be an interesting year.

Great stuff.

Speaking of 2014, it could not end up being -- it could end up being the year of the sequel again.

Hollywood has loads of sequels planned for the new year.

We will talk about the strategy that.

? that was a scene from the latest hobbit film.

It was a big performer on christmas day and has generated $150 million for the box office.

The holiday season has been littered with sequels.

2013 may just be a warm-up for what we will see next year.

Brad covers the media for verizon and he joins us now in new york.

I look at this list of planned sequels and it is long.

Transformers, spiderman, night at the museum.

Another hobbit movie.

Will this be a bigger year than 2013? it could very well be.

The sequels work.

If you look at the five top grossing films of 20's -- 2013, they are all sequels.

Led by ironman three and hunger games, they are from marvel comments.

A lot are animated series.

They lend themselves to a lot of merchandising and they lead to build in recognition factors.

There are dollars to be made.

You mentioned the top grossing films of 2013. if you put together sequels and reboots, like iron man three and man of steel, they do dominate the category.

It does not seem all that creative, though.

Is hollywood on autopilot?

That is sort of the criticism.

It is kind of on autopilot.

It is a different model.

It is just a verse.

You see some of the shows like the lone ranger that was kind of a show, more like a reboot, i suppose.

That failed.

You had 47 ronan.

They will take a write-down on them.

There are risks involved.

It is not necessarily a slamdunk.

Some of these things like transformers next year will be a reboot.

It is with mark wahlberg instead of child above.

There are risks in that.

The bourne legacy did not do as well with matt damon.

On the flip side, if you take "wolf of wall street" or " secret life of walter mitty"," these are not reboots.

Virtually every movie made today, not all, virtually all is written with a sequel in mind.

If you look at something like hercules or dwayne johnson, here is the guy who can lend himself to a sequel.

He does not have a franchise show.

He had 12 labors, hercules.

We could see 12 movies.

Ra.

got to leave it there.

Happy holidays.

Senior vice president, brad joining us.

More after the break.

? welcome back.

I am jon erlichman.

Coming up on the late edition at 3:00 pacific, from twitter's ipo to facebook's success in mobile advertising, 2013 has been a big year for social media companies.

What will 2014 bring?

We will have predictions.

It is 56 past the hour, which means we are on the markets.

Olivia sterns is in new york with the latest.

A lot of disgruntled online shoppers out there right now.

They are waiting for their goods to arrive.

Ups is enlisting the help of 2600 extra workers and even 900 of its managers to drive those trucks.

It is an attempt to deliver these christmas presents that did not make it on time for the holiday.

Bloomberg got a look at their latest technology that was supposed to help streamline their delivery process.

This is orion, the algorithm that makes ups tick.

Algorithm is not an -- a word you expect to hear at ups.

They are changing the world of package delivery trip we are a technology company that has trucks.

Orion is a program 10 years in the making.

The objective is find the fastest most efficient way to get packages to your door.

With 120 deliveries per driver, there are more ways to service those customers.

Orion is looking at trillions of things in seconds.

It will run 200,000 alternatives.

It will say here is the best way to deliver.

Each truck has over 200 sensors that monitor everything that drivers do, from turning on the vehicle to unloading boxes.

All of that is fed into the mathematical equation that prioritizes the variables.

Distance, time, traffic, and cost.

Our goal here was not that we would dramatically grow efficiency by doubling your trip playing.

It was trying to look at small gains.

On our scale, small is significant.

Its culture of efficiency has a storied past.

Starting with the company's first livery car, a model t ford in 1913. 11 years later, they built the first conveyor belt system for handling packages.

Good morning everyone.

This year, it is orion.

We are here because of orion.

By the end of 2013, we will have a portion of our fleet deployed.

It will save 1.5 million gallons of fuel.

It will adjust on the fly.

The waiting time changes by 10 minutes.

Here's your new plan.

People do not think to technology.

We think about google or oracle.

Google maps are not accurate enough for a ups trevor.

You are better than google maps?

Absolutely.

We have a world-class i.t. map

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

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