Live from pier 3 in san francisco, welcome to "bloomberg west." i'm he will -- emily chang.
Ahead, we are following this hour two major developing stories from around the world.
First, israel has launched a ground invasion of the gaza strip, with tanks and troops rolling into the embattled area.
It aims to end hamas rocket attacks.
It's israel's first significant offensive into gaza in five years.
From israel to ukraine, where a malaysian airlines plane that's cashed near the border with russia.
All people on board are dead.
Ukraine said the plane was shot down by pro-russia separatists.
Those rebels deny responsibility.
And google and i.b.m. are out with earnings.
I.b.m. posted a 2% drop in revenue but the declines were smaller for some business units.
To our lead story.
Israel has laumped a ground invasion into the gaza strip, its first significant offensive there since 2009. it's aimed at stopping the miss aisles fired into israel from hamas, which is in control in gaza.
Israel has also authorized the callup of 18,000 additional troops.
Israeli prime minister benjamin netanyahu says the israeli forces are charged with, quote, destroying the terror tunnels dug through the gaza industrial into israeli territory.
Elliott gotkine, what is the very latest on the ground where you are?
The latest, as you say, is tanks have gone into the gaza strip.
The first major ground offensive since 2009. and the mission, as prime minister netanyahu intimated there in that quote you just cited is to destroy these tunnels that hamas and other militant groups have guidugli -- dug under the ground, stretching kilometers in, order to carry out attacks.
What seemed to have pushed benjamin netanyahu over the edge, since he seemed reasonably reluctant to go forward with a ground invasion, is this morning before the temporary cease-fire came into force, 13 militants emerged into israel from an underground tunnel.
The israeli armed forces say they will -- they killed at least wuncht militants.
Israel's got an answer to the rocket fire, thanks largely to its own missile defense system, but it hasn't really got an answer to the underground tunnels.
Elliott, it's the middle of the night where you are.
What are you guys preparing for over the next several hours and into the morning?
Well, look, outside of the zone just immediately abut thing gaza, there aren't air raid sirens going off here more than, say, once or twice a day, although tel aviv and other cities to the north such as jaffa now seem to be in range of hamas and some of the other militants' weaponry.
There is an impact, meetings are cancelled, for example, people aren't necessarily flying in to have meetings.
Some c.e.o.'s -- one had to bring his daughter to work last week because she was too scared to go to school.
They may have to work from home.
Certainly factories and businesses closer to the gaza strip may close down and -- ar -- or are certainly work at full capacity because every time an air raid siren goes off, they have to go to their shelter.
So life is going on.
Obviously not completely normal but there is the hope that things will be over as quickly as possible and normality will be resumed.
You looking live at the gaza strip right now.
Elliott, thank you so much.
Live there from tel aviv.
Now to another major international story, the crash of malaysian firls flight mh17 in the heart of the area involved in the ukraine civil war.
A ukrainian official says the plane was shot down and is pointing the finger at ukrainian separatists, staying intercepted phone conversations among militants talking about the plane, but those rebels are denying responsible.
Moments ago russian president vladimir putin said ukraine bears responsibility since the crash happened on ukrainian soil.
President obama has been on the phone with the major players, including ukraine's president from air force one.
Straight to mike mckee in new york with the latest.
The u.s. now saying that we believe it was shot down as well?
Intelligence officials are telling reporters in washington, including from the washington post, that it was brought down by a surface to air missile, though they haven't determined what kind or who bears responsibility for it.
However, given the la -- location of this tragedy, it's the subject of many rumors and a lot of finger-pointing.
It's a war zone and a lot going on there right now.
It is dark in ukraine.
Makes it difficult to know who is going on.
There are reports that emergency responders have been hampered by armed militants in the area but they have recovered the black boxes.
The plane disappeared from radar about four hours after it took off in amsterdam.
Malaysian airlines in a sfweet -- tweet said it had lost contact, the last known position was over ukrainian air space.
The ukrainian government confirmed that crash shortly thereafter.
It went down in an area near the russian border that's been the scene of heavy fighting in recent days.
Militants have shot down ukrainian planes in recent days but say they don't have the capability to bring down an airliner.
Malaysian airlines it this time being much more communicative after being harshly criticized for their handling of the missing airliner that is still missing the this is a war zone.
Why was the plane flying over it anyway?
The f.a.a. closed 9 air space over crimyea can -- crimea earlier this year because of concern over which country would actually control that air space in terms of aircraft control.
But the route to russia across the continent remained open and at this point it appears that the malaysian airlines plane was using a route used a a lot of planes.
It has sin been closed.
Airlines fly at 30,000 to 40,000 feet and the surface-to-air miss aisles the rebels have only go about 4,000 feet.
The speculation is what kind of weapon was it?
It would have to be fairly sophisticated to take down a plane flying that high.
One report said it's a buc, a sophisticated type pro dousd by the russian.
The question is who in that area would have one?
We're going to have more on that question later in the show.
President obama has been speaking with the president of ukraine and offered all help necessary.
But, mike, what happens next officials if they can secure the area will try to get in and discover what they can.
You athe countries with nationals on plane have been in close consultation.
There is a security council meeting at 10:00 a.m. tomorrow.
The u.s. just imposed more sanctions on russia yesterday.
That's why the president and president putin were on that previously scheduled phone call today.
So a lot of political implications from this tragedy that have to be worked out over the next few days.
Bloomberg's mike mcdemy new york, following this crash all day long for us.
Thanks so much for that update.
Well, former secretary of sate hillary clinton speaks to charlie rose in an exclusive interview about the downing of the malaysian airlines plane.
We're going to bring that to you next.
Welcome back to "bloomberg west." i'm emily chang.
As we get more information about just what happened to this plane that crashed in ukraine, charlie rose just spoke with former secretary of state hillary clinton herself to get her thoughts on what it could mean for the ongoing conflict between russia and ukraine.
Let me begin with the news of the day, a plane shot down over eastern ukraine.
What questions would you be asking hi -- at this moment?
Well, the questions i would be asking at this moment are, number one, who could have shot it down?
Who could have had the equipment?
It's obviously an anti-aircraft missile.
Commercial airlines are big targets but by the time they got over that part of ukraine they sl have been high, so it takes some planning.
The ukrainian government has been quick to blame it on terrorists, which is their name for the russian ininsurgents and there does seem to be growing awareness that it probably had to be russian insurgents.
How we determine that will require from forensics.
But then if there is evidence pointing in that direction, the equipment had to have come from russia.
What more the russians may or may not have done, i don't know.
I read as we were coming in today to talk with you that the russian stock parquet has dropped.
There say great deal of western doctor concern is not only with a civilian plane shot down, but what this means about the continuing conflict in eastern ukraine and the role that russia is playing the so what does the united states do if there is clear indication and evidence that it was russian separatists perhaps using weapons from russia?
I think the first question is what does europe do?
The united states has been very clear in both its criticism of russia and putin, its support for pour ashempingo and the -- poros shmplet enko and the new government and there has just been a new roundle -- of sappingses announced by president obama himself.
I was just recent think in europe, a lot of questions about whether or not russia was really the aggressor, whether or not putin was really dangerous, how could that be evaluated?
From my perspective, and i have the bench not being in the government, if there is evidence linking russia to this, that should inspire the europeans to do much more on three counts.
One, toughen their own sanctions.
Make it very clear there has to be a price to pay.
Number two, immediately accelerate effort and announce they are doing so to find alternatives to gaz prom.
Musha has not diversified its economy.
Still largely dependent on natural resources, principally gas and oil.
There has to be more help on their borders in order to prevent this bore -- porous border allowing russians and insurgents to go back and forth.
The ukrainian military under the new president has been much more focused and successful but nobody kids themselves, if russia keeps weighing in on behalf of the insurgents, there is a lot more that has to be done and to put putin on notice that he has gone too far and we are not going to stand idly by.
The europeans have to take the lead on this.
It was a flight from always terdoom kuala lumpur over european territory.
There should be outrages in the european capitals.
If it comes to it, do you think putin is willing to take more risk than ever before with respect to ukraine?
And do you believe sanctions will have the power to restrain him?
I think putin is pushing the envelope as far as he thinks he can.
He has aneked crimea.
He is willing to keep the area unstable in order to try to get the ukrainian government to back off on -- on their 0 approach to the e.u. and i think the only language he understands is one that is very tough, very clear.
There is evidence that the sappingss are having an effect but sanctions alone will not necessarily restrain him or change his calculus.
That's why i would like to see the europeans do and i urged them to do and write about in the boorks going back to march 2009, come p with an alternative energy strategy that does not leab to you the mercy of putin and gazprom.
They've made some steps but not nearly enough in my estimation.
You can catch the full, exclusive interview with hillary clinton tonight p at 11:00 eastern on pbs.
Coming up, we're going to be talking with the former s.e.c. chair deborah herbman.
I'm emily chang and this is "bloomberg west" on bloomberg television, streaming on your phone, your tablet and bloomberg.com.
According to multiple reports, u.s. officials say it appears likely that malaysian airlines mh17 was shot down by a surface to air mice -- miss ivement but who is behind it is still not clear.
Joining us now, deborah hershman.
Thank you so much for joining us.
First of all, given your experience how does an investigation into a foreign country proceed from here?
You know, i would say that there are very good protocols for international investigations.
The biggest challenge here is that they are in a war zone, and trying to understand how you put your investigative team on the ground but you also guarantee their safety and security is probably one of the biggest challenges.
The second challenge is where the aircraft is located and how they secure those parts and that evidence.
That's going to be a significant issue here as well.
Deb orah, what kind of things exactly will they be looking for when they goat -- get to the spot?
Would the u.s. typically be involved in this if it didn't have a u.s. airliner or any other connections?
The direct connection for the u.s. is that this is a boeing aircraft.
The international protocols identify the lead investigator as the country where this accident occurs, the state of occurrence.
But the state of manufacture and the state of the operator, malaysia, has a role to play here as well.
But when they get on the ground they're going to be looking really to identify and track the evidence much the four corners of the aircraft, the cockpit voice recorders and really to identify where the first parts started to shed.
This is a diffuse field of debris as we can see from those photos, so they really have to start -- start at the originalnation point.
Which pieces started to break off first and what happened for that to occur?
Given your experience, i assume a jet liner taken down by a missile is an incredibly unique situation.
What do you do differently in that kind of situation as an investigator?
Well, i think they have to make sure that they have all of the evidence, all of the evidence.
Particularly if they're looking at something, possibly a missile strike, they've got to make sure they have the section of the aircraft, the evidence that shows where that might have occurred.
Now, there are often times when you get into an investigations and you think it looks one way when you start, but then you start to find different or conflicting information that leads you in another direction.
So they will have to look for everything, keep an open mind to try to identify who -- what occurred and make sure they follow the evidence, where the evidence takes them.
So presuming the safety of the investigators, which is a big presumption, what's the worst-case scenario in terms of the site being disturbed by the time the investigators get there?
Well, if key pieces of evidence have been removed on -- or have been damaged, then the investigation can be very compromised.
We have been in other countries where the ntsb has gone to help but much of the aircraft has been cannibalized and taken, so you have very little to work with.
You lose the recorders, then you've got -- lost a big part of what you can do as an investigator.
Now, deborah, what are the chances that this happened intentionally versus accidentally?
What are the chances that perhaps this malaysian jet liner wasn't giving off the appropriate signals so that whoever shot this from the ground may not have known that it was friend versus know well, i think we're going to have to leave that kind of information to the experts.
But i will say that people like to jump to conclusions early on in processes like this, and it is very difficult to do that.
We have seen other events that have occurred that looked one way in the beginning, but then you find additional information and you really have the -- to follow the evidence.
That's the important thing here.
I know there apes lot of rush to judgment, but.
You really have to let the -- but you really have to let the facts play out quickly, what do you think is happening right now hend the scenes between the ntsb and other agencies?
So, you know, these international protocols really identify how the investigations so -- should run so it is a state of occurrence where we really need to place the lead for the investigation.
They have tony vite others to actually join them and then many people are going to be looking to actually establishment visas and --? we'll have to leave it there.
Former ntsb chairwoman, deb rapp.
You are watching "bloomberg west," where we focus on technology and the future of business.
Many of the updates on the crash of malashean flight is mh17 are coming from social media, even from the airlines themselves.
One of the early reports came from the advisor to the ukrainian interior minister.
Trance lated, on facebook he wrote this.
Putin, you and your cronies did not escape from the international tribunal.
He says thousands of people have seen the launch and flight of the rocket which you kindly handed to sponsored terrorists.
Malaysian airlines also tweeted from the plane first went missing, writing, we have lost contact with floit flight.
More details to follow.
Other airlines like delta have also been responding to the tragedy on twitter.
Multiple reports say u.s. intelligence officials believe it was a surface to air missale that shot down malaysian airlines mh17 at 30,000 feet.
What weapons have the size to be cape ame -- capable of that?
P and what security measures are available to protect?
Joining us now, john mcgraw the former director of the f.a.a.'s flight service via skype out of stafford, virginia.
What kind of missile is capable of this and who has it in?
It's certainly something beyond a conventional surface-to-air missile we think of.
Shoulder-launched miss aisles have an altitude typically of less than 12,000 feet.
They can't reach ige -- anything that's 33,000 feet up.
It's very sophisticated, something you don't expect to be in the hands of anybody other than a sovereign government.
With the splintered government, obviously somebody was able to operate this very sophisticated system to be able to fire this missile.
Dmitri, what is the view in ukraine right now about this whole situation?
Emily, thank you for having me.
I wish it was under better circumstances the this is a vivid example of where putin's politics can actually lead to and the developments today is nothing less than a terrible tragedy and an act of international terrorism on a mass scale.
Unfortunately the fact are straightforward.
The russian government is doing everything they can, bombarding the space, including social media with fassfied information.
Right now we're facing a massive information warfare with russia, trying to basically hide what has happened, but i think the facts speak for themselves and people, both governments and the private sector, we need to act together.
To stop such a thick happening in the future.
It sounds like you are saying there say coordinated effort by the russian government to put out cyber warfare, if you will, false information?
Give us some details.
There are two parts to this warfare.
There is the military actions, and i'm not an expert in military warfare but i can talk much with regards to information warfare.
If you look at russia and how well they're positioning everything they do, everything the ukrainian military and the government does, it's nothing short of very well funded, very well planned information warfare against ukraine.
And really anyone who sees ukraine's future within the european union and western community.
Unfortunately the resources available in the ukrainian government are not even closely compared to the resources the russian government has at its disposal.
John, talk to us a little bit about the technology of the missile system by at which identifies things in the air.
Is it possible that this missile system 0 could have misidentified this plane and perhaps it could have been shot down accidentally because they were unable to determine whether it was friend or foe?
Does that seem plausible?
Or does this seem like an intentional act.
Well, it could be.
It could happen.
Typically the military and civilian counterparts in air traffic control and defense are very closely linked.
You would expect, if the u.s., if the military was going to shoot down an airplane they were talking back and forg -- forth to make sure that's not a civilian airplane.
It's unclear with the separatists whether they would have any air traffic control or were just shooting a a -- at a big airplane.
Whether they shot -- thought they were getting a russian cargo plane, for instance.
You have described these events, and i'm seeing that these were designed in the 1970's. have these been updated over time?
Have they been updated since the first buk miss aisles?
It's in -- unclear whether the latest versions would in the hands of these folks.
As any country, they typically don't export the very top level, the highest technology to other countries.
So it's really not clear whether they had both the higher technology miss aisles and the right training and expertee, and also not clear whether they were tied into a bigger radar network that would help them better identify the airplane.
Dmitri, what's being done in ukraine right now to keep people safe from these attacks, to prevent more of these from happening if indeed it was a deliberate attack?
Well, we're doing everything we can to make sure that it is still safe.
You have to realize the situation in the eastern ukraine.
There are many df well-armed groups, essentially terrorist groups.
And when such terrorist groups have in their possession such powerful military equipment and military machines, anything can really happen.
What we have to do together, and this is not only for ukraine but also for the international community because now we have casualties from many quiz -- countries, not just from ukraine, is to stop the flow of highly sophisticated military equipment and weapons across the bothered -- border from russia to ukraine.
If we can stop this, we can stop all the casualties and meakhure -- sure that such tragedies will never happen again.
I understand that ukraine's economy has suffered considerably as a result of the ongoing unrest in the country.
There say big technology community there.
You have been on the show in the past talking about the free throw of that community.
How has that community been impacted as a result of what's going on and how will this crash impact the community now?
Well, without a doubt the economy is in a very difficult state.
Much of the i.t. sector, which does depend directly on the ukrainian sector, has suffered.
But difficult times have brought people together.
So within our project, for instance, we're receiving significant funding from countries like norway and increasing operations not two times but 10 times.
When it comes down to ukraine, kimplet ev, all the other areas except those two in the east, people are prying -- trying to stay positive and looking forward to a bright future.
In general we hope the future will be brighting a -- as long as we can work with the international community to timely settle this unnecessary dispute with putin and the russian government.
Admitry, thank you so much for joining us in the middle of the night where you are, also john mcgraw, airo space consult and.
Thank you both.
Well, google is losing an executive who drove the company's advertising growth for welcome a decade.
When "bloomberg west" returns.
? i'm emily chang and this is "bloomberg west" the the man who drove google's testing growth for decades is leaving the company.
Nikesh arora is stepping down.
They saw a 13% rise in roiven and 6% be gain in net income.
A 28% flies net income.
The news kept coming this afternoon.
A lot of tech stocks break after the bell today.
Starting with i.b.m. you think that's quite significant.
This is why people watch "bloomberg west," i hope, because they focus on the businesses, not the analysts' machinations.
I.b.m. has not grown since fourth quarter 2011. first of 2012 was 0.3%. we'll round that and call it no growth.
Ever since then we've seen slinkage -- shrinkage on the bottom line.
There are some financial engineering and machinations to get to the earnings per share number they wanted to report.
The run you -- one that jumped out to me, it's legal to report a tax rate that's actually not a cash rate the company pays.
They lowered it a year ago from 22.3% to 20%. big deal?
It's the difference between making the number and missing the number.
Wall street may be all giddy about them making the number but they only did it because of this tax rate they penciled in.
Does it mean they need this partnership bhor apple than we thought in we don't note how much is going to come out of that.
We know that their customers want iphones and i pads among other things.
Nouf they have another arsenal.
But it's going to take a lot for i.b.m. to meet their targets.
They're borrowing money to do it and have to keep the free cash flow machine alive to pay back all that debt they're taking on to keep the earnings per share high.
Other news today, nirk -- nikesh arora, the chief business officer for google, stepping down.
Our very first guest on bloomberg wet679 he was?
I forgot that.
Long-time googleer omid kordestani will be taking over.
What do you think of the move?
The job he is moving to say lot more interesting.
To take a guy like him who really knows the u.s. technology scene, the global technology scene even, is obviously a great get by soft approximated bank -- softbank, and could be a sign of big things.
And the numbers, up 6%? generally the numbers were in line.
At the -- we see the cost, the number of clicks going p -- up, actually down, i think -- i meant to say down 6%. but as more as more ads are mobile, the cost per click is going down because mobile does not garner as much revenue per click.
We're going to continue discussing tech news after this break.
Moofs -- microsoft planning the largest cuts in izz -- its history.
I'm emily chang and this is "bloomberg west." some changes on apple's board of dromplets bill campbell, long-time confidant of steve jobs is retiring after 17 years on the board, to be replaced by sue wagner.
And there is also major board news oubthulel packard.
C.e.o. meg whitman is being named chairman of the board, replacing whitworth, who just stepped down for health reasons.
Alcoa's kleinfeld has been apoint the to the board, bringing the number of directors to 12. turning to microsoft, microsoft announced the largest mass lay f in its company history as new c.e.o. satya nadella tries to remake the software giants -- giant.
They say they will eliminate as many a18 p,000 jobs over the year.
More than 12,000 cuts are coming in the newly acquired nokia department.
Nadella writes this.
And for more on what the moves mean for the future, we're joins by mat mcgill wayne from seattle via skype.
You know satya nadella.
What do you make of these layoffs now?
I think it's less a focus on layoffs and a lot more on the quote that you just gave.
We've heard satya redefine the strategy at a broad level, about platforms and productivity.
We started to see a change in the culture and we're really seeing that up here in seattle, too.
It's exciting, a much richer focus on looking externally,enter acting with the communities out there, including the open source community.
This set of layoffs is really about simplifying, streamlining and helping the company execute now that they have a shift in strategy and greater external focus.
Most of the cuts are nokia alone.
I was on with someone earlier who said this is proof that nokeyea was just a bad acquisition.
Is that it or is there more to the cuts?
I was referring to the 5,000 jobs and the types they have cut.
You're right, the nokia thing is different.
Nokia thing is more looking back to that strategy of platforms and productivity and saying how much do we really need to be the handset manufacturer in that particular strategic focus we're going to moving forward?
I think what you are going to be hearing more about, maybe as soon as next week is a greater and greater emphasis on cloud, in particular the azure stack.
Fast and increasingly data and the role that data ware and deteriorate -- data driven services is playing over the next 10 years.
We knew the cuts from -- were coming but didn't know how big they would be.
We've been talking about how more modern companies like facebook and google have built huge businesses on much smaller platforms, where companies like microsoft have tens of thousands of people.
Can satya nadella meriweather not -- make not just one hard choice but many down the line?
It's early to tell.
If you give him another month here, you can give him a six-month review and a lot of positive signs.
This is a series of hard choices.
Nobody wants to lay off one person, let alone 18,000, but it was necessary a a lot of the folks that got laid off are -- [lost audio] hey, matt, you mentioned open stack and open source software.
Why signal that?
What does that mean to you?
Irsfve all, microsoft is saying we're going to shift and listen to what's good on out in the community.
Why are peoples using all these other kinds of software that are not soffs -- microsoft and what are the challenges with those and how could very -- could we as microsoft have a role in it?
I wouldn't be surprised to see them embracing languages like python, things that have been around a long time but now are emerging as -- as the lingwa franca of linux.
If you don't know what is going on, how can you be relevant as microsoft?
That's the culture shift taking place five months in under saltia.
Shall -- satya.
Obviously there is a huge tech community up there in washington.
Describe, with nadella take over, the ripple effect in seattle and redmond, washington?
Short and long term.
In the short tem it's hard for people to be forced into this kind of transition, but those people are -- will have little trouble finding opportunities in our tech-drinken economy up here.
In the long run, everybody is rooting for microsoft to be one of the survivors and five months in i which think people are encouraged and cautiously optimistic that satya is making some early, good moves and trying to inspire through this focus on cultural transformation, now structural transformation, the steps that could lead to microsoft being a big, relevant tech company for decades to come.
Matt, thanks sop for joining us.
Satya nadella has a long pursued -- road ahead of him but he's certainly making some moves right out of the gate?
And what a horrible day.
Layoffs and it's a really upsetting thing for a lot of people.
Your heart goes out to them.
But microsoft say place where people have gone to have very long careers.
It's a unique technology company in that respect.
You meet people who have been there 15, -- 10, 15 years or 340r89 it's a big change for them.
Remember, you can get all the news aught the time on bloomberg.com.
We will see you tomorrow.