Microsoft's Surface Loss: Bloomberg West (07/19)

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July 19 (Bloomberg) -- On today's "Bloomberg West" the focus is on innovation, technology, media and the future of business. Hosted by Emily Chang with Editor-at-Large Cory Johnson and Senior Correspondent Jon Erlichman f19om Bloomberg's San Francisco studio, it showcases the personalities, companies and trends that are transforming the global economy. (Source: Bloomberg)

? welcome to the early edition of "bloomberg west." we talk about companies reshaping our world.

Our focus, as always is innovation, technology, and the future of business.

Microsoft calls nearly 11% after revealing it is taking a $900 million writedown on the service tablas.

Combine that with slumping pc market and microsoft's troubles are getting worse.

The city of detroit is talking about going bankrupt.

It was once known for its writing auto industry, could a technology turnaround spell a brighter future for the motor city?

Uber is going well beyond the black car, expanding to ice- cream trucks.

The global slowdown in pc sales is hitting a number of tech companies are especially microsoft.

It reported a fiscal fourth quarter yesterday and was sought numbers that did not look so good.

The biggest problem is declining demand for personal computers.

Shipments fell for five straight quarters and revenue from the windows and it came in at $4.4 billion, less than the company sold one year ago.

Windows eight failed to ignite demand.

Microsoft is hurting after its entry into the tabloid market.

The surface as a struggle.

The price was slashed this week and has taken and 90 million writedown in service -- surface inventory.

Sales of microsoft are having their worst day in four years.

Let's bring in a technology analyst.

You have a $31 price target on the stock.

I care about the changes in technology and i wonder if today and yesterday's earnings are a signal event in the history of the personal computer?

Absolutely, if you go back, it may be september of 2011 where we restart pc palm's pre we shipped 96 million pc's. will we get back to that level?

Current shipments are expected to be around 75 million.

The pc may become a factor relegated to the enterprise.

We will ship three times as many smart on sales of microsoft is missing out on those trends.

I cannot decide it microsoft is the victim of the pc market or the instigator.

I wonder if windows 8 has further led to the declined because consumer adoption has not been there.

If i were a microsoft investor, what has been driving and holding up the wind is revenue line is in the enterprise refresh thexp to 7 because many people skipped vista.

That refresh cycle is now 3/4 of the way down so that is not a driver.

When you see people buying smart phones, three times as many smart phones sold verses pc's, they will not be using the office products.

Office has been carrying the day for microsoft but the weak pc sales is likely to impact sales of office.

Their enterprise business is really strong.

Outside of office, they have done well but i wonder -- it has been a slow offtake and better than the distance.

They have more users of windows 8 and they have on vista to this day but do you think there will still be an upgrade cycle?

Ballmer made the announcement the8.1 and he talked about touch and then the machine shifted to the holiday season.

Will that change things?

We will have to see.

If you want to be optimistic, you can say absolutely they can get back in the game.

If you look at the number one selling notebook amazon, it is a samsung.

The number two is an apple mac book perot.

Pro,. that will impact the office usage which has been strong driver.

When you combine it with this massive reorganization they are doing this year, it will be a tough year for microsoft.

I just don't see an end of the pc-era.

It does not seem right to may.

Intel and microsoft numbers, they stole billions of dollars worth of new gear.

The pc is not going away.

Given that the peak was 96 million units and we are shipping about 75 million units in the june quarter, what is to say that it will grow?

This cannot be a market that gross.

All these other proliferation factors, microsoft missed the boat on . apple has a smaller business and the operating system but on amazon, you see those mac book numbers come out and i was shocked at the numbers about os10 city and it is up 110% in one year.

Do you see the macintosh computer as something big gains from the struggles microsoft?

Absolutely, but i think the real company that has gotten traction is a brutal with chrome.

-- is a google with chrome.

Google did a reorganization of the combined and tried to crawl under one user had an apple did the same thing with ois and the mac ois and microsoft is chasing after that so we will start adding these unified platforms for your smart phone and tabla and desktop but those transition pointer with companies can gain or lose share.

What about the surface?

Microsoft is taking a big change in strategy this week.

People don't understand what is going on with the inventory.

The inventory write-down is really about just taking something they have on the shelf because they are selling it for less than what they paid for it.

When they have a chance to reenergize this, that $350 price.

For a full-featured is not lovely.

The problem with rt is that it is arm-based market sector.

You go up -- you get back to the core issue of apps there is a limited selection of applications.

For the service pro which runs on intel, you can run all your legacy software.

There's a good chance for microsoft to participate in that marketplace.

In terms of rt, it is attractive and for those who want limited usage, i'm sure there'll be some sales.

Look at blackberry when they slashed their inventory on their tablet which was not well received.

There were still able to sell a quarter of a million.

That is certainly not an indication -- we will see how many of those will get sent back.

Colin gillis, thanks very much.

Online coupon sites just became the third concerns -- consumer coupon site to go public on the nasdaq.

Good dispel opportunity in the public markets for a looming tax ipos like twitter?

All that is next on "bloomberg west." ? this is "bloomberg west" this is "bloomberg west" you can also catch us at our leisure time at 3:00 p.m. pacific and 6:00 in the east.

Detroit became the first major american city to file for bankruptcy protection but despite their financial troubles, venture capitalists say it is far from dead.

Where are joined by the founder of grow detroit.

Alex, talk to me about the start of seen in detroit.

What does it look like?

The startup scene is very young but what is inspiring, especially over the last 6-12 months, there has been an influx of venture-capital and investment money to support the increase in start up companies in the region.

What kind of companies are we talking about?

When i think of the ones i know of in detroit, i think of the hbo serious "hung" which showed an entrepreneur of a different sort but there is the watchmaker you have there, his name escapes me at the moment.

It is more a manufacturing base, the great design and industrial culture of detroit but not technology.

I think the manufacturing talents here is something that definitely should be and needs to be continually embraced and relied upon as people come up with new and interesting companies to create.

That is definitely happening.

When you look at some of the old guard with gm and ford, they have venture arms of their own that often gets overlooked.

The ford family has a fund called fontanellis and gm has a venture arm called gm ventures which are both investing in a very destructive companies very nnao steel those are manufacture and based companies and could be the gm of tomorrow.

But think they're worth noting.

What is nano steel?

It is a lightweight, much stronger steel that gm venture is invested in i believe late last year.

Sacti3 is a next generation battery company.

That is interesting stuff.

With all the focus on clean energy in recent years, there seems to be rumor around there.

-- there seems to be room around there.

I wonder of this same kind of entrepreneurial spirit exists when the city's discussion right now are about pensions and promised benefits and sort of right to work issue but not about starting up new things and taking massive unknown risks into the wilderness.

I think it can and what is happening now and why we created grow detroit is, there are young people graduating from great universities like the university of michigan and a day are doing what they have been doing for a number of years because there is a talent drain.

A lot of rmo was how we retain this talent and how do we provide the next 100 years of companies that will hire and provide opportunity in this region?

That was to keep the young people here and keep the local.

Is there one specific program that you are afraid the city will have to cut that will hurt start-ups' going forward?

There is not one specific program.

Something i would look at from maybe a larger standpoint is the geographic size of detroit news to the address.

There's a great statistic that the cities of boston, manhattan, and san francisco could fit in the geographical boundaries of detroit.

What do you do when you have a city of that sheer geographic size or the population has dwindled down to 70,000 people?

Alex southern, thank you very much.

Speaking of detroit, that was one of the places where the car- hailing service uber is.

They're getting into ice cream trucks.

It is not just about ice cream.

Domenick chu is something of an ice cream expert.

Why not?

What are they doing?

This is a great marketing tool.

They are using the delivery of my skin to get attention in cities around the world.

It is being offered in cities where uber is not normally have a presence like amsterdam, berlin and here in the u.s. in a houston, a portland, and miami.

This is to drum up interest in the company added services.

Since 2009, uber been aggressively expanding its services and is experiencing a lot of growth, 18% if month over month and now they are 12 times bigger than they were the same time last year.

The company says there are 35 cities around the globe where they are operating and have created tens of thousands of jobs for local transportation partners.

All of this growth is being solved by a legal and regulatory issues.

Taxi industry is intensely regulated to protect their own budget limits consumer choice and small-business growth for companies like uber.

Laws vary from city to city but take miami, when limousines like black cars have a minimum fair of $70, you cannot pick up passengers less than one hour after a reservation.

As the car service arrives in 50 minutes, you have to wait another 45 minutes to get in the car.

There is a fixed number of town cars in that city, six of the 25 licenses.

If there are similar laws on the books in places like houston and portland.

Ftc is considering a technological and a requirement that might shut down a taxi service.

I might say that taxi payments must be processed immediately into the cad system.

Uber ios 7 new rules would require them to shut down uber taxi and the taxi-healing service in those jurisdictions.

These are deeply entrenched laws provide drove a cab in new york long time ago and the powers of the rules and the unions or not to be trifled with.

What can i start up uber do to change these laws?

They have a staunch lobbying effort.

They are disturbing petitions that people can sign on line to maybe influence or pressure lawmakers and actively try to lobby for change.

If you are perhaps in the mood for some ice cream like it was earlier, you can try your luck with try uber smart phone app to get ice cream delivery but they will start in san francisco and about one hour.

This is really about trying to get the entrenched system or the establishment for taxi and limousine commission is around the country and the world to may be let uber in on the price action.

I have to wait one hour?

At least for you.

I will wait to the end of the show.

At that moment, i will order an uber ice cream.

Still to come, the security secrets that edwards noted could not crack and you can watch us streaming on your phone, your tablet, and bloomberg.com.

? this is "bloomberg west" edward snowdon has leaked governments that shows the american government was buying its own people but it turns out some information he did not get.

A bunch of former intelligence officials were interviewed and said he did that have access to much of the information he claims to have access to.

This is interesting because i love the where's waldo aspect of this story but there is a big business story or of the government pushed out work to contractors and how much did edward snow didn't see and how does that matter to the future of the business?

It's true.

One of the key aspects of this case is that snowden not work for the nsa directly, he was a contractor and that helped and did not help them.

He got to a place more easily as a contractor and had never get mission rights that put him in the fsa network which is one of the largest within the intelligence community.

It put them in a place where he itroam widely.

The culture of nsa war to against contractors.

There are certain very secretive high-sensitivity units that just don't use contractors.

Those units and their technology are pretty much walled off.

You actually have to be in a room where you walk into physically to access those computers.

There is more internal encryption.

It worked against him but also work for him in some ways.

Our piece is great on this subject.

-- your peace is great on this subject.

I cannot tell from my reading whether snowden was a hacker within the nsa formula reported on this stuff and took out the stuff he came into contact with.

What we know about what his job was, the nsa is divided between intelligence operations that collects information and actually go out and hack into computers and the defensive side.

The nsa job is to defend networks but also military networks.

He was on the defensive side.

He had never said mr.

Rice.

-- he had network administrator rise.

He would have wide freedom to roam and that is what he did.

One of the reasons he was able to get the documents he did is as a network administrator, he could move around easily.

That is why the big changes we have seen recently.

They just announced yesterday that they will change that policy so that network administrators have to work together.

You will have to have two people to sign untogether.

Thank you very much.

It is time for "on the market." thanks so much.

We are taking a look at stocks that are falling today on the heels of the record lows we had yesterday for the s&p 500. we have declines across the board and you might notice that the declines are worse in technology.

The nasdaq is down 9/10 of 1% because of the earnings talk of war we are seeing.

Technology earnings are disappointing.

Microsoft, google, a and d are all lower.

Energy shares have been doing much better today.

Schlumberger announced its earnings and coming out with the $10 billion buyback plan which is bolstering that energy group even as technology pulls down on the other side.

That is it for right now and we will be back in 30 minutes.

You get more of "bloomberg west,"in just a minute.

? this is the early edition of "bloomberg west." you can also catch us at our leisure time at 3:00 p.m. pacific.

Let's check on the stories making headlines outside of technology.

The chinese bank lending rates will set rates by themselves.

It could lower costs for companies and is the first major economic reforms since the new chinese president took office earlier this year.

Paul francis has set up a committee to look into the vatican's financial structure.

The eight-member committee steps into place after a senior vatican cleric was arrested last month as part of a big corruption probe.

Some of the biggest hockey stars will be going to the olympics after all.

The nhl and international ice hockey have federation reached a deal allowing nhl players to participate in next year's winter olympics in russia.

The move means the hockey league will have to take a two-break in the middle of the season.

Let's turn to the new hollywood.

There's a company embracing digital entertainment whose founders have deep roots in traditional media.

The official division as credit websites like wonder wall for celebrity news.

They are now expanding the digital evertz.

We're joined by john ehrlichman in los angeles.

This is a true new corp.

-- new hollywood job.

Tv and film are traditional but also digital.

There is a new site called purple clobber which is going after baby boomers who don't want to be called that.

Jeff berman the president and is in los angeles.

By the way, the last time we spoke, you were at the nfl handling digital media their annual joint bermanbraun early this year.

Why did to make the switch?

It is a ridiculous privilege to work in the nfl.

Everyone who works there is a custodian of that brand.

That is an unbelievable problems but at the same time, it requires you to be delivered and how you do things.

This company is nimble and opportunistic and really skating where the puck is going and media.

It is an exciting place to be.

Let's talk about this new initiative.

Bermanbraun does traditional film and tv but also does digital.

What is purple clover?

We are really known for identifying white space and attacking it and that's how we build most of our digital business.

We started looking at boomers.

Nelson does not even measure you if you are over 50 and yet this is set to inherit $15 trillion over the next 20 years and control 70% of discretionary spending in this country and already dominates over 90% of the cpg categories in this country and yet the media properties that targets them are, by and large, things you will not die from tomorrow.

Most people who are 45, 55, 60 are in the prime of their lives.

There is no media property targeting them, giving them incredible content, utility, giving them what they need to understand how to re-wire for the new economy and a third actor had to get their 25-year- old off of their cell phone plan.

Yes -- i believe this is a partnership with aol which is the way to team up for you guess.

-- for you guys.

What is the strategy there?

There is an opportunity here to reach an audience that is looking for exactly this kind of content and this kind of engagement.

Aol gives us a bigger platform to take this to market.

We have been very successful teaming up with them.

It has been a terrific partnership for both companies and it lets us -- bigger audience from jump as he tried to build a cross platform media company for people in the prime of their lives.

One of the biggest new hollywood stories in hollywood this week is netflix getting all those emea nominations.

I would imagine you guys were buzzing about that in your office.

What was your reaction?

I don't think we were shocked given the quality of the context that netflix has created and put out there.

What was really stunning is you go back and look that it took more than 50 years of emmys for best drama to come from cable.

In the last decade, cable has dominated that category.

To see netflix do this in its first year of big investments is exciting and it says there will be more and more opportunities for people to consume extraordinary content and that is good for consumers and good for bermanbraun and we hope purple clover will be in those categories as we go forward.

In the more traditional tv and film area, you guys announced a new production deal with mgm and there are many properties york or working with them on.

What is the thinking going forward with that partnership?

And gm is as historic a company -- mgm is as a store company as exists in this town and there is a real alarm of vision of going to a big exciting place particularly in the cables from the space but beyond that as well.

It is a trip -- terrific a line of two companies and a vision for where this is going and how to do it together.

Jeff, we appreciate the time.

We will jump away from "bloomberg west." president obama has taken a surprise appearance at the white house press room.

That happens to me at least before i was a senator.

There are very few african- americans that have not had the experience of getting on an elevator and a woman clutching her purse nervously and holding her breath until she had a chance to get off.

That happens often.

And i don't want to exaggerate this but those sets of experiences inform how the african-american community interprets what happened one night in florida.

It is inescapable for people to bring those experiences to bear.

The african-american community is also knowledgeable that there's a history of racial disparities in the application of our criminal laws.

Everything from the death penalty to + enforcement of our drug laws.

And that ends up having an impact in terms of how people interpret the case.

This is not to say that the african-american community is naive about the fact that african-american young man are disproportionately involved in the criminal justice system.

They are disproportionately both victims and perpetrators of violence.

It is not to make excuses for that fact.

Although, black folks do interpret the reasons for that in an historical context.

They understand that some of the violence that takes place in poor black neighborhoods around the country is born out of a very violent past in this country.

And that the poverty and dysfunction that we see in those communities can be traced to a very difficult history.

And so, the fact that it is sometimes not acknowledged adds to the frustration.

And the fact that a lot of african-american boys are painted with a broad brush and the excuses given that there are statistics out there that show african-american boys are more violent -- using that as an excuse to ben c. son's treated differently causes pain.

I think the african-american community is not naive stance to stick with someone like trade on margin was probably statistically more likely to be shot by a peer than he was by somebody else.

Folks understand the challenges that exists for african-american boys.

But they get frustrated if they feel there is no context.

That context is being denied.

That all contribute, i think, to a sense that if a white male teen involved in the same kind of scenario that from top to bottom both the outcome and the aftermath might have been different.

Now, the question for me at least and i think for many folks is -- where do we take this?

How do we learn some lessons from this and move and a positive direction?

I think it is understandable that there have been demonstrations and vigils and protests and some of that stuff will have to work its way through as long as it remains a non-violent.

If i see any violence, i will remind folks that that dishonors what happens to trade on margin and his family.

-- what happened to trade bond martin and his family.

There are some concrete things we should be able to do.

I know that eric holder is reviewing what happened down there but i think it's important for people to have some clear expectations tradition.

Like, these are issues of state and local government, the criminal code.

And law enforcement is traditionally done at the state and local levels, not at the federal levels.

That does not mean, though, that as a nation, we cannot do some things that i think would be productive.

Let me just give a couple of specifics that i am still bouncing around with my staff.

This is so we don't rollout some five-point plan but some areas where i think all of us could potentially focus.

No.

1 -- precisely because law enforcement is often determined that the state and local level, i think it would be productive for the justice department, governors, mayors, to work with law enforcement about training at the state and local levels in order to reduce the kind of mistrust in the system that sometimes currently exists.

When i was in illinois, i passed racial profiling legislation and that actually did two simple things.

It collected data on traffic stops and the race of the person that was stopped but the other thing was it resource tod us training police departments across the state on how to think about potential racial bias and ways to further professionalize what they were doing.

Initially, the police departments across the state or resistance but actually, they came to recognize that it was done in a fair and straightforward way, it would allow them to do their jobs better and communities would have more confidence in them and in turn be more helpful.

In applying belote.

Obviously, law enforcement as a tough job.

That is one area where i think there are a lot of resources and best practices that could be brought to bear if state and local governments are receptive.

I think a lot of them would be and let's figure out other ways for us to push out the kind of training.

Along the same lines, i think it would be useful for us to examine some state and local laws to see if they are designed in such a way that they may encourage the kind of altercations and confrontations and tragedies we saw in the florida case rather than defused a potential or about -- altercation.

There has been commentary about the fact that the stand your ground laws and for were not used as a defense in the case.

On the other hand, if we send a message to society and our communities that someone who is armed potentially has the right to use those firearms even if there is a way for them to exit from a situation, is that going to contribute to the kind of peace and security and order we would like to see?

For those who resist that idea that we should think about something like stand your ground laws, i would ask people to consider to trayvon martin was of age and arms, could he have stood his ground on that sidewalk?

We actually think he would have been justified in shooting mr.

Zimmerman who had followed him in a car because he felt the engines.

-- he felt threatened.

If the answer to that question is ambiguous, it seems to me that we might want to examine those kind of laws.

No.

3 -- this is a long-term project.

We need to spend some time to think about how we bolster and reinforce our african-american boys.

This is something michelle and i talk a lot about.

There is a lot of kids out there who need help who are getting negative reinforcement.

Is there more that we can do a to give them a sense that their country cares about them?

And values them?

And is willing to invest in them?

I'm not naive about the prospects of some new federal program.

I'm not sure that's what we're talking about here but i do recognize that, as president, i have some power and there are good programs being done across the country on this front.

Us to be able to gather together with business leaders and local elected officials and clergy and celebrities and at least and figure out how to do a better job helping young african- american men feel that they are a full part of the society and that they've got pathways and avenues to succeed?

I think that would be a pretty good out come from what was a tragic situation and we will spend some time working on that in thinking about that.

Finally, i think it will be important for us all to do some soul-searching.

There has been talk if we should convene a conversation on race.

I have not seen that the potentially productive when politicians try to organize conversations.

They end up being stilted and politicized and folks are locked into the position they already had.

On the other hand, in families and churches, workplaces , there is the possibility that people are a little bit more honest and at least you ask yourself your own questions about if you are wringing as much bias out of myself?

Amide judging people as much -- amide judging people as much on their character as the color of their skin?

I think that would be inappropriate exercise in the wake of this tragedy.

Let me leave you with a final thought.

As difficult and challenging as this whole episode has been for many people, i don't want us to lose sight that things are getting better.

Each successive generation seems to be making progress in changing attitudes like white comes to race.

Does not mean we are a post- racial society and it does that not mean that racism is eliminated.

When i talk to melia and saschi and i talk to their friends and to interact, there are better than we are they are better than we work on these issues.

That is true in every community that i have visited across the country.

We have to be vigilant and we have to work on these issues and those of us in authority should be doing everything we can to encourage the better angels of our nature as opposed to using these episodes to heights in divisions.

-- heightened divisions.

Which also have confidence that kids these days have more sense than we did back then and certainly more than our parents did or our grandparents did.

Along this long, difficult journey, we are becoming a more perfect union, not a perfect union.

But a more perfect union.

All right?

Thank you, guys.

Now you can -- president obama surprise appearance at the daily white house briefing with some very personal comments about the trayvon martin case talking about his personal experience of being african-american before he was a senator and talking about looking at standard ground laws and talking about this whole experience of reenforcing african-american boys on the plight of african-american boys and the way they are perceived by this nation.

That is something it does surprise.

We're joined by our white house correspondent, hans nichols from washington.

This surprise appearance -- give us context of appearing like this?

When the president first weighed in on this case, he said if he had a son, he would look like trayvon.

He has always personalize this case and spoke about a in a personal matter.

He was even stronger today and said 35 years ago, i could have been trayvon.

For a president that does not usually engage in hypothetical, this amounted to one big fight the bug -- this amounted to one big hypothetical about what it would have looked at how the tables been turned?

It was really pretty remarkable.

I'm not sure the president had a clearly defined.

When you went to the briefing room.

He had three things he ticked up but it seemed to me that he wants to get these things off his chest, comment on the case by friday afternoon and comment on a case that is clearly troubling him and he wanted to weigh in on.

At the same time, he did not say he wants to start a national dialogue on race.

If he did not think that was productive and praise the country.

The president went in many different directions and i'm not quite certain what his goal was.

I wonder if it was to call attention to this.

I'm struck by the night of the verdict and that was the same night that tim li nsicomb estee no header.

All my black friends were talking about the george zimmerman verdict at all my white friends were talking about the no-hitter.

The is being forced into this by some of the controversy brewing out there especially in conservative press about the role eric holder is playing in this and having a potential investigation, a civil rights investigation.

The president was a little forced into it but it felt like he wanted to get out there and talk about thank you very much.

"bloomberg west"will be back in a moment.

? welcome back.

Coming up in the late edition of "bloomberg west,"robots playing a bigger role in our factories, offices, and homes but whose jobs are these robust taking?

The author of "jobpocalypse "the is -- will be with me.

It is time for "on the market." here is julie hyman from new york.

We are seeing stocks pulled back today with earnings primarily from technology companies disappointing.

That has been weighing on stocks particularly on the nasdaq.

Other companies like ge are helping buttressed the dow to some extent.

Look at what is going on with oil prices.

We are seeing little change in oil.

We have seen some gyrations but what is more important is that we have seen the price of wti crude surpassed that of brent for the first time in almost three years.

Let's talk about why that matters with alix steel.

This is something the market has been watching closely.

Finally, wti has surpassed it.

It was the speed and velocity that happened that caught many analysts off guard.

First off, refiners are using more oil.

They are making our products.

Was a domestic inventories fall 27 million barrels in three weeks the.

And has never, ever happened before.

Second, more oil is getting out of cushing.

It was landlocked and more oil is coming out and supported by rail.

Wti is the oil we are talking about vs brand crude which is european oil.

Exactly, when we have the u.s. oil trapped in the midwest, the refiners had to in.

Brent crude which is more expensive and demand raise the price and wti has fallen.

Investors have reversed their positions.

When you see the spread now, you have to do some finagling.

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

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