New Products from Apple: Bloomberg West (07/23)

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July 23 (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 from Bloomberg's San Francisco studio, it showcases the personalities, companies and trends that are transforming the global economy. (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.

I'm emily chang.

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

Let's get straight to the rundown.

Apple promises a very busy fall for new product releases.

At the same time, we learn its flagship product, the iphone, sold more than 30 million units in the last quarter alone.

Cisco makes a nearly $3 billion acquisition, buying force fire, meaning to keep him here networks safe from hack attacks.

Universal music room partners with russell simmons to launch a new label.

Why is the new company focused squarely on youtube for its talent search?

First delete -- 31.2 million, that's how many iphones apple sold in the last quarter, up nearly 20% over last year and proof that apple is weathering weathering stiff competition from samsung.

Plus potential saturation in the smartphone market is better than many thought.

In the companies third-quarter earnings, sales totaled 45.3 million dollars, but the news is not all that good -- $35.3 billion.

Profits dipped to just under $7 billion.

Ipad sales fell 14%. that's the first time the ipad has posted a yearly sales decline.

As for new products, tim cook says it will happen, adding the company is working hard on amazing items it will be introducing in the fall and next.

Cory johnson has been combing through the numbers and joins us now with drill down.

Forget about the numbers trade has apple ever said it's going to be introducing a new product and when?

I think they're being clear about it because the products haven't been coming for quite a while.

Apple has been a case where business has been going strong, although it is slowing down, and wall street hates it.

Wall street likes these numbers because expectations have been lowered so much.

But in fact what we are looking at with this company is a quarter that was really weak on many fronts.

Yes, the iphone number was good . but let's are with the most basic numbers -- how much they are selling and how much they are making.

The sales growth, you can see a clear trend there.

The sales growth went from 60% to the high 20s to 1% this quarter.

That is a consistent trend of slowing growth.

Part of that is that they haven't had a lot of new product on the market.

At the same time, earnings before interest and taxes is a consistent trend as well.

You once saw profits doubling on a year-over-year basis and then up 20%. down in 20% , a very clear trend of declining profits at the same time revenues are barely growing at all.

What's talk about the iphone . in some countries, india up 400% grade to be fair, they had some catching up to do, but that is a whopping number.

They sold twice as many phones as the previous year.

China was also not doing as well as they hoped, but the iphone growth is slowing down.

It's a consistent trend.

It is a lot less than what we have been accustomed to in this business.

At the same time, we have the prices of the iphone significantly coming down.

There's a lot of conversations, from $650 a phone two $581 a phone, that's a substantial decline and a consistent trend in a direction that is not positive grade there has been all of this talk about will they out with a low-priced iphone.

They have made it clear that when the iphone 4s comes down, they can sell that when the component to get cheaper, but still offer a first-class iphone.

And they are seeing more and more first-time buyers for the iphone.

But what about the ipad?

That is the number that looked at.

That was a shocker.

When we talk about social, mobile and the cloud, what devices more mobile than the ipad?

Ipad sales down on a year-over- year basis for the first time since it was overt -- since it was introduced.

A lot of that is the ipad mini affect, but we saw ipad prices six months ago or 18 months ago, $559. it is a lot weaker.

Lex cory johnson, thank you so much grade -- i want to turn to gene munster.

He has been covering apple for almost two decades and has an overweight rating on the share very she joins us now from indianapolis.

What stands out to you?

Lex -- i will be a little more optimistic than cory.

The big inference is some of the interests that are clear in their business.

The answer as to what stands out, i thought the iphone number was a strong number.

It was 31 million.

They did part of that through lower pricing, so that was a disappointment.

If you think about apple and their key franchise, it is the iphone and we are at a transitional quarter.

I thought they did a good job holding the franchise together, doing better during the transition.

The ipad number on the negative side was a disappointment.

Let talk about the iphone and then we will get to the ipad.

Sales in mainland china up only five are sent but india is up 400%. tim cook doesn't think the iphone market is as close to saturated as some have said.

On the china side, the broader economic environment, it's probably fair that it has had an impact.

The numbers in india are just getting started.

Those growth numbers are a little misleading because they are coming out of such a small base.

As far as the health of the higher-end market, i'm a little more pragmatic.

It's probably a 5% type of growth market, but in apple's case, a huge opportunity which impacted the numbers today is finding ways to navigate themselves in an appropriate way into some of these bigger markets, which they did by using price with the iphone 4. the high-end market is more of a 5% growth, but there's a huge opportunity for the below $400 market area -- $400 market.

How bad is this number and the story?

Our sales -- is growth going to continue to slow?

I don't think it's bad.

It is clearly going to continue to grow and once they come out with the new products, we still believe tim cook's comment on the conference call suggests that they may or may not do this cheaper phone.

We think that they are.

You have to look at it in the context of an entire year, unfortunately, because quarter to quarter can get this leading.

I think the iphone franchises doing very well and ultimately, once they get into some of these bigger markets and do a better job, you will start to see those numbers reversing and i think to quarters from now, we will be talking about from stories.

What about max -- what about macs?

Is that becoming an increasingly smaller part of apple's future story?

It is.

It is about 15% of total revenue, so it is smaller.

It is not the exciting part of the story and i think that's probably being impacted from everything -- by everything from tablet to have some decent market share in the higher-end countries now.

Let's get to this new product in the fall.

What do you make of them being so specific?

Still vague, but more specific than usual about new products coming out in the fall and what are the new products going to be?

The company understand there's a lot of pressure from investors to come out with new product.

That's probably part of the reason why the dialogue they have is that they use get amped up going into this.

That is ultimately what is driving it, but i do believe these are ultimately going to be some big buttocks.

What's behind curtain number 1, 2, and three.

In years past, we didn't know there were any of these opportunities.

They have talked about the new markets they are going after, the new product categories.

That is something new.

We believe it is the television and the watch and a cheaper phone.

Collectively over the next six quarters, people are going to feel that the stock is not going to 60% growth again, but the comfort level they can continue to grow at a healthy pace, collett 10% to 20%, is going to increase with investors.

In the fall, are we going to see new products or new product categories and what product or product allegories?

We will definitely see new products grade the iphone five s probably in september and we believe a mid-or cheaper phone is going to come out.

The thing everyone has talked about but nobody has seen it is the apple television.

Is it going to be announced this year?

We think it could be announced this year and then ship them next year.

They will announce them in six months before they come out to try to hold the market.

Do we have the smoking gun that is going to be announced this year?

We don't. what we do have is a lot of strong verbiage from the supply chain and comments from tim cook that it is definitely on the roadmap and the watch is something else.

We think the watch is probably mid-next year.

Thank you so much.

We will be watching out for that unicorn.

Russell simmons founded the beastie boys -- found the beastie boys long before anyone heard of youtube trade now he's using the video sharing site to find his next big star.

We explain why, next.

? this is "bloomberg west" on bloomberg television and streaming live on your tablet and any windows phone as well.

Pricewaterhousecoopers is the largest professional service firm in the world.

Today, its chairman said down with facebook coo sheryl sandberg in menlo park to talk about the lien in movement.

She's unapologetic about any controversy surrounding the book.

Take a listen.

Anywhere i go, ceos say to me you are costing me so much money.

[laughter] because all the women working for me are defending raises.

To them, i say i'm not sorry at all.

I'm thrilled.

Bob morris stop by bloomberg before heading to facebook.

I asked him about his involvement in lehman.

It's all about having the best talent.

If you're going to have the best talent, you have to have the most first talent.

We've been focusing on diversity and women in the business community for a long time.

Which he came out with her book which was focused on what women needed to do differently, we focused on what organizations and what we do differently to support women in the process.

What do they need to do?

They need to lead from the top area second, you have to make sure you have an environment that is flexible and inclusive and make sure you have programs to support not only women, but man.

This is a team exercise.

What kind of programs do you guys have?

I will give you two.

People, women can leave to have kids and still stay connected with the firm and can leave for up to five years, yet come back and still be in the mix.

Can dads do that?

Absolutely.

We also have the flexibility program where everyone can work whenever they want, however they want and wherever you want.

The book has been quite controversial.

How do you take that into account when you decide to support something like this?

You have to have some direct talk.

That is part of of what she was promoting in her book.

But we have been talking about that for a long time.

Have a direct conversation and if it is difficult, so be it.

Let's manage our way through that and not avoid difficult conversations.

"bloomberg west" is a technology show.

You put out a report on m&a saying fundamentals look good.

What sort of activity do you expect to see?

We look order to quarter and the number of deals are down about 24%. we see the fundamentals being really good when you look at cash on the balance sheet and some of the stuff that got accelerated in 2012. the next should be on the upside when we look at tech m&a. it's tremendous -- tremendously innovative not only to detect industry but implications downstream and there are a lot of changes that have to happen and him and they can play a big heart of that.

What we found in our survey is 75% of ceos around the world believe m&a is going to play a role in growth in next year and tech will be a beneficiary to that great we have seen a lot of interesting heels like google buying waze.

Are we going to see more of these premiums paid for companies that don't make a lot of money?

You will see more and more deals and you will see them bigger.

Especially when you think of the social asked back then cybersecurity.

The organizations themselves and the tech sector has to continually move its business model for them to remain relevant.

You speak to a lot of ceos around the world.

How are tech ceos different from other ceos?

Ask the biggest thing they are focused on is the concept of innovation.

The top priority for about one third of the ceos, and the tech sector, it's about 50% where the cadence of innovation and continuation is super important which gets to the second issue which is how do we have the right talent and mindset?

That was the senior partner at price waterhouse super, bob cooper.

Electronic arts is a company in transition as it tries to henry moretti from digital games.

We got a look at how that is going very that's to come on " bloomberg west." ? this is "bloomberg west." i'm emily chang.

The pentagon has reversed course and has vowed to share its spectrum.

They can relocate out of the band without losing critical capability.

The defense department uses the airwaves for drones and pilot trainings.

Companies have been trying to get their hands on more spectrum is demand for mobile data grows.

Now to the digital remix -- an ongoing series looking at how technology is changing the music business.

Deaf jam cofounder russell simmons made a name for himself is covering the beastie boys and run the.

This time he's teaming teaming up with universal music to find a new generation of talent on youtube.

Jon erlichman has more on the story.

Does this mean for youtube?

I think it means a couple of things.

Consolidation of the platform , not that youtube needs it.

Many people would argue youtube is the second most influential social network on the planet.

Something like 100 hours of videos are uploaded to youtube every minute.

A lot of that content is music, whether it's somebody singing in their bathroom or somebody at a concert.

It is very scattered, so simmons and his team of smart thinkers are seeing an opportunity to put a little polish to all of that.

For youtube, maybe there is an opportunity to have war of these kinds of labels or hubs which may be offset their dependence on something like vivo, which is partially owned by google and by the music labels.

Recently, whenever renegotiations, vivo had a lot of leverage.

He has deemed up with ryan robbins.

Tell us about this.

He is somebody who flies under the radar for some, but his in litan the town is growing.

The tv business he started did very much what they are trying to do with its music label, which is trying to bring this different content through youtube and find common ground , and this case with the teen market.

The business wasn't around for very long before dreamworks animation bought it, so that's a great example of new media seeing an opportunity -- traditional -- traditional media seeing an opportunity with new media to see other businesses changing, especially when it comes to advertising dollars.

Dreamworks is already pushing into tv with the yield netflix and here's another part of their ambition on the tv side.

Some people have even talked about the possibility of him playing a larger role going forward within dreamworks.

Jon erlichman , thank you for bringing us that story.

Coming up, cisco makes a nearly $3 billion bet on cybersecurity.

Will it pay off?

You can watch is streaming on your tablet, phone and that -- and on bloomberg.com.

? and you are watching "bloomberg west" where we focus on technology and the future of business.

Music streaming service ario is partnering with live nation.

People shopping for tickets will be able to sign up to listen to tracks on the site grade they will us on cert to countries take festivals and eight pop festival.

Sales were up 11% and profits grew 27%. they have been adding new products to go along with its core virtualization business.

At&t says sales rose 2% in the second quarter though profit fell.

The company added a 500 51,000 contract customers in the quarter, up 71% from last year.

At&t has continuing subscription plans and unveiled an early upgrade plan.

Electronic arts is working to reduce the number of games it makes for consoles to devote more resources to the web.

Today, they reported first- quarter revenue fell 1%, but net income rose 10% grade like other game makers, ea is reacting to users shifting from console games to mobile and online games.

Joining us is the bloomberg entertainment reporter.

They did better than digital and expected.

Why are they doing so well when zynga did not?

It is turning into a brand game.

What ea is capturing very well is the idea of a -- of proven solid names.

Real racing did well, but with tapped out, they'd not it out of the ballpark because people know some sense.

-- people know some sense.

Their forecasted change.

Is that a bad sign?

They are trying to keep their fiscal house in her.

-- house in order.

In the transition, there is uncertainty around the market.

You don't know what's going to be a hit and what's not going to be a when you start trying out new types of games.

But they look like they are going to well from the reception they received a video show in los angeles.

It has been a few months since they have not had a ceo.

I know they are looking for someone.

What is happening?

Why can't they find someone?

I think it -- there was a lot of interest in getting him but he went to zynga.

But now they have to go and that candidates all over again externally and internally.

They have to give it a good due diligence before they decide who they are going to pick.

What kind of hersen do they need given the behavior shift into mobile and online and console sales are supposedly slowing down?

They really want to keep the trains running on time.

They think they have the right strategy, but they just want to make sure they get somebody who can expand on that business and be nimble without spending more money to get them where they want to be.

But how can they have the right strategy if they've been left in the difficult position?

It started way before rick came back to the company.

They were like everybody else come accretive to 50 or 60 games a year and counting on five of them to be popular.

They have been nailing that down quite a bit.

Now they have about 10 major games they put out per year and they are focusing resources on mobile.

They have a technology play going on right now where they can reuse the same technology for a lot of games erie we will continue to watch that.

Cliff edwards, thank you for joining us.

Cisco systems is on a buying binge, this time expanding into the security space.

They agreed to by sourcefire for two point $7 billion.

Cory johnson is your to explain why cisco would make the deal and pay so much.

This is the biggest deal since their $5 billion acquisition of nds.

John butler follows cisco and he joins me now from new jersey.

When you look at this deal, what is it in particular about the security offerings that are attractive to cisco?

If you look at their cybersecurity business, they've been losing share their to the smaller, more nimble players.

One of the reasons is this -- one of the reasons is they have this legacy portfolio.

Firewall is a market that has been contracting.

By by sourcefire, they are acquiring buying versus building.

It's a great strategy.

He gets them into the hardest -- the hottest sector of the market without having to spend the time and will -- spending time building those new systems.

They have been growing at an accelerating pace and i don't know if it's a particular product group or a global freak out about cyber hacking.

I think it is being driven by the monster trend of cyber hacking.

It's becoming an issue, particularly in the mobile markets.

People don't look at their smart phones a computer, but the reality is they are palmtop computers and security is going to become more and more of an issue there, just as it has with the government.

Is there a suggestion that the with the cisco sales force behind those products, the growth rate might go beyond 27% year-over-year growth?

I think so.

There is a terrific opportunity here for cisco to take this product sand cross sell them with their routers, switches and wireless product portfolio.

It is a win/win all the way around in my view.

X sourcefire is an interesting virtualization security product.

Is it an important area for these guys and for cisco which has not been as active in that area?

That brings up a great point.

A lot of what we are doing now is migrating from the device level into the cloud.

You are also getting shared resources in the cloud grade by that, i mean you may be looking as a customer at storage that you rented from amazon.

Amazon may have at storage it rents to you a ross several different storage platforms -- across several different storage platforms.

Storage becomes a nightmare in the case of virtualization, so you need those products to knock-down -- to lock down those networks and give those security assurances to your customers.

Lex i did a kind of ghetto model of the sourcefire this morning.

Their government as this is a growing at 60% year-over-year rate.

They are based in maryland.

Maybe i'm wrong to put it together with the nsa, but i see the monster growth in government cybersecurity work -- are they a beneficiary of the big spend of the military technology complex?

They will be, ultimately, in my view.

First quarter was very tough in the government business.

They got hit hard by sequestration and by the fact that the government didn't have the budget at that point.

Ultimately, that business will rebound nicely particularly now that we have a budget resolution.

Anybody who reads the headlines on the security issues with the government understands that.

Sourcefire is very well- positioned to take advantage of it.

John butler, thank you.

It is the new high-tech silk road.

Find out how hp is retracing some very old steps to help bring its pot to market, next.

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

? i'm emily chang.

This is "bloomberg west" streaming on your tablet for my phone and any windows phone at well.

All about his latest company to get into the smart tv business.

They have designed a system and set top box.

It will integrate the alibaba payment system into the television.

It's expected to hit the market in september.

Hewlett-packard's latest innovation isn't a new pc or data service.

The company is rethinking its supply chain to cut costs and improve conditions for its chinese workers.

Hp has created a modern-day silk road to move thousands of laptops and desktop monitors from inland china to europe.

In stead of transporting products by see, they are sending trained on a shorter and cheaper journey through cosmic stan and russia.

The path covers six countries and a total of 6700 miles.

You really executed this whole project, tony.

Why do it this way rather than the good old-fashioned way?

The genesis of this was the challenge we saw in two thousand eight and 2009 in coastal china.

We saw labor challenges, labor turnover, absenteeism.

So it was too expensive and workers were coming from china anyway.

Exactly.

Labor force was fueled by these migratory growth.

The workers, 70% of them were coming on migratory workers.

Our decision was to move them and put the factories where the workers were coming from.

Instead of putting the people on trains, find a way to put the product on trains.

We moved inland and now we are landlocked.

Our strategy to solve this landlocked situation was to develop a new land route.

Rather than coming all the way back to the coast, streaming all the way back to rotterdam or homburg, we developed and pioneered a new land route across china, across has extend -- into germany.

It takes a third less time, cost a third of air freight and has one 30th the greenhouse gases.

Faster, cheaper and more environmentally friendly.

How does a keep you competitive?

This is such a competitive as this.

Hp seated the top spot of pc sales to lenovo.

You need any help you can get to maintain an edge.

Hp was the first mover to go west.

At the time we decided to go west, the industry was very skeptical, including the company you just named.

If you observe what happened in the years that followed, you saw all the companies, and i will name them -- lenovo, dell, toshiba -- they began to move west.

They tried to emulate our strategy.

We have a first mover advantage.

We thought through the logistics first hand we have the added scales because we have -- we have the added scales to fill trained that our competition does not have.

A lot of people may not realize this is the biggest metropolitan area in the world.

There are tens of millions of people there.

What does it mean for the workers?

Does it give you an edge in attracting talent because migrant workers who were going to the coast can stay closer to their families.

Absolutely.

In 2010, i toured some of those coastal operations and talk to the people.

I asked where they were from and they were from these inland cities and very few of them were from the immediate areas adjacent to the factories.

About 70% of those workers were migratory workers.

Today, about 80% of the workers are the indigenous people from the immediate province.

There closer to their homes and families, they don't have to spend holidays traveling back and forth, they are eating their native cuisine and people around them speak the dialect they speak.

It's a much better lifestyle for them and better quality of life.

It's good for the workers, good for hp, and good for our bottom line.

They are known for their spicy food, so they can have all they want.

Could this model be in other countries?

Lex -- the exact analog?

Possibly.

There are other things we are doing with a similar sort of thinking.

If you think about our shipments coming from coastal china or singapore, see shipments from asia were developing a new route.

Rather than going through the suez canal, rotterdam or homburg, we are developed in a new ce route.

I'm sure you'll hear our competitors talking about it in the future.

We are moving into the port of athens great that government has privatized a couple of births there with the chinese carrier and these are state of the art.

So now we are taking the sea route.

Rather than going into northern europe, we are steaming and it takes us five fewer days.

Less inventory, less impact on the environment, lower cost.

Interesting.

Retracing the old silk road.

Thank you for joining us and bringing us an interesting story.

Google glasses and the only pair of smart glasses and development.

We will show you another company hoping to give google a run for its money, next.

? this is "bloomberg west." facebook is set to announce its earnings tomorrow after the bell.

It has been a busy year for mark zuckerberg and how many.

Will they keep the growth story alive?

Jon erlichman is in l a with a preview what are we expecting?

I think the business headline is a growth story.

Put aside the stock price for a second or any of the little nuggets we chew want a lot, new products like facebook home, at the end of the day, you have a business that fundamentally is seeing its advertising revenue climbed . they will likely see sales north of $1.5 billion.

If they do, that will be 35% revenue growth year-over-year.

That has to do with getting the right ads in front of you at the right time.

The relevant ads, people clicking on those ads and buying something or doing something as a result, that makes the advertisers happy.

Moving away from the teeth whitening ads that were not relative that's -- that were not relevant to you.

A lot of their ad dollars are shifting to mobile.

What can we expect on that front?

They love to talk about this.

A research firm called spruce media is estimating 38% of their ad revenue in this quarter they are about to report came from the mobile platforms as opposed to the pc.

It was 30% in the first quarter.

Facebook has a lot of control over that.

They're helping put those dollars to the mobile devices like google has control over it also.

Nothing wrong with that, just something to keep in mind.

What about instagram?

Are we going to get information about how the new video feature is working out?

The early verdict from some people i've spoken with is that 15 seconds may be too long.

Lex maybe they will have to change the number.

This was a quarter where they announced the video feature.

They love to talk about instagram.

As last order that mark the cover of mention they had half a million active users of instagram.

This is there not so secret weapon may have in her back pocket.

We will be all over facebook earnings tomorrow.

From social networks to wearable tech -- while google blast may have captured a lot of attention, the company was not the first to create smart glasses.

Our middle east editor reports that israel lost loomis is hoping its head start will pay off.

It begins as a piece of glass.

After coating of errors and thing in micro projector into the frame it becomes an 87 inch screen.

The technology has been used by the u.s. military for the last five years.

For example, by f-16 fighter pilots.

Now, the empathy has consumers in its site.

That might mean a face-off with google glass.

The major advantage of our technology is that element projects in two the eye.

This is simple eyeglasses.

It was also a lucrative business.

10 million pairs could be sold by 2016. in reality, much may depend on how rapidly software developers embrace google glass -- type technology.

It's all -- it's all about the apps, services and smartness, intelligence don't into these apps and services.

This means partnering with world's's biggest technology companies, setting its site on becoming something crucial to smart glass as intel was to the pc.

Is time now for the bwest byte, where we focus on one number that tells a whole lot to read -- that tells a whole lot.

146 billion 620 million u.s. dollars -- that is apple's cash stash at the midpoint of this year, up 1.3% despite increasing the dividend and buying back 22 million shares of stock.

Last earnings call, that's all we were talking about, these financial machinations to release some of their cash and the cash balance actually went up.

They must be spending that on the unicorn we keep waiting for.

The tv , whatever it is, the potential watch, that is what we are all waiting for.

Every earnings call, he keeps pushing tim cook to share . if the tv is being held up by the studio deals, with that amount of cash, tell me couldn't they just i hollywood?

It be amazing.

It is for sale.

Hollywood will do anything for money.

We will be watching or said unicorn.

Inc.

You all for watching this edition of "bloomberg west." facebook earnings tomorrow.

We will see you then.

?

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

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