Live from pier three in san francisco, welcome to the late edition of "bloomberg west" where we cover the global technology and media companies that are reshaping our world.
I'm emily chang.
Samsung's newest smartphone, the galaxy s five is coming this spring to my said to be released by april.
It may include eye scanning technology.
Netflix is launching the new season of house of cards in ultra hd.
The goal is to capture more viewers, but have enough people adopted the next-generation tv needed to enjoy it?
And overstock.com is taking payments by bitcoin.
It comes at a time when others are saying no to the digital currency.
First, to the lead, samsung is ready to up its stakes in its global war with apple.
It is about to release a new top-and galaxy five s, coming out.
-- coming out this spring.
It may have eyes scanning technology for the very first time.
It will also release an update to its smart watch, and that will be integrated with the phone, potentially.
All of this is according to the executive vice president of samsung's mobile business.
This coming as samsung says it is expecting to perp post -- to post a profit dropped in the last quarter.
It is the first profit drop in nine quarters.
Apple has been taking a bit of a bite out of samsung as of late, and this comes as samsung and apple are going to try to reach a settlement in the ongoing patent fight.
A court has ordered the two sides to sit down ahead of get another trial scheduled to start in march.
Cory johnson joins us from new york, as well as sam grobart of bloomberg businessweek.
Also with us today, awful warner of toby technologies, the executive vice president.
-- a warner of toby technologies , the executive vice president.
How exactly does this work, i recognition technology?
It is basically a way to know where you are looking on the computer screen.
It takes a picture of your eyes and it can calculate the direction your eyes are reading.
Is it just like, you look at your phone and it can tell whether it is you are not?
It is sort of like fingerprinting technology.
But it is much more than that.
You look at an area of the screen and it detects where your eyes are pointing.
You look at an area and did can interact with that area.
-- and you can interact with that area.
Normally, you drag your mouse and that entire movement would be unnecessary.
Sam, obviously you are the guy that looks at all of these devices.
You have been to samsung headquarters in south korea.
What is your take on the new s five?
How tricked out is he going to be?
Are you optimistic about this i recognition technology?
No, i'm a little skeptical.
I recognition technology has -- eye tracking technology has enabled to tell when you are looking or looking away and if you did look away, it would cause the video you're watching at that time.
That has already been the case.
There was another that was going to automatically scroll the webpage as you looked toward the bottom.
That was not the case.
They have tried facial recognition on existing smartphones.
The problem is, it always takes a little longer than you want, which ultimately renders the feature somewhat useless.
Cori, samsung is continuing to up its game with apple, with all of these new features, but my question is, does it matter?
How many people use all the bells and whistles on a samsung phone, things they don't have on an iphone?
One of the main appeals is meant to be to developers.
Maybe an app developer will use something that the average consumer will not.
I don't think we have seen something that a killer app has taken advantage of in these added capacities in the same way that we have -- sort of one of the big takeaways at the ces show was bluetooth technology.
That seems to be taking off as part of a broader ecosystem.
I think bells and whistles is it.
The main innovation in smartphones has already happened.
These things tend to be on the periphery and not exciting consumer developers and businesses.
Not in the same way the creation of these phones initially did.
And you are not seeing these things coming from apple.
Apple was conspicuously absent from the consumer electronics show.
Sam, did you get the sense that apple is behind because they don't have a watch or a phone that can do all these one million other things?
I think apple's history has shown that it doesn't have to be the first player in any given market.
When you look at mp3 players, or smartphones themselves, or even tablets.
Apple was never the first one there.
They were, however the ones that made the product so desirable and acceptable to a large number of people that it effectively created the market for that product, even if other products had existed prior.
Oscar, compare the sort of level of technology on a samsung galaxy x for -- this samsung galaxy s four.
Compare that to a dallas es fight.
-- a galaxy s five.
There is very much the eye tracking technology.
It detects that you are looking at the phone, but not where you are looking at the screen.
That is a very large difference.
If you really want to make use of it, in many ways you have to know where you are looking at the screen.
I want to talk a little bit about watches.
Because the samsung galaxy gear is already out.
It has gotten mediocre reviews, but samsung has already started saying they will put out another generation of it soon.
Sam, are you more optimistic about that?
A could not be much more less desirable than when it came out.
The original galaxy gear seems like something samsung bid to say, hey, we are here first.
We are planting a flag.
As to a viable product that people actually want, that is not the case.
Samsung has seem to acknowledge some of that by saying that the next version will be far less clunky.
I think that was the word they might have used.
Also in the case of wearables, nobody has really figured out the best way forward to make something truly compelling.
Samsung also revealed the connected home.
Is apple going to have the last laugh?
I think what we are seeing is that the phone is starting to become the center of where people innovate, but not just with apps.
But with other devices.
We saw some clues with the ces show.
In might be in the home.
There are all kinds of opportunities for hugs -- hubs to happen here.
The pace of change right now is really massive and having a dominant share now does not mean much five years from now.
There is the opportunity to innovate and find some greatness in ways that others haven't. eight years ago, nokia had a 50% market share in the u.s. and they are now essentially zero.
In terms of smartphones, blackberry was the dominant divider.
They are getting down to the single digits.
Change happens fast with this technology.
I do want to talk a little bit about this patent settlement discussion that apple and samsung have supposedly been ordered to do.
We obviously went through a big trial last year.
There was a $1 billion verdict.
These patents are potentially even more far-reaching because they are functional versus design patents.
Talk to us about the potential talks that will happen between these two companies and whether it will matter.
Apple and samsung went down this road before in 2011. they pursued mediation and it went absolutely nowhere.
I think there are a lot of people watching this who remain fairly skeptical about this go around.
They're in mind that all of this litigation, these court decisions, judgments among some of which have been radically reduced, by the way, from $1 billion, are all part of the larger negotiation happening between apple, samsung, qualcomm, and other companies that will eventually result in licensing agreements.
The trick is, using the courts and using litigation to effectively negotiate the cost of those licensing agreements down.
That is what is happening here.
I don't think there will be any big blockbuster settlement coming out of this.
I think it will all slide into, you will pay this much for this and i will pay that much for that and it will all work out and we will all be fine.
We will all be watching.
Thanks for joining us for this conversation.
Next, it is breakout hit, house of cards.
I cannot read -- i cannot wait for the return.
We looks plain why the second season will look much better, too.
? i faithfully discharge the duties of the office am about to enter, so help me guard -- god.
Democracy is so overrated.
That was a scene from the breakout hit, house of cards.
Kevin spacey is now going to -- with kevin spacey.
Netflix is now going to let viewers watch it in ultra hd.
I wish i could watch it in ultra hd, but i don't think i have an ultra hd tv.
What am i to do?
That is the very issue.
Every year at ces, televisions are a big part of the story, tvs that people might not have, because they are a little futuristic and maybe a bit too pricey.
We've seen the story of better screens over the years postop standard definition to high- definition and now ultra hd four k. is the movement from the evil providing the -- from the people providing the content or the platforms providing the experience -- netflix is moving this way in a big way.
Here is why netflix is making this bet.
We want to lean forward and have the best tv watching experience that netflix can offer.
You might be surprised, john.
Why are you standing here at netflix getting the best picture?
This is the ultimate irony.
It will not be a shift in blu- ray or hd that will get you that quality.
It will be better quality than that in the first place you will be able to see it is on netflix on your tv streaming over the internet.
All right, i will give you a chance to prove it to us.
Why if someone is watching will the experience look and feel different?
Second stream altar hd 4k to give you an idea of what it looks like.
House of cards is one of the first pieces of content we have in this format.
Season to premieres on february 14. it will signify on the screen where it says ultra hd four k. it is four times the information.
You are practically in washington, d.c. if you look at the columns that it is built out of, and all of the glorious architecture of the capitol building, you will be able to see the architecture.
Would've people do not go out and buy one of these fancy tvs?
The early adopters, those who are always the first guy on the block to get the best tv set, they will have it.
It will be a very small percentage of users at first.
And the prices will come down and it will get more and more affordable in the next couple of years.
And you think of netflix as a service available anywhere, any device and a lot of people are watching that way.
Our a majority of the subscriber sitting down on the couch and watching on a big-screen screen tv?
The majority of netflix users, the most hours is on a tv.
It is in your living room.
People are watching on their many devices, but the number one way to watch tv is on your couch.
Do you think netflix subscribers care more about altar hd or do they want more original shows?
Like house of cards, like orange is the new black.
They want more original.
We know that reed hastings, the founder and ceo loves technologies.
He has seen this as an opportunity to push ahead with the technology that netflix is using, while the cable experience is not moving so quickly.
That is definitely one of the reasons they are trying to prove a point in a lot of ways.
Jon erlichman in l.a., thank you.
The search goes on for a microsoft ceo.
Alan mulally is officially out of the race.
He told the associated press that earlier this week.
Cory johnson said down with elevation partners roger mcnamee in new york today.
Roger always has very strong opinions.
What does he think microsoft needs?
We had a very strange conversation about a lot of topics.
When microsoft came up, he had some clear thoughts about what this giant company needs and what he thinks it can achieve.
One of his big ideas was that rather than -- rather than have someone from the automotive industry or another industry, i think he felt the company needed a strong direction.
Listen to what he had to say.
You need an adult who is a technology person who has spent their career at microsoft.
Microsoft is a very strong, powerful, and frankly, very positive culture -- with a lot of smart people.
And they have not had the right focus point.
You need someone who can look and say, ok, people, this is where we are going.
Give them a focus.
Almost everybody there looking at is a spreadsheet guy.
And i made the mistake of suggesting it could be different people at microsoft.
He looked at me like i was an idiot.
I get that look a lot, but the book -- the look he gave me said, doug, it is bill gates.
-- duh, it is bill gates.
It is bill gates.
I'm sorry, i thought that was the only obvious choice.
He has got to come back for maybe one or two years.
Only bill's approval is going to let that person be successful.
An interesting take from a guy that knows technology and the way that it from companies relate to different companies with microsoft for much of the past two decades at its core.
Many people think that bill gates should not be ceo and should get out of the board room.
That is the strong view of many shareholders as well that he has been the problem and not the solution.
Just think of that, the notion that anyone who is going to do something is going to be carrying bill gates's flag anyway.
The notion that the true leader would be bill gates anyway at the founder and largest shareholder of the company will be there at some level not matter who takes the job.
Anyone have to be someone with just as loud a voice, and there is no one with a louder voice in redmond, washington, then bill gates.
Coming up, working on a connected home.
Sam grobart checks it out.
? welcome back.
I'm emily chang.
Samsung already dominates television, smart phones, tablets, and wants to take on home appliances next.
Sam grobart sees what it's like to have samsung in your kitchen.
Ces has always been about things like tvs, computers, mobile products.
But lately, you can add another category.
Kitchen appliances -- the home has become a world of opportunity for tech companies as things become smarter and more connected.
And one of the big players in kitchen appliances right now is samsung.
They have some ambitious goals.
They intend to be the world's largest manufacturer of appliances by 2015, which is going to mean a -- an uphill battle.
To do that, they have to increase by about $6 billion per year.
How do they plan it -- and to do that?
Take a look.
This has a target price of $6,000, so it is not for everybody.
It has an interesting he -- feature.
This button has buttons -- this tour has buttons and it can become a fridge or freezer for as long as you need it.
Also, the water dispenser, still or sparkling.
Let me show you what is going on inside this oven.
It is a flex duo of him.
That is because of this panel right here.
You pull it out and you have one giant oven for your biggest turkey.
Put that in, and you could have the asparagus at 275 degrees and the pork loin at 475 and you are cooking both at the same time.
This year, you are bringing new technology to washer and dryers as well.
You want a bigger washing machine?
That usually means the tub is going to get ypres, which makes it awkward to get things out of it.
-- is going to get deeper, which makes it awkward to get things out of it.
But this one is wider to my and that makes it super smooth to get things out of the machine.
It was not that long ago when people said, samsung?
That was sam grobart.
Just a few of the enterprise success stories of 2013, said blunk --splunk and tableau.
What happens next?
? . . you are watching "bloomberg west," where we focus on technology and the future of business.
Twitter shares are down for a fourth straight day, falling 17% this week.
Analysts are questioning whether the stock is overvalued and twitter's ability to improve advertising revenue.
Compared to larger rivals like facebook.
Still, shares are up 119% since the ipo.
Uber, which has faced backlash, is now cutting rates for its lower-cost service.
The reductions are effective in 16 u.s. markets, including san francisco, l.a., and chicago.
The change is not expected to impact surge pricing.
Snap chat finally says sorry for the breach of that resulted in the user names and phone numbers of 4.6 million members being posted online.
The company apologized in a blogp post today and updated the feature that was hacked.
Enterprise companies were the darlings of 2013. twitter cap the year with a big ipo.
Twitter has lost, as i said, a lot this week, wiping out $9.2 billion of market cap in december.
Will enterprise rise to the top again this year?
Which companies will be the most popular is to mark -- will be the most popular?
Your focus is really enterprise, right question mark tell me about where you are looking in 2014. there are a lot of exciting areas in the enterprise.
Enterprise has seen a resurgence over the last year or two.
Driven principally by the fact that we are a recovering economy and corporations are spending more money on their technology to improve productivity and so forth, but there has also been a big shift in technology spending, going from individual cio's to every head of the department.
Vp of hr or sales or marketing all spending money on technology.
That has created a much broader and diverse range of customers for enterprise committees.
And a lot of the smaller companies are seeing the growth that they are seeing right now.
Last year, enterprise companies were really the darlings.
They have not been the cool kids in a long time.
Twitter had a big leader -- a big year last year.
At the beginning of this year, a little shaky.
How will consumer tech stack up to enterprise tech this year?
In the enterprise sector, generally speaking, companies have shown more predict ability.
Sales a -- more predictability.
Sales cycles are long and you can assess the value of the company in a long-term way.
When you think of the core drivers, open source, use of cloud services, those are very long-term themes that we are in the early innings of written -- of.
I think we will see some big things coming from enterprise companies.
One of your companies, we here they are heading into ipo territory.
I think you will see interesting ipos in almost every sector of the enterprise.
You are going to see companies like pure storage last year, nimble came out at the end of the year with some terrific stuff happening.
I think you will see the early exits in the ipo markets for big companies.
I think software, service companies are showing some very interesting -- these are all companies you think will go public this year?
I do not know about this year, but they are getting into the realm and scale of companies.
What about acquisition?
I think we will see some.
There is some level of consolidation that is happening as these companies start to go public.
For example, we saw fire eye -- so consolidation in security and where else?
There are a lot of small verticals that can be put together.
I think more of these companies will take their companies public because of predict ability inserted and demand.
You guys led a huge investment in dropbox and did not even get a board seat.
How are you feeling about that investment about now?
We are feeling very good about that investment.
The company has done significantly better than our expectations.
They continue to be the leader in that sector.
At the time of the investment, people were worried about icloud, microsoft service, g- drive, and none of those things have materially impacted growth rate.
And they have done a great job penetrating the enterprise.
We could not be happier.
Do you see a bubble anywhere in this market?
Do you see things that you look at and say, this is too expensive?
Certain things seem expensive to us and certain things do not.
The real issue is our ability to assess risk and what exactly we think something is worth today versus tomorrow.
Most of these companies that are getting high valuations are representing a very large wave of the future and we do not know exactly how to price it.
They may be off a little, but i do not know that we necessarily feel it is a bubble in the sense that it is isolated and not related to actual success.
These companies are genuinely having robust success.
What about a company like twitter?
I use twitter a lot, a lot of users, and it has not turned a profit yet.
How concerned are you with that kind of volatility?
They did not lose $9 billion in the market cap -- on a percentage basis, it is less than 20% of the valuation changed.
If things were in the 20% range, we would be delighted.
One mentally, these companies move into the public markets and it is hard to assess the value of these businesses.
Right now, investors are giving them the benefit of the doubt.
They say we are going to value you as if we assume you are going to be successful.
My guess is this is about what twitter will be worth it they do not screw it up.
I used pass a lot to talk to my friends in the tech bubble.
Is it ever going to go mainstream?
Path is at the highest level of traffic that we have seen it.
It is a network oriented for small groups.
Small groups are not as viral.
The best we can hope for is to maintain solid growth like we have had and to expand the user base at a pace that we can sustain.
Do you think it will be a more niche social network?
It just does not have the potential range of a facebook or twitter.
It is just going to be smaller.
I think the range is there.
I think it take longer to achieve that range because it is not necessarily designed to be as viral.
What about snapchat?
Obviously, they turned a $3 billion offer from facebook down.
Do you think they are here to stay or do you think it is a fad?
I think the volt case is that it is going to stay.
What is the mike volpi case?
I think they will find evolutionary paths to the product.
We think of snapchat as it is today and say that is a lot of value.
You could say the same thing about twitter at one point in time.
I think the expectation is that, in all likelihood, snapchat will be a lot more than what we see today.
We just do not know what it looks like.
Turning down $3 billion, is that the right decision?
I do not know if i would have done it.
So you would not have done it if you were evan spiegel?
Thanks so much for joining us today here on "bloomberg west." we will watch to see how your trends play out over the next year.
Coming up, overstock is now accepting bitcoin as a form of payment.
Will other retailers follow suit?
That and more when we come back.
? welcome back.
I am emily chang.
Bitcoin fans can now use their loot on overstock.com.
It is the first major retailer to allow payments in bitcoin.
Overstock is working with coin based to make this happen.
Coin based provides online merchants with the tools to handle bitcoin transactions.
Brian armstrong joins us in the studio.
First of all, your story is really interesting.
You left airbnb to start coin base before became -- before bitcoin became a big deal.
We were moving money all over the world and i was working on fraud prevention and i decided to take a big bet on bitcoin and we thought it was going to be a big deal.
Turns out, that was right in with a company like overstock, how complicated is that?
You are processing all of this.
What does that involve?
We did an integration that allows them to midi great there -- to mitigate their exchange rate risk.
They are converting it to dollars.
It is really a cheaper way for them to accept payments from anybody, all over the world.
Does that mean they are not taking on any risk?
That is right.
We are providing that as a company.
So you are taking the risk.
Overstock says they are accepting bitcoin.
Alibaba says, we are not.
How does the volatility affect you guys?
We think 2014 will be the year a lot of big merchants start to accept bitcoin.
But you are going to be taking on all the risk.
There is a market lace -- a marketplace for these things.
Overstock was the largest merchant to accept it so far.
They are hard goods retailers.
It is a very mainstream website that is not about tech early adopters.
That was the first time that it really happened in the bitcoin world.
We think it is the starting point for a big series of adoptions.
What about the regulatory issues?
The federal government saying, look, this is a big issue.
We need to take a look at it and figure out tax rates for bitcoin.
Down the line, what if they do what the chinese government did and say that bitcoin is not allowed at all?
We are supported with working with the regulators in this process.
All of the conversations we have had is very positive and i think they are on a fact-finding mission right now to try to understand how the economy is going to develop with the additional currencies.
What are you doing to hedge your bets?
What if bitcoin goes to zero?
We do not think that will happen, obviously.
I think digital currency as an invention or trend has just started.
The next 10 years are going to be a wave of innovation that happens around that.
For example, another digital currency came, i think we could adapt to that.
I do not think that is likely right now.
He spent a lot of time looking at all the different risks in the business and thinking about potential downsides, whether it was compliance or risk in the software.
We got very comfortable and build a great team of people who we think can make that happen.
Is that mean you are porting bitcoins right now?
As a company, we do not hold bitcoin as an investment or anything like that.
You are trying to keep a net zero exchange rate at any time.
Our core business is making bitcoin easier-to-use for consumers and businesses.
They evaluated the options out there and put their faith in us.
What do you think of all the bitcoin mining that is happening right now?
More and more people getting into the solving these out rhythms to try to earn bitcoins.
Bitcoin mining is an essential part of the ecosystem.
It is not something we participate indirectly -- in id directly.
It is getting harder to mine them because more and more people are doing it.
What if people lose the incentive?
There is an efficient frontier where the appropriate amount of people in the world are mining.
It is an arms race.
It has reached that critical mass, the point where there is enough mining going on all over the world.
I do not think it will reduce the amount of mining out there.
Where is bitcoin today?
About $900 or so.
Where is he going to be this time next year?
I do not want to make predictions like that.
Obviously, we think it will be very valuable in the future.
Thank you for joining us today on "bloomberg west." yelp's business relies on consumer reviews.
Now a court wants the company to hand over the identities of several users.
That story is next.
? welcome back.
I am emily chang.
A virginia court has ruled that yelp must hand over the identity of seven reviewers who wrote negative reviews of a local carpet cleaner.
They were published anonymously and the cleaning company says they are not real customers so they are violating yelps terms of service.
I am going to get back to cory johnson, who has more in new york.
It is an interesting one.
The power that yelp has over merchants is disconcerting.
Merchants who think they do great service find surprising negative reviews online.
Yelp is very upset about this.
Let me read to you what they said in regards to this decision.
They said, "this ruling will have a chilling effect on free speech in virginia and yelp will continue to fight for privacy and free-speech rights." i think this is interesting because i think the merchants feel like they have no way to respond or even know if someone is slamming their business.
It is not just one merchant with a problem.
This is a big issue that is being fought nationwide.
It seems the company got a better ruling in virginia than they would have in other states.
It shows the power of yelp and the outcome of this lawsuit could be fairly important.
There is a right to privacy and anonymity.
A small district court rules for a local merchant.
I cannot imagine that would hold.
I disagree on that point.
The first point, yes.
We do have a right to free speech and privacy.
There is also a right against libelous statements.
If they do a libelous statement under anonymity, does the person have a right to figure out who it was so they can sue them?
The court was responding to that.
Lots of states have responded in a more global way.
Virginia is responding to a particular thing.
They are saying that it seems reasonable based on the evidence that you have given to us that the people who posted these negative reviews were lying and were not actually your customers.
Therefore, we will ask yelp to turn over their user data.
And you can proceed with a case against them.
We are not saying you will win that case, but at least you will be able to sue them.
Should it be determined first event was libelous?
You cannot really do that.
The libelous nature depends on whether it was false.
If there are customers saying, you stink, that is different than if they are not a real customer.
Truth and falsehood really matter.
The truth and falsehood depends on who the person is.
That is effectively what the court has said.
You can call someone a big, stupid jerk if they are a big, stupid jerk.
This is a classic bind that young companies have as well.
On one hand, they want to protect the anonymity of these people.
On the other hand, they want their reviews to be honest and fair.
Is it a fault within the business model of yelp that does not really vet who the people are who are making comments?
It is a hard thing to deal with.
They want everyone to feel like they are free to comment on what they want.
It is in their business interest to have the most reviews and the most accurate reviews out there.
You have a anonymous reviews and there is not an incentive or ease with which people can diss their competitors.
Watching how dominant this business has become, a few years ago, we looked at a number of companies.
Yelp has had a lot of success.
It is one of those businesses where it compounds itself.
As you do better, you get more people reviewing and more reviewers, which leads to more reviews and higher quality views.
The company has certainly succeeded and built its lead.
Growing at a 70% pace year- over-year, you might imagine that they would become the only game in town because it is a marketplace.
If you want to get to the place where the information resides, you are going to go to the place where most of the information is going to happen.
It goes back to the first point.
People care about yelp and it matters to this carpet company.
It does not matter on other sites.
Thank you very much.
Thank you, cory.
It is time for the b-west byte, one number that tells a whole lot.
Jon is in l a, you are in new york.
What do you have?
How about 25? 3-d printer maker 3-d systems has done 25 acquisitions in the last three years.
Despite all of those acquisitions, their revenue growth is slowing.
They have signed on will.i.am to be their chief creative officer.
If you are wondering why you would want a wrapper, hip-hop star to help sell 3-d printers, you are with me.
I am wondering the same thing.
They are hoping to get some kind of bump.
It draws attention to how much they are spending to try to grow the business.
Rex doesn't he already have a job at some other technology company?
How can he do them both?
What is he actually doing?
The dude codes.
He takes coding classes, i think he told us one time on the show.
By the way, there was some 3-d printing stuff at ces for food.
I think you can now make bulk chocolate if you want.
Quick you can eat 3-d printed stuff?
Did you try it?
Quick you can make it.
You can eat it.
I did not.
In three or four hours, you can have a piece of chocolate.
I do not know how i feel about that.
Thank you for watching the show.
We will see you tomorrow.