? welcome to the early edition of "bloomberg west." i am cory johnson coming in for emily chang.
Our focus is innovation in technology and the future of business.
Let's get straight to the rundown.
From alaska to meet your -- just got this -- the green light.
Business opportunities for the robots in the sky.
The share buyback plan before shareholders.
Then he urges shareholders not to vote for it.
Could apple have a plan to put 100 40s is billion dollars in cash to work?
2013 comes to a close.
We will sit down with eric schmidt to find out what he sees for technology and innovation.
First, to the lead.
In the effort to get drones to the nation, skies are about to take off.
Drone testing sites in six states.
The sites are located in new york, alaska, nevada, texas, and virginia.
Also in hawaii and new jersey and oregon.
The congressionally mandated test sites will conduct critical research into operational requirements necessary to safely integrate unmanned aircraft systems into international airspace over the next several years.
Our reporter has been following this story out of d.c.. why these states?
We do not exactly know.
The faa said they were trying to select a diverse number of sites . they went to alaska so they could get the severe weather, for example.
They say the new york test site will allow them to put drones into the sky in congested airspace to gradually test how they can do that.
They are looking for a wide range in a diverse group.
Quest that is just what we need.
Someone argued they are there for a long time.
I wonder, when they were trying to choose these, were they in the way congress -- where jobs will be.
Is that a way to do it?
Because of certain things that could be tested they're related to oil and gas and so on?
North dakota, the university already has a drone major.
Very strong aviation program.
It made sense in that regard.
I should be clear there is no plan to put drones over it at this point in time.
They want to test how drones might operate in more congested skies.
I would imagine there would be economic impact.
Not the space program, but there has got to be spending that will happen in these places.
I'm sure california would've liked to see that i did not get it in silicon valley.
Class i think, speaking of that, a lot of the test sites are hoping they will have drone alley next to their testing facilities.
There is a lot of projection of economic development.
We have seen sometimes you can spur technology development around a test site like this.
Some of the projections are calling for billions of dollars of economic development.
In terms of economic development, you mentioned the university of north dakota.
Will build -- will there be more -- well, these states anticipate there will be businesses, technology, software developers, hardware developers, that are actually making these drones.
That is the anticipation.
I think we will have to wait and see how that turns out.
Quest there is a notion of duration.
Will this go on for decades?
Do we have any idea what they are trying to find out?
Congress authorized these tests sites to run through 2017 at least.
Would not surprise me at all if the next time they reauthorize the federal aviation administration that they extend that.
Especially if this industry takes off, i could see these things operating for a long time.
The ponds are endless when it comes to this industry.
Amazon did so much attention for the notion of a joan.
We have seen drones used in the military for very different purposes.
What difference do you think the focus will be for the early stages of business?
That is a very good question.
We know drones can do these things like conduct surveillance.
That might include agricultural uses on a farm, for example, or law enforcement searching for lost children or something like that.
Interestingly, the faa posses at least initial guidance on what they will allow will not permit the types of drones amazon is anticipating, a robot device that comes out and drops packages.
That may be a way off.
Thank you very much.
Now to apple.
Lingering questions about what it will do with its growing cash.
A massive share buyback.
Apple is putting the voice before shareholders, urging them to oppose the measure.
We will break down the developments with adam and jon erlichman.
I thought it was really interesting they did not seem to fight the proposal at all and really want to put it out there in front of the shareholders.
They are embracing the spirit yes.
They are allowing it to come to a vote and then saying, here it is and please vote against it.
Apple posses argument is they already have a large share buyback and dividend and they are exploring other options that they anticipate making some sort of announcement in the new year.
The same wait and see and not to go with icons planned, which involves taking on new debt and things that they do not want to do.
When we look at the proposal, the call for apple to spend their cash have gone on for years and years.
Do you think they're thinking, look, fine, vote on it and let's put this to rest?
Yes, i think they are comfortable with it.
Apple has the problem a lot of companies which they had.
They generate a lot of cash.
Cash from operations less year, if you go back to the beginning of this year, when apple had its annual meeting, they were very comfortable to have a conversation about the best uses of their capital.
At the time back in february of this year, the activist investor, at the center of everything, was david einhorn.
Now we are gearing up for this meeting where the focus will be another activist investor.
If you go buy some of the language from some of the other investors, we heard from one of the most influential investors in the country, an apple shareholder, which described as a johnny-come-lately, they are totally fine to put in front of shareholders and probably feel they will get a lot of support for long-term investors.
Is there a suggestion they might come up with another plan to put the cash in use?
It is possible.
They certainly have a lot of cash and they continue to generate a town with sales of the iphone and ipad.
They had the opportunity to do that.
Apple went from having no cash return policy to having what is now one of the biggest ones in corporate america.
I think that is why what john is saying is correct.
They have the support of investors who, for a long time, had been pushing them to do something.
Now, what they have been doing, the $100 billion plan that is supposed to roll out over the next several years, that is not pocket change.
It is a lot of money.
Even to a guy like me.
I also wonder, some of the analyst notes are suggesting they would come out with yet another plan to put more of the cash to use.
You wonder, the scars of apple posses near-death experience from over a decade ago, still linger over the company.
That is absolutely -- it absolutely could be the case.
At the same time, we know that even if they are developing a television, a smart watch, and countless other things that make him out over the next couple of years, they would not need all of this cash to go down those roads.
They can still do it.
I think what is interesting is you have got to take the financial picture, the timing of a meeting like this, and put it all together.
A lot of people have told this story over the last week about apple posses stock performance this year versus the rest of the market, disappointing, perhaps, to some, and yet i was looking at the stock performance since the annual meeting last year, and the shares have rallied about 25% since that meeting into the end of the year.
There may be a different tone than as we are going into the annual meeting that -- last year.
Quest you're right.
The movement earlier in the year , the big fall, jon erlichman, thank you very much.
We look ahead who better to predict than google posses eric schmidt.
We will hear what he thinks will shape the coming year in tech on "bloomberg west." ? the new york times reports the president is working his way through breaking bad, the amc hit.
He is also making his way through homeland and madmen and remains a fan of espn sports center and abc posses modern family.
Google is in the headlines this year.
Devices like google glass is gaining mainstream attention.
Eric schmidt gave bloomberg his predations.
Take a listen.
Class i am the executive chairman of google.
The biggest change for consumers is everyone will have a art phone and the fact so many people are connected to a supercomputer means a whole new application, around entertainment, education, social life, and those things.
The trend has been mobile is winning.
It is now one.
More tablets than computers are sold.
People are moving to the new architecture very fast.
The biggest of structural we are sure about is machine intelligence.
To find people and talk specifically to them.
It changes every business globally.
The biggest destruction that we do not really know what will happen is probably in the genetics area, the ability to have genetics records and the ability to start gathering in all these basis -- they are unfathomably important.
At google, the biggest mistake i made was not anticipating the rise of the social networking phenomena.
It is not a mistake we will make again.
In our defense, we were busy working on many other things.
We should have been in that area and i take responsibility for that.
Google is very much investing.
We are hiring globally and we see strong growth and the arrival of the internet everywhere.
It is all green.
Google benefits from transitions from traditional industries.
Shockingly, even when things are tough in the country, because we have return investment-based advertising, it is smarter to move your advertising from others to google, so we win no matter the other industries are in good shape or not.
People need our services and we are proud of that.
The key limiter is our rate of innovation.
How smart and clever are we actually want to do that as fast as we can.
Eric schmidt looking into his crystal ball for next year.
Still ahead, on the heels of the scandal, just posted a pricing guide for new year's eve.
We also watch streaming in -- you can also watch trimming under tablet, your phone, and google.com.
? lawmakers are looking to ease the tax on digital pricing and digital sales.
Phil mattingly joins us right now to talk about this.
Is the tax anguish finally coming to an end?
Please, this is over?
Maybe not the long national nightmare, but there is some movement here by actual republicans and democrats working together.
That is pretty rare.
The basic idea for lawmakers who support this is to try to cut down on taxes.
When it comes to digital goods and services, companies and government officials are faced with a patchwork of tax law.
This has proven very problematic.
What we are seeing in january, a senior republican, cities which a bill to try to streamline things a bit, to define exactly what digital goods are and then limit taxation to where the state and customer is registered.
Say you are sitting in virginia and are just nine to purchase the new beyonce album but the album comes from visual retail in california whose computer servers are located in texas.
Stands there is a chance all three states can try to claim jurisdiction.
It is something that causes major headaches for consumers.
Lawmakers are trying to create a structure to better define how these righteous are treated.
What is different now?
The biggest roadblock was the states themselves.
Quick to come out against this strongly and there is good reason.
The congressional budget office is this could cost about $3 billion in lost revenues.
Lawmakers have tried to tighten definitions, reduce the hit a little bit.
Still no word yet where the nga is on this piece of legislation.
But if they just do not lobby heavily against, you could be crucial to whether or not this moves forward come january.
It is a story that caused a lot of controversy and conversation.
A policy charging more for rise in demand.
A big storm on the east coast.
It sparked a lot of outrage in reaction and ahead of new year's eve.
The company has put out a blog post trying to make it a little more clear this time.
Trying to get ahead of this potential controversy with a video explaining new year's eve is in fact the most expensive time to take a ride.
Take a look.
If you are at a party at 1:00 a.m. and you would like to get home economically, like, you know, with a relatively inexpensive ride, wait until 2:00. if you can, it will go well.
If you absolutely need a ride between 1:00 and 3:00 a.m., google will be very reliable but it will be pricey and you have to expect that.
For more, i want to bring in matt miller in new york.
What are you doing tomorrow night?
Class i do not have any plans yet.
If you have anything interesting in new york, please tell me after the show.
A lot of people will spend a lot of money, basically, taking in hoover, or, if they are smart, they will wait until a different time to use mover, or use an alternative method of travel, either a taxi or yellow cab or book a car in advance or ride the subway.
It has been really controversial, the surge pricing policy, ever since the snowstorm that caused many people including celebrities like jerry seinfeld's life, hundreds of dollars -- of thousands of dollars less.
Insider wrote a story about jerry seinfeld's life who wrote a cook or something and she paid $400 in change to get her kids to a sleepover and then she took to instagram to complain about this, even though her husband has a billion dollars, and said, never again.
This is too expensive.
For a normal person, that is understandable.
Jessica seinfeld did not have to book an uber.
The surge pricing model very clearly shows you it is going to be expensive.
You have to agree to the more expensive rate before you can book a car.
Class that is -- that is the consumer side of it.
It is interesting this business is struggling to make a name for themselves.
I wonder what that does to the ability to grow the business.
How smart they are.
Are they really doubting for prices?
Is the problem that no one else has surge pricing?
The model is really intelligent.
If you have this kind of surge pricing, you will get more drivers, more supplies to increase demand.
Left a man -- left demand.
Consumers seek publicity and maybe not like it, they are learning about the policy.
The drivers are getting more.
Class i think it is good not just for them but for everyone.
If we would all think about the way this works and why, we would have a much more -- environment in which to travel.
To your point about not having surge pricing, i have a confession.
What is the statute of limitations in new york city for breaking the law?
Class d you have to tell me.
When i was driving a yellow cab in new york a long time ago, on new year's eve, i took the off-duty light on about a half- hour before midnight and people come to the car and asked me how much a fair was and i asked them how much they got.
There was a lot of surge pricing.
It was illegal.
It does happen.
That is price gouging.
It is different when you do not set up.
Most taxi drivers will be doing the same thing this new year's. the point is, with uber, they tell you ahead of time.
You are not forced to pay their fare.
You understand it before you get into the car.
Thank you very much.
On the markets.
Class -- let's get you caught up on stocks.
Madison square garden on new year's eve.
Take a look here.
Not much change in stocks.
Higher and lower.
A manufacturer is dropping in its plans.
Saying there was a lack of financing for the deal.
Over $100 million in damages are being sought.
We will be back 30. ? this is the early edition of "bloomberg west." a second suicide bombing has rocked the southern russian city . at least 14 people were killed after a bomber blew himself up on a bus.
Killing 17 and the city's train station.
Just six weeks before russia will host the winter olympics.
Pending home sales showed their first gain in six months.
They rose 2/10 of a percent, less than forecast.
Keeping some buyers on the sidelines.
It is black monday when coaches get fired.
Crummy teams with a crummy quarterback.
Mike shanahan, buccaneers coach, the viking coach, and the lions coach.
All let go.
A big story.
They did not know there was so much.
Special and of the year here.
The bloomberg west top five as we wrap up the 2013. stories and trends that shape the year in technology.
His picks for the top five stories.
Question -- security in general will be with us for a long time.
If people want more freedom, some governments want more access to information.
It is going to be something we battle for quite a while.
Some have been more vocal than others.
Mark zuckerberg said the government blew it when it comes to surveillance practices, invasive surveillance practices.
What do you think echoplex i would love to tell you, but our board company, i would say yahoo!
Has an front and center supporting with facebook more scrutiny on the whole topic.
One of the things you point out when it comes to security is the rise of disappearing information in companies like snapshot -- snap chat.
He thinks it is a whole new friend where not everything needs to be permanent.
Not all information needs to be preserved online forever.
I think people will get more and more terrified about what they have and who has it and where it goes.
I think you will see more and more trans.
Look at currency.
It is all about making sure you have a different way to exchange money not controlled by governments or nationstates.
Do you think companies like snapshot -- snap chat are here to stay or is it more of a fat?
It is too early to tell.
The issue of privacy will be the -- something people are concerned about for a long time.
Who can capitalize on this?
First of all, the industry needs to continue to raise their game and do a great job and ensure people are secure as they go about their business.
I think all of the big companies need to look at that.
There is a ton of opportunity for small companies to go in.
We have a company doing really great.
One just got valued at $9 billion.
This is a ton of opportunity for folks out there.
Less talk about the biggest growth stories of the year.
In consumer technology, it seems like consumer tech made a comeback.
What do you think?
Aly baba is blowing the doors off.
Every time they turn around, their valuation is getting raised.
An amazing amount of growth.
You see the twitter ipo this year was a great example of a hot company.
Tumbler was bought by yahoo!. consumer is doing well.
The enterprise space also had an amazing year.
I do not believe there is a company out there who has ever grown at $4 billion at 30% growth rates.
Do you think the consumer comeback will continue into 2014? do you think consumer technology, there is always talk about a bubble.
There is talk about valuation being too high.
Do you think they will be justified in 2014? i think it depends on which investment you are talking about.
Valuation is a tough deal.
I believe we will see more growth in 2014. any areas in particular?
I am very focused on mobile.
It continues to be a hot area.
I believe monetization on mobile will catch up with what is going on on the web.
Take a look at the fancy, one of the companies we have invested in.
They are doing great and look at the mobile experience.
Remind us what it does.
It is interest for men.
I am sure they market it some other way.
I market it that way.
Stay tuned for more for the top tech stories of to -- of 2014. we will be right back.
? ? this is the early edition of "bloomberg west." back to our special year-end series as we wrap up 2013 and are taking a look back at the trends that shaped the year.
He spoke to emily chang about security and reg out growth stories of the year.
It is on to another big story in 2013, the rise of mobile.
It grew tremendously in 2013 and i think it will be an even bigger story in 2014. everybody says mobile first, but it really is, development is starting to happen first on mobile devices and mobile first israel.
I also think big data as another big trend around mobile, where what is going on, what are people looking at, i believe monetization -- monson eyes asian -- minus is a -- you said mobile has come on par with desktop and the web.
Do you think it will surpass?
Class it has the potential to surpass what you have been able to do on the web, but it is not there yet and it is coming.
You mentioned big data.
One of the things we have been talking about is everyone has been talking about a data.
A lot of data is out there.
How do you actually use the data and analyze the data and make it valuable?
Class that is the most important thing.
A lot of people can collect data.
How do you serve it in a relevant fashion and give somebody an experience they want?
I spend a lot of time not just on big data pieces, but on the synthesis and who delivers what to whom.
Your next story, top story, is that people do not just matter.
They still matter.
Were they starting to not matter?
i believe discontent, i wrote it but -- a book on this topic earlier.
People are more dissatisfied than they have ever been.
I think they are counting on companies.
Bh of the company is long gone.
People are now on their own more than ever, which most people want to be entrepreneurs and they like that, so there is a disconnect on how companies work and how people want to work today.
You have tech companies paying higher values than ever before and offering perks that are unheard of.
If they do not speak to somebody and people do not feel they are growing and learning, they get dissatisfied and a lot of people look to the company to solve that.
I try to coach people to look to themselves and be the ceo of their own destiny.
I think we need more focus on this than ever going forward.
What should people do?
What does focusing on your own destiny mean?
First, understanding what it looks like to you.
Taking control of your own life and career and understanding as a company you have to get voted on the team every day and understanding as an employee that you have to get rehired after -- every day.
I love this.
I saw company an hour ago that was an interesting mesh of sharing and mobile, where they are building an entirely free mesh and mobile network that is, you share your phone and network access with other people to make everybody else's phone better.
It is early, but it is an example of, i think, we have all of these idle assets and people are thinking differently.
Can it really be done well with everything?
Not with everything.
With a lot more than we think.
I could not find a seat for the super bowl this year.
After we got a few more tickets and my wife and i had an unbelievable experience, it costs more than i care to say, it was fabulous and there was not a hotel room to be found.
Since we are talking about uber, the pricing strategy has been under fire.
There was a big snowstorm in new york and they charged up to 35 dials a mile.
It says, search pricing is to increase supply to meet increased demand and attract more dryers on deaf drivers on the road.
Is that fair?
I think if you treat people correctly at all times, and not just when you have a chance to take advantage of them, i think it is a better long-term growth strategy.
I am investor sharing your personal car.
In general, i understand you can get opportunistic pricing based on certain things.
Think of the super bowl in new york city this year.
I think the room rates will go up here that leads people sometimes with a bad taste.
So you think uber was taking advantage of people?
I would not go that far but i would ask they take a look at strategies and ensure they do what they should do for the long haul to retain customers, not just when you can optimize for a special service.
I think they did something different for sandy, where they were working really hard.
They have done promotions and things like that in the past.
In a situation where it is winter on the east coast, what should they do in a situation where there is a typical snowstorm?
I think, find a way -- it is a supply and demand question.
If they have enough drivers willing to do that and if they can make good money for the drivers willing to do that and they can satisfy demand, i would love to see that.
If they're in a situation where there are not enough supply or drivers, maybe economics have to change to force more people out.
That was the chairman on the top stories of 2013. tune into tomorrow.
We'll look at the top five-story to look out for next year in 2014. crooks have ripped off tens of millions of target customers.
What is the information worth and how much is it going for on the black market?
We will look at the economics of stolen data next.
? i am cory johnson.
A massive data breach reminds us hacker economy is thriving despite billions being spent to hackers.
Some of the credit card information mated to the black market.
Jon erlichman joins us now on the digital underground.
Is this about the humpty hump or something more nefarious?
And my thinking about the wrong digital underground?
I am old school.
Actually, speaking of personal tales, when i was doing research for this story, i thought of a situation my wife was in.
She was in a starbucks and somebody stole her credit card and when you call the credit card company and say stop, they do but the sophistication of the hackers involved extends into the black market.
They do not want to be caught.
A lot of times, there is a very planned approach of getting access to these data and immediately taking them to the black market.
L actually has a security unit which tracks what all your stuff is worth in that shady world.
An average visa or mastercard can generate in the neighborhood of four dollars on the black market.
What is so important to the buyers is to be able to use these cards in a big way.
The more sensitive data they can provide, anything that allows them to get around security walls put up, it quickly boosts the price.
In the case of any of the data breaches come when you talk about millions of people affected, it quickly means huge amounts of money potentially being lost.
When someone buys these cars on the black market, does the buyer go on a spending spree right there or is something more complicated going on?
A lot of the time, the money is being shifted around quickly all over the place.
It is pretty common for credit cards to immediately be turned into gift cards.
You charge up the gift card with money from credit card to avoid authorities being able to trace you in an easy way.
The gift card can be spent very quickly and you buy stuff, electronics, or whatever, and you can sell that stuff wherever, on ebay or etc.. there is a calculated plan on the part of the buyers in the same way there is in regards to the hackers.
There is a lot of economic activity created by inviting these kinds of packings and the sale of this kind of data.
A lot of people ask the question of who will benefit from this example of target.
What is interesting is you have dominant companies, largely in europe, that have smartcard technology.
It is used in a big way in europe.
Less so in the united states.
Companies that make cards that are simply smarter and make it harder for the hackers to have their way.
In the united states, it has been relatively slow and it is hard to say why exactly.
To suggest they will overnight have a big win because of this is probably tough to say.
Thank you very much.
More on "bloomberg west" right after the blade -- break.
? welcome back.
Coming up on the late edition at 3:00 on the west coast, 6:00 on the east coast, driverless cars could become -- could be coming to the roads of michigan.
What that could mean for the future of the auto industry.
Three clock on the west coast and 6:00 back east.
56 past the hour right now, and we are on the markets.
Julie has more.
Let's get you caught up with stocks.
Not much action.
We are the second book -- second to last trading of the year.
There is not much movement but we are trading.
We will talk to matt miller in a minute.
First, general motors, calling nearly 1.5 million vehicles in the biggest callback of china.
Bulk of the models being recalled are you ask, found to have defective fuel pumps.
2.4 million vehicles in this year, extending its lead in toyota.
Record demand for the fusion.
Here with his own unique take on the car is matt miller.
The year is coming to a close.
We are talking about matt's favorite or most important car.
Not necessarily my favorite, or the top five cars of 2013, there is a list.
I wanted to start off with number five and then go in reverse.
The ball drop in reverse.
A massively important car, the spider, for the big picture.
It is almost impossible for any normal person to own the car.
It cost a million dollars and there are even not just there are not even that many.
Only jerry seinfeld and god get one.
It shows you the hybrid powertrain is not just about saving trees or the environment.
It is really about delivering power in a much better way in the internal combustion engine alone can do it.
This points to the future of all car technology will be hybrid.
Before focus is the car people can afford.
The most widely sold car in the world.
The focus st is really a sports car.
We have had these sports cars and the version of the sonic that has supposed to be sporty.
The focus, a sporty engine and less than $20,000. the bentley continental gt speed.
It is not a new bentley, although it was new for this year, the first to go over 200 miles per hour.
I have not found a grand touring sports car that compares.
I think it is the best grantor ever driven including the bmw.
I never knew until just this moment what gt stood for.
An incredible review of the