tv Bloomberg West Bloomberg May 28, 2014 11:00pm-12:01am EDT
>> live from pier three in san francisco, welcome to "bloomberg west", where we cover innovation, technology, and the future of business. i am emily chang. it is official, apple has forhed a deal to buy beats $3 billion. it is their largest acquisition ever. apple will gain control of the popular beats headphones and its streaming music services. closeal is expected to before the quarter. google is moving full speed ahead on the self driving cars. they will make more than 100 prototype cars that they built and designed itself.
they have no steering wheel, no brakes, new gas pedals and relies only on software to get around. testing will start with human writers but they will also have manual control. getting a sneak peek at some of the products developing for health tracking at an event in san francisco. showing off the prototype for the sim band, tracking heart rate, skin temperature, oxygen level. it has a detachable battery allowing you to monitor the body even when they are sleeping. samsung also unveiled an open data platform where it can be uploaded. now to our lead story of the day sending shockwaves through the music industry when it released itunes and the ipod back in 2001. after weeks of rumors, they have repeatedly hit a deal to buy beats and a newly created streaming service.
the price tag, $3 billion making it the largest acquisition ever by far. dr. dre and jimmy iovine will be joining apple. in a statement announcing the deal, tim cook said music is such an important part of all of our lives and hold a special place in our hearts apple. that is why we have kept investing in music and we bring together these extraordinary teams to continue to create the most innovative music products in the world. how will the beats deal improve apple's business? joining me now, editor-at-large cory johnson, west coast correspondent jon erlichman and senior analyst with jmp security. thank you for joining us. who wins here -- apple or beats? >> i don't think the shareholders do. if there's something under the
surface, this is backward looking to where it came from versus where it needs to go and it's something they should have been able to do internally. we are wondering where the innovation and imagination will come from to take it to the next level. >> to what degree do the contracts walk with beats? can they now take all of the streaming rights they had acquired in the negotiation with the record industry and bring them so that apple hits the ground running with a music streaming service like spotify, similar to pandora, and do the thing that for whatever reason apple has not been successful at. jimmy iovine and dr. dre can write a deal that they could not.
do you think they have those deals with them? >> that's an unknown. what we do not know is the scale of the beats business model at present. what kind of numbers should they be penciling in? you can make a case if you are apple based on your number of users, 800 million credit card numbers on file. you can make it work in pencil it in. it comes back to, again, at what kind of return will this entail for shareholders? are there any barriers to intrigue? >> jon erlichman in l.a., without about the berlin wall and wanting to bridge the differences between apple in the music industry. what do you make of that? is beats really the solution? >> it could be. following what alex said, we
heard today from george blankenship, an apple executive who played a big role in the retail strategy who told us he does think that there's something we are not talking about yet which will come to light in the months after this deal which will make it a little more sensible. you see how people are consuming music today, emily. it is changing from when steve jobs was pushing the idea to buy any track you want at any time. people are very comfortable with subscription services. even if there is some fine print that makes it challenging to get all the licensing stuff work out, eddy cue in the picture with them made it very clear in the released by our offering both the subscription service and the itunes radio service that apple released not too long ago. they are seeing these as companions at a time when there's a very different type of
music consumption taking place. >> they also said dr. dre and jimmy iovine will work there. dr. dre will do whatever it takes for apple. do you think this is tim cook trying to make his mark? i know that they were very good friends, but is this tim cook trying to put his stamp on the company? >> it's an example of tim cook failing to make a significant mark because this goes back to his legacy roots in music. sales are falling and this looks like a doubling down on music. the great concern i would have as an apple shareholder is if they are thinking with their heart, like they say in the press release, or using their mind? >> tim cook consistently thinks about risk rather than just opportunity.
if you were to look at all of the streaming services out there, which has a probably profitable business? the headphone manufacturer. i'm presumably thinking like i know, but there is a probable headphone manufacturer subsidizing the digital business. headphones will be better. digital business will be better. we will fix the problem with falling ipod sales and falling digital sales. do you see that as the way apple thinks? >> if that's their calculus, it's a doomed to failure. there's no way there's no way there is a margin structure defendable overtime. it did not work for sony back in the day. >> i think there needs to be something in the discovery contract you alluded to to make sense over time. from a hardware, that's a commodity business and that's the great concern. there has not in enough advances in software, in new business
avenues to make me convinced that apple can hold up to margin structure, way above anything in hardware right now. >> what does it say about apple's confidence in the future of itunes? >> i think they feel they are still a big is this in selling either tracks or albums. the numbers are enormous. we see trends where people are choosing streaming service instead of buying albums. look. you guys just highlighted the idea that they are doubling down on music, they are clearly staying in an area they are very comfortable with and they yell like having a very well-known people from the music industry breathing new life into how they think about all of this might make this a winning strategy. >> we were looking at some trends from surveymonkey and pandora was far and away in the
lead and apple was in the middle of the pack with spotify and sirius. >> another great example of the market they got away from. >> this begs the question if this is the beginning of a massive acquisition spree for apple. if this is kicking it off, it does not inspire a lot of confidence in how it will start about, at least in the ideas of gmp securities. >> alex gauna from jmp securities, jon erlichman, and cory johnson. ditching the steering wheel for a more chauffeured experience. how soon could one of these vehicles becoming to a street near you? watch a streaming on your tablet, phone, and bloomberg.com. ♪
>> i'm emily chang in this is "bloomberg west." from search giant carmaker google is sitting the blast on the self driving car with no pedals, no brakes, no steering wheel. it's runs on software. sergei brin talked about the possibility at the code conference. >> the reason that i'm super excited about these prototypes in the self driving car project in general is the ability to change the world and the community around you. >> they will start testing later this summer. they will have manual control and if all goes well, a small pilot program could be launched in california in the next few years. i was joined by professor at the m.i.t. department of mechanical engineering and a member of the artificial intelligence lab.
i started by asking if google can become the next big automaker. >> it is really big news. it's a transformative decision google is taking on. you can really distinguish this as more evolutionary. we are still a long way off from masculine production but the value of the software that they will create, if you can really enable these robot cars to navigate through the world safely, that could really be transformative. >> the car itself looks sort of cute. they wanted to look friendly. >> it looks like a vw bug. it does have an innocuous looking bout it. i know you drove a driverless car. have you seen them on the road? i find it really disturbing. i imagine a lot of other drivers do as well.
this will stand out when they see it coming from a distance. it's an intriguing notion to get out there and see how this fits in for the broader plans of google. the original goals is to make all the worlds information available. will this help them get there? >> let's take a listen to a little bit more of what sergei brin had to say about why he's so optimistic about this and why he thinks it such a big idea. >> i think some of these business questions like service operation, their partners, things like that, are things that we will sort out when it's closer to being widely deployed. i think the initial test vehicles, we will just operate the service ourselves because it will be a very specialized thing . long-term, it's not clear. we will almost certainly partner with a lot of companies, possibly uber.
>> they said it was potentially one industry that could be disrupted by self driving cars. >> the legal issues will be massive when it comes to proving safety. they will have a lot to go through in washington. >> i want to talk to you about the navigational and mapping issue. you've been a ton of research on the specific issues and problems that could arise. what challenges will google face? >> they use very precise prior mapping. it's the large-scale caption of information about the physical world that google is leading and it's like super gps. he gives them down to centimeter level positioning which transforms the ability to develop these vehicles. there are still some great challenges. google is driven by data. this deployment of 100 test vehicles will give them data
about how the systems might be used and how they could perform and will help them create the software value. it's mixed emotions. i'm excited about the technology, the chance to save lives, but i worry about things like left turns across busy roads, driving on roads that might have snow, and determining the gestures of crossing guards and traffic cops. it's pretty clear with the releases they've had in the past few weeks that google is not letting up the breaks, as you said. they're making this sustained, long-term investment. we might he a long way away, but i see this as a transformative technology. >> there are lots of innovations in cars that recognize when a car is drifting from a lane, control your car for parallel parking adventures, but the persistent nature of this that lets a car drive all the time,
what's the biggest difference between the occasional nature of self navigation and the persistent nature that they are proposing? >> the government has defined some levels of economy. that is when a car is driving itself but a human is ready to take control in the event of something going wrong. level four is full autonomy. they're going level for where a driver will not be able to take control. most of the other companies are going like level three. you have this challenge that if something goes wrong, how do you alert the driver rant and acted them? there are liability implications. is it the software or the driver? they are bypassing that completely and going to a more ambitious goal. they can do this safer, smaller scale the claimant.
i think it might be possibly decades away from taxi driver capability in manhattan. this is interesting getting the data in a safer, smaller scale way to understand how this might unfold. >> without the ability to give the human control, it only has two buttonless, stop and go. what if the stop and doesn't work? what do you do? >> the paradigm is that the stop button will always work. it will have redundancy in the sensor coverage. one small detail of the prototype come if i'm not mistaken, is a blind spot very close to the car which makes it hard to do precision maneuvering. the smaller vehicle seems to be designed to give complete 360 coverage all the way around the vehicle up close. they will be able to push the limits of the safety envelope so the plan is to not have the
i'm emily chang. cyber crime is on the rise. working against increasingly complex and difficult to detect cyberattacks. cory johnson is back with me now in joining us via skype, global u.s. cyber security leader david burke. thank you for joining us. who are the cyber criminals? what are they looking for? >> thank you very much for having me on here today. the reality is we see a number of different cyber actors acting in the world for a number of years. number one, we worry about nationstate actors who are very good at what they do. they have excellent techniques and are difficult to challenge to combat. we also worry about organized crime actors. these are also very talented, very intelligent threat actors who are very good at taking information and turning it into
monetized value in a variety of ways. we certainly worry about individual collectives that will focus on a particular company to make a social statement or two promote dogma. we are also worried about insiders, legitimate employees with rights and permissions, access to information that may be sensitive and may be working in concert with another threat actor groups i just talked about. >> david? one of the most important things i thought about your report was that it was so much to get into. there was the notion that some hackers are out there just trying to embarrass the companies they are hacking into. can you explain that? >> one of the concern is that many of our clients see today and many of our clients are concerned about.
information that is very sensitive being accessed and then exposed for the world to see. this is absolutely a very real concern that clients all around the world focus on and are concerned about. part of the challenges it's very difficult to predict that kind of attack activity will occur and you have sophisticated capabilities within those attack groups. >> if you have all of these really different motivations, embarrassment, financial fraud, dated to put to use somewhere else, how can companies effectively prioritize what the risk is? >> that's one of the important defining issues from our study. they did not take that very important first step. only 38% of responders -- >> sorry, david. we have to leave it there. pwc partner in global u.s. cyber
>> you are watching "bloomberg west" where we cover innovation and the future of business. sam sun wants to be a leader when it comes to tracking your house with wearable devices. at an event they showed off a new wearable device, the sim band that can track a bevy of biometric data like heart week and blood pressure. they are starting a software platform for developers where all of this can be downloaded. i caught up with chief strategy officer at today's event and i started by asking him why he thinks these announcements are so revolutionary.
>> was the announcement is really two things. we announced a wearable platform that can monitor our vital signs as well as a cloud data platform. it can look at your vital signs but not only from our devices but many other devices in a diagnostic way. you can put it together and make much more sense around the information. >> that's the platform and this is the band. >> we support multiple os. it's linux-based. we will provide options based on the platform. >> i've worn west bands for a few days. i'm not compelled to wear them every day.
what is the mass-market use case? why should everyone be wearing something like this? >> that's a really great question. i have dealt with all kinds of wearable devices. some of them are heavy. some of them are not very come bowl. some of them have limited functionality. but we hope to do going forward through the development platform is the whole world to join us to make a platform that can monitor our vital signs and know much more about our body. then we will make huge progress in understanding our body. in other words, why should you learn about your vital signs when you see a doctor? usually it's an appointment when you have a problem. could we know more about our vital signs continuously as a
way to know more about trends around our signs, heart rate, blood pressure, whatever that's important to you? >> do you see on a path to getting fda approval as something you want? >> our goal is creating the development platform. whoever wants to make trotta from the developer program, it depends on their objectives to go through the appropriate regulatory process. >> what's the coolest sensor you are working on? >> what we showed today in the platform. it can be able to monitor multiple things. it can give you monitoring your ekg. it can also potentially look at your body mass as well as an indicator of your stress in terms of humidity around her
body. >> what are you wearing? >> i know what time it is in korea and it gives me some idea around my heart rate. this morning i was at 52. it also tells me how much i've walked today. i walked 4985 steps. it's also telling me how much i around so they can see the information about the kind of exercise you have done. the cool feature here is that also monitors sleep. it monitors your sleep, how long you slept, but also how deep you slept by monitoring motion. >> you have four smart watches on the market right now. what have you learned from
consumers that you have integrated into what's coming next? while you do have a majority of the smart watch market, reviews have been mixed. >> it is clearly what we call early stage. an early stage, there's a lot of learning going on. our products will continue to evolve over time. as we are adding better sensors and incorporating better algorithms. >> apple's conference is expected to announce something fitness tracking related. is it a coincidence you held this event today just ahead of that or not? >> everyone has their own schedule. we're very excited we can talk about this critical subject. >> you work that intel previously in your career and he wants quoted andy grove that only the paranoid survive. do you worry about apple? >> i really cannot comment on
competitors but we're paranoid about anybody out there. we are trying to work on a very critical mission and trying to be the best that we can. when you do that and create products, hopefully we take care of these kinds of issues. >> you are headed the strategy and innovation center which sounds like a pretty big job. what's the next big thing for samsung? >> our engagement in addressing the need to address the ever increasing health costs. in the u.s. it's over $3 trillion per year. that's almost 20% of our economy being spent on taking care of this area. if we could be able to reduce the cost of health and be more proactive about it so that some
of this technology can be used to really improve our awareness, we should be able to reduce costs of health care and it would be a good thing. >> how do you see this fitting into the universe of samsung and other product. how does this fit into the bigger picture? >> samsung is a big company. we have a 420 billion dollar business today and nine business units. what we are trying to do is this tour that we develop that reference platform as well as cloud data platforms, samsung engagement in this is in a much more proactive, much more open, much more aggressive way to address important issues. >> samsung chief strategy officer young sohn. is a teenager that could help
>> welcome back to "bloomberg west." i and emily chang. the new microsoft ceo dropped a few hints about his strategy in his first public interview as ceo. he says there are no plans to sell xbox or microsoft's search business and here's what he said about potential acquisitions. >> i think we have to build something big. if along the way we have to buy things, that's fine, but we have to build something big.
if you add in next box, you can say three and a half but it's time for us to build the next thing. >> nadela says that he has been around helping in a variety of areas. nathan's friends carried him off the stage after was announced that he won the top rise of $75,000. editor-at-large cory johnson is here with more in the headlines about this kid, is this a teenager who can cure cancer? >> he was born in 1999. he was awarded the gordon moore award. he used a big dated to identify the cure to wrist of harmful
mutations in genes associated with cancer. he took a very interesting approach. i asked how he found out that he had one this big rise. >> i found out right as they were calling my name during the awards ceremony. it was pretty amazing. i was completely speechless. >> how do you define -- i read from people struggling to explain what you did. >> i created a process that can be used to predict whether mutations you feed and are likely to create cancer or not. i did this by mining data from online public the main databases and doing a bunch of to sister: analysis and approaching it with a technique called machine learning. it's like an algorithm you can use to teach computers how do cost a high data. in this case, mutation. >> machine learning is pretty
basic encoding. what was unique about the code you wrote? >> i used wolfram mathematica. it is unsupervised which means that it's flexible with the data you can input into its own that allowed me to be able to mine data from online public a main databases. i did not have a research mentor so i did not have access to proprietary databases. in previous algorithms that were unsupervised, they only had an accuracy rate of about 40% but mine was 81% accuracy. >> i've never heard of the unsupervised function. >> it's a machine learning function where the data you train the function on, basically the data you feed into it, you don't have to know beforehand
which category it belongs to. in my case, the data i fed into my algorithm, i did not have to know whether it caused cancer or not to customize for learning. that's the sort of data that's out there in public to main databases. in current doldrums, you need to know the data you input summa whether it causes cancer or they don't for clinical outcomes. >> basically, it was allowed to be in an unstructured format and therefore you could look at it a different way. this would not be limited to understanding genetic material and you could use it in all sorts of things like what? >> my algorithm is custom-designed for this biological application. theoretically, you could use it for just anything. machine learning is really big right now. maybe spam e-mail filters.
there's tons of applications using machine learning. >> why did you pick this? >> i was taking a biology course and it is one really introduced me to these online public to main databases. there is so much data out there, an incredible amount of cutting-edge data and i was so fascinated. what can i use this data to use something cool? after that, one year ago, my family visited a close friend who had been diagnosed with ovarian cancer out of the blue and it inspired me to create a system where you could input mutations and tell you whether they were likely to cause cancer or not. >> you are 15 years old. what's next? [laughter] >> i'm not entirely sure. now i need a summer job. ideally i would like to find a research lab that i could maybe
continue my project, maybe get a patent door find a practical application to apply this sort of system to save lives in the real world. >> what will you do with your 75 grand? >> not sure yet about that either. i will probably put most of it away for college tuition and maybe take some classes in the meanwhile. >> he needs a summer job that has 75 grand. when i was 15, i did not have 75 grand or any kind of awards. i was a camp counselor at sailing camp at 15. >> born in 1999. i cannot believe it. >> it happens. >> you definitely wonder what scientists are doing today and if they are taking advantage of the highlights and technology. >> the conversation we had yesterday with the president of harvey mudd talking about the
how technology affects the great outdoors. the north face was one of the ones to first sell gortex jackets. they have since expected design from this company. cory johnson has more. >> the north face started here in san francisco in 1966. technology has been an important thing for this company. test and design the product line. part of the point of this whole show is to talk about how they are using technology to change. what is technology doing now? >> the design, the effort, the technology that goes into every garment is hard to believe. you look at other things but they demand they perform in the
most rigorous conditions including being lightweight, durable, breathable. they wanted to stay warm and dry. >> that's always been true. what's different now? >> design labs in alameda that help us -- >> right across the bay. >> a new design center in boulder. >> what would i see if i went into the design center? >> mad scientist testing. in our business, business growth in maintaining consumer satisfaction. these were not there two or three years ago. we have been able to bring those. they are two products that we have here. people love down because it's
compressible, light weight. the problem is if it gets wet it looses thermal properties. we created a synthetic packet with the same properties. it's super thin although it has the same weight and warmth characteristic as a 600 fill down jacket. if he gets wet, it will still maintain 80% of its warmth care restricts where down will lose all of it. it's very light eight, compressible, folded up to the size of your fist to take on trips to everest. >> i frequent everest. >> this is launching this fall. it's a new technology where we are able to weave fabric in such a way that we are able to reduce the amount of seems as well as adding abrasions. that is woven into the fabric. prior to this new technology, you would have two different pieces of fabric, a seam, it
would be heavier and it would allow for moisture to get in. it's not as light as it could be. this technology is a breakthrough and we are launching at this fall globally. >> one thing that intrigues me about your brand is that it's, it's, a long way. there is a time 20 years ago when it really was the favorite dan that it was not. what can you do to bring the authenticity back? >> we have two focused customers, the top of the pyramid. we will continue to design, communicate, and talk to those consumers in that way and create that connection. we are a big company and we want to speak to those core athletes with the right tone to resume. >> innovation, technology, and the future of business at north face.
lindsay rice. who knew? >> time now for the bwest byte focusing on one number that tells a whole lot. senior west goes correspondent is in l.a. what do we have? >> 86, the age of my angelo who passed away, esteemed poet, author. a cutting-edge woman in business. she was the first female black cable car conductor in san francisco right here in front of the ferry building here in the 1960's. a really impressive person and a great leader among women in technology. >> and a writer of seven autobiographies. can you imagine having that much happen in your life? >> and someone who directed even here in hollywood. >> john, corey, thank you. maya angelou will be remembered as a force of nature. ♪