We think this is where they will unveil their galaxy as five. This is happening in downtown manhattan. We have also been talking about Mark Zuckerberg speaking from mobile world conference. He just wrapped up a keynote there. Tradeshow attending a like this is proof that mobile is a huge priority for tech giants like facebook. The company is fresh off their acquisition of the messaging platform whats app. Lets hear what zuckerberg had to save the big price they paid for the service. By itself, its worth more than 19 billion dollars. Its hard to make that case because they have so little revenue but the reality is there are very few services that reached a billion people in the world. They are incredibly valuable. This is the one service that gets to a billion people and ends up not being that valuable, i dont think i am. Zuckerberg spoke about the initiative to connect billions of people to the internet, saying there are economic benefits to providing Free Internet access to emerging markets. Theen to what he said about profitability of this project. We are near breakeven and have a bit of work to do but we are very early in tuning it, so this is what these partnerships are. Folks and you will spend more than youre making up front. But from what we have seen in the rate of improvement, we are highly confident we will get bes to a point where it will highly profitable. When a great group of guests to discuss. David kirkpatrick will be joining us from barcelona shortly. Paul kedroskys from san diego and a former facebook executive, Allison Rosenthal is here with us in the studio. It is worth more than 19 billion, but he doesnt know for sure if its going to be around a year from now . Really . It is hard to comment on the price because we just dont know at this point. It is growing at a million users a day. People are getting onto this Service Every day am a talking about things theyre interested in and chatting with one another. That. Is real value to more than anyone how difficult it is for an app like this to hit the mainstream and stay there. I had a guest last week who says he doesnt know what hes going to be using on his phone in five years. If thats the case, why is it worth it . Its interesting to look at what was happening when they started. In 2009, they were the first crossplatform overthetop messenger to emerge and they own the exhaustion is relationships. U. S. Areutside the growing like crazy and for the past four and a half or five years, they have building, building, building. It is not going to go away overnight. The numbers and lines show quite the opposite. The platform is amazing and the numbers speak for themselves. What is interesting is not how much business or how many, but what the businesses. Yes, they are taking money from the carriers, theyre just killing the business. What do you make out when you look at the evaluation and type of metrics facebook must have been thinking about . You were hiding in the wilderness last week, we were going at this in terms of looking at the universal gravitational concept of purchasing companies. This 42 per active user, you can look at another revenue purchase made in the 1990s with microsoft buying hotmail. We have seen these kinds of numbers for companies at this stage who dont generate revenues and im not particularly troubled by that at all. Looking at the size of their active user base and comparing it to twitter, you can see a lot of opportunities to produce material revenues in very short order depending on what dials they decide to turn. Companyunning to see a produce a network of this size and such short order. Over and that happen over . Imnts join and they say out, thats what makes facebook a bad neighborhood. That will be a pretty problem for the services, maintaining any sort of persistency. Athink we are going to see series of acquisitions like this over time. I want to push back on what paul said. You were a banker at goldman users, it wasnt even it was eyeballs and page views and those were serious the tricks discussed around mergers and acquisitions. Number of users is silly unless its revenues attached to users and i dont see inning there. But i be debbie downer, think its a hard thing to get to. No dcf one there was the analysis. Growth story. What paul mentioned with respect comparable as you start to tm on value, but you raise a good point. Whether or not facebook ultimately introduces ad products, they said they wont. This has such potential, these are Customers Using this roddick , this one plays every single day, so there has to be opportunity there. What about making money . We have his mission has been to connect the world and that sounds very benevolent but he talked about presenting this plan to his board and said i dont see an immediate way this will be a good is missed, but i have to believe it will be. In the midto longterm, his face book ends up being the Underlying Network so every time someone connects to the internet or 50 of the time, that is valuable. Is that possible with the way google and apple control at right now . It will be very interesting to see how internet. Org works out for them. I am hugely skeptical about that stuff. I find that happy talk rhetoric, i am happy hes doing it but i dont think it has material business consequences and will probably frustrate many investors as they hear how much time and effort i like what facebook does more than seeing what they do. When they talk about what they are doing, i get agitated and think this company is completely mad and then they go out and make these aggressive strategic act positions and say they are pursued to proceed to grand Management Strategies and that could work. Nevertheless, the outcome is the same. Given you have in inside facebook, is there a problem with buying versus building innovation . You have said facebook is more like a media conglomerate that a social network. Could facebook become so bloated it becomesne that like one of these legacy players having problems ike yahoo or cisco . I havent been inside facebook the way facebook thinks about enabling its talent and letting engineers and product managers and anyone really innovate the hacker culture mark talks about a lot it face significant strategic advantage. Him andght instagram they bought whatsapp and they said they are going to leave these strategies loan. Its an interesting allusion to what is going on but a lot of the success of facebook from the past, present and Going Forward has to do with a talented the way they treat this people. Which may be different from other companies out there. Versuss of buying welding, sometimes that makes sense. Innovation happens when you are the big player, that will sometimes happen and you strategically acquire that company before they can significantly compete with you. What does this mean for you guys . You have eight million users. Are you guys going to change your plan . Spinoffe working on a based on the data weve seen which has a lot to do with some of what i was talking about. Moving from purely communicating to communicating with and around content and helping people discover things and enable conversations around the things. We have a product coming out we think will address that. You are launching something completely new . We launching something completely news something completely new. Sharingk you both for your brilliance with us throughout that keynote and afterwards. Bloombergve more of west after this quick break. We will talk about comcast and netflix. If you have been frustrated watching house of cards with a slow internet connection, that could change soon. Welcome back to bloomberg west. Netflix has agreed to pay more for direct access to comcasts broadband network, a deal meant to improve speed and reliability for netflixs streaming customers. The Company Announced the multiyear agreement without disclosing the terms will stop Jon Erlichman is with us now with more from l. A. You think this is a huge deal and has huge implications for the future of the internet . The very nature of the internet changed. It means netflix will get ahead of the line and have preferential treatment on one of the most important livers of Internet Service in the world. Every other company out there who wants to get in line, they have to get in line behind that flex. Andont know if netflix deal is exclusive. What if you are spotify or someone else . It raises Big Questions for netflix. Thes the cost of running business if they have to pay for access to netflix . Lets start with the first what if. What if youre not netflix, what do you think . You think about the future of television and the idea of internet enabled tv and what amazon might be working on. Brad stone was talking about that last week. This is a big deal if your Fee Structure changes because the broadband player requires a lot more money, all of the sudden you have to revisit the terms. In terms of the cable landscape, what does it mean . On thelix just a channel cable dial . This is a lot more about internet infrastructure and the way the service gets delivered. Cogent does. They are sort of the middleman. Think of it as the on ramp or express lane. It helps take the content from netflix and the user. Youre going to jams much content on a throw, youre going to pay extra. Net neutrality rules said that would not be legal. That has been thrown into the air by a Court Decision where comcast will be a decider as to what kind of content you can get and who you can get it from. That has profound implications for business, users, freedom of speech, its a huge deal. What does this mean for users . What does it mean for me . I think netflix customers may be wondering if the bill they pay for netflix goes up. Thats a very real possibility of that raises the possibility of why would netflix do that . I would say because they saw it as inevitable. People talk about how much they are streaming through netflix and maybe its not fair. They did it because comcast was trying to buy time warner cable. They will need approval for that. They cut the deal is netflix come were going to give them good service and we do compete with them and i think thats why this comes together right now despite the fact that it could mean higher bills. Netflix costs do not go down. Is upinsane the stock today because netflix cost went way up today. We will see how this plays out, given that i am such a big house of cards fan. Have a talk with our reporter who just interviewed Mark Zuckerberg and we will talk to him next. Welcome back to lumbered west ergo i want to get straight to barcelona where David Kirkpatrick just finished interviewing Mark Zuckerberg. A fascinating conversation, watching you there on stage and you also wrote the book on facebook. What is your biggest take away from what he had to say today . I also did a lot of preparatory interviewing with him and his team and i will say it is amazing the continuing growth of the scope of facebooks vision. I dont know if you caught the thing at the end where he said if you have anything else henned for 20 42014 and says isnt this enough . You trying to connect everybody on the planet and a new way and i think thats impressive and amazing. They have taken this step and i think he articulated it ready well and passionately today. Wondering there was an interesting moment when he talked about modeling often ability. How much of that was a glimpse into how he thinks about is this, which is to say not at all he thinks about opportunity, not profit. How much of that was spent, saying dont look for any payout yet . It is incredibly perfect for that company that they have cheryl and mark as a ceo with a longterm vision. If he did not have cheryl, he could not think this way. But he has a close partner is a master business person with the company on an extraordinary trajectory that he doesnt have to worry about daytoday. I think if he continues to focus on product improvement and other stuff i think it gives him the luxury of having this surprisingly big picture, optimistic, aggressive, futuristic vision for how facebook camp lay a positive role in the planets future. But it is only because cheryl is there that it is possible. He said some funny things about his board and what they thought about this. I was trying to push them on that and did not get very far but im sure there are people on the financial side and on the board who have some reservations. Is itspinion reasonable to say it will have a longterm payoff. There are some Companies Just by having more people getting involved can ultimately make more money and facebook is one and google is another. Ande did not hear all the q a but i understood you asked him if you wanted to talk about snap chat and he said no. What the make of that . There was a question from the audience asking what about snap chat . I repeated the question from the audience. And id this is enough said with a 19 billion deal, it will take some time before we do anything else. I said with your company, you will never know. He could by other services at a good price that would help expand his vision in the near future, he would still do so. Value wentp chats up as a result of the transaction, but its a different kind of thing because its for developed countries. It is an elite service and a different universe. There was some discussion about integration and how the Department Might work. Lots of parallel services that dont necessarily interact on the front and. How do you think facebook thinks about these Services Like instagram . It is becoming a portfolio. No question. It was cheryl who recently ,alled facebook our primary app which was a stunning new direction to go. A are really starting to think of these other services as not equivalent but freestanding parallel entities. The way mark was talking about it, theres no question hes looking at it that way. One of the questions you may not have heard was a dutch journalist asking about privacy and whether the data will be exposed to facebook. Adamant itedibly would continue operating the way it always has. Its another reinforcement of the idea that these are parallel things that will be going the same way. I understand there was some discussion about china. Do you think this changes they spokes profits in china . There was an article about china. Operates in its not exactly a trojan horse, but for facebook to have any Services Operating in china is and advancement of his vision. Who knows whether paper may work in china. But i could see Facebook Messenger being allowed in china. We have to leave it there. Thank you for joining us. You are watching bloomberg where we focus on technology, innovation and future business. Carl icahn who last month pushed for ebay to spinoff its paypal business urged voters to push for the split while nominating two of his employees to ebays board. Criticized the online marketplace for lapses in Corporate Governance and singled out to directors, Mark Andreessen and scott cook for directly competing with ebay. Ebay responded saying ebay and paypal are Better Together and icon has cherry picked old newsclips and anecdotes to attack the integrity of two of the most respected leaders in Silicon Valley. Towill speak exclusively Bloomberg Television coming up later today at 3 00 eastern time. You dont want to miss that. Broke to comment and maker of set top boxes, is weighing an initial public offering. This is according to people with knowledge of the matter. The ipo would take place in the United States sometime this year. Some person at the company recentlys oak with tanks of the possibility of an offering. Microsoft is making a further push into mobile software to develop cheaper phones for emerging markets. Under the new leadership of satya nadella, they are working with qualcomm and lenovo on a lowcost phone decide that handset makers can use to build their own devices. Microsoft plans to update its software this spring. To mobile World Congress sam sun is hosting an event today were plans to unveil some new topics. Sam grobart is in Lower Manhattan where samsung is holding a partner event. Has traveled to south korea and covered samsung indepth. Lso with us is brian blair he covers samsung as well. I know we are waiting for the Samsung Galaxy s five to be unveiled, but two watches have been unveiled so far . That is correct. There is the new galaxy gear to and the galaxy gear to neo. These are refinements of the original concept sam shut samsung showed last year. Many view does is being clunky and management agreed. These new devices are much sleeker politer, and a little more wearable than the original versions. Watcheserstand it these are based on samsungs own operating system. Not android. What does that actually mean . Does that mean samsung is taking big steps away from google and android . Complicatedery dance and they seem to be doing many things that many times. Using it instead android means that data is going to go back to samsung. A samsungmpanies him and google, and recently came to an agreement about patent and intellectual property and it would appear the two companies are reaching an agreement as to which apps appear on samsung devices. Devicesbe a lot of repeated the functions of a google app and we may see less of that Going Forward. It is a compliment it is a complicated 3d chess game going on. At this newlook phone, whats the biggest question you have going into this announcement . Im adjusted to see what they are doing with the heart rate monitor. We understand it has a fingerprint center, but im curious to see how theyre going to tie it in to this fitness side of wearable technology. Is thing that is not clear what these companies are trying to do with the wearables. We dont know what the killer app is and it sounds like some song is betting his fitness. Meemily is making fun of because im wearing my heart rate monitor and my job own right now. Businessesw big that . We know apple has some patents around that area and tim cook is a big interest athlete, cyclist and so on. This be proof samsung is just following what it thinks apple is going to do next . Isnt it ironic that apple introduces a fingerprint sensor in the iphone that we now see it in the next galaxy phone . It is interesting that these companies that come out with abile products are doing fitness focus and here is samsung saying we are going to do it also. Samsung is not a great originator, but they are phenomenal at copying whats out there in the market and exploiting it globally. They are masters at it. Headed in a fitness direction and i think apple will leapfrog a lot of companies later this year. But this looks to be one of the areas we can get on board with. Back to the phone, i noticed there are some incremental improvements we are expecting. Share is their market shrinking, growth is slowing down, is there anything samsung can announce today that will get people excited about phones again . Im not really sure. I think we will have to wait and see. Demand for the galaxy s for flattened out over the year. Of thoughtschool that if i had a galaxy s three, youve got a capable smartphone and it was not better to move up to a gs four. It is similar to the look and feel of gs three. We may see something similar. I dont think were going to see anything announced today. Its going to be a slight aeration. Earlyhe photos released this morning, we know what its going to look like. I dont think there is anything thats going to help the highend improve this year. I have been told you are holding a martini glass question mark yes oh stop hows it going question mark tell us. Bout that can you not drink on the job . This may be my last broadcast with you guys but it has been my pleasure. Got dinged because it was a bit cheesy. It had a big musical theater element. This was down in soho, theyve got margaritas and an espresso bar. You should all come down. Seriously, what kind of drink is that . It think. You and i are heading to the bar. Its a jalapeno margarita. He also has a white iphone. We are going to continue to monitor whats happening. Coming up, nine months of nsa scandal exposed by Edward Snowden. Mike rogers is here with us to weigh in on it all. Welcome back to bloomberg west. Im energy im emily chang. The conference kicking off your in San Francisco the ongoing Edward Snowden nsa scandal is sure to be front and center. House intelligence chairman of mike rogers is here with me in the studio. Thank you for joining us. Withave been meeting industry ceos today. Whats on the top of their mind . How do we rebuild the confidence that our Intelligence Services are not violating privacy and not encroaching on won six of our economy growing right here in Silicon Valley . All of those conversations are happening. What do you see are the Chances Congress will finally come to an agreement on some sort of Cyber Security legislation . Are you willing to alter your proposal to get the deal . Im as long as for of bills the mission. People think the nsa and the Intelligence Services are doing, they are not. We are trying to say here is exactly what the threat is. Can we do a competent builder so we know that the nsa is not listening to their phone calls . We should do those things. Then we have to understand what the threat is. Public reports say iran has over 400 times probed our financial institutions. We know the chinese and russians are trying to steal an election will property at a breathtaking pace. How do we do this in a way that protects our ability to protect the economy here and still protect privacy . We can and should do both, but we have to Start Talking about it in a way that is productive. So one of the criticisms as to offer too much protection companies. We are trying to encourage them to share only cyber threat information. If you are staring if you are sharing in good faith, we should encourage that behavior. Its no different if youre on the subway system and see something bad happen. We want you to Say Something bad is happening. Same kind of thing. The government is not on private sector networks, so they miss a lot of what the chinese are doing when they are trying to steal information. What the iranians are doing, a robust sharing of only those threats can go a long way to allow the private sector to protect itself. That is the endgame. Edward snowden, hero or traitor . Over 95 of what the nsa contractor still has nothing to do with privacy. It had to do with defense, shortterm and longterm strategic threat. The army, navy, air force and marines had nothing to do with anybodys question of privacy. That looks at it in a logical way, its hard to walk away and think giving that to our emmy was anything less than treasonous. You have implied Edward Snowden may have gotten help from russia to carry this out. The technical capabilities were beyond his own. Why do you think that . I think of this as a former fbi agent. Look at the history starting in 2010, theres a large agree of suspicious behavior leading up to his decision to steal information. Do witht had nothing to privacy issues or what the nsa was or wasnt doing and had everything to do with information that protects the United States. That information is something he may not have understood existence, so we are curious how the tool was developed to go after information that he may not have even understood existed on the network. Lots of questions we have to get answered. Im not quite sure weve heard all of this story yet. Youther legislators say must have more information than they do if you think the russians were part of it. Russians are what came up. He certainly is in moscow now. No caps on or intelligence oficer in the service greasys not under the influence of the Russian Intelligence Service today. The question isnt whether hes under the influence of the russians, it is when did he start . That could be debated. I dont think all the facts are on the table. I understand guy, the value of small pieces of information, i just believe theres more to the story and as this unfolds, i just dont believe he acted completely on his own and he is currently under the influence of the russians. That is not disputed. When did it start is what the debate will be. What is the likelihood he ever returns to the United States . Unless he has a change of heart and brings back every piece of information and is willing to stand up to the scrutiny of a legal investigation, i dont think its very good at all. Lex the ukraine which are biggest concern there . It is split. I dont think the dissolving of the ukraine is in the interest of the european union. I dont even believe its in the interest of the russians. Do you think the russians could come in . Lets i dont see Vladimir Putin using troops. I see him exerting influence through his Intelligence Services and other ways to cause a split. He cant afford to lose all the ukraine. I have heard it said that russia without the ukraine is a country but russia with the ukraine is an empire. Behaved, i putin has think youd like to keep that sphere of influence. Intelligence services know where he is . Its unclear that u. S. Intelligence services know where he is will stop im not even sure the ukrainians know where he is. You could have a good hunch. I want to talk a little bit about apple because there was a big security flaw revealed over the weekend. Have issued a fix and theres one on their desktop operating system. When apple released this fix, there was no red alarm, up your phone right now. They did not give a lot of context about what was wrong and why we needed to perform this update. What do you think about that situation and apples responsibility to its users . First and foremost, they need to fix whatever anomaly they found that provides for a longer ability. Through time, they will correct that vulnerability. Dont know time, i if they want to advertise to every bad actor out there. There are all sorts of bad actors trying to take advantage of that vulnerability before they could get it fixed. It is always a balancing game. You will have vulnerabilities built into these systems, not on purpose but by the very complication of how the software operates. Nsahere is speculation the but the vulnerability there. I can tell you now that did not happen. This is part of the problem. The data points people believe that the nsa is doing a thing bad the government had a hard time operating a website for your health care, let alone this looking intoy are that around the world. Great to have you here in the studio. Coming up, we will be talking more about the apple security flaw and what it means to the security researcher who discovered it. Welcome back to bloomberg west. Im emily chang and cory johnson is here as well. A major security flaw left apple devices open to hackers who could exploit the flaw to steal Financial Information and email and so much more. Apple released an update for its mobile operating system and in a statement about his desktop operating system, apple says we are aware of the issue and had a software fix that will be released very soon. For more, i want to bring in our security adviser from washington dc. Hes the developer of an app that allows mobile users to track where their data is being sent will stop you were one of the first people to discover this and comment on it. Tell us how you came to realize this was an issue. Thank you for having me. What happened earlier this weekend, some researchers to thered an update iphone was addressing a very sensitive area of the security features of the iphone. Shortly in their analysis, they hinted at and wrote about the fact that it might be broader. So i spent some time looking at what apps might be affected by this vulnerability. So the mail app, the calendar, some of the other apps on the mac os will be honorable to this issue. What exactly does this mean for me as a user . Do you know the lock icon you see when you login to your bank or email . That is supposed to protect the communications and emails, your passwords and Bank Information from eavesdroppers. Whether its someone at the wifi cafe or the nsa. What researchers have demonstrated is the protocol doesnt actually work for apple devices and mac computers. Desktop isedge, did still vulnerable. If you are using the computer at a wifi cafe, someone can hijack your communication and monitor it and all of your emails and passwords, etc. Reaction to this been different from other companies and could they have done anything better . Surprising they released emergency updates without releasing it for the mac operating system. Given the sophistication of people working on this issue and the current climate you just had mike rogers speak given the current climate it is surprising they would not think to patch the system immediately rather than just trickle out one of eight after the other. What about the fact they released the update without a context . I probably would not have downloaded the update for a few more days if i wasnt in the know. Im a tech journalist. The question of transparency around these issues is a huge one. Usersct they dont notify that theres a major vulnerability seems really shocking. This thing called security bio security, just trying to slip it in without anybody noticing. Of one to 10, how big a deal is this security problem . This is a huge deal. The underlying security transports for product updates and passwords that make up all the communications are exposed. Thank you so much for sharing that update with us. We will be back with more liberal west later on today. I am mark crumpton. The is bottom line, intersection of business and economics. Samsung unveils but latest galaxy smartphone. Former imf official discusses what is next for the ukraine here to visit rheem court looks at president obamas time and change policy. Climate change policy. To our viewers here in the United States than those of you joining us from around the world, welcome. We have full coverage of the stocks and stories making have lines. Juss