Transcripts For BLOOMBERG Market Makers 20140328

Im Erik Schatzker. Im scarlet fu in for stephanie ruhle. Airlines,al, malaysia we will try to make you forget about some of that stuff. In the meantime, newsfeed stories, and around the world. Consumer spending rose slightly in february. It again 0. 3 . Oft is the median forecast economists we polled at bloomberg. Americans are slowly shaking off the effects of the coldest winter in four years. Household spending on Services Including utilities rose 0. 2 in the month. Cbss billboard business has gone public and will start trading any minute now. Raising 560 million. It will still be 83 owned by cbs corporate but eventually cbs shareholders will own all. Chris christie says he is still baffled by decisions his formal former aides made in the George Washington bridge scandal. The new jersey governor made the comment in an interview with abc news anchor diane sawyer. When things were first reported i said, this cant possibly be true, because who would do Something Like that . Sometimes people do inexplicably stupid things. So that is what makes it so hard, as the guy in charge. None of it made any sense to me. To some extent, still does not. The interview coming on the same day a report that Christie Commission found he had no knowledge of the bridge closures. The final call for obama care. Americans have until monday to sign up for health care insurance. Though the deadline is a little soft, lets say. The big question are enough healthy people, the socalled young invincibles signing up . We have the president and ceo of Independence Blue Cross of philadelphia which has been very active in seeking out the uninsured. How successful have you been finding the socalled young invincibles . Good morning. As aendence blue cross blue cross plan, we have been committed to reform for the last four years, since the law was enacted. We realized in order to make this work, not only did we have to reach out to the subsidy eligible population, the older population, but we needed to get the young and traditionally healthier population into the mix. Its working. Over the last month, we have seen a downturn in our average of enrollees to well over and well over a year. We used twitter and facebook and were have got the people were young people are. We used what we called the independents express, a semi truck that folds out into the apple store. Youtubeonline contests, contests where people talk about the importance of enrolling and we have seen a significant number of young people coming to us as the clock moves toward march 21 march 31. You have five planes offer. Silver is right in the middle. Where are the young invincibles signing up . Silver as well . The majority are going for the silver plan. It seems to work in terms of theays and access to various networks, physicians and other specialties. That is where they are tending to fall. Overall we have enrollees of 180,000 in our pennsylvania market, our new jersey market. And we have seen a trend downward. The last two weeks weve seen about 20,000 young folks sign up. For 2000 young people. To what do you attribute that . To the things you were making mention on your us, for example, willing out, trying to broadcast the message, or do you attribute and the some of it to the quirky, lets call it, Campaign Tactics used by the Obama Administration like putting the president on with zach between two ferns . I think it is a combination of both. Number one, yes the Administration Made an effort, the Insurance Industry has made an effort to be to the young invincibles where they are. It is all working. I think it is really using social media in ways that we have not done in the past. Rybody predict it government, the president , and the industry predicted that young people would sign up later than the rest. It is about educating them in the way that they hear it and the way they understand the importance of enrolling. I have seen the latest figures from the Kaiser Family Foundation Poll, nonpartisan gives us a sense of how people feel about the Affordable Care act. Saidl 50 of people polled that they still have absolutely no plans whatsoever to enroll in obamacare. What is it going to mean for Companies Like yours which meet all of these enrollees to make it financially feasible . . Lets take a step back. The risk pool has to be right. , we made alan decision not to be political in implementation but out on the front line and enrolling people. We firmly believe that if we want to people are older people at Community Centers and churches, middleaged folks at ballgames and other Community Events him and the young invincibles through social media, that we would attract them. It remains to be seen how it will work out financially. Our first and foremost goal was to enroll as many people as we could. It is the law of the land. We have a responsibility to do that. So far, so good. So far 110,000 people have signed up for obamacare through you guys. What about the plans you had to drop . Who are they and what kind of plans did you have to drop . Realizede started, we that the first goal was to go out and educate people. We spent the first few months through the independent six arrests and social media and other means explaining what the new law means. The next couple of months we reached out to our existing customers who had plans that were not compliant with the Affordable Care act. Working with the administration and State Government here in pennsylvania, State Government in new jersey, recalls walked them to compliant plans. All in all, the vast majority, with the exception of a few thousand, we were able to move to new complaint plans. We had a great deal of success. I think it has been a mixed bag across the country but we were very pleased we were able to get to those individuals, get to their families and help them move across the compliant plans. Takew long is it going to before you and Independence Blue Cross know whether the Affordable Care act is good is this . Good business . And comes down to what you reference earlier, the case mix. We need to have enough of the younger, healthier individuals in the program to make it work. We believe that the first year, our goal is to enroll folks. We certainly try to price it at a level that was, a, affordable but, be, make it good from a business perspective. As we move forward we will have a sense of what we need to do and exactly how good it is from a business and financial perspective. What is your early read . As i said consistently it has been focusing on enrolling people. I understand that but if you look at at a segmentation of people you were able to sign up. You talk about the elderly, the middleaged, the young invincibles. You look at the folks you do have signed up, the 180,000 between pennsylvania and new jersey, does a look at though that segmentation will lend itself to Good Business or is this going to be less profitable for Independence Blue Cross than your previous business . You have to first take a step back and realize we are only talking about five percent to six percent of our overall business. Going into that we had very conservative Profit Margins built into our plans. I would say what we have seen to date is it is just about where we thought it was, maybe trending a little younger than we thought. We did not plan to make a lot of money on this business. I think we will end up exactly where we would end thought we would end up. Point, early indications are the demographics are about what we thought they would be. 246 a month. What if you dont sign up more young invincibles . What is the possible effect of policy premiums next year . I think it definitely will have an impact on premiums if the young people stay away. Coming ine and more in the final days. But it will impact the pricing. Heres the interesting thing, though. We are already working on our 2015 pricing and related data that we will have to put the prices in place by january, february, and march data. Again, it is going to be a bit. F a crapshoot going into 2015 but less people who are young who sign up, that certainly impacts the risk pool. Heard about the three rs risk carter, reinsurance or other means were somebody who gets a bad riskpool, other plants will compensate them for it or government will compensate. So what still remains to be seen how this whole thing will play out. But you are right, young people have to sign up to ultimately make this program work. And unofficially they have until march 31 to do it. Thank you so much. President and ceo of Independence Blue Cross of philadelphia. Shares of blackberry arising. Investors cheering an Earnings Report that showed a smaller than expected loss and revenue was also smaller than expected. What should you do take away . At hudsonrincipal Square Research and he has a sell rating on black berry blackberry with a five dollar price target. It looks like costcutting was a big beneficiary to blackberrys bottom line even with the loss. How much is left . They said consistently they expect to be cash flow positive by the Fourth Quarter. Thanhile the loss was less expected on the net line, cash flow from operations was. Egative 553 million they are burning through a substantial amount of cash. They have really net cash of 1. 5 billion and they burned it million in the quarter. Gross margins were better in part because they sold so few handsets. Right now they are losing money when they sell a handset. When they sell few of them ironically it is better for the net line. Only 1. 3 million blackberry from a quarter of there are over 250 million smartphones sold every quarter. Down 70 78 year over year. Great,ostcutting sounds but you can only cause cut so much when your sales are falling 78 yearoveryear. 43 yearevenue is down over year. It just seems like there is too much headwind in front of them. They have bit of a honeymoon with john chen who moved fast but now they are talking about different handsets. The core blackberry fan has always loved their handset. They did not need a bunch of different models. Sort of a handset spaghetti against the wall strategy. Promised ushn chen he was not going to do that blackberry would narrow the range of handsets . Yeah, he was going to bring that the keyboard but ultimately would try to build an Enterprise Business that was not consumer handset focus . Right. Is exactly to be honest, i cant keep track of the number of handsets they have been talking about since the congress in barcelona last month. Going to keep the company alive, if they can, is the overall platform. And consumers going to rely on blackberry for their go to mobile strategy . I will point to a big hole in the platform which is tablets. Most consumers today have both. I think yesterdays announcement of Office Coming to the ipad helps underscore that. , the predecessor, said tablets were a fad. With the ipad ensuring it will be a productivity tool percentages and it came in and blackberry does not have an offering. They are just losing subscribers. That is were all the prophets are coming from. And then they have a strategy, which sounds good on paper, being the Software Service provider to enterprise similar to what we see with Good Technology and mobile iron and these services. In the past, blackberry has never gotten a lot of money from enterprise. They get it from the carrier sprint the contractor going away. Being case of cautious or bearish about blackberry but what is it about john chen that has investors at least for now convinced they can make he can make a difference . When you have a new ceo, there is almost always i think we just lost dan. Maybe he was talking on a blackberry. I will tell you this, i use a blackberry but the phone works just line. But unfortunately dan must have been on an iphone. Or maybe his landline went out. Daniel ernst from hudson Square Research. Be speakingng will to the blackberry ceo. Something you do not want to miss. If you are optimistic about blackberry maybe john chen will give you more reason to be a true believer. Coming up, walmart is suing visa for allegedly fixing of transaction fees. What is this lawsuit boil down to . For profits. You heard all the Horror Stories from the high seas. And the cruise industry persuade you to come back . Or take a first cruise. You are watching market Bloomberg Television, streaming on your smart phone and tablet, all over digital bloomberg. Com, apple tv, we are everywhere. A big take a legal development. Walmart is suing visa for allegedly conspiring with thanks to fix transaction fees hear it and walmart wants 5 billion or more in damages. Julie hyman is following the story for us. What does this boil down to . An old argument between the companies. Various Credit Card Companies have been basically fighting with retailers for a long time. There was a lawsuit if that happened that was settled in the fall involving some of the same allegations but walmart opted out of that because it wanted the opportunity to sue on its own, which it is now doing. Essentially it says, yes, there is price fixing of the fees. Visa essentially has recommended rates and that it recommends for all types of retailers in different categories. And as a sort of the fee setting mechanism, that is the target of this. Iswhat walmart is saying there isnt a real competition between the credit card Payment Networks. I was talking to an analyst on how the discount swipe fee, where the money go and how does a breakdown . We just put it up. Lets bring it back. You have the interchange fee, the bulk of it. This is the fee that is at the heart of the argument here. That fee, by the way, goes back to the banks. Kept by visa and mastercard but visa is the target of this because it sets the rates. Of aonly about a 10th percent goes to visa or mastercard. Inquirerthe merchant acquirer, the processing company, its the remainder. That is the nittygritty. Overall fee is around 2 of that is the average. Walmart negotiates with ease. It is negotiate between the two parties. Because of the volume, the amount of transactions that go through walmart, it is likely that it is able to negotiate somewhat of a lower fee. Is tied to how much the fact that walmart has been trying to do Financial Services on its own as well . And not just on its own but also with other retailers. A form something called the mcx exchange, basically an attempt to form some sort of mobile Payment Network on its own. The other mobile Payment Networks that are out there. Basically walmart, and other retailers, they dont necessarily like to be beholden to the Credit Card Companies in this fashion. So that is where it goes back to. And of course, there was a fight over debit cards as well and you got the cap on debit card fees. A long and been contentious relationship and this is the latest in that. How successful this litigation will be and whether it will end up being settled. Visa and very least, mastercard has to pay everyone else to go away. Is interesting is the original settlement went from billionlion to 5. 5 because of this opted out, including the Minnesota Twins who brought their own sword. Brought their own suit. Coming back innovation in the cruise industry. Celebrity chefs, rock climbing walls. Cruisers as this industry attempt to move past the safety concerns. Approaching 26 minutes past the hour. Time for bloomberg Market Makers and we will give you a snapshot of major indices. The dow trading up 125 points. Income increased 0. 3 as well. Consumer confidence coming in a little shyer of what analysts were anticipating but ending the quarter on a little bit of a high note. Outdoorsention of cbs moving higher in their trading debut. The other forgotten ipo of the week. The billboard Business Owner i still 83 owned by cbs. We will be back in two minutes. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. This is Market Makers. Schatzker. Im scarlet fu in for stephanie ruhle. Tgif indeed. It has been long i had to do radio and you were recovering from last week. Lets move on and look ahead to more enjoyable times. For those going on vacation, the cruise industry is gaining customers in spite of several incidents last year. 2013. M how is Royal Caribbean making sure those travelers are sticking with them . Us Adam Goldstein is with right now. The holy grail for the cruise line industry is the first time her. Those who have never taken a cruise before and want to try. Can you give a breakdown of how many customers are firsttime travelers versus returnees . On average on our cruises, about 30 of the guests have never been on the cruise. The other 70 may have been with us before are not that they have been on a cruise. Do they spend more money . Is the idiot to bring them in for a lifetime . The lifetime value of the customer. Bringing more into the category. Bringing more into the cruise proposition at a young age. Three retirement. Has the cruise industry found itself having to spend more re the firsttime cruiser because of the highly fires,zed incidents like illnesses aboard ships which we all read about and hopefully never find ourselves in the he costa or t concordia that capsized . Easiesthas not been the of times for the various reasons you mention. One thing we have going for us is the customers we have, they know how much care we take in everything we do. Are toow how devoted we always advancing the cause on safety and security and the environment. And so, would probably have to work a little bit harder to reassure potential what is involved . Whats continuing to get the message out of the extraordinary safety track record and the incidents that occurred are extremely rare. It is tough. Think about it if you were in the Airline Industry, the Airline Industry does not want to advertise saying, we are safe , the chances of crashing are very, very low. You dont want to have to find yourself doing the same thing with cruising. That is why for the most part we stick to the message of what a great vacation it is. It has the highest satisfaction rate of almost anything you can think of. But when people ask us directly, we need to respond. And we have a track record that says we are able to respond. One of the steps you have taken, late last year you and hiredrrival carnival retired military to oversee see operations. How much do you Work Together to address safety issues . And the last two years we worked together more as an industry on safety and Security Issues than the previous 40 put together. The Industry Association about 10 of them piecemeal to one Global Organization and within that organization there has been tremendous cooperation the last couple of years. What specific changes have you made to improve safety, especially with the bigger ships coming online question mark some say they might be too big to manage. Orwe have come out with 10 12 Safety Policies within the industry the last 24 months. Most either have been or will be adopted by the International Maritime organization. We have been able to take the lead on a lot of safety matters. A lot that has to do with the drills that guess have to undergo, what information is to be provided. There has been a passenger bill of rights industry adopted to make sure they are treated well under all circumstances. We have been able to not only pay more attention to safety but to guest comfort when there are incidents. Many different policies have moved us forward. How difficult is it to others take undertake brandnew initiatives . One of the things that stand out to me from your financials is how predictable your cost are. It is incredible. They are like exactly the same every quarter and the big variable seems to be revenue to determine how much money you make and the bottom line. Even the fact investors are so used to that, how do you embark on expenses expensive new initiatives . Want to true investors understand and believe we will continue to manage our costs well but i think most people do realize in this business the big variable is revenue generation. We need to figure out ways to invest in our brands, to keep the products fresh, contemporary, and vibrant. And in order to invest in that, revitalize the ships with newer features and bring out exciting , we have to be very, very careful about managing our general and administrative costs and it is about making sure the investments are things guest will be willing to pay for their a thirdeeship is smaller than your biggest ships, the oasis. Are you making a conscious shift away from the super large ships . I love the fact it is referred to as only. [laughter] of the seas comes into service in november and it will be the thirdlargest cruise ship ever constructed and people are looking at her as a small ship. She has incredible features. The north star, the mechanical arm that takes you 300 feet above the water and you can circle around. A skydiving simulator experience. These are things attracting people into the category. They are amazed these things can be on the water. They are active. We are showing people like with our culinary reveal that the choices are yours. We dont tell you an email what to do. There are 18 restaurants in the cruises are not longer than 12 nights. Restaurant with genealogy are and get a meal cooked by him. Maybe not personally by him but his Italian Restaurant is one week announced and a new gastropod by michael short. And we have wonderland. I read a little bit about wonderland, and what i read left more questions than answers in my mind. That is ok. It is supposed to blur the lines between reality and your perceptions. That is what the food and beverage people told me to say. [laughter] restaurant. Ty funky we were given samples of the other day, there is sort of like ice cream thing that if you clamp down on it you can breathe smoke out of your nose. Like a dragon. There we go. Thank you so much, Adam Goldstein, the ceo of Royal Caribbean international. Coming up, the great advertising ideal. We will speak to the ceo of cbs outdoor. Brandnew stock that starts trading and it is higher this morning. Outdoor is making a splash on its first day of trading. The Outdoor Advertising company just spun off from cbs opened trading about half an hour ago and the shares are silently appeared with me from the New York Stock Exchange is the ceo is this a ceo jeremy male. I guess we know you congratulations. I want to talk most importantly about the future of cbs outdoor. Starting with the name. What are you going to rename it . Good morning. We havent made a decision on the rebranding get. We will be part of cbs. 80 owned until probably september october and then we will be looking to rebrand. When we make the decision, you will be the first to know. That you are a quiet sigh independent company, what can cbs outdoor do that it was not able to do house within cbs . Cbs outdoors has been a great business as part of cbs for many years. But cbs has had a content strategy and to that extent we have been somewhat not core. I think it will reenergize the team. Having management right from the top and focused on Outdoor Media will be good. I think we will be happier having all caps allocation decisions in our hands rather than having to chase capital around a bit within corporate. Is considered a Media Company and you said you wanted to use money raised from the ipo to buy smaller u. S. Billboard companies. It was a sense what direction you are moving in as you try to consolidate this fragmented market . The u. S. E 20 of market. It just here in this city you will have seen our signs everywhere already today. On the subway, buses, billboard, metro north. We have a great business but 35 still fragmented. Dmae it makes sense, top 25 is where we want to focus. Sure, we will look at where we can add some weight where it makes strategic sense. What distinguishes cbs outdoor from its principal competitors, including a company used to work more work for, and Clear Channel outdoor. What makes you different . Are bothompanies particularly international. We are very much focused on an america strategy. We have a great business in canada, mexico, a small piece in south america. I think when you look at ourselves, we have this great billboard business. A very dominant in the top 25 dmas. And we have a great transit business. We operate parallel in this market rather than absolutely contrary to them. I know you are looking to convert more of your locations, traditional billboard into more profitable electronic signs. Give us an idea how much spending it will involve. Capitalcommend total expenditures will be around 60 million to 70 million a year. To put some other kind of metric, we have around 400 digital billboards now. Driving about 10 of the revenues. We anticipate adding around 100 boards each year. The great thing about digital is you could be so much more creative. Adds right across the u. S. Based upon who just scored in a football game. A lot different from Outdoor Media in the past where someone was going out with a ladder and a bucket. Way for Outdoor Advertising to capitalize, if you will, on the dynamism of social media . I think there is. I think the key piece for Outdoor Media is our audience is still growing. Most media audiences are declining or fragmenting. I think if you think about the declining fragmented consumer, the fact you can be connected while out of the home, it is growing our audience. Secondly, with the smart device, you will soon be in direct thing with our media either by swipe download. By click to actually we sometimes think as our medium as being a glue to the virtual world, if you like. And the virtual world, you mentioned the vices. What about partnerships with Technology Companies and those who make the wearable devices . For instance, the next generation Virtual Reality glasses . We have sort of done experimentation with the Virtual Reality. It is interesting. I can see that as being certainly an avenue we could take in the future. Technology moves so fast in our industry. I think we have to be a little bit careful who you anchor yourselves to, so from that point of view we like to keep pretty flexible so that we move with what is out there at the time. Jeremy, thank you for joining us on Market Makers. The ceo of cbs outdoor. The writ the stock raise the 560 million. Coming up, everybody seems to share or rent their music and stream it but they dont really buy it anymore. Or pirated, too. How do you rank all the music when everyone is sharing it . Coming up next. Withllboard is teaming up twitter. They announced a partnership to create realtime music charts that will rank songs by how much buzz they are generating on twitter. The man he hind the deal is here, the copresident of the Entertainment Group of guggenheim media, owner of billboard. Thank you for being here. How does it work . We are not going to reveal it to the public until the beginning of may. So, we cant tell you exactly how it works. Of the business announcement. What it will do and is the measure of all things music, and twitter is the king kong of conversation. What we wanted to do with the partnership is figure out a way to organize around that. We are creating an algorithm. We want it to be based on chatter surrounding music. We were looking at ways to do a realtime chart for some time. All of the charts are time stamped, wednesday to wednesday. We wanted to come to market with something that wasnt realtime and the only partner that we thought to do it with with twitter. Both twitter and billboard are ad supported project products. There are certainly a lot of opportunity around sponsorship. We think down the road there is opportunity around data. What we want to let the consumers first embraced the product. As far as Music Discovery and a battleground if you look at katy perry, 52 million twitter followers. When she releases an album they goes crazy on twitter. I believe they are called kitty cats. Like the monsters, the kitty cats. Be a battleground for them to rank it in real time. We think that data will be valuable down the road. Initially, there are a lot of brands that want their messaging around the product. Currentare the billboard charts are not capturing and how different the think the twitter charts were look will look from now . We are not cap capturing everything realtime. Generally a week exactly, right. This would capture literally, if you wanted to drop an album today and you are miley cyrus annual of a conversation between you and your fans as you are dropping a song or a full album, you can actually have that and we can track it right then and there. Songs puten have two out and once and see which 1 am i going to release to radio, what will i do my first video on, and have the armies it is the industry. The industry as well as consumers. We also think this is a huge opportunity for Music Discovery. Because if there is something bubbling up. If you are a kid who lives in kansas city but you are a huge e dm fan of something is going on in miami, miami music week, and you maya huge edm fan, not know what is hot and happening right then and there but twitter can give the access to it. It can also be a huge opportunity for Music Discovery. Ordo they demand the top 100 do they just want to know what their friends and peer groups are listening to . I think it is both. Certainly what youre peer groups are listening to matters. But what we found is when the numbers get large enough, the average becomes the average. That is always the case. If you were to say i want to take all of Yankee Stadium and track what they are listening to, it will be a hot 100. Fans, just because wanted the numbers become large enough, it always tends to go to the average. What we find, our hot 100 which is sort of our franchise chart, the top 100 songs, the traffic to that online is growing. Off of that online are grown. You want to know what your friends are listening to but it is hard to organize in large numbers. You can say, what are the two or three songs by friends are listening to right now but you cannot go deep and you cannot say, what is the 97th song theyre listening to right now. But billboard gives them the opportunity. Do you keep artists and labels from gaming the system . Twitter, things like this seem ht for search in jim Search Engine optimization pinhigh are a bunch of people in china to tweet about your new song or album it all of a sudden you rise on the top of the billboard twitter chart. Best atn, cocacola is marketing its product, more people will drink cocacola. To gameit is difficult like i said, and large numbers, is difficult to gain. Katy perry has 52 million fans for a reason. About the always been true intention. So you can game but only on a certain level. Me and i dont have talent as a musician dont sell yourself short. Listen, lady gaga will be me on this chart 10 times out of 10 and they even and i even know the algorithm. Joe we get the details beginning of may and i am happy to go back on and give you guys a demonstration and we will try to game it together and see if lady got back and beat us. In the span of two hours. I give so much. It is approaching 56 minutes past the hour and that means it is time for bloomberg to go on the markets. Lets take a look at the broad stock indexes right now. Consumerve some spending and income dated this morning that showed gains of with whatine economists were looking for. Smp up 17 points and the dow industrials adding to its advance. Can you believe one of the biggest movers of the day is microsoft . Excel for theveil ipad office for the ipad. See an officeple for the ipad an extension of the Cloud Strategy that the new ceo has pretty much state the companys fortunes on. This is as much a referendum on how Satya Nadella did in his debut than anything else. The man with the cashmere hoodie. Somebody challenge me on twitter to wear a cashmere hoodie. You think i should do it . Next monday, Erik Schatzker in a cashmere hoodie. We have to go shopping. In the next hour, you will hear from the ceo of blackberry, john chen. The company just recorded a smaller loss than predicted. This is Market Makers. Taking on the tea party. Big business wants republicans to push issues like immigration and tax reform. More than half of americans say it is time to move beyond the debate on obamacare. Will the gop listen . You are going to hear from a member of the House Republican leadership, live. Ceo john chen of blackberry is cutting costs, revenue in the Fourth Quarter still declined. How the Company Plans to return to profitability by 2016. Chineseands of rich citizens are getting visas to move to the United States. The catch they have to promise to start businesses and create jobs. It is a friday morning. I am Erik Schatzker. And i am scarlet will, in for stephanie ruhle. The most the afternoon. , but we are getting ahead of ourselves. We need to talk about business. A mixed bag for black hairy. The company lost less money than analysts expected. One reason the stock is rising. Anchor emilyt chang is in san francisco, following the story. What are the highlights beyond the top line and the bottom line . The revenue number is a big ouch. Sales sinking below a billion dollars since 2011. Losses were less than expected, and shares rallied 20 . That is since four months ago. Investors are liking what they are hearing. Don chen is inspiring. He has real turnaround experience. He got in there and started making hard choices right away. He signed a distribution or production deal with foxconn. He began laying out about a third of the star. Could bringl estate in as much as 500 million. That would significantly improve the tax position. They also got a big tax refund from the canadian government. Why isnt he revising his targets more aggressively . He says they will be profitable by 2016. He is very much stabilizing the ship, what can he get revenue growing again . It is going to be very tough to do. The blackberry share of the Global Smartphone market has slipped below one percent. Can you believe that . If you look at hardware sales, people are not buying the new blackberries. They are buying the old blackberries with the classic keyboards and the old favorite buttons. John chen is bringing back some of those features. But in terms of hardware, the story is not looking good. Evolverying to pivot and this into a software and services company, vocus more on businesses and government and it is on consumers and hardware. Weat the detroit auto show, saw Impressive Software from blackberry. Ford is putting black area software in its cars, getting rid of microsoft. I know you will be talking with ceo john jim. Any word on how important a role that will play . John chen is betting on cars, and they have a decent foothold in the car market. Software actually partners with apple on the car front. Like very helps Apple Software work on the dashboard. It is android that is a big competitor to black area. Microsoft as well. Cars as asees platform of the future. He has an interesting vision for the future of computing in general. He sees devices fading away. Therell be sensors in our clothes, cars, and homes. We will not necessarily need to carry a device. That is why cars are so important to him. He big question is, why wont blackberry get edged out in cars the same as smartphones . I will talk to john chen about that in our interview, coming up. You and the bloomberg west team what are they saying about library . What could they say that would help them move past their skepticism . Of technk a Lot Companies are not using blackberry. President obama is testing android. They have used by kerry for a long time. Snowden, nsa surveillance issues that has been good news for blackberry. First,g about security john chen is trying to sell that security story. Now, it is more of a software and services play. , in 30 minutes she will be speaking live with blackberry ceo john chen. The latest sign that the broader economy may be able to wake up from a winter nap. Michael mccue has been looking into the state of the consumer. When the eventually wake up, are we going to have a lot of energy, or postnap lethargy . The Consumer Confidence numbers that have been coming out in the past week suggest that consumers are hanging in there. They do not really like where we are at the moment, but they do feel better about where we are going. They areem is what spending on in recent months does not give you a clue as to whether they will continue to spend. Rise, but itending did not happen at department stores. It did not happen outlook sharia retailers. It did happen for utility companies. We saw a lot more money going into the kind of spending we see when it turns really cold, on heat and services. Todays number really rising, compared with durable goods spending, which fell. What does that say about the months to come . The Biggest Issue here is, do we have the money to spend and the will to spend . He will we do not know about. Wages and salaries are rising a little bit. We have seenon incomes rise is obamacare. There have been medicaid transfers that are pushing up personal income numbers. Those numbers are not as reliable as they might be. Is, all of theng major banks are marking down their gdp forecasts to the low ones right now. They do not know. Wey are anticipating heard Charlie Evans tell betty liu we would see a quick rebound in the second quarter. What we will not know that until the middle of the year. We will not get that data until july. There may be a few months where we do not know what we are operating with. Know the central bank has been trying to stimulate a wealth effect through its easing money. Trading near record highs. Shouldnt that trickle down and help . Crexendos what you would hope. We have seen a little bit of it with people who own stocks individually the wealthier individuals. Market returns, dividends, have been going up. We look at the wealth effect through the dividend and interest payments. But home equity extraction has been falling. People have not been taking as much out of their houses, even though home prices have been going up. Is the average person going to spend . That is a dilemma for fed officials. That is why you have dissension. The economy could still need the stimulus. The average person is not going to be able to spend. We do not want consumers to be using their homes like piggy banks. We do not want to reach the levels we did before, though we are still saying home equity extraction decline. If people do not feel they can get something out of their houses, that is a reason they do not want to spend. Economics editor, giving us the state of the consumer at the end of the first quarter. Still one more business day of the first order. Purdy much, you get a picture of what is going on. From obamacare to immigration. We are going to be talking with republican representative Cathy Mcmorris rodgers. She gave the republican response to the state of the union. You will see her right here. Its the congresswoman from washington. It is time to play the yearbook game. He is a real estate mogul. He graduated from high school in illinois way back in 1959. I think i know who this is. Highland park high school, involved in real estate. Tweet us your guesses. This is Market Makers. Until january, you may not have rogers, congresswoman but she catapulted onto the National Stage with a wellreceived response to the state of the union address. As the number for House Republican, she is one of the most powerful women in washington. We welcome congresswoman mcmorris rodgers. Let us start with the subject of the moment. It remains the subject of the moment until at least march 30 1 obamacare. As you know, the most recent Kaiser Family Foundation Poll shows that a majority of americans are tired of hearing and whatmacare, legislators like you to focus on other issues. Will you . Going to remain focused on Getting Health Care right. It is too important of an issue. We need to continue this debate over, how do we ensure that people have access to quality and Affordable Health care . The concerns over obamacare continue. No one wants to go back to the way things were. But there is a better way or work, and it is up to the republicans to be showing that way forward, and holding the president accountable for the implementation. What is the way forward . A law that would bring back decisionmaking to individuals, so that you as an individual, as a patient, as a consumer, and your family, have control over your health care decisions, not a onesizefitsall, governmentcentered approach to health care. This is the federal government saying they know better how to make your decisions. Some of the most personal decisions youll ever have, related to health care. Better than you. You will see us moving forward thatal time to help people are being negatively impacted right now for the health care law, but also a bigger proposal. No one to make sure that those who have preexisting conditions get coverage. That sounds reasonable. At the same time, individuals can choose the Health Care Plan they want to set up sign up for. There are different levels. How would the republican proposal differ, pragmatically, and in detail, from what we have right now . Marketplace, the exchanges it still is determined by washington, d. C. , by the federal government. I think what you will see from us is an expansion of allowing Health Saving accounts, allowing people to go outside of state boundaries, so there will be more options available, so it is not an individual being limited by what the federal government says you need. If you are not going to have children, you do not have to be paying for maternity care, for example. You can actually go in there and find a Health Care Plan that would fit your needs or your family needs. I would like to go back to the first question, which is oft even if not even 50 the republicans polled want to talk about obamacare. Why does the party continued to make this the signature issue . Or are so many other things that matter to americans and to our audience, to business, like immigration and tax reform. We are leading on those issues. Well, no. The house is not doing anything about either. The house has put forward a tax reform proposal. Ways and means put together a specific bill on tax reform, to address what is too costly, too complicated, the tax code in america. It is one of the best things we can do for economic growth. Xd you support the tax reform proposal . We are getting that input right now. The ways and Means Committee is having hearings. We are going to continue this debate over what is the best way forward. That is an important part of the process, rather than being an obamacare approach, a small group that figured it out and rammed through congress. Appropriate the steps. Obamacare is also a huge impact on our economy. 2. 5 million jobs are going to be lost. And the continued impact, because of the uncertainty, is also part of the reason our economy continues to struggle. In terms of other issues the Republican Party can focus on, one question eric wrote up was this idea of, what other issues will you be addressing that matter to businesses . For so long, many People Associated businesses with the Republican Party, but that seems to have fallen apart a little bit. There is no longer that connection. It is the republican i continued to ask the question, where are the jobs . But what about solutions . 150e have passed over different jobs bills in the house. We are moving forward on immigration, on immigration goals,les and specific to both secure the border as well as visa reform and a guestworker program. That is important to our Economic Security and our national security. You see the republicans putting Forward Solutions to move this country forward and improve everyones life. This is another aspect of it. The best Antipoverty Program is a job. We need more jobs in this country. What about the longterm unemployed . We have more longterm unemployed, the lowest workforce participation rate, since 1978. We need more jobs. We need to be focusing on the skills and education that people need, so they can fill the jobs that are open. That is another big issue, the skills gap. We passed the skills act to address this. These leading on all of issues. Many of the most Innovative Companies in america will tell you the best way to create jobs is through Immigration Reform, yet there has been nothing but in action from the house. Why . We are acting on Immigration Reform. When was the last lu passed on Immigration Reform . Five bills have asked out of the judiciary committee. All of the separate aspects of Immigration Reform need to be addressed. Starting with Border Security, interior enforcement. American were to ask business, i guarantee you Border Security would not be the top of the list. It is part of Immigration Reform. Tookcongress, the house the lead on the high skills visa bill that passed the house and did not go anywhere in the senate. We have been taking action on immigration issues. In terms of the future of the Republican Party, people wonder whether the American People are as divided as congress. Rootdo you think is the cause of all the dysfunction . Not havesanship will left. I think what i would point to i would point to the way that obamacare was rammed through the house four years ago. What about before obamacare . It has made it worse. Democrats said, this is the bill, this is the way we are going to do it. It was very divisive. The way that this bill continued to be implemented, that you have the president unilaterally deciding how the law is going to be implemented he unilaterally decides to delay who gets exemptions, what the deadlines are going to be. Americans do not think obamacare and health care is the main issue. It still is a large issue in our lives. And there are still a lot of concerns over this health care law. Even the deadline coming up for youh 31, which is the date had to enroll he is delaying back, unilaterally. As ais not his role president , and it undermines representative government. And i thinkrtunate, that as republicans and democrats, we need to be aware that we need to be working together. George would point out w. Bush did the same with a prescription medicare plan. How is one different from the other . The dysfunction remains. President bush did not unilaterally decide how that was going to be implemented. Underminedbama representative government. As president of the United States, you do not get to decide how laws are implemented, or change the law on your own. Both on the employer mandate, the individual mandate, the exemptions he has offered, he is doing that outside of congress. In america, we have three branches of government, and it is the legislative branch that writes the laws on behalf of the people. We need to come back and he needs to be respecting representative government. He definitely is acting outside the wishes of, at the very least, a lower house of congress. What does he not have that prerogative . It is not his prerogative to decide to change the law unilaterally. Is that to say it is illegal . I do believe that it is. Our choice is to go to court. Court cases right now, because that is the balance of power. We believe in three branches of government and the balance of power. That comes through court action. It could be your choice to go to court. How would you pursue an action like that . You have to have standing in court. But that is part of the challenge right now. Do hear this concern regularly, as i am traveling the country. People see a president that is deciding, himself, what the laws are going to be, and how they are going to be implement it. If the administration or the white house were to be sued, and that is what we are talking about by going to court a lawsuit over the extension of deadlines for the Affordable Care act, who would file the suit . Who would seek standing in court . We have worked on some legislation called the enforce a law act, i would give the house or Senate Standing in court when there is an example. Quickly house would sue the president . The executive french. Branch. Is this going to happen . America, foundation of we have three branches of government. The balance of power that results in holds the different branches accountable. Right now, we have the executive branch and the president that is acting unilaterally. That undermines fundamentally who we are as americans. We have passed the enforce the law act. We passed a bill that would require the president to notify congress when he is not doing what the law actually says. Let us say republicans win back control of the senate. What are your legislative priorities going to be . Our priority is going to continue to forward those legislative priorities that are going to grow our economy, get people back to work. Tax reform. We have the highest Corporate Tax rate right now in the world. There is bipartisan agreement on tax reform. There are lots of democrats who like what was put forward. Why cant we put tax reform before november . That would be great. Who is holding it up . Speaker boehner laughed off the tax reform proposal. I think the quote was ha ha ha ha ha. This is a great opportunity. You want to see tax reform. We are moving forward on hearings in the house. We are working through the process, to make sure that we can be ready. We have a new chairman in the senate, senator baucus, ambassador to china. Reform, health care reform, a better way forward on health care. It is impacting our economy. That is impacting every person in the country. A geisha are individuals and families have control over health care decisions, and he sure employers have some certainty. That would be of the top of our list. Do you think we could see a republican in the white house without Immigration Reform . We are laying the foundation now. We have to get through the 2014 election first. Foundations will be laid after the 2014 elections . I am still hopeful we will get it done this year. Pleasure to have you here. Congresswoman Cathy Mcmorris rodgers. Fourth ranking republican in the house of representatives. A delight to have her with us today. I have to go wrapup radio. I am going to leave you here. We have a lot coming up, including a conversation with john chen. Cheered investors with a smaller loss than anticipated. What it is a long road ahead for john chen. Emily chang has some tough questions for the man. It is friday, the day we play the yearbook came. Have a look. Whoal estate mogul graduated from high school in illinois, way back in 1959. And wee your guesses, will be back in a couple of minutes. This is Market Makers, with Erik Schatzker and stephanie ruhle. Morning in neway york city. I am Erik Schatzker. Stephanie ruhle is out today, but you will see her back on monday. It is time for top tech and media headlines. He willosoft ceo says hold nothing back in the quest to get Company Programs on all devices. Satya nadellas comments came as microsoft rolled out software for the ipad, topping the charts in the ipad store today. Mike asaphs goal is to get office on every gadget, even if it reduces sales of other products in the process. Bloomberg is expanding into asia. Is an effort, due to demand from customers all over the world. A three day trial of october in hong kong starts today. Steve cohen has increased the state from zynga. This is according to regulatory filings. E valued at about 173 million. Blackberry lost less money than analysts expected last quarter. The company is predicting a return to profitability. Possibly not until 2016. More on blackberrys results, and the companys future charge. Ang, the man in the ceo of five. Joining us right now. Ship. Ghted the you stabilize the ship a quarter earlier than even you said you want. Why not set more aggressive targets for profitability and cash flow . Obviously, we could see it, but it is important that we take it a step at a time. It is a long journey back. We can make progress along the way. We were showing some Good Progress upfront. Shares are up 20 since he took over. How confident are you that you can turn blackberry around, compared to when you started four months ago . I do better every day. The results show that. All the indicators are doing well. Cash is doing much better. Inventories are doing much better, in terms of managing them. We are losing less money. Cash positions are good. I feel very good about our chances, going forward. How is morality doing . That is probably one of the better stories. I think in the last four months we had to go through a lot of ups and downs. We had to do some difficult things. We definitely had a tail end of all that journey. We are looking for the growth, for the possibility, and for the engagement. Inside the company. Meeting,d a town hall and things are starting to gel. Still got work to do, but people are feeling better. Fore laid out key areas growth in software and services. What about hardware . We know like perry shares in the Global Smartphone market dropped below one percent. How can you change that number . I do not know where you got below 1 . The numbers keep bouncing around everywhere. We still have quite a healthy business. Sold over 3 million handsets in the last quarter. If you multiply that on an annualized rate, that is about 1215,000,000 handsets. Bigs not a humongous wood number, but not a small number either. We have a relationship with foxconn. That was going to push lower end phones in the emerging market. We also are designing really highend phones here in waterloo , and many different places around the world. I truly expect those to do well, especially in the enterprise space. We will come back. I was looking at q4 numbers from idc. What about the white house . There are reports that have been testing android. The president has been a longtime blackberry user. How much are you lobbying them . I do not lobby the white house. Make sure they know our roadmap, understand where we are going, in terms of boosting our security and productivity profiles, and the technology i cannot all stop comment on the white house testing any other devices. This is obviously their choices. The white house would want to know everything there is to know out there. Different types of variations. I respect that. I still believe that blackberry is the choice. A couple of days ago, we announced that we want some sort of occasion to run on the dod network. We are the first one who has that. I am comfortable with our positioning in the government. What about becoming a Google Android for mobile business users, but only software and services, and getting rid of the hardware completely . Wouldnt that be more profitable . We are an endtoend solution. I think we have to see how the market develops. It is important for us to provide all components. We are not only on the handset side and the server side we are also in the messaging side. We also have our own locks, which makes us the most available network. We have the market share of the embedded car world. There is a lot of Good Technology. It is really an endtoend solution set. A pathway to other devices that remains to be seen. We have some uniqueness in our handset that a customer. You mentioned bbm. Lots of stuff going on in the messaging space. What do you see as the future . D. C. This competing in banking chat rooms . Why wasnt bbm whatsapp . Something there is. Lot of security we are creating more hardhitting issues. Handinhand, and align with our server strategy. Give usmake us differentiation. Among all the social messaging systems out there, we do have 85. Illion that is active registration. That number will continue to grow. Not long ago, we put it on the Windows Mobile devices, as well as new devices. They embedded that in multiple different countries. There is a lot of momentum on building more registration. I need to tie that into the enterprise play with our server. I believe that is going to be strong growth. It is very focused on enterprise. We have a consumer play out there. We are going to continue to push on that also. How about cars . You have a strong foothold in cars. How do you see that playing out . Future for thea internet of things. There has to be an internet of all things, everything connected. We are doing phones today. It is about the device. There is the connected car world. We own the lines share of the infotainmentrms of , car management systems, on the dashboard, and all of that. Secure microkernel technology. Over half of the industry uses it. With the compatible ,pple play, what google has working on. And as far as microsoft. There is a consortium out there. We are one of the leading providers of the consortium. I am very comfortable about our connected car positions. Hat should give you a hint we would like to continue to branch out to the jasons. There will be connected to adjacents. ,here will be connected homes connected everything. All things internet all stop thanks so much for joining us. Thank you, emily. Chang, in san francisco, interviewing john chen, the ceo of like perry, a man for whom we have lots of questions. , a manceo of blackberry for whom we have lots of questions. The American Dream is alive and well, if you are willing to pay for it. The u. S. Government offers a special visa program that is especially popular with chinese. They are threatening to overwhelm it with demand. Yang yang is in washington this morning. How much does this cost, to get one of these visas . Upwards of 600,000. ,ut for chinas nouveau riche it is a small price to pay for the coveted American Education for their children, and a better life. , thes known as the eb5 am really category for skilled workers, specific to immigrant investors or entrepreneurs. To investnational has of 500,000, and it has to be linked to the direct creation of 10 fulltime jobs, or the visa holders risk the rotation. Chinese accounted for 80 of the total eb5s issued. Critics say these is should not be for sale. An Attorney Says the naysayers are missing the bigger picture. If you are in a position to be able to invest 500,000, most of those people arent that money. They did not inherit it. I have already shown the entrepreneurship that is want. Ing you i do not think it should negate the right for people to get this investment visa. One analyst credits nearly 5 billion in direct investment. Which branch of the government operates this visa program . Of more interest to me, who audits it . B program is administered through the state department and homeland security. The way they oversee the program is that within those two years the chinese moving to the United States have to prove a direct link to those 10 fulltime jobs. If they cannot prove a link, they are deported. They need to make sure they are not going to risk deportation. For the most part, once the two years are over, they applied for green cards, and the rest of the process is just as it would be for any permanent resident in the United States. A littleknown but fascinating program. Thank you very much. It is friday. Time to play the yearbook game. Estate mogul. Graduated from high school in illinois back in 1959. Highland park high school. That is all we are telling you this morning. Who do you think it is . Tweet me your guesses. We would love to know what you think. This being friday, it is the day we play the yearbook game here on Market Makers. This is a real estate executive who graduated i think he is more of an investor, is a better way to describe him. Graduated class of 1959, Highland Park high school, illinois. Do you know who it is . I think i know who it is. We are going to reveal the answer when we come back as a matter of fact, we are going to reveal the answer right now. Scarlet fu is not here. She cannot congratulate me. I think i got it right. I believe the answer is none other than sam zell, perhaps the greatest Real Estate Investor in american history. Can you see the resemblance . Sort of. Back then, sam did not have the soul patch. Here are some of our winners. He is indeed a wizard of real estate. Congratulations. Do we have one more . We do not have time. What lots of people got it right. Sam zell, the answer. On the markets is next. We are approaching 56 past the hour. That means Bloomberg Television is on the markets. I am julie hyman. Stocks are rising after a twoday decline. The vix trading back below 14. A stat showed an increase in consumer spending. Is this a sign that the economic downturn might be turning around with the weather . I was talking with an investor earlier about this. We have been stuck in a range. The stocks have not been able to make much progress. If you look at the vix falling, that. Ort of supports any signs of a breakout in either direction . We are not seeing any signs of a breakout yet. At the past month, the weather and how it has affected the economic data. We have overlooked some pretty downbeat ada over the first part of the year, and everyone has blamed the weather. The market is pricing in a bigtime turnaround for the spring. Every ceo at mr. Earnings this quarter has blamed the weather. If we do not see that turnaround in the spring, this market has a long way to fall. 14, buyingx below protection is still relatively cheap, and probably prudent if you are a longerterm investor. Is that something you would be doing as well, buying protection using the vix . We do not trade with that long of a time horizon. I am in and out quite a bit. Trading the market is difficult, because it is quite choppy. Equities,who are long i think buying protection is very good at these levels. Might being else that a tricky bit to get in and out of his blackberry. The company came out with its earnings today. The numbers were better than estimated. Emily chang just talked to ceo john chen. About theked a lot company being more efficient and elling off real estate. Talk to me about what you are seeing, optionswise. Highs now. Ll off the leading into the Earnings Report, he saw a lot of activity in blackberry puts, investors betting the stock was going to looking foror protections. I think the stock looks weak today. It will put a huge wake on the top of the daily bar if it closes at these levels. It has found sellers in the range of 10 and 11 twice this year, and it took 20 . Posting not gone be positive earnings until sometime next year, they be even late 2015. Looking for investment opportunities, better opportunities out there. Let us talk about a company that came out with earnings earlier in the week, gamestop. You said it reminds you of a Company Called blockbuster, whose Business Model essentially became obsolete. The stock pulled apart after the innings. It is coming back pretty good, but you are not competent it is going to stay up. I am not. It really is just like blockbuster. We know they are going to have to compete with walmart in brickandmortar stores. I think the biggest headwind is the fact that nextgeneration consoles allow players to download games via the cloud. They do not have to go through the store anymore. The stock is down over 20 this year. A terrible looking chart. I do not see things looking any easier for gamestop, going forward. Talk about your strategy in the Options Market. The stock is pumping today. The Options Market is implying a to 4 lowernd 3. 75 by may. I can buy the puts bread for . 25. For 25 cents. Ead i could get 31 on my money. Thank you so much. General mellie joining us to talk options on a number of different subjects. We will have more soon. Welcome to lunch money. I am adam johnson. Here is what weve got today. In tech, forget 4g. Facebook wants to bring you the internet with drones, satellites, and lasers. Is john chen blackberrys savior . We will hear from the ceo himself. There are winners and losers in healthcare enrollment. Finally, meet the luxury veteran who made a winning bet on a