Here is ceo tim cook on the conference call. Interest in apple products is at an alltime high with half a billion customer visits in the first quarter. Demand for iphone has been staggering, shattering our high expectation driven by the unprecedented popularity of iphone 6 and iphone 6 plus. Staggering is right. As cook mentioned, iphones are flying off the shelves. The company sold 74. 5 million in the quarter. Maybe the only negative note was a decline in ipad sales. The Biggest Development is the success apple has seen in china, where sales are up 70 yearoveryear, opening another potential growth area. For more, i spoke with Piper Jaffrays gene munster. I asked about the whopping iphone number. I wondered what was the catch, if there was some sort of channel fill in their or some explanation. It could just not be that good of a number. It turns out that it was a clean number, that they did not fill the channel. Even though Investor Expectations were for high 60 million. That 74 million number was well comfortably above that. Anyway you cut it, it was impressive. We were on live tv and they were talking to somebody else and i saw a number go by. I was waving frantically to the producers to come to me because that was the number. But there were so many other numbers in this quarter. It seems to me that the margins suggest that it wasnt just big iphone sales, but big iphone sales, that is the iphone 6 plus. Yet. Yeah. They talk about on the call some of the geographic mix, they said overall they sold more iphone 6 than any other ones. It sounds like in the emerging markets, the 6 plus has been the big winner. That has been suspected. They havent had an answer to the larger screens in the market. That, as you mentioned, has a nice impact on growth margins. There growth martin margin guidance for march was better than expected and would have been even better if not for the fx impact. Anyway you look at it, it looks optimistic. 46 unit growth on a yearoveryear basis on the biggest quarter they ever had a year ago. It is interesting also that the numbers were so strong and the market reacted to it as if it was going to continue to happen. Is this going to continue to happen with the iphone . They talk about that, the sustainability. That is the core question for investors. At some point, they will have to start comping these incredible numbers. Investors think six month ahead, so we are already working through that question. Some of the comments from tim cook were that firsttime buyers were at an alltime high. That suggest they are gaining share. They have been tracking the switch rate from android to iphone for three years. It is the fastest turnover market share gain from android which plays into the theme which is the product cycle will have more legs than investors expect. And then you have the benefit of the watch, whatever the expectations are for that, that was not in the march guidance. You put all these together there is still the big elephant in the room, which is what do you do with the big comps for next year . But overall, everything for march look too good. Average selling price for the iphone is 687. If that kind of stays somewhere in there but the price of the components could come down in the margins could get better. They could. Without the impact of the fx they should be inching about 40 . They did hit a peek margin of 47 a year ago. That was in the march quarter similar time frame. That is obviously unrealistic. But it is safe for investors to think about margins inching higher in march and in june. If you are a believer that stocks follow margins, that would suggest that shares of apple will move higher in the next six months. Stocks follow margins interesting. Ipad, however, kind of disappointing. They introduced an upgrade. It was the lackluster announcement of this new ipad. Maybe the results suggested that maybe they knew it wasnt going to be that big a deal because the ipad sales are down now four quarters in a row. It has been a big disappointment. There seems to be this tradeoff between some of the ipad and the mac sales. The mac sales where at a decline point, now they grew at 14 , a record mac quarter. I think what you actually see is some people going back to your phone and your computer, your desktop and portable. And the ipad is caught without a home right now. They talked a little bit about this on the call in terms of the business side and ibm having a positive impact. I know that bloomberg reported about a larger screen ipad which we also believe is in the works in 2015. That may be some hope but i dont think it changes the broader theme which is the ipad is probably a low singledigit grower. I have to say this anecdotally fred hickey is a hightech strategist. I look forward to getting on my ipad. I am reading on my new phone now, and i wonder if users are finding that the killer app for the ipad isnt there. Once we have big phones and very skinny pcs. The ipad unit Growth Numbers suggest that is exactly what is happening. I dont know if its just the phone, right . We have seen four quarters of this. The phone has only been around for one quarter. Could the tablet be a fad . I dont think its going to be a fad. There is clearly a place for it. I think that there needs to be more applications that are optimized for that form factor to get it to grow again. I think the other piece that plays into this is the replacement rate is a little bit longer than typical phones. I think having i think it hasnt grow it hasnt normalized the growth yet. I think we will start to normalize it. If singledigit growth is a fad, then it is a fad. If not, then its a steady grower. It depends on your perspective. Gene munster of piper jaffray. Facebook may be starting to look a little bit like amazon. Expenses arising in Ceo Mark Zuckerberg says he has a longterm vision. In the short term, he is doing pretty well. We break down facebook earnings next. This is the best of bloomberg west. I am cory johnson. Facebook is cranking up big time gains, increasingly on mobile. Sales in the Fourth Quarter totaled 3. 85 billion, 49 gain. Net income and profits up to 696 million, up 34 . The percentage of ad sales for mobile was 69 in the quarter, up from 66 of the prior quarter. Facebooks user base keeps growing. The company reporting 1. 3 9 billion monthly active users. 1. 3 9 billion monthly active users. That growth rate of sales and users is slowing. Expenses rising bigtime. Here is Ceo Mark Zuckerberg. 2014 was also a year Big Investments in our future. This year, we made big bets on the next generation of communication and computing platforms by acquiring whatsapp and oculus. We focused on serving our Community Better across all of our products, raising content on the newsfeed, improving or certain video product, and improving the performance and efficiency of our mobile apps. For more, i spoke with former facebook head of mobile and david kirkpatrick, author of the facebook effect. It is almost boringly predictable. They have beaten 9 or 10 quarters in a row. I thought it was so interesting the way zuckerberg answered a question about how arent they really putting the wrong emphasis on building up use in the world. He takes such a longterm view. I heard that. I love that. It was an amazing moment. Ive never heard a ceo say you are not our kind of investor if you do not subscribe to our viewpoint. Thats basically what he was telling that person who asked the question. If you really want shortterm, dont invest with us. We think really longterm and that has paid off. The one thing that most blows me away, less than three years ago, they went public and everybody was saying dont get mobile. This is a big problem. Now they are up to 69 of revenues on mobile. They doubled their mobile ads in the last year in revenue. That is incredible. These guys have turned on a dime. As somebody said today, one of the great analysts, i forget his name, this is a historic thing in business that they achieved this mobile ad result. It really is amazing. My old boss used to say you can change a fan belt while the engine is running, but its not preferable but thats what they have done. Its really amazing, ali. Building on your work, of course. It is remarkable. When i left facebook, we were not even close to monetizing mobile. It was more of a growth product. Very much a growth product, i should say. Consistent with marks comments about trying to reach and connect the whole world, we were really reaching users and new users via mobile devices because they were probably the only device they had access to. So we were very focused on mobile as a product that could reach the ends of the earth and not as focused on monetization. I am blown away by, but not surprised at facebooks ability to blow away their numbers in this category. There are 526 million mobileonly users. The percentage of users all in was 37. 8 of the users, well over a third of the users now, nearly 38 are only on mobile. Yeah. Was there a belief in the early days of mobile at facebook that that is where the world is going or that we should at least dip our toes into these waters and see what happens . I think it was a culmination early on of initial inbound demand. People hearing about corporations, other users hearing about facebook growing in the u. S. And wanting exposure to the product. Some of it with inbound initially, but a lot of it was an early recognition on the part of mark and the Management Team that this was the way users outside the united states, and canada for the most part, would first be acquainted with facebook. It really blew open with the advent of the smartphone, the iphone, and the developer platform. What is it that mark said he wrote in the letter in the s1 . Yeah, i heard that. Its remarkable. Even if you look at the new ad unit, the video unit they have introduced the phones being , developed today, the Network Infrastructure that enables you to watch native content in this experience is really remarkable. The fact that mark wrote this letter on the phone was not surprising. The hardware is there. The software is there. And facebook has been there every step of the way. At least over the last couple of years. Yeah. David, facebook spent 1. 1 billion in r d in a quarter, 29 of revenues. Both those numbers are near records for facebook. The r d spend is a record. What does this tell you about their plans for the future . Again, longterm, longterm longterm. Virtual reality is the potential next interface for computing that takes a lot of thinking a lot of spending, a lot of experimenting to understand. They bought oculus but that is one of the ton of things they are doing. I think a lot of money is going to internet. Org, which is not a nonprofit business. It is the kind of thing that has some quality to it. They have a lot of things we dont hear about, im sure. David kirkpatrick and ali rosenthal. Up next, we head to the campus of the chinese ecommerce giant alibaba. Love is in the air. This is an inside look at office romance, alibaba style. Welcome back the best of bloomberg west. I am cory johnson. Alibaba is a weird company in about a thousand ways, but one of the most unique way is built around love. Mass weddings, office hookups. Bloomberg west producer candy chang traveled all the way to alibaba headquarters for a look at love alibaba style. When you enter alibabas headquarters in china, it is a lot like walking into any tech campus in silicon valley. Inside, there is a starbucks yoga classes, and three cafeterias serving employees but the perks dont stop there. Alibaba takes it one step further, helping employees find love, marriage, and even start families. It may look like any other tech company, but the culture here is unique. Employees refer to each other as ali people. And many assume nicknames taken from kung fu novels. One of the big influences on jack mas life was a martial arts novelist. In the early days, people took on nicknames, different characters that were in these novels. That fighting spirit has attracted young people to work at alibaba. The average employee is 30 years old with a starting salary of nearly 33,000 a year. That is more than seven times the average of urban chinese workers. Alibaba tracks Young Chinese who are at the top of the field because it is an exciting Corporate Culture. People feel they can break down barriers and do new, cool, innovative types of things in their work life. Jack ma is also unlike any tech company founder. Can you feel the love tonight from serenading employees to playing matchmaker. A heartshaped dating board between the gym and the cafeteria is filled with photos and names of employees looking for love. Jack motte is so revered in the Corporate Culture that every year, on ali day he actually marries dozens of employees and they have ali babies photos on the wall of those born to employees. Those new alibaba families can also get an interestfree loan for a down payment on their first home, and over the years alibaba has also given birth to a whole new generation of chinese internet companies. Former employees have helped start more than 145 new businesses. They have attracted people who believe they could do something different, individuals who were dreamers and felt they could change the chinese economy through alibaba. This closeknit culture has been a critical part of alibabas identity and keeping it all in the family has helped the company grow into a global powerhouse with over 24,000 employees. Thats more than facebook and yahoo combined. Candy chang, bloomberg, china. For more on alibaba, betty liu spoke with alibaba executive vice chairman joe tsai. Topic number one, mobile. This shift to mobile is obvious he there are two sides to the coin. On the monetization rate, it has been trending up over the last few quarters. The one thing to remember about mobile is we have now 265 million monthly active users that are coming to our mobile apps to buy things. That is a very good results especially in light of the net ads. We believe, as long as you continue to attract users on mobile to buy things, to engage on your platform, at some point, monetization will follow. One thing i would like everyone to remember, in the Fourth Quarter, alibaba generated 1 billion u. S. In mobile revenue. This is a substantial number. We broke that 1 billion mark. Joe, on other developments speaking about mobile, yahoo saw some good mobile ad Revenue Growth in their quarter just a day ago. Marissa mayer has now spun out her alibaba shares into spinco. Would you have any interest in buying all or part of spinco . We dont anticipate buying entering into an agreement with yahoo or spinco. This is their right to do. The board has obviously decided to do the spin off. From our perspective, operating the business day to day, we have a 15 shareholder in us. That is yahoo . It really doesnt change anything from our perspective. But i would like to just take this opportunity to thank Marissa Mayer and also jackie reses. They have been great partners with us over the last couple of years. Joe, i know you are a great deal maker and you have made lots of deals for alibaba. Is yahoo on your radar at all . Can i ask that . We are very focused on our business in china. If you look at the deals that we do in terms of investments and m a activity, over 90 of them are focused on how we grow our user base, how we increase user engagement, and how we expand our categories in china. With the limited activity that we do outside of china, its very much focused on the crossborder trade, always with one leg in china. That is how to enhance our ability to serve Small Businesses to sell, chinese businesses to sell to overseas consumers. And more and more so now how to help Small Businesses from around the world, including the u. S. , to sell into chinese consumers. Our platform has 334 million active chinese consumers. I mentioned earlier about the fight you have had in recent days im sure its not something you wanted to talk about or that you would want to talk about on a day like today but the fight you had with the chinese regulators over alleged fraud at alibaba. The fact of the matter is that is one of the risk matters in factors here in buying into your company. What exactly are you doing to combat fraud on your Online Marketplaces . So the underlying issue is an issue that we take very seriously. Alibaba runs retail platforms that trade 370 billion a year on a last 12month basis. That is a lot of transactions. In a way, we very much reflect a very significant part of the retail economy in china. The issue of Fake Products counterfeit products, are really a matter for all of the participants in the economy to solve. They involve both online efforts and offline efforts. Let me just say this for us there is nothing more important than the trust that consumers have in our platform. That means they should feel comfortable to come to our platform to buy things and trust that our vendors are selling them highquality goods. So we take a very draconian approach toward counterfeits. We spend a lot of resources and money and people to combat this problem. Alibaba executive vice chairman joe tsai with in the loop anchor betty liu. From redmond washington to the sidelines, we are going to head out onto the field next to show how Microsoft Surface is changing the way coaches play. Next. You are watching the best of bloomberg west where we focus on innovation, technology, and the future of business. I am cory johnson. Hey, its super bowl weekend. Patriots back against the defending champions the seattle seahawks. More than deflated balls technology took a center role. I went to seattle ahead of the super bowl a few weeks ago, and i had a chance to talk with Russell Wilson about how the Microsoft Surface tablet is helping change the way the team draws plays. Check this out. Every time Russell Wilson does this touchdown the nfl is watching and so is microsoft. This season, the nfl introduced digital, the custom Microsoft Surface tablet, on the sidelines. Way up here in the catacombs of centurylink field, the clink are where cameras capture the images but the cameras are controlled by the nfl. The league takes the image. The team approves the image instantly, sends it to the server, and then shows up on the