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40% tos brand value rose 150 $9 billion thanks in part to the company's innovations like google glass. apple sales is number two after three years in the top spot. apple's brand value is down 20% to $148 billion. drop ins weathering a pc sales. laptop and desktop shipments were up year-over-year versus the downturn for the industry as a whole. and it's global smartphone shipments were up. to rise itsexpected ipo later today. the online retailer that has a business model summer to amazon is seeking to raise as much as $1.7 billion in its u.s. ipo. .com has not turned in annual profit in contrast to another e-commerce site, alibaba. welcome to bloomberg west. i want to welcome our special guest host for the hour, the founder and managing partner of capital fund. great to have you here on the show. >> great to be here. i am really excited. >> what is going on now? where are you guys putting your money? >> we have had a couple of interesting things happen. i think it was well-publicized what happened around tender -- around tinder. >> you sold a big stake of tinder. >> we did a controlled transaction of one company. we inherited ownership of tinder. we sold that. what spoke to us was, when valuations get crazy, which i think we are in the phase right now, it probably makes sense to start looking at different ways of doing interesting transactions. we are increasingly looking at doing buyouts and transactions and spend a lot more time on our private hedge fund. >> before we move on to that, tinder, what is its real valuation? one was closer. in the range of half $1 billion. that is a fair number. i think the original number was wishful thinking for everyone involved, including myself. but we were quite happy. >> where can you find value? what areas of technology are you looking at? valuations are not in sync. thatere are businesses right now are actually getting started with capital because they are in this really weird, awkward growth strange. the companies that are growing by 100% plus are getting bit to the moon. but the ones that are not karm to and are not going it's an opportunity for us to $10just do a typical million transaction, but a $50 million control transaction, $100 million control transaction. by them, fix them, and then take them back up. >> i want to get to our lead story of the day. you have been following ebay, asking users to change their passwords as it caution after one of the databases was attacked. it was hacked between late february and early march p.m. hackers gained access to customer information coming clean passwords, birth dates and addresses. they also compromised a small number of them play login credentials. ebay says there is no evidence of unauthorized activity resulting from this. wade williamson joins us on the phone who studied new techniques to compromise networks. start with you. how do you think this attack happened and how bad is it? >> typically, these things will be coming in through an employee. it is far easier if you are an attacker to find someone who is willing to click on a bad link and click on an attachment. once you are inside the network, you can start rooting around and looking for all of the important databases. that indications is that was the model here. that is a difficult one to defend. >> does this speak to the failure of the ability for the internal checks and balances in ebay to protect their users? >> it's a good point. something that i think is a good databases thate help credit card information seem to have been separated from the ones that held other personal information. which is a good thing. obviously, you don't want to get credit card information or payment information zone. other internal controls, that remains to be seen. i think that the state of breaches we see enough of these now that we know this first kind of breach where the bad guys get inside, that continues to happen. we definitely need to have better controls about making sure that the bad guys can't get out with the crown jewels once they get in. and also doing a better job of making sure that they can't use the data that they eventually steal. >> it seems like every week we are waking up to a massive hack attack target. that ebay should be held to the same standard record company like target? >> the answer is yes. the question though is was the ultimate end of that series of events at target, was that really the solution to the problem? >> you mean the ceo leaving? >> i have known john for a while. he is the most exceptionally, on a roll, amazing person, one of the most amazing people in silicon valley. if he knew something was going to be done, he would've done it. the question is where were the real checks and balances in place in a bag? also, how are they figuring out what technologies they should be using so that they are one or two steps ahead or at least in lockstep with the attackers who have an increasingly massive economic incentive to be tried to hack them and frankly every other company? view this as a massive failure on a base part given that some a companies are a seen this exact same issue? or not? >> no, i don't think it is a massive failure. when a breach happens, something wrong happened. from what we've seen so far, this doesn't look like it was anything negligent on ebay's part. of course, we are going to learn more as time passes. but the really important thing to remember is that the first layer of the breach, where someone -- an employee gets infected, it is really difficult to make sure that no one that works for you ever gets compromised by malware. that is a really tough job. what i do think the industry can do a little bit better is not only when we find a breach we let people know quickly, but also we need to be looking at other security technologies beyond just how do we keep that first piece of malware out. what we do from the people that are already infected with malware, how do we make sure that those guys don't become an entry point into the really important things inside the network? that is something that i think is both a responsibility for enterprise as well as the security industry to help fill that hole. you so williamson, thank much for joining us. coming up, more where there special guest host. i will ask you about the state of our tech industry. i love hearing your opinions about how all these companies are doing. that is coming up. you can watch is streaming on your phone, your tablet, bloomberg.com, and bloomberg app. watch this is "-- >> this is "bloomberg west." i want to start by asking you about facebook. with all of the acquisitions that have been making, does it all make sense? >> i think most of it make sense. having been there through a handful of them announcing them from the sidelines, what has turned out to be the cheapest and smartest acquisitions done probably by any internet company. one of the things i did when we left facebook is created growth team at social capital. we use that within the companies that we invested and help them grow. but they also help figure out what is growing. well we do our own internal projections, it tells us that, sapp will have more acquisitions than apple and facebook. apply some reasonable discount, what apple will be worth is multiples more than -- worth multiples more than what facebook is paying. if you as a stalwart company aren't figuring out every day how to get into the next wave, you're going to die. you don't want to be the company five years later with just a bunch of cash and no ability to innovate. like cisco,et it hp. there is a whole gaggle of these companies now that don't know what to do. as a result, your lunch is getting eaten. >> we will be speaking with john chambers later this hour. what about oculus? >> that is a head scratch her. er.head scratch is it worth $2 billion? i have no idea. doesn't matter when you're talking about a nominal amount of dilution? again, if he could be the next platform, at least facebook as it. reasonablyis a measurable right off and they can keep going. >> how long will facebook remain the dominant network >> 10 years? -- for the next 10 years. >> i think that is locked in. whatsapp, you will see everything from transaction, payments come a lot things right now that you see in places like china and japan that will get brought over to the rest of the world. there will be this massive platform that enables it all. i will keep facebook relevant for another decade. >> what about snapchat? >> it is a largely teen oriented product in the united states. >> google is buying a lot of robot companies. it is competing with facebook and try to connect the world in different ways. >> i think google's proposition is very different. it said we are going to organize all the world's information. they realize that some point along the way that information is getting generated in all of these other places and let's go untracked and on the locket. so when you buy that, you are unlockingt your information around the home. >> google glass? >> the point is they realize that the world's information is no longer trapped on webpages on the internet. information exists everywhere. so their job is to use all of the cash from search to go and basically get them into the information business everywhere else. it is an amazing business. >> what about apple? >> i think they are screwed. i think these guys have lost largely their mojo. speechsee the transaction, for me, it is a head scratcher. you are buying a hardware business, low-margin, doesn't make any sense. said that they are trying to buy to compete with beat music. why not buy the number one for three times as much than buying another for $3 billion. it does not compute for me. >> what if they come out with a larger phone or a smart watch? >> i think it is more of the same. the reality is that the success of companies like netflix, totify, things are moving the cloud. content is moving to a place where it is available all the time everywhere. and these devices are getting cheaper and they are becoming more abstracted. they are becoming more available. so being in that business is a race to the bottom. so you have to find a way to go upstream. thethe balance sheet to buy winners and software. by dropbox. by spotify. by netflix. those are winning strategies. coming up.e with you stay with us. also, a quick programming note as we had to break. tomorrow, we have an exclusive interview with intel's ceo brian kucinich. he has new hopes for intel chips, the maker market and he will tell us why tomorrow right here on bloomberg west. address, dropbox all with multibillion-dollar valuations. do these is her but -- do they deserve it? with the 11 nine-figure funding rounds in the first quarter of 2014 alone, is it possible fundraising is getting a little too easy? johnny me now is stewart butterfield. stuart, thanks for joining us. first of all, i want to ask you -- how is it different starting a company today than starting flickr a decade ago? >> the company started in 2002 so you had the dot com crash, 9/11, worldcom, enron, s&p went down 79%. it was impossible to raise money. we were working on a game. flickr was a last-ditch effort to build something of a technology that we could finish quicker. in one sentence, we were lucky. but it was entirely different. >> is it too easy to raise money today? >> no, i think there are a lot of companies that are not raising money at all. company's like stuart's, just take a step back for a second. amongst our enterprise portfolio, we have done probably 20 or 30 deals for 200 million dollars on the ground, conservatively, it is worth probably $200 billion. companies we have ever seen in the enterprise, when he walked in the door, we were just like, what is going on here? these growth characteristics were like a consumer company. it was like i had seen at facebook but it was applied to an enterprise. >> your company is promising to eliminate e-mail. how? >> inside the organization. e-mail is not going anywhere in the long-term. maybe it's got a couple of decades left at least. it is the easiest way to cross organizational boundaries. but it is the worst way to communicate within an organization. having the whole archive available to somebody new, somebody who starts on the team six months on our five years from now has the entire archive available. it is a huge advantage. said it has eliminated from percent -- >> take away the nuclear growth and revenue, that is all well and good. but we have seen e-mail job by 30% to 40% internally. more important, it changes the organizational psychology of the people that use it. there is less internal politics. there is less smaller e-mail threads between people. everything is more transparent. everything is out there. as a result, things are more logical. people just operate within a company in a sort of more relaxed way. so they work smarter, better. i think it has profound impacts way beyond just the revenue in the growth and all that. >> let's talk about something that may be a logical. valuations at large. are they? >> i think some of them are insane and don't make any sense to request you said there is blood in the wall -- don't make any sense. >> you said there's blood in the wall, blood in the water. >> when everyone asks me about sayerest or uber, i linkedin has 300 million users, complete mode, complete monopoly. it will get to a billion users. doubling every year. 90% margins. and you can buy it at four times 16 revenue. if i can buy that for a $15 million market cap, i don't know what to think. either linkedin is completely mispriced or everything else is. i don't knows i just keep buying linkedin. >> what do you think? having been in this environment to one mobile? in this so -- environment through one bubble? >> it is so difficult to tell. it is very tough to say. you are talking about whatsapp and facebook. was that worth it to facebook? maybe. by anyt worth that calculation of their forward revenue. you have to take into account the future value of this business. >> very collocated. stewart butterfield, founder of slack here in a give for joining us today. coming up, cisco ceo john who says nsa surveillance is hurting american companies. ♪ >> bloomberg is on the markets. let's look at where stocks are trading. we have a rally today. you can see the dow is leading the way by 8/10 of one percent. in terms of individual stocks we are watching right now, the world's biggest maker of customer management software forecasting second-quarter sales will come in higher than analysts were predicting as they continue to lure new users. sales growth expected to exceed 30% for the third straight year. but the stock is still down. more "bloomberg west" is next. cisco ceo john chambers is worried nsa surveillance could have a major impact on his company. he sent a letter to president obama asking him to curb the nsa surveillance program after greenwald alleged in his new -- the cisco live conference is happening live in san francisco today. >> john chambers, cisco ceo, this event has been around for quite a while, 25 years. it is an interesting gathering of cisco clients. we have known each other for a long time. tell me about this event and the type of customer who is here different from five or 10 years ago. >> the event this way 5000 people here, 2000 people online and it has everyone from your cio to your network engineer and what is changing is that they are now focusing on business outcomes instead of just wor -- instead of just networking. high-end writing, new high-end switching, something called application-centric infrastructure. with a platform, with the intra-structure, with security. thethe first time, customers got it. so did the financial analysts. we are going to embrace these concepts and be the leader in fdn. what i enjoy most is the time with the customers. in 48one seven sessions areas. together know from selling closed technology or the cio having technology to a business outcome looking in from the customer perspective? seems to me the hottest idea in the world of networking right now. the way i think of it, correct me when i tried to explain. as i'm with my family in the car and my wife and navigator says, let's take a turn and go over here, let's stop for dinner and change something so my needs, as i go through the network off the highway, changes as i go. >> the concept is absolutely right. you have your virtual layer and your physical layer. but the two separate are too closely and to difficult to work off of. the financial analysts got it and the customers got it. we had six customers on stage, two who had done another companies scn. -- sdn. h talked about how infrastructure brings common policy and applications from the cloud to the data center to the core. a huge competitive advantage. then we talked about security. now we have a good shot at it. our knew announcement was around collaboration. a desktop device it will be the cost of a notebook with android capability with the ability to have world-class telepresence, touchscreen, and that is just the device. the collaboration is what is missing in terms of productivity and business. >> it seems the very notion of sdn sits on the opposite end of the argument, the virtualization of storage that says we are going to have a storage so specific that the direction will already be decided before the packet leaves a network and you don't need the software to find that. is it one or the other? >> i don't think so. i think software defined networks are here to stay. you will see us put that into our own infrastructure and ample mentation. we got the advantages of sdn in programmability and flexibility with the advantage of having one network do this and your you have a, policy throughout not just in a data center but all the way to the action. >> you talk about security, the letter you sent about the nsa to the white house. i thought it was really powerful. the quarter before last, you are more specific than just about any big ceo saying that there may be a big impact because of some of the nsa policies. cannot operate this way. our customers trust us to be able to deliver to their doorstep products that meet the high standards of integrity and security." what are you hearing back from customers outside the u.s. about the impact of the nsa activities? >> i would not have written that letter if it weren't from a picture of a cisco blocking greenwald's book. there has been no follow-up on that. first, i want to take a step back. >> you spent a lot of time in the white house. >> a lot of time on that. but the key take away was, at that time, if you told me we would go 12 to 14 years without another attack on american soil, i would have said impossible. yet the government is done a very good job of protecting us. however, if you expand too far, you been to affect the global supply chain. it is the companies announced back in september, facebook, google, apple that said we have words, a statemy of proper conduct or rules of the road as we move forward because there are none. it is a wild, wild west. i am not being a doctor goal of the administration or the nsa. i am saying we have to take a step back. with other governments around the world, here's how we move together and how do we position it so we don't affect the supply chain which may, in a given country like india or china, affect the supply chain how you get the product out. >> is the business impact limited to china right now? >> the business impact we said was an impact in china and an impact in certain other parts of the world hesitating. you never know the true impact. >> the and instead -- the nsa is stalling sales. >> what i said is people don't trust us. and we have an issue here. that's when we need a rules of conduct that we are going to use going forward. and look atto go how we have become the global internet and how every country has benefited from it and every country play some role in the supply chain. you have to have a consistency you can rely on. here is the transition. we are moving to become the number one security company because the only way you can defend us is from the cloud to the data center, wide-area network to the device. -- several of my peers who were pushed on security, they said this is john's issue to solve because you can only sell it to the network. and we said that we would become the number one security company, people said maybe. we may 3 acquisitions in the last year. we are moving rapidly to all areas of security, not with individual pieces, but with architecture to bring us together. thaten did an acquisition focuses on malware and effective utilization. so we are going to view this as how can a network or security in a way that no one else can and cisco will hopefully become the number one security company. >> you have been at your job for 19 years. what are the advantages of being in one job for so long? what do you see coming around the pike or what meeting are you sitting in and you say, you know, i have seen this before and this is what we need to do? >> you always want to listen to others. but as you said, the ability to play off the game come i get data points, a, b, go to the endgame -- if you have seen the movie, you have advantages. , three yearsage is ago, a competitor said, john, i want to congratulate you for reinventing cisco one more time. that's why think a ceo should be in the job more than 45 years. he said, most of us, including himself, we don't reinvent ourselves every four to five years. your company and your culture and you as a leader have been able to do that in ways that others do not. he said, how many of the leaders you have have been in the job longer than five years? the answer is only one. this is where there are companies or individual leaders, if you cannot reinvent yourself on market trends, used to be three to five years, now it's only three years. at cisco, although people give us unbelievably good grades on innovations, we are going to increase that by two x. so maybe one more reinvention for you or will we we sitting here again in another 19 years having this conversation? >> no, we have given it a timeframe in the next conversation will be when i announce my successor. changed five cfos in the company, probably seven head of sales. i like the second one, that was me. have a very strong team, a number of people that can replace mandarin a better job than me. my job is to make this just like your family. i just want my family to grow up and do even better. >> john chambers, thank you very much. >> thanks so much. just a reminder, tomorrow, we will be speaking exclusively krzanich.l's ceo brian is >> welcome back. university says its online classes are used by millions across the globe and harvard says it is all in for online education. so why would anyone invest on in-line education startups? ryan carson here as well. additionally, the online education market hasn't gotten a lot from the sea -- from vc's. right now, things are cyclical and they have been slow. we are in a phase where every consumer company was big. now every enterprise company is bid. now health care and education companies will get bid. the stool of these good investments now when nobody is looking. when everybody is paying these crazy prices, we will probably be selling. >> treehouse, you guys claim that you can teach anybody how to code and then can get a job at a startup, make your own apps, make your own website. you're telling me i can get a job at square. >> believe it or not, yes. we're taking people have no degree and no experience and putting them in real jobs. they are making at least 45 k. these are guys that have no computer science degree, no expense at all and it's actually working. and we do it for $25 a month. >> and using this could be a real solution to other inequalities. >> i think ryan is building a billion-dollar company because he is addressing a fundamental need that people have, which is they want to know that there is social mobility. even if you are born poor or uneducated or unhealthy or whatever, you can become healthy, you can be educated, you can get a job, you can thrive, you can make money. everybody wants that. so building these services for humanity not just has a social benefit, but it has a massive economic benefit. you see that everyday day. he has 70,000 students. that is the largest of your science university in the world. >> are these people competing with people who learned how to code when they were number five? -- when they were 5? >> we cannot produce enough computer scientists to fill all the jobs. the estimates that there will be a million unfilled jobs are wildly underestimated. everything is going to be software, everything. we are going to need millions and millions of people to do it and they don't need degrees or big skills. >> should people, kids in school learn to code like they learn a language or learn math? >> this should be thought of as a sacrament which. if you are not -- as a second language. learn spanish and some coding framework. >> how do you you see this as an inequality issue playing out? here in san francisco, you have people complaining about google buses and people getting priced out of the market and moving outside of the city. >> i grew up with parents who didn't have great jobs. we were on welfare most of our lives. i worked hard. i came here. i did go to a great school. then i got lucky. that is fundamentally what happens. i look at other people and think they should be in the same position i am in. when you see people protesting, that is what they are expressing. they are expressing that they do not have a chance. if you saw those things, not only do you make them happier, society's most stable, but that is how massive new businesses will get built. this is the only place we should be spending our time because it is where all of the value defined anyway you want will be in the next 10 to 20 years or >> do you think online education can truly change the education you get in a classroom? >> absolutely. you can do it in your free time anywhere. moms andlking about dads who have no time. they have no chance. they can go back to college. they can't get a degree. they can't get any experience. there is no way except for online. so it's perfect. >> it helped to redefine learning in a way that is personal for you. everybody learns in different ways. easy look on academy has done for these inverted classroom models. are different ways that people need to be given information and allow them to empower themselves. it is amazing how much motivation people have to better themselves. they just don't have access to the tools. reduce it to the cost of a few lattes a month, you change. got a big responsibility here fixing inequality in this country and the world. thank you. a big up, netflix makes push to expand its reach in europe. i will tell you which companies are getting the online video service and how it can impact the company's bottom line next. >> our special guest host for the hour is still with us of the social capital partnership. we are talking about netflix and it is expanding its on-demand empire a major dissing services in germany, france and four other european countries. meantime, amazon, which offers a says a first wave of shows in a partnership with hbo is now available. john, what do you think is most significant about this international expansion for netflix, which is the messing of the expansion they have seen in three years? >> it is a huge opportunity for them to get subscribers. i think about them as new tv networks. you need all sorts of programming. you have to make it and go out and buy it. you also need people to be watching that. you need the viewers. in the case of netflix, subscribers. clearly, they're looking for people who consistently, month after month, pay for their service. that is why they are increasing pricing and launching in these european nations. they really look for markets where they can consistently find people who will pay as opposed to markets where piracy is an issue. on the amazon site, you have the content costs rising. spending as much as netflix every year and now, but there have been some estimates that there hbo contract might be in the neighborhood of $300 million a year with an endgame being a little bit different than netflix in that they want to get people to buy more stuff from amazon. >> what do you think of a company like netflix? 48 million subscribers now yet running up against potential net neutrality issues. they take up 34% of internet traffic at peak time. >> it's an amazing service. we are large holders of that company in our hedge fund. where moving to a world the physical pipes are commoditized and valueless. and companies like netflix or for together the expense we want. on-demand, interesting content, original great programming at a really cheap price point available everywhere. that is what we want. i don't want to pay $150 a month. >> comcast is tried to buy time warner. at&t is trying to buy directv. where does that leave them? a rumor that google was trying to initiate nfl access rights. -- stuffe this makes like that makes so much sense. right now, there is no reason why you would want to be digging up the dirt of the physical, wrong iron pipes in. >> you think the guys in apple and google will find their own ways to get access. there will be apple and google drones flying around. >> net neutrality is a bit of a red herring. you see netflix negotiate their own deals. you see apple announced they will create their own cdn. massiveity is there is innovation happening. there will be drones in the sky. >> when? >> there will be lasers. in the next five to 10 years. pie and net neutrality will be important. fortunately, there will be ways for these new entrants to win. >> drones and lasers in the sky in the next five to 10 years, john. did you hear that? >> i did. i will be looking forward to it. >> thank you. it is time now for the bwest bite. the ciscoon is at conference. is 1.7%, whichay is the odds of having the nba lottery last night. they did. this makes and now two years in a row and three of the last four years that they have won the number one pick in the upcoming draft. chance to talk basketball. -- hree out of four >> i should mention that he is the owner of the golden state warriors. >> the new manager of the warriors. pick hason winning the not much correlation with winning the championship. the second thing i will tell you is that steve kerr will be on amazing church -- amazing coach. >> quickly, donald sterling. >> donald sterling is a complete clown. kevin, we love you. please come to san francisco. >> eight has been a pleasure having you here on bloomberg west. thanks a lot for watching. bloomberg world headquarters in new york, i am mark crumpton. this is "bottom line." reservehe u.s. federal releases minutes from its april meeting. then president obama thomases to fix the veterans affairs agency. we will look at the winners and the losers of last night's political primaries. to our viewers here in the united states and those of you joining us from around the world, welcome. we have full coverage of the stocks and the stories making headlines today. but we
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