It is worth more than 19 billion. It is hard to make that case today because they have so little revenue compared to that number. The reality is there are very few services the region 1 billion and they are more valuable than that. I could be wrong. The recent chance it could be the one service that could get to 1 billion. I do not think i am. Zuckerberg talked about internet. Org to get billions of people to the internet saying there are benefits to providing free access. Here is what he had to say about the profitability of the project. Break even and have a bit of work to do. We are very early. That is what a lot of these partnerships are. We work with folks and it is not tuned and you will spend more than what you are making up front. What we have seen, we are highly confident will go to a point where it is profitable. For more now, cory johnson and i spoke to Paul Kedrosky as well as former ceo executive ali rosenthal. I asked her if it was worth more than 19 billion. It does get at one million users a day. 72 daily active users. People are getting on the service talking about the things they are interested in. There are real value to that whether its 19 billion or 25 billion, appropriately, i do not know. How difficult it is for an app like this to hit the mainstream and stay there was that i had a guest last week who said he does not know what he will be using on his phone for five years. If that is the case, why is it worth it . If you look back to when i started in 2009, the first crossplatform over the messenger to emerge, they owned. Emerging markets, markets outside of the u. S. Are growing like crazy. For the past four or five years, they have been building. It is not going to go away overnight. The numbers show quite the opposite. I think this platform in particular is an amazing one. The numbers speak for themselves. What is interesting is not how much business or how many users are usable what the business is. They are taking money from the carrier but they are killing the biz of the carrier. What do you make of it when you look at the valuation . Yeah, whenever you are hiding in the wilderness and going at it this in terms of the universal gravitational of purchasing companies. Weirdly enough, 42 per active user and you can look at another revenue purchase into the 1990s. Microsoft buying hotmail around the same price. The company at this stage it does not generate revenue for a while. And i actually think looking at the size of their user base and comparing it to twitter, you can see a lot of opportunity to produce 500 million, depending on what dial they decide to turn. The deeper issue is it is stunning to see a company produce a network of this size in a short order. Why cant that happen over and over . Parents join. People saying i am out. That is what made facebook a bad neighborhood. It will be a perennial problem. It does not mean they should not have bought it. Well see a series of acquisitions. I want to go back to what paul said to you. You were a banker with Goldman Sachs went in the hot number of it was not the users, it was eyeballs. Those were series of metrics. This number of users to me is a silly unless it is revenue attached to users. I do not see getting their and not to not to be a downer. This is a hard thing to get to. I am quite sure there was no pcf. This kind of analysis. It is a growth story. What paul mentioned to twitter as a comparable, you start to key in on value, but you raise a good point. Price but not value. Whether or not facebook introduce ad products directly to what apple, they said they want to believe. They will figure out a way. It is such potential cyber these are users and Customers Using the product. There has to be opportunity. What about making money on internet. Org . We know his mission has been to connect the world. He, himself, talked about presenting the plan to his board and saying i do not see an immediate away it will be a Good Business for us but i have to believe it will be. In the midto longterm, face but ends up being the utility, the Underlying Network to every time somebody connects to the internet or 90 of the time. Is that possible with the way google and apple control now . I do not know if its possible. Itll be interesting to see how it works out. Paul go ahead. I am usually skeptical about that stuff. I find it a happy rhetoric and im delighted he is doing it. I do not think it has material business revenue. Itll probably frustrate many investors. I am much more interested, i like to see what facebook is doing that what they say. When they talk about what they are doing, i get agitated and think this company is completely mad, what are they doing . And they make aggressive acquisitions a you say they are prepared. That could actually work. Maybe they are doing it on purpose or by accident. The outcome is the sign. Ali, on that note, do you think theres a problem with so buying versus building innovation . You said facebook is more like a media conglomerate that a social network. Could facebook become so bloated it down the line that it becomes some of these older legacy players that are having problems like yahoo . And being a part of the culture and the way facebook thinks about enabling talent and let engineers and product managers and anybody who works innovate. The hacker culture that mark talks about is an advantage for them. They bought instagram and whatsapp. It is an interesting allusion to what is going on. A lot of the success both from the past and present a Going Forward will have to do with the talent and the way they treat people. It may be different from other companies out there. I think that in the terms already buying versus building, sometimes it doesnt make sense. Innovation happens when you are not watching. When you are the big player or big bet he met, sometimes its what happened. Behemoth, sometimes it is what happened. Sometimes it works. Are you guys going to change your plan . We are working on a spinoff based on data we have seen which does have a lot to do with what i was talking about. Moving from purely communicating to communicating with content and helping people search and discover things and enable conversations. We have a product coming out and the next couple of months that will address that. We are launching something completely new. That was Paul Kedrosky and ali rosenthal. Still to come, more from mobile world congress. Ginni rometty speaks at a critical time. Well have a roundtable. I am emily chang. It is a crucial time for ibm, the biggest Service Company after employee headcount dropped last year for the first of in a decade. That theyre looking to rein in costs in hope of meeting profit goals. The ceo, ginni rometty, spoke about the changes. Take a listen. Any company has to go through transitions. We are 102 years old. What we started out doing, it is not what we do today. You go through the transition to be any age, of course to go through transition. I think that applies to anybody. Moderating the panel was David Kirkpatrick who joined us after the event alongside alex and began by asking david and what was the biggest take away from the interview. I think she has the right vision of the right changes, data, cloud, and engagement which others would call social. These changes are happening. Ibm realizes, she has a giant aircraft that she has to shift. She is not all the way it there but she is doing her part. People took away a favorable impression. Ibm is cutting jobs by the thousands and the revenue has dropped for seven quarters in a row. To what extent did she inherit the problems and issue being blamed for the problems . She is near 1. 5 years of leading the company. One could argue that some of these were inherited. She tried to move the ship, right to the ship and get rid of somebody moneylosing businesses and really bring ibm for the transition she talked about other companies have to go through. You would say she inherited some of these challenges . Some of them, they did, long ago when she took over. This shift in technology began before she came in. She has had to bring her company into this new era. What is your sense on what ibm is now and what it is becoming . You have to realize that a lot of the revenue coming from moneylosing hardware businesses and in the company could quite possibly shrink and be more profitable. Even though the ravens have gone down, the prophet have not. The profits have not. When you sell off, i do not know how many billions of server businesses they have sold to lenovo. The fact is that they are shrinking by choice in some respects. They key is to figure out how to grow and do more profitable areas of service. It is a Service Company she said. 10 50 of hardware. A way lower number than recently. That is a big shift. In terms of job, alex, that committed to keeping 3100 jobs in a new york state through 2016. One analyst said they could cut 13,000 jobs this year. Does that jive with what you are hearing . It does kind of jive that the company has had to shift and needs to become smaller and more focused. They did that when they sold the computer business to lenovo and now theyre offering services. It made by shifting the focus to the cloud and social and mobile areas a way from the legacy hardware business and that might mean cutting some of the jobs. Weve heard from employee groups they are starting to cut positions overseas in asia and europe and her job cause are supposed to be coming and the United States as early this week. If it does not jive with the whole moving of the shift into the new era. David, some of the things we have heard about watson sounded great and revolutionize the number of industries. Some custom web users said it is too difficult to teach watson everything it knows. It takes too long. What about those kinds of concerns . That are up against think about it. They are going against google and amazon will be in the business. These are more modern companies that have the intrinsic web dna and in no really, really well how to operate super, highvolume analytical systems. I do not think i have not used it. I have a feeling it is a technology that will take a long time to really prove itself. I would not be surprised if it turned out to be good. They keep talking about it. To diagnose different medical cases. That took them a long time to input the data to make it useful. That is a cool thing about it. The more information you put into it, the better it gets. Its a lot like google. Alex, how wellequipped is ibm to compete with google and amazon . It depends on the space. We see the opening of our Cloud Platform and opening up watson to developers to try to build up the ecosystem of outside help to revolutionizing these products. Investors and analysts will tell you amazon got ahead of the cloud space and ibm made we try to keep. Ssi they are making a concerted effort and they are shifting 1 billion. It is a big of a race in cloud services. As ginni said, we will see if they can expand. Alex and David Kirkpatrick speaking about ibm. Coming up, bloomberg sits down with blackberry ceo. Welcome back to bloomberg west. Continuing our conversation about mobile world congress. Caroline hyde talked to blackberry ceo, john chen. He talks about the messaging service. Caroline began by asking about privacy in the wake of the nsa revelation. I think a lot of people might care less about security but they really care about the data privacy and personal privacy. That point has not really been made well enough in the markets. And and i, i am a big deender of that. When i talk about the importance of blackberry, the collaboration and communication. I never he really focus on one thing we do well which is privacy. What about the focus of messaging, 19 billion . Does it make you reassess . Running a public company, anything to help our shareholders, i have to take a serious look. Today, i think we need to build up the base and in the model. We have a very good base, about 85 million. Engagement time is quite good. Usually about 40 minutes. That is a very big engagement time. Usually, our 85 million, the people who are on it for activity, that was a good thing. We need to build it up and introduce or more of our features. Today, we tell about enterprise. Bbm. We already do voice. Then, we will have other features. We have three or four different services, capabilities that we are working on. Probably in the next 12 months it will be announced. It will be helpful. So we are very excited about that. The point is, the potential to try our best, it will be huge. And until we get to the point where we showcase the potential, it is too early to think about getting the 19 billion. You think that is why your competitors other players, they point products compared to ours. Nobody has a messaging, secure messaging infrastructure. We are the only ones who have it. It is important that we showcase and use it as a differentiator and to be thousands and thousands of enterprise customers. What about Wearable Technology . Everybody asks about wearable. I do not have a plan. I think we are too early for that. For blackberry. I have my hands full with a number of things to do. We have to get in the devices. I have to get the server this is growing again. The bbm skeleton. On qx, where the connected card is, i need to win more designs. When you talk about m2m, not just cars, wonder that people can make money off today. And we have a big footprint on that perspective. But i think, we need to win other verticals whether retail or logistics. If we could start winning the medical and all of those applications, i think we will be much better. Wearables, it is too early for me. What is your favorite gadget that you have . You cannot be without or the one you most want to buy that is not blackberry. I do not know. I am not a [laughter] i am not a gadget person. I think i am more of the serious user of technology. I think i have everything i need. That was john chen with Caroline Hyde in barcelona. Samsung unveiled new wearable devices. A first for the company. The next galaxy phone and we show you everything next. Youre watching the best of bloomberg west. Samsung has its first wearable devices. It has introduced a new smartphone, the galaxy. Look at what this new phone does. Sam grobart has his hands on it. Look. This is the new galaxy. I want to show you five things about it that are new as it was just enough today. For starters, it is a larger display. This is 5. 1 inches. The old galaxy only has 4. 5 inches. You have a fingerprint sensor on the bottom. It is something we have seen on other phones as well. On the back there is a heart rate monitor. The phone will tell you if you are about to have a cardiac episode or not. There is a better camera and better materials along the back. This answers some of the criticisms that they were not the best. It is also water resistant. It will be just fine. If you drop it in a bar bathroom, it is curtains. Joined corian i4 conversation. Joined corian i4 a conversation. This is water resistant as well as a dust resistant standard called ip 67. It can be in one meter of water for up to 30 minutes. Wow. That is a true innovation. That has me more interested. The heart rate monitor, if i get into a heated conversation with cory, i can check my pulse . Right of the back of the phone up. Than i can check my shortly thereafter. Im at 67 beats a minute. They tend to follow a lot of innovations. The heart rate stuff, i am wearing one on my wrist. This is for when i run. It does not require the thing that a heart rate monitor used to. The last only introduced had a barometer in it. Are they just going to throw things into the blender and see what sticks . This is been the criticism of their phones. They throw every feature they can think of and they can develop into one device. The Company Seems to be aware that criticism. It is not so much promoting 48 Different Things that you can do. They are very much focused on the notion of health and fitness. That relates to the galaxy s5. How much cooler do you think the s5 is . Will people want to upgrade . It is not a groundbreaking device. At this point, i cant think of what it would be, even for apple or samsung or some other manufacturer. We seem on a certain level to of reached a certain plateau. These are small boxes that have modems and radios and displays of them. You make some improvements here and there and that is great. The big stuff for the most part has happened. About apple, what are we expecting from them this year . I know there is a possible larger phone. Youve spoken to the executives there. If that going to happen . They told me their entire plan for the next five years. I will share it with you right now. [laughter] just between us. Theres been a lot of pressure on the market has shown a real desire for larger displays. You wonder to what degree apple will move in that direction. It would seem they would want to. As far as what they are up to, who knows . That was sam grobart. I had, the changing of the guard. We will talk to the guy who is taking the reins next. Welcome to the best of bloomberg west. I am emily chang. Paul broun is stepping away come in taking over as the new president is sam altman. He has been with them since the first start of class. I talk to him about what it is life to be in charge of the organization that launched him. I believe this is an Important Institution for startups. It is really important to me. What is your role Going Forward . Paul is going to advise the startups. That is what he did when it was small. There were only eight companies in the whole batch. I will handle running and organizing our operation and i will make decisions that run daytoday. It takes all of your mental cycles. Paul will advise startups. You have invested in 630 startups. They are all in the yc network. We are with them from the very beginning. We tend to have extremely Close Relationships with the startups that we fund. Even five or nine years after, we still help them. Why do you think paul pick you . I do have the state of yc in my head. All of our partners are good. He thinks very highly of you in particular. He put you on a list of the five most interesting founders with steve jobs. A lot of other founders are probably better than me and have not gone through yc. You are being humble. Why do you think you should be in charge . The goal for yc is there is a shift to more startups. That is the driving force of innovation and Economic Growth in the future. Yc can be at the nexus of new startups. Our goal is to fund the best startups and be part of this community. One of the things people do not