People like Arianna Huffington and even oprah, and president obama hits the west coast for some major fundraisers, including one from silicon valley. We have more from Hillary Clinton and rand paul, paying attention to the community. In microsoft and apple have their orderly report cards. Sales were strong, but it certainly hit the bottom line. We will talk more about that in a moment, and let look at apple and their fiscal third order results. A 12 rise in net income, sales up six percent, more than 37 billion. Ipad sales falling for the second straight quarter, subquestion is, are these good enough for now . And we have a guest in the newsroom as well as in minneapolis. Both of these guys have been covering apple for sometimes. What was the big thing that jumped out at you, if anything . Two things. The gross margin was much better than expected, and that was a huge concern months ago, so that is better. And then they have a new product line, new categories, products and nurses in the backend of 2014, so they started this almost one year ago, and this is a critical window now in the next six months for them to get some of those products out, so i think that is the real take away. Let me ask you about gross margin. That was a number that jumped out at me, as well. I would think it would take a big hit because of the new products coming out. We think apple has a propensity to guide conservatively, so we are not overly can turned with this guidance. Of course, gross margin was a great number. Going back to your western, cory, was the number good enough . Yes. More importantly, it was a good result. Apple issuing the best eps, and it is coming at a time when its key competitor in the android community, samsung, is in a state of contraction. I was surprised that these iphone sales increased her teen percent yearoveryear. Gee, with a new phone coming, everyone knows, like where you are reporting, you think sales would have fallen off a little bit. Well, they did not, and it is proof that apple has differentiated rotted in the marketplace, and you also find them succeeding in emerging markets, and you talk about the bric countries, and in china. We are going to get those new iphone 6s, and we will continue with other products, like the iwatch, and i think that will be great for apple. Why were the sales lower than the First Quarter of 2012 . I think that the speed with which the ipad took off in the last four years was a little bit better than what people expected, and i think they have essentially saturated their key markets, the u. S. And western europe he and the growth in ipad was still strong in emerging markets, but i think at the or, they hit a saturation point. The next logical step is one of two avenues. One is to go to the enterprise route, really push this ibm experience and relationship to try to increase penetration there, and two is maybe they go a totally different direction. Maybe they actually move away from the ipad, and as they come out with this tablet with the 5. 5inch screen, i think they are willing to make that transition. I think theyre willing to sell a 600, seven hundred dollar iphone and give up a 330 ipad. Mini. I have my notes so that i can look at them when i come back from the air, including my tweets, 225 million ipads since 2010, whereas the iphone is still 551 million, so a little more than half as many sold in three years. What does that tell us about how big the market can be . Well, that is a great number, and that is a number that apple defined, and i actually disagree with gene. Yes, there will be some blurring of the distinction between the smaller ipad minis and the iphone air or whatever they call it, but at the end of the day, what apple stands to do with ibm is take a bigger chunk of that to take that 600plus billion opportunity and do something with it. Gene, what research are you doing to find it with the market might ultimately be for the ipad . We do different surveys in emerging markets. We look at it and to buy. We do this also with u. S. Markets, and i think if you take a look at all of those, the intent to buy iphone is high. It tends to between 30 in emerging markets and 70 in the u. S. , and those numbers keep inching up. Despite the competitive talk, i think that is the critical focus, trying to get an edge in how the iphone is progressing. Some other fun stuff we reported on today, every six months, we do a headtohead test between google and siri and see which one is better, and for the first time, google just sneaked by siri, but people still want their iphones. All right, from piper jaffrays, thank you. And also on this day, microsoft reporting earnings for the fiscal fourth quarter, first full order, under the new ceo, and microsoft said revenues raised, with income falling, and one of the reasons it fell was because of the acquisition weighing down the bottom line. The Earnings Report coming just days after microsoft announced cuts. Joining us for perspective is a ceo from a facebook cto and microsoft watcher. These are interesting results. Where do you see this happening . The announcement last week was coupled with some interesting industry news. We saw ibm partnering with apple, which is one of the partnerships, that classic photograph of steve jobs under the ibm sign, mocking it, back when they were everything apple wasnt, and amazon was getting into enterprise collaboration software, so google invested more in this space. I think there are two trends which are really going against microsoft right now, and the first is a move towards mobile devices, and that is dominated by the operating system, and the second is the move to the loud, and modern Enterprise Software now does not run on the windows operating system. People are not running windows in other systems either. With 365, you have got some really big components. There was a memo. I was on vacation, but i spent some time with the people, and they say that 365 gives us something new to sell. I think that is true, but it also goes handinhand with the fact that some startups are now playing on equal footing with microsoft. It used to be that every computer ran windows. They have windows servers, windows laptops, and office ran perfectly on windows, and they basically took away the enterprise for productivity software, and now people are using iphones, ipads, and whether it is other web services, it is true that microsoft has a competitive offering, that in terms of the Sales Channel they have now, it is night and day. I also think the fact that people are using so many different vices now, they are looking for a different experience, which is why some are not even getting startups the time of day. Some people do not know what quip is. We started off with a device application for smart phones and tablets. We had a story on the show which talks about this and how it came to be and how they are really positioned around this word. They were talking about it today on the conference, as well. Such a big focus for them. It has been Great Software historically. I think the only idea is if it is optimized for the pc, and the retired one item recently. The platform shift happening underneath office, so now, people are on their phone way more than they are on their pc, so these are becoming less important, not because office is bad but because our usage and habits are changing. I think because of that, the window is on the decline. It is not going to go away, but pc sales should not be flat line. Going up this quarter and down next quarter. People are maintaining it. The growth areas, tablets. I think for microsoft, a place where they can actually deliver software across this platform is probably in office. It is a typical innovators dilemma. I think it is a smart strategy. It seems like there is a lot of work for improvement in the world with email. I was driving in yosemite valley, and i found 370 emails the other day, so i feel that email has a long way to go. Thank you very much. Kobe bryant playing basketball in l. A. , but he leans on the Tech Community here for advice. That story, next, on bloomberg west. You are watching bloomberg west. I am cory johnson. Kobe bryant is gearing up for a film that zeroes in on his inspiration, with meetings from everyone from Oprah Winfrey and others, and we caught up with him, and we are joined from now with an l. A. Icon. It was really interesting, cory. I think whether you are a ceo or a star in the mba, you need to be dedicated. I do not think anyone has ever questioned kobe bryants dedication, and this coming out later this year is not really the story of kobe bryant. It is more about what gets you inspired, who inspires you. Here is a bit more about that. I look inside and say, ok, what was the genesis for me . Who inspired me to get to this point . When i face adversity and look at this challenge and opportunity, where did it come from . Who did i learn that from, and that is what this film was really about. It was about a kid seeing the film and being inspired by the film, being able to have muses of his own. I think that is what it is about. What is this process . You pick up the phone who are leaders in industry and pick their brain . Exactly. I just cold call people, absolutely. I cold call people, and some of the questions i asked will seem really, really simple and stupid, quite honestly, for them, but if i do not know, i do not know. I have to ask, so that is what i do. I asked them and learn more about how they build their business and run their companies and how they see the world. And who are some of the people that you pick up the phone and call . I cold called mark parker, johnny ives, dan wieden, Oprah Winfrey, recently Arianna Huffington, and the list goes on and on and on. Hilary swank. The list goes on. Taking johnny, you guys had a conversation . He is obviously unique in what he does. Why . How . How does he view product . How does he view it . How is he seeing the world evenly than anyone else who is manufacturing hardware . Because there is something going on for him the moment that he sees something to when it goes into his brain that is a different process. I am curious to know what that is. I spent the day there at the software giant. Things like that. What makes them who they are and why. I am very, very curious about that. And, i think, once you have that, other entities or works of art, you can draw things from that to help you be better at what youre doing, by looking for those, denominators. How do i prepare . How do i prepare . How do i build my game . And my response is it is much like he build products. Yes, you look at this, and the end result that you want to create, but we an result of that, there are so many Little Things they go into the device. It is no different than having a basketball game. You start with what you want your game to be, what would make your game most unstoppable, and then you work backwards from there, and you Start Building it one piece at a time, one move at a time, one counter at a time. That was really interesting. What a cool i have watched kobe play from the beginning, but how he processes, and the notion that he can learn from technology in the way he build his game, because he does have an interesting style, not just moment to moment, but what he does throughout the game. Yes, and you have got someone who is an interesting part of his career, at the end of his career, and someone who has been pretty clear that he does not necessarily want to be a coach or a general manager, and that sparks curiosity, and he makes an investment in a sports drink maker, body armor, and we were talking about Carmelo Anthony now making some investments or getting ready to make some investments in Digital Media companies. Clearly, kobe has shown some interest in Companies Like apple. I do not know necessarily that he will be making tech investments, but he wants to invest in stuff he understands, and he understands the world of sports. He understands the world of Sports Marketing after all of the time you spent with nike. And you caught him in a real friendly mood also. Seriously. I wonder if he is thinking very specifically about certain things. He is obviously not wanting for cash with his career come and he has had some pretty big contracts, but wondering what he will do when he hangs things up . He did hire a former aide arrayed executive, and i think there are interesting things to watch for. All right, thank you very much. Google and apple fighting for your dashboard. Were going to compare apple and google, next. Welcome back to bloomberg west. Think of this. Apple and google in your car. Apple and google are not happy on your phone. They want to take over your car also. I was and android, simply by plugging your phone into your vehicle ios and android. For the most part, they are the same. Your car has a display that becomes a mirror for many of the apps on your phone, things like text messaging and music services. They will now come from this, not from hard drive under the dash. Right now, almost every automaker in the world has announced one of these programs, and for apple and google, moving into the car is just another way to get you to use more of their services. A do not want to lose you just because you happen to be sitting behind the steering wheel. Others are happy because for more than a decade, they have been trying to cram more and more tech into their vehicles, and the feedback has been mixed. The confusion learning a new interface will soon be a thing of the past. You can also get new Technology Without getting an entirely new vehicle. New features will just be the matter of a download, not a trip to your dealership. You will also, hopefully, be safer. Using an interface you already know, like ios or android will lead to less distraction on the road. And then, text away. That was our Bloomberg Businessweek reporter, and more of bloomberg west after this. You are watching bloomberg west. I am cory johnson in for emily chang. Hillary clinton went to facebook, twitter, and google, and while at google, eric schmidt pressed her on nsa surveillance. Here is what they had to say. As you know, google is quite opposed along with the other Tech Companies about the overreach of the nsa, and we think, for example, bugging Angela Merkels phone is pretty dumb. What is your opinion about domestic surveillance . The number one question. Well, yes, dont do stupid things, and that does not mean we dont need to have a system of surveillance, because we do. I think that has to be accepted, but how we do it and how we explain it and what we tell our partners is incredibly important. I was just in berlin on my book tour in europe, and, of course, that was the number one issue, and i said, look. Angela merkel is a friend of mine, and i apologized to her. It was wrong. It should not have been done. Listening to my conversation with my mother . I mean, people remember that. Absolutely. We were beginning to take a hard look at what we did post9 11, and that was happening. The president had actually given a speech before the snowden disclosures about the need to take a hard look at the legislation and how it was being implemented, so we had to do that, because i voted for things, and then i voted against things, trying to figure out how to get the right balance in security and liberty, the ageold question, and we have to do a much better job, and we have to do it in a way that does not affect our great companies, like google, because, clearly, that would be unfortunate for us. Clinton also participated in the q a session at twitter and facebook. Well, secretary clinton is not the only big diplomatic name in the bay area, president obama returning tonight to attend a luncheon tomorrow in the hills in silicon valley. 10,000. Willie brown is with me. What is this that National Politicians like about the bay area and the tech scene here . Almost more than anything else, california and the bay area are cash cows, and in particular, for democrats. Real, quality, upscale democrats come here to get refueled. And fueling the Campaign Coffers in election years. But isnt Something Different now . This city is very different now from when you first became mayor, largely because of the decisions you made about building different kinds of housing, more upper Income Housing in places, to help set the table for the growing tech scene. In reality, San Francisco has transformed itself over the last 20 or so years from being kind of like many other places in america into something very special. A culmination of incredible Research Capacity for medical coverage and for health and the whole business of what do you do with the socalled internet, how do you move into the world of tomorrow. We are now the ground zero for all of the thought processes and all of the investment and the capital that needs to fuel those two concepts. About 10 or 12 years ago when you are trying to determine what would happen with the city, and diverting it to a military base, to some kind of business, and i was completely against what you were deciding when you made the decision to make it possible for investors like magic and george lucas, whose operation was there, which i foolishly thought was the future of this city. Talk to me about the role of Economic Diversity, because you were right, and i was wrong. What is the role of Economic Diversity . It clearly demonstrates yourself by what you currently see, and you have to be incredibly careful that you dont become reliant on one area of the economy. You have got to be prepared to diversify. You have to be prepared, hopefully, to continuously promote modifications, creations, and new opportunities, and that is what we have done in San Francisco. The tech scene is so i see it or a certain rosecolored glasses because i do this tech show here, but it seems the whole world is flocking here to do technology, and not even biotech, but technology, technology in a certain way. Naturally, they flock here to live, and they are living part of the engineering world, who are trained to deal with the internet. The quality of life would never sus