Other new products and services that we cant wait to introduce. On top of that, the c. F. O. Said it will be a very busy fall. The buzz about new products, specifically bigger screen iphones comes as apple reported a 6 gain in revenue and 12 gain in profit in the third quarter. Fueled by rising iphone sales. For the latest on apples quarter, our editor at large cory johnson spoke with alex. And gene muenster, who has been covering apple since 1995. Cory started by asking gene which part of the Earnings Report stood out two things. First is the growth margin was much better than expected which is a sign that the underlying profitability is better. That was a huge concern nine months ago. They are doing well there. Second, they are reiterating this product line. New categories. Products and services in the back half of 2014. They started this expectation almost a year ago and were now at this is a critical window now in next six months to get some of those products out. I think that is the real takeaway. Alex, let me ask you about the gross margin. That was number that jumped out at me as well. I was wondering if it would take a big hit because over the new products coming out likely this quarter . We think apple has a propensity to guide. Were not overly concerned with this one quarters worth of guidance. Going back to your original question, cory, is this result good enough for now . Definitively yes. More importantly, it was a good result. Apple is showing the best e. P. S. Growth it has in seven quarters, up 20 . It is coming at a time when its key competitor, samsung is in a state of contraction. Alex, i was surprised that we saw iphone sales increase 13 year over year. With the new phone coming and Everybody Knows it, bloomberg news, our colleagues reporting that the first time, you would think the sales would have fallen off a little bit. Well, they didnt. It is proof that apple has differentiated product in the marketplace and also a sign that it is succeeding in emerging markets. It talked about the brick countries and in particular china, they are seeing 2 x the rate of industry growth. I think what is really important is we are going to get the new iphone 6s and iwatch and i think that is going to be great for apple. Gene, why were ipad sales the lowest they have been since First Quarter of 2012 . I think the speed that the ipad took off over the last four years was a little bit better than what people expected. I think they have saturated the key markets, u. S. And western europe. The growth in ipad still was strong in emerging markets but at the core they hit a saturation point. The next logical step is go the enterprise route, really push this i. B. M. Experience and relationship to increase penetration there and two, maybe they go a totally different direction. Maybe they actually move away from the ipad and as they come without this tablet, i think they are willing to make that transition. I think they are willing to sell a 600, 700 iphone and give up a 330 ipad mini. There could be something bigger going on here. I hadnt thought of it that way. Im tweeting my notes out so i can look at them when i get back on the air. According to my tweets, ipad sold 225 million ipads since summer 2010 where the iphone has sold 551 million. A little more than half as many ipads sold in three years. What does that tell us about how big the market can be . That is a great number. That is a number that apple defined. I actually disagree with gene. I think apple is a long way from saturating what it can do with ios and the tablet market. Yes, there will be some blurring in distinction between the minis and the iphone, whatever they call it. At the end of the day what apple stands to do with i. B. M. Is taking bigger chunks of that 677 billion Enterprise Market opportunity out there for i. T. Devices where it is only scratching the surface. Tim cook said that on the call and i think he is right. Gene, both of you guys do a ton of research. Thats why we have you on the show. Gene, what kind of research are you doing to figure out what the market might ultimately be for the ipad . We do different surveys in emerging markets. We look at intent to buy which is a critical metric. It is less about what you bought and about intent to buy. If you collectively look at all of those, the intent to buy iphone is high. Tends to be anywhere between 30 in emerging markets and 70 in the u. S. And those numbers keep inching up. Despite all of this competitive talk, i think that is critical focus here in trying to get an edge in how the iphone is progressing. Some other fun stuff we report on today, every six months we do a headtohead test between google and siri and see which one is better. For the first time, google just sneaked past siri. I think the big picture here is despite that, people still want their iphones. Alex and gene with our editor at large, cory johnson. From former secretary of state Hillary Clinton to president obama, Silicon Valley has been a top stop for big name democrats. Why is washington obsessed with Silicon Valley . That is next. Welcome back to the best of bloomberg west. Im emily chang. Former secretary of state Hillary Clinton has recently made the rounds in Silicon Valley, stopping at facebook, twitter, and google. Eric schmidt pressed her on the issue of n. S. A. Surveillance. Take a listen. 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 stupid, if i can be blunt. Mmhmm. What is your opinion about domestic surveillance . This occurred after you were there. Right. Do you have an opinion about this . Number one question from google. 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. I had dinner with her and she said what are they doing . Listening to my conversations 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. And secretary clinton is not the only big democratic name stopping in the bay area, president obama returning tonight to attend a luncheon in los altos hills. My partner spoke with former San Francisco mayor willie brown and said what is it that attracts politicians to the bay area . 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. Get their wallets refueled and campaign coffers. It is an Election Year this year. But is it Something Different now . Certainly 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 of today. 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 were trying to decide what was going to happen with the presidio and it was going to be converted from a military base to some kind of business. 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 in San Francisco and how did it play out here . It clearly demonstrates itself 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. I dont know if we have done it well. The tech scene is just so i see it through 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 sustain itself or hold their interests unless there was a kind of diversity in the world of the arts, diversity in the world of entertainment, diversity in the world of health, diversity in the world of food and diversity in the world of design. All of those things happen in Northern California, and, in particular, in the bay area. That is what makes us different. Talking about politicians coming year, there is something not just about getting those wallets filled. Politicians associating themselves with the future, being with tech. G. E. Is just inventive of a company in many ways as google is, but politicians standing next to eric schmidt that makes them seem like they are more forward thinking . I would guess politicians would be foolish to allow themselves to be cataloged only for San Francisco for that purpose, i think you have to be careful. Remember, microsoft is in the northwest, in seattle, and that still has all of the components of a part of this whole scene. You have to be very careful about what happens in north carolina, in particular, just an incredible kind of component that is there, and then finally, of course, new york still has its place in the sun, so to speak, and chicago is being impressive, so not only do they come here to stand next to the google guys or stand next to who it is, facebook, but they have to make sure they make the other stops. The last president ial election, every single candidate was running an ad that showed up with a windmill that suggested they were greener than the next regardless of their environmental policies. A messaging that happens when you stand next to mark benioff. Keep in mind, the whole business of greenery is bigtime, and believe me, it does not look as green today in california. Visibly, as it did one year ago, because of the absence of the water from the clouds, so to speak. Clearly, politicians have got to be careful on their green advocacy. They have got to demonstrate that in a different way, and mark benioff, obviously, that affords people that opportunity. But keep in mind, there is the objection to things like the pipelines that come to deliver energy. You have to be careful with all of these things, and we politicians, in particular, coming to Northern California, which is far left of the rest of the country. To that point so, rand paul, a possible republican candidate for president , has aligned himself with a Northern California libertarian instinct. It has also been very important. San francisco, in the valley, maybe not. Is there still an element that the right could draw themselves, whether for clinical purposes or financial purposes . Very much so in california. There has always been incredible independence among people who did not exactly go left and who did not exactly go right. They were not the middle of the roaders. They were the libertarians, or they are the libertarians. And a lot of them like technology. Absolutely, and rand paul, rand paul spends as much time as he possibly can doing the same thing Hillary Clinton does and doing the same thing barack obama does. Former San Francisco mayor willie brown with my partner, cory johnson. Kobe bryant may play basketball in l. A. But he leans on many in the Tech Community for advice including apples design head, john ive. Kobe talks about how he inspires him. Next. Welcome back to the best of bloomberg west. Im emily chang. Basketball superstar kobe bryant is gearing up for both the nba season and are release of his documentary, kobe bryants muse. The film zeros in on bryants inspirations which come from meeting everyone from Oprah Winfrey to apples johnny ive. Jon erlichman caught up with kobe and asked him all about it. 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. Thats really what it is about. What is this kobe 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 pick their brain about stuff and some of the questions i ask 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 just started in the nike family. I cold called mark parker all the time. Johnny ives, dan wieden, Oprah Winfrey, recently arianna huffington, and the list goes on and on and on. Hilary swank. It just goes on. Take johnny ive. You guys had a conversation . He is obviously unique in what he does. Why . How . How does he view product . How does he view the process of designing the product . 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. And you went to apple to spend some time there . Yeah. I went to apple. I spent the day there talking with johnny and kind of picking his brain about product and things like that. What makes them who they are and why. I am very, very curious about that. And, i think, once you have passion, you can look at 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 common denominators. I dont even know, how do i prepare . How do i prepare . How do i build my game . And my response is it is much like he builds products. Yes, you look at this, and the end result that you want to create, but in order to create that, there are so many Little Things a go into this device. It is no different than building a basketball game. You start with what you want your game to be, what would make your game most unstoppable or hard to deal with 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. There is a lot of similarities there. You got this business, kobe inc. Are there more investments coming . We havent made any formal announcement. Im sure we wont. Andrea fairchild is helping me run kobe inc. Which is cranking away every day building out the internal structure of what the company is to be and how can we communicate the culture building out that model, that plan. Thats what were focused on. You need headquarters, you need to hire people, all of those things when youre starting out the business. Andrea is the one who keeps things lined up and dotted. I have this idea, this vision of where i would like for us to go. Now it is important for us to go one step at a time and not get too far ahead. Would you want to put the market skills you have learned to work for others . Maybe. For me doing that, it seems like i should really do that for free. What im going to tell them is be yourself. Be you. Be you. There is no gimmick. You dont have to contrive anything. Who are you . Where are you today . What is your story . Where does that come from . All youre doing is commuting communicating stories to the public. Im sure you have learned a lot about that in the context of all the endorsement deals you had through your career. Some of them are amazing. Some of them maybe less so. Right. What have you learned from going through that process . The endorsement process . You learn a lot. I have seen so many different sides of that spectrum. Those who are the best in the world at doing it with those who are no, maybe not so. And you see how they operate and think, culturally how they are different, how they communicate, what do they pride themselves on . Companies that have complete focus and others that lose focus and try to regain it. Ive learned a lot just through osmosis really. Nba star kobe bryant with our own jon erlichman. Technology is playing a major role in protecting civilians in the conflict between israel and gaza. Well tell you how next on the best of bloomberg west. Welcome back to bloomberg west. Im emily chang. It has been a tense time