Usernames and passwords. We have more on how the hackers got this information. China is already causing headaches for apple. The Chinese Government has productse purchase of due to security concerns and that means that the apps may be a tough sell to chinese companies. To our lead story. How safe is your data online . The question is front and center after a report that a group of hackers stole 1. 2 billion unique usernames and password combinations, and more than 500 million email addresses. The stolen information was collected from more than 420 web 420,000 websites. They did not name the affected websites, but they are said to include household names. Our guest is the Vice President of strategy at shape security. Schuman, it sounds very bad. How worried should our users be echo it is difficult how worried should our viewers be . Is the goal to say. We will probably learn more in the next few days it is difficult to say. We will probably learn more in the next two days. It is definitely on a larger scale than we have previously seen. How do i know if i need to be worried . That is one of the interesting questions, because you look at the previous breaches and they typically affect a small number of websites, or a single website. In the case of an ebay breach, were you have 145 credentials breached, what does it look like in this case echo is it one company that accounts for the vast majority of credentials echo is a large number of companies . We dont know. There were enormous extent as in the last quarter because of this reach breach. Will the specific companies that know what is happening have to face a similar cost in the current quarter, where they will suddenly have to spend a lot more to fix the problem . Certainly, if they have discover they are affected by this breach, then they will have significant costs to figure out what went wrong and what they can do. One of the really scary things about it is that there may not be anything they can do about it, depending on the method of attack to create the breach. Some of the methods released so far indicate that the hacking groups started off by purchasing credentials online through other hacking groups in the black market. But then they used. Netbased attacks. When you use a bot netbased attack, you use the previous credential stolen to go through the front door of other websites to be able to test those credentials and discover which ones are valid on other websites. In other words, they learn individuals usernames and passwords, and then blast them across the internet to find other places where the user has used the same thing and the Company Never knows they gotten the exposure. Exactly. And that is not something that constitutes a typical Security Breach on the companys part. Because they do not have the vulnerability on the infrastructure that the hackers are exploiting. How do the Companies Know . They can find evidence of the users names and passwords being used. In this particular case, the initial use cases have been used to expand malicious email links. The companies that have users that are breach, they may discover these spam mail or malicious links going out. The report says it is a russian gang, essentially. Who are these people . Are they selling the information . Is that the endgame . It is a very different system on it comes to credentials. There are many things they can do. It looks like so far, they are monetizing it by providing Services Like sending out these malicious links. In some cases, they can use the bot nets that they have built in order to create even more sophisticated attacks, attacks like the name of the browser, which can be used to take those credentials and steal money from peoples bank accounts. The level of monetization that they can actually accomplish is based on the specific type of attacks that they are selling in the rest of the black market. I imagine so many different businesses 10 years ago, the companies that would have face the sort of thing, in terms of being online and being mobile even come i wonder what the companies risks are and how you can remediate that with insurance or whatever else. It certainly requires a great deal of specification and vigilant in order to being tame to maintain a complicated Online Presence. And companies are trying to reach their users as broadly as possible, so having an Online Presence is pretty essential to every business this days. These days. 148 million, though they have 38 million of insurance, you know, we keep asking if these attacks can really be stopped. Can security get so good that these things will not happen, or will the hackers catch up every time . I dont think you can make a system that is absolutely not hackable from a theoretical standpoint. You can make practical defenses that make certain types of attacks so extensive that the hackers decide to do something else. What are those practical types of defenses . This is what security companys are fake are focused on. These barriers to per event prevent some type of automation. This game is estimated to be about 20 people, but they have stolen over one billion credentials. The only way to do that is through automation. The vulnerabilities that they discovered, as well as all the tools that they used to monetize them, if you can discover and prevent those, then it is much more costly to run this type of business. A quick example. Our product is called the botwall and it prevents any type of attack from being able to go on to your website. In this case, when they are trying to use the credentials and log into other websites to discover whether they were, they are unable to use the script to automatically login. If you have millions of credentials, you cannot manually test those and try to login manually. You have to use some kind of script through bot net at that scale. If the automation of the work, the attack goes away and the business fails. Thank you so much for that update. We will be watching to see if more information comes out in coming days. September 9 is the day apple is expected to unveil two new iphones. But besides the larger screen, what else can we expect . We will have a preview, next. Im emily chang and this is bloomberg west. Mark your calendars, apple will unveil its newest iphones on september 9. We know about the larger screen, but here to tell us what else might be coming at this event, im emily chang and this is bloomberg west. Mark your calendars, apple will unveil its newest iphones on september 9. We know about the larger screen, but here to tell us what else might be coming at this event, our editor at large cory johnson and senior rocketing director, marsh brian marshall. Two new phones, do people want the larger screen . In our opinion, this will be enough to drive a massive upgrade cycle of the existing base of iphone users. We have been joking for the past year that this will be the mother load of all upgrade cycles. It is big. It competes with the ipad. The ipad mini, 7. 9 inches, no question. The largest we have seen out there the that we thought was ergonomically sensible was the lge flex. It is six inches. But it curves, so it kind of curves across the mandible. It fits nicely. We did not think that was too big. I think the 5. 5 inch iphone will be fine. The question will be to see which the Apple Community likes better, the 4. 7 inch or the 5. 5 inch. My best guess is a 5050 split. Apple didnt seem to get it right last time. Their lowend phones underperformed for them. Talk about how apple manages its supply chain. What does this mean when they do not know how this will take off and they are trying to launch this . They are taking a greater risk than ever. You bring up a good, huge point. Of their base, about 100 million are not eligible to upgrade. That means there are 200 million within the existing phone base that is ready to migrate to the larger canvas. What we have seen is that it peaks and then comes down. Now, we think that this is going to be 60 Million Units, 70 Million Units, 80 Million Units for quite some time. It will be quite a refresh cycle. What about the other new features . What else can apple do besides the screen size . There has been a lot of talk about extending battery life. Not much battery innovation in the past several decades. I was reading in the New York Times about wifi charging, wirelessly essentially. What about this may come out . My iphone 5 last less than a day sometimes. Me, too. Number one, i think that will be the larger screen. Number two, improved battery performance. It will need to be a better battery. A lot more power. Dinner, and you can fit more in there it will be thinner, and you can fit more in there. When you break these phones open, the impact is almost all inside the battery. It will have an expanded surface area, so the battery life will increase your medically in our view. And then the eye the operating system, ios eight. Franco, we dont see a tremendous amount of innovation on the actual device. Regardless, it will be selling like hot cakes. Its going to sell anyway. But you wonder what is going to take to get more. Other things like that, that move the needle. Samsung is throwing all kinds of junk at the phone. They have a barometer, the waterproof stuff. Do you expect apple to respond with some of that and throw in some new possibilities . The cellphone market globally is a 2 billion unit market. Now, smartphones for the First Time Ever over 50 . A billion units. This is largely immature market a mature market. Think about pcs. Have things really changed . Not really. The fundamental format of the pc is not believe all thing. We feel smartphones have reached a similar place of maturation. The most exciting product line that he has seen in 25 years, one analyst says. Tim cook agrees with him. What else could there be . Will the iwatch come out this fall . Is it just the new phone . The commentary from the Senior Management team is, obviously, is trying to rally the troops internally, but also the public as well. Yeah. How could the new iphone be more exciting than the original . At the end of the day, nothing will move the needle from an apple perspective with the exception of new, updated iphones. If you think about it, the apple ecosystem, they will join over 200 billion of revenue next year and ship over 200 million phones. Even if the iwatch is a grand success, it will not move the needle from a financial perspective. Sales of the ipad had a an incredible success. If they were to launch the ipad with the same success that they had in the first year, this year, it would be less than 5 revenues. That is an interesting way to look at it. They could not do anything to match the success that they had with number one. When you have sweetheart carrier deals coupled with incremental resale and in some cases up to 85 gross margins, its still hard to compete with anything else. And considering the global cell phone market is a 2 billion unit Market Opportunity for my you cannot see anything else moving the needle. Tmobile is out there with the strategy of untying the user to the contract. The user is actually paying full cost for the phone. You have smartphones with fewer features than the Samsung Galaxy or the iphone, but at a much lower cost. Does that start to eat away at the business for apple and samsung . I think it will be a thing of the future, no question. But at the end of the day, the smartphone costs 600 or 700 without a contract. If you sign a twoyear contract, that will be 2500. There is a little chunk of the price that is actually the phone. The real cost to the end customer is the subscription service. I dont expect much change overall in the highend market of the phone where apple compete. The general smartphone industries about a 335 asp over one billion units. Apple place at a category of twice that. Brian marshall, isi senior managing director. As always, great to have you. We will be there on september 9 and bring you the full story when iphones, we hope, our release. Sprint has dropped its bid for tmobile, but is it really over . That is next. Welcome back to bloomberg west, and im emily chang. Sprint has dropped its bid to buy tmobile, citing revelatory concerns. And they also named a new seo in a state new ceo in a statement today. Sprint now has an opportunity to focus their efforts on robust competition. But how do the nationss third and fourth largest carriers compete with at t and verizon Going Forward . And might tmobile entertain offers from others, including dish . There are headlines crossing right now that are saying it may make sense to buy tmobile. You are so lucky we live in the land of charlie ergen. I think those statements from tom wheeler are amazing. It is incredible to have an sec chairman come out so strongly now, mind you, its just a day after sprint has left this deal, but to come out so strongly saying it is good to have separate carriers. I think it shows just how strong new regulatory ire might have been, had sprint pursue this. I just spoke with john legere earlier this week, the colorful ceo of tmobile. I asked him if the sprint deal did not happen, what are other options, what about dish . This is what he had to say. Ive been very consistent. I will not comment on any specific transactions of the company, never have. Ive always been consistent that in the long term, if i really want to bring in longterm competition and lead this entire industry in the u. S. , sales are important, capital is important. And one of those things could be a transaction in organically of some type. Ive always said we have multiple options. In the shortterm, what i have pointed out is that wanted to native lee and qualitatively, this company is hitting on all cylinders and we have a great runway. We have multiple options to accelerate being a carrier. We have been consistent in that all along. If it happens, youre the guy in charge. If it doesnt happen, youre the guy who has to figure out what to do. What else is in the spectrum, dish . You know that with a transaction or without a transaction, im hugely in favor of john legere being in charge of anything. That is my position and always has been. What a knucklehead, that guy. I love it. What other options are there . He didnt talk about selling the business. He didnt talk about walking away from the business. He is talking about ways to make tmobile grow. And being in charge. And being in charge. Look at. If someone wants to step into a situation, it could be a situation where they borrow so much money where they cannot do an acquisition without building out tmobiles network. And sprint as a competitor will make it harder for tmobile to grow and to get coverage where they want to get coverage. There are other ways to do this, but there are fewer ways for them to acquire spectrum and get your. They will have to grow organically, and that will take boatloads of cash. And we do have a quotation from charlie, something he just said. The sprint announcement has just increased some of the option now the that we had. A lot happened in the last 24 hours. He added that tmobile could be one of those theyre looking at. We will continue to follow this story. Foursquare is going back to basics as it tries to boost its users. Dennis crowley tells us all about their new features right here on bloomberg west. Lets take a look at where stocks are trading right now. Consumer staples rose on betterthanexpected earnings. Print healed proposal and closing lower. We will have more after the break. Im emily chang. This is bloomberg west. Time warner reported earnings just a day after Rupert Murdoch withdrew his 75 billion takeover bid of the company. Revenue down 9 from last year. In the meantime, operating income jumped 17 to 1. 6 billion. Will the time warner ceo jeff bewkes revealed a growth plan that is more viable than murdoch could have . And will murdoch take another shot at this down the line . Cory johnson is still with us in the studio. Jon erlichman also joined. Did we hear anything that gives us any indication about how he is feeling, and how they are feeling about m a . He talked a lot about their business, but this is a story that will not be settled for a very long time, because this is jeff bewkess bet on the longterm business and squeezing more value out of them. He vaguely talked about m a opportunities, but he is using this more than opportunities to say, we like the prospects of hbo as a global business, and the cable networks, and the turner operation as a global business. We dont have to be bigger. We are a leader in a bunch of categories, in movies like warner bros. And this is my case to you, the analyst and the investors, that of a loan is a better proposition than us as part of fox. But obviously, we talk about the stock selloff that has happened since fox pulled the plug on its pursuit. How do you see this . Is it not in play in the near future . Yes, inasmuch as it is not still in play from fox. If we can believe murdoch at his word that he is not interested in the property at all, which i find hard to believe. I dont think any other players who would want to acquire the company are available to do so. Rupert murdoch was bidding against himself. Its not a position you want to be in, but backing away from this bid for my he puts himself in a better position where it is not first offer or higher. Should jeff bewkes have engaged a little bit more with Rupert Murdoch . Look, he has clearly been a position to get the benefit of the doubt from shareholders, because as we have been highlighting, he took a strategy to get out of businesses that he did not believe he should be in. That resulted in some pretty good performance for time warner stock. But it also left him in some ways exposed to a company like fox, to sort of say, where is the game plan from here . No doubt there will be pressure on a company like this. A lot of these Media Companies do you like there is a way to squeeze some juice from some of the new ways of consuming content. He is a veteran, and he talked a lot about the delay structured with amazon earlier this year, which brings older hbo shows, shows at least three years old, to amazon prime service. Amazon is hungry for content. Hbo is happy to sell them content if it doesnt bother the paytv operators. And that resulted in Something Like 56 growth on the content revenue side for hbo yearoveryear. If he can strike more deals like that, there is potentially the ability to unlock some quick value. But as i set the offset, i think this is a longerterm story that the shareholders will have to believe in from jeff bewkes. Bu