Out will will unveil its latest iphone on september nice according to people familiar. We know the phones what have larger screens. One will be 5. 5 inches. The size of the big screens, what might other features may be iphone have . And ike to Brian Marshall started by asking about the screens. Believe it or not, our goal is almost two years behind and the leaders. It is going to be enough to a massive upgrade cycle. We kind of joke for the past year, it will be the mother load. Why five inches inches . That is big. The ipad. S with the largest smart phone we have seen was the lg flex. We saw it this past year. It is six inches of buzz in curves. It curves across the mandible. We do not think it was to bed. We do not think the 5. 5 will be too big. We did not think it was too big. Our best to guess it will probably be a 50 50 split. Apple did not seem to get it right the last time. When the phone under performed for them. What does apple do . We do not talk about how well they have manage the supply chain. What does it mean . They are tried to launch this in a bigger way. Huge point. Up a there are 300 million iphone estimate 100h we million are not eligible to upgrade. There are 200 million and in the install base ready to migrate to the larger phone. Typically, what we have seen with launches recently, it launches and peaks and comes down. 60think this is going to be million, 70 million units. Multiquarter refresh cycle. We think it will draw expansion. What about other new features . What else can they do besides screen size to move the needle . We have heard about battery innovation. I just read about wifi charging wirelessly essentially. What about this kind of technology . Of my offline my iphone five is less than 50 charge for the day. We have a long way to go. First will be larger screen and second better battery performance. It will be physically bigger battery and more power. Thinner, so we can cram more batteries in there. The 6 will be all battery. When you break to be from is almost all battery. Will have increased surface area. It will increase dramatically. Will be the updated operating system. Ios 8. Frankly, we do not see a tremendous amount of innovation on the actual device. Regardless, it will be selling like hot cakes. It will sell anyway. You wonder what it will take to get something more . And otherout nfc things like that that move the needle. Sound sangha through all types of junk on their phone. W allm sung samsung thre ties the jump onto their phone. Do you expect apple to do the same . For the firsts time ever are over 50 . Market. Largely a mature fig about pcs other than the form factor, has much really changed . We tried this netbook thing and that did not work. Evolving. Really apple executives say its the most exciting product line he has seen a 25 years from apple. Tim cook agrees. What else could there be . Will and i watched clone out this fall i watch clue out fall . Come out this if they are trying to rally the troops. How could a big iphone be more exciting than the original . And nothing is going to move the needle from apple perspective with the exception of a new, updated iphones. Theou think about it, ecosystem, they will generate over 200 billion of revenue next year. Even if the i watch is successful, a grand slam success, it will not move the needle in our opinion. I looked at in the financials from the ipad and it was an incredible success. Probably never seen. Were to launch the ipad with the same success and they had in the first year this year to a bigger apple, it would be less than 5 revenue. An interesting way to look at it. They cannot do anything to match the success that have had. When you assume when you have sweetheart subsidy deals and up to access gross margins, this is on the iphone, it is so hard to compete with anything else. Considering that global cell phone market is at 2 billion get anythingnot else to move with the needle. Tmobile is out of there with usertrategy of untying the to the contract. The users paying full cost of the phone. You have smart phones that have less features like the Samsung Galaxy but at a much lower cost. Eat away of the business that apple and samsung has dominated . It will be a sing of the future. Day, smartof the phones cost 600 or 700 without a contract. That will be 2500 dollars with a twoyear contract. User as thet to the subscription service. I do not expect much change to the overall asps on the highend market where apple competes. The general smart phone industry is about a 335 asp. Over one billion units. Apple pays at a category of more than twice of that. Brian marshall and corey johnson. Apple is also taking steps to control of more of the User Experience launching its own content Delivery Network. How much of a game changer if it . That story is next. Welcome back to the best of bloomberg west. Apple takes a major step of controlling every piece of the User Experience and is reportedly spending tens of millions of dollars to build its own network will stop its own internet backbone. A report said a small percentage has gone live in the u. S. And europe. Apple has reportedly struck deals with large providers to deliver content on ios of dates. This means the content can be delivered at faster speeds and without relying on technology from third parties like level three which apple currently relies on. Cory johnson and i spoke to a analyst who wrote the report. Ios 10nted out that downloads are directly from apple to the comcast network. I asked him how he figured it all out. Out all things netflix and microsoft and google decided to build their own because they needed to take more control of what they were distributing. For most content owners and syndicators, it does not make sense of going into the business of building. From an economic standpoint, that are not large enough. Outdoor has a lot of Different Software downloads and streaming as well. If you think about the radio and onlyes and apps, they are just starting off now. Theyre only doing a small portion and they will continue to do more. You say this content Delivery Network is huge or potentially huge . If you talktty big to some the isps i have spoken with and they talk about the type of capacity that outlets put into place. What outdoor has done an typical of a company that bills is on hasout full what apple done and is typical of a company own, it is still pretty small but they put in the capacity for 10 times that for the future. This as aooking at longterm play of where it will play of them controlling the entire ecosystem. Some other reports show apple uses only 4 of internet traffic except when they do an ios update when it becomes a netflix like. Take, exactly what does apple have to do to deploy this . It is not that difficult. They are deploying servers, in many different locations, not too many because they are primarily focusing on north america and europe. They play servers as well as their own data centers that apple controls a couple was that they build them out. Those servers connected to other networks. Apple controls a couple. They build them out. The connecting networks and sometimes a paid interconnect a netflix dosaw with comcast. Apple is doing the same thing. They are not laying fiber but turning on what is already there . They are not a backbone provider. Apple is buying from Companies Like apple level three and a voice and a lot of Network Resources and putting it together to create their own network. They do not own the cable into the ground or laying the cable. When you list at the potential when you look at the the potential for this, how big is it . Yosemite, to ios 10 where is he going to close my play . Play come into chris level three most likely. They point out that while apple is a customer, no customer is more than 10 of revenue. We know they are spending less than 150 billion last year. They are probably spending tens of millions of dollars to get their content on the net. They could achieve cost efficiency. Growths cheaper, their margins get better. Number two, they may be able to tailor it if they are tailoring their servers to deliver the kind of content that apple comees and that will across faster and cleaner. Not just the stuff we know like movies and music or software but things they struggled with like i cloud that is the future computing and apple has had issues. Controlling so much of the User Experience, do you think it is something other companies could do as well . Other companies have done it. Apple is late to the game. Microsoft, google, yahoo, a lot of these companies started building up in 2006 and 2007. Cory is absolutely right. Apple has a huge advantage. Their servers would not be all purpose built. They will be for apple content. They roll out Additional Service and i cloud is something that is to performance issues as something apple wants to correct. It is going to become imperative to the quality of service and they will provide across all of their services. What about Apple Television . It is something worked out about four months. Could Something Like this come into play in a big way if indeed apple comes out with a Television Set or some kind of Television Service . Report, aey wrote the lot of people speculate about an itv. This has nothing to do with the itv. I do not know any other plans. They are putting this in place for software. They want to improve software in icloud. This book is the size of their business today. It does not have anything to do with itv right now. What does it have to do about creating a dropbox or Something Like that . It is a pleasant apple has look to grow in the past. Absolutely. Any Additional Services they want to roll it down the cloud, they can use their cn 4. They are only rolling it out. That was not deliver 100 of their content overnight stop microsoft and netflix who has done something similar, it takes 24 months before they bring a vast majority of their content. I do not think apple will ever bring 100 of their content but they will bring most of it over time. Our editor at large cory johnson and dan rayburn. Common god, a group of Russian Hackers may be said coming up , a group of russian hack ers may be sitting on one of the largest in history. Welcome back to the best of bloomberg west p Bank Bloomberg west. How safe is your data . It is front and center after Russian Hackers allegedly stole 1. 2 million passwords. The stolen information was collected from more than 420,000 websites. Were notted websites named. For more, cory johnson and eyes will with and i spoke with a Vice President at it security company. I asked him how serious it is breach is. Know is very difficult to without having to examine the data set. It has not been made public. We will probably learn more over the next two days as more details are released. It is on a much larger scale than previous breaches. It is scary and we know that a major websites were affected but we will not tell you which ones. That is an interesting question. If you look at series breaches and they affect a small websites or a single website. In the case of the ebay breach re you have credentials what would the distribution look like in this case . Accounts for at vast number of the credentials . I am glad you said it. They have had enormous expenses because of what they had to do to fight to this. Are there specific companies will have to face similar costs in the Current Quarter where they have to pay more to fix it . Certainly if they discovered they are affected by the breach, they want to figure out what went wrong and what did they can do about it. One of the scary things is there may not be anything they can do about it depending on the attack. Some of the details that have been released so far indicate the Hacking Group started off by just purchasing credentials online from other groups on the black market. They switch to using bot net. We use a bot net attack, which you can do is leverage the previous credentials you have stolen to go through the front door of other websites and test those credentials and discover which are valid. Let me paraphrase. They learn an individuals username and password and blasted across the internet and other places where the user has used the same thing and the Company Never knows . Exactly. That is not something that constitutes the average or breach. They do not have vulnerability in their infrastructure. They are going right through. How do the Companies Know . Of the can find evidence passwords a users names being used. In this particular hack, they found the initial use cases have sent is spam and malicious email links. Thecompanies that have users that are breached may discover these spam or malicious links going out. The report they say is a russian gang. Who are these people and what are they doing with the information . Is a very sophisticated ecosystem when it comes to credentials. There are many things they can do. Its a loci that are monetizing it like providing services. It looks like they are monetizing by providing services. A can build a bot nets. It is man in the browser that can be used to take the credentials and steal money from people with bank accounts. The level of monetization they can accomplish in space on specific type of attack and they are selling to the rest of the black market. I imagine it affects so many different businesses. Companies online and turn to being online and mobile even. I wonder what the companies risks are . Requirescertainly sophistication and vigilance in order to be able to maintain a complicated Online Presence and companies are trying to reach their users as broadly as possible wherever they might be. Having an Online Presence is essential. Justreleased the cost of that massive data breach. 48 million. We keep asking the question, can the attacks be stopped . That security get so good it does not happen or will that hackers catch up every time . I do not see you can ever make a system that does 100 uninhabitable. What you can do is create defenses that make certain types of hacks so expensive that the somethingd up doing else. Being able to introduce barriers between different websites in order to prevent automation from occurring. This gang is estimated to be 20 million and size. The only thing you can do that is through automation. Theou can stop the tools, exploits in the first place and and monetizeols them, it is much costlier for them to crate a business. Putting up walls between websites . Our product is called the bot wall. It prevents an automatic attack from going to your website will stop when they are trying to use and zach are unable to use the script to automatically log in. And tryot manually test to log into each one manually. You have to use some type of script in order to region that scale. If the automation does not work, the attacker goes away. Cory johnson and shuman ghosemajumder. , the car pulling business. A new feature dedicated to car pooling. Lyft is not alone, uber is following. Welcome back to the best of bloomberg west. I am emily chang. Carpooling has gone digital. Just launched a carpool program. It is only available here in San Francisco. Also announced a similar feature that will launch in San Francisco later this month. I spoke with john zimmer about how mobile work. Ride said some to going in the same direction. We are taking the two routes and matching them up and saving users 62 . Is testing out something similarly to this month. How will it be different . It is flattering to see others follow what were innovating in the space. I think one thing that we created is a sense of community and this culture of sharing within lyft. It is also true to our roots and vision from the beginning. We started a Company Prior to lyft where we did longdistance ridesharing. We have come full circle. To 60 . An save up one of mobiles is taking a ride in a direction . We will still give you a savings. It might just be 10 or it might be more. If i allow some in my car with me i still get this cap. Why wont everybody do that . We hope everybody does. We think it is the best way to get around. We are creating personal transit at your doorstep. It is enticing for users. We have seen hundreds and thousands of rides. We have a lot of lyft users on our team. There was a bit of and i dont know what i get into an uncomfortable situation . People had those questions and we started lyft at the beginning. We have created an incredible experience. You have screening of both passengers and drivers. It is work that well. We have done 10 million rides on the platform. We have over 60,000 drivers. It is more than fedex does vehicles. People do want the service. They are using it in large amounts. Iece, and works at. And driverset more pay less. Fewer drivers are needed. How does it work from a supply and demand perspective . At our peak times in the morning and evenings, it is nearly impossible to get enough drivers to serve those needs. When you create a five dollar ride or a seven dollar ride, that increases demand. Creating your daily ride. When you start creating something that is a five dollar price point, people get rid of their cars. The story that has been told previously is what we are doing in this 11 billion taxi and the way we see it is we are going after the consumer transportation market. That is a 1 trillion market in the united states. Spending is people money on personal vehicles. You had some challenges in washington dc. Some people say it is not really lyft anymore if you take out the fun stuff. Other places complained you cant get a ride and there arent drivers of metal. We are seeing an incredible demand in new york city. Our third highest demand across all 67 markets. We have all been live for about two weeks. Hasets like chicago that been live for over a year are not seen as much demand as new york city already has. This is a massive opportunity. We have created new product there that we are calling lyft pro. Regulators said it had to be this way. We are bringing peertopeer as well. How will you get more drivers on the road . They will have to be licensed by the taxi and limousine services. There are 1000 drivers li