Said instagram alone would fetch a valuation of 35 billion dollars. Facebook paid a billion dollars for it to years ago. And google says more people are using its same Day Delivery Service as it takes on amazon. Books handles 50 more than the previous year. Joined us to talk about the changing pattern of holiday shoppers. Consumers procrastinate. The pressure is matching what other people are doing and making sure they are providing the same level of service. Raises the bar, it is good for consumers, retail, but it will cause a level of investment maybe they are not used to. This after amazon rays to the bar even further, starting one hour Delivery Service in select manhattan neighborhoods. Surely more to come. Apple raising its iphone prices in russia. That means the basic iphone 6 costs 956 u. S. Dollars. Had lost about 30 versus the dollar this quarter. U. S. Isto the lead, the turning to north koreas ally as it tries to learn more about the hacking of sony pictures. A started its own investigation. Foreign ministry has condemned the cyberattacks, it says there is no proof north korea is behind the attack. Obama called it an attack of cyber vandalism. Get more complicated once a china is involved. Joining us from new york is gordon chang, you have written a lot about this relationship between the u. S. And china and the u. S. And china and north korea. What do we think likely happened . Inthese attacks originated china. Sources have been telling media organizations the tax did not originate in north korea. If they started in china, that would be consistent about what we know. We dont have enough evidence to say 100 . What we do know is these attacks were routed through chinese ip addresses and that means china had to know what was going on because china has a great firewall, the most sophisticated set of internet controls. They know everything that goes out and comes back and we know of the sony attacks, the North Koreans took at least 100 terabytes of documents. Clearly the chinese knew what was going on inside the borders. It is amazing the infrastructure north korea has put together. , from a former hacker, who worked in china, said that the facilities north korea has cobbled together are all over the world, not just in china, also in the uae, and in germany. Or five different countries. Most of them are in the peoples republic of china, including the luxury hotel that has gotten all of the publicity lately. When you have more than 100 or a0 cyber hackers in china on permanent basis, the chinese authorities had to know what was going on. The chinese are involved in cyber hacking of their own. Koreanknow these north attacks on sony are more sophisticated than what north korea did last year attacking south korean businesses. Most people think the technology came from the chinese, the russian, or iranians. Given the other circumstances, it is probably the chinese. Wait, north korea is acquiring Hacking Technology from china . Yes. This has been documented many times that the best Cyber Warriors are trained in china and russia. Packetsrmation and the of information we have seen are modeled on stuff the chinese have. So clearly north korea has been able to launch stateoftheart attacks. They were working with outside sources. Have all sorts of issues because obama said no other countries were involved, consistent with the fbi report. Which did not involve china. I think of israels unit involved in cyber security. They looked at what happened with the Iranian Nuclear development program. Unit 121 in north korea. I find it interesting this country that cant get power or food to its people can be on the cutting edge of cyberattacks. How complicated is this relationship with the u. S. And china such that the u. S. Cant ask for help . Because we have issues with beijing of our own, as we know from the indictments of five chinese officers in may. The chinese have been going after intellectual property. The amount of theft is staggering. When you look at the report of last year, American Companies lose technology each year on the order of exports to asia. 475 billion. Ere only 100it is billion. Were talking about a lot of information that is being taken by countries like china, russia, and iran as well. In his departing interview, interesting he chose cnn to not call this cyber terrorism, but cyber vandalism. I wonder if that had something to do with the u. S. Needing to go to china. Does that have something to do with that nuanced phrase . I think you are right. The president is trying to keep the china connection undercover because he wants to go to beijing to make sure the chinese out these people. This is a diplomatic answer, not really what he thinks. Whether we call it an act of war does not matter. The question is, what do we do about it . I think it is important our response be effective, whether proportional or not. Not had ane Effective Response to north korea or china. Is it notable that china has done a lot of surveillance of u. S. Companies through its Cyber Capabilities and this was an attack on a company . Yes. That does complicate his Diplomatic Initiative because while he is talking to the chinese about north korean attacks on an american business, hes got to talk about their tax on our businesses and that the chinese in a difficult position because they cant say this is really bad because they know they are involved in it and we can prove it because we have attributed those attacks to one building in shanghai. Of thecular floor building. So the chinese cant say it was not us. Undeniable. Author of a, terrific article on the subject. Thanks a lot. Xiaomi has raised another billion dollars in investment. Richests now the valuation of any private tech startup in the world at 45 billion. How can a cell phone baker be worth that much money . That story is next on bloomberg west. Im cory johnson. This is bloomberg west. On the cuttingedge of dumping old technology. It has done away with nearly all of its office voicemail. Starting in atlanta and a tech center, callers are told to use alternative method is to contact an employee such as text or email. The move will save 100,000 a year but a Spokesman Says it is more about simplifying work and making the company move faster. Employees could have kept to the old technology, but 6 opted to retain their voice but lines. Few startups have gone as quickly as the chinese smartphone maker xiaomi, founded in 2010, just like bloomberg west. It is now bigger them Bloomberg Smartphone largest maker. It raised another billion dollars in funding bringing it to evaluation of 45 billion dollars, according to sources familiar with the matter. Joins me now from new york. I know youve followed this company for a long time. Becausely a long time, it has not been around a long time. This valuation for a company that is not profitable is a fairly amazing. Is, but so was their growth. They are on track to ship 60 million smart phones this year. You look back at 2011, they were just a start up. Talking a quarter of a Million Units shipping back then. C. The growth has been meteori one of the keys to their success is they have tapped into the young culture in china. They have resonated with of them. It has earned them the nickname the apple of china and it is well deserved. They have an online only model. They are big into software. They are getting into apps and gaming and video and they have done a superb job. Hats off to them. Me, it is interesting to tells us a lot of their strengths, and also suggests how variable the market can be. They have grown to this big market share globally. Overall within china. That is a strong thing. That also suggests they could lose it as fast as they got it. May be. At this point, they have the brand strength to hang in there and continue to grow. Say about them, they hit the sweet spot in china. Withreally came to market these fully featured high quality phones for the price and they kept the price point low, between 100 u. S. And 300. Being homegrown, they recognized where the sweet was withoping and answered it a portfolio of great phones. Price is an issue. s dont know xiaomi financials. When you look at Companies Like lenovo that are doing 2 operating margins, if they have a price point like that, they are not making a lot of money. I did a search of other companies that are publicly 50 ed growing revenue over that have a valuation of 40 billion. Only four Companies Like that. Biotech, and the other is alibaba, gilead, baidu, they have over 35 . s is surely no where near that. They may or may not be. I dont know the financials. One thing to keep in mind, i touched on it before, they are taking a strategy where they are not focusing on hardware. They are developing a Software Ecosystem built upon the growing base of phones. So they have a terrific app store. They took android as a base operating system. They really build upon that and put their own stamp on it. So as they get more into gaming, more into apps, and into video and have made investments, that is going to help the margin tremendously because there is higher margins in software than hardware. Lowou look at the interestrate environment and you see how investors chase any kind of topline growth. I would posit that a lowcost , whose primaryr operating system they do not own and dont control the application, is never going to get the profits that would value the company at the current private value because the profits me never be there. Again, i have not seen the financials. I hate to comment on that in particular. But the growth is there and the strategy. Pardon me. When you think about where they are headed, where they are focused, it is not the u. S. Or canada, or western europe. Are inew beachheads india, latin america, they really have the right phones at the right time in markets that are craving those lowcost devices and they are laying on the content on top of it. Isi think the Business Model spot on and in line with the strategy that is likely to work well. Certainly that means we will be watching them in deed. Thank you very much. Next, nfl teams are using the surface tablet to get in edge on the competition. So was the competition. We will talk to Russell Wilson and how he is using the surface to program his plays. Maybe another super bowl. Hard to imagine. And amazon fire tv. Im cory johnson. Is is bwest byte bloomberg west. Innovation on the sidelines is a big reason why this isnt in the nfl is faster, quicker to adjust than ever before. Ahead of thettle 49ers lost to the seahawks, which hurt me. It was a great thrill. The nfl gave us a firsttime claims have the secured photos that help teams plot the midgame adjustments. Every time Russell Wilson does this touchdown, seahawks. The nfl is watching, and so is microsoft. The nfl with a custom surface tablet on the sidelines. Catacombs isn the where the cameras captured the images. They are controlled by the nfl. The teams approved the image instantly and send it down to the server and it shows up on the surface tablet on the sidelines. Last year, slow print caps on a crummy printer. Has not been evolutionary. It has been revolutionary. Today, a digital transformation. My rookie year, we used paper. Flipping through the pieces of paper. You only had two pictures. Hes going to cover him mantoman. With this, you have a lot more views. It is a your credit bureaucratic process. This booth. Ere in he has a computer where he manipulates the images and then you used to print them on a laser printer and hand them off to the coaches. Now it is all digital and sent to the surface where the players can work their magic on the sidelines. The players come off the field. Theyve got that image taken before the snap and after the snap and they can download it onto here and make the adjustment and compare it to other plays and make whatever notations they want and throw this think on the ground, gu rugged for nfl use. Microsoft is planning for more season. The players and coaches have given us feedback. They want more. They want video. When the game is on the line, and youre playing the San Francisco 49ers, you need to know what to do. So that really helps a lot. The tablet is working better for seattle than arizona. Can wrap up Home Field Advantage with a win against st. Louis at home next week. Ticking for holiday shopping. How can you make sure your package arrives in time and how is it changing the nature of the shipping business . About thatk to a ceo next on bloomberg west. The hourutes after which means bloomberg televisions on the markets. Lets get you caught up. After the biggest threeday rally since 2011, stocks are gaining and shares are plunging along with oil. Blackberry,overs is shares were upgraded to buy. They had a 12 month target of 13 a share. Despite the hardware sales, it missed estimates because of new suffer services. More on the markets again in 30. Make the best entertainment part of your holidays. Catch all the hottest handpicked titles on the winter watchlist, only with xfinity from comcast. You are watching bloomberg west. Im cory johnson. Crunch time for lastminute shoppers. Of course. In on to cash procrastinators is an Online Shipping Service trying to bring convenience to delivery, wrapping up a partnership with Banana Republic stores. Joining us now is the cofounder and ceo. Tell me how your business works. Is the easiest way to ship everything. Easier than a paper airplane. Absolutely. App it is, it is an iphone that literally if you want to ship a sweater to your knees, take a picture of it, enter in the address, and we will pick it up in about 20 minutes, we will take it back to our warehouse, and then we will ship to the lowest cost carrier. We use ups, fedex, and the great thing, it is just a five dollar fee plus the retail cost of the shipping. We mentioned Banana Republic. Do you need to have those agreements or can you send a shopper in . Sending out. Ut we dont have to be inside a store. It is really the time for consumers. Gifting, and that is from your home, your office, anywhere you are. Ecommerce. One third of all orders are returned. The last one is casual selling. Ebay. Issue, you think they are returned because the item is not what people thought it was . I think the biggest driver is apparel. Items, you get to see and try them on before you know if youre going to keep them. Companies like zap bows. They changed. The only reason i look making returns happened, what do you do about returns . We work within the existing infrastructure. You could give us a prepaid label. We use it as a customer acquisition. We want to be able to change that and make it so you take a picture and it is gone. What are your fulfillment costs . Is a volume game. When we first started it was expensive. Supply is people. We have people around cities and also warehouse is we lease and also people packaging. We need to be up and running. That is a big cost. So the notion of sending a shopper to pick up the sweater at the store, you really want to that shopper to pick up six things because that lowers your cost. That is what it is all about. For a single item, it is hard to make the economics work. People that are doing 5, 10 items, and selling online, we have people doing 50 items at a time. That is where we make a lot of money. The customer is part of the value chain. One of the things being online is track the customer better. Where they live, what business they do, you are stepping in the middle of that relationship. We really enable people to ship. So many times they would not have gifted otherwise. Are competingrs with other online merchants. Does that create a disadvantage . I dont think so. Doing is we are moving all of the barriers to do that, packaging is a huge thing. You dont have to wait in line. Were just trying to remove all of the friction. You want to start to concentrate. How do you pick the region where you are going to expand . We are focused on consumers. Populations. San francisco, new york, miami. To laces thatand have a lot of people. We are based in San Francisco. People who like to download a new app are the ones who are here. Is it similar in new york . Absolutely. Similar. Is for them, they have a lot more people. The coverage area, that is important. How do you know . Is it anecdotal . There are a lot of studies. Miami is interesting. It will be a boutique. They have a center in their store that are shipping items. Instead of that, we remove that and enable them to focus on their business. In other words, maybe your ideal story is not a Banana Republic or williamssonoma, but a oneoff boutique. A great Clothing Store where i go. That is the kind of thing. They have an online presence, but really going in and sing the random wonderful things that works best for them. AnBanana Republic was opportunity to get in front of their customers. What the Partnership Looks Like we have aing presence in 19 stores. San francisco, miami, new york. You will get Free Shipping from shyp and we have a physical presence in their three stores. Home andf having to go actually request a pickup, you can do it in store. This is something that is not our core business. That is doing it from your home and office. With Banana Republic, it was a great opportunity to get in front of their customers. Youve got a chance to reach a lot of consumers. Interesting stuff. We will keep watching shyp. Thank you very much. Platforms Just Announced from uplands. The ceo is with us next on bloomberg west. Im cory johnson. This is bloomberg west. An Online Platform for remodeling is looking dominant. I see it all over the place. 25 million users. Theyve had successful launches this year. Take ons planning to the rest of europe and asia. Joining now is the ceo and cofounder. I was at a friends house a couple of weeks ago. He is redoing his kitchen. This is a guy who has built many homes and all over the kitchen where the images of houzz. I said what is this . He sa