The Financial System on a regular basis. We participate jointly in Many International meetings including the g7 and g20. And we confer on matters that are coming before those groups. Republicans have proposed bills to put the fed under more public scrutiny. Greek finance minister Yanis Varoufakis says that millions are flowing back into greece after the euro bailout deal. Not millions of people, but millions of dollars. He spoke to Erik Schatzker in an exclusive interview. Yesterday we had a deposit flight back into the greek banking sector. 700 million to be precise. 700 Million Euros came back . Yes, as a result of the news of this agreement. I havent checked the numbers but it will be there. You are still down. It is a question of direction. Once you turn the tide you are up. He says he is counting on the European Central bank to help avert default when it runs out of money next month. Salesforce reports a Fourth Quarter loss of 66 million. Revenues rose 26 , though. Subscription and support revenues are up 25 . Professional services is up 41 . Salesforce is pushing data analytic, Corporate Social Networks and marketing services. But is not helping them make profit. Investors like that shares are rising. Morgan stanley agreed to a 2. 6 billion settlement with the Justice Department to resolve claims tied to sales of Mortgage Backed securities. They boost their legal reserves for the settlement by 2. 8 billion. The settlement will cut 2014 earnings per share by 1. 35. There are a lot of deals going down in sunnyvale. Drugmaker pharmacyclics is exploring options including a sale. They may expect as much as 17 billion. They make a fastgrowing drug for blood cancer. Aruba networks may get bought by hewlettpackard. After reporting lackluster earnings, we have learned that hp is in talks to buy aruba. They make hardware and software used to make Wifi Networks for typically hotels, shopping malls. Why would they do a big acquisition . Alex sherman broke this story. This is interesting coming when it does. The companys future is a question mark. It is interesting that hps first acquisition, first major acquisition since autonomy comes now after hp reports earnings. Aruba reports earnings tomorrow, so we will have a chance to hear from arubas management point blank. Management is going to be asked. Hp is going to be under the microscope. No matter what they did they would be under the microscope. Aruba is the first stake in the ground from meg whitmans turnaround. It is interesting hp would theoretically move before splitting the company. Perhaps that is because they want aruba networks. And if they are selling, they may think we need to act now or risk losing them. Hp is talking about improving operating margins, and they talked about it bumping up by a percentage point, but only when rounded. It was really like 15 basis points. Buying moneylosing aruba doesnt help you make more money, it helps you lose more money. What is it that they like . Hard to know. We need to hear from hp. You can only guess. We can guess hp wants to add on their Network Business has struggled, down 11 annually. The enterprise wifi is hot. Huge growth. Hp would like to make a bigger footprint in that business to challenge, say cisco, which does a lot of work in enterprise wifi. The idea is that if they see the growth moving in that direction, then it doesnt matter if they dont make money now if they make money in the future. Aruba may be a simple integration. This may be a good first acquisition for hp to make postturnaround because it is digestible and it is not too big. You look at stock compensation it is trading 18 times earnings. It is high for the group but not crazy high. They have a services business. You wonder if this is the kind of thing where they could add to arubas potential because they have so many feet on the streets. That is possible. There is no reason aruba ends hps acquisition surge. Meg whitman say we are prepared to do acquisitions. They could make another acquisition before the split takes place, if it really wanted to. We will have to see exactly the direction hp goes. Again, we will likely hear from aruba tomorrow. Im sure the bankers are knocking on the door. Thank you. Earlier i talked to jayson nolan for a dive into hps earnings. I asked what surprised him most . The Biggest Surprise to me was the Free Cash Flow guidance came down at 3 billion. A big component was the cost of separation. Legal fees, consulting fees, there is a lot of work that has to be done to separate these companies. I think it is the right move longterm, but that was a big surprise. I did not expect 1. 3 billion this year, and 2 billion over two years. Lets talk about this free cashflow notion. It is very different from earnings. Free cashflow is actually the money that the company collects. There is a lot of backandforth that goes on on the Balance Sheet that leads to that. The Free Cash Flow guidance sounds like it did not include the cost of layoffs. That is right. Earnings took a hit on f x. They priced in local currencies in foreign markets. That is a function of math and a strong u. S. Dollar. This Free Cash Flow thing when you lay people off you pay severance. It is a huge cost upfront and saves the company money. We have argued hp needs to become a smaller and more focused company. Some of that is lower headcount. The Free Cash Flow at hewlettpackard, for the last year or two, has had the benefit of factoring. It is barely mentioned in the quarterly reports. They have been selling their receivables, the i. O. U. s from customers. They have been selling that. It has been boosting Free Cash Flow but are they running out of those tricks to boost Free Cash Flow . They have extended Payment Terms to these customers. Now it is more of a working capital and cash convergence cycle play. They can only take that so far to your point. That 1012 day range is about as far as they can take it. We have seen very good Cash Management over the last couple of years, and there has been a little bit of a step back here. If you look at the way they have boosted that by selling receivables, maybe i am conspiracy theorist, but i look that a quarter of the ceos bonus pay is based on Free Cash Flow percentage of earnings. Then they are selling the receivables. In my crazy to look at the profit motive . Not at all. You can only do that for a certain amount of time. The company was obviously overly enthusiastic when they gave that 6. 5 billion Free Cash Flow guidance raft knowing that they had a separate the companies they should have been more forthright. People were caught offguard by that. We can talk about this forever. Enterprise services, the businesses which i think of those consultants marching, that should be a great business for them. That was horrible. Down 10 . That is another one getting smaller. Profitability certain to come back. They inked a big deal with a large investment bank. That is where hp can come in and sell service, sell software, and be better at selling the breadth they have. They need to stitch that together. That was r. W. Baird analyst jayson nolan. Bloomberg west will be back. Im cory johnson. This is bloomberg west. Hsbc ceo Stuart Gulliver says his bank helping clients avoid taxes is the product of a different error. He said his own account has nothing to do with dodging taxes. It was purely about privacy. Privacy from colleagues in hong kong, switzerland. It had no tax purpose whatsoever. Gulliver says he is derisking the firm after reports that hsbc sheltered money for tax invaders and criminals in the 2000s. Sim card maker gemalto says the u. S. And u. K. Governments were probably behind the 20102011 hacking attacks on its networks. Comments came after report in the intercept blamed the governments for the hacking. It is a great story. It was based on documents leaked by edward snowden. Gemalto says no products were affected, there was no significant theft of data. That story would argue otherwise. Radioshacks name is going on the Auction Block separate from the stores. The biggest shareholder has offered 20 million for the name and other intellectual property. Standard general are also trying to buy 2000 radioshack stores. The drumroll beats for the fccs vote over open internet rules. The vote is tomorrow. Today the house energy and commerce subcommittee gave its two cents. Joining us, larry downes, who testified this morning. What did you tell them . Good morning. What i told them was the hearing is no longer really about the open internet rules. What the fcc is doing is going for title ii, this reclassification of the internet as a public utility. That is more worrisome to many of us than the rules themselves. What i did with along with a former democratic congressman, urged the committee to act as congress only can do and pass Bipartisan Legislation that would solve the problem without resorting to these crazy legal theories. Is this a crazy legal theory, title ii . No. I think the big isps have their smog machines out to befuddle and confuse the media and people. Lets start with the basics. We dont have a lot of time. The question at issue today is whether an agency in washington dc is going to have the authority as it has had since the 1920s over telecommunications, to make sure there is no discriminatory actions by the providers, to make sure now in terms of the internet that a favored few arent going to be able to throttle content or block content, or prioritize content or determine what news you and i are going to get. The fcc has had this authority. The question is going to reassert the authority for the Communications Infrastructure of the 21st century. Its not rocket science. I wonder, the isp argument aside, we understand they have a vested interest, the argument is that title ii is not the best way to do it. Are there problems with title ii . Why is title ii the best way to pursue this . Title ii is the best way because it is the only solid Legal Foundation. The courts have told us that. If you want to do Net Neutrality rules, which the courts indicated is something the fcc is authorized to do, you have to do it under the right Legal Foundation. When the commission in 2002 voted that cable broadband was not a telecommunications service, it wiped out that argument. Nobody can predict the outcome of what happens when these decisions go to court. If we are going to court, i want to go with the soundest Legal Foundation there is. Clearly that is title ii. We know the lawyers are going to be paid for this. Someone is going to go to court. Why is title ii not the right way to pursue this goal that most everyone has for an open internet . I would have to disagree with the commissioner about this. What the court told the fcc, and what the chairman acknowledge d through the summer was that what the court said section 706 is solid legal authority. He said that was a roadmap an invitation to reenact the rules under that authority. The problem with title ii is the supreme court, agreeing with the fcc, has said it does not apply to information services, does not apply to the internet. That means for the fcc to pull off this gambit it is going to have to fight a much stronger uphill battle in the court possibly to the supreme court. I want to read a quote. This is, in the hearings about secrecy. There was a quote from two congressmen that i imagine as arm in arm. They said together i wonder if you can help me understand why the fcc has not made the entire proposal public before the vote. I think number one, they are following the terms of the administrative procedures act. They have put out a fact sheet and we will know a lot more about it very soon. But you have to realize, this proceeding has the most complete record of anything the commission has done in years and years. I reference that 2002 vote. The commission has been compiling a vote ever since then. It has asked every question. Every issue that can possibly come up has been vetted. You could not get a more complete record. There is no need to delay this. People who talk about other alternatives like legislation, my goodness. When has Congress Passed substantive legislation recently, anyhow . Can you imagine how long that would take . Net neutrality has been put out on the sidelines too long. It is time to do it and do it now. I want you to sit tight. I want to continue this conversation. It is a good one and you know what you are talking about. Back after this. This is bloomberg west. Im cory johnson. We are talking Net Neutrality. Former fcc commissioner Michael Copps and larry downes, we were talking about the secrecy issue. Is this a big deal . It may be as open as the fcc has ever been, but is it open enough . I agree. He knows more about the secret workings of the fcc than most of us could ever possibly know. It is not traditional for the fcc to circulate its orders ahead of a vote. They may still be making changes to them. While i would like to see the 332 pages that are allegedly in the report, i understand we have to wait until the vote. Given the magnitude of what is happening, and the size literally of what is coming you can understand why members of congress and others are increasingly agitated about what is coming. Is the interest over this issue something you think we are going to see in the future since technology is as important factor in ways it has never been before . I think so. Isnt it amazing that we have had 4 Million People contact the fcc for something as seemingly arcane as Net Neutrality, which is not an organizing terminology, and going beyond that to title ii. That is because people really understand that what we are talking about is their Communications Infrastructure. Their platform to talk to one another, to find jobs, to do jobs, to educate themselves, to take care of their health. It is integral to their lives. This is the infrastructure of the 21st century. Of course they have an interest, and that is going to grow. I think as the media gives it more attention, like you have through the years and other media are starting to do, people are going to be more involved than they have been before. I think that is good, that is democracy. That is the way policy should be made. Larry downes, do we need more interest from congress as a result . I think so. Congress even a year ago undertook this committee, a starting point of looking at the Communications Act as a whole. It has not been significantly updated since 1996. That is a process that could take years to do. Obviously we need 21st century regulation and that is up to congress. Larry downes, Michael Copps thank you very much. We appreciate it. Bloomberg west will be right back. Hes out there. Theres a guy out there whose making a name for himself in a sport where your name and maybe a number are what define you. Somewhere in that pack is a driver that can intimidate the intimidator. A guy that can take the king 7 and make it 8. Heck. Maybe even 9. Make no mistake about it. Theyre out there. I guarantee it. Welcome to the Nascar Xfinity series. You are watching bloomberg west. We focus on innovation and the future of business. Snoop dogg, mark zuckerberg, they obviously have so much in common. Not least of which is there enjoyment of phils coffee. Phils recently closed a 15 million funding round led by snoop dogg, jonah hill, and maynard webb. Im joined by yahoo chairman maynard webb and the ceo of phils coffee, jacob jaber. Glad to have you both here. There is something going on with coffee and technology. I dont get it but the success bluebottle has had, the success you have had locally, i have seen it on virgin america. What is it about coffee and technology that is coming together . Part of the big reason is that we are in silicon valley, and we have most of our stores in the bay area. There is a lot of Technology Folks who come in and drink a lot of coffee, especially the engineers to keep going. That is a big part of it. Why for you . This is my First Venture outside of technology. I will tell you my story. I love coffee. I am one of those tech guys that loves coffee. I have a problem. I cant drink anything caffeinated anymore. I have decaf. That is being a loser, because you go into stores and nobody has a lot of choices. My son told me about phils, and he brought me a cup to a meeting. I said you put cream in this. He said i did not. Wow. That is good. The quality of the product. There is more about the connection between technology. It is disruptive. What is disruptive . I think we possess a lot of similar values that some Technology Companies do. Our philosophy is that the best coffee is the one that comes to your tastes. Comes to your taste . It comes to each person individual taste. We have a platform for customization. We dont even do espresso because it is about what you dont do. We want to focus on doing a few things well. Every cup is handcrafted. We convert thousands of latte and espresso drinkers into phils drinkers. One problem, it takes too long for me. I am always running from place to place. I go in there and have to wait. Decaffeinated people can be in a hurry. It does not take that long. It can take 35 minutes for a cup. If there is a long line, it may take longer than that. There is opportunities for efficiency. We optimize for quality, not efficiency. But some folks d