Recovery in the cow. The cow saw a satisfying performance during the the owner new york. Those are the headlines. But sick a look at the market. Hong kong, china closed for lunch. They are trading for the morning session. This is the picture in singapore, tokyo, mumbai. It is a mixed nature in the asiapacific. Hour ink in half an time for bloomberg west. Announcer growth this lower. Reporter well take a deep dive into cloud. Well analyze apples defense against the fbi. Tohspeed internet is coming San Francisco for its next fiber project. First up is salesforce. Trading higher after has boosted its guidance. Better than analysts had predicted. Some companies have been hit hard. Major tanking last month. Hitting investors across the sector. Ink issues its first Quarterly Report of the standalone company. They are coming in line with analysts estimates. Crawford del press is in boston. When you look at those hp numbers what you see . Crawford they had a really tough quarter. From an overall demand standpoint. Pcs continue to struggle. For the consumer more than commercial. We saw some real struggle on the printer side. It is really clear that were just not seeing the kind of secular weakness and not seeing that market recover as we go forward. As you get back into pcs, we are not seeing necessarily a stimulation and demand associated with windows 10. Even though microsoft has lit up hundreds of millions of desktops. And notebooks. Were seeing a relatively weak demand in both consumer and commercial. Corey if you look at those printer numbers you can see the decline in printing getting worse a doubledigit decline in the printing business. Certainly hurt by currency. That helps the japanese competitors where they can sell stuff for less. It hurts hp, it is more expensive around the world. The ceo said to me i expect that to be the new normal. It is the way this environment is going to work for the foreseeable future. In my mind hope is not a strategy. Do you see within this signs of any kind of a turnaround . Crawford they are really defending their business as best they can. Hp pours a tremendous amount of innovation into print. It is not going to go away but it is going to continue to decline for a while. On the pc side, they are defending their number one position. They have streamlined their product line. On the commercial side they will continue to fight it out. Over the long term this business will stabilize. You saw him say was they are taking immediate action. Theyre cutting expenses. They have to in a weak demand environment. Corey the neverending restructuring of hewlettpackard that goes all the way back to 2001 is continuing. He said we will accelerate our restructuring. Adding 3000 people into the year. The restructuring never ends at this company. Crawford youll see this Going Forward until they can find a bottom with respect to demand. Corey at salesforce slowing growth. The really strong growth for really big company. 26 to deferred revenue. That was a key highlight. This Company Continues to grow at mid 20s. Everyone thinks it is slowing. But the backlog growth is about 11. 5 billion. That is a phenomenal number. It was a godzilla quarter. Relative to tableau and linkedin. When you look at mid 20 growth and improving operating margins and subscriptions going lower. When i look at the clouds that they are giving birth to. Some of them are growing bigger. It is still drawing double digits. They signed two nine figure transactions, with state farm and another big as i company. S i company. Multiple ceo level decisions making platform decisions across the board. Not just to run sales and service for custom applications. This is hitting every employee in the company for salesforce. Not just what oracle can handle. They are heading across the platform. Corey i am alone in my concern about their marketing expenses. Over 50 of sales spent on marketing. Those are huge numbers. I wonder if it is over 3 billion. As a percentage of sales there is no other company that comes close to spending as much to promote its sales. Brent it is a fair criticism but as long as they keep driving the rate they are able continue to spend. When they see a slowdown they are committed to wall street that they will slow down and that operating margin will decline. Corey to my mind marketing expenses is how much you want to put the pedal to the metal. They are drinking the red bull and it is working. As long as it continues to work they will let it run through a steady out margins. The minute that it dries up. They will at the margin go up. It is not pretty but it is it has worked. The guardrails here are cios love their approach. It is not the old microsoft approach of heres 10 million in some Software Good luck. We think they have the right people. They have just raised prices by more than 10 . The first time ever. That is still something investors have to look forward to. As that rolls through these renewals. It is tough to pull any big holes in the story right now. Corey always appreciate your thoughts on this company. Coming up, the battle between apple and the u. S. Government. Should code be protected under the First Amendment . It is a very interesting topic. Plus a look at Virtual Reality. A film studio producing ai content. Corey blackberry building on the consultancy business. Set against hackers to acquire the u. K. Firm. Encryption. They are not saying how much they paid for the company. The deal has the potential for a new source of revenue for a company that needs it. The ceo is shifting the company from relying on smartphone sales. On to the ongoing encryption debate. Apple fighting a Government Order to unlock an iphone that was used by one of the San Bernardino shooters. Apple ceo tim cook explains why he believes he is doing the right thing. Tim cook we know that doing this could expose people to incredible vulnerabilities. This is not something that we would create. This would be bad for america. It would also set a precedent that i believe many people in america would be offended by. When you think about those which are known, compared to something that might be there, i believe we are making the right choice. Corey the full interview airs on abc world news tonight. Apple expected to argue in federal court that code should be protected as speech. On wednesday, attorney general Loretta Lynch defended the governments stance. She said if the government needs the assistance of third parties to make sure that a search was actually conducted those parties must assist if it is reasonably within their powers to do so. The battle between apple and the Justice Department sparks a larger debate with congress. Should they be with access encrypted communications . Jeff smith holds 20 patents in this field. Has the government picked this case as the beginning of many cases . I do think the government was looking for a case. A poster child for an image an issue that has been simmering for the last several months. When the paris attacks came along government officials were quickly out the door saying that Technology Companies had blamed the attack. It had been piling on over the last several months. Then San Bernardino came along. The government has seen this as being a case where they have some sympathetic facts on their side. Theyre trying to drag the Technology Industry into a public battle over this. Corey how do you look at this . It is an unfortunate situation. Government is potentially going to create a big problem. Introducing a new weapon for terrorists to use against our country. I think they are rushing to make a decision here seems mercurial to me. I wonder if they should take a step back and allow all of us to assess what is going on. Perhaps revisit some of the assumptions they are making that are flawed. Corey even as were talking right now. The ceo of verizon sent out a statement jumping into the fray saying they support strong encryption with no backdoors. They are committed to consumer privacy. They say the case with apple involves some unique issues. It should not be addressed in an ad hoc basis. Supporting apples contention that congress should look into what the rules of the road are. I wonder if the framers didnt decide this when they made this a First Amendment issue. Very interesting to frame this as code as free speech. Jeff it is one of the most powerful arguments the Technology Industry can make right now. The government cannot compel the company to write software. Companies have a freespeech right in their software. That is an arguments that the Tech Industry will have on its side. The government was looking for a case that they can bring to the forefront. I would just Say Technologies companies are trying to say we need to get this out of the courts right now and lets take it congress. Be careful what you ask for because congress is not always sympathetic to the Tech Companies either. Corey a fair point. Jeff i do think the Tech Industry is on apples side. I developed some of the standards that we used to encrypt email. These are some of the Software Systems my company built. Some of the standards that exist today. I can tell you what the fbis asking apple to do is a mistake. It is not going to make us safer. It will create a key that we assume is only going to be protected by the government but once we create that key which doesnt exist today. We wont know where it goes. They are offering up a new precedent as it relates to how companies behave or even how we as citizens express ourselves through speech. It is one thing for the government to be prescriptive and tell us what we cant say and what we cant do. It is something altogether different for the government to come in and tell us what we must say. How would bloomberg feel if we came in the government came in and said heres the story we want you to write. This software at apple does not exist. Apple has tried to help the government access this information. Now the government is telling them to build a new version of the software that would unlock 700 million iphones across the world. It is a bad idea. Corey do you think they could even build the software . Jeff i suspect they can. It is just taking down the guard that is preventing a group force attack. It does not exist today and theres a reason they havent built it. Corey thank you very much. Siri may finally be coming to the mac. Apple will use a major operating system upgrade to expand across all of the product lines. It made its they at the debut at the developer conference. Of all the cities that might need an internet upgrade San Francisco could be next in line for the ultrafast google fiber. Everything else is a little different in San Francisco, so why not . Corey the nike cofounder is giving 400 million to stanford. It is one of the biggest gift ever given to any diversity. It will be modeled on the road odes scholarships. On thursday the eu has been investigating google for monopolistic practices. It claims that it diverted traffic away from its rivals to google. Google could face billions of dollars in fines if it is found to have violated the european antitrust rules. The ultrafast Fiber Service will be here in the Silicon Valley area, some parts of San Francisco. A lot of San Francisco is weird. It would be built on existing fiber that already exist. Existing in the city. Jack, i was in provo about a year ago. It already has fiber in unprofitable system that google decided to take over and run. What are they doing here . Jack theyre taking fiber from a bunch of unnamed providers. That is somewhat different from what theyve done in provo and huntsville, alabama. Where they have gone to municipal fiber and see if they can tap into that. This is a way to bring that cost down. They dont have to know that infrastructure. They can tap into the one that exists. You dont get everywhere covered. They havent disclosed that. Given how crazy San Francisco rents are, we dont know. I live on the east bay. Were talking about one gigabyte so that is 10 times faster than you will get in most places. 20 to 30 times faster based on the actual speeds based on their traditional provider. They are rolling this out for a really slowly. They are starting to ramp it up. Google at first wants to do fiber as a way to set an example to places like at t and comcast. Have him reduce prices and up speeds. They are trying to turn it into more of a big business in itself. They do generate revenue from this. Around 400 million in the most recent year. Quarks much of it is making what we dont know yet. When you look at how much comcast earns or at t, there is money to be made from selling the internet. Corey it is a very different kind of Business Model than the google Business Model. Jack renting it from someone else rather than laying down the cable yourself. Corey thank you, jack. Deep mind technologies is pushing into medical technology. They have created a software called streams. It allows doctors to see medical results faster. This is a very different kind of business. Jack it is an early pilot project. It will not make money right now. I am an english person i have been to the nhs a lot. It runs off pen and paper. Theyre just trying to bring some Software Techniques into British Health care. Corey it feels like this is an announcement to kick the shins of ibm. Jack it is a statement of intent. Theyve hired 15 people and a couple of doctors. A lot less than ibm has in its watson division. Google is famous for doing Good Technology very quickly. With relatively few resources compared to traditional Tech Companies. They got fields of computers. Corey coming up, hollywood animated blockbusters coming to the world of Virtual Reality. I will be joined by the director of the madagascar films. He has started a Virtual Reality studio. Bloomberg is on the radio. More from bloomberg west after this. Reporter ivan update top stories. Foxconn is going to buy a sharp. To billion dollars. The bid was up against japanese governmentbacked inc. J. The government still has high hopes for sharps future growth. Decision ultimately laid with sharp. Galaxy entertainment fell less than expected. Galaxy posted earnings of 322 million. Down 7 from a year earlier. The companys Broadway Project help boost sales. Billions inends france. Is expecting to invest in paris. He plans to announce a major deal. Speaking of football, fee for but reducends their suspensions from eight to six years. Delegates from world soccer, are in zurich to pick the next president. Those of the president headlines from Bloomberg News. We will check in on how the markets have been trading. Reporter take a look at what is going on. A mixed picture at shanghai stocks. We are in the middle of the lunch break right now. Profit is taking place. We have a pretty good run up after the lunar new year. We did see the money market rate search. That is jumped in a month. Just for the thinner new year. Lunar newfore the year. Sharp is rising seven and a half. Was rising 5 and then fell back 7 . Multiple reports came in on the possible bid. We also got reports that the government was going to be pushing its watch it. That is really helping construction and real estate stocks today. We will reopen in at the top of the hour. Virtual reality has taken certain centerstage. Security tourism even the workplace, this is what he had to say about the numbers so far. Even justin veer vr even even just in gear vr, there have been many hours of 360 video being watched. That will be one part of the content ecosystem for Virtual Reality. Cory content ecosystem. Eric darnell knows some thing about that. He has been making animation specifically designed for the immersive experience. Tell us what you are doing. It is so fascinating. Our approach is to do entertainment content. Narrative, character driven. It is not games. We think there will be a great opportunity for storytelling. Cory the way that movies work is to sit the viewer down and have them have an experience. Things rush toward them and see things happen. But you have a captive viewer. Virtual reality is the opposite where the viewer guides things. How do you tell a narrative when you cannot control the viewer . They can look anywhere. That is one of the beauties of the art. Cory or reallife. Exactly. You can explore. As a director i encourage or inspire the viewer to compose certain shots. You can do that with sound or a character going, what is that . And you want to see what they are seeing. There are a lot of ways to see the pace could have the viewer look at clouds roll by. Cory i was thinking of the example where youre in a Movie Theater and you see Something Like an object crash toward you or role in your direction. Youre sitting in her seat and in your seat and cannot get out of the way. In vr, you would get out of the way. Maybe . Youre right. It is such an immersive experience that even though you know it is not real, something in your reptile brain in the back says get out of there. Cory is that what is back there . Reptile brain . It is. Cory that explain a lot in my life. But your brain can say thats not real that is fake. Cory some are saying people cannot take too much vr. It is too much stimulation and exhausting. What do you think the right duration is for this immersive storytelling . I think that the duration depends on two things. What is the content . If youre doing a pointandshoot game you could get physically nauseous because your inner ear and eyes are giving a brain different information. There are those challenges that mak