tv Bloomberg West Bloomberg January 11, 2015 3:00pm-4:01pm EST
and there are loads of wearables, but the apple watch was not in attendance. the mdc that the table was felt especially as smart watches do in the first half of this year but can it the a big hit? i asked how apple fires up the market for its watch. >> not a broader watch market, so that's going to be a smaller initial market. we have been surveying a lot of people. we surveyed about 10,000 people in the u.s.. obviously some of them knew earlier in the year -- they did not know what the watch looked like. the interest level was surprisingly low. it runs about 10% of iphone owners say they are going to buy the watch will stop as this sets
up, it is clearly the big topic but it will maybe take some more powerful apps to drive the value for consumers to find out why they need the watch as opposed to just using their phone. >> you do as much work as anyone i know on the sell side and trying to figure out what trends to tie it to -- i've got my fit bid -- some people where there heart rate monitors. do you take that and multiply it? what sort of -- what you attach to the growth rate? >> we think the general wearables mark is a good starting point. there are about 5 million of those per year. this is not the phone market not a alien unit a year kind of market. the value, the power of the apple watch is going to go beyond fitness. it is going to be a platform. to answer your question, we kind of start with a base level of how many other fitbit units are
out there, and then we think about a bigger number because it will be an expanded size. we think a good way to think of this is a section of what the current iphone users are. the big picture of this. think about this as probably somewhere between 10 million 20 million units in the first year. that is compared to about 200 million iphones. much smaller. maybe down the road, it could be a 50 million type of business but it is not going to be a 300 million type of business for apple. >> ever? >> i think it would be tough. i don't want to say ever. you don't want to bet against it. probably down the road, that -- that is a possibility but not in the near term. >> my question is what is the -- what is the thing that is going to make it incrementally where you'll say oh, my god. this is taking off. like what is the one thing that
could change that? >> well, if you look at the most basically level and think about the watch part of that. obviously people use their phone as their watch. you think about the watch, the pocket watch was basically eliminated when the wristwatch came out. there is a lot of utility in having some things readably accessible on your wrist. the value is going to come from things that can be easily accessed, whether it is apple pay, opening locks. to use the starwood example, you can go check in your hotel. you don't have to check in with anybody. you just go to your room and wave your watch. eventually you can do that with your car assuming that the battery holds up and you can access your home. i think some of the value on it is some of those everyday things that are kind of annoying that you take out of your pocket. you have to take keys or your phone out of your pocket. putting that on your wrist. i think that is going to be some
of the initial big value. longer term, health and wellness is going to be something bigger. it is up to app developers to build those applications. >> we talk about the price point for the entry level model. i wonder -- this is going to be a regular quiz on "bloomberg west" for the next few weeks or months. the costly edition. how much will the apple edition watch cost, gene munster? >> we think it can be well above $1,000. probably $1100 or $1200. it is going to be a big ticket item. i think that the average price of an apple watch is probably around $500, $550. much higher than the $350 entry leve. >> i wonder if apple is thinking about a very different way to market products. they are thinking about retail multiple price points and limited runs, very different from steve jobs' approach of one great device for everyone. >> they definitely want to make
it so it is personalized. part of that is having the detachable bands that you can dramatically change the look of the watch by changing out the bands. they have more of this personalization than they have with any other product. i would agree with that. i think they still want the basic platform and the real substance of the technology to be mainstream or to be consistent across the board, but i think the ability to personalize it is one of the key differences between the watch and other apple products. >> that was gene munster. meanwhile apple rival samsung has seen its smart phone dominance erode, but is the company already making a successful transition to its next phase and next multibillion business? we're going to explore samsung next.
>> this is the best of "bloomberg west." i'm cory johnson. samsung electronics said it saw a 37% drop in fourth quarter profit and 12% drop in revenue as smart phone sales continue to stall. dig a little deeper, there may be a silver lining. they are investing another $15 billion in a new chip plant. on top of that, samsung has made a huge push into the internet of things devices. >> by 2017, 90% of all samsung products will be i.t. devices. that includes all of our televisions.
>> so this is question. has samsung found a new multibillion focus for all of its businesses? i spoke with brian blair. >> it is a very profitable business. the volumes are substantial from just apple alone. i think a year ago it was 70-plus percent of their business. i think what they have to do is find some new areas of growth. you mentioned earlier the internet of growth. their booth is about 50 yards behind me, and the internet of things connected appliances is a huge trend for them. in addition to foundary and the internet of things, i think samsung is looking for new areas of growth. they think it's the internet of things, but it would be nice if the foundary business could grow for them as well. >> what do you think a chip costs? an iphone a-6 or a-7 chip, whatever the new one is.
what do they get for the internet of things chip? $85 for an iphone and then a couple of dollars? >> you know what? i think about it more like $25-$30 for a base band chip and probably $5 for an internet of things chip. you bring up a good point. a discrepancy in the average selling price. the difference is if we see connected device throughout homes over the next two years, the number actually will be bigger than even this 1.5 billion unit smart phone market. i agree. the a.f.p's are small but the opportunity is substantial over the next several years. >> but if there is that difference, they would have to sell 600% more of those chips than the phone chips they are selling right now. that is quite -- i guess i wonder is the center of samsung going to be chips? not devices? >> i think it could shift to
chips. they are hoping it is going to be both. they are showing connected dish washers over there. a lot of different appliances. you have maybe one or two smart phones in your home. maybe four if you have kids. how many appliances do you that are connected? probably 50, if think about connected chip opportunity. if we all have connected device throughout our homes over the next five years, then the internet of things will be bigger than smart phones and it will be a substantial opportunity for samsung. >> i need someone to load my dishwasher. not to run it with a chip for me. you mentioned the oculus -- it really was an oculus device that they said was made by samsung. it wasn't any special samsung stuff. it may have changed. did you see anything that was ridiculous over at that samsung booth? >> well, the connected
dishwasher is interesting. i would not call it ridiculous but i wonder about connecting some of these device. lights. refrigerator, that could be good but i didn't see anything that ridiculous. everybody is doing curved screens right now. i think they are beautiful but i'm not sure it is enhanced experience that it is going to drive huge demand over the next several years. a lot of these panel companies are making the bet that that is the next thing. nothing ridiculous. samsung's version sounds ridiculous until you actually use it. when you try it, it is amazing how good it is. it is a truly immersive experience. i think that could be huge and facebook feels the same way. >> to find out more about samsung's potential i spoke with crawford del prete. here is some of that conversation. >> they are rising a sizable check to get into a space.
what i heard over and over and also from jawbone in that is we will be an open platform. we were all comers. we want to connect everybody together. i think it is a shot at apple and a shot someone at android. and basically it is their way, when you don't have a massive base to try to bring people to the party as quickly as possible. >> if samsung shooting android is samsung shooting themselves in the foot? >> i think what they are trying to do is say any work breaks out between nest products on apple products in the future, that is fine. we're going to connect everybody and everybody is welcome in our play on the i.o.t. it is not necessarily a shot at your phone business. they want
to continue to be investing in the phone business with android. they do not want to go on a proprietary direction. it is not dissimilar to what microsoft is trying to do with their wearables. basically support all platforms because they want to be relevant in each of the large ecosystems. >> it is helpful that samsung is describing this not as i.o.t. but as sensors, but the platform is more open than the i.p. base. what are the other technologies that are helping this now? we have been hearing about this from c.e.s. forever. >> yeah. there is a lot of different technologies that are going to come into play. some of them will be 2.5 gigahertz wireless. some will be things like traditional wi-fi. you are seeing some interesting technologies from broadcom about stepping up their ability to project images over wi-fi, which
is part of it. i think the core what happened is missing from the message is that the customer cannot be expected to figure out all the problems in their life and stitch them together in open platforms. that is where apple and google will go in and say we will solve the backend technology. you don't have to learn about five gigahertz wi-fi. you can basically have it work. i think samsung may be rushing to a world where it works seamlessly and the customer kind of loses in that experience. that is the problem. samsung is saying we want to connect everybody. where does that leave the customer? they are their own systems integrator. >> that was crawford del prete. from the gold rush of 1849, to the tech boom of the 1990's san francisco has a lot of
>> i'm cory johnson. this is the best of "bloomberg west." it is boom time here in san francisco. at least when it comes to unemployment. the unemployment rate was 4.4% in november. the lowest since before the recession. in the city, 90,000 jobs have been added in the last four years. office rents are poised to overtake manhattan in price. but the price of that growth and the technology-led growth led to a whole new set of problems including constraints on housing and office space. i spoke with former san francisco mayor willie brown.
he was in the office during the boom and bust over the dot com era. listen to what he had to say. >> it is what every mayor in america would love to have. that is problem you want. you want unemployment under 5%. you want help wanted signs all over your town. coupled with that, however, is the need for you to make sure that affordability is not totally and completely ignored. you need to make sure that the gap between those who earn it and those who need it are, in fact, coming closer together. so, the city and county of san francisco, with mayor lee saying jobs, jobs, jobs in his first term, he is now talking affordability in his second term. believe me, that is a far more pleasant response kind of thing to do than to be worrying about trying to create jobs. >> so what lessons -- you took this city through the dot com boom and the dot com bust.
what did you know about the statistic when he left office, 10 years ago tomorrow? that you left office. >> there was no question that the day that i left it was clear the concept of all this newness, all of this new economy where almost no products were produced, was simply the foundation of what we are now benefiting from. we have all kinds of things going on. throughout the world there is a working relationship and there is a product being produced. that did not happen in the first boom. only the creativity and the brainpower were there. in addition thereto in the first boom, people did not move from silicon valley and relocate. >> that is what characterizes it interestingly to me, this is very much an urban phenomenon. not suburban. which is what the biggest part of the dot com bubble produced. >> correct.
therefore the people that want to live in san francisco and work in san francisco and spend their money in san francisco suddenly you're not in the boom and bust cycle as we were in the old days. >> yet, we still have a football team setting up in the suburbs there in santa clara. >> i think that football team is now having second thoughts. have you noticed that their fortunes were not nearly as positive as they were at candlestick. \[laughter] >> does this feel different to you? less dramatic? >> they are buying. they are spending. they are having their kids in the schools. they are doing the kind of things you need to do on the give back with tip-in points and other organizations of that nature. it is dramatically different.
>> that is former san francisco mayor willie brown. one of the companies setting up shop in san francisco is the grocery delivery start-up instacart. it raised another $210 million in funds. they get groceries to the customers in less than an hour. how is it going to compete with other big tech giants? amazon and google are entering the same arena. >> i think of the analogy of the casinos in the early 1980's. the casinos had a lot of people coming in and out into not know who they were. they actually created carts. now instacart is able to give grocery stores data that other companies cannot capture. >> really? that is interesting. i see it show up at my house. it is a popular company in the johnson household. i also got an instacart delivery yesterday.
i did the whole thing, put on the green t-shirts, delivered groceries. it's interesting, these big companies like whole foods costco are not trying to do this themselves. why not? >> it's hard for a large company to get out and do it. plus instacart has a different model where they are bringing together a marketplace of personal shoppers who want to work. maybe they have different jobs more flexible hours, and they are pairing it with different kinds of grocery stores. so they are not holding inventory. >> they are not holding inventory, they do not have warehouses, they do not have employees, they have an uber-like model where they have regular people. it is an open model like uber where the picker uses a smartphone and uses their own car. >> absolutely. they can log in and out of work when they want to. you're getting at this idea of being able to deliver something
to somebody and capture that data and create that customer relationship. the other piece that is a key strategic advantages they are already profitable, but you can also start to spin up newer cities faster. >> they are already profitable? really? that is interesting. is that what you want this early in a company? >> i don't think it hurts especially in this kind of environment. it does not hurt. >> interesting. look at all the cities that instacart is in, boston, new york, d.c., portland, austin los angeles. >> i'm a very early smalltime investor, but in the history of knowing the founders, and i have been with them for years, every time they have said something about their impatience and i thought in my head "no way" they have proven me wrong every single time. they think they know a secret about building a big independent company like uber. >> that would be an interesting strategy. they are facing some serious competition from amazon doing
grocery delivery. when i was out yesterday with the instacart delivery, we saw the google delivery guy going by, and there is a lot of that stuff going on with all the other companies competing with instacart. >> it's tough. people want to deliver within the 48-hour window. 48 hours, it is really how to get something soon. the instacart starting with groceries is how to get something to you in an hour in more cities. if you look at the footprint of google shopping express now, amazon express now, it's not the same as instacart and that is because the model is different. >> i was also impressed with instacart's quality of produce figuring out how the touch the bottom of a pear to see if it is ripe yet. those are the things that make a difference. >> they have people who are trained. >> coming up, protecting people's online data. one of the most pressing issues
>> you're watching the best of "bloomberg west." consumer privacy is a major concern everywhere you turn. business week's brad stone spoke at the consumer electronics show. >> how can the internet not sacrificed consumer privacy and security? i think companies need to do the following things are in it first, they need to think about security by design.
companies need to think hard about how to embed security. they need to think about long-standing privacy principles. companies need to be thinking hard about whether or not they to be collecting as much data -- do you really need it? if you store a lot of data there is possible intrusion. i think transparency and getting consumers greater control over their personal information is key. i think there are three key steps essential for making this successful. you can ensure the privacy. >> you have spent a lot of time with technology companies. you have settled cases or brought cases with snapchat, apple, amazon.
why the focus on tech companies? are they too aggressive when it comes to matter of privacy and protection? >> we need to be where consumers are. technology is playing an increasing role in the consumers'lives. we are going to take action. we see new companies entering the technology space. it's important to make sure that they understand basic consumer protections that exist in the mobile sphere. >> you brought a case against at&t for throttling it data and limiting it, even when they had unlimited data plans. how prevalent is that practice? what is it constitute an unfair trade practice?
>> what i can tell you is what we found problematic about what at&t was doing was they promised people unlimited data and they broke the promise. certain consumers or getting unlimited data. we are protecting consumers and making sure that companies fulfill their promises. it's a simple as that. >> they settle that. >> that case is being litigated right now. >> in november, president obama came out in strong support of net neutrality and said that internet access to be regulated as the utility under title ii. that would mandate your counterpart having a larger role in regulating internet access. what does that do to your jurisdiction?
does it limit your ability to enforce consumer protections on the internet? >> i agree with the president. we need an open internet. how one achieves that is something the sec is looking at very closely. we do have an exceptional jurisdiction. we don't have jurisdiction over common carriers. >> that was brad stone. tom wheeler says his view on net neutrality aligns with that of the president. that could mean no internet fast lanes. >> that's a big issue in front of the agency right now and it's an important issue. the chairman has not shared the specifics of his proposal with us. i expect to see it in early
february. i anticipate the commission will vote by february 26. >> you can tell us right now if you want. it's fairly amazing, the reaction to this john oliver had. i think it shows how much people are passionate about what they get on the internet. do people understand the issue? >> i think the internet is important to everyone in our lives. our internet economy in the united states is the envy of the world. we are getting a lot of attention right now. that's a good thing. >> you see where all of this stuff became popular in the late 90's resulting in different products. what did you see when you go to the consumer electronic show? >> first of all, it's getting geek heaven.
we've got football fields worth of new devices and technology. all you hear over and over again is mobile, mobile, mobile. as someone who thinks about the airwaves all the time, when i hear that, i hear spectrum spectrum, spectrum. >> there is an auction it going on that was expected to be good. it's raised $45 billion. in the history of spectrum auctions, only $50 billion is ever been raised. why this success? it can't go through buildings or is not in the best urban areas? >> think about your own lives. we have more mobile phones in this country than we have people. it's the remote control to all of our lives. more than half of adults have tablets or even readers. they use our airwaves like never before.
brad stone caught up with the daimler ceo. they talked about a new mercedes concept car. >> this prototype drives autonomously. it gives you space and room. you can sleep, you can work, you can have video conferencing. you are in the middle of the internet at the same time moving from a to b. this is groundbreaking. >> the appearance of the vehicle is so striking. what is hired to design? >> we wanted to design the future. that should be shown by the style as well. we started in 1886. it was a carriage.
you are sitting opposite the four passengers at a carriage in former times. >> i'm struck in talking to automakers how few companies are talking about google and its role in the automated car future. where do they play? you develop this technology yourself. >> their interest is to accompany people along the day 24/7. that is what people are doing everywhere. i don't think they aim to build cars. >> they are spending a lot of resources trying. >> i have a lot of respect for the company. we are merging. this is a great new opportunity. >> what needs to happen in terms of the regulatory environment
for this to drive on u.s. roads? >> we have to learn step-by-step to see what should be allowed. at that point in time it, this car is not allowed. >> have you written in this car? >> of course i did. >> i would like to ask you about some disruptions. the first is uber the goal is to make buying a car obsolete. >> we are sharing things. it's about convenience. the customer decides. when it is more convenient, it might become disruptive. we try to be ahead of the wave. we are number one in the world. we are happy seeing these things
develop. we could continue what we are doing. >> tesla, you sold your steak last year. why? >> we bought low and we sold high. we are working with tesla and we continue to do so. >> you compete in the luxury car market against them. what's it like to compete against elon musk who is a steve jobs like figure? >> he is very impressive. he is a great guy and what he has accomplished is impressive. at the same time, we know what we are doing. we are not afraid of anybody. we love competition. it inspires us. we will continue to work together.
brad stone caught up with jeff clark. he asked about the new product lineup. >> this is our best ever portfolio product. we won seven awards. we are excited. one is the most prestigious innovation. it shows that innovation is thriving. this is a 13 inch notebook. >> tell us about the notebook. to the untrained eye, it looks like a notebook. >> you might consider it a usual notebook. what's unique as this is the world's smallest 13 inch notebook. we built around this borderless display. it's an infinity screen with high resolution. it has no border. it's a 13 inch screen. we took all of the air out of the product, so to speak. we built the smallest 13 inch notebook without compromising performance and high resolution display.
the battery life is increased to 15 hours. this is the smallest 13 inch notebook with 15 hours of battery life. it's an innovative product. we have a new price point of $799. >> a lot of talk on the resurgence in the pc business. >> 2014 was an improvement in the pc business. it's been a good run for us. we have year-to-year growth. our business grew 27% in the united states alone. if you extracted dell from the u.s. market, it only grew 2%. you can see the momentum we have had for seven consecutive orders.
we see stabilization and we see people going back to the pc, which is exciting to us. >> this is an android tablet. tell me why this is special. >> this product won the best in innovation. many of the world's first's. it's hard to tell, it's the thinnest. it has the best display in the tablet industry. it is an edge to edge screen. >> would you call this a landscape screen? >> this is a landscape mode today. it has a rich and immersive experience. you can interact with the product. it also has the first 3-d depth-sensing camera.
it allows us to do measures. look at this. we can refocus the picture from the individual. >> let me ask you, how does going private allowed dell to innovate faster? >> it's allowed us to make faster decisions. we make decisions that are in the best long-term interest of our customers. we can move faster without the overhead of managing the next 90 day. you can see the product coming from that. we have the world's smallest 13 inch notebook. the world's thinnest tablet today. i think it demonstrates that innovation is thriving at dell. it shows what we have been able to unleash over the past 15 months. >> that was jeff clark, the vice-chairman of dell. cisco and charter team up to create a new way to see cable tv. is it cable? is the future of pay tv, we will
>> i'm cory johnson. this is the best of "bloomberg west." beside concept cars and dishwashers, the future of the tv is a big topic at the ees area dish has a new streaming bundle and cisco teamed with charter. they are calling world box. they are giving networking equipment and charter the content. i talked with cisco's senior vice president. >> it's really a combination of all the things we talked about video moving towards a cloud-based delivery model. what charter is doing is offering a new experience. they are leveraging a lot of technology elements in the
solution. they are offering the ability to move to new experiences. they can deliver inside the home with the box solution. >> when you say leveraging the technology, what system are you talking about? what technologies are required to make this work that one available five years ago? >> the first is the ip based network. you've got to be able to render the video from the cloud. that means that instead of doing the video transformation inside the home, you are doing the video rendering from the cloud. charter can now deliver this experience using any device that they have. they have in putting these inside customers homes. the newer devices are going to be capable with multiple tuners. if you have five tvs in the home and a five programs to record, you will do that with one
device. the new platforms will be available. >> that cloud rendering is interesting. the reason that cable boxes render on the box is the computing power is so massive. you can move more along the pipe when it's just video. what has changed to make sense of rendering on the cloud? >> a lot of the video processing capabilities as well as the technology around taking video streams and putting them into video streams and putting them into clients, you don't need as much power inside the home. you are doing the processing inside the cloud. software security solutions, we can deliver to the cpe device. we can deliver that from the cloud. we also have digital rights management as well for charter and the rest of the industry.
>> let's talk about the rights issue. it's such an archaic thing, it's a very non-so and alley way to think of things. the way content providers try to protect their content and strength these deals to keep people from watching espn online. with cisco approaches this business, how do you get around those issues? >> from a technology standpoint, charter was to take their services and able to offer them on any screen. that is what charter is been able to do. they have to work through the rights management and having the right solution makes them available and possible to be able to take these capabilities. it's a very important issue for the industry and it requires us to work with charter on that.
that's right in terms of what you are saying. this is exactly what this is going after. >> i've always thought that the fasting part of cisco's business is new technology that will suck bandwidth. is this part of that showing up what can be done so people are doing more online? there is more cisco boxes in the universe? >> if we go back a few years, we predicted that video is going to be the dominant across the industry. video is the new voice in terms of communication and collaboration. it's gaining a lot more capability, even as entertainment video gets delivered. >> that was the senior vice president at cisco. that doesn't for this edition of the best of "bloomberg west." you can catch us monday through friday. we will see you next week. ♪
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