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EMILY: AMAZON SHARES SURGING AFTER POSTING SURPRISE EARNINGS. I'M EMILY CHANG IN THIS IS "BLOOMBERG WEST." ALPHA THAT -- ALPHA THAT WITH THE THIRD QUARTER WIN. MICROSOFT ON CLOUD NINE, THEY'D THE THINGS TO RISING DEMAND FOR CLOUD SERVICES. APPLE LET THE SUN SHINE IN THE COMPANY, DOUBLING DOWN ON SOLAR POWER INVESTMENT CHINA. I WANT TO START WITH AMAZON, SHARES SPIKING 13%. NOW NEARLY DOUBLE WHERE THEY STOOD LAST YEAR. REVENUE SOARING 23%. PROFIT INCREASING 118% TO $7 MILLION. ANOTHER IMPORTANT NUMBER, OPERATING CASH FLOW, $9.8 BILLION. UP 72%. THE BOOST COMING FROM SALES ON PRIME DAY. AMAZON CLASSMATE UP 52% OF PROFIT. FOR JOINING ME IS THE AUTHOR OF A BOOK ON AMAZON , EVERY TIME AMAZON TURNS A PROFIT, PEOPLE GO CRAZY. GUEST: THE PROPHET NUMBER IS ALWAYS KIND OF MEANINGLESS. THEY HAVE PULLED BACK A LITTLE BIT. WHAT WE SEE NOW IS THAT EVERY PART OF THE BUSINESS IS WORKING REALLY WELL. THE FLY WHEEL IS TURNING. $25.4 BILLION IN QUARTERLY SALES . FOR THIS COMPANY IS GOING TO PASS 21 YEARS $100 BILLION IN SALES, THE FASTEST IN HISTORY. E-COMMERCE ITSELF IS GROWING AROUND 15%. RETAIL IS BASICALLY FLAT . AMAZON IS TAKING CUSTOMERS AWAY. PEOPLE ARE BUYING MORE FROM AMAZON. EMILY: LET'S TALK ABOUT THAT, 52% OF PROFIT. THAT IS HUGE. >> SOMEDAY, IT COULD BE BIGGER THAN THE RETAIL BUSINESS. IT IS AMAZING HOW THIS IS A BUSINESS THAT NOBODY UNDERSTOOD UNTIL LAST YEAR. EMILY: LET'S TALK ABOUT PRIME DAY. I REMEMBER GOING HOME AND TRYING TO BUY SOMETHING AND I DIDN'T WANT ANYTHING THAT WAS LEFT. IT SEEMED LIKE A DISMAL SELECTION BUT REALLY, IS IT PART OF IT? >> IT IS A GOOD QUESTION TO SEE HOW THEY CALCULATED IT. IT WAS AN OTHERWISE SLOW QUARTER , THAT SELECTION OF THE DAY WAS VERY STRATEGIC. IT MAY BECOME MORE PEOPLE TALKING ABOUT AMAZON. >> THEY SAY IT ADDED 2% TO THEIR GROWTH RATE. MOST PEOPLE MAKE FUN OF IT AND WONDERED WHETHER IT WOULD HAVE ANY IMPACT. AMAZON SAYS THEY ARE GOING TO KEEP DOING IT. IT WAS PATTERNED AFTER AMERICAN EXPRESS HAVING SMALL BUSINESS SATURDAYS. THEY WILL HAVE TO DO IT EVERY YEAR INTO A BETTER NEXT YEAR TO MAINTAIN THAT SALES GROWTH. >> THEY MAY NOT BE JUST COUNTING THE NUMBER OF SALES ON THAT DAY, IT IS THE NUMBER OF PEOPLE THE TRUE INTO PRINE. YOU GET MORE PEOPLE INTO PRINE, THEY ARE MORE LOYAL. THAT IS WHY THEY DO ALL THIS STUFF. EMILY: IN GENERAL, AMAZON IS A SECRETIVE COMPANY. WE ARE NOT GETTING HARD NUMBERS ABOUT THE NUMBER OF MEMBERS. WHAT ARE THE NUMBERS WE WANT TO KNOW? >> THERE ARE A LOT. THAT PRIME NUMBER IS KEY. I THINK IT IS AROUND $40 MILLION-$50 MILLION. THE FIRE TABLET IS ALWAYS THE MOST POPULAR ITEM. >> OF COURSE, YOU CANNOT GET IT ANYWHERE ELSE. >> THEY RECOVERED , THAT WAS ONE OF THE THINGS THAT MADE PEOPLE VERY SKEPTICAL. COMING BACK TO HER PRIME, IT IS NOT JUST A QUESTION OF MEMBERS, IT IS THE FACT THAT THEY KEEP FINDING OTHER WAYS. THEY HAVE A $49 MEMBERSHIP FOR STUDENTS. AMAZON FRESH IS $299 PER YEAR. THEY ARE FINDING MORE WAYS TO GET MONEY OUT OF PEOPLE. EMILY: I COULD NOT LIVE WITHOUT AMAZON PRIME AND AMAZON FRESH. THANK YOU SO MUCH FOR JOINING US. MICHAEL, YOU WILL BE WITH US THROUGHOUT THE SHOW. I WANT TO TALK ABOUT MICROSOFT BECAUSE IT RELATES TO AMAZON. SHARES ARE SLIGHTLY UP IN AFTER-HOURS SHARING. FIRST-QUARTER PROFIT CAME IN AT $5.4 BILLION. ANALYSTS HAD BEEN LOOKING FOR SALES OF $21 BILLION. DELL IS FOCUSING MICROSOFT -- JOINING US FROM NEW YORK, ON A RUG -- ANAROG, WHAT IS JUMPING OUT? REPORTER: WE WERE NOT GOING TO SEE THE PUSH FROM WINDOWS 10. THE 36 GOOD. REVENUE WAS UP 9%. EMILY: LET'S TALK ABOUT THE CLOUD BECAUSE MICROSOFT CLOUD IS ALSO GOING GANGBUSTERS. I SAT DOWN WITH MICROSOFT'S CEO YESTERDAY AND I ASKED HIM ABOUT MARGINS SPECIFICALLY. IF YOU ARE COMPETING WITH AMAZON , COULD AMAZON SPOIL MARGINS FOR THE ENTIRE INDUSTRY? >> I DON'T COME AT THIS BY STARTING WITH MARGINS BECAUSE I THINK IF THERE IS ONE THING THAT ALL OF US HAVE LEARNED IN TECHNOLOGY, IT IS HOW DO YOU GROW THE PIE? WHAT MATTERS TO ME IS THE MAGNITUDE OF REVENUE AND THE IMPACT IT CAN HAVE. EMILY: IS THAT FAIR? IS THAT THE RIGHT WAY TO APPROACH THIS? >> IF YOU LOOK AT THEIR OVERALL MARGINS, FEW BUSINESSES HAVE A 60% OVERALL MARGIN. THEY HAVE TO BE IN THE CLOUD TO PROTECT THEIR COURT. A LOT OF THE PEOPLE WHO USE OFFICE 365, THESE ARE SMALL BUSINESSES WHICH ARE ALREADY MOVING INTO THE CLOUD. MICROSOFT HAS TO BE THERE AT ANY COST. THE EXTENT TO WHICH THEY SACRIFICE MARGIN TO BE THERE SHOULD NOT MATTER. EMILY: SOMETHING ELSE WE ARE SEEING IS PARTNERSHIPS WITH COMPETITORS. MICROSOFT AND DELL ARE BOTH MAKING PCS, DROPBOX, IBM. IT IS INTERESTING THAT A NEW YORK TIMES HEADLINE CALLED IT, HIS "CRAZY LIKE A FOX" STRATEGY. >> WHAT IS IT THAT WE CAN UNIQUELY DO? I ASK MYSELF EACH DAY, I DON'T WANT TO BE IN EVERY PART OF THE INDUSTRY, I WANT TO BE IN THINGS THAT ARE ADDRESSABLE MARKETS. I THINK THAT SENSE OF PURPOSE AND IDENTITY IS WHAT MAKES COMPANIES SUCCESSFUL, NOT JUST DOING EVERYTHING. EMILY: WHAT IS YOUR RESPONSE TO THAT? MICHAEL: IN SOME SANDBOXES, THEY ARE FIGHTING WITH PEOPLE. IT MAY LOOK LIKE THEY ARE TRYING TO COMPETE BUT THAT IS REALLY AT THE MARGIN. A BIG PART OF DELL'S BUSINESSES ARE THERE SERVERS IN A RUN ON MICROSOFT PROJECTS -- PRODUCTS. OTHER COMPANIES ARE HARD TO PARTNER WITH. IT IS HARD TO PARTNER WITH APPLE AND GOOGLE. MICROSOFT IS OPENING THE DOORS. THEIR PARTNERSHIPS WITH DELL AND DROPBOX, ALL THEY ARE GOING TO DO IS DRIVE BUSINESS FORWARD. EMILY: MEETING HIM FOR THE FIRST TIME, HE SEEMS VERY FOCUSED. HE IS WINNING OVER PEOPLE WITH HIS STRATEGIES. REPORTER: WHAT THEY HAVE DONE IS A SMART MOVE TO CONVERT TO THE CLOUD. THAT HAS TAKEN A LOT OF MONEY TO COME UP WITH THAT INFRASTRUCTURE. WHAT THEY ARE ALSO DOING IS SELLING SERVICES TO THE CLOUD. THEY MIGHT BE MATCHING AMAZON PRICE TO PRICE BUT THEY HAVE HAD-ON SERVICES WITH A HIGHER MARGIN STRUCTURE WHICH IS WHAT IS GOING TO GIVE THEM NOT JUST THE REVENUE GROWTH OF PROFIT GROWTH. EMILY: GIVEN YOUR ROLE ON THE YAHOO! BOARD, WE ARE SEEING THE CHANGES IN LEADERSHIP THAT MICROSOFT. WE ARE SEEING HIM NAVIGATING THIS TRANSITION WELL. HOW WOULD YOU COMPARE THAT TO YAHOO!? MICHAEL: THEY ARE BOTH VERY DIFFERENT COMPANIES. MICROSOFT HAS LOST ITS WAY BUT THEY STILL HAVE A MASSIVE BUSINESS. IN A LOT OF WAYS, THEY HAVE GONE FROM BEING A CONSUMER COMPANY TO BE IN A BUSINESS-TO-BUSINESS COMPANY. THEY ARE IN DIFFERENT BUSINESSES. EMILY: YAHOO! IS TRYING TO BE A CONSUMER-ONLY COMPANY. MICHAEL: I THINK YAHOO! WILL FIND ITS WAY. THE DEAL THEY ANNOUNCED WITH GOOGLE CAN MAKE A HUGE DIFFERENCE. EMILY: ANOTHER EXAMPLE OF PARTNERING WITH A COMPETITOR. MICHAEL: I DON'T THINK MICROSOFT WILL BE AS GOOD OF A PARTNER AS GOOGLE WILL. EMILY: THANK YOU FOR STOPPING BY. STAYING WITH EARNINGS, PANDORA HAS HAD A SOUR NOTE WITH INVESTORS. THE LARGEST INTERNET RADIO SERVICE LOST $.40 A SHARE. PANDORA SAYS REVENUE ROSE 30%. SLIGHTLY LESS THAN WHAT WALL STREET WAS EXPECTING. THEY ARE TRIMMING FOURTH-QUARTER REVENUE PROJECTIONS. SHARES WERE DOWN ABOUT 20%. COMING UP, GOOGLE'S FIRST QUARTER IS ALL SMILES FOR THE COMPANIES NEW CEO. EMILY: NOW TO GOOGLE. REVENUE UP 15% TO $15.1 BILLION DURING THE THIRD QUARTER. PROFIT UP TO ALMOST $4 BILLION. THIS IS THE FIRST AND LAST ALPHABET REPORT BEFORE BREAKING OUT. THE BIGGEST SURPRISE OF ALL, THEY ARE ISSUING A MAJOR BUYBACK. THE EXACT VALUE OF THE BUYBACK IS SOMEWHERE OVER $5 BILLION WHICH MIRRORS THE SQUARE ROOT OF 26, A PLAY ON THE 26TH LETTERS ON THE ALPHABET -- I WILL NOT TRY TO READ IT ON AIR. HERE WITH US IS THE FORMER CEO YOU KNOW OF GOOGLE EUROPE. -- COO OF GOOGLE EUROPE. I WANT TO START WITH THE BUYBACK. THIS IS THE FIRST BUYBACK FOR GOOGLE IN HISTORY. COMING FROM AUSTRIAN -- COMING FROM WALL STREET, ONE OF THE FIRST THINGS HE IS DOING IS GIVING CASH BACK TO SHAREHOLDERS. MICHAEL: PART OF IT IS SENDING A MESSAGE THAT WE THINK OUR STOCK IS CHEAP. THIS IS A COMPANY THAT DOES GENERATE A LOT OF CASH. THAT IS ONE OF THE FIRST THINGS. IT IS A WAY OF SIGNALING TO THE STREET THAT DESPITE THE CREATION OF HEALTH ABOUT -- ALPHABET, THERE WAS TO BE A LOT OF FINANCIAL DISCIPLINE. EMILY: A LOT OF THE QUESTIONS ABOUT GOOGLE RIGHT NOW HAS TO DO WITH MOBILE AND YOUTUBE. >> OUR STRONG REVENUE GROWTH REFLECTS THE ONGOING MOMENTUM IN GOOGLE WITH ACCELERATION COMPLEMENTED BY THE STRENGTH OF YOUTUBE. EMILY: WHAT IS STANDING OUT TO YOU? GUEST: WE LOVE TO HEAR THAT PROGRAMMATIC IS GOING STRONG. EMILY: THIS IS A MARKET THAT FACEBOOK HAS BEEN RUNNING AWAY WITH. GUEST: THERE IS GOING TO BE A TRADE-OFF AT GOOGLE. THE MOVE TO MOBILE DEVICES IS A BIG QUESTION MARK. INCREASED ADOPTION OF VIDEO AND YOUTUBE, AND HOW VIDEO CPMS COUNTERACT THAT AFFECT YOUR THAT IS WHERE THE TENSION IS. EMILY: THIS IS THE FIRST CALL WE HAVE HEARD FROM THE NEW CEO OF GOOGLE -- WHAT IS YOUR TAKE ON HOW HE IS DOING, ESPECIALLY WHEN IT COMES TO MOBILE VERSUS DESKTOP? GUEST: YOU SEE RESULTS BEATING EXPECTATIONS. QE3 SAW ABOUT 20% GROWTH. SOMETHING IS PICKING UP. THEY MENTIONED PROGRAMMATIC MOBILE AND YOUTUBE. THAT IS MOST PRIZE. -- THAT IS NO SPREAD. THE NUMBER OF MINUTES BEING VIEWED IS UP 60% PER YEAR. MICHAEL: A LOT OF GOOD DRIVERS. YESTERDAY, THEY ANNOUNCED A PAID SERVICE TO WATCH YOUTUBE VIDEOS ON THE CURRENT CREATOR VIDEOS AS WELL AS NEW WAS THEY ARE LIKELY TO CREATE. IT IS ULTIMATELY A COMPETITOR TO NETFLIX BUT ALSO A COMPETITOR TO PEOPLE LIKE SPOTIFY AND PANDORA BECAUSE YOUTUBE IS, WHEN YOU STRIP OUT THE VIDEOS WITHOUT MOTION, IT IS THE LARGEST MUSIC SERVICE. IT SUGGESTS THAT THEY ARE LOOKING FOR ANOTHER REVENUE STREAM BEYOND ADVERTISING. EMILY: FACEBOOK SEEMS TO BE MOVING AHEAD. GUEST: MARKETERS ARE DESPERATE FOR HIGH QUALITY VIDEO INVENTORY THERE ARE FEW PLACES YOU CAN GO TO GET SCALE, PARTICULARLY ON MOBILE DEVICES. FOR A LONG TIME, YOUTUBE HAS HAD THAT DOMAIN AND AS HE MENTIONED, FACEBOOK IS PUTTING A LOT OF PRESSURE NOT JUST ON VIDEO BUT ACROSS THE SPECTRUM ON GOOGLE TO INNOVATE AND AT THE END THE DAY, THAT IS A FAIRLY GOOD THING. WE ARE SEEING GOOD PRODUCTS COME OUT OF GOOGLE. IN THE PAST, THEY JUST WAITED IT OUT. EMILY: WHAT WE ARE LOOKING FORWARD TO IS THE NEXT EARNINGS CALL. THAT IS WHERE WE WILL FIND OUT HOW MUCH THEY ARE SPENDING ON THINGS LIKE GOOGLE-X AND THE ROBOT. WE WILL BE ALL OVER THAT NEXT QUARTER. THANK YOU BOTH. APPLE IS RAMPING UP EFFORTS TO REDUCE GLOBAL WARMING EMISSIONS FROM ITS SUPPLY CHAIN IN CHINA. THEY PLAN TO BUILD SOLAR GRADES IN CHINA TO GENERATE 200 MEGAWATTS OF POWER. THEY WILL OFFSET THE GREENHOUSE GAS EMISSIONS OF COMPANIES THEY WORK WITH IN CHINA. APPLE SAYS IT IS ENOUGH ENERGY TO POWER 265,000 CHINESE HOMES. APPLE PREVIOUSLY FUNDED THE CONSTRUCTION OF TWO SOLAR FARMS IN CHINA TO COVER THE ELECTRICITY USED BY THEIR OFFICES AND STORES. THE COMPANY IS FOCUSING ON CHINA BECAUSE THE MAJORITY OF PRODUCTS ARE MADE THERE. STILL TO COME, WHY MICHAEL WOLFF THINKS FACEBOOK WILL DOMINATE THE SOCIAL MEDIA LANDSCAPE. EMILY: FACEBOOK'S SEARCH ENGINE IS GETTING A FACELIFT. THEY ARE CHANGING THEIR SEARCH BAR. INSTEAD OF ONLY BEING ABLE TO SEARCH FOR OTHER USERS AND GROUPS, THE UPDATE ALLOWS USERS TO SEARCH ALL 2 TRILLION PUBLIC POSTS. YOU CAN SEARCH FOR BLOOMBERG WEST AND YOU WILL BE GIVEN A LIST OF POSTS. ACCORDING TO THEIR VICE PRESIDENT OF SEARCH, IT WILL BALANCE HOW THE AUTHORS ARE RELEVANT TO YOU AND HOW WHAT THEY ARE POSTING IS RELEVANT TO WHAT YOU ARE SEARCHING FOR. STILL WITH US, MICHAEL WOLFF. YOU COVERED A LOT OF GROUND, A LOT OF PEOPLE CALLING YOUR SLIDES ETHIC. I WANT TO START WITH FACEBOOK BECAUSE YOU MAKE SOME BROAD CLAIMS THAT FACEBOOK IS DOMINATING MESSAGING, AND IT COULD LEAVE SNAPCHAT IN THE DUST. MICHAEL: MESSAGING OVERALL IS DOMINATING THE WORLD. MESSAGING, WITHIN THREE YEARS, MESSAGING WILL GROW FASTER THAN THE INTERNET. THERE ARE 2 BILLION PEOPLE USING MESSAGING TODAY. EMILY: MESSAGING APPS PRIMARILY LIKE WHATSAPP, MESSENGER, FACEBOOK MESSENGER, SNAPCHAT, A COUPLE OTHERS. WITHIN THREE YEARS, THERE WILL BE 3.6 BILLION PEOPLE USING MESSAGING. THAT IS GROWING MUCH FASTER THAN SOCIAL MEDIA BUT FACEBOOK OWNS THE TWO LARGEST, FACEBOOK MESSENGER AND WHATSAPP. EMILY: WHAT DOES THAT MEAN FOR SNAPCHAT? AND TWITTER? MICHAEL: THEY ARE IN A DIFFERENT BUSINESS, THEY ARE NOT IN MESSAGING. THEY ARE PURE AND SIMPLE, SOCIAL MEDIA. MESSAGING IS COMMUNICATION, BUT INCREASINGLY, THEY WILL BE COMPANIES TO BUILD APPLICATIONS ON TOP OF MESSAGING. FACEBOOK HAS ALREADY LAUNCHED AN APP STORE, ALONG WITH SENDING VIDEOS TO YOUR FRIENDS, WE WILL SEE A LOT MORE HAPS. WHERE THIS GETS A COMPETITIVE IS FACEBOOK'S LARGE AND ITS OWN VIRTUAL ASSISTANT, SOMETHING LIKE SIRI. THE DIFFERENCES, YOU DON'T SPEAK TO IT, YOU TEXT YOUR INSTRUCTIONS. THIS IS GOING TO BE VERY DISRUPTIVE TO THE ENTIRE SEARCH BUSINESS AND OVERALL IN TERMS OF THE INTERNET EMILY:. WHAT ABOUT MUSIC AND AUDIO STREAMING? WHAT DO YOU SEE THEIR? MICHAEL: IF YOU STRIP OUT ALL OF THE STREAMS FROM YOUTUBE, YOU CAN SEE THEY ARE THE LARGEST MUSIC PLAYER BUT NEXT TO TWO, PANDORA IS AD SUPPORTED. SPOTIFY -- THE REAL QUESTION IS, WHAT IS HAPPENING TO APPLE MUSIC? TIM COOK SAID THEY HAVE 6 MILLION PAYING SUBSCRIBERS, THERE WERE A LOT OF JOKES THAT THERE WERE 6 MILLION PEOPLE WHO FORGOT TO CANCEL THEIR SUBSCRIPTION. IT IS NOT CLEAR WHO IS GOING TO WIN. ONE THING IS FOR SURE, GOOGLE HAS A LOT IN IT TO WIN BECAUSE GOOGLE HAS SO MANY MORE TRACKS THAN ANYBODY ELSE. EMILY: THANK YOU SO MUCH. DEFINITELY WORTH DIVING INTO. MICHAEL WOLFF , ACTIVATE. BREAKING NEWS FROM MICROSOFT, THEY ARE CUTTING 1000 JOBS IN A NEW ROUND OF LAYOFFS ACROSS DIFFERENT UNITS. WE WILL FIND OUT MORE ABOUT THAT AND BRING YOU MORE TOMORROW. THANK YOU FOR JOINING US, WE WILL BE BACK TOMORROW. >> FROM OUR