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tv   Bloomberg West  Bloomberg  April 28, 2014 11:00pm-12:01am EDT

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>> live from pier three in san francisco, welcome to "bloomberg west." it is a race against time as microsoft tries to fix a major security flaw in internet explorer, that hackers are already using in targeted attacks. we are expecting the biggest ipo filing since facebook with alibaba. the commerce e-commerce giant is on an investment spree with the latest deal announced today. first, a check on your top headlines. apple and samsung are ready to make their final pitches to the jury. closing arguments will begin today in the blockbuster patent trial. apple is seeking $2.2 billion in damages for patent infringement. a win would allow the company to
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seek a sales ban on earlier models of samsung phones. an update from google on its self-driving cars. the company says that cars have logged nearly 700,000 autonomous miles. google has been testing the cars around their hometown of mountainview, to improve their ability of driving in urban areas, but they say there are more problems to solve before the car starts driving in other cities. microsoft will begin rolling out its first original xbox tv shows in june, including a reality series called "every street united" which will cover local soccer teams, as well as coverage of the binary music festival. to our lead story. after the disclosure of the heartbleed glitch, there is another glitch affecting the internet explorer browser. this affects about 25% of browsers out there, looking at versions 6 through 11, although the most recent ones are mainly being hurt. the way it works, it gives the hacker the same level of access as the official user. people that still have microsoft xp, windows xp, are particularly
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troubled in this case. cory johnson, microsoft stopped providing security patches for xp, so those 3 million machines have nothing to do. >> we know the mitigation it takes to take the system to the new operating system. for an individual, it may take a few hours, but corporations, it takes nine months to make the switch on average. the change away from xp does not happen quickly. it is likely that we will be hearing more things like this because the hackers are evolving and this operating system is not. >> it feels like there is a new one of these every day. are there more attacks, or is security tracking getting better? >> these techniques used by hackers, particularly in eastern europe, are very different from where they were even a year ago, much more organized, bigger groups. >> where do they go from here?
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i know microsoft is doing an investigation, but at what point do they make an exception for this major security flaw for xp users, maybe they would do something. >> you wonder what form it would take, and what does this mean for microsoft itself? if people are unwilling to switch to a new browser, they may move to a new product. >> for more on how risky this flaw is, i want to turn to the director of threat research at fire eyes, the company that found the breach. why are we seeing more of these threats, is it because people like you are getting better at tracking them down, or there are just more of these things happening?
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>> a combination of both. it's a pleasure to be here. in this case, the bone ability was widespread, roughly one in four users visiting the web, going to any website that hosts this kind of exploit, would have been compromised. we do not see this going away. we detected this particular thread group as recent as friday and we had to move quickly to get detection, response, prevention, and advisory out quickly in order to respond to the threat. fundamentally, i do not see that this particular issue will go away anytime soon. >> are you looking at particular , flaws in xp, because it is not getting updated? >> we are looking at the front groups that are using these \attacks and these vulnerabilities. we are able to detect and see these types of vulnerabilities
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being westernized into attacks just by looking at the affects of the victims involved. we are then able to further develop defenses, protections, as well as advisories, based on that. we do not need to necessarily go through and document all the different vulnerabilities. the attackers are already doing that for us. >> walk us through how this particular vulnerability is and what it actually means. >> fundamentally, zero day attacks are roughly two to go different things from vulnerabilities. vulnerabilities are not that serious unless you are dealing with a remote code execution vulnerability. that allows a hacker to compromise a user remotely, from anywhere on the internet. those of the types we see from these different groups, the ones that we see the most severe. fundamentally, we see this type of issue getting worse over time. >> if i have internet explorer, what should i do?
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>> right now, you can go through and disable flash. that seems to be the initial infection vector. you can also enable private mode. the croissant hasn't ruled out the enhanced mitigation toolkit, or you could switch to a different browser. >> you talk about finding the affects of the victims involved and using that as methodology. have you any anecdotes, something that happened to somebody, or a company? >> in this particular case, we work closely with many of our customers who were targeted in this particular campaign. we went through and actually merged the intelligence collected from our worldwide sensor grid of appliances protecting the customers, along with boots on the ground. those folks involved with instant response professional services. we fused the information to go from discovering the exploits to rolling out protections for it, to rolling a prevention for it, as well as working with microsoft to release the advisory, less than 24 hours, on a weekend.
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>> my point is, what did you see happening that let you roll all of this together into an alert? >> we start with some sort of spear phishing attack. in this case, the thread group involved was watching some sort of malicious link within mail messages. unfortunately, those victims were clicking on the links, getting compromised, seeing the results of that, and seeing how the compromise occurred. normally, visiting a website should not compromise an endpoint, but in this case, that is what was happening. >> what do you see as a result
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of this happening, do you see microsoft revealing a patch for ie, and do you see other people downloading other browsers instead? >> it is a combination. this should be the final nail in the coffin for windows xp users. they should really not be using the operating system anymore. for those users who are using internet explorer but later versions of windows, a variety of different mitigations would solve the problem. the most effective one we have seen is actually deploying emess. it would have caught this exploit as well as the past three or four that we have seen, plus 10 or so others from the last year. unfortunately, that will not work for most enterprises based on the pains of rolling out the type of fix. that is why microsoft is offering these other mitigations, such as turning on protected mode, potentially
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disabling activex controls, or flash altogether. >> thanks so much for sharing with us the work you did on this one. one ceo says he got fired after pleading guilty to domestic charges -- violence charges. we will talk about how this may impact the company going public. ♪
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>> welcome back to bloomberg "west." i'm emily chang. radiumone ceo gurbaksh chahal said that he was fired by the network after accepting a plea deal on domestic violence charges. he was charged with 45 felonies of domestic violence, but all of them have been dropped, and he accepted a misdemeanor plea deal and a fine instead. bill lonergan, the ceo of the company, will take over the company, which was in the stages of an ipo. cory johnson is with me as well as ari levy. you were speaking with chahal over the weekend. what did he have to say? >> he was shocked.
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it had been 10 days. he pled guilty to the charges, charges happened about six months ago he pleaded guilty, paid the fine. the board waited until april 26 to do anything about it. he had many more to meeting since then, so i think >> he is surprised. according to chahal, it was not the charges itself, but the criticism of it. >> obviously a dramatic story. this had been going on for two years since the original charges were filed. >> if you think about his
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position, 45 felony accounts, convicted of none of them. and that he had to pay a $500 fine and do some community service. what is the big deal? >> from the board's perspective, this company will be going public, we will have to answer to investors. investors will have a lot of questions about this company because it is an ad tech company. having to answer the question, why is the ceo, who pleaded guilty to two misdemeanor charges related to domestic assault, why is he your ceo, isn't there anyone else? it is better to get rid of it now. >> while he has been facing the charges, we had the cto on from radiumone. i want to talk about his blog post. he says --
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cory, what did he have to say about the actual accusations? aside from getting fired, what did he have to say? >> i thought he said even more on the blog them when he talked to me, and i talked to him many times. i asked him specifically about what happened. he said he lost his temper. i do not know what that means and i will not try to interpret it. there was a lot of media about this. a lot of them focusing on this notion that there was a videotape, which no one has seen, which revealed something that was never revealed. >> known in the public. >> correct. -- no one in the public. i do not know what it showed, but i know it never made it to
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court. some of the reporting on that is so inflammatory, perhaps irresponsible. >> didn't the police say in court documents that he hit her 117 times in the video? >> but they never charged him. i do not know what happened. he said he lost his temper. it is still a serious thing. >> ari, how does this impact the road to ipo? will they still go public? >> that is very much up in the air. whether conversations are still have -- happening with the banks, whether they want a cooling off until, hopefully we can find that out. bill lonergan, who is taking over, he has been a finance and
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operations guy throughout his career. he was the cfo of blue lithium, the company that chahal founded before selling it. he is not a startup ceo. whether this is the long-term answer to who will run the company, we do not know that yet. >> may be the most inflammatory thing that he said yesterday was that he said the board compelled him to take the plea, that he wanted to fight in court and become exonerated. it runs a direct quote in my story, the board wanted me to settle the so we could go on with the ipo. he is leveling the charge against his board of directors that they compelled him to take the police so they could get their payout in the ipo faster than they would otherwise if you are fighting it. >> in terms of timing, what have you heard? are the plans the same, will it be postponed? >> a spokesperson for the company would not say. it is small enough, they could file anytime now. we know they are coming close.
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>> it is ironic this is all happening at the same time, in the same week literally. >> it is not a coincidence. i think it is the reason it is all happening at the same time. maybe after 10 days, they thought it would go away, and maybe they had suggestions for the bankers that it would not go away. >> there are many things that could derail an ipo, we just do not hear about them. >> thank you both. the heartbleed bug grabbed headlines and proper attention to how underfunded open source efforts really are. now facebook, google, and amazon are pledging money. but will it be enough? ♪
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>> welcome back to "bloomberg west." i'm emily chang. on wednesday i will be interviewing twitter ceo dick costolo. we will be talking about their efforts to attract more mainstream users, its new ad network, and much more. don't miss my interview with dick costolo coming up this wednesday. now to the security flaw exposed earlier this month, heartbleed. it has some tech giant coming together to fund improvements in open-source programs. cori, this is interesting. people tell me that all of these bugs could compromise the future of open source and whether it exists at all. >> it is an interesting story and not easy to say, heartbleed bug. heartbleed bug. the organization has a new innovation because of this heartbleed bug. the director of the linux foundation is now with me.
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open ssl has not received a lot of financial support like lennox, for example. -- linux, for example. >> that is right, a typical market failure. if you look at linux, an important project that has received a lot of funding and is an important part of society. open ssl is also an important part of internet security, but for some reason, funding has not caught up with the important role it plays on the internet. >> can you explain what is open ssl? >> open ssl, essentially that lockbox in the corner of your web browser. it provides encryption for communication that you send over the internet. in this case, there was a bug discovered in the code base that was the result of this heartbleed bug. >> open ssl is created by whom? >> a group of developers, some of the best in the world when it
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comes to crypto technology, who have spent most of their adult lives on this, by and large, as volunteers, to put together the code. they have not had a lot of resources. post-heartbleed we decided to take a broader view and look at projects, not test open ssl, but other projects that are widely just lloyd and available jet -- widely deployed and available to the internet, and provide the resources to them to make the software better. >> you got big cash donations from companies that use or host open ssl. >> it is more than just open ssl. the companies i've spoken with want to get ahead of the next heartbleed. what they want to do is look for all of these products out there that are important to the stability of the internet and provide them with resources. whether it is microsoft or amazon or facebook or google. it is not just about open ssl.
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it is how do we get ahead of them rather than reacting defensively. >> you said some of the greatest computer experts created open ssl, but there is some criticism that the code is written so poorly, the notions might be great, but the code is so sloppy, open ssl cannot be saved and we need to go to an alternative. >> open ssl is widely used, so we cannot move to something else. we need to allow them to have more resources to make the code base better. you will see other efforts trying to clean up the code base in parallel, and that is a great thing about open source. you can have multiple responses to any problem. >> that needs to be accepted by the open ssl leaders, and that has not happened until now. can your involvement change that? >> the open ssl guys were work on their code. one of the things they have needed is resources to have people working full-time on the code base, provide for audit,
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additional testing. that is what we hope to provide, in addition for next project that needs it, beyond open ssl, other core infrastructure projects that for some reason have been underfunded. >> thank you very much. >> we will be right back with more "bloomberg west." >> it is 26 minutes past the hour, and that means bloomberg tv is on the markets. we do have the nasdaq, after being a little changed, now down 1.5%. we are really seeing a sellout
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continue with these momentum names, and netflix, amazon adding hit particularly hard. baidu as well. we will continue to watch the downward movement. ♪
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>> you are watching "bloomberg west." i'm emily chang. popular american tv shows are no longer available on some of china's biggest websites. they are no longer being streamed. this comes after government censors launched a recent crackdown on content deemed offensive. speaking of the streaming site,it just got a big investment by alibaba. alibaba and its founders have been on quite the shopping spree ahead of the company's highly anticipated ipo.
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last year, they purchased an online mapping company, acquired a stake in a tv and movie production company, and invested in both a messaging app and a department store operator. today, they agreed to spend $1.2 billion for an 18.5% stake. joining me now is someone who helped set up google's operations in china. thank you for joining us. when you look at the stuff that ali baba has invested or bought, it is incredible. why the shopping spree, why now? >> i did a quick calculation. $4 billion worth of acquisitions in the last six months alone. if you look at these, they are very well considered, in strategic areas that i have to believe would make a great
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growth story, such as video or mobile or content distribution. i think it will be helping them with a strong ipo story. >> they are investing a lot of money. these are not just one offs here and there. $1 billion to buy autonavi, $215 million investment in tangome. 10 figure investments here. what do you make of the fact that they are buying rather than building? >> absolutely. we talked about this a couple of times. they are somewhat behind on mobile. that is an area that people are investing heavily in. by spending this money to acquire its user base, in yuku, which has 300 million plus mobile users, they are growing much quicker than they can organically, acquire users on mobile. they are showing they can be bold.
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>> do you get the sense that they are rushing these things before he the ipo filing? >> it does seem like it. i am personally excited about the ipo even more than before. they are well-positioned to tell a great story. investors can draw the dots. video content in china vision, video distribution in youku. all of these are great stories and huge businesses for them. >> how does this fit into their grand plan in this case? >> they have to find growth. they are already a sizable company. a couple of areas for growth are geographic, and they have said they are not really going to go abroad, other than to promote cross territory trade, such as merchants selling things abroad, and selling in china. they are also behind in mobile and user behavior shift for mobile changes quickly. and to remind you again, china has one of the most active mobile populations in the world. to capture that, they have to quickly build up a strong mobile presence, whereas right now, they have been mostly a docile site.
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>> in terms of how they square off against other big players, like tencents, for example, what sets them apart? they have a huge social investment, although they are not a social company themselves. >> they believe they are most threatened by tencent, who has the biggest presence. tencent also recently invested in the second largest retailer, so they are probably going after ali baba. alibaba is going from commerce to mobile usage. >> how do you see this playing out between the big players? does one company owned certain territory, are they all try to go after everything? >> it seems like everyone is going after everything, which is why it is so different from the u.s.. if you look at alibaba's core business, it is like ebay and amazon combined. it would be unthinkable to have such a large player in the u.s. now it is sort of like combining it with youtube.
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it is mind-boggling how ambitious these companies are in terms of trying to take over everything. >> as the filing approaches, how do you expect this to play out? the chinese government can, at any times, though a wrench into this thing, as they did with his pornography issue. >> absolutely. i believe lots of discussions have happen with the chinese government. ali baba cannot be successful
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today if it had not already had a great relationship with the chinese government at all levels. the trade levels, security level, privacy level. i have to believe all of that has been done. if these acquisitions show anything, there is a playbook and they are executing it like a machine. >> crid yu, thank you. nba players and fans are protesting he l.a. clippers's donald sterling's alleged racist comments. what impact will it have on the league's bottom line? you can also watch us streaming on your tablet, phone, and on apple tv and amazon fire tv. ? ♪
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>> i'm emily chang. this is "bloomberg west." the warriors beat the clippers in the playoff game on sunday but the match was overshadowed by recorded comments allegedly made by clippers owner donald sterling, to his girlfriend. take a listen to what he allegedly had to say. >> this is in response to a picture that the girlfriend posted on instagram of herself with nba great magic johnson. the comments were met by protests, not surprisingly. carmax today announced it was ending its sponsorship of the team. joining me now is cory johnson and former nba tv president. he is currently the president of a media sports network. how do you expect us to impact the team in the short term and the long term? >> emily, i think you have to look at this in the way that the sports business works. the reality is, the sports business infrastructure is a very high fixed cost, high fixed
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expense business. so with player costs on the one hand, everything else that goes into the cost structure, essentially being fixed, and the revenue streams, whether they be local television, national television licensing, ticket sales, sponsorship, most of those are actually long-term agreements that do not really respond quickly to market forces. obviously, you had the carmax announcement today. it remains to be seen whether that will be an isolated incident or will be something bigger.
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>> i think what is interesting about this, to me at least, as a longtime sports and nba journalist, is that you have so many players and team executives from other teams dumbing down instantly and not disputing the notion that this could be true. we are still not sure if it was sterling himself saying these things, but i wonder, from the perspective of the league office, because of the long-term deals, if they know this is happening, if this is the way that sterling conducts himself, if it was his statement? but i also wonder about what the league has known about him. he has been a thorn in the side of the league for a long time. >> there have been issues going back to when he moved the team from san diego to los angeles in the early 1980's. i think, really, this is one of those perfect storms where we see a combination of celebrity, some tawdry mess, some race issues, billionaires, you have a lot of ingredients that only a screenplay writer could really fully appreciate, all happening all at once.
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it has managed to crowd out the top news stories of the moment, things like racism in arizona, issues of searching for planes in malaysia in the indian ocean. it is an interesting study on the news media, the sports media, etc., but as a business matter, it seems to me, it is too early to tell what the ultimate impact of all of this is going to be. it is one of these small incidents that has mushroomed into a large incident. i will say, sports leagues are pretty adept at crisis management and damage control. that is one of the core competencies of the sports
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league. you are always dealing with player fines, coaches misbehaving, issues of particular calls and the like. clearly, this is a bigger issue than the every day, but you look at what the nba has had to deal with in recent years -- you had the refereeing matter, which went to the core of the legitimacy of the game. >> we are hearing now from more sponsors who apparently think it is a bigger issue. virgin america just announced that they will withdraw their support from the clippers. i also have that statement from carmax calling sterling's views completely unacceptable and that they directly conflict with carmax's culture of respect for all individuals.
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while we have been a proud sponsor for nine years, -- my question is, right now, in the middle of the playoffs, going head to head with the warriors. how does this impact the games happening right now? could fans just not show up? >> there may be on the margin some impact in that regard, but a fan is a pretty hardwired creature. if you follow the team and the players for years and years, yes, you are clearly going to focus on these things that are as highly publicized and controversial as they are, but it does not really follow that you are going to abandon support of the players -- >> you say that, but i cannot imagine the blake griffin's clippers jersey is going to sell this week like it did last week when he had been dominant game
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in game three. i wonder, if at any point -- especially when the brand is starting to expand into new media, using twitter and instagram, all of these new forms of media around the world -- that this could damage the financial value and compelled the league to get involved as they never have before. especially with a new commissioner. >> clearly, adam -- >> the new commissioner of the nba. >> yes, he is a smart guy, has been a run the business for a while. he has been in the background as many of these issues have faced the league. i am quite confident he will find the right balance. there is a certain rush to judgment going on, and that is unfortunate, but clearly, the statements are not acceptable, if they are proven to be legitimate.
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and we do not know that yet. in one way, it has very little to do with the game of basketball and the product, but as is the case, where, in an interconnected world, where everything relates to everything, you cannot will escape -- >> the nba is investigating and says they will investigate quickly. you have the most famous player in the world, michael jordan, coming out against this, the clippers own coach. we will be watching how this comes out. ed desser, the president of desser sports media. intel raises $113 million. is it a sign of a bubble? ♪
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>> welcome back to "bloomberg west." i'm emily chang. when the moon is full, deals are 43% bigger according to the company says it has figured out how to use artificial intelligence to predict the best times to make a sale, and they just raise $100 million, the 13th company to raise a nine figure around so far this year. the funding was led by polaris, including an investment from kleiner perkins caulfield and buyers. ceo david elkington is with me right now. tell me about this moon thing. how did you figure this out?
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>> it is a piece of a larger ecosystem of data we are analyzing. i was sitting down with my father-in-law in law and he was an internist. he told me that at times during a full moon, the er room happen to be fuller. we are looking at the stock market, global gas prices, always looking at new things to analyze. we found there was a minor correlation. >> you are using ai gamification to figure out when to make a sales call. >> what we are really doing is we have an ai platform. we are looking at all of things that could influence a person as they make buying decisions. not unlike what amazon is doing, where they are creating personalization at the point-of-sale. if you have a sales rep who is about to sit down and engage with somebody, we can tell them who should -- they should be talking to, how they should be interacting.
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if you call it a ceo, you will probably not get him. i have a buddy who is a ceo, and if i call, there is a less than 12% chance i can talk to him. if i text him, it is much more likely that he will respond. >> this is a very competitive funding round. 25 different vc firms wanted to invest. 10 term sheets hear it and you walked away from $250 million. >> it was highly competitive, lots of people involved. >> why do you think that is? >> the enterprise space is going through an evolution. the consumer technology space was selecting its new winners with facebook and twitter. the same thing is happening with enterprise technology. there are 13 companies that have raised over $100 million. these are the new winners in enterprise technology.
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>> they are also consumer companies on the list, like airbnb. are you worried at all about a bubble, ridiculous amounts of capital chasing deals, things getting a little too hot? >> it is the responsibility of the company to grow into that kind of valuation. we have grown 100% over the past three years. it is all those tools that drive efficient processes and sales. there will be a multibillion dollar company. it is my responsibility, having taken so much capital, to provide a return for my investors, and my employees, and frankly the community around us. for us, it comes down to growth and owning. >> what was the valuation? >> significant. >> multibillion dollars? >> it was significant.
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>> now that you have raised money you have a lot of cash in the bank, what is the road ahead, when might you consider a public exit? >> it is all about growth. an ipo is an irrelevant funding stage in the company. for the last three years we have grown 100%. i would hope to continue that kind of trend over the foreseeable future. we will grow well over 100% this year. i am hiring lots of people. we had 150 employees, we have 375 now. i hope to be around 600 by the end of the year. we will be in asia and europe. we are building out lots of technologies. hiring in all categories. >> ceo of 13th company to raise a nine-figure round of funding. it is time to focus on one number that tells us a whole lot.
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jon erlichman is in l.a., cory johnson is in the newsroom. >> 3.5 million. there may be as many as 3.5 million atari game cartridges dumped in a mexican landfill. they overestimated the demand for an old-school videogame. i just love the book. she quotes a warner executive who says of the 4 million games that they shipped, 3.5 million were returned and eventually buried in a mexican landfill, until now. documentary filmmakers unearthed hundreds of those cartridges, some of the worst video games ever made. >> i am told that this game destroyed the videogame industry. >> this was a tough one, and ironic that the company behind this documentary is xbox studios , who has some pretty known video games. >> thanks, guys.
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thank you all for watching. ♪
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