tv Bloomberg West Bloomberg June 20, 2016 11:00pm-12:01am EDT
>> you are watching bloomberg west. let's begin with a look at the news. the fbi has released the transcript of the orlando shooter talking with 911 and crisis negotiations. >> he identified himself as an islamic soldier and he was intent on killing americans. >> the bureau says that he was radicalized in the united states and not i-84 in terror group. -- not by a foreign terror group. the campaign manager for donald trump had been let go. -- has been let go. testing a zika vaccine on
humans. they plan to start testing the vaccine in a few weeks on 40 people. the cavaliers are back in cleveland, after delivering the first major championship in 52 years. the cavaliers won the seventh game after falling 3-1 against the golden state warriors, the first time that has ever been done in nba history. ♪
emily: welcome to bloomberg west. facebook holds a much-anticipated shareholder meeting. plus, the bumpy road to india. there could be an opening for the tech giant in asia. a countdown to the biggest deal in m&a history. dell continues to trim the fat. facebook holders have approved the creation of a third class of shares to give mark zuckerberg the controlling share of the company for the for the forseeable future. the board was approved, including peter thiel. not all shareholders are pleased. she expressed opposition and said that it would be
implausible for outside shareholders to have input on the shareholder decisions and we are concerned about the governance risks. sarah and the senior research analyst. i will start with you, since you are at the meeting today. where was the action? >> there was excitement around the proposal and everybody knew it would pass. the comments were some that many feel strongly about and zuckerberg has majority control and he can build this. even down the line, if he gives this a way to charitable causes and he diversifies, he will still maintain control of the company and that is how it would always be. emily: anyone who bought in knew
that one share was one vote. that said, investors may never have an opportunity to impact the facebook business decisions. is there a point? >> investors will not get the opportunity to have governance over facebook, unless mark zuckerberg did that up. -- gives that up. mark zuckerberg is young and has established himself as a visionary, doing an incredible job. a majority of investors are ok with this, because he has been a responsible leader and the expectations are that he will continue to be. the concept of how he ceases ownership going down, giving away $40 billion to charity.
he has good motives for putting this in place. emily: it makes sense to ask for this, as long as facebook is doing well and they are beating earnings again and again. mark announced he would ask for this and there were some who said there are some risks. do you see risks down the line? what if facebook starts to not do so well? >> there are risks and you need to give zuckerberg credit. obviously, people can make mistakes and the trends can be missed. i don't forsee that. that is a risk. there is a mechanism to get some change in the leadership. i think it is unlikely that it ends up being a problem.
but, that is a risk. emily: someone asked if mark zuckerberg would leave facebook to pursue the philanthropic efforts. >> he said he would stay involved and the thing to note about the structure is that it is only if zuckerberg maintains the leadership. if he decides to leave and do philanthropic initiatives full-time, this voting structure is kaput. emily: there was a question about china. let's take a listen to what she had to say. she said -- we are having trouble with the soundbite. she said the mission was to connect everyone in the chinese market and to see what happens. is the facebook status in china going to change?
>> i don't think so. i think it is unlikely. i think there are core values that the current government of china will not support and it is hard to operate in a world that is operated by the government. they may try to have changes and be advocates for change. we are not holding our breath for anything take in china -- anything big in china. emily: thank you so much. coming up, apple is closer to opening doors in india. they are still reeling from a setback in china. jeff bezos blasts beyond. details of the weekend launch. ♪
emily: this is bloomberg west. tim cook is holding a fundraiser next week for paul ryan. this is according to republican aides. some will go to the congressional committee to benefit other candidates. tim cook looks to boost establishment republican. he will not sponsor the convention next month. a number of companies have scaled back or dropped their support of the convention. the apple asia ambitions are being put to the test. the government clears away to open up shop with foreign investment and, in china, apple is reeling from a setback.
our managing editor of tech coverage is joining us now from new york. peter, i will start with you. how big are the changes in india for apple? emily: it is a step -- >> it is a step in the right direction for apple. there are local sourcing rules that require you to get 30% of your inputs from a country to open your own retail store. apple has been trying to get around these. the last we heard was that the government would hold apple responsible for meeting local sourcing rules to open its own retail sources. now, india has overhauled a bunch of regulations to get more foreign investment. they think there will be a grace
period for apple. there could be a three-year grace period to open up retail stores. emily: you said there were barriers to india being bigger. do you see some of the barriers removed? >> look at the headlines and there are more people in india in the next 10 years than china. at quick glance, the opportunities are parallel. the gdp per person in india is 1/5 of china. so, yes, the news does make it easier for apple to open up the stores and to build brands. there are still economic hurdles that they will need to get over to capitalize on that opportunity.
emily: we know that tim cook visited india recently. wire the rules finally being relaxed now and what took so long? >> they want to show themselves as being more open to business and it is not just about apple. the smart phone market is the fastest-growing in the world and there will be many more phones sold their, than in china, for example. retail is a critical pitch to consumers and they would like to open up those retail stores as flagships, so that the people can see what they look like. they are a small player in india, for the exact reasons laid out.
they only have 2% of the market, because their phones are priced higher than what people typically pay. there is a challenge on the price side. there is also an opportunity. emily: what do you make of the ruling that apple must stop selling the iphone 6 and iphone 6 s? apple has appealed this how serious -- appealed this. how serious will this be? >> by this time -- by the time this plays out, they will be on the iphone seven. -- iphone 7. for the investors that i talked to, they are less concerned about the near-term impact and they want to feel better about china and apple working together. i think that the huge opportunity is in china and you have to deal with the bumps in the road's.
>> do you see this ruling as being politically motivated? >> they are getting comfortable about exercising their ip rights and we saw huawei and samsung with patent violations. now we heard about a lawsuit against apple in beijing. it is exceptional to see these companies exerting the patent rights in a way that we have not seen them do before. the government, in this particular case, is trying to make a judgment about the facts in front of them and the question is, will this have broader repercussions? to be clear, in beijing, the iphones are on sale and apple has appealed this ruling and they will continue to be on sale, until the ruling is
decided. emily: all right. the managing editor for technology, thank you for joining us. thank you for stopping by today. speaking of the smartphone wars in asia, a handset maker in the domestic market is advertising big-time here. if you watched the nba finals, - we asked how they plan to set themselves apart from huawei. >> this is designed in
california and we have local design centers, local call centers, distribution, sales, and marketing. we are very close to our customers. >> where do you see the growth? in china, the smart phone market has come to a halt. will that rebound? what will kickstart that. >> there is a lot of competition here and we believe that zte will rebound in china. >> the zte is one of the first handsets enabled for the google platform. >> vr will be parts of things in the future. we have named our flagship
because we believe the vision in the future will be the smartphone is the center of everything. we will be part of the many things you could do with the smartphone and the connections around you. emily: apple is working on better ai and voice features. what does that mean? >> in 2007, steve jobs change the industry. he was able to get the computers to where they want in a touch. now, with the broadband access and 5g coming, we are going to smart 2.0. we will have voice control as an important factor.
as a matter of fact, in 2014, [indiscernible] we did a lot of effort in that to create a healthy system and we get a lot of studies. smart phone users prefer a function. we have found that 41% of chinese customers like smartphone with a voice control. it is a high-end brand and quality. emily: do you make anything beside smartphones? >> in the villages in china, we gradually grew to worldwide.
we have infrastructure behind the smartphone for the wireless and broadband and price solutions. we have many devices. would have the smartphone and the smart projectors and the connected devices. emily: our conversation with zte's u.s. ceo. coming up, the venture in china. the details of the local production plan is next. ♪
bloomberg reports that shanghai is the first in line for the proposed base. joining us now for more is our managing editor for tech coverage in asia. what do we know about the partnership? >> to be clear, this was not announced i either company, at this point. a person who is familiar, they said that, among the cities competing, shanghai is the number one contender. that is not a big surprise. there is a free economic zone that would be good for tesla. there is motivation to build a plant in china avoid the levees that you would get, trying to build outside of the country. emily: this deal, is it a big
deal? >> it would be. there is speculation about what the percentage of preorders from china are. for tesla to have a second factory or a second assembly plant would be a big deal. emily: tell us more about the company that tesla will be working with. >> it is not a particularly high profile company, at this point. it sounds like there are close ties to the government and they would help facilitate the production, if teflon decided to move ahead. the agreement is nonbinding and it sounds like there are negotiations to get through and this is the direction that they are heading. >> why is it important for the
production cut in china. >> it is expensive and you have to ship to china. it is a lot of travel time and they do not like to have to wait. eventually, they have the ability to make the facilities elsewhere. >> i think this is a steady relationship and it has not been a huge market for them, historically. they are offering the electric vehicle to help with some of the pollution problems in the country and there are domestic competitors who would compete with their own electric vehicles. i think that tesla has an enormous opportunity. emily: talk to me about the domestic competition. we have spoken with a chinese electric car company that has some basis in the united states. how formidable are the competitors and who are they?
>> it is not clear. there is one that has plans for the electric vehicle and they are behind tesla. you will see competition. there are local competitors who have set up joint ventures with western manufacturing partners and there are some domestic partners that are emerging strong. emily: interesting. what will you be watching? >> you see the center of power in beijing and shanghai is the economic center. and a lot of tesla customers are wealthy customers in the southern part of the country. what are they building? is this a second factory? emily: we will keep following this. peter, thanks for stopping by. coming up, more deals out of silicon valley and we will take
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x1 will change the way you experience nbcuniversal's coverage of the rio olympic games. call or go online today to switch to x1. >> the top stories. reversedcks earlier losses. a new poll for the you referendum is too close to call. it is having his longest winning streak in more than five years. brexit poll tracker has the leave kids at 44% and remain at 42%. the indian prime minister is getting flexible, allowing for identities to fully own local airlines along with some defense assets. has also meant that apple could be opening its own indian stores after an easing of
locals pursing. the ins says japan has fallen short of economic targets and needs to reload the arrows of abenomics. it remains out of reach. he came to power promising a strategy to revise the world's economy. global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. this is bloomberg. we will get the latest with david. it's about the time of the day when japan reopens in china goes into its own break. we are looking at equities, near session highs at the moment, volume/compared to the 30 day average. it was a rusty start, shaking off some of the cobwebs, and it looks like we might end up with a third day of gains across the
asia-pacific with investors happy to take one additional risk, although not with the same monday.method we saw on that being said, despite the rally, we are seeing markets here in asia -- the other side of this risk spectrum is dollar-yen and you are looking at a two day chart -- we are still very close to the upper end of the retraining, which seems to be the market clearing price. while we are still seeing a rally across risk assets, selling the dollar does indicate that not everyone is convinced the u.k. will remain. that is how the debts are piling up. it's a fairly clear indicator, it might have been exacerbated yesterday by the rally.
in, sayings chiming that if the u.k. does leave the eu, 15% drop at the very least. that will be extremely low levels. emily: more deal activity in tech. on monday, twitter ceo jack dorsey explained he was buying a company so that twitter can continue to be the best place to see what's happening and why it matters. this move comes as competitors have been boasting rapid growth in video consumption on their platforms. twitter shares rose 1.9% on the news but are down 30.9% this year. dell looking to buy out francisco partners management as well as the newly established ever coast -- evergreen coast capital.
the sale is part of dell -- dell spun out its cyber security unit in april in a $100 million ipo, one of the only tech listings of the year. a month before that, they sold the business to japan -- to a company in japan. some analysts say this could trigger a flurry of deal activity in the tech sector. thank you so much for joining us. elliott is involved in this. you see private equity getting more involved in this? >> certainly. we saw equity partners acquired -- you are seeing a flurry of these deals happening with both large companies and private equity
investors. it's a reflection of a couple things. one is that prices are stabilizing a little bit. that's great. there is a fair amount of cash floating around with the large companies and the private equity investors. one point that people miss is a must if you look at the end customers, -- that people miss is, if you look at the end customers, there is a market for security products and count products. that's going up. emily: we heard last week that there is a lot more m&a in the pipeline, more near-term than we've seen in the last four years. would you agree? zia: i would agree. the ipo market is softening a little bit. there's a lot of money that has gone into these players. you have pent-up demand. you talked about the twitter deal. you have machine learning and
artificial intelligence, a very big deal at this point. you have the internet of things. you have the cloud players and security. all of that is being driven by these end customers that are demanding these products in a stronger way to never. -- way than ever. emily: who are the buyers going to be? who is going to get bought? zia: you saw the linkedin announcement. there may be others -- emily: like twitter? zia: potentially, and others. you have security companies. you may have a spike on the security side as well. and the buyers will be the big tech companies. but i wouldn't be surprised if an industrial company or a retail company or a nontraditional buyer comes in. these companies are strengthening their software capability. that may surprise us at some point. emily: we've been talking a little bit about microsoft buying linkedin. i want to bring in our bloomberg editor at large, cory johnson, who has been taking a look at
whether linkedin may bring about to microsoft's earnings sooner than forecast. cory: using the bloomberg terminal, we can drill down quickly into this by getting into the terminal a little bit. we get microsoft. you can see the acquisition of linkedin there. drilling down a little lower into linkedin, you can see the detail, the dates of the deal, when it was effective, when it was announced. we want to get into the numbers. the mrgc function shows us how the merger would work. assuming they are going to use all debt, that cost of debt, assumed to be 3.147%, that's a trailing cost of debt for them. right now, interest rates are so unusually low that they have an ability to borrow at lower cost.
this is what you want to keep an eye on. it is expected to be diluted. if we use the current cost of capital, not the average cost of capital, but the current cost, that is 2.375%. all of a sudden, we see this goes from being dilutive in the first year and second year to being accretive. that means the deal could add to earnings for microsoft in its second year once the cost of capital is lowered to the realistic number. that's one way for microsoft to keep their numbers low and let microsoft beat expectations, by lowering expectations. it's probably not realistic. microsoft is getting a better deal than they may be letting on. emily: what's your reaction to that? zia: i'm not going to get into the economics. that sounds like a great
analysis. linkedin is part of a strong professional network. you've got the business capabilities and the sophomore platform -- software platform. those two things seem to fit together. and you see such other combinations, enterprise and users will become an important combination. emily: was this a good bye form -- buy for microsoft? will they see results sooner than other deals? cory: microsoft's history says they will screw it up. that's the ultimate question -- can they make this merger work? can they make linkedin what it has been, which is a company that has been successful, or are they going to screw it up like so many other acquisitions, nokia, and technology -- ad technology? what do they do with this thing? is socgen at ella -- is satya
nadella's microsoft any better at acquisitions? emily: sometimes m&a is a hail mary. sometimes you are buying something really valuable. how much of the m&a that we are going to see is going to be new companies that are truly adding value and new companies that are just trying to figure out how to exit? zia: i think the magic on software m&a happens -- you have to hold onto the people and the technology. there are some companies that are better at it than others. different deals have different dynamics. i understand linkedin, from public reports, will remain as an independent company with the support of microsoft. cory: if you believe that. that stretches credibility. maybe it will. zia: companies, if you are spending that much money, you have to pay attention to the post-merger integration and the dynamics of the team that is
there, and i think these companies will do that. emily: do you think of brexit would impact tech m&a, and, if so, how? zia: it's too early to tell. you have a market where there is an increasing amount of startup activity happening. those companies may have difficulty expanding into europe if some of those rules and regulations change that may impact valuation, but i think it's too early to tell. emily: zia, thank you so much for joining us. cory johnson, our editor at large, thank you very much for that deep dive as well. another story we're watching, well marked hoping to -- walmart hoping to reshape its business in china. these companies will link up their supply chain. walmart has struggled in china. walmart's ceo has stressed that the company needs to succeed in
nasdaq, and -- earlier, we spoke exclusively with the ceo of iex and asked why he applied become an exchange in the first place. >> part of it is scale. there are limits to how big dark pools can grow. we no longer have a limit to how large we can grow. the other parties competing at the absolute highest level. for us, too, we are focused on serving multiple constituents, so we look at, right now, i think our best relationships are with the broke it -- the brokers and asset managers, but there have been a number of public trading companies who have expressed interest in working with iex. becoming an exchange is the next step of us doing that. erik: you account for about 2% of all equity trading in the united states right now. if this is successful, where that -- or that number be in a year? >> it's hard to predict. we don't offer the same
incentives. we are not paying people to send us orders. we have earn those orders a different way. part of it is about people understanding the execution quality on iex. this comment process has been very helpful. a lot of large asset managers have expressed better execution quality on iex. i think it takes time for that message to sink in. it will take some time, but we are pretty confident we can become one of the largest markets. erik: your critics are vocal, powerful, and deep-pocketed. how do you expect them to respond now? brad: i think we've seen a lot of the strategy, and the strategy was to aggressively oppose. we are very thankful for the support we got from investors publicly, because i think that forced the opposition to be very public about why they didn't support iex, despite is being backed by some of the larger investors. so, i think that part of it is
about misinformation. we've read a lot of things that simply weren't true. we expect that to continue. the good news is that it did not influence the outcome, which is iex getting approval to become an exchange. hopefully -- in a way, the facts prevailed at the end of the day. erik: nasdaq and potentially others that i may not be aware of how threatened to file a lawsuit challenging this decision by the sec -- sec. is that something you think will happen? are you preparing? brad: from our standpoint, it's kind of ironic that nasdaq is a company that actively pitches the fact that they are a technology company, they pitch disruptors in silicon valley. this is their response to facing disruption themselves, a lawsuit. we would be surprised if it took that half.
at the end of the day -- that path. erik: you think it is an empty threat, in other words? brad: i think it's an interesting response. emily: our colleague erik schatzker with iex c.e.o. brad katsuyama. jeff bezos' private space company launched a rocket into suborbital space and landed it in the span of eight minutes. the fourth successful landing. these tests have all been unmanned. blue origin is hoping to carry tourists into suborbital space by -- this could one day cut the cost of each launch by millions of dollars. staying with space, a russian court is -- russian soyuz capsule broguht back -- right back three astronauts, all in
emily: one story we are geeking out about, china dominates the latest ranking of the world's fastest supercomputers. for the seventh time in a row, china has the fastest machine. for the first time, it uses a chinese-made chip, instead of one made by intel. evidence that the technology gap between china and the u.s. is closing. the faa is expected to issue
regulations for commercial drones as early as this week. reports of the government summary have been posted online. the rules are expected to restrict a pilot's age, require pilot's to speak right and understand english, and place a maximum cap on altitude. these rules will spark broader demands for even more restrictions. thank you so much for joining us. we have seen this leaked report of what the government is supposed to approve. what's your first reaction to what you've seen so far? >> i think it's very positive. the industry has really been excited about this. this is something we have been building for since 2014. what we saw leaked was similar to what was proposed a year ago,
when the faa part -- put out some of these rules for comment. it is similar to what we were expecting, as far as the operators. it is pretty well in line with what the industry has been expecting. emily: do these rules go far enough? jesse: i think so. you are flying a small drone within a somewhat contained environment. this ensures that operators are safe, that they understand the rules of the road. there are ways to find out exactly where they are flying, who is flying what aircraft. there is a trail to go back and understand, if there is an issue, who is responsible. emily: do you think the restriction should be loosened? are there other changes you would like to see, like flying at night, for example? jesse: beyond line of sight is one that is critical for some companies, to fly long range over there powerlines -- their powerlines. he does not make sense to stop every mile or two -- it does not make sense to stop every mile or two to catch up with the aircraft. emily: you guys have been doing
most of your testing abroad, right? jesse: we've been working commercially here in the united states. you can fly under a section 333 exemption, which lets you do similar types of operations. we work with a lot of faa designated test sites. that lets us fly in neighborhoods and look at rooftops, those types of things. we were able to do quite a bit in the united states. emily: how will these new rules change your business at all? jesse: we are still going to be able to do a lot of the work we are doing. it's going to make it easier for our customers to operate on their own. it is a barrier to entry for a large corporation that may have been waiting for some of these rules to come out. now they can start operating. it's clear what the rules are. it is clear what they are going to have to do to get up and flying. emily: a couple weeks ago, i was out with my family.
there was a drone hovering above us. no idea who was operating it. it was fine. it moved off. it came down just fine. as a consumer, as a person out there in the environment, should i be worried about this? my kids are sitting under this drone, and i don't know who's controlling it, and i don't know if they actually have control. jesse: this is a safe technology that has been used by the model and hobby industry for decades. emily: you are saying nothing could go wrong with the drone? what if the power shut off or the person got knocked over? would that drone just safely land without hitting anyone? jesse: it depends on the type. a lot of the commercial types have things engineered into them to account for a variety of things that could go wrong. the faa now requires registration. there will be a registration number on the aircraft. if they are noncompliant with that, they could be subjected to enforcement actions.
emily: what about accidents? jesse: there are a lot of things that come out in the case of r&d. in the commercial industry, these are people's livelihoods and industries at stake. when we put something out in front of a customer, it is critical to ensure that it is something that can be flown over over -- over and over again safely. it is paramount that things are safe. emily: thank you so much for joining us. it's time now to find out who is having the best day ever. today's winner is disney's abc. game seven of the nba finals was the most-watched sporting event on abc and espn since 2006. it is the most-watched nba finals matchup since the days of michael jordan. the cleveland cavaliers took home the title, beating the war years -- warriors, much to the disappointment of people in my house. this is the first major sports title for cleveland since 1964,