>> live from pier 3 in san francisco, welcome to "bloomberg west," where we cover innovation, technology, and the future of business. i am cory johnson, in for emily chang. on june 18, amazon will be unveiling a smartphone. the move will give amazon another platform to sell digital content and perhaps escalate its rivalry with apple, google, and others. sprint moving closer to making a bid for t-mobile, nearing an agreement on the cost and capital structure and a termination fee -- that is according to people with knowledge of the matter. sprint will offer 50% stock and

50% cash. the agreement could be announced as soon as july. one tv host ranting about internet fast lanes, creating a buzz, tens of thousands of comments flooding the fcc after hbo host john oliver urged viewers to go to the fcc's website and give them comments in support of net neutrality. it caused the website to go down for a brief time. alibaba wants to go public on august 8. they see 8/8 as a good omen for the ipo because the number 8 in chinese considered lucky. the alibaba management is also said to prefer baba for the ticker symbol for alibaba. why not. amazon is about to jump into the

crowded smartphone market, unveiling a smartphone later this month. amazon tweeted that it is holding an event in seattle on june 18 with ceo jeff bezos scheduled to make an appearance. the tweet included a picture of a thin device with the amazon name on it. it would be the latest equipment from amazon. we helped break the story. adam, a phone is provocative, i think, not just because it is a phone but one wonders what it will cost. like, could it be free? what kind of things will they do to juice sales? >> amazon is a fascinating company, so there will be all sorts of interest in the specifications of the phone, but also the business model that amazon and jeff bezos may have something up their sleeves, a new way of selling the device, priced in a different way.

a lot of anticipation in the next couple weeks. >> you also wonder how customized it might be. presumably they will use android software, but maybe not. >> they have been using a variation, their own customization of the android for their other devices like the kindle fire and tablets, getting into the market for a new way for amazon to sell all the sorts of other content they have. they are not like apple where they are looking to get 30%, 40% margins on the sales of devices. jeff bezos has shown that he will sell these at essentially cost and look to make money on the sale of music, movies -- >> or maybe just make revenue, not profits. when you are looking at a company with a less than 1% margins in any given quarter,

they could have a phone that could be very cost competitive. >> absolutely, but it is an incredibly competitive market. the only two companies really making money in smartphones right now are apple and samsung. that could be an advantage for amazon in that they are not looking to make money on the device. >> there was the contention made that so many big tech companies we think of as very different -- apple, google, amazon -- they really have the same infrastructure, with server farms, high-speed fiber. it is interesting to see amazon's business model move a lot closer to apple's, making devices and selling digital content. >> an event like this really shows how far the business has come from being just a bookseller. meanwhile, they are having this very public fight with hachette, the book publisher. this sort of shows the attention they are giving, that jeff bezos

is giving. >> it has been the joke that people would buy everything but books from amazon. adam, thank you very much. sprint nearing an agreement for an acquisition of t-mobile in the u.s. they say sprint will offer 50% stock and 50% cash for t-mobile, leaving deutsche telekom with a 15% stake in the combined company. joining us on this developing story is alex sherman, who helped break the story. alex, what's the scoop? >> the scoop is the sides have been talking about a deal for months, maybe even years. they are finally reaching at least the financial terms on the deal, meaning the price, which we hear will be close to $40 per share for t-mobile. today they closed at about $34 and change, so a little premium for that. they are also close to a termination fee, which has been a point of contention all the

way back to when at&t was trying to purchase t-mobile for about $6 billion in cash and assets. they have not wanted to pay a termination fee that high, so the termination fee is expected to be lower than that. we still don't know the exact details, although we hear they want to pay about $1 billion. deutsche telekom wanted about $2 billion, so figure somewhere in between. they are almost ready to shake hands on a cash/stock offer. >> the termination fee is not inconsequential, not because of the numbers, but the justice department has looked at t-mobile and thought maybe they should stand alone. >> that has been a big point, they do not want to pay a large termination fee. when you look at comcast-time warner, at&t-directv, no

termination fees on those deals. they're hoping to dovetail off those deals and maybe take advantage of the wind of telecom reform. they're hoping to come in on the backs of these and be approved. >> alex sherman, thank you very much. still ahead, can a tv host slow down the creation of internet fast lanes? the fight over net neutrality heats up thanks to a compelling piece on hbo. and how did a 4-year-old company overtake apple in china? we will find out tomorrow on a special edition of "bloomberg west." from the flagship mi3 smartphone to its ambitious global expansion plans, we will have a look at all things xiaomi, one of apple's biggest threats in china.

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>> welcome back to "bloomberg west." i'm cory johnson. the fcc is getting a growing backlash in its plans to redefine net neutrality, tens of thousands of people flocking to the fcc website after john oliver urged viewers to post comments supporting net neutrality. >> that's right, the fcc are literally inviting internet comments at this address. at this point, and i cannot believe i'm about to do this, i would like to address the internet commentary out there directly. good evening, monsters. >> the fcc website crashed following the oliver speech. i spoke with reed hundt and asked if he had ever seen anything like this. >> back in the day, in the 1990's, we had aol, steve case

was the ceo. he arranged the first e-mail of political lobbying in history, 400,000 e-mails sent to the united states congress to tell them to keep the internet open. it's the same issue many, many years later. the power of the net roots has grown and the fcc chairman is getting an earful. >> no kidding. on some level, i feel like i have not done a great job of explaining what this is about. the notion of net neutrality i think is sinking in, the notion that some things will be allowed to come to you faster if certain companies pay for that, but there is a bigger regulatory framework. i wonder when you were at the fcc how you tried to position the internet and what was relative then in terms of trying to regulate it. >> the fundamental view of the fcc ever since i was there in the clinton administration has been that the internet really

ought to be open to all users, and that includes people who put content out and people who just want to see the content, and it ought to be neutral in the sense that anybody can put content out and anybody can access it. i am on the board of assia, and we are launching this friday a particular application which anybody can download for free onto a smartphone. if you download it, you will be up to measure in your house your wi-fi speed and find out if you actually are getting the internet that you paid for. if you order from comcast 100 megabits per second, you will be able to measure and determine if you're getting it. the key with the fcc is you ought to be able to go as fast as you purchased. you ought to be able to go in the fast lane that you chose to any website with any content.

>> i think this is sort of a fundamental belief about business and government responsibility. fundamentally, if comcast has to deliver everything at the same speed, they take on a greater cost for the burden of what, for the benefit of whom? >> for the benefit of you and me. the question is, do you want the cable guy or the cellular company to be between you and the content? well, they are between you and the content, but do you also want them to close some doors and open others, slow some access speeds, increase others? that is the fundamental issue at the fcc. the starting point is you ought to be able to know that you're getting what you paid for. that is what the free assia application will permit you to do, to know that you're getting what you paid for. >> if someone else were to have

that kind of control, it raises some big free speech issues. i was surprised to see john oliver, of all people, take this on in a funny way. let me play you a brief clip. >> these companies have washington in their pockets to a conveniently, almost unbelievable degree. >> comcast has spent $18 million in lobbying last year, more than any other company besides lockheed martin. >> just to be clear, the ranking of who buys government influence is, number one, military-industrial complex and, number two, the provider of lizard lick. >> "bloomberg west" viewers got a little of that before john oliver showed it. what about this sort of revolving door concern, the

concern that tom wheeler and others cannot be fair because they have gotten so much influence from lobbyists in washington? >> back when the internet was in its founding days, in the green of youth, all of us in washington -- i remember us sitting in vice president gore's office, we wanted it to be a platform for grassroots democracy. now they call that net roots, but what you're seeing in these comments to the fcc is what we hoped for. we would hope that everybody could log onto the fcc website -- sorry that it crashed, it needs to be beefed up -- but log on and submit comments. i want people to download this free app from assia, measure their bandwidth, and tell the fcc whether you are getting what you paid for. if you are getting what you paid for, compliment your cable guy

or your cellular provider. and it's a free app. >> there is, however, in the u.s., even when it's as advertised, it is pathetic compared with some of the other countries who have internet access, period. >> there's nothing wrong with whining about it. download the free app, send a message to the fcc if you're not getting what you paid for. tell them that you don't want to be in japan in order to get fast internet. >> reed hundt, really appreciate your time. thank you very much. coming up, alibaba's ipo, choosing a bid for the e-commerce giant's trading debut. that's next. you can watch us streaming on your tablet, phone, bloomberg.com, and apple tv. and how did a 4-year-old company overtake apple in china? find out tomorrow.

the flagship mi3 smartphone, it's a leader, and its global expansion plan -- an in-depth look at all things xiaomi, one of apple's biggest threats in china. ♪

>> welcome back to "bloomberg west." google's planning a new e-mail privacy tool to prevent the nsa and others from snooping, promising that e-mail will remain encrypted until the recipient decodes it. google has released the source code and wants developers to do some heavy testing before it is

released as a chrome extension. alibaba hoping for a good fortune when u.s. trading begins. the company is targeting august 8 for its ipo because the word "ba" means 8 in chinese, which means good fortune. they also prefer having baba as their ticker symbol. joining us to talk about the alibaba ipo is jeff. look, this is a challenge. it's interesting, first of all, culturally, but it's a challenge to get a deal like this done, let alone in summer, let alone with a target date. >> you raise a number of good points. in the perfect market, the perfect time, a $20 billion ipo will be challenging to do. it's one of the largest ever and

likely to be one of the largest ever. august 8 perhaps fits the window where you are early enough in august to avoid interrupting banker vacations and avoid the real slump that happens in the second half of august where the market slows down and trading volumes follow. but they are not wed to august 8. they would like to do it, they would like to have the ticker symbol, but they are realistic, they are businessmen. if it doesn't work, they'll push it past labor day, which is the normal timeframe for an ipo. >> this is such a big deal, like landing a 747 on an aircraft carrier, and the market has not been as strong as it was in the fall when they were bringing together plans for this. >> i think it has worked out reasonably well in some respects that the tech sell-off happened in the spring, the march, april, may timeframe. >> really? >> they didn't want to come in at the peak with everyone else,

when all these other tech stocks were up and the tech investors were exhausted and had put their money in a lot of other places. if there is a sell-off, you don't want a sell-off that runs right up to this hypothetical august 8 ipo, but a sell-off a quarter before or a few months before is not the worst thing in the world. the other thing about the august date, google did an ipo in august, so it can be done. >> 10 years ago this summer, that was google's, at the time one of the biggest ipo's. this could be the biggest ipo in the history of ipo's, forget technology. it's hard to imagine that in the summertime they would drum up enough support. you have sort of suggested that the vacations, you have to have these shoppers in the stores in front of their screens to buy this. >> it is also, the key -- the retail investors are nice, but the big institutional investors are the ones who really matter. you need some people to take this, the fidelity of the world

and the blackrock of the world -- for any large ipo, you need them to take a couple percentage points of any deal. it will be key that you are able to have a good road show through july, early august, to get a deal of this size done. >> jeff, this is a big rock in the middle of the pond. i wonder what ripples and other deals we will see affected by this. >> you know what i think really plays a role is not just the ipo landscape but also the m&a landscape because this deal, softbank has a big stake here, and you also see alibaba doing their own acquisitions. they have done a number of acquisitions already. they are constantly on the prowl, looking for others, and once they have the ipo and they have a valuation attached to the company and they can sell shares in a deal if they want to, it gets easier for them to pursue deals. the impact of the ipo is more broad, the trillion dollar,

multi-trillion dollar m&a as well. >> interesting. jeff mccracken, thank you. >> thank you. >> tune in tomorrow for a special edition of "bloomberg west." xiaomi rising, looking at the smartphone maker that went from a scrappy startup to one of apple's biggest threats in four years. that is tomorrow on a special "bloomberg west" at 1:00 eastern, 10:00 pacific. in business today, the walk-and-talk meeting. i hit the trail with the linkedin ceo. why he says no to the traditional power lunch. >> time for on the markets. the equity markets, stocks traded higher across the board. the s&p 500 with a record high, record high every day, but that

is exactly where we are. adp jobs report, not too impressive, but the beige book painted an optimistic picture of the u.s. economy. ♪

>> you're watching "bloomberg west," where we cover innovation, technology, and the future of business. i'm cory johnson. the traditional business meeting may be the latest thing that silicon valley is making obsolete. many top executives are taking a page from the late steve jobs and shunning the conference room in favor of the walk-and-talk. linkedin's ceo is known for taking walks with team members on some of their trails at their mountain view campus. i spoke with him to see why he is taking it to the streets. ♪ show me the way.

this is your regular walk? >> this is where it all begins. >> tell me why you started. >> it was practical at first. when we were at the earliest stages of hyper-growth, we were in the throes of facility planning. at one time, we had a lot of people and not enough space. one of our folks, who was actually responsible for training and fitness, he said, i've got a great idea -- in addition to reducing the demand for conference rooms, you will actually be in better shape, just doing your meetings while walking around. this was apparently something they had already started, and i started sharing that with people in the office. when i heard it, i thought it was so clever. >> basically, you do not want to spend more time in conference rooms? >> we have actually built out and continue to expand. we are in 26 cities around the world, we have a big and growing presence in san francisco, we have a big office space in

sunnyvale. i think this is a natural expansion of the hyper-growth of the company. you will find inflection points where people very practically have to -- watch out for -- >> one of the hazards. >> practically speaking, you have to come up with solutions. >> it's funny, it is so easily overlooked, things like facilities. what kind of things do you get in a walk-and-talk you do not get in others? >> first of all, it would be hard to say, but getting out of the office, getting outside just changes the whole state of things. it's incredible scenery. it's beautiful weather in northern california. there is something about being outside that i think in and of itself is a huge benefit. that's one. two, i think people connect better when they are walking together. maybe they are more direct and candid because they are not making direct eye contact, the

comfort with being in the outdoors. something clearly changes. another interesting part of it is it minimizes distractions. >> there is no checking e-mail. >> when we are walking together, i'm certainly not doing this. people can interrupt us. we are not walking in the office. ♪ that's the nature of the times, to some extent, enabling you to get away from that and getting dialed in and focused. >> that was linkedin ceo jeff wiener on the mean streets of mountain view, california. pandora is facing a new challenge with the u.s. justice department reviewing decades of old agreements for songwriter royalties. it could change how much pandora has to pay songwriters each time their songs are played. jon erlichman is in los angeles, in the thick of things with the music industry.

this is a big deal for pandora. >> this is a story you have covered as well, cory. songwriters generally feel like in the process of music being played, they get a raw deal. they get less than performers do when their songs are played. you have groups like ascap chasing people down who are playing the songs and saying, hey, you have to pay the songwriters. the general beef they have had is twofold. one is that all the laws surrounding ultimately how they are paid are way too old. not irrelevant in the world of internet radio. number two, coming back to what ultimately a company like pandora pays songwriters and composers versus what it ultimately pays the performers, it's interesting actually when you look at the data from pandora. it says last year, 7% of the royalties that were paid by

pandora went to the songwriters and composers. the rest went to the britney spears of the world. >> interesting, particularly for musicians, these rules go all the way back to the days of the player piano. that's when they were originally written, because of the piano roll. pandora's founder certainly knows this. >> he does, and he gets angry when people suggest that pandora does not want to pay songwriters or composers. he had a blog a while ago where he said, first of all we went to ascap, we went to the management, we worked out a deal where we would pay higher royalty rates. the board said, no, we're not going ahead with that. he basically said that a few high-profile publishers were greedy. as a result, pandora was in a position where it would be paying lower royalty rates than otherwise. that is why this really has to be played out and figured out,

it seems like, in washington. >> the songwriters are on one side. what about the artists? what do they think about this? >> i think most of the artists, generally speaking, and songwriters and composers, they like pandora. it's part of the future. pandora today said they had 77 million active users. their share of the overall radio listening market in this country continues to grow. if you look at this in the context of the apple-beats deal, it's not necessarily that people aren't buying cd's anymore, it's that they are not as inclined to download a song from a service like itunes. now you have to think a lot more about the rising power of subscription services, the rising power of internet radio services like pandora. as artists, we can either fight them or choose to be with them, because they represent the future. i think that is one of the other

reasons you're seeing a lot of artists really focused on concert touring, because that is where a huge amount of their income is coming from as opposed to people just buying the cd. >> the economics have changed so dramatically since we went to streaming. it makes me wonder what apple is thinking with beats, if they really think that the streaming download service has changed so dramatically because of the justice department. >> absolutely, and i think it will be -- what apple has currently in place with the itunes radio service, it gets really complicated because there is the ability to play some of your existing music, coupled with listening to radio tracks, coupled with the ability to go on and buy songs. for an artist, it may be challenging to know how you are getting paid through the services. the question is, do you fight them or just assume that the apple and pandora of the world are looking out for your best interests. >> i still have trouble downloading the latest allman brothers record to my eight-track player, though i will figure it out.

qualcomm has a new feature that could redefine the future of the tablet. we will take a look at this. also, how did the 4-year-old startup xiaomi become apple's biggest threat in china? we will have a special, "xiaomi rising," 1:00 on the east coast, 10:00 on the west coast, on your phone, tablet, and bloomberg tv. ♪

>> welcome back to "bloomberg west." i'm cory johnson. meet the tablet of the future, which will let users capture ultra hd video. the question is, what is making

these features possible and when will it happen? a tiny chip that's made by qualcomm. tim, i'm really excited because i want to see what my next tablet is going to look like, and it all starts with the chip. >> qualcomm's job is to drive innovation in the market, which makes you want to buy the next tablet from the companies that we sell to, like xiaomi, htc, etc. >> we had the ceo of merrell boots on talking about innovation. after the show we were talking. they have merrell boots, which don't get worn out for 15 years. show me something that's going to be amazing that will make me want to buy another tablet when the one i have works really well. >> i think you will see a transformation, the way that the industry changes from hd to 4k. the hd transition took a while. you had to wait for the dvd players, the set top boxes, the

content took years. you don't want to buy a new tv every seven years. smartphones, the industry moves incredibly fast. the design cycle is months, not years. people buy a new smartphone every year or two years. it will compare the smartphones like the lg3, the samsung galaxy, those already capture 4k. you may be taking 4k video without knowing it. >> but you couldn't see it on a tablet, until right now. >> people are already capturing 4k. the question is how to display it. these are reference designs. we help developers, they build apps, play with the product. >> let's see.

this is a 4k video. and this is going out on the hd broadcast at 1080. >> i have to apologize, my tablet is better than your camera. >> we are going out at 580. >> it's amazing, when i bring this device home, it's better than a lot of the electronics in my house. >> talk to me about the chip. this is snapdragon? >> there are whole varieties of snapdragon. this is the latest and greatest, 805. this will start being in phones and tablets the second half of the calendar year. for a lot of people, we think it will be by christmas. >> like any chipmaker, you're trying to make it thinner, stronger, faster, more transistors on the chip, a smaller size. do you have to start working with the glass makers and the other people who can make this kind of stuff work? >> you have to work with

everybody. first of all, you may be able to capture a 4k image. the sensor manufacturers have lined up around 4k, you need to architect the chip with the image signal processor, you have to have the right kind of memory, graphics processing, and then you have to work with the display manufacturers to have displays at that resolution as well. >> we see this. >> 4k is not just about video. it's really 4k everything. i will show a demonstration, a graphics demonstration. one of the next-generation consoles will be hardware-based consoles, a feature -- >> hardware-based? >> it's a simple demonstration. this is console-style technology showing up in a tablet. >> you have the rendering happening, the 3d. >> it's side-by-side. these are the polygons that are making up this particular bug.

if you're looking at them here, he is in reasonable resolution. you can almost see like a toy that was put together, like blocks, simple shapes. i will zoom in on him some more. i will kick up the resolution. >> that's really fast. >> absolutely. and at this resolution, which is quite low, the chip doesn't even break a sweat. i will take the resolution up by a thousand times. >> you start to see how much math has to be done in real-time. >> absolutely, and we are taking the original layout and adding details. it happens to this bug, i will take the resolution down again, take a closer look. here he sort of looks like a toy, like a lego. as i add in detail, he looks much more realistic, with platelets, tails. >> five times more stuff. this reminds me of some of the old days, when we saw a rendering in the movies with cgi

computers with "jurassic park," all the polygons being calculated. would you imagine -- imagine the xbox before the xbox -- doing games on these devices? >> this is console-quality graphics. >> you will see this in the next year? >> you will see this by the fall, christmas. the guy, flying over here, the guy in the airport -- >> ok, flying up there? >> the guy at airport security was carrying a ts4 in his check-in luggage. i had three of these tablets. i had probably three times the capabilities of video games. i can play with these on the planes. >> i discovered when you carry that many tablets at airports, it is a different level of security. thank you very much, tim, really cool stuff. some of the next chips from qualcomm. you rarely see them in action. explainer videos help attract

investors. it's big business in silicon valley. that's next on "bloomberg west." ♪

>> welcome back to "bloomberg west." i'm cory johnson. in the startup world, you have to explain clearly what your company does to customers, investors, and the like. a lot of companies are choosing short explainer videos from production houses. switch video has produced hundreds of explainer videos for startups. joining us to talk about this growing business is switch video's ceo. you were kind enough to do a video to explain how this stuff works. there is nothing like a picture describing a story.

>> we have been doing this quite a while and really dug into the science behind it and why video is so effective. if you actually read text, people only remember 10%, whereas if you put that together with images and tell the story visually, people retain 68% of the information. that's kind of why the videos are so effective and why that video was really great. >> specifically around startups, it's interesting, startups often these days, they don't have a lot of structure, they use amazon cloud or something like that, they don't have a sales team. i imagine this looms large, trying to get off the ground without having the muscle behind them. >> the industry has taken off. when we started six years ago, there was nobody else out there. now so many people are producing videos, every single startup has videos at launch. >> specifically, the animation, it is expensive. animators are desperately needed.

so many are using animators, animation houses. tell me how your business works. >> my production team is in canada. there is a lot of animation in toronto. we offer consistent, full-time jobs in the small market of toronto. that's where my production team is. we have a really great core team and office there. that's how we are a little different. >> are they cheaper? >> everything is less expensive. >> that is also true. there was this great book where the author tried to explain what it is about cartoons and illustrations that resonate with people. it just was simplifying something down, simplifying a face down to a smiley face makes it look like everyone's face and everyone has a connection with it. is that the appeal of the

drawings? >> i think that, and also recognizing people's working memory. you can only take in so much information. if you simplify things with the core messaging, people actually take the information into their working memory and it becomes long-term knowledge. that's why going with simple visual animation is good as well. >> what have you done to automate your process? it's not just the time it takes an illustrator, the concept of how to explain something complicated is really tricky. >> it is, and having produced about 600 videos, we are really good at it. we have been doing this a long time. my team, being in canada, we have low turnover in this small town. we have an awesome core, we spend a lot of time. having that process is really important. >> particularly in the winter, when you have six feet of lake ontario snow. andrew, thank you very much, appreciate it.

now it is time for the bwest byte, one number that tells us a whole lot. jon erlichman has it. jon? >> 25,000. gopro recently told us that the gopro cameras are sold in 25,000 retail locations and in more than 100 countries. they told us that, they told us a whole bunch of stuff when they unveiled their plans to go public and had to share their financial information. the company said that tony bates, most recently of microsoft and who led skype, is joining gopro as president. >> it is a fascinating company. i have not read the prospectus yet. it seems to be popping up far beyond surfboards and kite boarders. >> that is what they would hope. you were just talking about video. clearly this is a company trying to position itself as more of a media company than just a

hardware manufacturer. it probably started with the success of its youtube channel, but now you go on virgin american flights and there is a gopro channel. tony bates is known for skype and cisco, but he has been on the board of youtube, worked on the board of global tone, which was acquired by amazon. i think he is in the same frame of mind. >> i went snowboarding this winter and i couldn't believe how many people were riding around wearing gopros on their helmet. >> you can go to collinwood next winter. >> thank you very much, jon erlichman. how did a 4-year-old startup become apple's biggest threat in china? the secrets of xiaomi, an in-depth look on a special "bloomberg west" tomorrow. check it out. ♪

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