♪ live from pier three in san francisco, welcome to "bloomberg west" where we cover innovation, technology, and the future of business. a merger that could shake up the tv and entertainment industry as we know it is growing will stop rupert murdoch's 21st century ,oxx is targeting time warner the parent company of cnn, hbo. in a statement, time warner says the board is confident that continuing to execute its strategic plan will create significantly more value for the company and its stockholders and is to. to any proposal that 21st

century foxx is in a position to offer. murdoch is reportedly willing to raise the offer higher than $85 a share if time warner opens its books and starts talking. mergerld this potential change media as we know it? cory johnson with me here in the studio and in l.a., our senior west coast correspondent, jon erlichman. what is 21st century foxx and today?time warner inc. like these are largely television-related businesses. they both obviously have film operations but this is largely a play on the future of television. if you look at where is foxx sits. dealsve two massive taking place. time warner cable being swallowed up by comcast. we constantly talk about what for the channels,

what kind of leverage they will have in the negotiations when they are trying to squeeze more fees out of the cable company. if you look at some of the things foxx has been doing, trying to boost the value of their own brand. this would be the extension of that. hbo, turner, some of the big brands that time warner would bring to the table, they can potentially have more like bridge. leave silicon valley out of this discussion. silicon valley companies are pursuing their own content shortages. here they are, interested in going after time warner. ago, alexnutes sherman reporting that time warner does not want to consider this while other potential suitors are busy doing other deals. comcast, trying to buy time warner cable.

what do essentially, you make of the fact that they have rejected this out right? >> it is hard to say that it means anything. this could be a bidding proposal. there is only so much the company can do. there was the case of the existence of time warner itself when there was a higher bidder out there and they went to delaware chancellor record. the attempted takeover time was tossed out and warner bros. got the gig. fundamentally if the prices there, shareholders will demand it and that is the risk of being a public company. they don't get to choose their own destiny, it's shareholders do. >> bus talk about rupert murdoch, if not the most ambitious media tycoon ever. he has been planning this deal. this would be a last feather in his cap.

why does he want to do this and does it make sure to tick sense or is it about vanity? >> i think he is big, he is bold. the timing seems right. if you think about where we are right now. we explained the landscape, the reasons he might want to potentially do this. to go public puts pressure on time warner to find an alternative. they don't want to negotiate with foxx on a deal right now. what are there alternatives? you mentioned the reporting, because to potential interested bidding forbe in this asset are very busy in washington right now. the timing seems right, it is opportunistic, strategic, and smart. there is a way to build up your business. we did not even talk about the international reach. both foxx and time warner have substantial assets overseas that

are growing. >> jon erlichman, our senior west coast correspondent. i want to bring in erik schatzker in new york who has been looking at this all day. you have been looking at this all day long, what do you think is the rationale behind this deal? >> i have spent quite a lot of time talking with people who are deeply involved in the bidding process for time warner cable people. who have direct knowledge of what has been discussed and why. question, it is not vanity, or i have been persuaded that it is not vanity. it is about taking advantage of synergy. this is between a foxx and a time warner. they have identified at least a billion and a half dollars of cost overlap that can be eliminated right away and helped to justify the 20% premium that

foxx has put on the table. build a muchto more powerful brand internationally. easyhad not had it that expanding the carriage in europe. rupert murdoch believes that the competition of time warner and givewould make -- would them the programming, the platform to have much more negotiating leverage in europe and to expand the company's reach. they don't believe that they can run hbo better than any other asset has. they do leave that more can be done with hbo overseas. if you take cable and satellite, sportsthat hbo, and then rights that time warner has two major league baseball, the nba, and the ncaa, you have three legs of a stool but they believe

supports a very firm rationale for the combination between foxx and time warner you might not be will to get with two other companies. >> hbo is the crown jewel. what about cnn. if this happens, what is the actual value of cnn to time warner? foxx and its advisers believe that they could get at least $6 billion for cnn and that value is calculated on the basis of a low double-digit multiple, earnings before interest taxes, amortization. da of about $5ebit billion. aat is just on cnn as business, its value to say a strategic buyer. if vanity work into the equation, in the party of someone looking at cnn, they believe that cnn would be closer

to eight or $10 billion. already there is $6 billion of value there to be recouped. youbillion minus six gives a $60 billion purchase. there is at least $20 billion of value currently and much more upside, and again if they were to be successful in expanding it internationally. >> ok, thank you so much for breaking it down for us. warnerikely that time will have to spin off a news network for regulatory reasons. foxx is the owner of the foxx news channel. now.robart joins us cnn has got to be sold, if this happens, but to who? >> that is a big question. you have to ask yourself, who would want to see and in? there are a couple that rise to the forward pretty quickly.

among them, disney. they have no cable news that were. they would be adjusted in combining those two assets. john skipper running 24 hours news and information networks. another company that you would want to have to think about is yahoo!, ever since mercer mayer took on server, it is been clear that she wants yahoo! to be a 21st-century media company. this might add an additional venue. or many of the big names, the people that she is hired recently, and you can see that being a possible combination. it has a lot of traffic, it has a lot of eyeballs. then, there is cbs, the other big network that doesn't have a presents.e

you can see sumner redstone. it is kind of funny. rupert murdoch, sumner redstone, these are the names we have been talking about the last 30 years. >> that is interesting. some of the same acquisitions we are talking about. wonder, one of the things that is not well understood is that maybe murdoch would not want this. the different businesses work together. talk to us a little bit about how time warner has been able to use hbo as a tool to force carriers to take tnt, tbs, and cnn when they would not otherwise want to pay for those services. >> when a company like time warner goes to comcast one of the cable operator, it is a package deal. do you want hbo? of course they want hbo. they need to have hbo, they need to have espn. those companies make them take on additional channels as part

of the overall bundle and that is why we have all of the channels that we do have on our dial. many of them would not survive on their own so they need to be part of a larger bundle which leads to who would want to buy cnn? cnn would need to be paired with a very powerful channel partner to make a good deal and have a lot of leverage with those cable operators. >> the possibilities are endless. they do so much for breaking us down for us. now, the terms of the deal between foxx and time warner might just be the beginning of the battle. coming up, we will be talking about some of the regulatory hurdles that the still could face. -- that this deal could face.

>> welcome back to "bloomberg west." the parent company of hbo, warner bros., c and and, and other properties has rejected a $75 billion takeover 21st-century foxx.

murdoch is willing to raise the offer if time warner's show some interest. what are the chances of this happening? 20 next is a senior media and entertainment analyst at s&p capital. now is a senior media and entertainment analyst at s&p capital. what are the chances that there is a deal that this ends in something? >> there is a good chance that you will see a higher offer from foxx. look at the way their shares are reacting. 's you look at at murdoch history, i think when he sets his sights on something, there is a good chance that they will give it a good shot. the premium that was offered on the initial proposal frankly i thought was a lowball offer. a company like time warner should command a very very hefty premium given the collection of assets that they have. what i expect is something that

could set the terms and that is likely to happen in foxx comes back with a sweetened offer. about comcast, at&t, they are currently occupied? what if they were available? >> i think what you are seeing now is some kind of consolidation on the content aside as we have seen on the distribution side. those companies you mentioned, they have their plates full right now. companies like cbs and viacom, all of the leading content providers are going to reassess how vulnerable a combined foxx and time warner is going to leave the overall landscape. i think you see the shares reacting on speculation that this could trigger a wave of content consolidation. >> rupert murdoch certainly doesn't like losing. what do you think the chances are that he will give up and he will back down? >> well, there's a price for

everything, right? i think what you are likely to see is that he will come back with an offer at least to get time warner talking. focusedstors are still on the succession question for foxx. so, part of what has happened is that there has been a spinoff and you have foxx that can make these kinds of merger attempts. i think that there is a good chance of that rupert murdoch his swan at it as song, to make this transformational deal which just frankly a few nuts ago i don't think anyone would have expected that you would see this kind of approach from foxx. as i said, i think that this will be transformational, if it happens. right now there is a chance that the talks will be revived at some point. >> if a deal goes through and cnn does need to be sold, who do you think buys it?

we were talking about yahoo!, abc, cbs. >> yes, i did overhear that conversation. all of those companies are conceivable candidates to acquire cnn. i would argue there is a lot of value in cnn. i think perhaps there is someone out there that could conceive of a way to extract more value. i do think that there are a number of companies out there that would covet owning cnn. >> senior media and into tenant analyst -- entertainment analyst , -- thank you for weighing in. >> thank you. >> is the pc rebounding from its slump? you can watch us on your tablet, phone, computer, bloomberg.com,

apple tv, amazon fire tv.

>> intel reporting big profits and strong sales this quarter. they said demand in general starting to recover among consumers who are mine laptops again. is the worst really over in pcs and what about tablets? >> really interesting. who knows better than the chief bean counter. fromeo joins me right now santa clara. , the resultsas were still really strong. the guide is even stronger. it seems like a lot of that was

driven by corporate demand. >> yes. i think at the highest level, what you see is our strategy playing out. there was some momentum in the pc segment of the business, particularly in the corporate segment. you saw gaining share in tablets and we are well on our way to 40 million. then, the data center which serves all of the other markets. all of that played into nice results in q2 and a nice guide for the rest of the year. >> the one who wrote the e pc ise "th dead" wrote it on a pc. >> there are a lot of computers out there who are over four years old. when you think about the evolution of the computer over the last several years. i have spectacular performance in graphics, great battery life, touch enabled. what we are seeing is the start

of the refresh of people buying new devices because of the capability that those bring. >> you guys have a better crystal ball than most companies. when you look out into the future, what is it you think that will finally get consumers to put down their phones and tablets and pick up computers with intel chips? >> i don't think they put down their phones and tablets. i think what we see in the consumer segment is consumers have multiple devices. and they walk into a retail outlet to buy their next device, what will they buy? is toe are aiming for make bad computer so good and so compelling that as opposed to upgrading their tablet, they might be a couple of years old, they upgrade their pc. it can be significantly older. isis the user experience, it the touch enabled, it is a modern os, all of that plays in here. is foreverade cycle

different now than it had been with the introduction of phones and with the adoption of phones and tablets? >> i think that we have seen over the last five plus years, we have seen in extending out of the life of computers. i think the way people use computers has changed so much. i think people have multiple devices. is the home media. this might have multiple laptops. those do not tend to get replace. you tend to by other devices for new usage models. part of what we are enabling, i remember how traumatic it was when the price of a pc dropped below the price of a dollars. great device.y a >> the gross margin improvement, quarter after quarter, it is

really impressive. is that just about utilization? >> at the highest level, it it is moore's law at work. and what our manufacturing advantage was, this is where performance matters. we can bring in architectures that have so much performance that we can actually drive a really rich mix by selling these high-performance devices. they get such a return on investment with going on the high end of our road map. we can target our manufacturing advantage to make sure we have the lowest possible cost. you saw that playing out in the quarter. they have date trail. we can do it in a way that we generate gross margin for the company. it comes to other manufacturing

advantages. it is helped by the factories are running nicely right now. >> stacy smith, thank you. up, more of a "bloomberg west" we will dive into the regulatory issues fox and time warner.

♪ >> you are watching "bloomberg west" where we focus on technology and the future of business. time warner projecting a takeover did from rupert murdoch's tony first century foxx. the umpire -- from rupert murdoch's 21st century fox. so, what is the current reputation inside and outside of the company and in the broader media business? from l.a. with more. this is not about vanity or

winning, this is about strategy. what is it? >> thinking. being a visionary. you profiled a lot of entrepreneurs, a lot of people who are thinking about the future and trying to run their businesses in a similar fashion. rupert murdoch has been doing this for decades. and it comes to being entrepreneurial, there are different facets of it. whether it is willing to move quickly on a deal, whether it is willing to try a new business and push aggressively like when broadcast in fox the first place or when it comes to putting people in the incisions of power. a lot of people who work for rupert murdoch over the years have talked about a big company where there is a bit of a startup field because of his interest in moving quickly. in this particular case, while we talk about rupert murdoch, we have to talk about his right hand man, chase carey.

of jamesasing role murdoch, one of his sons who has been focused on the television assets. i think with that collection of thinking on the view and a lack of fear. since his twitter account, not a lot of corporate ceos are willing to say what they feel. >> speaking about his reputation, does rupert murdoch have a reputation of being a shareholder friendly? >> it is feeling like this deal may ultimately be a shareholder decided deal. already we are talking about the fact that we have shareholder bases at both foxx and time warner. the group that he might have to be convinced of whether or not this is actually a good path or not are similar individuals. if you look at what happened with the mess that was the phone hacking scandal, the split up of

the two different businesses which was seen as a shareholder friendly thing. things like stock buyback. there is this view that foxx is a well-positioned business that has strategically made investments over the years, led by murdoch, that may be do not make sense right away. that have set them up for profit and revenue generation going forward. i think they're in a position to have the benefit of doubt from shareholders. i've spoken to at least two today who are encouraged by this development. i do believe that a lot of the shareholders who are invested in 21st century foxx are also invested in time warner , right? >> yes, it was fascinating to see jeff up-ice talk about the fact that there is no interest at the board level of engaging foxx at all right now. it did feel like that was a little bit of positioning

because you have so many other potential suitors who are tied up. we talked about it earlier in the program with time warner cable being swallowed up i comcast and at&t not able to do anything because it is acquiring directv. it is a very different tone than to say, we are not interested in doing this deal at this price because we are worth more, which is certainly the way things played out with time warner cable. if there is this view that the shareholders are getting something that also helps foxx, maybe they will be more willing to do a deal like this. , maybe also helps fox they will be willing to do a deal like this. withe of the weakest deals the $75 billion deal is a predatory issue. cory johnson here with more. us, other thanor cnn, are there issues?

wexler could be issues. it is really about the concentration of the business. a lot of the rules about cross media ownership have changed. there was a time when you cannot have a broadcaster could not own a newspaper and a tv station in the same town. those rules have changed. >> what did prevent the deal from winning governor approval? the former commissioner joins us from washington, d c. harold, you heard cory say earlier, are there other issues beyond cnn that these companies have to worry about? the deal goesk if forward, there will be a lot of issues outside of cnn. a lot will depend on how the antitrust agencies define the relevant markets.

this is lovers to the other assets that time warner and the others have. >> talk to us about some of the legal framework with which the fcc will look at this. >> well, the fcc will look at this. candidly, i don't think they have any legal foundation to look at it at all. these are two entities that are heavily regulated by the fcc. they will take a good hard look at it and see how they will be able to affect the deal. the will do what is called .tandard, the amorphous term this is whatever the fcc decides to do. i looked very heavy lee at the cable programming. the bargainingat power and negotiations between distributors. this is driving a lot of the recent mergers.

certainly, comcast, time warner, at&t, directv and is very much about seeing who can have a lot of bargaining power, negotiations between distribution and content origination. >> the fcc is looking at comcast. susan fromring in harvard law, the visiting professor and the author of " captive audience." how does this strike you from a regulatory perspective aside from the issue of cnn in presumably would be sold anyway? >> this is being driven by enormous concentration on distribution. hollywood is scared, seen that comcast is likely able to merge with time warner cable. a need a lot of half on their side to negotiate. >> don't you think is is driven by hollywood, not by cable? >> absolutely. this is driven by the programming industry.

this is to make sure that people can reach their programming without whatever comcast, time warner, whoever wants them to pay for attribute. if hbo can go over the top by themselves, they need to be able to be sure that it can reach subscribers. that is only going to happen if they have enough power to make that true. >> why do you think that the fcc shouldn't be looking at this? >> it is one of my personal views that the fcc does not have the authority to review mergers. the american public is well served by two antitrust agencies, the department of justice and the federal trade commission. you have hundreds of hard-working civil servants who work at these agencies, they do a wonderful job at reviewing mergers. we don't need the fcc to review it as well. >> how do you see this playing out? time warner has said they don't want to consider this when other

potential bidders are dealing with other acquisitions, also verizon potentially. how does this actually play out? jeff up-ice has to be nervous because comcast, time warner cable him if it goes through, they will control about 70% of american households. they will be the only choice for high-speed data distributions. if he wants to make sure that hbo can get there, he has to worry about being acquired by comcast. only a few players left on the board with him he can deal. >> why should or should not the fcc be involved? >> harold, when he was a commissioner, voted to approve all of the megamergers that have gone through in the last few decades and during his time. he presided over in part enormous consolidation in the industry.

the fcc's broad public interest mandate allows it to look out for the future of american medications. that is it short in early important. -- the fcc's broad public interest mandate allows it to look out for the future of american communications. >> do you see this triggering a spate of megamergers? >> is hard to predict the future, and it's hard to know whether there are future large mergers down the road. my tenurefor noting on the commission but she did not mention that i dissented from every condition on every merger. that theon the grounds fcc had no authority to actually review the mergers writ large. i do agree that the fcc has the authority to review the transfer of licenses just as it does for the hundreds of thousands of licensed transfers that happened every year.

>> what i wonder from you is what are the issues that the fcc specifically what address that and the justice department doesn't? >> well, they can speak about the future of over-the-top video. right now, they're looking at the interconnections between the netflix network, the types of comcastey used to reach subscribers. having expertise in that issue will help them evaluating whether time warner in the future, as a programming company, will have the freedom to reach subscribers. so come it gets to look at the entire ecosystem of information and explore the deal through that lens. >> well, a lot of unknowns in the which is how regulators will handle this. much you so ahead, apple and ibm have

put aside differences to form a news partnership. that story and more when "bloomberg west" returns.

>> welcome back to "bloomberg ," i am emily chang. apple and ibm have been rivals since the dawn of the computer era. they are teaming up to develop apps for apple's iphone and ipad that are designed to work with ibm's data analytics and cloud services. ibm is going to be providing ipads and iphones to their enterprise clients. it did a big deal or is it not a big deal because i've seen both ways. >> two points on this. first, it is how the tables have turned. ibm used to be the company that the agenda for

technology. that is a very clear sign that we are seeing a much weaker ibm as a tech company. secondly, i have read a lot of stories about this being a great move for apple. i think it is a defensive move by apple because they were going to get jostled out of the market by android which is a lot more open and more flexible from on enterprise standpoint. from that standpoint, this is a good combination for them. had just another channel partner for them, essentially that is what it really is. targetarted selling to and walmart in the consumer market. they are using ibm to go into the enterprise. in that standpoint, it is a net positive for them. it still does not take away from the fact that android is more flexible and more adaptable for

the enterprise. >> you wonder if ibm will strike the same deal with google next. they will be offering android devices. >> i wonder if there's any part of the deal that would prevent that? >> exactly. there was no indication about that. fortune 500 of the companies adopted, sold an additional couple of thousand ipads and iphones, if half of the fortune 500 picked it up, it would not add to half of a percentage point of revenues for apple. what it could mean is the blackberry users, the corporations that refuse to embrace any kind of apple product are no longer those holdouts. the notion that ibm and apple compete is a 30-year-old notion that is not important. it really does signify something different the last boundaries of apple's reach have fallen.

>> i think the shift to mobile computing has created a whole new class of leaders. you see ibm, dell, hp, the star is on the wane. this is really what it is and that standpoint. >> ipads flails are slowing down. >> the new service device is an impressive device that does a lot of things that a laptop would have been used for in the past. >> i'm really impressed by tim dok's ability to out-of-the-box things to make sure that the revenue stream

keeps growing. i think it is easy to forget that this is a company which is big, >> appleme is the biggest company in the world. >> we have seen them strike a deal with beats, with dr. dre. is this a new apple that is more cooperative than steve jobs' apple? >> this is definitely a new apple. jobs, this iseve tim cook's apple. this is more execution oriented.

willing to be adaptive to the new reality. is it visionary? >> it is smart to get the biggest reseller in the world selling your stuff. it would be a very big deal. ibm needs this badly. they need to have the solutions available. >> what apple does which is visionary is not seen normally. over the things they do under

the hood, the phones, but tablets, the devices they make. justn't see it, we don't use it. that is the new apple. that is what we probably we have to get used to. you think about a bigger apple iphone, just a bigger iphone. what happened underneath the screen which is something that not all of the people do. >> you'll stick around with us for the next block. 's new logo.l airbnb we will be right back with more on airbnb coming up. ♪

♪ >> welcome back to "bloomberg west." wests time now for the bew

byte where we focus on one number. what do we have? like how about one? one, the number of logos. they have introduced one new logo. there is the logo. >> this is the journey to the new logo. >> what do you think? go ahead and say it. >> you stopped me from saying it. >> jon? >> is that a mushroom? >> a paperclip.

>> it is a slow news day. this is the town where image is everything. so, regardless of what we think, i suppose this is an important step for them. this has grown berkley and may be branding became secondary in nature and now maybe this gets stamped wherever you end up staying. -- this has grown quickly and branding became secondary in nature. >> i thought the old logo was fine. >> for all of the logos, this has become a dominant business in the hospitality industry, it is changing the hospitality industry. >> thumbs-up or thumbs down? >> i'm kind of lukewarm. i think that that pink is throwing me off. don't even remember what the old logo looked like. >> it was blue and white. >> old logos die hard.

for watching this edition of the show. we will see later. ♪

>> from bloomberg world headquarters in new york, i'm mark crumpton. if this is "bottom line." news.in with breaking the federal reserve has released its age book survey that is based on anecdotal reports from businesses which are compiled by the fed's 12 regional banks. yang yang is in washington with the delays. good afternoon. afternoon. a generally upbeat picture of the u.s. economy in the latest beige book. this time around, gathered by the kansas city fed base on information collected