>> live from pier three in san francisco, welcome to "bloomberg west." i'm cory johnson. it on bloomberg west this hour, means biggere sales. the company getting geared up for its largest initial run of iphones ever. this comes as competitors like omi are releasing bigger devices. kobe bryant is getting ready to the technology community for inspiration. he talked to bloomberg west about the lesson he learned from apple.

politicians swinging for silicon valley, hillary clinton was here. what's with washington's obsession with the texting -- with the tech scene? to our lead story after saying android buying other smart phones, apple is going all in with bigger screens. the largest initial run of iphones ever. it 70-80,000,000 phones with larger screens. bloomberg broke the news a wild back. 5.5 inch screen. this comes as apple faces increasing competition from samsung and xiaomi.

the senior managing director joins me and the chief research analyst. brian, let me start with you. even when they announce a new product, this feels like the quarter before something. phone fored for this a long time. it's nothing revolutionary. >> you called it early. calling for a bigger phone for a long time. >> yes. that's what the consumers want. feels almost like a toy in your hand. they want to expand the canvas to be on par with the other worldwide smartphones out there. >> did you make the switch? >> we almost bought a galaxy s5 from samsung, got cold feet

while in line to pay for it because the ecosystem is too sticky. i did not want to transfer everything over because i've got my macs at home and my ipad. waiting for this bigger canvas for a long time. it's the mother load of all apple upgrades. >> when we look at the device landscape for apple right now news is so widely telegraphed at this point, could it be hurting sales this quarter? >> absolutely. you may see a positive quarter as people sit back and say this product looks like it when my hand. i really want to get something that is bigger. without a doubt, you will probably see a pause in the numbers. the plot is going to thicken from here. they do a 5.5 inch iphone going forward, it's going to put more

pressure on the future of the ipad and the ipad mini. becomes tough to pocket. you will see a lot of juice around the 4.7 inch product. there will be a lot of complexity in their product line going forward in terms of how they manage the transition to the next generational ipad. the successes of apple over the last decade has been inventory management. with four or five products out there, it's hard third what are you looking for this quarter as a risk to inventory? >> i'm not expecting much change. if you think about apple, tim cook has been an operational guy. to -- they've been shipping massive volumes. from a $200 billion

standpoint in 2015, they will be just fine. they need to manage for a larger build as their products permeate the planet and the adoption rises. you think about the iphone install base rate, roughly 3 billion units. non-upgradable to the iphone six. that leaves pent-up demand of 200 million units. channeld to fill that for an anticipated launch in late september. >> could be the biggest upgrade cycle in the history of computing. fromrgue about windows ms-dos or something. even then -- >> it will be big. you are talking about the

smaller phone or what that might mean going forward, what do you think the margin difference is and which phone is more profitable for apple to sell? >> the larger phone will likely be the more rough-and-tumble phone. you could see a 10% to france between the products. -- more profitable phone. >> a 10% different in the dollar margin? at 10% difference in the dollar margin. of marginf the amount they could get on any given product. that, i think they cut out forir work them. the exploration, showcasing and shopping around the 5.5 inch could be crazy interest port. people will really look at that 4.7 and say that is a product i want to carry around everyday.

we have not seen crazy numbers out of any other supplier for a product of that size yet. it will be very interesting to test in terms of what people want to carry around. my money is on that 4.7. >> you're a model geek. when you adjust your models itng forward, do you imagine cannibalizing ipad mini sales? >> it will happen a little bit. 5.5 inches is close to the 7.9 inch ipad mini. the biggest smartphone we actually sampled earlier this year with the lg g flex which is a six inch phone that curbs. -- that curves.

clearly, we will see that cannibalizing little bit. i think we will see guys migrate to the 5.5 inch phone and the ipad air as opposed to the four inch iphone 5 s and the ipad mini. we see the function migrate a bit. >> bigger and better. what's your take? >> it all gets down to the job you want to get done. when you start moving into the airspace among you start getting into a different kind of experience. you get out of that consuming media experience. you get into a very different type of price point. there will be a set of people who want to consume their media on that 5.5 inch device. it they want to live with it every day -- do they want to live with that every day? inch doese the 5.5

not get the same level that apple is thinking. thank you very much. microsoft reports earnings after the bell today. we get a look at the performance of the company. the first full quarter under santana dela. nadella. microsoft put together an elite team of engineers and designers and programmers and spent years in washington try to come up with a tablet -- trying to come up with a tablet that could compete with apple. they gave me a secret look at their secret service labs. inside the secret service labs of microsoft, you see one thing. the original design. in our is not something dna 20 years ago. not in our dna 10 years ago.

>> hardware design with constant improvement over many years. >> this is not one of these things when we started nine months ago and came up with a great idea. >> the design tools are a sight to hold. a magnesium slicing cmc machine. >> you start to see that come to life right here. employs all shop sorts of tools. old school and new. machines, table saws, power drills. 3-d printers. all sorts of new materials to model with. acrylics, plastics, metal. a modern geppetto's workshop of modern design. the circus flopped in 2012. a $500 million gap. flopped in 2012. market share is slowly growing. >> 400% the actual size.

they get a real sense of what it would look like, what it would feel like, what it would sound like. they knew what they were getting into. time thehe third charm, surface three has to get everything right. skinny.skinny, skinny, >> thinner and lighter. ram is a huge currency for us. >> thousands of man-hours went into designing this. andou take this analog icon turn it into digital. >> all that iteration and inventing gave microsoft what they think is a productivity tool to replace the laptop. >> to get to that perfect piece where you say, this is it. >> cory johnson, bloomberg. designs, theirr

1% market share is tiny compared to ipads 33%. i got to see the next iteration of the surface. mobile is indeed the future for microsoft. kobe bryant may play basketball in l.a. he went to the tech community for device. how apple inspires him, next. ♪

>> you are watching "bloomberg gearing up bryant is for the nba season and the release of a showtime documentary, kobe bryant news. it focuses on his inspiration from oprah winfrey to jony ive.

icon -- >> it was really interesting. or a staru are a ceo in the nba, you need to be dedicated. nobody has ever questioned kobe bryant syndication. -- kobe bryant's dedication. it's about what gets you pumped up and inspired. who inspires you. here is a bit more on what he had to say about that. okcan i look inside and say, , what was the genesis for me? who inspired me to get to this point? i look at it as a challenge and an opportunity. where did that come from? who did i learn that from? that's what this film is really about. will see there film and be inspired by the film to be able to have uses up his own. -- have muses of his own.

>> you called people who are leaders in industry. people,d call absolutely. some of the questions i ask seem really simple and stupid. if i don't know come i don't know your do have to ask. if i don't know, i don't know. you have to ask. >> who were the people you called? callarting with nike, i them all the time. jony ive, oprah winfrey, arianne huffington. the list goes on and on. hilary swank. jony ive.d that

you guys have a conversation? >> he is obviously unique in what he does. why? how? how does he view product? how does he go about designing the product? how does he know that he has where he wanted to be? how do you know those things? there's something going on from the moment he sees something to the way it goes into his brain. a different process than other designers. i'm curious to know what that is. >> you went to apple to talk to him? >> yeah. i went to apple and spent a day ande talking with jony picking his brain about product and stuff like that. what makes them who they are. and why.

--re he curious about that very curious about that. passion, look to other people and other entities and other works of art and draw from that to help you be better at what you do for looking those -- looking at those, denominators. how do i prepare and study? how do you build your game? my response is much like the way he builds products. he thinks sequentially. result. at the end there are so many things that go into this massive entity or device. from buildingent my basketball game. you start with where you want your game to be, what would make your game most unstoppable or and start withth

one piece at a time, one move at a time. >> that was really interesting. -- i would watch kobe play. processes of how he and the notion that he can learn from technology to build his game third the way he changes his game throughout the game. who is ingot somebody an interesting part of his career. nearing the end of his career. somebody who has been pretty clear that he does not necessarily want to be a coach or a general manager. he launches this business in kobe inc. that sparks curiosity and he sportsn investment in a drink maker, body armor. you talked about carmelo anthony

making some investments in digital media. clearly kobe has shown interest in apple. i don't know that he is going to be making tech investments. that heaid in the past wants to invest in stuff he understands and he understands the world of sports and sports marketing after all the time he spent with nike. in a realght him friendly mood, too. i've seen him do some bad interviews when he does not want to be talked to. he is thinking very specifically .bout things he has big contracts. i wonder if he knows what he wants to do when he hangs up his sneakers. >> he did hire a former gatorade executive. there are interesting things to watch for. fighting for apple

your dashboard. releasing products to bring your favorite smartphone apps to the car. ♪

>> welcome back. apple and google in the car. google aren't happy just living in your phone. if they want to take over your car, too. both companies have announced programs to integrate their mobile os into car dashboards simply by plugging your phone into your vehicle. apple's version is called car play while googles is called android auto. for the most part, they are the same. once you connect your phone to your car, your cars -- display becomes a mirror for many of the apps on your phone. things like navigation, phone calls come in text messaging and

music services will now come from this, and some hard drive under the dash. right now, almost every automaker in the world has announced compatibility. most will support phones. for apple and google, moving into the car is just another way to get you to use more of their services. they don't want to lose you because you happen to be sitting wheel.hind a steering auto makers are happy because they've been trying to cram more and more tech into their vehicles and the results have been mixed. and frustration of learning and automakers bonkers new interface will soon be a thing of the past. you can get new technology without getting an entirely new vehicle. new features will be a matter of a download, not a trip to her dealership. -- you're dealership. you will be safer. using interface you already know

will lead to less distraction on the road. until cars can drive themselves. in which case, text away. more "bloomberg west" right up to this. -- right after this. ♪

>> you're watching "bloomberg west." hillary clinton making her rounds until con valley yesterday. she went to facebook, what are and google. eric schmidt pressed her on the issue of nsa surveillance. >> as you know, google is quite opposed to what we see as overreach by the nsa. we all think bugging angela merkel's phone is pretty stupid, if i can be blunt. what is your opinion of nsa spying? this occurred after you were there. >> don't do stupid things.

mean we don't need to have a system of surveillance, because we do. that has to be accepted. how we do it and how we explain it and what we tell our partners is incredibly important. i was just in berlin on my book tour in europe. that was the number one issue. angela merkel is a friend of mine and i apologized to her. it should not have been done. >> what are they doing? listening to conversations with my mother? >> we were beginning to take a hard look at what we did post-9/11. that was happening. the president had given a speech the snowden disclosures about the need to take a hard look at the legislation and how it was being implemented. we had to do that.

i voted for things and then against things trying to figure out how to get the right balance in security and liberty. we have to do a much better job and we have to do it in a way that does not affect our great companies like google. clearly, that would be unfortunate for us. clinton also participated in a q&a session at twitter and facebook. bigisn't the only democratic name in the bay area this week. president obama returning to san francisco tonight to attend a luncheon tomorrow. tickets for that fundraiser started $10,000. it that national politicians like about the bay area and the tech scene here? almost more than anything else. california and the bay area are cash cows.

particularly for democrats. real quality upscale democrats come here to get refueled. >> to get their wallets refueled. is it something different now? certainly the city is very different from when you first became mayor. largely because of the decisions you made about building different kinds of housing. helping set the table for the growing tech scene today. transformedisco has itself over the last 20 or so many otherbeing like places do something very special. a combination of incredible research capacity for medical coverage, health and the business of what you do with the so-called internet. how you move into the world of tomorrow. zero forw the ground

all of the processes and all of the investment and the capital that needs to fuel those two concepts. >> it was about 12 years ago whatyou tried to decide would be done with the city from a military base to some kind of business. you made the decision to make it possible for industrial operations to move there instead of cnet which i thought was the future of the city. talk to me about the role of economic diversity. you were right and i was wrong. it clearly demonstrates by what you currently see. you have to be incredibly careful that you don't become reliant on only one area of the economy. you have to be prepared to diverse affiant. you have to be prepared to continuously promote modifications to the creations and new opportunities.

that's what we have done in san francisco. we do tech scene is so -- this show here. it seems like the whole world is flocking here to do technology. they are flocking here to live. they are living as part of the engineering world trained to deal with the internet. the quality of life holds their interest. in the worldrsity of arts, entertainment, health, food, design. all those things happen in northern california. in particular in the bay area. that's what makes us different. >> is there something not just about getting wallets filled?

politicians associating themselves with the future of being with tech. ge is just as inventive as google is. but google gets all the credit because of tech. politicians standing next to eric schmidt. >> they would be foolish to allow themselves to be visiting san only francisco for that purpose. microsoft is in the northwest. of theill has all components of a part of this whole thing. you have to be very careful about what happens in north carolina. the incredible component there. and new york eared it still has its place. chicago is being aggressive. not only do they come here to ornd next to the google guys whoever it happens to be, but they have to be sure they make

the other stops. >> i think of the last presidential election when every single candidate was running an ad that showed a windmill somewhere suggesting they were greener than the next. the messaging that happens when you stand next to mark benioff. >> the whole business of greenery is big-time. believe me, it doesn't look as green today in california visibly as it did one year ago because of the absence of the water. barely, the politicians have got to be careful on their green advocacy. they have to demonstrate that in a different way. mark benioff affords that opportunity. there is the objections to things like the pipelines that come across to deliver energy. you have to be careful with

these things and politicians coming to northern california. has aligned himself with the northern california libertarianism. very important there. is there still an element of libertarianism that the right could draw themselves to. >> very much so in california. there has always been incredible independence among people who did not exactly go left or right. they were not like the middle-of-the-roaders. they are the libertarians. >> a lot of them and technology. >> absolutely. you notice rand paul spends as much time as he possibly can

doing the same thing hillary clinton does and the same thing a barack obama does. he comes to california with a considerable amount of flair and paused. he is almost as acceptable from the standpoint of the independents as are the democrats. wallet witheck my all these politicians around. frontier for science and exploration could be the ocean floor. we look at special vehicles that could transport us below the sea to find our future. that is next. ♪

>> i'm cory johnson and this is "bloomberg west." is shaping the future

of transportation. 94% of life on earth is underwater. 5% of the earth's oceans have been explored. deep flight is trying to change that with its underwater airplanes. plane. with only three submersibles, .hey have dived under the water graham, this is fascinating. tommy, how are people using your devices these days -- tell me, how are people using your devices these days? there are a few wealthy individuals picking them up. and can explore the circus now they've got personal transportation to go and explore the much more interesting. we put it on a boat just off one of these peers here -- piers

here. what are the cool things people have done with this super falcon? parteryone gets to see a of the planet nobody has seen before. branson bought one. was repavedeffort and 30 seconds. moving in a way humans have never done before and that's the payoff. was in a hedge fund and i looked out the window and i see these two guys pushing what looks like a torpedo on a dolly .

backer, as ir big recall. tell me how you transitioned this business and what you've got now. >> steve was one of the first private individuals. he gave us the means of doing a lot of r&d. we've pivoted that into the public. money today raising build these machines for the public. it's a huge goal. you can have personal transportation and go. >> you are doing that through crowd funding. >> it's a wayward in which more companies like ours -- a way in which more companies like ours can raise funds through the public. >> do they get a piece of the company? >> this is not the normal crowd sourcing. this is the real deal. this is equity investment.

the crowd funding is simply connecting individuals to companies like ourselves. >> tell me about the technology. why is this possible now? batteries, the .magination leap it could not have been done 50 years ago. >> what are the batteries? >> lithium-ion phosphate. they are safe. not the ones that blow up. >> or the ones that catch fire. or the materials changing as well? >> yeah. composite carbon fiber resin. they are five times stronger

than other metals. finallyare you imagining? >> we are assembling. lots of machines around here. >> how do you imagine the use going forward? only superrich guys or something else? >> superrich guys are the opening market. want to get to tour is on. we've been flying underwater. >> really cool stuff. good to see you. up, well-known investors teaming up to find the next generation of tech companies. we take you inside their plan, next. ♪

>> welcome back. -- sherpaventures ventures just announced their first fund of $154 million. these guys invest in $1.7 billion -- how do they plan to invest their cash in their first fund together? emily chang sat down with at stanford to find out. >> we are happy to announce that we have closed our fundraising for our first fund. -- we feelillion very lucky to be able to do that. it's a big milestone for us. >> that's a lot of money for a first fund. planning torunnin

spend it? >> it's a statement about trust and our strategy. we work with a handful of limited partners. our strategy is focused on really putting capital to opportunities. we have an active program as well. because of who we are and our backgrounds, our strategy is to get involved with companies early and go deep. having that early exposure gives us a tremendous amount of insight and information and access to deal flow. goldmane a long-term operator. -- howyou come from i do you complement each other? uber.met because of i lead the series b. it was immediate.

we had not met before and we we justt -- i remember went deep on talking about the and we had ar number of ideas that we really liked. from then on, it was a match made in heaven. deal in up closing the dublin. we ended up back in dublin again and we did not go to conference at all and we spent the entire time dreaming about if we were to start a company together, what kind of fund would we start. >> at the same time, we are talking about uber. a $17 billion valuation. how do you plan to deal with valuations with how high they are right now? >> everybody talks if we are in a bubble.

i don't think we are in a bubble. we both lived through the bubble. whether at any metric it's number of ipos, valuations, revenue, number of users online, they all scream a very different from where we were in the 90's. however, when you look at valuations, you have to look case-by-case. at our early-stage investing, it's really hard to say this is exactly this value. they should be a $4 million not $4.5 million valuation. you have to go with your gut. series a and series b have a tremendous amount that was not available to investors 5-10 years ago. we can spend quite a bit of time getting into the data and looking at the actual user data. b the time they are in series , they are making money.

that's unheard of. our valuations higher than we are used to? sure. of sherpaventures. we focus on one number that tells us a whole lot. jon erlichman to tell us about it today. >> 60 million. ,ccording to morgan stanley when apple eventually releases its smart watch, it could sell between 30-60,000,000. their estimate is $300 a pop. bryant andbout kobe his visit to apple headquarters. applewas a report that

had been reaching out to professional athletes to test the fitness capabilities of the iwatch. to see if it's ready for business. >> he could do that. i have a surprise byte. 18. i met kobewhich bryant on a playground in new jersey. i was doing a story for vibe magazine and i picked kobe bryant and he was so striking. he was 18 years old and he had this -- it was a great interview. it really captured him. it was good stuff. >> i want to see that playground photo. he is a smart guy. a global figure. he is thinking bigger beyond basketball. >> jon erlichman, thank you very much.

more bloomberg west on your phone and tablet. we will see you tomorrow. ♪

>> from bloomberg world headquarters in new york, i am mark crumpton. line." "bottom what he calls the biggest presentation of his investing career. then, u.s. flights to and from tel aviv are canceled for 24 hours. sales of previously owned homes in the u.s. reach an eight month high. to our viewers in the united states and those of you joining from around the world, welcome.