>> welcome to "bloomberg west." the iphone six plus is on backorder. apple says it will not ship for three or four weeks. demand was so great that the website had problems loading. investors appear to be buying into alibaba's ipo. the company has enough demand to sell its stock at the high end of its $60 to its $66 range

according to people with knowledge of the matter. the ceo is in san francisco. we are learning more about the tense relationship between tech companies and the nsa. the government threatens to find yahoo $250,000 today if it did not turn over user data. this happened in 2008. we will look at what changed since then. to the lead story. the biggest iphone appears to be off to a hot start. the device is on backorder and is not expected to ship for three or four weeks. the data phone is scheduled to hit stores. people vented on twitter. one tweeted -- not everyone having problems but

with the issues, is it a supply couple more are they trying to drum up demand? what do you think, is this marketing or do they have supply issues? >> every single time they come out with a phone this happens. i will go with this is probably the way they want it to play out. it is great to have two or three week backlogs. it would be a disaster if it were two or three months. to say there is so much demand you have to wait another two weeks, that sounds about right. >> is this an indication this will be the most popular phone? >> without a doubt. people want a larger phone. if you travel in asia you realize half the world is

already there and we're a bit behind. quick 70% of the people who left the ios environment did so for a bigger phone. we talked about this yesterday, the fact that there are nine countries with initial phone releases. every previous phone has expanded the number of countries until this one. are they not in china because it is not a roofed -- approved? or is this because of supply. i did get up to go for a run and by the time i got back the phone was sold out and it suggests that they have an anticipation that demand was going to be so great. we knew that there were more people coming off of a subsidized phone and able to upgrade than ever before. the demand for this phone, the potential market was greater than ever before.

>> if they wanted to because they need all the demand. >> they want to sell as many of these phones as possible. if they could have sold more they probably would have. >> they could have made more. the bgigger battery and the newer chip, all this required filling a channel for some time and they did not have forever to do this. i have always thought the marketing gimmick of the lines in front of the stores were a total joke. they could manage the delivery, they know how many phones they can make and how long it takes to put on a slow boat from china. the fact they cannot manage the line is baloney. that is a marketing stunt but running out of phones shows the demand. >> apple gave away the new u2 cd.

let's listen to the exchange. >> are we the first people to see this in the world? >> yes. >> how do we get this to as many people as possible. >> we do have itunes. >> i believe you have over half a billion subscribers. could you get this to them? >> sure, we could do that. >> some people thought it was kind of cool but people are complaining.

>> this may have been a sharp jump moment for folks under 35. who is u2 and why are you messing with what is on my device and playlist? apple missed the social effects. >> this is my phone, this is not apple's phone. i choose my music and the personalization. apple has a weird moment where they're looking at a watch that will offer multiple varieties and price points were lots of different devices. they have multiple phones. this is not the company steve jobs made. here they are jamming a personal choice into the device and they said you can choose what will be on it. >> u2 is an extraordinary band but i do not want music chosen for me ever. very personal. i think the watch will be amazing but i do not see it as

just a $300 or $400 watch. i see it as a $1500 dollar watch area do you have to have the iphone and all of the other apple products for it to truly work. i am an android guy. >> now you are. >> you made the switch. we will see how long it lasts. >> if i want the watch and would have to go back to the iphone and tim cook knows that. >> you are doing this san francisco community will turn themselves inside out with the new conference. all the tech companies inviting people into the offices, we have a few dozen people behind us.

talking about technology, everyone from salesforce to microsoft. >> once a year to open your doors and let people see how does it work, it is a neat idea. >> how is this different, is it that much more effective? >> it is a completely different experience and is great for both sides. the host companies and the attendees get a lot out of it. >> what is different this year? >> these tech companies are not tech companies. this amazing electronic bicycle.

bringing technology back into the community. these are companies that feel like tech companies but they are in hospitality or transportation or energy or health care. i am finding that interesting this year. >> thank you for stopping by and bringing your crew to watch and always appreciate having your thoughts on the show. there appears to be an overwhelming demand to own a piece of alibaba group. the latest on what could become the biggest u.s. ipo of all time. ♪

>> i am emily chang and this is "bloomberg west." investors seem to be buying in to the alibaba ipo.

what is the latest, how much demand is there? >> what this says is they have enough interest from investors. this is interest, not binding interest. the demand they're saying is not necessarily from investors who will buy shares. it depends if they are allocated area and they will purchase it but right now it is just interest, at what we're seeing is a lot of interest. there were long lines on monday. on tuesday everyone involved could not stop commentating on how many there were going to be.

there were 200 investors. that does not account for the big one on ones. they will see where investors are interested. this is enough demand from key investors. if they are saying enough demand at the high end of the range they may seek to raise it and they may seek to price it above the range. those decisions we expect to be made in the next couple of days. >> you are skeptical. >> they said, let's price it at

a multiple of ebitda. they are trying to sell more stock than anyone has sold in u.s. history. inflation adjustment not withstanding. as a result they have a careful plan to make it seem like demand is higher and get demand increased and announcing to us that this will not stand. that is part of the marketing effort. >> it is a big game of psychology. they are showing that there was strong demand. the problem is who the demand was coming from. institutional investors started backing out when they did price at which cause them to go down that hierarchy of more profitable clients. they had to sell more allocation which spooked investors more.

this is why you saw the spiraling effect on the first day. you want to make investors see that this is a hot stock, something that is in demand. there is tons of hype. while at the same time making the growth story match up to that demand because -- so does not spook them the last minute. >> what is the likelihood the prices higher than the range they have suggested? >> within this range, $66 at the high end. it is one thing they will have to keep in mind. that will raise more money for selling shareholders but on the other hand you do not want this

deal to go badly because it is such a big deal. it has the potential to disrupt the whole ipo market. >> we would say to the investment bank, we will take down 1% of this deal. at $15 a deal we will lower this. i will buy 3% if you give us -- if the valuation is better. you can see the big investors -- fidelity is saying they have the exact same conversation. if you raise the price higher we will buy less. if you lower the price we will buy less. they are actively involved and when they are in no position to make decisions about how the big the book would be and what date they will stop taking orders.

yahoo! facing a fine of $250,000 today if they did not turn over user data. what kind of issues were the government after? next on "bloomberg west." ♪ >> marissa meyer is naming

christian baldwin. and kerry diamond of yahoo! food. new court filing shows they fought the government over nsa surveillance requests in 2007 in

2008. they waged a 10 month battle against the prison program in the foreign intelligence surveillance court but the government threatened yahoo with fines up to $250,000 a day if the company did not turn over user data. it turned over the data and was not find so what did the government want and what does it say about the relationship between tech companies and the nsa? i am bringing in our guest. >> the documents were made available. this is something that yahoo! pushed for. we are seeing a profile of the kinds of requests that were made early.

this goes back a number of years. maybe one of the most interesting things, there is so much hyperbole about these far ranging, the government wants to know everything. maybe they were not able to know as much as people thought and they were trying to understand is there ways under the constitution for them to access data. this idea that the government had access to everything is a lot of hyperbole or at least it was at that time. >> what do you think of the fact that facebook, google, and microsoft were also asked and they did? >> yahoo! made a choice and decided they were not comfortable with the bulk requests that were being made. we're going to have to think differently about a lot of things. they were all requested because

these are the hubs of our modern ways that we communicate. yahoo! took a stand and it is where the vast majority of communications is happening. >> what were they looking for? >> the conspiracy theorists out there believe that government is looking to be snooping. there is a lot of technology out there for pattern recognition and a lot of technology in the analytics based understand is there a threat, is there a potential terrorist threat. you need a lot of information to

go through which means that these bulk requests offer the ability to have bulk information to start seeing patterns. i am not sure these were individual targets. this was can you see a pattern develop and -- if you think there's a probable cause. that is what the government might have been looking for. >> does this revelation that yahoo! tried to help back, this trickle down to users that might perceive them as a defender of privacy? >> i -- think that to some degree, it shows that yahoo! was willing to take a stand and say we are not necessarily comfortable. i do not think that when users are out there deciding who they will know their relationship with them makes a tremendous amount of difference.

facebook operates at a larger scale. these are the places that were communicating. doesn't help yahoo! probably not a lot. does it hurt? probably not a lot. >> a "bloomberg west" story. the alibaba story. next. ♪ >> i am julie hyman. we did have declines on the day. down .6 of 1% after we saw a retail sales for the last month,

better than estimated. that led folks to speculate maybe the fed is going to raise rates. for "on the markets," i am julie hyman. ♪

>> welcome to a special edition of "bloomberg west." jack ma said we are a crocodile in the yangtze river. we found out how this group of people has run into a global e-commerce phenomenon with the profit that is bigger than amazon and ebay combined. we want to start by looking at the many businesses of the alibaba group.

80% comes from chinese system -- consumer sites but it started with alibaba.com. helping connect buyers and sellers but how does alibaba and is the process similar to buying something on amazon or ebay? sam grobart went to the prices of buying custom pants. >> one way was to use a manufacturer who uses alibaba.com. connecting buyers all around the world with an equal number of manufacturers to give them what they want. to reach those manufacturers i had to create a buying request. a form that describes what i want to be made.

i had replies from manufacturers in china, india, pakistan, and the czech republic. to whittle that list down i ditched any replies from companies that were not gold suppliers. they have submitted to some background checks to make sure they are not running a scam. i judged their responses on bases like prices and delivery times but also on how well written their responses were and whether if they included a picture. i decided to work with the manufacturer in pakistan. how could i be sure the suppliers were not a bunch of sweatshops? i checked with the u.s. department of labor international affairs bureau. they gave this project a clean bill of health. to get started, my guy and pakistan needs to get some

money. this could happen in a couple of different ways. alibaba has alipay. you can pay directly using western union or wire transfers. how much money are we talking about? let's consider. i am looking for pairs of pants in four different colors and multiple sizes and they want more than one of each. that gets me the 280 pairs of pants and nine dollars a pair my total cost is 2005 hundred $20. my cost did not end there. getting them airship would cost another $1983. that would get my pants flung from pakistan to new york and two days. how did it go? remarkably simple. it was like combining a craigslist ad with a giant 3-d printer.

i got what i was looking for. a big mess of pants. they came out fine but what do i do now? i have enough to last me the rest of my life or i could share them with 279 with my dash of my closest friends. there isn't a pair on the streets like them. >> always stylish, sam grobart. also with us, our guests. how similar to was this to amazon or ebay? >> they are based on individual customers dealing with

retailers. i am dealing with another business who is coming back to me with specifications and timing and schedules. in the same way you would do with someone if you were buying auto parts or computer motherboards. there is much more back and forth. you have to know what you're looking for is opposed to rising through a catalog and eating out something you like. >> does alibaba have something similar to amazon prime? >> the shipping costs almost as much as the pants themselves. it was $2000. $500 less than the cost of making the pants. >> can major businesses make up the albaba group, how would you

describe the group? >> they took some of the best ideas of internet commerce whether it was payment ideas and put them all together into this chinese company. it has lots of pieces of all of those things. let's not forget the massive shipping component. they are similar to amazon, even ebay has their own. it fulfills the needs that are more -- a more robust post office might do if there were such a thing. >> revenue comes from taobao. >> taobao is china specific. where individuals and small businesses sell to consumers.

>> are those from alibaba.com? >> they are not but they could be. i think that for nine dollars a pair, the gentleman at marks apparel did a nice job. i am a little fancier so these are different. >> the question is it could be a global phenomenon but couldn't compete with the likes of amazon and ebay? how would you answer that question? >> their strategy has been to invest in the u.s., investing in businesses in silicon valley. the office -- they opened up an office in san francisco. they are capitalizing to build their global brand.

>> thank you all. from english teacher to china's richest man. we have the story of the founder jack ma. on this special edition of "bloomberg west," the alibaba story. ♪ >> welcome back.

one man i synonymous with the companys. his name is jack ma. the founder and chairman and

now, china's richest man. it is not quite a race to riches story. his first job paid $12 a month. now $22 billion. who exactly is jack ma? take a listen. singing on a stage, he is not your average corporate chairman. he flunked his college exit exams and he learned english and became an english teacher and left the classroom to ride the internet wave as china's economy opened up in the 1990's. he recruited 17 partners and the

group was born. even though he is over five feet tall his larger-than-life personality has helped grow into the e-commerce giant it is today. he sings and performs mass weddings and is a huge fan of kung fu and started a tie chi school. his own wisdom has helped grow his personal fortune for $22 billion. it is trying his richest man i had been other tech titans but for ma it is not about the money. if he cannot surpass walmart he will regret it, he told charlie rose. porter joined alibaba in 2000 as they were moving out of jack

ma's apartment. he worked as the head of communications for eight years. what were the founders like in those early days? >> they were as ambitious and as big a dreamer as a silicon valley startup . at the time people thought this english teacher who was making bold claims about where the internet would go and where alibaba would go, there would be a lot of skeptics that the team worked with these ideals they had and looking back on his offices do not seem so crazy. >> did you work very closely? what does he think of the film? >> i said i wanted to tell the story for my respective and he gave me his blessing for that but after that i disappeared for

three years and i wanted to keep it. dependent. i made the film and started submitting it to festivals and then i nervously contacted jack to tell him i went ahead and made this film that he gave me this blessing for. i showed it to him and his first response was pretty lukewarm. it is a fair portrait and there were certain things he probably knew would have told differently. it was from my perspective. he felt it was fair said he did not protest when i went on with my plan to show it around the world. >> one of the things you capture so well having lived in china myself is the culture of alibaba and everybody cheering. people had almost this patriotic devotion. >> in china at the time, there were not very many places to go and pursue your dreams.

the internet was the first time that young people had a chance to go out and chart their own destiny. i think the company attracted dreamers who had this passion and idealism. that is why i think they are devoted to what alibaba is doing. the first real national heroes that were not anointed by the state that were homegrown came out of the ranks of entrepreneurs. >> alibaba did go public and that is where your film ends. what was that moment like? >> it was exciting. we had worked to build this for a long time and the ipo was so

successful in hong kong that even the currency was destabilized. the government had to intervene because so much money was coming into hong kong to invest and the stock price immediately shot right up and then the financial crisis came and they ended up as the stock price fell. one of the lessons of my experience was that the company went through moments of euphoria in moments of crisis. you see that in the film. even when the company was in this euphoria of an ipo, jack ma was warning the staff. the moment you are on top things will collapse. we were prepared but it was a difficult time after the hong kong ipo. >> one of the tings about a good leader is how they handle the worst times.

>> jack was pleading with the staff to stick true to your values and do not let euphoria or this sudden wealth take over the culture and he predicted the financial crisis before it happened. he does a great job of keeping the company focused on the long-term in helping people anticipate the rocky road ahead. >> is there anything that can knock alibaba off its golden road? next. ♪ >> welcome back.

i am emily chang. alibaba is dominating, facilitating delivery of 5 billion packages created while it is showing its dominance the company is still on guard. it has been making acquisitions to keep up with other chinese tech companies. in areas like mobile and video. also entering the u.s. with the shopping site but its success here is not guaranteed as it competes on amazon and ebay's home turf. i spoke to the coo of yahoo! in 2003 and 2004 and the managing director of china market research group focused on china. i asked by -- what do they see as their challenges?

it is what your buddies challenges are. there has not been a company that has been around for 100 years that has been able to reinvent itself. there have been a couple that have done it successfully. apple has done it and it has done a nice transition. time will tell whether or not they get disrupted after they spent all their time disrupting other people. once you get outside of china and he is dealing in a more competitive market particularly if he focuses on the u.s. or europe he will come up against people who -- whose goal is to make sure he does not win. they are very smart and they have been very successful. >> one of the most tangible descriptions is that it is a little bit amazon and paypal with a dash of google. would you agree with that and do

you think that they can take on these companies on a global scale? >> when they got started that would be apt. it was a copycat of those companies. it has emerged as innovative in its own right. it is a mix of the best technology companies with a chinese twist. it will be quite difficult for them to move into southeast asia or the u.s. airline there are a few technical -- companies that are consumer facing that are able to become truly global players and you need to look at the types of products and why people want to use those products. it will be tough for alibaba to scale up and become as dominant as they are in the u.s. or europe as they are in china. >> what about the idea of alibaba buying yahoo!

>> it makes a great deal of sense if you are alibaba. it is not alibaba, it is more softbank. i am not sure they would want the operating business. they would be less equity. it is more interesting to softbank because of the yahoo! japan stake. that would be a transaction about equity and not necessarily equity in yahoo! itself. i hope that yahoo! remains independent and marissa build something great. >> what does alibaba look like five or 10 years from now? >> they will have to be more focused on mobile devices. there is a lot of venture

capital money going into mobile facing e-commerce plays. that is starting to chip away at alibaba's and e-commerce. they might become a gigantic conglomerate. the question that shareholders have to know is is it owned by alibaba or jack ma? there is anger or frustration because he has its low stake in his company. he is not like arc sector berg -- mark zuckerberg. he gets a lot of press as an investment when it is really his own. thank you. that does it for this special edition of "bloomberg west," the alibaba story. ♪

.

>> he's been called the startup whisperer. reid hoffman is the executive chairman of linkedin and an investor in some of the most successful companies of all time, including facebook. he wasn't always on track to be an entrepreneur. a student of philosophy, hoffman at one point pursued a career in academia. but he took his first job out of school at apple, and then joined the paypal mafia. now a partner at greylock, hoffman sits on seven boards. he is the author a new book, "the alliance." thank you for joining us.