♪ i'm cory johnson in for emily chang and this is "bloomberg west." next third-quarter earnings with the looming sale of their parent company emc, and tesla shares tank. and why the multibillion-dollar delve megamerger will succeed.

but first to our lead -- yahoo! shares are lower in the biggest quarterly dip since 2009. marissa mayer in her fourth year at the helm of the company with little to show for it. yahoo! still struggling to hold on in key areas like mobile advertising. still wrestling with its thorny spinoff of the alibaba stake. this quarter is interesting. going to start with alibaba. quite literally the biggest and yahoo! and it's not a part of yahoo! it all. >> this thing is looming. there's a lot of questions about what is going to happen. we expect to hear something by the end of the year. looks like we're not going to hear that. it's going to get pushed out.

the irs has waited. cory: they have waited and they have waited. you expect that they would give some sort of blessing, but it looks like to me, if i am a yahoo! shareholder, i'm going to get this spin co and i have no idea what the irs is going to do that. and i wonder what it will be like from january to december because the taxes will not be due for a full year. crawford: the uncertainty is just a drive. -- just a drag. the uncertainty with alibaba and the uncertainty in terms of the grander strategy and how it is going to play out. cory: so it's a most waiting for the fed to raise interest rates. we have been six months away for six years. crawford: you could see a push and get results and the results could be lackluster.

i think when you get beyond the january timeframe, it's in their best interest to get this thing to close. cory: i could make the argument that the last thing marissa mayer wants is for us to pay attention to yahoo! results. what do we see in terms of progress in terms of charging more for advertising? crawford: you see they are able to grow revenue, but not as much as last quarter. cory: revenues are down as a present. crawford: that revenue is expensive. they grow 300% year-over-year. the cost to get people too, and basically to get traffic into

the site were up 300%. so that basically says the money they're paying to oracle, pain to other sites continues to be a drive on overall profitability for the company. cory: mobile? how they look in mobile? crawford: mobile was up 34%. it was up considerably, but it would probably have to double -- to your point, when you look at yahoo! outside of alibaba, the need to accelerate. cory: is there any sense that the acquisitions marissa has done -- she does not call them acquisitions. i call them acquisitions. she has told me they are trying to bring in talent faster than hr can do it by buying companies. crawford: the acquisitions build out a stronger skeleton for yahoo!, but what they do not yet seem to be doing is putting an entire strategy in place. an entire strategy that allows you to see where yahoo! is headed. they are clearly headed toward content, but that content is a

experience.f bringing in david pope, katie couric. cory: and a sports reporter. crawford: but then you try to fold in a tumblr, other properties. what is the overall story. i think the average investor would say i understand google or alphabet's strategy a lot better than yahoo!, because the story is still being formed after all this time. cory: let's talk about tumblr. they paid a outfit billion dollars for. you would've thought this is the year you would see acceleration. are we seeing it? crawford: so far we are not

saying tremendous acquisition. again, a site that a lot of folks want to go to, the very, very difficult to monetize and they have not shown an ability to monetize it, particularly on mobile platforms. cory: sports is done well. crawford: yeah, sports continues to do well, but sports is an incredibly competitive area. you look at fantasy sports properties -- cory: i thought that was a con. crawford: [laughter] here is the thing about sports. sports drives engagement. you are so engaged in acts. think about fantasy sports. -- you are so engaged in apps. yahoo! had a considerable lead, but now you see properties beginning to catch up. that means they will have to move faster to differentiate in that category. cory: so, you're saying daily fantasy sports exceeded

expectations? crawford: we don't know what those expectations were, and i would guess that the folks at espn felt the same way about the ability to engage people with those properties. cory: my expectations of you were very high and you have exceeded them, crawford. and that orange vest with that orange tie. crawford: i'm on it. cory: moving on. tesla it longer on the recommended sedan list. david, i feel like -- this is my complaint about tesla coverage. it is always covered by tech reporters, not car reporters. what does this mean? david: tesla has ramped up production and as they are selling the model s, they have taken their eye off the ball and maybe it is difficult to keep track of quality when you're adding more features. the complaints consumers have is everything from small stuff like basic carmaking issues like a sunroof that squeaks, door handles the not do not do what

they're supposed to do, to big stuff like the electric motor had to be replaced for some buyers, the chargers were not working for some people. that's just more stuff to keep track of and things go wrong. reports the consumer important? i think every car ad is, when i'm watching football is "motor trend car of the year." does consumer reports matter

much? david: consumers look at them quite a bit. toyota has done well for such a long time and it confirms what everybody already thinks. tesla already had -- i would say it was a coup to have the model s recommended last year. everybody thought, ok, they are brand-new to the game. they will make mistakes. they will have quality issues. they didn't. now as they are adding sunroofs and more electronics to the cars and building new models, they're starting to look like every other car company and that is where problems are creeping in. they can still get a handle on this because they do a pretty good job of launching these cars. they know what they are doing. they are not just a group of silicon valley guys, but they will have to pay closer attention going forward. cory: they have problems with door handles. they can get a handle on it. tesla owners still seem to love the car in spite of squeaky sunroofs and for handles that do not work and voters that have to be replaced. the report also found that customers rated tesla service the best in the world.

they proactively address issues. proactively, of course, is two times actively, or a word i cannot stand. what do you make of that? david: people do love these cars. the car performs very well. it can drive a long time on a charge, which people like, especially with an electric car because people worry about it running out of juice. it's pretty dynamite really and it's a good looking car. it really delivers on all of that stuff. people like the cars lot and when the things go wrong, if the company can get it back pretty quickly, which by all accounts so far they have, the people will be happy. this is more an issue going forward if they can get this under control and launch the model x with very good quality as well. cory: all right, david welsh, think you very much. appreciate your time. most of you were watching the new "star wars" trailer last night.

tim cook had interesting things to say at a q&a. the apple ceo answered questions for about an hour and though he did not come out and say it, there were suggestions that an icar was in the works. >> it would seem like there will be massive change in the industry. massive change. you may not agree with that. that is what i say. so, for us right now, as we look at it, we would like people as they enter the car to have an iphone experience in the car. cory: he also gave details about how apple music has been doing. the service has 6.5 million paying users so far. 8.5 million using it for free. this is compared to how spotify has 20 million paid users. coming up, a closer look at

third quarter results after a spinoff of dell and how one ceo ceases a deal playing out. ♪

♪ cory: cory johnson, in for emily chang, and this is "bloomberg west." vmware was out with her quarter earnings and it looked good, but you dig a little deeper, not so good. sales of $1.67 billion. analysts thought things would be a little bit worse. bookings were only 3%. analysts were looking for 11% and that is bad news which suggest the future may not be so bright. the shares of vmware down three bucks after hours and they are still selling off. emily chang is in austin, texas for the dell world conference, but she sat down with george colony to get his thoughts on the megadeal with dell, whether it is likely the largest tech deal ever will happen?

>> it will be very difficult to pull off on a cultural level, on a financial level. what is happening, in the i.t. space, you have an aggregation of these very large players. this is the first of many deals we will see in the i.t. space. when i say i.t., i am differentiating that from the business technology space, which is what companies are building for their customers. i think this will be very big, powerful to get over. emily: you referenced hp and compaq. you said this took carly fiorina down. why won't does not take michael dell down? george: he is like the little train that good. he just kept growing and growing. he just showed an aptitude for proving me wrong and he is not very flashy, but he has a very good strategy. it does not mean it will be totally successful, but if anyone has a chance to do it, he has a good shot.

emily: hp is going in the opposite direction. who is going to be on the right side of history? george: the i.t. space is a maturing space with lower growth and lower margins and that will dictate the aggregation. so, i would say i would be worried if he was going with this -- emily: why not? george: because it is a space where more is better. look at what is happening with large companies.

they are trying to rationalize i.t. you want the lowest cost. you want one supplier for the full deal and that's really what michael is building, a one-stop shop. emily: have you told meg whitman you do not like the direction they're going? what is the response? george: everyone has the run -- their own logic. she has her views. by the way, i call that the investment banking view. she is listening to investment bankers. of course, the way that things should go for investment bankers are higher fees and higher fees generated by breakups. emily: who will be competition for dell? george: amc. -- hp, and then ibm. those companies have the room -- their own problems. hp is breaking up. who did i forget? emily: cisco. george: cisco is in a position of new vision, new leader.

if i had to rank them, this is not a formal analysis, but i would probably put dell at the top of the list. emily: interesting. you do not think anyone else is going to bid? george: the other potential bidder is oracle. remember, mark hurd, the ceo, co-ceo, is heading it a waiver away froming oracle the technology world. but we do not know how larry will react to this. larry and michael have a good relationship, so i do not see revenge or blocking going on here. oracle's biggest competitor's sales force. cory: that was george colony with emily chang. tune in tomorrow when "bloomberg west" is live from the dell

world conference. emily will be speaking to michael dell. ok, there will be 350 jobs layoffs and announced for employees as early as tomorrow for espn. espn has lost customers due to court cutting. this follows disney's announcement in august that earnings for the network did not meet earlier forecasts for the company. coming up, what to look for tomorrow from ebay. we will look ahead at the company's first report since paypal. ♪

♪ cory: i'm cory johnson in for emily chang. this is "bloomberg west." satyana nadella taking a personal hit. his compensation dropping. that is sad compared to the $84 million he made last year. only 8 million of these stock is based on 1.2 billion dollars. ebay will release its first order earnings for the first time since the split with paypal. how will the business standalone without the business arm to support it? paul sweeney from bloomberg intelligence. paul, what your thoughts about

ebay now that it is back to just being ebay? paul: this is a big quarter for ebay. this is the first since the split up. this is a company that works, that is really positioned in an industry that has grown 20% a year. yet ebay has only been growing its topline in the low to mid single-digit range. they clearly have an issue in terms of topline growth and repositioning the growth, and that's going to be the challenge, to put out a strategy for a roadmap to get some back to the growth the industry is experiencing. cory: it's an interesting business, because in one case, it is one of the dominant e-commerce companies next to amazon on all of the internet, but the growth is really not happening there. i wonder if the world is changing and amazon once again

has the upper hand? paul: it certainly does. if you look at amazon numbers, they continue to impress. ebay has been transitioning from their historical auction business to more of a traditional e-commerce business, so that transition is in place, but while they have been executing, and one can argue they have had success, but while they are executing on the strategy, traditional retail has been upping its brand offerings. they know that e-commerce is the future and they are putting serious capital beyond those efforts. it's a very competitive marketplace for ebay right now to be standing on its own. cory: i wonder if people do not have --roblem people

is people do not recognize that most of the sales on ebay are sold at a fixed price, it's one of the largest car market places in the world, and i think that people do not think of ebay as what it really is. paul: my hope is as a standalone company they will be better able to capitalize those strategies. this is a time for ebay to arguably sink or swim over the next year or two. cory: paul, 10 seconds. a 1977 ferrari listed on ebay. are you a buyer or a seller? paul: i do not think i will be a buyer today. cory: paul sweeney. bloomberg intelligence. thank you very much. tomorrow, emily chang sits down with michael dell. thank you for watching "bloomberg west." ♪

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