mark: i'm mark crumpton. let's start with a check of your first word news. secretary carter is bashing the rebel forces in southern syria. he said they were fighting secretary state. he called russia's action problematic. they misused a channel that's intended to get air forces over syria. government forces have gained control over most of fallujah. his troops control about 80% of the city with islamic state militants on the city's northern edge.

the voice and data recorders from the egypt airplane that crash into the mediterranean are extensively damaged and will need repairs before they can be analyzed. that's according to the "associated press." searchers recovered the second black box today in the quake of the florida massacres, they hoist republicans that the government be allowed to prevent anyone on a terrorist watch list from buying a gun. republicans disagree. they said a court should have to sign off on no-buy order. from bloomberg world headquarters in new york, i'm mark crumpton. ramy: this is "bloomberg

west." apple facing the threat of a sale freeze. how serious are the allegations? we're break them down. bill gates sits down exclusively and hear his views on the linked in deal. and hollywood dips its toes in virtual reality and why the gaming industry is still sitting on the sidelines. apple hit with a patent dispute in china. the beijing intellectual property office has found that the iphone 6 and 6 plus are too similar to the chinese baili. apple quickly fired-back.

all are gearing out to roll out the next model. r.b.c. joined j.p. morgan for the stock. so how big a deal is this? really. research president bob o'donnell joins us from fran and with me for the hour. bloomberg news executive editor tom giles. first off, bob. thank you for joining us. i never heard of baili. i lived in hong kong for four years right across from shenzhen. tell me about this. bob: well, they're a tiny company. started by a former executive with a technology.

but this whole story really makes you wonder about what's going on. you look at those phones as you look on the screen. they don't look the same. there are plenty of other phones that look very, very similar. and oh, by the way, weren't with the 6-s and 6-plus included? there's a lot of questions marks about what's going on. there could be some back door political cronyism happening here. and that's the big question here. ramy: it begs the question, is this a real patent dispute or is this a load of bull that beijing is trying to pull here. what do you think? tom: i think it's more the latter. i'll be honest with you. it reflects the challenges that a lot of western companies face when they go to china particularly as somebody as big as apple. look, the chinese government knows how important the china market is to apple. we've seen a number of these things.

we've seen itunes and the story being blocked. we've seen a number of challenges there. we saw the investor what they did in didi. there's a lot of back door happening that we don't know about. but i'm sure some of this stuff is at play. bottom line, i don't think it will impact their sales. ramy: how much does a legal precedent set? this is a company that is still putting in place policies that govern how they deal with patents. how much could this affect rulings in the future? bob: if it plays out, it could have an impact. there have been smaller cases like this that have been overrned. this is a bigger player with apple and it may be that they want to make a statement. and that is a bit of a concern. but i have hard time believing that anyone would really take this to an extreme level. again, as it is, it's

interesting that they focused only the 6 and not 6-s line. that suggests to me that it may not be that big of a an issue. if they wanted to make a big issue they would have to go after both of them because they look identical. ramy: we had a conference in san francisco. and we had the opportunity to interview michelle lee who heads the u.s. patent and trademark office. she talked about how much time and energy she and her staff have been putting china to rewrite and reform their patent and their i.p. protection. i'd like to listen to some of the things that she said briefly for a moment. michelle: keep in mind that countries across the world view the intellectual property system as a tool. they're undergoing changes to their trade sequence law and there are no other areas of law in intellectual property. they want input wanting a system

more like ours. they're establishing courts much like ours. so the combination of laws on the books, court systems that are less prudential, subject to favoritism and a real desire by upper level management. and it will take time. it's a huge society with lots of different levels but at the highest level there's an intention to move in a direction that's more respectful of copy rights. not because trading partners are asking them to do it. ramy: so michelle talks about the need for there to be reform. she talks about there being political will. but do events like show how far we have to go to prevent that in china? >> it's very provincial. the thing to remember about this, this is from beijing which is just the city, it's the biggest city but it's not the whole country. that reflects to me that this is more of a provincial challenge

that reflects the complexity of the chinese government and the regulations there and the kinds of challenges that all company who are going to be big in china are going to face. yes, i'm sure the best intentions are there in china to change this but it's also going take a very long time before this plays out. we'll see if this becomes a bigger issue. my guess is this one's going to blow away and a week from now we would have forgotten about it. ramy: up with more question for you. if iphone sales do get stopped how much hurt will this bring to apple? apple gets about 25% of its revenue from greater china. but this is the iphone 6 and iphone 6-plus specifically. any numbers? bob: i don't think it will be huge because this is the older generation 6, not the 6-6 s and not the,-s plus. so it's the older generation phones. it's going to have less of an impact.

fundamentally, i really don't think this is going to become a real issue in terms of stopping sales. even if it was, it would be in beijing and not the rest of china. ramy: bob o'donnell, thank you very much. and tom staying with us for this hour. speaking of apple, regulatory filings shows warren buffet pays $49.40 a share. bershire has $976 million. at the time it slowdown iphone sales. but the rebound has yet to materialize. shares fell another 2% in the friday session. coming up, what does the co-founder oaf the microsoft think of linked in? our exclusive interview with bill gates is next. later, facebook's annual shareholder is on monday. what investors are trying to say about the company's third class of shares.

ramy: welcome back. microsoft announced its plan to buy linked in in one of the biggest tech deals ever. wall street acted with mixed reviews but how about bill gates? eric sat down with bill gates for an exclusive interview. take a listen. eric: i think it's a -- a great transaction. linked in brings a lot -- i node reed hoffmann and jeff, the team there built an incredible audience and so combined with what microsoft does, working with people and productivity helping professionals communicate there will be a lot of synergies there and so i was

very encouraging if that deal came together and glad to see it that it really happened. ramy: so far investors haven't been very supportive of the transaction. should they be? bill: the stock market is going to jump up and down. i'm no expert on what the stock market should be day-to-day. i think the company is better combined. i love the idea that the market wants us to show that. i mean, the company is expert in software and managing those audiences and it's great that they have an opportunity to surprise the world and say, oh, my god, this feed on linked in, that's how i want to learn about my career, my company, my industry. if we can make that as say valuable as the facebook and the

social world that's huge value creation and that will happen over a period of years. ramy: you were c.e.o. and chairman of the world. you know deal execution and integration are tricky especially with a deal to this size. what are the keys to not screwing it up? a lot of what licked in does will stay exactly the same. the idea of how you get the contact list and the user files, it's pretty easy without changing a lot of the engineering. so microsoft like most tech companies have had deals that have gone better than others. i think we've got good preparation and the nature of the synergy is pretty clear. ramy: all right. microsoft co-founder bill gates. bloomberg editor of technology

tom giles to talk more about this. let's look ahead on the microsoft linked in deal. the biggest challenge that it has now is regulatory approval especially over in the european union. how likely is that? eric: well, magritte is head of the antitrust at the e.u. she said are we going to use data in a way that kind of creates a disadvantage for competitors. now, they took a close look at facebook, what's app. we don't have any indication that there's not significant indication that there's going to back huge hurdle. i would turn it and say that the biggest challenge they're going to face is getting their synergies, really making as bill gates say he thinks two are better than one. they need to prove it. i think that's going to be their biggest challenge. i don't think regulatory is going to be their biggest. ramy: looking into the data that they're talking about that the e.u.

chief talked about, what would be a barrier that might potentially raise a red flag here? eric: i think any time you have a monopoly situation that you use that to put up barriers to entry for another player to come into the market, a smaller player, again, it's not something that we've seen a lot of concern over. we talked to people out there. we're not hearing that that's kind of the thing that is really rising to the surface. ramy: all right. let's switch to a suitor a failed suitor according to people familiar to the matter. what didn't that go through? eric: it's a very expensive deal. salesforce.com has a few money in cash. it would have been a difficult deal to digest would that have to issue shares, borrow a lot. what would have happened linked in went to microsoft and said

hey we're starting to get down the aisle with this other player. what do you guys think? and microsoft came in and said this makes a lot of sense for us. we think there's a lot of ways that we can use our pickup trucks, mesh them with the linked in products and connect them to the hundreds of people that are using linked in and they're so much more well capitalized. they have tons of cash. ramy: microsoft looked at basically buying sales force. do you think they might look at that again? eric: what you're going to see with linked in, they're going to give them the potential for a sales force to help people and they're going to go out on a sales call. well, you're friends with three of her colleagues. so you can bring that up in a conversation and all kinds of way that microsoft is going to try to leverage its know-how

with that network that you were working with on a daily basis. ramy: we'll leave it at that for now. tom giles sticking with us. we saw the d.c. court of appeals rule that internet providers cannot slow internet content to consumers. it defines it as utility that all americans should have access to. bloomberg's oliver explains. oliver: net neutrality calls for an open internet everything on the web should be equally accessible. while everybody claims to honor that principle, interpreting it in real terms is a bit of a different story. here's the situation. a u.s. federal court recently upheld the f.c.c.'s opinion to have more oversight of broadband track.

comcast and verizon will be treated the same as public utilities. they cannot prevent to charge like netflix for preferential treatment. it stops them from blocking or slowing web traffic. while the rules already in place in much of europe, the internet service companies which fought the new rules say they want an open internet. here's the background. the term network neutrality was coined in 20002 by tim lu who argued people would pay for more bandwidth. in the late 2000, the f.c.c. stepped up under the principle of net neutrality challenging comcast and verizon in court. on the one hand supporters needed this power to have internet providers to treat all web trafficking equally. but providers say this regulation deters investment and we should know u.s. broadband speeds are behind that of france, u.k.

and south korea. but beneath the legal policy questions rises the more philosophical one like who owns the internet? do consumers pay to connect to it? and who balances all those competing interests? ramy: bloomberg's oliver roenick on net neutrality. coming up, ted talks about apple buying tesla.

ramy: this is "bloomberg west." alphabet fell the most in friday trade. one citigroup analysis suggests that second gross revenue could come 1% to 2% below expectations. shares came at 3.1%, the biggest decline since april. microsoft's $26 billion acquisition of linked in is raising the question which other

cash rich tech companies might be looking to buy. david west spoke with ted leonisis about the future of tech. ted: i could see sincerely apple buying tesla. i think that would be a smart move. they want to get into tribalist cars. tesla has next generation leadership. so a computer company is buying a car manufacturer. and tesla is a computer company. just has some wheels on it. i think you're going to see those kind of big going outside

of your swim lane to try to get capability, i.p., to try to get management. and everyone needs to grow into a conned category to continue the growth because these companies have such incredible scale. i looked at a wal-mart. wal-mart needs to grow 1% or 2% per year because they're so big. and where will that growth come from? 1% or 2% comes from growing their biggest competitor on an annual basis. unless you start to look at difference industries or businesses it's hard in your lane to get that kind of growth. >> you're all shot. a.o.l. is owned by verizon. it seems to be a significant

bidder for yahoo!. does the deal for yahoo! make sense? ted: i tried to buy yahoo!, i think it was in 1993. we offered $2 million to jerry and david at the time. and, you know, we watched the company grow and they really replicated a.o.l. in terms of e-mail and search and content but built an unbelievable franchise. now the world has moved totally away from desktop and desktop search numbers are way, way down and everything is about mobile. so verizon buying, acquiring a.o.l. wasn't just about a.o.l.'s content being put into a smaller footprint but it was about their ad servicing technology. all of facebook's growth is coming from advertising. google's one achilles heel is falling behind and how do they catch up on mobile. i think it would make incredible

sense if verizon and a.o.l. were to merge and acquire the yahoo! but there are lots of other really, really talented people out there that are making a play for it. but it needs to be in some one else's hands right now. i think there's a collective understanding that it's time and that this needs to be on someone else's platform. it's not a platform in and of itself. >> bloomberg's david west's interview with ted leonisis. coming up, facebook's annual shareholder meeting is monday. investors are looking for news on the news class of shares. we'll discuss mark zuckerberg's plan for the company if you look bloomberg news, you can listen on the bloomberg radio app and on sirius x.m. more of "bloomberg west" continues next. ♪

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mark: i'm mark crumpton. you're watching "bloomberg west." new details are emerging about the terror attack in orlando, florida. multiple media outlets are reporting that omar mateen sent text messages to his wife, noor, during the shooting. it's unclear if she knew where he was when she received them. she and the gunman's father have been placed on no-fly lists. the british parliament will be recalled from recess on monday to pay tribute to slain lawmaker joan cox. the prime minister david cameron laid flowers in cox's memory. >> parliament has lost one of

its most passionate and brilliant campaigners the one who epitomized the fact politics is about serving. it's time to stand back and think about some of the things that are so important about our country. >> mr. corbyn called thursday's killing an attack on democracy. russian track and field athletes won't be able to compete in the rio olympics after a doping related ban was upheld by the international association of athletics federations. russia called it unprecedented. sebastian cove talked to the media. >> the statement that we made today is a very clear indication that over the long haul is for us to protect clean athletes .

the international olympic company is scheduled to discuss the decision next week. doctors without borders will no longer seek funding from the european union. last year the group got about $52 million or 8% of its budget from the e.u. massachusetts senator elizabeth warren gave a pep talk to hillary clinton staffers at clinton's headquarters. senator warren has endorsed secretary clinton. the clinton company is actively looking at warren along with other potential candidates as a running mate. firefighters battling a 1200-acre wildfire are hoping winds won't kick up and send the fire roaring west of santa barbara. about 140 homes and ranches would be at risk. 800 firefighters are battling flames and steep terrain. so far there's no containment.

global news, 24 hours a day powered by our 2400 journalists in 150 news bureaus around the world. from new york, i'm mark crumpton. ♪ ramy: i'm ramy inocencio in for emily chang. tom giles for the hour here as well all eyes are on facebook specifically those of its share holders. stock closed down slightly 1% ahead of the company's share holder meeting on monday. they announced a plan to create a third class of shares this would cement mark zuckerburg's control of the company. it will send about 5.7 billion facebook shares but stripped of their voting rights. joining me to discuss this is tom giles and in san francisco

facebook reporter sarah frier. how does this keep mark zuckerburg in leadership? sarah: zuckerburg said he would give a bunch of his wealth through initiatives that he sees are outside the scope of the company such as eliminating disease, counteracting poverty, improving education. so as he invests in those philanthropic initiatives, he needs to maintain control of facebook and this is going to cement that control for as long as he leads the company. ramy: so sarah, this sounds well and good now when facebook is killing it. the stock is up. people are buying their shift into mobile. they've got great leadership in place. my question is, what happens if and went and we know that fortunes can change on a dime in

the tech sector, what happens if the story isn't quite so rosy at facebook and there comes a time when people aren't as satisfied with mark's leadership? what happens then? sarah: well, the company is saying that they want a c.e.o. to be long-term focused and they believe in the founder-led company. so this would -- even if facebook stock would become under pressure. maybe mark zuckerburg is investing too much in artificial intelligence and virtual reality, he still maintains control of the company. they think that the long-term focus is important to the health of facebook. their argument is look where it got us, almost triple the value we were on i.p.o. day. this is something that's worked for facebook. even when they questioned facebook. so they're asking shareholders to say this is really -- say that you look how things are going.

ramy: and i assume we expect that this is going to pass tomorrow. but my question is, aren't there some shareholders are that barred from holding shares and companies where there is so much ownership by one individual? and will we see some -- maybe some change some movement in the share holding base as a result? sarah: well, the funny thing about money is it is up to vote by shareholders and mark zuckerburg is the majority of the shareholder. so his vote will be enough to tip this over the edge. if there are any protests, they will discuss whether this will hinder the facebook stock. they are already are doing so if they own facebook. >> and we are expecting for that to happen on monday because of course, mark zuckerberg the majority owner. sarah, thanks so much from san

francisco investigators are linking russian and some banks with bank heist culminating in $81 million from the central bank in bangladesh. they're known to operate in russia and former soviet countries. mary jo white said cyber threats were the biggest threat to the financial system. so how can global institutions protect themselves from cyber crimes? for more we're joined by jim flagging, the head of business strategy and tom giles still with us. ramy: so first off, i want to talk about bangladesh and central bank. it's getting hacked. it's one institution, jim. but when we expand to a huge network for example the swift network all around the world the issues get harder.

from one institution to something around the world? jim: i would start with the phrase another brick in the wall. this tells us that we're not talking about smash and grab cyber theft. this is a patient, highly talent adversary that found the weakest link. got access to the score system. used that access to create valid accounts from which they perpetrated their crime and then sort of deathly covered their tracks. i think with swift and any of these trust based organizations have particular challenges in being able to influence but not necessarily mandate the type of cyber hygiene and risk management program that you would find with a corporation or a single intensity. ramy: jim, my question is we are seeing these attacks become more and more sophisticated coming

from these state actors. are we as a nation taking the cyber threats as seriously as we should as a national security issue? and if not, what needs to change? jim: i'm actually more of an optimist on this issue. but it is worth stepping back and looking at how cyber is different from the other forms of our defenses, air, sea, land and space where in those cases the government would acknowledge -- we have the primary expertise. we are the main body on this. and cyber security that primary expertise sits in industry. and so i think it's very positive that government has asked industry to lead on this. asked us to continue to innovate because cyber security is an area that is rapidly changing and the status quo quickly becomes tomorrow's vulnerability. ramy: let me ask you another thing, given that this is affecting the financial system and mary jo white talks about it being such a big threat, are these attacks going to give a

leg up to alternative systems like the block chain that at least according to their backers say will insure greater transparency and potentially greater security? jim: yeah, it's a great question. i think first it's a fantastic that chairwoman white made that statement about the importance of cyber security. and i think what this will help do is send yet another wake up call into the corner office into the board because clearly cyber security is no longer a technical risk for those guys down the hall. this is a business risk and for many, it's a top business risk and as such it needs phillip the c.e.o. and the board. it needs to be funded and inspected and reviewed accordingly. i think what we saw with what appears to be the case in the swift example is some of the -- them had awareness but did not take actions that were commiserate as part of the swift network. now back to --

ramy: yeah, go ahead. jim: in terms of what are some things people can do, and maybe the back end of that question on block chain, we think that one of the key areas is identity. identity used to be this sleepy issue back on i.t. operations, i need my password reset. it's a fundamental building block and complete simply by following the five a's of security, you could go along way to reducing your risk. ramy: i want to talk about m.n.a. we talked about it about $2.6 million. in terms of what acquires are looking for, what are companies looking for? jim: well, first on the semantic blue coat deal that's a good deal for customers, for everyone involved.

symantec brings threat, e-mail and data security. and blue coat has been a leader in cloud gateway security which is critical as we go furtherer in that direction and is also very strong in network and advance persistent threat, detection and response. it's a very synergistic deal. in terms of some other areas to watch, i.o.t. security is going to be a big deal particularly as it relates to industrial security. we continue to think there's going to be very interesting properties around both identity and data security or other areas. >> are we going to see more deals whether it's i.p.o. or acquisitions? and if so what are the companies that are going to be in the cross hairs? >> i think there's a number o good company, $100 million-plus, growing and profitable. some may make it. i think in another area that factors very squarely into

security the private entity players. i would highlight toma brava who have a business model that's very conducive to growing security companies. they're less worried about security result. they can invest for the long-term. it's critical as some of these companies make the move from selling licenses to a fast paced model and need to make tuck-in acquisitions and emerge as a much stronger i.p.o. later. talking about the m.n.a. and i.p.o. my guest host tom giles stays with me for this hour. coming up, virtual reality is getting the hollywood treatment. we sit down with the c.o.o. of a company that scored a major investment. that's next. ♪

ramy: this is "bloomberg west." virtual reality is getting heavy investment from federal venture firms and more and more from film studios. one company that's beginning -- getting the hollywood treatment is verse. they announced a funding round led by andre horwitz. here to discuss is drew larner, the parent company of bloomberg parent company is an investor. drew, congrats on the new round of funding as well as the new name. got to ask about that. why the name change? >> thanks. congratulations on the funding. as far as the name, for the last couple of months we've been thinking about how we have a name that grows with the company, you know, the name itself, the old name verse, four-letter name, one vowel, hard to pronounce.

but the bigger reason having a name we can grow with as we start to move forward with our mission to start driving her forward. when you think about what virtual reality is as opposed to books and tv, you're looking at characters. you're focused on characters that are over there. but with virtual reality it's about characters that are around you. we think that that name signifies what we're trying to achieve as a company. >> what can you see when you hold hands with hollywood and holding hands with hollywood and getting us in there? what are you working on? can we see out there? >> there's a lot of content on our platform with vice, the "new york post," the u.n. and u2. over time where i see the business is going more where the company is a around today.

whether it's writers, directors, talent you're usually seeing in the movie they're going to contact. that is our goal. >> are we going to have v.r. headsets when we walk into the theater? talk to me about the nuts and bolts of it. have we gotten over the hiccup? i don't like it when i feel when i wore a headset? >> if you believe that this is the medium by which everyone is going to be consuming their content going for war. you know, watching my son just lose husband mind with delight over what he was seeing. i could envision that everyone is going to be consuming everything through the medium. ly get more comfortable. it will get smaller. that's what we're counting on. >> what are your favorite --

what's the hardware that you're most -- that has the most potential so far. >> i'm not going to pick one. we're reckoned on every platform you saw them yesterday. we'll be placing a play station v.r. in the fall. we want to be ubiquitous and there is room for many platforms. >> basically what we're seeing the hollywood pushing far into the v.r. but the gaming world not so much. early this week, the president of the nintendo america talked about. it i want to play the audio. >> it takes content creating companies like us to really make things that the consumer want togs companies, that they want to jump into the particular technology. that's how we move it forward. we've been looking at the space. with us we want to make sure

that our next content is going to be mainstream, mass market approachable and when something like v.r. is at that point, you could expect nintendo to be there. >> what makes it more profitable for them to get in with you guys? >> it's not the best thing to focus on because current think there's not a lot of revenue generation. but over time is similar the way people consume content now. add supporter will be a big part of it. ultimately where i would like to see us go is a description along the lines of networks or hbo. of the way hbo now appears to courts, they subscribe really to two shows, "game of thrones" and "silicon valley." i will look forward to it.

tom giles is still staying with us. up next on "bloomberg west." we sit down with a microsoft, analyst. are we alone in the universe? that conversation coming up next. ♪

ramy: welcome back. and in this addition of "out of this world" we hear from dr. nathan myhrvold, the former c.e.o. of microsoft who now runs his company. he's worked with steven hawking. he's partnered with paul allen to fund extra terrestrial life. we asked him about the chances that there's other life in the universe. >> most neutral unbiased scientific analysis says it's probably pretty likely.

now, there's a separate question if life is out there, how well can we detect it? single celled life, algae or bacteria, it may be there but you have to go there because we can't listen to their broadcast. yuri and i have been involved for the search of extra intelligence. we're looking to that life which would send a radio signal or a tv signal. >> will we get a signal back in your our lifetime? >> we may get one tomorrow. so a two-way communication might be tough. we don't know for listening at the right frequency. we could be the give lent of a primitive tribe listening for drum beats where they're on l.t.e. cell phones.

we're too technologically immature to know how mature we should listen. you can't rule that out because when you try to reason about is there life or is there intelligent life, fundamentally, we have one example. they've heard us. and generalizing that is difficult. >> right. >> elon musk thinks for a living in a different generation. what do you think? >> if we lived in a compute simulation, i like the keanu reeves one. the matrix was awesome. for as long as there have been philosophers there have been people who come up with ideas like this that perhaps all of what we're experiencing is

hallucination. i'm not trying to make too much of a fool of myself right now. because what if there really are people watching this on tv, right? well, unfortunately, it's fun to speculate like that. i don't think there's any usefulness to it. so what? if you can tell, great, tell us what is your evident. this simulation be so complicated that it could fool us. well, what's the point? go on to work on my useful problem? >> great conversation there. that was intellectual venture, nathan myhrvold. do you believe in alien life? >> yes, i do. if they're listening, i want them to know that i welcomed the overlord. i'm looking forward to that broadcast.

that does it for this edition of "bloomberg west." a big thanks to tom giles. bloomberg continues around the world. ♪

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