mark: you are watching "bloomberg west." german police are warning people to stay indoors as they hunt for the gun man who opened fire at a munich shopping mall. eight people were killed, several wounded in a rampage authorities described as suspected terrorism. a ninth body near the scene is being examined to see if it is one of three gunmen who carried out the attack. president hollande says that france will loan artillery to iraq. he's moving an aircraft carrier to the region. speaking in paris, president hollande pledged to act "firmly against terrorists." the highest court in france has

ruled that christine lagarde will have to stand trial in the case stemming from her time as france's finance minister. she is accused of negligence that pave the way for massive corruption of government payout to a tycoon. virginia senator tim kaine is emerging as the leading contender to join the democratic ticket as hillary clinton's running mate according to two democrats who both cautioned that mrs. clinton could still change directions. the announcement of her pick could come today during a campaign event in tampa, florida. it follows the just completed republican convention. global news 24 hours a day powered by 2600 journalists and analysts in more than 120 countries, i am mark crumpton.

emily: i'm emily chang and this is "bloomberg west." coming up, verizon can see the finish line in the race for yahoo! details on the telecom giant's $5 billion pitch. pandora opens up. one million active listeners have tuned out. founder and ceo tim westergren explains why he is not worried. and it's not a michael bay movie without an epic explosion. now you can get to experience them in virtual reality. details on how the director is stepping up his v.r. game. first to our lead. verizon is on the verge of winning the battle for yahoo! verizon is nearing a deal to buy yahoo!'s core internet assets for $5 billion. at this stage, the deal does not include yahoo!'s patents. the deal may be announced in coming days, ending a month-long bidding process. i'm joined by our tech editor. sir alistair, when we would know for sure?

alistair: so far what we know is that barring any last-minute disasters that verizon has won it, in a combination of more money but also strategic value. put a bit more cash on the block. emily: now, the information reported that yahoo! would not be a good deal for anyone. is this really a good idea for verizon? they already have a legacy asset in aol. they have been transforming that asset. does this combination really make sense? neil: i think it does. first of all, you get larger scale in terms of a media asset. secondly, you have some pretty complementary products. verizon's aol does really well with political and entertainment and yahoo! does really well with broader views, finance and sports. finally on the backend, you have the technology ad platform or

you can sell that to agencies and really hit a broader audience. emily: i did speak to arianna huffington and recently -- aol bought "the huffington post." take a listen to what she had to say about the synergy. arianna: the synergy -- verizon is a huge distribution potential for us. especially, we are moving more and more into media. we launched go 90, which is their video play, and have produced and paid for great content from many providers. so, this is fantastic for huffpost because it gives us great distribution. emily: can verizon plus yahoo! become a great content distribution platform? alistair: they have about one billion monthly viewers. they have a smaller mobile

audience that is growing quite fast. that is where they are going to need to improve. the ad tech stuff on top could be a great combination, but really they are paying with aol and yahoo!, they are paying $10 billion to basically cut 1/3 of -- google who are way, way ahead. it is going to be a tough growth. emily: is a $5 billion pricetag a good deal? we originally reported verizon may not be considering the real estate asset. it includes the core business but does not include yahoo!'s i.t. neil: if you look at what verizon paid for aol, this is a slight premium to that. and you are getting a much larger base of users. basically, a better brand. emily: what happens to the other brands at yahoo!? tumblr, crunchy roll? neil: we have seen with aol when

tim armstrong took over, he started to dismantle aol and sell off the brands that were not core to the mission. if tumblr is not making a lot of money, they will sell that. emily: interesting. what about marissa mayer? if verizon was a winner, marissa mayer would not likely stay on. and tim armstrong would run yahoo! what do we know? alastair: she had a very tough job, i would argue, running yahoo! i imagine she is going to be looking elsewhere afterwards. i suspect almost any tech company would have her. emily: exactly, what is next for her? should become, does she go into venture capital? does she go to run another big

tech company? alastair: i think she will probably pass on an opportunity to run a big legacy technology company. she could maybe, she would be a great venture capitalist maybe for a while. then i suspect longer-term she is going to be running a big tech company that is hopefully growing this time round. emily: i know she does have a passion for new products. before she joined yahoo! she did a lot of angel investing on the side. neil, what do you think her reputation will be on the street after this is said and done? neil: fairly mixed. she came into yahoo! with a whole aspiration to really grow this business. all that's happened is that revenues have continued to decline. the fact she was able to salvage some value will be positive, but her track record is not that great. emily: we are going to be watching. sometime early next week, we presume we will see some sort of climax after all of this time. thank you both.

well, paypal cofounder and venture capitalist peter thiel became the first speaker ever to declare he is gay in a speech at the republican national convention on thursday. >> every american has a unique identity. i am proud to be gay. i am proud to be a republican. but most of all, i am proud to be an american. emily: later in the night, republican presidential nominee donald trump pledged to protect gay citizens after a nightclub shooting in orlando. the human rights campaign, which endorses democratic presidential candidate hillary clinton, said it was disappointed with both speeches. the group says thiel should have used the speech to push for equality and trump was using the orlando shooting for political gain. coming up, pandora's revenues fall short as listeners tune out. our interview with pandora donor founder and ceo tim westergren next.

we are watching paypal dropping on concern about the cost implications of its new agreement with visa. shares closed down 6% from thursday. this is bloomberg. ♪

emily: now to our interview with pandora founder and ceo tim westergren. shares plunged after pandora reported revenue that fell short of estimates. by the end of the day, up over 2%. it lost more than one million previous listeners but listener hours increased 7%. we got started by asking westergren how he makes sense of these numbers.

mr. westergren: we've been signaling we expected to be flat for a while. really we are surrounded by a glut of free on-demand services we cannot compete with yet. we are on our way to do that. but i think the growing engagement is a really positive signal for us. our core listener base listens more and more. we just crossed the 24 hour a month threshold. that is a reflection of product improvements, our team has grown, more distribution. we feel really good about the core product and cannot wait to offer the more complete marketplace to compete. emily: $4 billion by 2020, but revenue growth is decelerating and now we are seeing the listeners fall. why should we trust your plan? mr. westergren: let's start with the base. so, we have about 100 million people coming to pandora. and their listenership is we have had a huge investment. rpm's are growing.

as we look ahead, as we expand the product and we are diversifying from advertising and subscriptions, we are going to start balancing business, we are optimizing a good 20% year on year. i think the business is in good shape. emily: you have made acquisitions. you are working on an on-demand service. what will be the key differentiator? there are so many on-demand services. apple is reinventing its music business. spotify is spotify. what is going to make yours different? mr. westergren: a lot to bring to the table. this is not going to be a me, too, product. on-demand services are 30 million songs and good luck. that is not what you need for the average consumer. pandora brings this enormous listener base about which we know a ton. when you come to pandora's on-demand service, we will be able to curate that and make the on-demand service as easy and intuitive as we made radio. the music will magically appear

and will be easy to use, which i think reduces the problem that needs solving right now. a lot of data, a huge audience, and the ability to deliver our products will be differentiated. emily: do you plan to have a tiered service that will keep users engaged with the radio product? mr. westergren: you start with this foundation of 100 million people who listen 24 hours a month, about whom you know a ton. this is about adding the upsell opportunity. so we can speak to you in the context of your radio experience and say, we have noticed this about you. you want to do this as well? subscribe to pandora. we can find the right ways to hook people in. the music industry is seeing we are incremental to the business. we are going to solve the biggest problem -- how do you take that mass population and bring them into the services? emily: what are the key sticking points with the industry, with the labels and the artists right now? mr. westergren: the key sticking

points -- we feel confident based on the progress of the last few months, a great win-win. part of what is taking time, as we did not come with a cookie-cutter deal that came before us. we want to offer a more considered product that requires additional features. that makes time to evangelize and explain. they are beginning to understand the opportunity we bring. emily: there is an ongoing review of publishing royalties for streaming services. how could that impact? mr. westergren: the big piece is really on the performance side. that is what we are negotiating directly with labels right now. i think we are also increasingly confident we can sign deals that preserve the long-term economics, which is very critical for us as we diversify the business. emily: on this report from "the wall street journal," that you guys got an offer from sirius xm. what happened? mr. westergren: the ceo part of my job is to look after long-term value, myself and the

board. that is the lens that makes all our decisions. we have a strong core business. again, i wish i could show you the product we are going to launch. it is going to be something else. we are bringing so much to that product. i think we are going to reinvent the space. emily: this is a question you feel that many times over the years. i have asked you this question many times, but are you open to the offers that cross your desk? would you ever consider selling? mr. westergren: again, my job is to look after long-term shareholder value. a very strong, independent board. we take all that seriously. that is how we make our decisions. emily: we are at the height of the political season. you once told me that pandora can tell if you are a democrat or republican. how can you tell? mr. westergren: if you combine your zip code with the style of music you're listening to, we can predict your political affiliation with a 90% accuracy. it is an amazing platform for political advertising. we see spending on pandora from local and county supervisor

races all the way to presidential. it is amazing. the effect of targeting. we have a very strong political foundation, the right product. this year has been unusual. and we signal that in the call. it's reflected in our second-half guidance, because the spending on the republican side has been slow to mature. we expect a strong season. emily: we reported the presidential campaign, super pacs have been spending on pandora because of the ability to get targeted advertising. i am wondering if you have seen any interesting trends when it comes to political advertising and how much that has really helped the ad budget? mr. westergren: the visibility of the platform in d.c. has grown across the republican and democrat spectrum. candidates are getting more savvy about digital. they know how to use it. and so, it is a tailwind for us from a revenue standpoint. emily: you said half of radio listening occurs in the car. what kind of traction are you seeing in the car in particular? mr. westergren: a lot.

north of 190 models have embedded pandora functionality. unique activations. 19 millionwe are looking for the arrival of the connected car. we are waiting for that. the day when you get in the car and turn it on and pandora starts playing. when you get to that point, it is a whole new ballgame for us. so, we are lockstep with them as they develop the technology and helping be part of that development, actually. but we want to be right there for when that nirvana arrives where the car is like a rolling computer and pandora can be there easy to use on the dashboard. emily: our exclusive interview with pandora ceo tim westergren. coming up, the apple watch. sales are down 55%. we discuss what it means for the company next. this is bloomberg. ♪

emily: new information about the ultra-secretive apple car. previous cars had set a 2020 release date. according to a new report, that date has been pushed back to 2021. little is known about the car. nicknamed project hyphen. it will be an all electric car with a focus -- whatever it ends up looking like, will have to wait longer to see it. smart watch shipments are down for the second quarter this year. according to new numbers, sales have fallen by almost 1/3 in large part due to the apple watch. market share sales for the device are down 55% compared to the same quarter a year ago. we have a research manager and joins us now to break down the data. why such a dramatic drop for apple in particular? >> take a look at where we are

right now. we had no -- product refresh in the second quarter of 2016. rewind the clock back -- that has been the watch launch. that is when the was a lot of anticipation, pre-orders. when you do not have that same quarter kind of fulfillment schedule, you are bound to see that kind of decline year-over-year. so, all eyes are on apple, is it going to be during the third quarter, fourth quarter, if it all? if so, what is it going to look like and what is able to do the first generation didn't? emily: did the competitor come out with competing products? didn't samsung, with noble, garman they did not see much of , a change at all. >> apple had their 55% drop in a lot of the vendors, samsung, lenovo, they all posted double-digit gains year-over-year. that says to me, even though apple does get more than the lions share of attention, the competition is not staying still and they are doing their own thing to not just remain

relevant but also to establish themselves. look, if you took a look at the samsung gear s 2, you can hook it up to your cellular account over at&t, t-mobile, sprint and verizon. you could make phone calls and get data without having to go through your smart phone. it is a big step. emily: how do you think the next generation will change things? will we see a big rebound? >> in terms of hardware, i do not see a lot of changes taking place. this is still a first generation device. i do not think apple wants to alienate or disappoint anyone who got the first generation apple watch with a brand-new body type and change all the physical aspects about it. instead, i am taking a cue from a worldwide developer conference from apple. the emphasis is on software. on having more sensors, having

it easier user interface. be able to navigate through a lot quickly. apple is responding to a lot of the criticism that many people had. is that going to be enough to say to a lot of people, this is the watch i have been waiting for? my guess is probably not, especially among apple fans who take the approach of, i am going to wait for that third generation device. then i'm going to make my move. emily: the apple watch in its first year still outsold the original iphone in its first year. we are in a different time. do you see the watch becoming a much larger category, or remaining fairly niche? >> i think for now, it will remain fairly niche. if you take a look at the financial results we will see next week, my suspicion is that you will see a lot of the apple iphone accounting for the majority of revenue in vines than -- volumes than the others category where the watches are. if you compare the revenue

numbers, the watch in that other category does not hold a candle to what you see for the iphone shipments. for now i think it is just going to be a niche category, among the loyalist fans out there till it becomes more user-friendly, mass-market from the. -- mass-market friendly then a lot of innovation goes into it. emily: there's a niche category for apple. the iphone makes up 65% of business. the watch makes up 5%. they are relying more on services and the services part of their business. does it matter right now? >> i think it does matter. because look, this is a market that is still very much in its initial stages right now. for a company like apple to lure -- roar into the market and establish itself as one of the major players, that says a lot. if you think about the overall digital strategy for apple,the apple watch is yet another reason you do to keep you within that apple ecosystem or perhaps to switch over. i think it will be more of the

former. even though it is a niche, i think what we were hoping to see this year and into the next couple of iterations to come is a device that is going to show a lot of maturity, a lot of innovation and development. time by 2018, 2019 rolls around, we can look back on 2015 and 2016 and say that first apple watch looks rather quaint. rather simple. we can make that same argument for looking back on different iphones and ipads. talking to a lot of the folks within apple, the numbers are very much where they want them to be. and that says to me they did not expect this to be an overnight success. nobody anticipated the watch was going to account for 50%, 65% of revenue in its first year. it just was not going to happen. it is a long marathon race ahead. emily: thanks so much. coming up, prepare yourself for the next transformers movie may be in v.r. michael bay is partnering up

with a production studio. a sneak peek of what you can watch for next. if you like bloomberg news, check us out on the radio and listen on the bloomberg radio app, bloomberg.com. this is bloomberg. ♪

mark: let's begin with a check of your first word news. german police say a munich shooting attack has left eight people dead along with the ninth body that police are examining to see if it was one of the attackers. police are still searching the city for the shooters. munich is in a lockdown with trains, buses and trolley cars halted. president obama responded to the attack. president obama: we don't yet know exactly what is happening there, but our hearts go out to those who may have been injured. it is still an active situation, and germany is one of our closest allies. so, we are going to pledge all the support they may need in

dealing with the circumstances. mark: this is the second attack in germany this week. in baton rouge, louisiana, family and friends paid tribute to matthew gerald who was one of the three police officers killed in an attack last weekend. funeral services for sheriff's deputy brad garafola will be held saturday. officer montrell jackson's funeral will be held sunday. hillary clinton was in tampa, florida, today. as she gets closer to naming her vice presidential running mate, she took aim at the republicans following their convention this week in cleveland, and she mocked republican presidential nominee donald trump. mrs. clinton: donald told us, i am your voice. well, i don't think he speaks for most americans, do you? he does not speak for small businesses like the ones he has

consistently stiffed and driven into bankruptcy and financial peril. mark: mrs. clinton also visited the site in orlando of the rampage that killed 49 people at the pulse nightclub, placing white flowers at the site next to a candle and a framed picture of a cross. donald trump says he would not accept ted cruz's endorsement even if the texas senator offers it. trump says cruz should have endorsed him and he might set up a super pac aimed at defeating cruz if he tries another presidential bid in 2020. cruz says trump's attacks on his wife and father nullified an earlier pledge he made to support the republican nominee. one of aviation's greatest mysteries may remain unsolved. the hunt for the missing malaysian jetliner will be suspended once the current search area in the indian ocean has been scoured. officials from malaysia, china and australia admit the likelihood of finding the plane

is fading. the boeing 777 disappeared more than two years ago. global news 24 hours a day powered by our 2600 journalists in more than 120 countries around the world. i am mark crumpton. emily: i'm emily chang and this is "bloomberg west." there is no stopping pokémon go. the reality game set a new record in the itunes app store. the app downloaded more times in its first week than any other in history. there are no signs of it slowing down as the game appears where it all began, and that is japan. its local release comes two weeks after the app made its debut overseas. triggering a worldwide phenomenon that added $20 billion to nintendo. many pokemon go players are struggling to maintain a game-life balance, including

some journalists. one reporter was called out during a state department briefing. >> as the secretary said earlier today, and i think it is an important reminder -- you are playing the pokémon thing right there, aren't you? >> i'm just -- >> did you get one? >> no. the signal is not tracking. >> sorry about that. emily: darn. from a.i. and video games to virtual reality in films, one man has found his call of duty. we caught up with pete brumel, the ceo and creative director at the rogue initiative. they just set up a partnership with michael bay, creator of hollywood's hits like "pearl harbor" and the transformer series. i started by asking about the partnership and how he sees v.r. enhancing michael bay's work. >> this is something we have been working on for quite some time. it involves a few moving parts but we got to know each other a few years ago.

we had a few ideas we wanted to create. especially in the interactive space. i've always been passionate about trying to find places where hollywood and tech can come together. v.r. became that bridge. we have to find a way to bring michael into this. he is a talented person with amazing ways of executing things we never think of. for us to come together and find a place where we can create that and curate it for v.r. is what we are pushing right now. emily: there is a question for entertainers as when to start adopting new technology, like 3d. it has been slow, though some filmmakers are going that route. how do you see v.r. enhancing michael bay's style? pete: he knows how to bring people into the moment. that is what his movies do. that is what imax is about. this is another version of that. to create character and emotion and all these ridiculous,

amazingly blowup kind of environments and sequences is what he is really good at. he is the perfect partner. he is someone who has always believed in technology. he is one of the people we want to get in first and create the framework for what v.r. could be. emily: will we see it in the new "transformers" movie? pete: possibly. emily: what about cost? pete: v.r. is not as cheap as someone would think. the more important thing is how do you monetize? so, we are looking at baby steps. episodic content to create bigger experiences as we grow into the space. emily: you're also working with the producer of "interstellar." pete: she is a remarkable talent. we have a live action division. we have a partnership to work on content. right now her role is to quit working as an advisor of sorts and really helping us navigate some of the hurdles in the production process on the hollywood side. emily: is this something that all filmmakers should experiment

with? pete: there are certain aspects of film and some directors know how to make explosive, big special-effects movies. we can make really intimate kind of interactions with people that are not normally, they would normally go to movie and see some thing, get to know that character and have the director bring you into that world are into what we call spaces you would not see on screen. we can create in a virtual reality experiment or inviting. short story is, yeah, i would encourage a lot of film, especially ones with big worlds experiment with bringing audiences into those world. emily: you worked with a number of different distribution channels. sony, oculus, samsung gear, netflix, amazon, hulu. what are the key challenges in producing content for so many different players? pete: a lot of it has to do with

how you offer content from the onset. there are tethered high and systems and something for mobile. you have to be up front that either works on mobile or it works as a tethered experience, more costly to make. or create content that you would dovetail out of that. so we have things we are doing internally to leverage assets on both sides. pick one side or the other when you are doing the project. we have projects that work in different places. emily: you were very involved in the activision call of duty franchise. a lot of the gaming companies we have spoken to like take 2 and e.a. and even nintendo have been cautious about virtual reality and investing resources that. they say, we are going to wait into the market develops. are they on the wrong side of history? pete: possibly. a lot of what you see is the approach of seeing how things pan out. they come in later and do an acquisition.

we saw candy crush get bought for billions of dollars and more than disney paid for "star wars." those publishers tend to be more cautious about things which gives us a good spot to create cool ip and build out a portfolio and the slate. i think we are in a good spot for later on. emily: when do you think v.r. will have its mainstream moment? pete: things like pokemon go are showing there is some kind of demand for it. and just the right ip with the right tech at the right time. emily: have you played it? what do you think? does this mean a.r. is here now? pete: that is a great first step. it is very compelling. here i am. i have kids. we all love it to we go for walks together and things like that. the social aspects are very important. emily: how do you see the futures of a.r. versus v.r. in entertainment different? when we see a.r. in movies the same way that someone will see virtual-reality?

pete: virtual-reality will have its own place where it is a very social, in a confined space. you're in a theater, in experience that is very much you are in another world entirely. a.r. kind of does something different, it blends worlds together, which is very good. those two are very separate audiences. i'm not saying that they have to do either/or, that they are different experiences. i do believe a.r. is something that will come from v.r. technology. good gateway. emily: that was pete blumel, ceo of the rogue initiative. we are wrapping up our series on the multibillion-dollar food tech industry. we will speak with a ceo who wants to make your kitchen obsolete and, yes, i got my first taste of soylent. this is bloomberg. ♪

emily: we are wrapping up our deep dive into the multibillion-dollar food tech industry. we have spoken to some of the top disruptors, including nima, a portable gluten sensor. now we turn to a company that has done away with food altogether. soylent, the producers of a meal replacement shake, has taken silicon valley by storm. wildly popular with tech workers, it contains the necessary nutrients for a human being. soylent ceo rob reinhardt joins us now from new york. thank you so much for joining us. i got my first taste today with our floor director mallory. so, it tasted sort of like the milk at the bottom of a cereal bowl. i decided maybe i would like mine cold in coffee or something like that.

but, first of all, tell us about the idea and what sparked this for you. >> the idea grew out of a personal need and frustration. i found that a lot of my options for food were not doing the job. a lot of options seemed unhealthy or inconvenient or not really affordable. and moreover, i seemed pretty frustrated by all the waste and processs surrounding it, throwing away lots of leftovers and packaging material. i just thought, could we really design something from scratch to be exactly what we needed to be really healthy and then manufacture it in a very efficient format, trying to be very sustainable, very healthy and what we found is really important for consumers these days is convenience. so, it tastes very pleasant. you, doesn't need to be refrigerated. shelf life of the year. it lends itself to e-commerce where we do our sales right now could we sell on amazon. and we found that people have taken a liking to it for breakfast or your hurried lunch.

makes a lot of sense. emily: so, can this really replace three meals a day? >> that is not exactly the intent. consumers want to eat a variety of foods. i strategy is not to convince everyone to live on this one product but to come out with more great food products that allow people to save time, money. it is a great, quick, easy light meal, 400 calories. cost $2.50 for subscribers. we have a lot of excited products in the works. emily: what exactly is in it? tell me about the recipe. >> the recipe has gotten from taking a look at the nutritional requirements of your average human and kind of working back from there. we need these vitamins, these minerals, these electrolytes. certain protein sources that are behan others. we use only plant proteins. we use algae oil because it avoids cholesterol and it is a sustainable source of healthy fats.

we use low glycemic index carbohydrates. it is all the body's requirements with a little subtle sweetness and a little bit of flavor. but a lot of people flavor it on their own as well. emily: how big a business do you think this can be? i was interviewing mark andreessen and he talked about soylent as the one investment that people say, you guys are crazy. obviously, they are big backers of your company. how big a financial opportunity do you think this is? >> absolutely enormous. think about it. everybody eats, everyone chooses one food brand over another. trends are more towards packaged foods. i think that we can make better, healthier, more convenient packaged foods and save environmental resources -- nestlé does more revenue than google. there is an enormous financial potential. this is a huge market. and i think we are seeing the

beginnings of major movements in the food space. we want to be on the forefront. emily: now, this is really popular in silicon valley, popular among folks in the tech industry. i know a few women who drink it. what i had to point out this week from a journalist who said, "i tried explaining soylent to my mom and she was like, oh, you mean slimfast? i was like, but now made by and for men." this was retweeted thousands of times. how do you respond? >> there is big difference between something that is designed for weight loss and something designed to fill you up in a convenient, affordable fashion. whereas there are products that help you lose weight, there is not something designed to maintain your weight and then improve your overall health. if you look at the calories and some of these other drinks, it is clear they used for post workouts supplementation or

weight loss. this is something completely different. it is meant to fill you up. you feel full. it is a good way to count calories. but it is not something intended for weight loss. it is a wholly different product. emily: i spoke to, we had soylent presenting at our bloomberg tech conference. the person who was giving out the sample said that the customer base is a majority men. is that the case, and how do you, are you intending to target more women and how so? >> absolutely. i think there are number of ways. this is only our first couple products. we have a lot of products in the works. some released quite soon. for women, there are considerations around serving size. 400 calories in a bottle may be a bit much. so, we have different packaging and serving sizes in the works in addition to other products. there are a good amount of women using the product today. but i see we can capture more of that market through additional flavors, additional serving sizes. everything, all things that are currently in the works. emily: i do want to talk about

the competition quickly. there are some competitors out there. smoylent, schmilk. more established competitors. some people have said to me this is just like another kind of protein shake. what's your response to the competition? >> it shows the appeal of the idea. there are a lot of copycats. it's flattering, but i'm confident we have the best products at the best prices. emily: rob reinhardt, ceo of soylent. thank you for joining us today. ok, big tech earnings in the week ahead. q2 is historically apple's slowest. will there be a change of tide? what to expect from the iphone maker. on monday be sure to tune into bloomberg for david cote's interview. this is bloomberg. ♪

emily: looking ahead to tech earnings next week, apple is set to release a report on thursday. the fiscal third quarter is rarely a great one for apple but it could be worse than usual. tim cook says apple will be between $41 billion to $43 billion in revenue. what should we be looking for? alex webb covers apple for bloomberg. apple has guided us lower compared to the third quarter of last year, but why so much lower? alex: it is in fact the trough of their product cycle. two years since the sixth generation of the iphone was introduced. we expect a new one in september, october sometime. the flipside is that they are also experiencing a bit more competitive pressure in places like china. emily: how much does the iphone have to do with this? it has been more popular.

and analysts have given it good reviews. that may be bringing down the average price of the iphone. alex: on the one hand, is it going to win new customers in developing countries, india and china, or cannibalize the average sales price in the u.s.? ideally, apple wants those people to buy the higher end 6s, 6s plus. iphone 7 and people are paying less for the se, not great news. emily: let's talk about china. this is a market where the have seen incredible growth except last quarter. sales fell in mainland china. what are we expecting? alex: we are expecting sales probably to fall as apple has telegraphed and analysts are expecting. the problem is in china that the phones made by local competitors are rather good. they are cheaper than the apple phone often. not quite up to the same spec, but if you're paying the price

-- half the price of what you may lay out for an iphone, it is a very appealing prospect. emily: what about some of the regulatory issues, the lawsuits, around ip? is that a serious concern? alex: at this stage, it is relatively minor. the risk is that it may herald further problems. china has never been an easy place for western companies to do business. if it is a start of a broader push, a broader attempt to push the chinese manufacturers and give them an edge, then it could play on apple. emily: on a lighter note, pokemon go is bringing apple good business. alex: not the zombies walking around the streets of san francisco. they have seen the fastest selling app on history, apple's announcing this yesterday up in a lot of analysts have said this is the case. and we've seen the bump in the nintendo stock as a consequence. emily: the iphone 7, we are expecting it to be unveiled in the fall. how big a bump are we expecting?

alex: it is hard to tell. people go into these things and say, it does not look like the iphone will be that great. then it blows them out of the water. it is a brave man who makes predictions about a phone that nobody has seen yet. the expectation is that next year's phone, let's call it the iphone 8, will be more of a blockbuster. it is ten years since the iphone will have launched. that gives a reason for them to say, look how far we have come and introduce a raft of different products. there may be some changes, we think. different headphones. some other tweaks around the edges, but i do not think it is going to be mad. emily: we spoke earlier about a not so great outlook for the apple watch, how it's been performing, sales have dropped 55% while competitors had actually held steady. what does that mean? alex: that might be a function of the same trend with the iphone, namely that it is a while since the apple watch has been introduced. people are expecting a new apple

watch this autumn. emily: so, we are going to give an iphone 7 and a new watch? alex: the difference is that the next apple watch 2 will have direct cellular connectivity. you can potentially leave your iphone at home and make calls on your watch. emily: that would be very helpful. what about this news about the car? the car could be delayed until 2021? we don't even know if the car -- alex: putting up your finger, testing the breeze. the car -- apple never confirmed they are making a car. i mean, there was talk a couple years ago that apple's developing a television. that product never surfaced. i am sure that there are any number of things they are developing behind the scenes. setting expectations -- when they might arise is, you know, it is reading tea leaves.

and maybe that tea -- emily: alex webb, who covers apple for us, will be covering apple for us next week. thanks so much. that does it for this edition of "bloomberg west." happy friday. we will see you next week. ♪

announcer: the following is a paid advertisement for time life's music collection. ♪ >> these are songs that can relax and soothe you. >> ♪ somewhere, my love there will be songs to sing ♪ announcer: songs that make you feel good. >> ♪ you're just too good to be true.