esther trump questions the results of some recent surveys. mr. trump: i think we are going to do so great and i see some great holes. i see one from the "los angeles times close to where we are ahead i four or five point. i see one from cnn where we are down. i think there's something about these polls, there's something phony. continuingsign of dissension within the gop, trump said he is not ready to endorse house speaker paul ryan or senators john mccain or kelly i ought. new york congressman richard hanna is the first house member to announce support for hillary clinton. retiringed, the congressman rights donald trump is unfit to serve our party and cannot lead this country. reevaluateit will any use of the sicilian airbase against therikes

islamic state. italy agreed to let armed u.s. drones to take off, but only to defend american forces targeting extremists. day powered24 hours by 2600 journalists and analysts in more than 120 countries. i'm mark crumpton. emily: i'm emily chang and this is "bloomberg west." coming up, fit at the latest in the tech parade. a of trackers may be gaining traction. tech made -- tech megamergers maybe you rolling in. and instagram takes a page or maybe a whole chapter from the snap chat labor. changeslatest product

enough to take on the competition? first two are lead -- investors liking fit it and sc posts earnings. to 586 growing up 46% billion from a year earlier, suggesting new fitness trackers are getting a leg up. gross merchandise sales, the value of the goods that passed through the forms increased to $670 million. so are things turning around for the stock market rookies that went public last year. here with me to digest is cory johnson and the cofounder of elevation partners and my guest on etsy,the hour and plump highlights and why things seem to be looking up for this company? guest: i think it's a matter of

expectations. they said x dictations that were way too high and then under delivered. then they set up expectations that were reasonable and they have been exceeding those expectations. the number you talked about was a slight revenue acceleration and the real takeaway here is e-commerce is accelerating. .e sought with amazon and ebay people are buying more and more online at an accelerated rate. had a note from an analyst at citigroup saying it is unfair to the here at sea to amazon. amazon has it own division called handmade to take on etsy. what do you think? is there any comparison mark guest: i'm a big believer that the market place, when you get enough people in it develops a life of its own and things don't compete exactly. ebay developed a early culture that remains and betsy has

developed its own. i think it's much less related to competition then to the activity of the members of that community. are they doing things and is that community growing? time will tell. it's not a huge marketplace, but when you want a giant ball of yarn, there's nowhere else to look except at the. for a weird reason, i was looking for a giant all of yarn and it was my first stop. it turns out they offer a lot of giant balls of yarn. emily: i've gone there for pillows for every shape and color but i don't go back to the same retailers, the same shops. guest: the market lace develops the brand value. it's hard to break out of that. maybe that's not such a bad thing. maybe the value is in aggregating everything.

large halls ofng yarn, my sense is at sea, even if it is not promoting you for a second and third sale, getting the first one is a big deal. how well is at sea doing when it comes to developing relationships between buyers and sellers and increasing these the keenness of the warm so that these purchases are not just one off mark -- just one off? guest: that is the limits. the sales are continuing to decline in the sellers are realizing they be it better to just have their own storefront and a are going to shop by and opening their own store because they realize what a are doing is renting customers from it. ofthat's a caveat, the rate net sellers is declining and has declining four quarters in a row. fit it. want to turn to

they went public and have had a bit of a rough go full we see some traction with a of fitness trackers. what would you pull out here? the: they talk about ladies, their new watch and how it is 50% of sales. initially, the wall street reaction was about this. falls immediately because investors may have looked at the gross margin number. let me show you how it changed. this is me doing my weatherman. flying taxidermy swirls on at sea and if you can't find your ball of yarn, i suggest you look there. if you wanted to admit come he might have not you were paying less for it. the gross margin number was a

concern. numbers, this the quarter all the way down to 41.8%, a substantial change. they decided they could charge the cost of sales and decide more money or potential warranties and they said were this quarter, that charges going to reduce gross margins. it was additional warranties taken the side and the way the warranty is being used, how many actual returns they get, those numbers have unless than the money put aside. this one, they are putting aside a rainy day for monday he will for warranties. they don't explain exactly how much there any aside. i don't know if they are going to say anything in the call about it, but it was some of the

initial confusion. i think this company does a pretty good job of disclosing those numbers and talk about how they are putting aside for those weren't these. emily: fitbit has been trying to transform it into a digital health company. they are competing with apple and xiaomi in a wearables market that is fairly nascent. the first law of tech investing is that product cycles are the only cycles that matter. you can ignore the economy come you can ignore just about everything else in the bid is an example of this -- the fit it is an example of this. fitbit has done a brilliant job of establishing a each had underneath apple. they have carved out a low and they are

doing a great job of putting people to share their information in group activity. i like the product cycle short term, but i don't think it's ever going to be a giant company. i say this as someone who owns the stock, you are buying it with the expectation that at some length, the product cycle will run itself. i would like to see how this pays out because the people i know who have fitbits, it's a social experience. i think the angle of them becoming wellness oriented is not new. that has been part of their story from the beginning and if they are small, they will find more ways to get people emotionally engaged. emily: you mentioned the social. . my in-laws got bits of the same time and they love them, but they have an through three of them over the last six months because they have rogan.

-- they have broken. cory: that is an issue. i've and looking at the amount of warranty reserves they have and the amount of returns has been a small percent. the warranties of the money they put aside ranges anywhere three to bash 3% to 5%. 3% to 5%. one thing that may have confuse a lot of people on wall street -- when you look at these numbers, they report a smart watch category and apple, the biggest seller of smart watches, the numbers are down 55%. it is not considered a smart watch because the only app that runs are fit it apps. -- fit bit apps.

but they have had great success at wearables, if you percent growth year over year with the number of units sold. to your point, it is a social thing, it is a thing where people to wear these things, it's a very active heart of -- very active part of their life. i eventually got them for everyone in our family. guest: and people brag about it. there is this concept of the net promoter score, which is a gauge of how much your customers believe in your product and there's a high promoter score because there's something about that experience were people don't just share with their social group but in their broader facebook immunity. i think that is the secret weapon. i don't think this is going to be an easy business.

but it would not surprise me at all if it does play out. emily: we are going to talk about ea earnings out after the bell. thank you to cory -- to cory johnson and the director of wedbush securities. other stops we are watching, lou mobile and ea, both out with earnings after the bell, but the big mover is glue -- chairs limiting after they say their profit loss would be wider than estimated. they are behind games featuring kim kardashian and katy perry. down, the arts chairs company posted a surprise profit per share but the revenue disappointing some analysts. fastere a very early him -- early investor in ea. they say they have not seen any impact from pokemon go revenue.

what do you think? baloney. pokemon go has changed the entire conversation in the mobile market. that everyone in games faces today is that there was this extraordinary growth for mobile, but we have hit saturation relative to new phones. once people get comfortable, the rate of purchase declined. i am not super confident that the near-term outlook is going to be that good for anyone who doesn't have a product like pokemon go. nintendo has something really special going on here and who knows how big it is. but vr is not here yet, ar, you have your first glimpse, so these are new opportunities for game developers.

until those things are in the it is going to be tougher sledding than people like, but you can see what is coming. anding the product cycle figure out who is most leveraged to play there, ea has not shown us that they are going to be the one but i wouldn't be surprised if they have some kind of effective play. emily: we are going to dig more into mobile gaming this thursday .ith the ceo of we will talk about how kimmy k's game is doing. next guest says the age of smart phone adoption is over. so why does he think it is worth hanging onto apple shares? instagram just paid snapchat a serious complement -- we will talk about what some are calling a copycat move later this hour.

this is bloomberg. ♪

emily: the world's largest smartphone maker, samsung, trying to build on its competition, unveiling its new phone, display curves down both sides of the phone and it can be unlocked with an iris scanner. it comes one month before apple is expected to announce an update to the iphone. smaller chinese rivals are expected to release or sophisticated android and vices -- devices. the age of smart phone adoption , whoer, services my guest says we are on the verge of smartphone adaption.

he is still with me here to explain. our smartphones over? what do you mean by that? roger: all product cycles follow a comparable arc. they all follow a certain curve and there's a time when people are adopting a new technology and if enough people adopt it, it becomes standardized and really big. we sell his personal computers and it was so big that by the time everyone adopted, if you were a business, you can count on the fact every customer you wanted to reach had a personal computer and you needed a way to reach them. onlydaptation phase is something that happens when you have a giant hot cycle that a product to the entire population. all the sudden, everyone goes now everyone has a smart phone. how does that change my business mark what do i have to do to

take advantage of that merck emily: what does that do to businesses that rely on smartphone sales like apple? roger: it's going to be difficult. five years ago, many people were still getting their first smartphones and they were open to all kinds of applications. they would up trade every year or every two years. now you are at the point where the evolution of the product has slowed down dramatically so the need to upgrade his every three or four years. you are a manufacturer, you are past peak. you see this in europe and china. emily: samsung is out with a phone that unlocks based on scanning your eye. could we see more innovation? roger: i expect tons of innovation. what i don't expect is there's nothing obvious they can do that causes the install base to up date at once.

thinked a big bulge, so i for apple and samsung, i think apple is interesting because the pe multiples are so far below the s&p 500, yet the cash flow is exceptionally favorable. of those things come you can own apple and not worry about the audit cycle and every once in a while, you get something where everything does lineup and they have a good period and the stock is up. emily: what do you think of the state of innovation at apple? what do you think of the apple watch mark roger: i don't think apple plus trouble ms. innovation. they have the most successful product in the history of technology by a mile and it's almost impossible to imagine a company coming up with a bigger

thing than the iphone just when you need it. they may eventually come up something but the notion that a are going to do it, that is unusual and i don't think you can penalize them for that. there was no way the watch was ever going to be a substitute for the phone. ist the watch is about facilitating services like apple to be moreting apple engaged and connect did in the customer experience. emily: you have been consistently critical of apple software. what do you think of the state of apple software right now schumer and has not been a transformational product. roger: i don't care about the watch. i care about products like itunes and their activity applications are all buggier than the used to be. the user interfaces are more

complicated and much less useful to people. emily: why don't you care about the watch? roger: because watches are a tiny market and apple is a giant company. if they make a car, that will be interesting. emily: what are they going to do? roger: i have no idea. my point is they don't tell me and i don't read it in the newspaper. see anybody who has great insight, but the stock is so cheap i don't care. i'm looking at this going i will take my chances. deliver aucts still better experience than their -- it's not worse enough to get me off the platform. people who are android customers will remain android customers and people who are apple customers will remain apple customers. they are stuck. they are not adopting a lot of new things. if you are at cap developer

trying to make new sales, all of that is terribly complicated. what is going on with pokemon go is so unusual because it has been so hard for vendors to rake out of the noise. the key thing is the at at tatian phase will be different than the adoption phase. in the adaptation phase, most of the benefit goes to the topanies that are out how integrate smartphones into their businesses the weight uber did, you are going to see companies like starbucks relative to pre-ordering and every company has to do this. i suspect it will create a small number of mega independent companies. the internet was the way companies integrated pcs into their business. so we will see an analogous kind

of thing as companies do it. it will be different, it will be new, and there will be different winners. we will continue more in the show. they with us. the right back. -- we will be right back. ♪

emily: coming up, the tech megamergers keep rolling in. we will look at the likely targets and whether the largest internet companies will be getting in on the game. us, you can listen on the bloomberg radio app and on serious xm. this is bloomberg. ♪

mark: i'm mark crumpton. let's begin with a check of the first word news. president obama is urging republican leaders to withdraw their support of donald trump

the president made his comments during a joint white house press conference with the prime minister of singapore. president obama: the fact that he doesn't appear to have basic knowledge of vertical issues -- critical issues in europe, in meansddle east, in asia that he is woefully unprepared to do this job. meanwhile, trump says the president and hillary clinton single-handedly he stabilize the middle east and handed iraq and olivia and syria to isis. new york city police mission or bill bratton has announced his resignation. he will stay on the job until some number. yes twice served as new york police commissioner and is the only person to serve in new york and los angeles. after hammering hong kong with strong gales and heavy rains, a typhoon is headed toward china.

the storm briefly shut down the series, grounding hundreds of flights and halting trading for the day on the hong kong stock exchange. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. it is just after six: already p.m. here in new york. my colleague has look at the markets in australia. >> and other grim day in sydney, a wet day for the weather and it wet day for the markets. zealand index down .1%. we are going to be watching some -- making theoday

.ulk of their revenues in asia analysts are expecting quite a sharp decline in earnings over this recent time. ana holdings, the biggest airline by passenger reduce, that is going to a lot of ana dollar cost. we will be watching that first quarter result with analysts expect to need rest first quarter results and we are .atching carmakers emily: this is bloomberg west.

i'm emily chang. this week kicked off with more deals and tech news -- the sale of uber's china business and elon musk's merger of solar city and tesla. what is driving this recent dealmaking?h my cohost is with me, a co-founder of silver lake back in the day. how much more m&a activity will we see? roger: i think we are going to andgnize is when merger acquisition activity rises, it is always a signal the environment is difficult for earnings. fundamentally, you've got europe, not just because of grexit, brexit is almost certainly going to add drag. inngs are not as robust china and if you look at the s&p 500, more than half of the earnings come from the u.s.

if you have bad trends in europe and the biggest parts of asia, you have to anticipate margins have probably peaked. there's a lot of analytical support for that notion. against that model, how are people going to keep her stocks ?p to get people to focus less on the current results, and the day is a great way of doing that? i look at linkedin and it's a perfect example. microsoft had a big run. it's not obvious were the next row sleep is going to come from and it's like an obvious linkedin can provide it but it changes the story. on microsoftle going income a gives you something to be bullish about. emily: roger: are you a bull on this deal? i'm not. i want to applaud the management

at link them. they went from nothing to tens gotillions of dollars they -- as they got paid for -- they sold it for far less than what it was price that. it's not at all that they sold for less than it was worth. an extraordinary outcome for the management of linkedin. billion of value will require some gymnastics. it is by no week -- by no means a certain thing. but linkedin is tiny scale wise compared to microsoft. lift tolly provides the keep things going, but it does change the story. about some of these other stories like verizon and yahoo! and solar city and tesla? twins are good and bad roger: let's start by -- start with

eating. that was a really and move by uber. like they wered going to be successful in china and they were leading up to lien dollars the year. bleeding a billion dollars a year. the long-term for strategy but if you look at the opportunities that they face, it probably the best play they could have had. the competition is a lot easier into the marketplace than they were originally asserting. they are going to need that. edition through subtraction. -- addition through subtraction. they've got aol and aol is not going to change the direction at all. it has helped the management

team feel better. or double downup on that opportunity. i think the sad ring about yahoo! is you have had several generations of energy past with building on the great brand that they have. no one was able to do that. it points to the fundamental flaw in how executives are compensated because every one of those executives got paid royally to leave because the next one was going to be the one ao saved it and made it worth half. when you add up executive, come i can get was a quarter of a billion dollars in rough terms. really serious money for what? i look at it and go i think shareholders were not particularly well served, but the pain is over, so that is a good thing. emily: our shareholders being

served well by elon musk? roger: that remains to be seen. one person described it as a strategy of putting too boat anchors together in the hopes that they would float. the problem elon musk as is i think tesla is an amazing company and the brand and the products are extraordinary, but it is leading a lot of cash. and solar city is leading a lot of cash. putting theear how two of them together addresses the fundamental problem either one of them faces. inevitable for them. emily: i want to do a quick lightning round. which of these companies do you -- do youacquired think will get acquired? gopro? roger: i doubt it. i imagine there are buyers by i

don't think so. i think they are an independent thing and it's not obvious where does it rate fit. emily: pinterest. roger: probably. emily: who? roger: i don't know. i can see a lot of buyers folding it in saying it's a good addition to our portfolio. i would way sooner own pinterest than yahoo!, for example. yft?y: l iter: they are sort of doing now, partnering with gm, which i think is the right strategy. ft great fear is that when ly and hoover entered the market, the price was so compelling that it drew millions of customers into the market did not create a business model with what i would describe as adequate margins to provide a return on the capital invested in them. i don't know how they get out of that box. i think that suggested a sale would be in the interest of everybody.

emily: pandora. you are a musician. roger: i don't know. the music industry feels an ever shrinking business. amount of participation is staggering. they had the entertainment field to themselves with the exception of television and movies and since they stop -- that was the last time, when they created the music video and put it on mtv. since then, they have done nothing that has been customer value added. we have created video games, the internet, social networks and a zillion forms of entertainment and music guys expect to get paid and i don't see it happening. i can imagine a consolidation acquisition of pandora but i don't see an acquisition that provides a great deal for anyone. emily: twitter? roger: yes. emily: by who? roger: i don't know.

i think the issues they face internally, they don't appear to have an internal solution. i keep hoping they will. i can easily imagine a scenario where the board asks a few people wouldn't you really like to have this, and who wouldn't? if you are a media company, when you like to have to what are? emily: maybe. and nobody seems to be buying yet. i want to talk to you about instagram. you were an early investor in facebook. instagram now doing disappearing stories. it disappears after 24 hours. is that latent copycatting? -- blatant copycatting? those two things inconsistent? i think it's important for any theyess to recognize when are at a disadvantage and to do

what they can to offset those disadvantages. and this is just software. it not a patentable, copyrightable technique. customers clearly love that. the incredible thing about facebook is the core business continues to grow. mobile and video together continue to drive earnings growth even from a large scale. gun to monetize the other core apps that they have. they haven't started on messenger, and i have barely started on whatsapp and instagram, they started but it's a small fraction of what it is going to be. the right thing to do is to make sure there are no -- there are no holes in your lines. the advantages their competitor had in that space was so significant, they needed to fix it. talked to the ceo of

instagram and i asked if he was afraid of snapchat. he said we are not resting on our laurels and we know what they have come out with. he was quick to give credit where reddit was due and complement snapchat. don't think snapchat has harmed instagram at all. they couldou think because it is so popular with millennials? roger: i think it is its own thing. it has its community. aren't there a billion users of instagram mark half a billion users. it is huge. perspective, the path to a billion is obvious because there are all of these ways to integrate and extend to more people. they are never going to get everybody and they don't need to eat everybody. they just need to have a great is this of their own. i could be wrong, but half a

billion is a number you can build a lot of revenue on with a product as good as instagram. with each of these additions, they enlarge the opportunity. emily: does snapchat get acquired? shown aney have ability to remain independent and i wish them the best because they have then right so far. offers atd down some the time i thought they were nuts. i took i have to them. way to go, guys. knock them dead. i wish them nothing but the best. emily: roger mcnamee, you are with me for the rest the hour. coming up, uber may have waived the white flag in china but will a tech giant follow suit? we will look other disruptors trying to crack the market. this is bloomberg. ♪

white uber has waved the flag in china, but what about other companies trying to make a push into the come -- into the country? airbnb has had some difficulty gaining a foothold but it is pushing forward. fewer than 50,000 of its listings are in china. on the other hand, airbnb's biggest chinese competitor has 400,000 listings. airbnb is not giving up. they have teamed up with sequoia country expand into the and is planning to hire a ceo for its china business. techng us is our bloomberg editor and still with me in the studio is roger mcnamee. busy --pany has a very

very different business model, but talk to me about airbnb's chances in china. are the odds as much against them as they were with uber? guest: you are right. they are somewhat different businesses. they manage a lot of its properties and behaves in some ways more like a hotel chain. as we know, airbnb wants people to open up their doors and living rooms and extra property so people can stay. one way to think of it is airbnb's interest in china is twofold. it wants to open the inventory of properties available to people going into china but what is critical in terms of airbnb having a presence is outbound travel. chinese tourists are fanning out across the globe, and asia, europe and the u.s., and they want places to stay where they

can accommodate a lot of people because they like to travel in groups of family and friends. there's a lot of moving parts there and i do think airbnb ton't given up on trying expand the number of rooms it is also renting out in china. road is littered with u.s. tech companies that have tried and failed in china, whether they got pushed out or left on their own from facebook to twitter to google to now over. should airbnb even be bothering? guest: i think there is always -- roger: i think there is always hope that each company can find a home. i can't speak to what the other opportunities at airbnb are. but there was a time which to have ended about a year and half or two years ago when they started to make the changes, the purchases of routers favoring their own products.

but there was a long time where china was getting progressively more open to western companies. where it was a really good place , but now things have slowed down, the rules are changing, and they are changing in a verdict bull and unpleasant direction. predictable and unpleasant direction. whether they can solve this issue of building a brand that allows chinese people to be aware of airbnb when they are traveling outside of china, that's an interesting way of thinking about it in the cost of making that happen may be quite reasonable in the broader context. emily: you have a story that uber is going to redeploy 150 engineers rum china to other regions, southeast asia and indonesia, regions that could benefit from additional uber resources.

the uber of southeast asia put out a statement saying with the deal in china, we expect uber to divert more resources to our region. we will make them lose again. tell me more about where you expect to see more uber firepower and if they will run into the same problems they ran into in china. there's a whole other war going on in southeast asia which has not gone on to other people's radar screens. there are thriving delivery businesses in southeast asia in particular, malaysia and coming up in india. we are not just talking about people getting right. that is this model has already existed for a long time, people hopping onto the back of scooters. the business down there involves a lot of delivery and services,

to your homesseur or cleaning people to your home. i think the challenge there is figuring out what it should do differently. i don't think going in and offering rides will be enough at this point because people have discovered they can tap a button on their phone and get groceries delivered from a guy on a scooter. in a sense, i think this explains the 150 engineers. you will see a lot of features being built into the uber at. itly: does uber become -- is truly a $62.5 billion business? market gets to decide how to value it. my own view is they have yet to

prove a sustainable business model that justifies a high valuation. i'm afraid each of these efforts that they have made it doesn't work, the opportunity cost is so great that they don't get a chance to recover. i'm very nervous about hoover -- about uber as a stock and if they allow people to short it, it's interesting to cme people would jump on that opportunity. a great idea and a great product, but a very high price talk. emily: -- very high priced stock. emily: great to have you with us. we will be right back. this is bloomberg. ♪

emily: alphabet said on tuesday that it plans to sell $2 billion of bonds. it's the company's first on sale since 24 teen. >> we remain focused on

optimizing our capital structure, recognizing the strategic value of our balance sheet. we completed the debt exchange in the second quarter which gives us flexibility, including the ability to use debt financing if appropriate. accessopportunity of lee our market to turn out commercial paper. emily: tech companies have been among the leading issuers of u.s. debt, selling $103 billion high grade on. and microsoft are the three biggest issuers in the category this year. that does it for this edition of "bloomberg west." that's all for now from san francisco. ♪

♪ >> from our studios in new york city, this is "charlie rose." charlie: we begin with politics. in an interview this weekend, donald trump suggested the u.s. should accept russia's and accession with crimea. the deal runs counter to the obama administration. it is now believed that the might be responsible for the research and testing from this dnc campaign.