A BlackBerry Buyout?: Bloomberg West (09/23)

REPLAY VIDEO
Your next video will start in
Pause
  • Info

  • Comments

  • VIDEO TEXT

Sept. 23 (Bloomberg) -- Full episode of "Bloomberg West." Guests: Wedge Partners' Brian Blair, BDA China's Duncan Clark, Stitch Fix's Eric Colson, CircleUp's Rory Eakin and Bloomberg's Paul Kedrosky. (Source: Bloomberg)

? live from pier 3 in san francisco, welcome to bloomberg west, where we cover the global technology and media companies that are reshaping our world.

I am emily chang.

Our focus is on innovation, technology, and the future of business.

Let's get straight to the rundown.

Library has a buyer may be.

-- blackberry has a buyer, maybe.

Lincoln is accused of hacking your dress book and -- a linkedin is accused of hacking your address book and your contacts.

The company says it does not contact anyone without permission.

First to the lead.

But very was on top of the market.

-- blackberry was on top of the market but now i could cease to be a public company in a cup -- it could cease to be a public company and a couple of months.

The deal would buy out blackberry.

The agreement is subject to six weeks of due diligence.

They need to secure financing.

In a statement they write -- blackberry sought alternatives after its latest phones failed to stop the exodus to android and android devices.

We are joined by our editor-at- large cory johnson who is in new york with a drill down.

This is not a deal quite yet.

There are some reasons.

You will see a lot of headlines that say this is a deal to take blackberry private.

There are reasons that people are jumping to that conclusion.

There are any number of them.

When they published this letter of intent, when they showed us the announcement of the letter of intent, there is the fact that is -- it is nine dollars in cash and they say the board approved of the terms of this deal.

There are some reasons why you might believe it.

So why would we doubt that this will actually go through?

What are the reasons to be skeptical?

You have to take them at their word.

If you take time to read the letter, there are some important outs here that tell us this deal is not anywhere near being done.

This letter contemplates a transaction.

It is not a transaction.

It is a consortium that is seeking financing.

They do not have the money yet.

There is a breakup scene if the deal does not come together.

All these things suggest that there is doubting and things that have not come together to make this happen.

It is a way to stop the hemorrhaging in the stock so they can drum up another offer.

Everything -- this has not worked.

They need money and partners.

Who could those partners be?

Who is who they are not.

These are the larger shareholders of blackberry.

Mike lazard, biking global.

These are the biggest other shareholders and presumably because the largest shareholders and board members, these guys are on the speed -- speed dial of everyone at fairfax who are trying to take this company out since they first announced it.

They have not stepped forward and that says to me that they are not interested.

This looks like a white flag sent up from waterloo, canada as opposed to a deal to take the company private.

They do not have the money and they do not have the partners and if they did they would tell us.

We will continue to watch this closely.

Who is fairfax financial and why isn't interested in taking like very private?

I will dig in more on this with her stena alessi.

-- cristina alesci.

If this is a deal, if it -- is this really done yet?

Rex fairfax financial owns 10% of the stock and we know the cost basis, they got in on this company at $17 a share.

To a certain extent fairfax is looking to protect its own interest here.

May be signaling the market that it is essentially a backstop to this company, may be seeking to stop the hemorrhaging that we saw last week on the heels of that announcement about the right down and laying off 4500 employees.

We actually did see the stock price bounce a little bit today.

As cory points out there are real questions over this deal predominantly over who the partners are.

When you have such a challenging turnaround and a potential breakup, you're going to need a heavy-duty financial player here.

Fairfax is an insurance company.

The ceo calls himself the war and buffet of canada.

They have never done a tech deal and three months ago he was on the record saying blackberry brand is one of the most recognizable rents of the world.

The company got complacent and perhaps overconfident and perhaps did not respond fast enough to apple and android.

Acknowledging the challenges that exist and today's announcement may have answered some questions but we still have any more to go.

Cori talked about who the partners would not be or likely will not be.

Who could the partners actually be here?

We got a hint today went fairfax just a short while ago put out a letter to shareholders explaining the deal structure the way that they see the outs and the breakup in more detail.

As one of the benefits of a fairfax-led takeover they said there is a high certainty and speed of completion.

There will be no need for regulatory approval.

The company that is taking this over presumably led by fairfax would be a canadian company.

Other buyers in this group would be from canada, not a huge surprise given the fact that this company has been on the market for year.

There has been no interest from strategic like microsoft or others out there, maybe from asia.

Not a huge surprise to see a homegrown solution if it resents itself.

All right.

Cristina alesci, thank you.

One thing is clear.

Blackberry has a tough road ahead.

Brian blair who covers like very is with me now from stanford, connecticut.

The critics of this possible deal are saying that prem watsa is crazy.

What do you think?

This is the only great tech company in canada over the last 10 years and i think there is a lot of national pride behind this.

It is not a mistake that this insurance aging -- agency wants to protect this.

Also protect this brand and not see it break it -- broken up into tiny parts and spread around the world on the cheap.

Whether or not they are smart or not, the opportunity as i have said for a while is to sell low- end devices on a sub -- kind of sub-two hundred dollars into emerging markets.

There is an opportunity.

Half of the world's phones are still not smart.

There is 700 million units a year that they can address and that is the opportunity.

There is a little bit of an enterprise opportunity.

A lot of people still like their like berries -- blackberries.

He wants to refocus on the enterprise.

People will not be that excited if he says we will go for the low-end $150 customer in emerging markets and that represents a bigger opportunity.

We are seeing most enterprise customers, most large companies are migrating away to the iphone and we have seen that trend for the last two or three years.

That is one of the things that has killed the company.

There are users that still like keyboard-based like berries -- blackberries.

When i -- when we were working on the story, i remember one i got my first one.

It sort of changed my life for now, i still carry one.

It does not compare to the other devices out there.

How can they win even in emerging markets where there are ideal cheap competitors?

Rex if you think about it there are still people who just want e-mail and me beef access to facebook or twitter.

Even the old system perform those functions adequately.

For somebody who has not had a smartphone before i might had an iphone or an android, this is still a novelty.

If they can get it at $99, there is still a market for that.

Sometimes we forget outside of north america you have aliens of people who do not think about -- billions of people who do not think about the iphone the way we do here.

They want access to the network and the basic functions and there is still a market opportunity.

The question is, can it be done profitably, can they sell it $100 phone and get a 30% margin out of it?

If they can they will survive and that is the big question.

We are getting some reeking news from hugo miller.

He spoke with prem watsa.

Lazardis is not involved in this deal and he came together over the weekend.

What is your reaction to that?

It certainly seems last-minute for sure.

Given that there are some in the missing pieces.

As sound -- as soon as they announced on friday, at one point, the stock dropped 23%. watsa said we have to put a backstop.

Let's put a bit out there.

Let's take six weeks of due diligence before we have to decide and let blackberry shop themselves to other prospective hires and that is what is going on.

They're kind of hoping that another party comes in and bids higher than nine dollars for it.

That is what happened on friday.

Who is going to be?

The only thing i have said for a while is there is a possibility of some of these asian players, maybe someone like huawaiei or zte or lenovo.

Forget about the higher-end enterprise customer and focus on selling cheap devices.

There was a 20% or less gross margin and their content with that.

That is what makes sense.

There is a small opportunity for one of his players to come along but like i said it is small.

They announced they were for sale last month and nobody has jumped on it.

Until the stock got pummeled on friday.

There may not be another buyer but i see that as the potential outlook.

Click six weeks of due diligence.

We will be there every step of the way.

Thank you very much for weighing in.

Apple had a record-setting weekend when it comes to the iphone sales.

Is china a big part of that boost?

That is next on "bloomberg west ." ? i am emily chang.

This is "bloomberg west." the new iphones are already breaking records.

The company sold 9 million devices this weekend, almost double the last record set by the iphone 5 launch last year.

This is also the first time china has been included in the opening weekend.

How much did that market factor into apple's sales success?

My guest helps companies expand their business in china.

We do not know for sure but what do you think as far as the numbers break down?

For the first time ever the iphone was available in china at the same time it was available here.

This is the first simultaneous launch and rather like hollywood we are seeing the linking of the tech firms to the enormity that china represents.

China has its challenges.

There was discussion about not having a deal with china mobile.

Phones are sold in the open market and people have been lining up in droves.

They have been lining up.

What are consumers saying, are the excited?

We have the two phones launched so that is an interesting psychology.

It is only $100 more to go to the high-end.

We are seeing the psychology of i want the best.

The phone is an expression of my personality, of my status in society.

We thought the iphone [indiscernible] --5c would be perfect for the emergent -- emerging market.

It is all about going to the premium end of the market and that is why we think the gold is an additional boost to this phone.

The gold has been and shortest supply.

The hardest one to get.

Talk to me about the brand perception of apple and china -- in china.

We have talked about how apple has lost its cool factor there.

Now that these phones are out to my is that really true or do people still aspire to have an iphone?

It has been a good weekend for iphone.

-- apple.

This is a good idea for them to go for that higher-end market.

If they started to slip they would find themselves at the mercy of the lower and smart phone manufacturers.

Samsung has been offering more screen sizes.

That may be a challenge but this is a great launch for them particularly with the cool factor of the gold and the buzz to restore their cool.

Click some of the samsung phones have a your screen, it has been very appealing for chinese consumers.

What do they think of samsung?

Samsung is very well integrated.

Is it as aspirational as apple?

Wax they are spending more now on marketing and r&d. the marketing power is evident around the world.

Apple has relied on buzz to some extent but they will have to invest more in diversified sets of products to keep the cool factor at the high-end.

Samsung is seen as a very well embedded player.

In terms of market share apple is number seven in china.

How do you see that shaking out down the line versus samsung, versus some of the cheaper players?

It would be a mistake to go to the low.

In china you always lose to the foreign player at the low-end because you can never compete on price and distribution.

Nokia had that for a long time but lost it.

I think apple is well a devise to keep going for the high-end.

Maybe some trickle-down products.

We are seeing it outsell by a big margin.

How many stores do they get in -- do they need in china?

More -- one of the restraining factors is the ability to find good locations.

There is a bit of a constraint on how many really good shopping centers they can find and they need to find a safe place as well.

We have seen in previous launches the crush that can happen so they have been shifting to online a lot more.

They have to gauge it that there's a huge amount for them in retail.

Thank you for bringing us the perspective on china.

Netflix made history at the emmys last night.

It may not be as big a boost as it may seem to the streaming service.

That is next.

? welcome back to "bloomberg west." i am emily chang.

Netflix made history at the emmys last night becoming the first online video distributor to take home a major primetime award.

David fincher won an emmy for directing "house of cards." the only when four netflix and the major category.

Even though i had 14 nominations.

"breaking bad" won best drama.

Showtime's "homeland" won awards.

17.6 viewers tuned in.

The largest audience in eight years.

What does an emmy win mean four netflix?

-- for netflix?

And what is the buzz?

Very buzzworthy.

As for "hosue ofouse of cards," there were nods when they got their nominations.

Symbolically, their win is a victory.

At the end of the day, who ultimately owns the series is a big part of the financial story on whether it helps the bottom line.

This has been a big year for netflix and its original series, "house of cards." they spent $100 million in the first two seasons of the show.

A financial bet that was hardly a sure thing.

It was a big that without the sure outcome.

That team deserves a lot of credit for taking the risk and it has truly paid off for them.

Original shows are helping make netflix must-see tv.

The service has 30 8 million streaming subscribers up 36% from the same time last year.

Winning hollywood awards like emmys can provide a further financial shot in the arm.

Unlike hbo that owns most of the original programming on its channels, netflix isn't -- is in the licensing game.

The show is produced and owned by media rights capital.

It licensed the dvd rights to sony television so if you buy a dvd on amazon that money does not go to netflix.

"aarrested development" is produced and owned by fox.

Another netflix original, " "orange is the new black" is produced and owned by lions gate netflix has hinted it may move in that direction as part of a plan to keep its subscriber numbers climbing.

We should note the strategy of having a show air one place and produced somewhere else is very normal in hollywood.

You think about "breaking bad," it is produced i sony.

A lot of people are complaining -- comparing netflix to the hbo model overall.

We will be back in a moment.

You are watching bloomberg west where we focus on technology and the future of business.

I'm emily chang.

An fcc panel will recommend the federal aviation administration recommend the use of wireless devices are an takeoff and landing.

A report will be coming later this month.

Currently, wireless devices are banned over fears that they will interfere with radio signals.

Faster database software at the open world conference.

Larry ellison says the technology will improve seats by 100 times -- speeds by 100 times.

Revenue growth has been slowing amid intense competition.

Twitter is adding another partner to the amplified tv program as it hears out foreign ipos.

Teaming up with cbs to sell ads during dozens of cbs shows.

The company has announced a deal as part of the new york advertising week.

Microsoft unveils the new surface tablet today.

For microsoft, not much happened with the first surface.

Despite a massive advertising campaign, it was a flop with consumers.

Cory johnson was there.

Standing by with the drill down.

What is new?

A little, and not a lot.

We are looking at the stock chart because often people connect the headline to the stock chart.

The surface has done really poorly, below all expectations and the stock is up five percent this year.

Microsoft believes it might be about the surface.

They put out a big sales job.

A special event here in new york city, they have microsoft employees clapping and even screaming and shouting with excitement when they saw the different colored keyboards, and different ridiculous stuff.

There are two new surfaces.

Different operating systems.

One at 400 and $49 and the other at $899. it has a chip that allows them to do different things like improving the battery life just a little bit.

Generally, the same kind of design with the same kind of software.

Given that steve ballmer is leaving within the year, what does this mean?

In the world of wireless where you have the apple ios raking records today, selling so many computer phones, microsoft is till trying to sell computers.

The surface is them saying that we have a tablet and a phone.

Now they are saying that we have accessories.

Like a grown-up pc maker with a docking station and a car charger and a mouse.

They are announcing them today, ready in 2014. the problem is, their stuff does not work together the same way that ios does.

Any clues who will be the new microsoft ceo?

Outside sources have suggested larson green would be a good ceo.

She did not take the stage and declined our request for interviews.

They don't want her out in front of things or she doesn't want to be in front of the camera.

It's not clear she will be the person leading in the future.

One analyst said it was the worst analysts day in over a decade because the company did not have numbers to present and did not have a clear vision of what they are doing.

They didn't even know if the reorganization was going to stick under new management.

It is clear that microsoft has not decided everything about where they are going and they are not putting out these big public statements about their future.

Linkedin is being sued by users that say this site is accessing e-mail without permission.

The lawsuit alleges the network hacks into users external e-mail accounts and downloaded addresses of their contacts.

The attorney tells bloomberg that they intentionally developed a deceptive advertising to generate profits.

It posted that the company senior director said the allegation that they break into e-mail of members who choose to upload there as dressed books -- their address books is not true.

You can choose to share with professionals that you know and trust.

It will continue to do everything we can to make our communications as clear as possible.

Also a former equity analyst and a in early-stage investor from san diego, what do you make of this lawsuit?

Can this really hurt?

I don't know if they can hurt them, but it can cause them to change business practices, which is bizarre and unfortunate.

In a perverse sort of way, we are all to blame.

Users complain to them at different times that they are flown to the side of a mountain, look around, realized that they know no one, don't know how to connect to anybody, and complain that the service is flawed.

Many have tried to get around this problem by saying that this is the way to figure out who you know.

And if you know them and trust them, we will hook you up to them.

There is a big difference between connecting to no one and wanting to connect to everyone you've ever e-mailed.

The service will air on the side of trying to contact everyone you've ever met.

Linkedin has been doing well, the stock looks good.

But over the last several months, it has become a company known for sending a lot of e- mail.

John oliver had a famous bit which, take a listen to it.

I keep telling linkedin to stop sending me e-mail.

Leave me alone.

Will this do it?

I am on television.

Unsubscribe.

I am unsubscribing with my mouth and i don't even understand what you do.

You seem to have monetized era dating people.

-- irritating people.

Does it have an e-mail spam problem?

Yes, but everyone does in this business.

You have to find some way to connect people.

I can't come to your house and knock on your door, so e-mail becomes the method of contact.

Until people are willing to go through their entire address book and say yes to them but not them, you have this tension that is never going to go away.

I think it is childish for people to complain.

They give that information and then complain that they use it.

There is a legitimate business purpose for trying to contact people.

Even if they have remission, is doing so a good wallace he?

-- policy?

I think so because you have the have the social context to connect people or the whole thing falls apart.

You have the have some way of making that last step.

Will they go to far?

Are they too intrusive?

The problem is one of the user interface problem.

The default is your sending e- mails to everyone in your address book.

I don't know anyone on the service.

You could've checked the box at the beginning.

Great, now i want to shove my fist down my throat because users are driving me crazy.

There is no winning solution in the business of social networks.

You are from canada and europe been following this closely, predicting the death of black area for years now.

What do you make of them going out on a limb to buy this company, maybe?

This is sensational.

It is an offer that they would like to call and offer.

And on financed letter of intent that will not disclose their cigna kit -- their cigna kit -- their syndicate.

It is like a worse version of the old letters of we have some people here that might be interested in buying your company and we all sell your stock.

This is desperate stuff, and it is really distressing about how this was becoming an incredibly embarrassing spectacle.

It is really unfortunate.

It becomes one of these kinds of offers.

Giving it to us straight, thank you so much.

Can a computer pick out your new favorite outfit?

We look at how one startup is applying pandora and netflix algorithms to fashion.

? pandora shares under pressure today, down as much as 12% after apple shares of early numbers on the usage of rival offerings, john is back with more on that story.

Apple simply announced the number of users and pandora shares just plummeted.

Everybody focused on the headline was that there were roughly 9 million iphone 5s's and 5c's. there was a specific comment on itunes radios.

They have already tuned in since launch and it could take away from the market.

If this product can go from nonexisting to have an 11 million unique visitors, what does that mean for pandora?

Pandora has been a very hot stock for a bunch of different reasons.

It is getting its advertising story in line, figuring out exactly how to get more advertising revenue without bothering the growing list of users.

There is a new ceo and they seem to be figuring out the key concern over royalties, the single biggest cost for the company.

And pandora has been the one that argued their largest competitor is not necessarily apple, but traditional radio.

The numbers will play out over the next couple of years, i'm sure.

Imagine if shopping for close was as easy as picking out a movie on netflix.

Aiming to do that by analyzing user data that send close to match their style.

The start up charges users $20 every month and sends each user five different pieces of customized clothing.

Customers can keep and purchase a piece, sending back what they don't for free.

The chief analytics officer is also the former vice president of data science, an interesting combination going from netflix to fashion.

How does it work?

You explained it pretty well, a styling service for women's apparel.

You don't have to do it every month.

You put in your preferences and we will select an assortment of items and ship them right to your door.

You get to keep only what you love and you can send the rest back.

How do you get it right?

The use of machine learning algorithms in conjunction with expert human judgment.

The two work wonderfully together, we found out.

Do you have stylists on the scene?

Doesn't it require a lot of manpower?

We will sort them for the human stylist.

A final selections.

Any numbers on success rates?

We love it when customers keep two out of five.

We are more interested in them having a great experience.

We want them to level five even if they can only afford to keep one or two.

We take care of shipping and we want to make sure you get great stuff.

You have been around for how long?

Two and a half years.

Wax why do you wait one month to get the first box?

We want to have the best inventory for you.

It builds up and we want more inventory to make sure that we have a great selection.

Maybe they are not perfect, but i end up keeping them because it is too much work to send them back.

How do you avoid that being how to make your money?

We make it very easy to send your back, a postage paid envelope.

It is very easy to send back and we like the feedback.

When we miss on something, we need to know and that is what makes the algorithms better.

I think i want to try it out.

The algorithms officer, thank you for sharing with us today.

We will be back with more in just a moment.

? welcome back to "bloomberg west." a key change to try to raise money, title ii of the jobs act going into effect today.

It lists a band that prohibited companies from advertising they are raising money.

They can openly solicit investors.

What will these offerings mean the startups?

Cory johnson is back from new york with more.

It is meant to protect investors from fraudulent companies.

It is a big change.

Joining me to talk, he can serve up a crowd funding platform that make these connections to growing businesses.

How important is it?

It is a big day, the first time in 80 years that investors and companies can come together more efficiently.

Let me be the senate that i actually am.

-- cynic i actually am.

There were so many frauds, promoting companies that barely existed.

How does this prevent that from happening.

The law is still only credited investors.

Folks that meet the high standards.

The other thing is the proliferation of information available to the average investor.

What you can do today was not possible in 1933, checking out their profile and seeing them on the web.

We work with only companies that have an existing product on the shelf.

You are now able to get more information about that through websites.

Because the internet, it is now buyer beware.

Investors have always been able to invest, it doesn't change how that investment happens.

Just how i can advertise.

Defined an accredited investor.

The most important for individuals is $200,000 in annual income.

$1 million in net assets.

How many american adults meet that definition?

About 9 million people.

9 million can be solicited directly without having to file documents in advance?

That is right.

There is not a requirement for advance filing.

There are rules put forward but it has not yet been finalized.

Initially, companies will be leveraging resources that they have that are cheapest and most effective.

Still a small selection of the american population that is accredited.

Social media, twitter, linkedin, starting that conversation.

The details in the offering will be together in one place.

Investors can compare them, but you to spark a conversation for the first time.

I hope it turns out better than it did years ago.

Time for the bwest byte, one number that tells a lot.

Here is the number.

The amount of money for the self acclaimed war and buffet of canada has lost on blackberry.

His average cost is $70 a share, closing at 882 today despite his offering.

Did he call himself the war and buffet of canada?

Just his investing style.

You will never see him with a cherry coke laughing and shaking hands.

He is a very private person and that is why this story has a lot of clouds around it as well.

We will continue to follow this potential deal.

Thank you for turning into this edition of the show, we will see you back here tomorrow.

?

This text has been automatically generated. It may not be 100% accurate.

Advertisement

BTV Channel Finder

Channel_finder_loader

ZIP is required for U.S. locations

Bloomberg Television in   change