Apple Sells 9M iPhones: Bloomberg West (09/23)

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Sept. 23 (Bloomberg) -- Full episode of "Bloomberg West." Guests: Piper Jaffray's Gene Munster and Accel Partners' Hilary Mason. (Source: Bloomberg)

Live from pier three in san francisco, welcome to the early edition of "bloomberg west." i'm emily chang at our focus is on innovation, technology, and the future of business.

Apple has a blockbuster weekend, selling a record 9 million iphones which is double the first weekend of sales for the last model.

This time, china is a major factor.

Take two for the surface as microsoft revamps its tablet and tries to take on the ipad after the first urgent flop.

-- first version flopped.

Netflix has a victory at the emmys.

Apple's brand-new iphones have a record-setting debut.

They say they sold in total of 9 million 5c's in the first weekend which is double the previous record for a weekend rollout.

The heavy demand has strained supplies.

Tim cook writes -- this is also the first time china has been included in a new iphone rollout.

I am joined by one of the leading authorities on apple, gene munster.

This even surprised you.

When i saw the 9 million number, i fell out of my chair.

To put that into context -- we had the next vexing 5-6,000,000 units.

That 9 million included channel fill of the 5c and based on conversations we backed into what that was and there is roughly 3.5 million units in that are the real number was probably closer to 5.5 million.

That was certainly better than the feedback we had heard from the high side.

-- buy side.

The important part is even when you back out the channel inventory, it was up from the iphone 4 and 5 from one year ago.

What do you mean by channel inventory?

They had not included that in previous numbers.

When they launched a phone, they did not have any supplies other was no channel fill.

There are many places where you can buy an iphone and those places need to buy inventory.

Apple recognizes the revenue when an at&t store buys 10 phones.

They may not sell those phones but they are in their inventory but apple recognizes that rapid that -- that revenue is that is channel fill.

That is different than sell through.

It was not an apples to apples comparison versus last year but when you back that out, it is still better.

There was the benefit of china, which you mentioned but there was the headwind that they were not doing online pre-orders for the 5s so there were gives and takes.

In general, it was a solid start to the iphone 5s. it sold out in many places.

Why is that?

Why cannot apple make enough to meet demand or do they purposely not put enough out there to create a hard to get product.

We have asked apple that many times if they purposely do that to create this hot product.

Their response has always been that when someone is in the mood to buy something, they want to have it there to buy and i tend to believe that.

They want to get the money whenever they can get it.

The reality is that building this many phones at scale this quickly is a hard thing to do.

To do it tonight profitable, efficient way -- there is a lot of gives and takes there.

In this case, the reason why the supply issues are more related to the fingerprint scanner and the fact they are adding the kinks worked out of that impacts the numbers.

The good news for apple is we called stores throughout the weekend.

There was a healthy demand.

People still were clamoring for the phones even though the stores did not have them.

That is assigned there is probably legs to this story.

It seems the gold iphone is the hardest to get.

Is that because it is in the shortest supply or because it truly is the most popular?

Our believe is it is truly the most popular.

When you come out with a new color, as crazy as that sounds, that ends up being a big deal.

In the past, apple has had issues about colors.

The white iphone was harder for them to produce for some unknown reason but this was probably demand driven.

What color do you want?

I think i have to go old school.

They call it like space grey, the closest thing to black.

That's probably what i will get.

Have you given any more thought to the iphone 5c? it seems to be pretty popular and we know it was as cheap as some people thought it might be.

Do you think it will have trouble in the long run reaching some of the more middle-of-the- road consumers?

Bloomberg has done a great job of kind of pulling back the curtain as far as the apple strategy.

You have written in the past and talked about apple focusing on the high-end.

It sounds like they will stick to that roadmap.

Our belief is that throughout the year, there will be some tweaks to some of the pricing country by crunchy -- country by k-rod -- country by country.

I don't think we can say how that will be.

We believe it will be flexible and apple will not drop it to $300 like we expected but they will tweak that pricing.

I think the jury is still out and the iphone 5s, we estimate they did for million of those.

The iphone 5c, we are expecting 3 million.

In general, is not as exciting a product but we will see what they do and pricing.

Thank you.

Microsoft unveiled a new surface tablet, can the new features attract the customer that the customers did not?

That is next on "bloomberg west," on bloomberg television and streaming on your phone, your tablet, and

. ? this is "bloomberg west," streaming on your phone, your tablet, and

Microsoft unveiled its new tablet today.

It is called the serviceii.

-- it is called the surface ii.

The first one was a flop with consumers.

Cory johnson was at today's surface ii launch in new york and got a look at the tablet.

How is it different?

Will it attract any more customers?

Meet the new boss, same as the old boss.

It's got a little bit different chip but it is generally the same.

The battery life should be longer.

Let's go more by the numbers.

The first number is the stock price.

Microsoft share price has risen a bit in the last year but that is largely a factor of what is going on in the overall market.

It has trailed the s&p 500. they were trying to show off this new device.

The announcement was packed full of microsoft employees.

They showed the new keyboard and people would cheer like crazy.

They would clap and yell but fundamentally, there are two new devices, the surface ii and the surfacepro2. both of those chips allow them to conserve the battery at lower power and that helps them save battery life.

The devices were criticized before for crummy battery life last time around.

What did microsoft have to say about why they think this will do better than the last one?

Microsoft is new to the hardware business.

They have been in software for decades but manufacturing hardware, they are figuring this out so they talked about accessories and the kinds of things they would offer like a docking station, a car charger, mouse.

Big deal?

To them it is because they did not have those ready last time they launched this product.

It is anderson that while they announced these things, some of them won't be available -- it is interesting that while they announced these things, some of them won't be available this year.

We know that steve ballmer is leaving within the year.

In terms of strategy and the bigger picture, does this change microsoft in any way?

I think it does and we see that already.

Every time they come out with some convoluted statement that talks about hardware/software company, their gross margins are declining because they are getting into the hardware business.

They started off at 80% and now they are down at 74%. marketing is trailing off indicating that fewer pc sales are hitting the bottom line.

Clearly, their change to a hardware business will have a significant impact on gross margins and operating margins.

Was steve ballmer at the event today?

No big executives.

No jumping around on stage?

I'm trying to think of what you are thinking of.

Developers, developers, developers, developers you read my mind.

Did you think i was not ready?

I have no idea.

Julie larson green was in the audience.

Microsoft is in the state where they don't know who the next leader as and the employees don't know if the reorganization plan will stick with the new boss.

Even their big buyback of $40 billion has no timetable.

I talked to some analysts and they said it was the most disappointing thing because they did not get the info they wanted to get.

Cory johnson, thank you.

We turn from microsoft to blackberry.

I have a last-ditch effort to hold onto and eroding share of the cellphone market.

The company announced friday it will slash 40% of its workforce and take a write-down of almost $1 billion as they continue to look for buyers to no avail.

Can they just target corporate customers?

Is the understanding that nobody wants to buy blackberry?

They are having trouble finding a buyer?

That's what we understand.

We have heard that their biggest shareholder, fairfax financial, has been reaching out and making the rounds with canadian pension funds but getting a cool reception.

U.s. private equity firms are giving them a similar lack of enthusiastic response.

The company is kind of stuck.

They are stuck with these phones which are not selling hence the $1 billion write-down.

They are stuck in a situation which they said we are up for sale but no one is buying.

They are forced to think that we have to keep pushing on so this is part of this big corporate refocus on saying let's go back to our roots and go back to the customers that still like us the most.

Refocusing on the enterprise enterprise -- will it work?

Haven't they been focusing on this all along?

They have but they made a foray into consumers maybe eight years ago.

For a while, it appeared to be working and they boasted they were adding consumers overall and the balance of consumers vs business customers had exceeded 50%. is it going to work when the company increasingly says you can bring your own device policy.

? listening to the story about microsoft becoming more of a hardware company, perhaps with blackberry should be doing given how on profitable its hardware business is is maybe they should go back to being a corporate services business and maybe get out of the hardware and try to get back into the software and take advantage of that secure network that they built for government and business and make a go of that.

I don't know what that would look like.

Marching onward -- hugo mellor, we will continue to follow your reporting.

Netflix made history at the emmys last night but that may not be as big a boost to the streaming service as it would seem.

That is next.

? welcome back to "bloomberg west." we have breaking news about sac.

Steven cohen is looking to settle the insider-trading cases against the company.

This is a bloomberg exclusive -- it comes to us from the features editor of " bloomberg businessweek." she has learned that last week, lawyers for the hedge fund, sac capital, reached out to prosecutors in new york to say that stephen: is interested in settling the civil and criminal cases against him -- stephen: is interested in settling stat stephen colin --steven cohen is interested in settling the civil and criminal case against sac.

It would include a substantial settlement.

One factor that is in consideration of resolution of the criminal case is the desire to inflict monetary pain on cohen himself while avoiding damaging other parties like the investors.

The u.s. attorney made this comment when the charges were placed against the firm and late july that while there was a civil case against sac involving money-laundering and possibly seizure of assets, they wanted to proceed and be careful to make sure that third parties were not involved or hurt.

This is what we are hearing and we should point out this is a multi-year investigation that has been conducted against sac and some of its former employees.

In addition to the charges against the firm on july 25, there are two trials against former fund managers and analysts at the firm in one trial will take place november 4 and another is scheduled for november 18. according to people close to the matter, we understand the firm and its founder wish to resolve the matters against the firm.

Would this mean that jail time is not involved for any of these parties?

The sac charges mainly had to do with the culture of the firm.

The government said there was a culture that fostered fraud and showed that insider trading was substantial comer pervasive, and on a scale without precedent.

It is unusual you would have the government criminally indict a firm, an entity, that were mainly financial.

We are told this is why a resolution is being discussed because there were no individuals involved.

It is an indictment of a company which makes it rare and unusual.

The sec case it is againstcohen himself and the outcome might be that he would be banned from operating in the industry.

We are not sure that is being discussed at this point.

Thanks so much for that.

Time for a look "on the markets at." i guess we don't have julie hyman now but we have news out of blackberry -- shares have been halted -- blackberry shares trading has been halted and we will look into why that is happening and will get you more on that story when we return in a moment.

? this is the early edition of "bloomberg west," and you can catch us on our later addition.

Let's start with the latest on the terror attack at a canyon shopping mall.

It started over the weekend and kenyan security forces are pushing into the mall to rescue the remaining hostages being held by militants.

Explosions have been reported.

The somali terror group al shabab has claimed responsibility which has left 69 people dead.

German chancellor angela merkel is searching for a coalition partner to form an government for her third term.

Her christian democratic union party more -- one more than 41% of the vote leaving -- leading her main opposition by 17 percentage points.

Walmart is staffing up, moving 35,000 part-timers to full-time status and moving another 35,000 temporary workers to part-time and will hire 55 temporary workers for the holidays.

Walmart and sam's club lost 120,000 employees in the last five years.

California regulators are proposing a bill that could provide a reset button for the online identity of young people.

If passed, legislation will be the first measure and the country to give minors a legal right to erase unwanted tweets, status updates and other materials.

Cory johnson is back with more.

Facebook and others have already offered an option like this but the california bill will make it a right across the internet for children who live across the state.

Hilary mason is joining me from new york.

You analyze data, is this the kind of thing that is easy to do?

It is not easy to do so while the bill is well- intentioned, it is technically very complicated.

There are many questions to ask like what do we do with the data we calculate from these things?

What if you post data about me that is compromising?

I don't have access to delete that.

Discovering that data is a challenging problem.

It seems whenever anything is out there, it is out there for however long.

What makes it hard to control this?

Things spread quickly on the internet and the somebody not in the company has a hold of it, no one has control.

We have breaking news about black area that looks like we -- about blackberry.

It looks like they have a bid for the company.

I'm reading through the release now.

Blackberry is said to have signed a letter of intent agreement with a company called fairfax financial holdings that is offered to buy the company barring due diligence that needs to happen.

Blackberry as a potential buyer, somebody that is interested in buying black area, fairfax financial holdings.

We don't know what parts of the company they are planning to buy or if they are planning to hide the entire company.

The transaction would be valued at $4.7 billion.

We were speaking earlier about whether or not -- hugo miller had said that blackberry was having trouble finding a buyer to this point.

They had decided to refocus on the enterprise.

Let me bring in jon erlichman who has been covering blackberry for many years.

What do you make of this news?

Blackberry has a buyer.

For all the options on the table, this is probably the most likely outcome.

This large financial firm, fairfax financial, has been a large shareholder of black area -- of blackberry.

Their leading investor had been sitting on the board of directors and then stepped away in part because of possible conflicts of interest.

There has been discussion about whether or not he would want to lead some kind of deal like this.

With the deal valued at nine dollars per share, $4.7 billion, this is one of those dell scenarios who feels like this company gets trashed in the present maybe can do a better job behind the scenes to boost things up.

There is a comment on the statement to that effect.

There will be the immediate question that a special committee at the board level that looks at all the options on that table, if they need to shed light on how many other options they have and is this the right one?

Given that this is a nine dollars share price, people who were hoping that maybe there might be some kind of offer on the table at a higher price would be frustrated.

He says we believe this transaction will open a new exciting chapter for black very, customers, carriers, and employees.

The immediate reaction will be one of somebody who many people thought would be looking to do a deal like this and now we will look for the specifics on how they can get it done and have quickly and what happens to the business in the meantime.

Based on the results last week, blackberry is struggling to find people to buy their hardware now.

Blackberry shares have been halted as part of this news.

An interested party is interested in buying blackberry.

Let's bring in cory johnson from new york.

We have been talking over the last few days wondering who would be interested and why.

Fairfax is one of the largest holders.

There is no financing for this deal so they don't have the money to get this deal done.

They went to some negotiation this week and we know they were seeking private equity partners but they don't seem to have those.

They are seeking financing from a couple of banks for this deal but they might not get that financing.

There is a breakup fee, $.30 per share, which is 157 million dollars that would go to fairfax if the deal does not happen.

Fairfax kind of just got a put option if this deal does not go through.

If it does not get the financing they are seeking, they will get $157 million out of blackberry and they will still be stuck with the shares they own.

They might indeed tried to use options strategies to protect their investment while the shares are trading at a narrower level while they try to find the financing.

This is not a done deal and they will have to convince some banks that there is a future in black area, something the market was not convinced of today.

Can you get us an idea of why fairfax would want to buy blackberry?

Do you know what plans they might have for the company?

They are stuck with 10% of the company as it is so they are looking to they'll out their investment.

They might believe there is a future here.

I don't know but clearly, these guys have got a lot of money on the table already and no one else -- the executives at blackberry, the investment bank, the canadian government -- none of them have been able to find a buyer for this company.

They put up the white flag and waved it to find anyone, announcing that the business is for sale.

Fairfax was stuck with this 10% holding.

They lost on the stock today.

They lost a lot with a decline in the shares and they want that to and and that's why they tried to arrange this deal.

But this into context for us given the struggles that blackberry has been having over the last couple of weeks and months, the decision we heard earlier about refocusing on the enterprise.

What could this mean for blackberry itself?

And some big organizations, blackberry still has a good relationship with the leaders of the it department.

There has been a lot of pushed by the company to be in a position that if more people are bringing in iphones and galaxies that it can still control, in part, the management of that.

There is a legitimate case to be made there.

There is obviously other parts of the business that they have been able to grow -- license out their software -- the operating system that fuels the of devices.

The company they acquired to rebuild their operating system also licenses a lot of that technology to the automobile industry.

There are a bunch of areas where blackberry is somewhat relevant.

Going back to fairfax financial led by the man on the board of directors and is aware of the possibilities that surround a company that has known for a long time that it has to think of what it alternatives might be, you can understand why he would be interested in going down this road, other than the fact that he is already invested.

John erlichman and cory johnson -- black area has a buyer come up -- blackberry has a buyer -- breaking news.

They have about six weeks to conduct due diligence.

Blackberry share trading has been halted but will resume later today.

We will be back in just a moment.

? welcome back to "bloomberg west." we have breaking news about blackberry -- fairfax financial is interested in buying blackberry in a transaction worth $4.7 billion.

They will have six weeks to conduct due diligence and trading of blackberry shares have been temporarily halted.

Let me bring in christinaalesci.

What can you tell us about fairfax financial?

It is the biggest shareholder in blackberry.

They had a vested interest in seeing this company turned around potentially.

The real question is what kind of partner can they bring in that specializes in these kind of challenged companies?

Fairfax financial is an insurance company.

They take egg steaks and other companies but they are not experienced in act -- they take a big stakes in other companies but they are not experienced in turning around another company like this.

They are publicly out there saying that they need someone to join their group.

They say there is a consortium around the but they don't name who the partners are which raises real questions.

This is not a deal to buy the company.

This is merely some progress on the fairfax deliberations over this company.

It says they will conduct due diligence and go ahead and do the real serious work that is necessary before a deal can actually take place.

This could be a sign that they are trying to drum up interest from outside investors.

It will be a real challenge.

Let me bring in hugo miller again from toronto.

We were talking about how difficult it has been for blackberry to find interested parties.

What do you make of this news?

It is unprecedented.

It's unusual because this has been presented as a letter of intent.

The guy at fairfax likes to make contrarian bets.

He made his name in canada betting against the u.s. housing market.

His track record in technology is not great.

It is mixed.

He invested in canwest which was a troubled broadcaster up here and has not turned out well.

The question of whether he will be able to secure other backers and pull this off as an investment, i think, is a very large question.

Christina, they have six weeks to do do jell-o jens and blackberry can look for other parties.

-- six weeks to do due diligence and blackberry can look for other parties.

Describe the process.

Jpmorgan has been hired and they have been looking for buyers for over a year.

This could be posturing.

It is not a very orthodox way of trying to drum up interest, publicly saying we are doing the real work.

What he is trying to do is convince others around him that he is serious about potential he taking this company over.

The interesting thing is you have the largest shareholder who is essentially rolling their equity into this deal.

At dell, that's what we saw there, too.

We could see maybe prim watson going to other shareholders.

Maybe he is going out to other shareholders to see if he can get them to roll over their equity as well.

Thank you both for weighing in.

We are continuing to cover news that fairfax financial may be interested in buying blackberry in a transaction that would value the company at $4.7 billion.

We will have more right here on "bloomberg west." ? welcome back.

We are continuing to cover news that blackberry shares trading has halted and the company has filed a letter of intent with another company called fairfax financial that expressed interest in buying blackberry for $4.7 billion.

Fairfax financial is a huge shareholder in blackberry.

The chairman and ceo ,prem watson has been called the canadian warren buffett.

Any parallels to the real warren buffett?

None and an investment like blackberry will prove that.

Hilary mason is still with me and you did work where we could see what people do on the blackberry.

Does that give us a clue as to what works with their business?

Absolutely, it gives you a big picture into human behavior and we were curious whether this advice change behavior on the internet.

People use android and iphone devices in exactly the same way.

They are looking at the sing kinds of content at the same kind of day but blackberry devices are different.

A 10 to be used during business hours but not late into the morning.

We see a couple of different clusters of behavior on those devices.

People look at a lot of youtube videos and people might think that as teenagers but they also look at news stories.

Maybe there is something they can do, thank you very much.

We will be right back after this.

? welcome back.

Coming up in a late addition of "bloomberg west," netflix has earned its first emmy award ever.

What does it mean for the future of its original content business?

It may not be as rosy as you think, john is at 3:00 p.m. eastern time.

"on the markets bloomberg tv is." julie hyman is in new york.

Blackberry share seven halted and the trading is expected to resume in a few minutes.

In just a few minutes and we will be watching those shares and one would assume we would see an increase in news of this bit from fairfax financial.

We are still seeing declines on the broader market.

There is confusion about when the fed may be tapering its stimulus.

Various fed speakers did not shed any light on the matter.

We are seeing oil come back today and that's as we see middle east tensions reduced to some degree so oil is pulling back and gold is also lower because even at the fed is not tapering stimulus, the outlook is that it will at some point.

Let's turn to another macro issue and that is uncertainly in washington which is weighing on wall street from fed tapering to the potential government shutdown and another debt ceiling debate.

Stocks started this week in the red after three weeks of gains.

What will happen next?

Our eyes will be firmly placed on washington.

Let's bring in the chief financial customer of bank of tokyo/mitsubishi and let's talk about the potential shutdown of the government.

It seems like most investors -- stocks may be down but they are still trading near records.

Most investors seem to be saying this will be one of these 11th hour debates on they will figure it out.

Yes, i think we are waiting.

The timing of when the government actually runs out of money isn't midnight monday, september 30. this could go for a number of more days.

I am surprised that stocks are not weaker.

The focus has been taper, taper, tabor and not government shutdown but it's out there.

We remember what happened in 2011. how big a risk do you think this is?

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


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