EBay Putting Its Faith in PayPal

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Oct. 16 (Bloomberg) –- Bloomberg’s Jon Erlichman discusses PayPal as a percentage of EBay’s sales. He speaks with Emily Chang on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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

I'm emily chang.

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

Let's get straight to the rundown.

Should ebay we worry about a slowdown in online retail sales -- be worried about a slowdown in online retail sales?

New reports that apple is cutting orders for its lower end iphone 5c. could supply be catching up with demand?

It seems like hollywood is always been a fan of twitter.

We introduce you to the director who is one of twitter's first beta testers and earliest investors.

More on all of those stories in a moment.

I went to update you on the deal struck in washington today to raise the nation's debt ceiling.

The senate will be voting any time now on the bipartisan compromise.

The house expected to follow suit sometime today.

Peter cook is live on capitol hill.

When are these votes coming down?

We expect the vote in the senate to happen within the next hour or so.

I am told at a range of 6:00 to 7:00 p.m. eastern time.

Lawmakers want to wrap this up, and this crisis and let federal workers come back to work and take the risk of default off the table.

It has been a painful few weeks in washington.

It ends with this compromise brokered by two veterans of the u.s. senate, harry reid and mitch mcconnell.

A lot of fits and starts.

At the end of the day, here is what we have.

The debt ceiling limit lifted through february 7. again they will have to decide what to do about funding after january 15. there will be a house-seven budget meeting.

-- senate budget meeting.

The two leader spoke on the floor and talked about the compromise they reached.

For today.

The relief we hope for is to reopen the government, avoid default, and protect the historic cuts we achieved under the budget control act.

This is far less than any of us had hoped for, but far better than what some had thought.

Senator mcconnell and i have sat and had very serious discussions the last few days.

We're going to do everything we can to change the atmosphere in the senate and accomplish things that need to be done for our country.

Over in the house of representatives, this is a defeat for john boehner's fellow house republicans, who push for much more, including significant changes to the president's health care law.

John boehner talked about it on a cincinnati radio station.

We did everything we could to get them to the table and negotiate.

John boehner received a standing ovation.

There are still some conservative republicans not happy about the situation, and other republicans worried about the damage done to their brand after the shutdown and the fight over the debt ceiling.

We are standing by for those votes.

Peter cook, thank you.

Now to ebay, which reported double-digit gains in sales and profit.

Sales rose 14%, to $3.9 billion.

Writing down those numbers further, ebay saw gains in its paypal business and the value of its merchandise.

Ebay is expanding its ebay now delivery service to london.

The forecast for the holiday season is worrying wall street, sending shares down in after- hours trading.

Jon erlichman has been sifting through the numbers.

Tell us more about paypal.

This is one of the things you have to had line with this, because if there is an argument out there based on some of the headlines that this holiday shopping season, ebay has its work cut out first as a player like amazon, maybe that puts more dependence for ebay on the paypal business.

You're talking about a part of the business which is not small.

It has generated more than one half billion dollars in revenue during the period compared to $2 billion for the traditional ebay business.

As a percentage of all the sales ebay generates, paypal has consistently been becoming a larger piece.

You go back to 2009. it was less than a third of the overall revenue.

It is now 40%. the payments business quickly changing.

Lots of mobile activity.

Huge opportunity for this company.

That's a balancing effect with the other part of the business.

Ebay has done deals to bolster the paypal business.

Recently we talked about braintree on the show.

It's hard to argue that we were not on top of our game with developers for a couple of years.

Now we are focusing very intently on coming back.

The braintree deal is part of us accelerating our comeback in the developer seen.

-- scene.

He's admitting their that for a few years, they did follow bit behind and they are playing catch-up, and now they are focused on it.

What do you make of that?

This is a company that has said, we will do acquisitions if we feel like we missed the trend.

In the case of braintree, the business has been providing payments technology for players like uber, air b&b. it is quickly changing all the time.

Even ebay and paypal have to be thinking about, what are the other companies looking to buy had -- ahead.

Still ahead, hundreds of millions of dollars to invest in a media venture.

To ibm, the pc slump is striking the company hard.

He reported six straight quarters of falling sales today.

Operating profit was up 9%. that income jumped.

Ibm has been trying to shift to software, as demand for computers and servers drops.

Our editor at large joins us now with more in today postural down.

-- today's drill down.

The company has taken great aims to say, don't look.

Look at our big strategic moves.

If you look at the stock chart, stocks -- five years' time.

-- doubled in five years' time.

It is alarming this company has not seen revenue growth in eight quarters.

In the last six quarters, you have gone from flat to down 3%, down 5%. that is not inconsequential for this company.

You mention operating profits as well.

Operating profits are still growing.

The rate of growth is very much in declined.

That is an alarming thing when you see a company that has spent well over $15 billion in acquisitions.

You're not only seeing operating profit growth, you are seeing revenue growth.

Let's talk about the biggest part of ibm's business.

Their technology service business is half of revenue.

That business has been suffering from a great retrenchment, shrinkage.

The retrenchment of so many quarters in a row, and the fact that their software business -- there is been a suggestion they should move more into software -- the software business barely growing 1% year-over-year.

It is supposed to be the strong suit for this business.

What else jumped out at you?

This whole game of did they beat or miss the estimate -- their tax rate was 16% in the quarter.

They took the third quarter, their assumed tax payout for the quarter.

They lowered it from 22% to 16% rate that was a tremendous benefit.

It was not enough to convince wall street to move the stock up after hours.

That one time change was not something analysts were looking for.

Cory johnson, our editor-at- large.

Thank you.

Less than a month after going on sale, apple is cutting orders to the iphone 5c. ? this is "bloomberg west." i'm emily chang.

Apple is cutting orders for the cheaper iphone 5c. production may be cut by a third , while orders from the supplier may be cut by 20%. the phone went on sale last month in the u.s. with a suggested price of $99 with a service contract.

I spoke with wedge partners principal and senior analyst brian blair about what this means for apple.

We wrote about this to our customers last week.

We believe apple has been cutting their production.

Whether it is by 30% or 40% is not clear.

What we feel confident in saying is they have cut production meaningfully for the 5c, but they believe we have raised -- they have raised production for the 5s. the 5c, investors have been concerned about sellthrough of this product.

It is not seen the stockouts of the 5s. we talked about this last week.

The 5s, more of them are being produced.

How serious is this for apple?

We do think there is still overall production cut.

We think units are going to come in lower than we expected.

I thought the units for the december quarter could be in the $58 million range.

Now it is likely to be in the $53 million range.

In terms of the stock, investors really express this concern immediately after the price of the 5c was announced.

Once people announced it was going to be $550 -- i think investors price this in a while ago.

Not a huge impact on the stock in my view.

Do you think it was worth it introducing a cheaper phone at all, or should have stuck with their original strategy just to make the old model the cheaper model?

This was a good move.

They introduced colors.

Where they flubbed is in the pricing.

This should not have been a $550 phone.

This should have been $399, selling more palatable.

If you walk into at&t or verizon, it is free on contract.

This is a much lower quality device.

In china, i have heard the joke made that the "c" stands for cheap.

If you're going to make it cheaper, it should be more affordable.

Could they cut the price still?

I think they will.

They might just wait until next year.

We might not see a real price cut until we get to september of 2014, when they introduced the iphone six.

Then we will see this come down and pricing sharply.

October 22 coming up, apple having a big event.

We are expecting ipads to be unveiled.

What are we likely to see?

The ipad mini, we will see that introduced with a retina screen.

That was one of the big things it was lacking last year.

On the larger 10 inch ipad, we're going to see a much smaller bezel.

The area around the screen itself will be considerably smaller, making the device a lot more portable.

We will see a faster processor.

That was wedge partners principal and senior analyst, brian blair.

The patent war between apple and samsung has taken an interesting turn.

Samsung and its lawyers may be in hot water, and what is being called patent gate scandal.

How did this happen?

This is an unbelievable story.

When we talk about patents, people start to drool.

This story is amazing.

We know the case of apple versus samsung and samsung still some patented stuff from apple, the look and feel of the phone and the way the phone is used to read.

The verdict was reduced, but it was in the hundreds of billions of dollars.

The judge said, yes, samsung, you have a right to know about apple's patent agreements with the likes of nokia and others.

But samsung, you cannot look at this.

The federal judge said, you have to have your outside attorneys look at these documents from apple and not share them with samsung.

Samsung's outside counsel was supposed to look at these documents off-site and never share them with samsung, just look for infringing materials.

It later turns out that samsung read these documents they were not supposed to see.

The judge very explicitly said, you're not supposed to have them.

These confidential documents ended up in the hands of samsung.

What was in the documents?

Licensing agreements with nokia, royal philips.

These are deals that apple had, patent deals that were licensing deals that were confidential that samsung was not supposed to see when the judge -- see.

When the judge found out they had seen them, the judge is livid and may impose some sanctions.

What has the judge said so far?

Your some of the quotes she has said in open court -- here are some of the quotes she has said in open court.

Confidential information remains confidential.

If parties breached this basic rule, the court's assurances to come meaningless -- become meaningless.

What can the court do?

We don't know what they're going to go after.

The court is saying that the court's entire integrity is based on these agreements that happen before the judge, and these were not kept up.

Samsung wanted to investigated themselves.

The judge laughed and said, rarely is the fox allowed to investigate without supervision the disappearance of chickens at the henhouse.

This will be a big story going forward.

It's not about confusing patents.

Not about billion-dollar verdicts, either.

It's about lying to a judge.

Judges don't care for that.

Before it went mainstream, twitter when hollywood.

Meet one of its earliest investors and baited testers.

? welcome back.

I'm emily chang.

This is "bloomberg west." early backers are getting attention.

Jon erlichman has more in today's new hollywood.

Who are we talking about here?

These days we are talking about the ties between twitter and television.

There were some tv executives who did not know those two were going to come together the way they have.

Here's the back story.

Tv director greg may not work in silicon valley, but he says being an l.a. show runner is like the life of a tech entrepreneur.

If you look at the process and the way a starter begins, they really nearer each other -- mirror each other.

He has directed tv shows such as "lost" and "grey's anatomy."

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

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