Live from pier three in san francisco, welcome to the early edition of "bloomberg west," where we cover the technology and media companies.
My name is emily chang.
Let's get straight to the rundown.
The plan for lower-priced iphone may not the succeeding as well as the company hoped.
The iphone five -- iphone 5s is being preferred by consumers 221. and a discussion about making netflix an option on your tv.
And robots revolutionizing the silver industry.
We will introduce you to the so- called superheroes of solar.
We will get to apple in just a few minutes.
First we want to get to the government shutdown and debate.
President obama has summoned the top four congressional leaders to the white house this afternoon.
That meeting is scheduled to take place in two hours.
Thursday's debt ceiling deadline getting closer.
Julianna goldman joins us.
What is the latest?
We have that meeting at 3:00 p.m. at the white house.
That is going to be key.
The president just made us step -- made a stop at martha's table in washington, d.c. he says that he believes they made progress at the senate side . he talked about the consequences of default.
He says it is good that republicans are realizing it is not tenable and not smart to let the country default, but if republicans do not figure out a way to solve this, there is a good chance the u.s. could default on its debt.
On the one death, the president trying to sound notes of cautious optimism, but also wanting to make sure the people are understanding what is at stake here if they passed the october 17 deadline.
As we get closer to october 17, is the white house, is president obama softening his stance at all?
It does not appear to be.
We have these tracks of talks between harry reid and mitch mcconnell and the senate and 12 senators working on crafting a deal.
The white house says they still believe they can get something through that is a clean bill to fund the government and a clean debt ceiling increase, antivenin some sort of side process on bigger budget talks, something that could deal with the affordable care act.
But specifically we are talking about this tax on medical devices that could get you $30 billion over 10 years.
The negotiations right now are really hung up on trying to craft some of the deals for that side process.
What is the most likely outcome -- this is something leon panetta, former defense secretary, former weight house chief of staff, former budget director, said today is you will likely see a short-term deal with the debt ceiling with this continuing resolution and the president at some point is going to have to roll up his sleeves and get involved in negotiating as well.
All right, julianna goldman, thank you for that update.
Stay tuned to bloomberg television for all updates on the government shutdown in that meeting later today.
The new iphone 5s is outselling the cheaper iphone 5c 221 according to research.
Iphone 5s accounted for 64% of sales in september.
The older iphone 4s model made up nine percent.
This data came from purchasers from june until september when the new devices became available.
I am joined by a partner at consumer research partners.
This is more than two to one.
Tell us more about your findings.
As you said, we surveyed customers who bought the iphone in the past few months, but the results we showed here are strictly for the results after the launch on september 20. so, we were able to compare what happened in the past roughly two or so weeks to these similar launch of the iphone 5 a year ago.
And there has been some anecdotal accounts of the sales of the s and the c, but we think this is the first solid evidence that the s was outselling the c at least two to one in these two weeks here.
We will have a full report of the launch later on this month when we do a special bit of research on what happened at the launch.
Were you surprised the 5s was outselling by so much?
If you compare the launch this time to the launcher year ago, actually, they were kind of similar.
A year ago, the iphone 5 was the flagship phone and the 4s and the iphone for worthy midpriced and the free phone, if you will.
While there was also the hype about what the 4c represented, one way to look at it is it is a midpriced phone.
Apple repackaged the 5 a little bit and put the colorful bodies on it.
In some sense the iphone 5c is the midpriced phone at this way.
What conclusions can we draw, michael?
Do they still think of apple as the luxury model?
Depending on what your expectations were, this really was a very successful launch.
A compared favorably -- it compared favorably an equal footing to what the iphone 5 did.
If you compared to the iphone 4s launch two years ago, the iphone 5 and the iphone 5 as -- iphone 5s did not do as well.
We were encouraged that the iphone 5s was doing as well.
But again relative to launches in the past, they are getting a much more even spread of sales relative to what we have seen two and three years back.
Any better idea who is buying the iphone 5c? teenagers?
Who are the customers?
It would be folks who are coming into the apple ecosystem, if you will.
We also track data on what phones people had before this, and clearly the 5s customers are upgrading from existing apple products.
A lot of people coming in from expiring 4s contracts.
A few people coming in from having the iphone 5. either breaking the contract or upgrading early.
The 5c tends to attract more people coming from android platforms, blackberry, some of the other, or legacy smartphones.
And the 5c, if you also look at the 4s, they are attracting first-time smartphone buyers.
People converting from flip phones and there are plenty of those.
Or first time phone buyers.
Of the 5c, any colors doing particularly well?
Any colors not doing well?
The data is a little like understanding the distribution.
We will have a full account in three or four weeks.
I think among the colors, they were pretty evenly distributed the last i looked at the data.
Except yellow or some reason did not seem to do quite as well as the other ones.
And the 5c, believe it or not, there are plenty of gold customers.
It was roughly a third.
Again it is pretty early to know that.
We will have more data on color distribution of little later this month.
All right, michael.
We will be looking out for your report later this week.
Michael leben, cofounder at consumer intelligence research partners.
Thank you for joining us today at "bloomberg west." we will look at the twitter cfo's strategies for taking the company public, next.
You can also watch streaming on your phone, your tablet, and bloomberg.com.
? likes this is "bloomberg west," on bloomberg television and streaming on your phone, your tablet, and bloomberg.com.
I'm emily chang.
Facebook -- they have agreed to by a non-vote --buy onavo.
In an e-mail statement, facebook said we expect onavo to play a central role in our mission to play a central role in our mission to connect more people to the internets.
Twitter is just 11 days away from when it can begin to pitch to investors or trading.
We are learning more about the roadshow.
We are also learning about the terms for bankers.
They will only pay a banker free of 3.2 for -- the .25%. at the deal was worked out by the twitter cfo and it's not his first time taking the company public.
He took zynga public.
Are there similarities between these deals?
Ok, first, who is this?
Mike is a former investment banker hired by yahoo!
About a decade ago and really orchestrated, helped orchestrate a couple big deals for yahoo!
Including the alaibaba deal.
And then there was the micr osoft.org deal.
And then of course zynga, he helped bring that public.
Why did he leave zynga to go to twitter?
The presumed reason would be there were any number issues going on with think at the time.
Zynga had a lot of turnover.
Twitter has been hiring aggressively.
Let's talk about the deal.
There are a lot of similarities going on with twitter ahead of this ipo, right?
Basically it is the same group of bankers going after all the social media deals and have been for the last few years.
It's a highly competitive race.
One of the things you can do as a bank is you can offer to use the balance sheet of the parents company to make the deal more attractive.
It is a billion dollars for zynga.
It is a way to make the deal more attractive.
And also to show the companies, hey, we are in this for the long haul.
We will be with you along the way.
What does he need to do to make this ipo go smoothly?
The rates will be interesting for twitter.
We would love to be a fly on the wall at the meeting.
You will be dealing with investors who are still -- you still have a little bit of the facebook hangover affects.
How do you monetize?
Also, what is the potential -- what are the potential mobile options here?
It took a long time to get there.
What do we see next?
What are the products coming in the future?
All right, all right.
Thank you so much for that.
I want to get to washington now were president obama has started speaking.
He made comments at a nonprofit earlier today.
Let's take a listen.
These are folks who have not been paid -- in some cases are very eager to be back on the job.
But they are not even allowed to work.
Yet, they are here contributing, giving back to the community and i think that shows the spirit we have among all kinds of federal workers all across the country.
People who dedicate their lives to public service, think that what they are doing is important in terms of helping this country, and yet find themselves in a situation where because of politics, they are not able to do their jobs.
This week, we will be entering into the third week of a government shutdown that is completely unnecessary.
I'm going to have the opportunity to meet again with the congressional leaders this afternoon, and i am going to once again urge them to open the government and make sure the united states government is paying its bills.
This is fairly simple.
This whole shutdown has been completely unnecessary.
Keep in mind that the problem is not that the u.s. government has run out of money.
The problem is not that our deficits are going up.
Our deficits have actually been cut in half since i came into office and are continuing to go down.
The problem is not that there is the opportunity for us to work intelligently to come up with a budget that creates long-term fiscal stability while still investing in growth.
The problem is we have seen this brinkmanship as a strategy time and time again to try to extract extreme or partisan concessions.
I think the american people have made very clear that is not how we expect washington to do business.
There are going to be differences between the parties.
There are going to be differences in terms of budget priorities.
We do not need to inflict pain on the american people or risk the possibility that america's fullface and credit is damaged just because one side is not getting its way.
Not only is it untenable for us to continue this shutdown, this week if we do not start making real progress both in the house and the senate and if republicans are not willing to set aside some of their partisan concerns in order to do what is right for the country, we stand a good chance of defaulting, and defaulting would have a potentially devastating effect on our economy, sending interest rates shooting up, people whether it is social security recipients or people with disabilities or small-business people who are vendors to government not getting paid on time.
We already had a damaging effect on the economy because of this shutdown.
That damage would be greatly magnified if we do not make sure the government is paying its bills and that has to be decided this week.
So, my hope is the spirit shown by all of these outstanding volunteers is going to carry over in the meeting with the leadership this afternoon.
They can solve this problem today.
It does not mean the differences between democrats and republicans go away.
That is what elections are for.
But between elections we're supposed to be governing and we're not supposed to be hurting the very people who sent us to represent them.
I hope that kind of spirit holds true ring the course of discussions today and over the next several days.
Thank you very much.
President obama speaking at martha's table, a nonprofit soup kitchen and learning center in washington, talking about progress or lack thereof on the government shutdown leading to potential default, maintaining what sounds like a pretty hardline in terms of the white house's willingness to negotiate.
More after this break.
? fixed this is the early edition of "bloomberg west." i'm emily chang.
You can also catch us at pm eastern.
Netflix is an early discussions to add set-top boxes for comcast and time warner cable.
Jon erlichman is here with more.
How will this work?
This is very similar to the way it would work in the world of hbo.
If you think about it, a kind of advances a story bloomberg reported last month with the cfo of netflix telling bloomberg the company has had an open offer on the table with some of the pay- tv providers here in the u.s. for the best part of two years.
We know in the case of netflix, we are talking about a company that is interested in having its service available anywhere and everywhere, whether it is an xbox, rocha who --roku, apple tv.
They have cut some deals to make the service available on pay-tv operators in europe.
One of the eight questions in bringing netflix to cable is who gets the revenue?
You know, obviously if you are a cable player trying to hold onto customers and you can offer netflix, why wouldn't you?
But at the end of the day, what is netflix willing to share in terms of the revenue?
I think that is likely where the negotiations slowdown, but we will see where it all plays out.
What would this mean for a huge competitor to netflix?
I think on one side, you could see this as being a threat to hbo.
On the other side it could be a chance for hbo to say, hey, we told you so.
The world is inside cable, despite all of the worries and fears about ward cutting.
Hbo gets paid a lot of money to stay inside that world that is cable, so much that its strategy has not been to move away from cable but make itself available on mobile devices through its hbo go service, which of course more recently became available on apple tv.
All right, don erlichman, our senior west coast correspondent.
-- jon erlichman, our senior west coast correspondent.
It is time for lumber to go on the markets.
We started off sharply lower.
Throughout the day, optimism starts to be growing among investors.
You heard president obama say progress has been make in the senate talks.
The s&p is up almost two points.
The dow is up 22, 23 points.
The nasdaq is up almost 11 points.
A few stocks we want to highlight for you.
Expedia, those shares were cut from buy to hold.
That is going to hurt.
We are also watching shares of st.
They bought a company for $124 million.
More "bloomberg west" after the break.
? welcome back to "bloomberg west." i'm emily chang.
This is the early edition of the show.
You can catch us at our later time, 3 p.m. eastern.
Now for headlines.
Edward snowden speaking publicly for the first time in months.
Snowden received an award for disclosing the nsa surveillance program.
He says people are realizing surveillance programs do not make us more safe and are hurting the economy.
A northeast india, cleaning up after major cyclone hit the area.
At least 17 were killed.
The numbers of homes and building -- a number of homes and buildings destroyed.
A real-life pirate story on the high seas as turned out to be no match for the outerspace drama.
The sandra bullock and george clooney movie "gravity" raked in more than $44 million of the weekend.
The new tom hanks movie took in $26 million in its debut.
On capitol hill, top of progress on the deal to and the government shutdown and the threat of u.s. default, but it is not done yet.
Our chief washington correspondent peter cook has the latest.
Harry reid and mitch mcconnell are wheeling and dealing today?
They are wheeling and dealing.
The two veteran leaders of the senate have been talking off and on since saturday to come up with a deal that not only would avoid the threat of a u.s. default for the first time ever, but get the government operating again.
Harry reid has told reporters this morning at your meeting with mitch mcconnell they were making progress.
They hoped to perhaps have a deal to bring over to the house when they meet with the president at 3 p.m. eastern.
The president was at martha's table a short time ago.
You saw that footage, meeting with federal workers, for load federal workers putting food together for the homeless.
-- for load federal workers putting food together for the homeless.
He is pushing republicans to come to the table and basically throw in the towel when it comes to these negotiations.
But again we are waiting to see.
There was optimism heading into this day that there might be some movement today.
Is this good enough is the big question.
Here is the president on what he expects later today.
This week we will be entering into the third week of the government shutdown that was completely unnecessary.
I'm going to have the opportunity to meet again with congressional leaders this afternoon, and i am going to once again urge them to open the government and make sure the united states government is playing it -- paying its bills.
Again, that meeting set for 3 p.m. eastern time.
One person in the room will be vice president joe biden.
John mccain and has been joking that he has been in the witness protection program.
He has not been part of these conversations.
He will be today.
What is going on in the house?
What deal comes out of the senate has to air the house as well.
We are waiting to see what is john boehner's reaction to what is coming through the senate.
Is he willing to risk the potential backlash from the conservative conference?
All right, our chief washington correspondent peter cook on capitol hill.
The shutdown will have a ripple effect on silicon valley and the nation.
One example is the work of the federal communications to mission could delay the entry of new wireless devices onto the market.
Megan hughes has the details on that.
What is the fcc's role on this process?
Anytime a new smartphone, tablet, or laptop is introduced into the marketplace, the sec has to certify it will not cause interference with the wireless.
Usually the agency there's 16,000 devices a year.
Output during the shutdown is zero.
Even when the shutdown ends, there is likely to be some backlog.
This could mean delays for google, apple, samsung, htc, and lg electronics.
Most of the companies we reached out to would not comment as to whether they were being impacted yet, but the fcc is an agency hit hard by this shutdown.
90% of the staff has been furloughed.
For the tech world, that also means the spectrum option work is on hold.
No big mergers requiring fcc approval will be able to go through.
And the applications for wireless devices, emily, also no small part of the work the agency does.
The number of applications has shot up or hundred are sent over the decade.
-- shot up 400% over the decade.
That work is on hold.
What about new tech thingies that have to get patents?
Is that impacted?
The patent office is open for now.
The deputy director told employees it has money for prior-year feed selections to operate for another few weeks.
Even though the patent office is funded through user fees, it is still subject to congressional appropriations.
Congress has rocketed some of those fees in the past.
It held back as much as 140 $8 million from the office because of the sequester.
If that money does run out, they will go to a skeleton staff.
They will have a very small staff maintaining the id & to, accepting new applications.
It could take time.
They said for weeks.
We are on day 14. i reached out to the office to find when the drop dead date is, when do they run out of money?
They are closed for columbus day.
Megan hughes, thank you.
And new compact speaker today -- we will talk to the ceo about streaming wirelessly in the digital living room, next.
You can also watch streaming on your phone, your tablet, and bloomberg.com.
? this is the early edition of "bloomberg west." i'm emily chang.
You can also catch us at our later time of 3 p.m. pacific, 6 p.m. eastern.
Bloomberg west has reached out to magnify for comment but has not heard the terms of the deal.
The company known for its high- end wireless speakers is getting smaller.
They unveiled play one, a speaker that is smaller in size and below the typical offering.
Jon erlichman has more in today's digital remakes.
We talk about how people are streaming net flicks -- netflix and roku.
This is a device that people use to stream pandora and other services.
This is the size of the larger scented candle.
I know you wanted to do this for basically the last decade.
Why is it possible to make this device at this smaller size now?
Well, jon, i appreciate you having me here.
We are proud of the new unit.
It was a real rate through in an aggressive footprint and the price point.
It took the right economies of scale in all of the industries that go into the unit.
We are quite proud of it.
I think people will be happy with it winning try it.
Give us a little more context on that.
How technology changes when we talk about moore's law.
10 years ago what you were able to do versus what you can do now.
We could not have built this unit, the play one, we could not have built it even four years ago.
Moore's law has helped substantially.
It is a wireless smart speaker.
There is a high-capacity microprocessor inside.
There is also wireless technology.
There is a lot of care around the independent drivers.
All of this took a lot of technology to get them priced in time.
Devices like this are very important companions, partners to streaming services like pandora, spotify.
Do you have any idea how many pandora users or subscribers use some nice -- sonos?
We track the amount that they use sonos.
Pandora is the number one source in the united states for usingsonos.
Of course, spotify, rhapsody, all the other services.
Anything about music, when you bring it into someone's home and it is all the music ever made on the earth, there is no two people who have the same choices in music and you are giving them all sorts of options to feel at home with music.
All these services get used quite substantially.
Pandora is in the lead.
Speaking of choices -- samsung, bose, jambox.
A lot of players interested in having ownership of this market.
What is your competitive edge?
We have been at this for over a decade and we are the only wireless high fidelity system.
We love the category.
They are all coming to it.
They are offering nice spurts that's -- nice first steps, but they are really shooting at where we were two years ago.
The business is really exploding right in front of us.
To bring those into your home, the time is now and we are well- positioned for that.
What about how devices are changing?
I'm sure a lot of people still have a docking station that throws out sounds throughout their living room and you have to be in that business over the years.
Are you still doing that?
Are docking stations dead?
What is happening is your phone or your tablet is a wonderful way to tell your music system want to do, but it's not something you want in the middle of the experience when you are home, and you want other people to contribute if you are having a dinner party or you have friends over.
Everyone should contribute to that music experience, and that is the advent of smart speakers, which is exactly what sonos does, where they reach out to be streaming services, play it around your home.
Whether you get a phone call a text message, or you leave, the music keep streaming.
Only 20 seconds left.
Are you able to maintain your profit margin, make these smaller devices as profitable as your larger devices?
Well, we think more in terms of making sure our modern music lovers are happy and we are reaching aggressive rice points.
Of course you have got to have a profitable business, so we worry about that, too.
But it is really a growth phase right now.
We have been growing eight percent year on year.
We are quite happy with where we are and where it's going.
All right, john, we appreciate your time.
John mcfarland, the ceo of sonos . emily, i'm showing it over to you.
Htc takes a page from apple for outlook without fingerprints center of its own.
We'll be back, next.
We are also streaming on your phone, your tablet, and bloomberg.com.
? this is "bloomberg west." i'm emily chang.
Microsoft is updating of software for windows phone.
It includes a larger display, allowing the software to run on devices with a five or six inch screen.
The software rolls out tomorrow to developers.
Htc is taking a page from apple's book.
The taiwanese handset maker is unveiling a fingerprint sensor.
The sensor is on the back of the a device while the iphone 5s sensor is on the front.
How does this stack up to what is on the market?
Look, if the competitive set of specs.
Across the handset and the tablet market now, people are trying to adopt various different strategies to compete with the two heavies in the room, which are samsung and apple.
Whether it is a strategy with a regional focus or uprising -- or a pricing strategy or a specific feature set list -- a motion sensor, a fingerprint scanner, high-resolution displays, high resolution camera.
Across the different aspects, companies are trying to compete with apple and samsung and less far we have not seen any dramatic success.
This is one have potential?
It does, but it takes more than a bunch of different feature sets in order to make a product successful with the consumer.
It has to have multiple things and it has to have a solid ecosystem.
In this case, it is part and parcel of the android ecosystem.
You have one dominant player there, so in a lot of ways the htc product in the one series on the phone and the tablet side is competing against the samsung galaxy product.
That has demonstrated success and georeach.
What do you make of the fact that now htc has this feature in addition to the iphone 5s? is this something we will see commonly from all handset makers?
I think apple hit the nail on the head earlier when it said it takes more than a bunch of features to make a product successful.
If you go through the list of features available across the android ecosystem that compete -- if you look at the cool pad, the lenovo product, even the sony experience z, they all have phenomenal features.
So, why is the galaxy rotted head and shoulders away the unit leader in that space -- why is the galaxy product head and shoulders away the unit leader in that space?
I think it takes more than a couple of disparate product features to make a product successful.
On paper, this product is appealing, but again, i think it takes more than that.
Corrects quickly, they are launching this in china before the u.s. would do you make of that?
This is a testament to the fact that smarter smartphone growth in china is significantly better than the united states.
The price points are dramatically different, but 91% growth versus 38% growth in the united states, i think that tells the whole story.
All right, thanks so much for weighing in.
More of "bloomberg west" after this break.
?/ welcome back.
I'm emily chang.
Coming up on the late edition of "bloomberg west.," we will hear about expedia's mobile bookings and google glass.
Take a listen.
This spring on new inventory for consumers to use -- i think clearly, consumers like that new inventory.
It is a fairly small segment of consumers out there, but i used air b&b to book a paris vacation for my mom.
It is a great erotic.
We think over a long time, the -- it is a great product.
We think over a long time, the laws are going to catch up.
That is at 3 p.m. pacific, 6 p.m. eastern.
It is 56 minutes past the hour which means bloomberg television is on the markets.
Alix steel has more.
Let's catch up on what is happening on the markets.
The s&p up almost two points.
There is the optimism some kind of deal will get done.
President obama saying republicans recognize the fault is not smart.
-- default is not smart.
He is meeting with congressional leaders at 3 p.m. many are saying that by the dip has been the theme of the selloff today.
Let's look at commodities.
As stocks go, the opposite for commodities.
Gold paring its gains for the day.
That safe haven bid, if there was not a debt ceiling now.
The other one we want to point out, new york crude, up ever so slightly.
If there is some deal, that will help commodities.
The dollar also helping commodities.
The dollar has been paring some of its losses, but overall analyst staff cut their forecast for the dollar for the third straight month, down to 1.2% in october.
Earnings also happening.
With a lyrical and economic rushers waiting on the markets, talking about what markets are actually making -- with political and economic pressures weighing on the markets, talking about what the markets are actually making.
There is no doubt that the consumer markets are cooling off.
On the corporate front, after years of cutting costs, a lot of corporations feel they have maxed out on cutting the fat.
What they need now is topline growth.
If you look at the estimates for the dirt quarter results, blue- chip names, exxon, it caterpillar, ge -- we are expecting 24% from caterpillar.
Apple poised to post third straight quarterly decline.
You look at the average for the s&p 500, 1.4% last quarter.
Half the gains of the previous quarter and a fraction of the growth rate for the previous 10 years.
All of this according to average estimates compiled by bloomberg.
Analysts have downgraded their estimates by five percent.
That's a just and the business environment is pretty rapidly deteriorating.
-- that is adjusting the business environment is pretty rapidly deteriorating.
Looking at names like caterpillar and exxon.
Those are great to commodity- specific factors.
What are other issues at way besides from washington?
If you take a step back, wings like the higher cable tax- cut, the automatic budget cuts have really been part of it.
It is not just bp?
Thank you, olivia.
We are on the markets in an 30 minutes.
For now "money moves" is next.