Microsoft Buys Nokia Unit: Bloomberg West (09/03)

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Sept. 3 (Bloomberg) -- Full epsiode of "Bloomberg West." Guests: Lithium CEO Rob Tarkoff, Transmedia Capital's Chris Redlitz and Bloomberg's Adam Satariano, Paul Kedrosky, Doug MacMillan and Alex Sherman. (Source: Bloomberg)

Live from.

Three in san francisco welcome to the late addition of where we covered the media companies that are reshaping our world.

Let's get straight to the rundown.

We are in a position to accelerate and is only good for windows phones, tablets, and pcs.

Shop that are those are the words of steve ballmer.

So says -- sources say nokia has started talking to banks and could file to go public before the end of the year.

Apple sent insights for a big event next tuesday.

There was a note that said that should brighten everyone's day.

Is it a clue that some brighter colors are on the way for the next iphone?

It was a surprise deal of the holiday weekend when microsoft announced a plan to buy the nokia handset business for $7.2 billion.

Microsoft has come to rely on nokia for it to mean partner.

That means microsoft will have full control of software and hardware.

The same model that apple has use with the iphone.

Microsoft is hoping that they can better weather the slump in pc shipments.

As for nokia, the question is whether this can help and its long fall from grace.

Nokia dominated the phone market in 2008 with 40% market share.

We have seen marketshare dwindle and the stock moves more than 80 -- lose more than 80% of its value.

He spoke with steve ballmer about the deal.

He will be leaving microsoft within the year.

Tom keene started by asking him how he expects it to gain mobile market share.

Take a listen.

This acquisition of the nokia mobile phone business is really all about accelerating our share position by accelerating and improving our agility and innovation, inc.

Able to a clear, concise communication with one brand into the market brand.

And being able to be very agile in our is the strategies intact asked to go to market.

I am excited about what we have accomplished in the 2.5 years we have built.

We are extremely glad to do this as a way to further accelerate our position with windows phones.

When you look at windows phones, by doing this transaction are you going to push away the others that have used the windows platform?

Are they going to say "forget about it?" nokia account for well over 80% of the windows phone volume today.

I think we are in a position to accelerate through this acquisition.

Certainly acceleration in windows phone is only good for windows tablet and pcs.

Our partners in the pc and tablet business that i have all talked to seem white enthusiastic about this acquisition -- quite enthusiastic about this acquisition.

You have seen so many struggles.

You have been a piÑata of the business.

With that said, does that bring to an end any debate about separating your consumer division off of your enterprise position?

We're focused on being a device and service company that focuses on the high-value activities for consumers and for businesses.

That is the strategy that we are on, that our board has endorsed.

It is a huge transformation.

We are glad to be acquiring the talented team at nokia.

We think this gives us extra muscle as we go down down that path.

We are aligned on our strategy.

We're moving forward.

. it is a big transformation.

That is what you need to do in the technology business to move forward.

We are certainly pleased that we have continuously moved forward, improved our position and profitability.

We serve over one billion people around the world.

We may close to $30 billion of profit.

We are proud.

That was microsoft ceo steve ballmer with tom keene.

Now to microsoft and nokia's competition.

Apple and samsung dominate the smartphone market.

About that product releases within the next week.

Samsung is expected to reveal a new and smart watch.

Apple sent out the official invitations.

The event was marked with colorful circles and noted "they should brighten everyone's day." we are joined now in the studio.

What is it going to be?

We are expecting a couple of iphones.

One will be an upgrade to the existing model with some enhanced features.

As well, which could be more significant, is a lower-priced iphone geared toward emerging markets.

Do we have any idea how much it would cost?

Not exactly.

Analysts are guessing from $300 or $400 or more.

Where they fall on the price point will say a lot about how aggressively they want to go after these lower markets.

It is critical timing.

We have been talking about the market share in china.

It looks like they are really struggling there.

Companies like shall meet our -- shoa mi are pushing down the prices.

Every iphone that apple releases is significant to the company.

It creates about half of their revenue.

This is a particularly important moment.

Apple has not released a big project since last october.

A lot of new entrants are coming into the market.

What about the colorful circles?

Is it going to be multicolored iphone?

I do not get too much chronology -- crypto knowledge in trying to figure it out.

It could mean more colors for the phone.

They are also releasing the iowa seven -- ios7. the colors are much brighter.

The e-mail on the calendar and the photos that people take with their own everyday, it is going to look radically different than before they made this upgrade.

Why cupertino rather than san francisco?

They jump about to where they want to have these events.

Last time they had one at this place where they were going to release the iphone 4s. that was a few years ago.

They have done it in san jose and san francisco.

They have put a lot of thought into why they pick one.

This time we will be tracking down to their headquarters.

You will be down there next week to see potentially two new iphones.

Thank you.

Adam's atari auto -- adam satariano.

Samsung is set to release its much hyped smart watch.

Jon erlichman is in new york where he will be covering the event for us live.

Put this into context for us.

How important is a given everything that is happening out there from apple to microsoft and nokia?

This is hugely significant for samsung.

Are there other smart watches?


Is there a company that has come out with enough devices that it already offers to make a smart watch strategy successful?

Samsung is the largest seller of smartphones on the planet.

Some would argue it has some apple.

Envy because apple has a way of buying -- talking people into buying multiple devices.

That nice experience at mrs.

Them altogether.

-- mixes them together.

This is a chance for them not only talk about the innovation story but to say we can take that experience with the smartphone to the next level if you use a device like this.

If you buy the smart watch, it could be great.

If you buy the phone it could be great.

If you buy both of them the experience gets better.

Maybe that is where the storyline will be going.

What is the market for the smart watch?

Not a lot of people wear them.

Not a lot of people wear watches at all anymore.

The lay up customers they will have are the tech enthusiast, early adopters and the fitness fans.

They have spent a lot of time making sure this is a product that will appeal to the same he will better using fitness apps.

I go back to the issue of experience.

If they can convince people to keep your phone in your pocket but is connected to your watch and you can see the phone calls, check twitter, if they can make that all work well seamlessly, they might have the edge on players like sony that has smart watches on the market but do not have the nutrition in the smartphone market.

What about the significance of this launch?

Microsoft buying nokia the handset business and looking to not be number three or four.

Microsoft sends the message once again that owning software and hardware today is important.

Microsoft is not missing the hardware component.

From samsung's perspective, they have been missing the software component.

They have pushed their own operating systems but heavily reliant on the android operating system.

There is a possibility that it will be part of the storyline with this launch even though it will be an android supported device.

Maybe it is an opportunity for samsung to push its own software.

Jon erlichman, thank you.

Of course we will have much more for us live tomorrow from the samsung event in new york.

Still ahead, we did it for -- deeper into microsoft.

Could this be a big sign into who will be the next ceo?

? this is "bloomberg west"." i want to get back to our top story.

Microsoft has agreed to by nokia's handset unit for seven $2 billion.

What's with the future of microsoft look like?

Will it impact the search for a new ceo?

Earlier we spoke to cory johnson about the deal.

I started by asking what if they will be a happy union.

One of the things people do not talk about enough when it comes to this acquisition is through cultural fit.

It is hard to make the case that these two organizations other than their financial need for one another have a great cultural fit.

This is a strongly and proudly finished engineer driven organization.

We have a classically pacific northwest and trying to meld the two across is going to be really hard.

I think one of the but big challenges is trying to make that work.

Leaving aside the troubles microsoft has had historically.

They are going to rely on nokia to drive most of the process.

I do not see anything that reassures me that they will be able to make that itfit be anymore more.

Are they going to be stronger together or weaker?

Their argument is that if they get some again in the market share they will get $40 in profit per phone incident a $10 profit per phone.

That means they need the gains in market share.

Their argument to get there is by offering really cheap phones in developing markets so that people's first commuting experience is in the place where the growth is happening and on their phone.

What do you make of them by nokia and not blackberry?

It is interesting.

They do see this as a consumer opportunity, not an enterprise opportunity.

Got very would be a quick and cheap way for them to get into the enterprise.

-- blackberry would be a quick and cheap way for them to get into the enterprise.

Maybe blackberry is not a great opportunity for them on the consumer or enterprise side.

This is a company, with one notable exception, has really struggled.

Hardware is a very difficult business.

They have difficulty getting this right.

They are hoping the nokia guys will help them get it right.

They have not had the same type of problems lately.

Nokia had been big-time time over the past decade.

I am dying to hear your thoughts about who should lead microsoft after steve ballmer leads.

Internal candidates, outside candidates being discussed.

Sheryl sandberg.

What you think of the names?

Who do you think is right to lead the company?

Like i hate them all.

I do not see any as realistic.

One will become the candidate.

I do not think any of them , in part because it is the correcting influence of having been at microsoft for so long anyone who had any capacity to make material change would have felt stifled and completely suffered in this organization.

Definitionally, you do not want anyone who has been there any length of time.

They can be in a structure that suffocate innovation and leaves it in a back room to die with middle managers.

I said in the past i wish i would see reed hastings come there.

I do not think it will ever happen.

There are a lot of interesting people who could be strong ceos and make change and probably end up doing some significant asset sales.

None of them are people who have spent any time inside the organization.

They have to be people with strong operational experience.

What do you think of sheryl sandberg?

I think she is a great marquee candidate.

I think she would be fantastic from the standpoint of what it represents in terms of the industry and what can be done with a company like microsoft.

I do not think she brings the dealmaking experience that i wish the new candidate would have.

They are going in there and saying i am fully prepared to break this up into three pieces.

Let's go out there and really test what it would get as to on a sale.

I do not see her as that person.

I really do not.

Dallas paul kedrosky -- that was paul kedrosky.

Shedding some light on the plan to turn around the "washington post" or an attendant to do so.

That is next on "bloomberg west"." ? amazon is rolling out a new program called kindle matchbook so they can buy physical books of what they arty own.

This will go back to 1995. kindle editions will cost anywhere from two dollars and $.99 to nothing at all.

More than 10,000 books will be available -- $2.99 to nothing at all.

More than 10,000 books will be available.

Jeff bezos has been in the news for his purchasing of the "washington post." he says he plans to apply the same business philosophy.

In an interview, he says we have three big ideas at amazon that we have stuck with for 18 years and they are the reason we are successful.

Put the customer first, in the event, and be patient.

-- with us now is brad stone who has covered amazon for more than a decade.

He has interviewed jeff bezos numerous times and is about to come out with a book on amazon.

What did you think of his comments, wanting to bring back a golden era?

Let's give him this.

In an age of increasing distraction, they sow's has willed and empire -- bezos has notes and empire based on longform.

If anyone can pull it off it is jeff bezos.

What makes him an expert?

He has never had to deal in media before.

That is right.

He has with the kindle and amazon's music offerings.

The thing that struck me about that interview is he preaches patience.

Jeff bezos is strategically patience.

He is not operationally patient.

If there is a good idea at amazon and you are told to execute it you are basically late.

They're going to have their hands full making him help he happy.

Is a to return to the golden era?

The thing people do not understand about a print newsroom is the culture of decline.

Everyone is so pessimistic tummy tuck.

It imbues every lin dunn -- of everything.

You feel like you're playing a game of layoff musical chairs.

I think the big thing that will change as there is going to be optimism and experimentation a long runway.

He threw out a few ideas and he was very realistic about his own ability to do this.

He said i am not a magician.

What do you think you will start experimenting with?

He's very self-effacing.

One is the pay wall i would expect to see go.

It is not reader friendly.

The post does not need to make the budget that every quarter every more.

The second one is hiring.

With his backing, they can go out and this is an arms race, compete for the best people and best loggers -- bloggers.

He's going to be visiting the post in a few days.

What are we expecting?

Everyone there, if you talk to the reporters, they are scared.

I do not think they should be.

There are a lot of opportunities.

Hopefully he will give them -- they will give him a good grilling and ask him what he has in mind.

I do not think he was straightforward in the interview and now he is in a roomful of journalists.


Brad stone.

Thank you.

Cbs is back on time warner cable just in time for football season.

We have the details of the agreement that ended a month- long feud next on "bloomberg west"." ? you are watching "bloomberg west" where we focus on technology and the future of business.

I am in the lead verizon has agreed to play -- pay vodafone for a 45% stake in verizon.

It is one of the biggest deals in a decade and gets verizon will control over the most profitable u.s. carrier.

They can use it for network investment.

The company say they expect a deal to close early next year.

Photography pioneer kodak emerged from bankruptcy today.

In order to do so, codec had to cut $4.1 billion of its shareholders.

The new kodak is quite a bit different.

It is smaller and will focus on printing technology and film for the movie industry.

Three shareholder advisory firms are renewing their support for michael dell and the plan to keep the computer maker private.

Iss and egan jones ratings all put out reports endorsing a deal.

Shareholders will meet last week to vote on the buyout plan.

Cbs is back on time warner cable after a month-long feud.

The cable company agreed to pay more for the right to transfer -- transmit cbs signals.

It is still below the two dollar subscriber per month that cbs wanted.

Who is the winner?

Alex sherman covers time warner cable for bloomberg news and joins us from new york tummy tuck.

-- new york.

We have been talking about this.

A deal has been done.

What are the aspects of this deal that stand out to you and why did it happen now?

Time warner cable and cbs have thoroughly exhausted me.

They have come to an agreement finally after a month of delay right before the nfl season, which i do not think is a coincidence.

The key points here are that time warner cable probably lost.

It seems like they were the ones that kate here.

Cbs is getting closer to the two dollar purses driver it wanted.

In addition to that, time warner cable does not get the out of home mobile rights that it wanted.

They can potentially sell those right down the road to one that may not even be there today.

Or potentially a company like amazon and netflix but may want to go into live streaming.

Those are probably the main points.

Is the take away content is still king?

I think so.

The idea here is that content companies like cbs continue to come out on top.

The pay-tv providers continue to be pressured.

Earlier today i was talking to jason blair.

He believes this will lead to more consolidation down the road which is a common theory.

Then we can see them get involved with say a charter or a cablevision and come together building up their customer base and having more leverage on the content of the news which are able to drive the ship.

Cbs may win in a disputed but in the future if time warner cable has a million more customers, it may be time warner cable that has the upper hand.

What about unbundling.

How far away is that?

I only watch about five channels and one is online for free.

Time warner cable actually offer this all at cards -- a la carte solution saying we are ok.

Pick a price and we will sell it for you.

It is not the pay-tv providers that are against it as much as the content providers, the disney's of the world.

The model works really well from them.

They get a certain amount of money per subscriber.

Everything a person that signed that pays them effectively a certain amount of money per month.

That means you may not watch espn but you're still getting paid five dollars or six dollars every month for every person that has cable tv.

That is why this idea of unbundeling probably will not be here anytime soon.

The programmers do not want to do it.

Life a lot remains to be seen as always.

Thank you so much.

One of the things that played a big role in this dispute is the way new platforms like netflix and hulu are changing the way people watch tv.

It is something that les mendez -- les moonves even announced to his staff.

Jon erlichman has more.

The way we have watched television is changing.

Forget black screens.

Many of us turn to smartphones to watch television.

No cable, no problem.

With an internet connection you can watch shows on netflix or hulu or amazon.

As consumers are getting more concerned about higher cable bills, they will push back on the cable providers and say i do not want to pay these higher bills for this big bundle of channels.

He recently called a la carte a fantasy.

Will consumers agree if apple unveils a smartphone style television were channels are more like apps?

Consider the view of advertisers.

People do not actually know what they want inside the bundle until they have it.

Once they have it they really as i do not need 80% of it.

Advertisers will benefit.

For now, everyone is playing nice.

Apple is adding channels like hbo and espn.

If users already pay for the truck ramming through a provider.

Younger demographics in particular are getting more used to watching tv shows when, where, and on what device they want.

You heard me talking earlier with alex sherman about this very question.

Can customers really force this kind of change if the content providers are resisting and the cable providers are resisting?

We highlighted that comment from chase carey.

The fantasy does not give you a lot of context.

A giddy more context when he said this is a conversation -- it gives you more context when he said this is a conversation over 10 years, not over three.

I think that is where you can have more debate.

Are we going to see a lot of new, innovative services that are going to put pressure on the traditional way television is delivered?

One of the comments i got to this is what about area -- aereo?

You are right.

We will be uncovering a new samsung watch tomorrow.

It depends on how many new products and services will be offered over the next three years.

By the way, bloomberg is one of the channels you can catch on aero.

Jon erlichman.

It is one of the most anticipated tech ipos.

How close is twitter from going public?

We will tell you next on "bloomberg west"." you can also watch a streaming on your tablet, phone, and

? welcome back to "bloomberg west"." one of the most anticipated tech ipos could be getting closer.

Twitter has started talking to banks about handling its ipo.

According to two sources with direct knowledge, the companies waiting -- the company is waiting on third-quarter results.

It could happen this year.

I am joined now.

Doug, what more can you tell us about the timeline of twitter filing to go public?

The filing could happen as soon as this year, perhaps next year.

They're waiting for their third- quarter results to come in.

After that it is a lengthy process of going back and forth with the sec and making sure that perspective for investors is in good shape.

It is looking like 2014 is the time.

What sort of discussions have they had with inks -- banks?

They are feeling out the banks.

The cfo it sprang to get a sense of who they want -- is trying to get a sense of who they want.

Working stanley led facebook ipo.

Got some flack for that.

Probably feeling it out at this point.

They're probably starting to get an idea of who will get that coveted position.

Tell me more about mike duke dump -- mike gupta, the ceo of twitter.

He has been around the industry for more than one decade.

He was at yahoo before that.

He will probably draw most on the zynga experience.

One of the things that kept coming up is that he really has a knack for explaining complicated or new emerging business models to the laymen, to the investor.

That was important with the net to explain things like virtual goods.

It makes it important for twitter to explain how they make money.

Their new online advertising business is not well understood by wall street.

The other thing he did as inge with secure a $1 billion dollar line of credit from the wall street banks -- i'd zyngaaat zynga was secure a $1 billion line of credit from wall street.

What is going to keep them from making some of the same mistakes facebook when -- made when it went public?

We talked about timing.

Timing will be important here.

They know not want to go to early.

They want to have an established revenue growth.

They do not want to show too much maturing and slowing down.

The other inc.

Is that -- the other in that they are taking a proactive stance on is employee shares.

While facebook let private market investors get their hands on the shares, that had an effect of making the ipo were chaotic and more speculation about the valuation that eventually drove up the value.

Twitter has been more firm about keeping track of who had those shares and two has information about the value.

We're going to be on top of making sure this does not go out.

Setting the price will be a key factor.

Thank you so much.

Speaking of twitter, one of the social platforms of that has come away for brands to reach potential companies.

Lithium creates software to help companies do this and counts companies like best buy and support a in its clients.

They just completed another - sephora in its clients.

They just completed another round of funding.

Lithium allows customers to talk to other customers about brainsnds they love.

You can think about the advantage of finding her at and experts out there who can help spread word and get people to buy more products or get them to help other customers fix problems.

Some companies provide new innovation.

Your competitors are salesforce, jive.

What makes you different?

The big competitors have the old way that things have been done.

There have been billions of dollars that have been spent on digital customer care and marketing initiatives that really do not serve the need for customers anymore.

The real question is how do you take the old way of doing things and turn it into the new way?

Salesforce and jive are involved in that as well.

There are public companies.

While ay raise 50 million incident looking for a public exit?

We have raised capital.

We had plenty.

We saw an opportunity to partner of one of the leading mutual fund companies that manages over 2.5 trillion in assets.

It helped us establish an anchor shareholder that can help us perfect our strategy for going to the public markets.

I think you have seen a number of companies trying to work out to many of the kinks in the public markets.

Do you think there are too many risks to going public?

I think there is a separation between markets where you are replacing technology that has been used and new markets like social.

In social we're still learning what the very large shareholders want to see to help fuel the growth growth of multigenerational billion-dollar companies.

In this case, we had a chance to partner with a shareholder who could really help us.

What about rewarding employees?

One of the great things about the bm is our values about building long-term success.

Most of our companies -- about lithium is our values about building long-term success.

Most of our companies are helping build change in the way large brandss are doing business.

It is exciting to perfect this path on becoming a public company, building the right business model and helping us avoid mistakes.

Quite how can you help brands that are struggling?

Let me give you an example.

Can you talk about them in particular?

Best buy transformed their business.

What they are really finding is that getting in touch with their customers over social channels is a great way to stay connected as they transform into other product lines or perfect more of their e-commerce capabilities.

In the case of hp, there is over 500 million posts on the hp communities.

We handle 20% of their traffic.

As they transition to be able to address the opportunities of mobile, we help them stay connected to their customer base.

We have other customers like sephora where women are talking about which mascara to use.

We have companies like skype where 200 million people are answering questions about how to install skype on new products.

Conversations on a network across all of our brands are happening every day.

Thanks so much for bringing that story to us.

Thank you for joining us today on "bloomberg west"." here's a look at what is coming up tomorrow.

Samsung is releasing a couple of new products and we will be there live to show you the new galaxy smart watch, tablet tom and anything else they unveil.

That is tomorrow at 10:00 a.m. pacific.

Up next, can technology will be key to reforming some of the nation's toughest criminals?

Some veterans think so.

We explain next on "bloomberg west"." ? this is "bloomberg west"." imagine a startup incubator in prison.

This group teaches inmates about technology and then has participants at their startup ideas to the likes of ceos and mc hammer.

How are they doing?

Chris is the cofounder of the last mile and joins me here outside on this beautiful day.

Tell me a bit about the program and what it involves.

It is a six month program.

We teach them about technology.

We actually teach them about business skills.

Most of the men in the program have never experienced technology like you and i are used to.

Many have never been on the web.

We teach them basic technology through bringing in experts to the prison and through more traditional means.

What kind of prisoners have you worked with?

What kind of things are you teaching them?

There is a social media part.

All the participants actually do participate in social media.

They blog, tweet and answer questions.

It is all done manually.

A write it out.

We create a tweet sheet where they fill in.

Our volunteers upload the content.

It is published to the web.

What kind of ideas are coming out of the incubator?

What we asked them is to come up with what they are passionate about and we will build a business around that.

One is the guys came up with the idea of creating mobile barbershop, inverting old school buses around college campuses.

The technology component was to create an app where you scheduled, paid, and you uploaded your playlists and send it to your chair before you actually sat down to get your hair cut.

That sounds like something i could use.

You are also working with some high-profile people.

Mc hammer, the first lady of california.

How do you get these people on board?

How much of their time do you get?

I have asked a lot of people to come in.

There has not been one person that has declined at this time.

There is an entry about into a prison.

Once they see the enthusiasm and the passion that people have insight, they come back.

Thank you so much.

It is such an interesting program.

Thank you so much for sharing that story with us.

It is time now for the bwest byte, a one number that tells a whole lot.

What do you got?

It is $250 billion.

That was no key is peak market valuation-- nokia's peak market valuation.

The market valuation is $19 billion now.

A lot can change in 14 years.

It has.

It is incredible.

That was it the market cap.

The peak market share was in 2008 with 40% of the world wide mobile phone market.

It has plummeted spectacularly.

I saw an interesting stat about their chinese market share.

They had 54% of the market in 2010. now that is 1% percent.

Can you believe that?

Those are big numbers.

They are still selling a lot of phones even with the declines.

One that i thought was fascinating was that the board had met no fewer than if tee times -- 50 times to talk.

We have seen this as though many of the companies.

All right.

Thank you for that.

We will see you tomorrow in new york at the samsung event.

Thank you all for watching this addition of "bloomberg west"." we will be back in the morning.


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