Twitter's IPO: Bloomberg West (11/06)

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Nov. 6 (Bloomberg) -- Full episode of "Bloomberg West." Guests include Roger Lee, general partner at Battery Ventures and 20th Century Fox Home Entertainment President Mike Dunn. (Source: Bloomberg)

Again in 30 minutes.

"bloomberg west" is next.

Francisco and new york city, welcome to the early edition of "bloomberg west." our focus is on technology in the future of business.

Let's get to the rundown.

How high will twitter share price the?

The company is making that decision right now with its bankers less than 24 hours before it is expected to begin trading.

John scully tells us he was lining up a bit with other investors to take blackberry private.

Why he thinks the company can be saved.

And as more people watch more video online, fewer are buying dvds.

How 20th century fox is working to survive the shift in behavior.

First to the lead, we are just hours away from twitter's ipo pricing, it could bring more than one $.75 billion to the company in new financing.

The question now is how high will the shares go?

The roadshow saw higher demand for shares than expected, pushing up the pricing range by 25%. the company is working with bankers right now to set the final share price later today and could be higher than its most recent guidance.

For more on what to expect and into tomorrow, we have the story covered from every angle outside of san francisco is jon erlichman, cory johnson is in san francisco and cristina alesci is with me on the set in new york.

I want to start with you.

We are hearing so many numbers.

Would you think they're going to price at?

We knew they were going to be above $23. there is a lot of back-and-forth with the top investors.

They are still going back-and- forth.

About $25. exactly.

It is going to be between $27 or $28 is what i'm hearing.

A very strong number.

We are going to be talking tomorrow about how expensive it is.

It sounds high.

They started at $17. the bankers want some assurances.

It seems like they have gotten them.

The long-term money will continue to buy after this thing starts trading.

That is the key metric, especially when you want to reduce volatility.

You want those long-term holders to be in the stock and right now, talking about putting a book together, you want to see a concentration, 35% of the book in the hands of these long-term traders, which it looks like it is shaping up that way.

Obviously the idea is some kind of a pop on the first day.

That did not happen with face look.

What kind of volatility are investors expecting?

Straight up or could go sideways?

A little bit of a pop is good.

At the end of the day, even long-term investors will get to take some profits off the table.

What they have to be careful about, and this is where the banker comes in, you can to stabilize the stock if it is going up.

The bankers will try to stabilize it on the way down, if we get some selling.

I'm hearing goldman sachs is playing it conservatively and they are mindful of the fact you do not want follett to lady.

He talked about the fact that twitter has not turned a profit.

What else are they worried about?

You know this, the major swipe against twitter is the fact it is a niche player.

The mainstream people are not going to really take to the platform in the same way they did facebook.

A lot of people are saying, look, you can bring a niche player and get the advertising side of the equation right and develop the kind of advertising you can charge more for an partner with marketers to provide that kind of premium advertising.

And everybody forgets to mention the fact this company does not have the patent portfolio investors want.

They have nine patents.

And facebook had more than 700. those are some of the concerns.

Management possibility to execute is also a concern.

The company has had a lot of venture backed supporters.

We will see their involvement going forward.

Thank you for weighing in.

We are continuing to wait on that price.

What is it like working for a company that is the talk of wall street?

It is likely exciting and a little distracting.

Jon erlichman is live outside of twitter headquarters.

I'm sure you're trying not to distract employees, like a good reporter.

Talk to us about the employee side of the story.

Especially given that twitter has been through so much to get to this point.

Yeah, we have gone through those documents twitter has shared with us.

One of the risk factors is tied to the employees.

Not just finding the best and the competitive market, but retaining those employees.

Obviously the ipo opens the door for some of those employees to sell stock and keeping them motivated is going to be important thing.

This workforce has exploded over the last couple of years.

2300 employees, compared to google, that is small.

Google has 46,000 employees and facebook has a much larger employee based than twitter currently.

But as you grow, these kind of issues come up, can you keep everybody focused?

Certainly if you look at facebook, you did see some top talent to leave after the initial public offering but the overall workforce has grown over 12 months.

I was speaking with randy zuckerberg yesterday.

She worked at facebook a long time.

I asked her what her advice was for twitter employees as they prepare to go public and she said, enjoy it.

Will the ipo affect the culture of twitter?

I think that issue has to be dealt with from the top.

You have interviewed the ceo.

He is a relatively understated person.

Somebody who is trying to lead by example.

The fact you do not have the senior executive selling the stock is meant to send a message they are in it for the long- term.

They are hoping the employees will take that message and remember people look at the fact twitter is not a profitable company.

To a certain extend that is by choice.

Its revenue grew from $20 million in 2010 to half $1 billion this year.

Technically they could be squeezing more money out of the revenue to take to the bottom line.

They are looking to use a lot of this capital that they raise to continue to grow the business.

Jon erlichman, outside twitter headquarters in san francisco, thank you.

I want to get to the business of twitter.

What is the most romantic thing revealed -- one of the most dramatic thing revealed as the user engagement figures.

Cory johnson has been going through the filings.

He is with us in the drill down.

What is jumping out at you when it comes to user engagement?

You know, if you think about how advertising works and the things twitter has said, they want to find ways people will use this service and not get kicked off with ads.

We see some user numbers within the filing, all of the statistics, one hundred percent year-over-year growth, the size of the user base and how much they are using the service was amazing.

232 million viewers but i thought what was interesting was the timeline usage, the timeline being that thing on the twitter website or on your phone where you see all of your tweets.

Twitter's engagement as registered by the timeline usage is incredible.

15 9 billion page views in the most recent quarter.

Those numbers jump out.

That said, the growth in those pages is at a climbing rates.

It was glowing -- growing at double digits.

I think it is amazing to look at how much people are going to twitter.

When you break it down, how much is each user checking?

Among the things they do not tell us is how many power users, people like emily chang, are using or raw or.

On average, we are looking at numbers of 7.5 times every day for twitter users to be checking it on timeline.

Seven point five timeline views per day, whether their own were somebody else's. that is increasing.

It shows the service has been successful at delivering value because people are using it more.

To go to seven point five shows people are using the service a lot.

How does it translate into sales?

We know the majority of twitter users are abroad but the majority of the revenue comes from the united states.

One of the other interesting things they tell us, we, could the first one, what the revenues are like per 1000 page views.

That number, not only is it good, as much as $.97 last quarter, it has been increasing at a good clip.

You can also look at the value of the twitter user.

How much is a user with too twitter?

It has been able to generate $.73 for every user in the most recent quarter.

That is the number that has been picking up steadily over the lowest -- over the course of the past two years.

That is the kind of thing investors will have to pay attention to.

Cory johnson, thank you.

Coming up, junks going -- john scully says he and some investors were lining up a bid for back larry -- four lakh very.

-- for blackberry.

? we are talking all things twitter today as the company is expected to price its ipo in a matter of hours.

Our next guest is a could mean big exits for other companies that grew up around the service.

My partner cory johnson is back with us for more.

I spoke with an interesting and important guy in silicon valley, one of those longtime silicon valley investors who knows how things go.

Twitter could actually spawn a new ecosystem of other startups, ones that could go public themselves.

Here is more on his take.

It is a global -- mobile five form.

There is high levels of engagement.

People are communicating with friends or family.

As i said before, the most interesting story is the enterprise ecosystem building up around it.

Businesses are starting to embrace it in a meaningful way.

I would add zynga to that list.

For sure.

That was the consumer side to build a big gaming business.

There is all of these enterprises people do not pay attention to and they created just as much equity valley.

In the case of some, it was over $1 billion in total.

We see it happening in twitter.

Sprinkler is a batter a portfolio company.

Also who'd sweet as well.

I do the same thing, helping business -- hoot suite as well.

They do the same thing, helping businesses use it as a tool to make the business operate more efficiently.

When you look at investments in your role as a venture capitalist, when you see something like a twitter, maybe you would choose not to get involved because the valuation is not right.

So do you look for other companies that will benefit from something like that?

We do.

It can be its own platform.

Usually we can build a business around it.

It does not always happen.

Every once in a while you will see that.

How did you do research to find these businesses?

A lot of hard work.

We are always talking to entrepreneurs to ask questions.

We are trying to figure out if a platform emerges, what of the some of the outcomes of that.

What of the problems they create and how can we find entrepreneurs to solve those problems.

You have been involved oh with many ipos over the years, it is a tumultuous time.

Putting your nose to grind and not paying attention.

That is completely untrue.

I wonder from the venture capital side, what is going on with those involved in twitter?

Are they putting dollar signs next to things yeah, -- things?

I do not think so.

For them in this part of a much longer multi-year journey.

A lot of them vester's have been involved -- a lot of these investors have been involved a long time.

They look at this as an important event in the history of the company.

It is not the end goal.

It is one step along the way.

Would they be doing any kind of work on twitter?

What kind?

It depends in their role in the company.

It has to assemble the right board.

It has to but together compensation committees and audit committees, governance committees.

Each of the board members are assuming some of those roles in helping the business mature to a public organization.

I wonder, when you look at the valuations of some of these deals, the facebooks, i think facebook is in its own category.

But let's say twitter and look at what the net and groupon and some big, expensive ipos, you look at those value a in and what is your reaction to them?

-- do you look at those valuations and what is your reaction to them?

I remember when somebody invested in facebook at $10 million and everybody thought it was crazy.

He has made more than 10 times on his investment.

Companies are building these global platforms.

Other companies certainly are not.

That was the general partner at battery ventures with cory johnson.

Still ahead, why the former ceo of apple thinks blackberry can be saved.

John scully is next.

You can also watch us on your tablet, phone, and bloomberg.com.

? i'm emily chang.

Fair financial's bid fell apart.

The former ceo is now in charge of trying to turn the company around.

Earlier, tom keene and scarlet fu sat down with the former ceo of apple, john scully.

They asked him about reports he and his canadian partners are interested in a bid to my blackberry.

-- to buy blackberry.

We followed it very closely.

We never did make a bid because i finally talked to someone last week and he said his deal was going to close and so i said, let's wait and see what happens.

I thought he was having trouble on getting the finances.

Because fairfax was moving forward?

I did not think he was going to get the financing.

I was surprised when they actually did not have anyone by the company but they injected more cash into the company to save it that way.

And they have a seven year duration.

You and i know they are not going out seven years.

What was the strategic interest for of the future for blackberry that you observed that will assist to create value?

I think the company can be saved.

Here's the strategy.

First you have to decouple the hardware devices from the bes.

To do that you have to sell back to somebody like lenovo.

Lenovo can't buy the whole company because the chinese would not be allowed to buy a highly secured platform.

I have to ask you the same question.

What are the patents worth per share?

That is the critical plug-in right now.

I do not think that is the critical plug-in.

The patents are worth somewhere around and billion dollars to $1.5 billion.

The key thing is they have a network which they built years ago of about a 600 wireless characters.

We have a company which is building all of the byod secured messaging, for at&t and we said if we could put those pieces together we could have something really interesting, once you decouple the hardware device.

I want to go back to lenovo for a minute.

Lenovo actually pursued a blackberry bid aggressively of the canadian government and said no way because of national security sick concerns.

Now that john chen is heading up blackberry, does that make it more palatable to canada to sell off a part to its chinese buyers?

I do not think it has to do it john thain.

He is a respected ceo.

Just because he has a chinese name.

He has strong ties to asian companies.

The more important thing is the canadian government was not going to allow a chinese company to own all of blackberry.

But they might allow, and we looked at this, they might allow them own to -- might allow them to own the hardware company.

Lenovo could do a great job to sell it to their supply chain and sales organizations.

There is an outcome that could be positive and john chen looks like he has the right skills to be the person to do it.

What about you?

Are you out of the game?

The stock has only gotten cheaper.

That must be attractive to you.

If the company decides to sell itself, we would be interested.

In the meantime, blackberry is a licensee of our software, and we think we can -- who is we?

Who are you working with?

I have my own firm and i have canadian partners in that.

I am also -- i do not mean to interrupt.

Continue.

My partners are gordon the millon and they are based in toronto.

We are a canadian entity, which makes it attractive.

That was john scully this morning on "berg -- bloomberg surveillance." it is time for "on the markets." julie hyman has more.

How is it looking?

We are seeing a mixed market today, emily.

We are seeing the dow and the s&p trading higher.

The dow actually approaching a closing record.

In terms of individual stocks, first up, chesapeake, the energy company selling 600 million dollars this quarter and it's finding more for 2014. shares are down is the ceo tried to calm investors saying it will not be a fire sale price.

Also down today, abercrombie & fitch.

He recorded sales that fell by 14%. it is embarking on some restructuring plans to get the number back up again.

More on the markets in 30 minutes.

? this is the early edition of "bloomberg west." i'm emily chang.

Now for your top headlines, we have the results of some key races for governor in the united states.

Chris christie cruised to reelection, bolstering his standing as a potential presidential candidate in 2016. terry mcauliffe won the virginia governor's rates in th -- race.

Be blasio won in new york city.

Home prices climbed to 90% of american cities in the third quarter according to the latest numbers.

One third of areas had double- digit increases, buyers competed for limited inventories including fewer discounted foreclosures.

Bad news for video rental company block mr.. -- blockbuster.

It is closing all remaining stores and will also and it's a dvd by mail service in early january.

The franchise and other stores will remain open.

Back to the top story, the twitter ipo depends on advertising dollars.

As twitter becomes a public company, the question these days is what our ads really worth to marketers?

Jon erlichman is back with us from outside twitter headquarters in san francisco.

It is a difficult thing to measure.

It became an issue on the roadshow when investors were asking questions to management.

Some of the same investors were the one interested in the facebook story.

It has more than one billion users.

Twitter has 236 million euros.

What are each of them worth?

I always preferred the cream part of an oreo.

This was the tv ad aired during the super bowl.

This was the ad everybody talked about.

Made for twitter capitalizing on the super bowl blackout.

Twitter uses this example to show how it is shaking up the ad business.

65% of people on twitter are on their phone in front of the tv.

Those are moments we never had before as marketers.

American express, jcpenney, and dell are examples of brands betting on twitter.

They have succeeded to a degree that is the envy of every company on earth.

You do not see an advertiser or anything today without a twitter handle tilt into it.

When advertisers put money to work on twitter, they buy promoted tweets which pop up in your feed.

If somebody retweets it or follows the brand on twitter after seeing it, twitter gets paid.

Experts say that payment could be $.50 each time a user engages with a brand but during bigger events, it could be a few dollars.

Multiply that over and over again and you start to understand why twitter is expected to generate a billion dollars in sales in 2014 according to bloomberg sources.

What is the brand's return on investment?

When you run a promoted tweed, which is taking a regular one and putting into people that are interested, we see purchase intent upward of 40%. twitter recently opened its doors to outside ad partners for helping marketers figure out if it sounds of generating sales.

Simon runs a partner of twitter.

He also works with facebook.

He says it is always coming down to one question -- when you have a lot of exposure on twitter and facebook, do you sell more stuff?

Contends the answer is no.

That does not mean you should stop advertising.

But it might mean you're not doing things right.

Is for twitter, the see of cash it has raised has afforded us some wiggle room.

They have plenty of time and money.

I look at this and go, you know, they have done the hard part.

Creating the twitter brand, that was epic.

The challenge of creating a business model behind it is relatively less.

Meanwhile, there is the question about how platforms like twitter are influencing the world of hollywood.

For more on that site i am joined i mike gundy, the president of 20th century fox home entertainment worldwide and has led the charge in terms of how films are distributed.

What do you think about platforms like twitter and how they are changing how business is done in hollywood?

Good morning.

Twitter is an incredible fan engagement tool.

For example, our summer blockbuster was "wolverine." we are going to release it digitally november 19. in that movie, hugh jackman stars and he has 3 million twitter followers.

During the production of the movie, he gave them insight you could only get from somebody like hugh in the middle of production.

And then the director has 12,000 followers and he is giving a different kind of look into it from a filmmaker perspective.

So it really engages the fan base early on.

And provides a lot of value.

Obviously you have focused a lot of energy on the digital releasing of films, especially in the second windows after they have been in theaters.

We just heard emily chang talking about how blockbuster has decided to close all of its remaining domestic stores.

What was the moment for you when you realized the dvd business is a business that a lot of kids do not know about anymore.

We have to change our thinking.

Around the recession, 2008, the physical business really started to struggle.

It was because there are a lot of disney -- different business models involved, netflix with their movies by mail and now they are streaming in red box, low-priced rentals.

Obviously when you look at movies and books you saw a physical to digital taking over and the entire world is going digital.

The challenge with movies, the movie file is so robust, it is not like a music file which is zipped across the internet.

It requires more downloading and a more robust internet to move content.

You have pushed something called electronic sell through, which is basically if you want to get the digital version of a new release film a couple of weeks before it is on dvd, it will pop up on itunes and you pay $14 and it is there for your collection.

Tell us about that process and how successful it has been for you.

The pricing decision.

Everything we try to do is from the consumer back.

You're looking at two kinds of consumers, those that are buying physical, there are 90 million people do still buy blu-ray and dvd.

There is about 38 million by our -- people that are engaged in digital but they are not building collections.

We are looking for the benefit to serve that 38 million people.

It had to be in high death, they are future proofing their purchase.

It had to be under $15. if it was early, that was more benefit.

The reason is that consumer, that the digital consumer right now is content centric.

It really is the intersection of technology and content.

We have about 20 seconds, you are pushing for an ultra hd like device.

There is a moore's law with television sets, they will get bigger and more high def.

One year ago it was 65 inches.

Now you will see 100 inch televisions that are becoming very commercial.

To do that you need higher definition.

So we are trying to satisfy that consumer with great content that looks beautiful and sounds fantastic.

Mike, begs for joining us.

The president of 20th century fox home entertainment.

Emily, back to you in new york.

What does designing software have to do with designing a smoke detector?

We ask that question right after this break.

You can also watch us on your tablet, phone, and bloomberg.com.

? this is "bloomberg lastwest." i'm emily chang.

Tony has helped design the most iconic apple products.

Now is the ceo of the net, he is designing high-end sensors for your home.

The newest product is a smoke detector called nest -- called nest protect.

I caught up with them in san francisco and started by asking, why smoke detectors need a makeover.

Right now the government tells you you have to buy a smoke detector and you have to buy multiple of them.

What happens was those things is they beep at you.

They beat that you when you are cooking, when you are taking a shower and when you are sleeping to tell you the battery is dead.

We do not understand why it should be.

-- bbepeep.

We think it should be informational.

It gives you a heads up before it beeps.

It tells you, iraq ignite smoke over here.

You might want to check it out.

You're probably just learning this.

99% of the time you're probably doing something you know the cost to some smoke happening.

It should not cry wolf.

You have attacked a variety of design problems, whether portable music with the ipad, the heating in your homes, smoke detection, can you apply the same design thinking to these different kind of problems or does it require an industry specific thought?

I do not think there is anyone process but you want to look at these things differently.

Most people think of a thermostat as a thermostat and they add features onto it.

We think of these as a smartphone inside.

All of the things in a smartphone and what kind of apps can you layer on top?

What kind of experiences?

To think of this as a thermostat, think of it as a smartphone with thermostat capabilities or instead of a smoke detector, a smartphone with a smoke sensor.

How does the design process change and you're talking about hardware?

I think the process and length of time it takes to design something and to implement is longer.

Hardware is longer because you have to make physical atoms, where as apps you can make one and you can copy it quickly.

Process is longer but the design intent is definitely the same.

When you're getting ready to ship a product, how do you test it?

Do you do surveys?

Do try it yourself?

The first thing is absolutely you need to try it yourself.

This is a certification kind of effort where we have to work with underwriters laboratories and bsi in the u.k. to make sure we get it right.

When it is something about safety, we have to make sure people feel like we have done the testing.

This can be a beta application.

Nest is $249? you will need multiple ones for your home likely.

Your products are relatively expensive.

Apple is expensive.

Who are you designing for?

For a small number people?

Or for the masses?

Right now if you look at something like the thermostat, we are in target today.

We are where the largest majority of the u.s. the shops, for us, we are not designing for the high-end customer, we are designing the best experience possible.

The same thing with nest protect.

If we could have made a lower priced, we would.

Everybody should have these things.

This is the best we can do with the technology today and hopefully over time we will see a change, just like you saw ipads go to $49 over time.

I hope the same thing is going to happen here.

That was the nest ceo.

Kathleen sebelius is facing questions today about the glitches with healthcare.gov.

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

Secretary is back on capitol hill today.

She was grilled on the healthcare.gov disaster after she already faced questions last week.

Megan hughes is on capitol hill today.

And he new information from kathleen sebelius on when the website will be fixed?

We have heard repeatedly from the administration the website will be running smoothly by the end of november.

Secretary sibelius did admit there are still hundreds, hundreds of items on their punch list.

That is a list of things that need to be fixed.

They have a long way to go.

She said she takes full accountability, even as she was being written by republicans, some of whom are asking for her resignation.

Take a listen.

He is that statement on the white house website to work faults?

Correct sir, i think the statement -- is it true or false, madam secretary?

The vast majority of americans who are insured are in the employer market, in public plans or in veterans planes.

And those lands have stayed in place and continue to offer benefits.

I would ask the record note you have refused to answer my question, whether it is true or false.

As to the website itself, the secretary was asked, why not take the entire website down and then put a backup?

She said she was instructed that would not necessarily help anything.

Workers are able to do it hot hatches and make fixes while it was up and running.

They are also taking it down about four hours around 1:00 in the morning, early hours of the morning.

She says there have been improvements.

17,000 people can enroll and register in one hour.

She says that is an improvement.

One question that is still outstanding is how many people have actually been able to use this to enroll.

Kathleen sebelius did not answer.

The administration is expected to come out with those numbers next week.

What is the white house strategy?

Is the president in damage control mode?

He is actually on offense today.

He is going to be in texas later today.

The reason he chose dallas, that is an area with a high concentration of uninsured people and also a state or the government decided not to expand medicaid.

That gives him an opportunity to talk about those things.

The strategy is to try to shift the attention away from the website and onto the uninsured.

Megan hughes on capitol hill, thanks for bringing us that update.

We will have more after this break.

? welcome back.

I'm emily chang.

Tune in for a special two-hour -- and of "bloomberg west" we will break down all aspects of the business and bring you the very latest on the company's pricing.

And it is 56 pass to the hour which means bloomberg tv is "on the markets." jules, what are you watching right now?

We will be on the floor of the stock exchange.

Today we are watching a stock that is really mixed.

The nasdaq is lower.

We had some beneficial's over the past couple of days talking about economic weaknesses, seeming to give fuel to the idea the fed is going to keep the tax on for now.

The treasury market, we are actually seeing yields come down to some extent, following on the same thinking and we are seeing that in the currency market as well as we take a look, we have been seeing some strength in the euro, for example.

Let's talk a little bit more about the currency market, we can see a lot of activity tomorrow.

The bank of england and the ecb holding policy meetings.

Joining me now with what he is expecting is the senior currency strategist at gain capital group.

Inks are coming in.

We have some economic data out of europe that would support the idea the ecb does not mean to cut rates, which is a flip of the expectations we have seen.

Obviously the eurozone is in a recovery right now although it is weak and fragile.

It could be argued there needs to be some more support for that.

Also if you look at some of the major indicators such as inflation, it has really fallen off.

That is below the two percent target of the european central bank.

For tomorrow, we expect they are going to be on hold.

It will take more of a dovish tone, which could weigh on the euro.

I had of that meeting, we are seeing the euro rally because of expectations.

What would be your strategy with regard to the euro?

Would you follow the momentum and the long as well?

We think that is going to be a knee-jerk reaction, if there is francisco and new york city, welcome to the early edition of "bloomberg west." our focus is on technology in the future of business.

Let's get to the rundown.

How high will twitter share price the?

The company is making that decision right now with its bankers less than 24 hours before it is expected to begin trading.

John scully tells us he was lining up a bit with other investors to take blackberry private.

Why he thinks the company can be saved.

And as more people watch more video online, fewer are buying dvds.

How 20th century fox is working to survive the shift in behavior.

First to the lead, we are just hours away from twitter's ipo pricing, it could bring more than one $.75 billion to the company in new financing.

The question now is how high will the shares go?

The roadshow saw higher demand for shares than expected, pushing up the pricing range by 25%. the company is working with bankers right now to set the final share price later today and could be higher than its most recent guidance.

For more on what to expect and into tomorrow, we have the story covered from every angle outside of san francisco is jon erlichman, cory johnson is in san francisco and cristina alesci is with me on the set in new york.

I want to start with you.

We are hearing so many numbers.

Would you think they're going to price at?

We knew they were going to be above $23. there is a lot of back-and-forth with the top investors.

They are still going back-and- forth.

About $25. exactly.

It is going to be between $27 or $28 is what i'm hearing.

A very strong number.

We are going to be talking tomorrow about how expensive it is.

It sounds high.

They started at $17. the bankers want some assurances.

It seems like they have gotten them.

The long-term money will continue to buy after this thing starts trading.

That is the key metric, especially when you want to reduce volatility.

You want those long-term holders to be in the stock and right now, talking about putting a book together, you want to see a concentration, 35% of the book in the hands of these long-term traders, which it looks like it is shaping up that way.

Obviously the idea is some kind of a pop on the first day.

That did not happen with face look.

What kind of volatility are investors expecting?

Straight up or could go sideways?

A little bit of a pop is good.

At the end of the day, even long-term investors will get to take some profits off the table.

What they have to be careful about, and this is where the banker comes in, you can to stabilize the stock if it is going up.

The bankers will try to stabilize it on the way down, if we get some selling.

I'm hearing goldman sachs is playing it conservatively and they are mindful of the fact you do not want follett to lady.

He talked about the fact that twitter has not turned a profit.

What else are they worried about?

You know this, the major swipe against twitter is the fact it is a niche player.

The mainstream people are not going to really take to the platform in the same way they did facebook.

A lot of people are saying, look, you can bring a niche player and get the advertising side of the equation right and develop the kind of advertising you can charge more for an partner with marketers to provide that kind of premium advertising.

And everybody forgets to mention the fact this company does not have the patent portfolio investors want.

They have nine patents.

And facebook had more than 700. those are some of the concerns.

Management possibility to execute is also a concern.

The company has had a lot of venture backed supporters.

We will see their involvement going forward.

Thank you for weighing in.

We are continuing to wait on that price.

What is it like working for a company that is the talk of wall street?

It is likely exciting and a little distracting.

Jon erlichman is live outside of twitter headquarters.

I'm sure you're trying not to distract employees, like a good reporter.

Talk to us about the employee side of the story.

Especially given that twitter has been through so much to get to this point.

Yeah, we have gone through those documents twitter has shared with us.

One of the risk factors is tied to the employees.

Not just finding the best and the competitive market, but retaining those employees.

Obviously the ipo opens the door for some of those employees to sell stock and keeping them motivated is going to be important thing.

This workforce has exploded over the last couple of years.

2300 employees, compared to google, that is small.

Google has 46,000 employees and facebook has a much larger employee based than twitter currently.

But as you grow, these kind of issues come up, can you keep everybody focused?

Certainly if you look at facebook, you did see some top talent to leave after the initial public offering but the overall workforce has grown over 12 months.

I was speaking with randy zuckerberg yesterday.

She worked at facebook a long time.

I asked her what her advice was for twitter employees as they prepare to go public and she said, enjoy it.

Will the ipo affect the culture of twitter?

I think that issue has to be dealt with from the top.

You have interviewed the ceo.

He is a relatively understated person.

Somebody who is trying to lead by example.

The fact you do not have the senior executive selling the stock is meant to send a message they are in it for the long- term.

They are hoping the employees will take that message and remember people look at the fact twitter is not a profitable company.

To a certain extend that is by choice.

Its revenue grew from $20 million in 2010 to half $1 billion this year.

Technically they could be squeezing more money out of the revenue to take to the bottom line.

They are looking to use a lot of this capital that they raise to continue to grow the business.

Jon erlichman, outside twitter headquarters in san francisco, thank you.

I want to get to the business of twitter.

What is the most romantic thing revealed -- one of the most dramatic thing revealed as the user engagement figures.

Cory johnson has been going through the filings.

He is with us in the drill down.

What is jumping out at you when it comes to user engagement?

You know, if you think about how advertising works and the things twitter has said, they want to find ways people will use this service and not get kicked off with ads.

We see some user numbers within the filing, all of the statistics, one hundred percent year-over-year growth, the size of the user base and how much they are using the service was amazing.

232 million viewers but i thought what was interesting was the timeline usage, the timeline being that thing on the twitter website or on your phone where you see all of your tweets.

Twitter's engagement as registered by the timeline usage is incredible.

15 9 billion page views in the most recent quarter.

Those numbers jump out.

That said, the growth in those pages is at a climbing rates.

It was glowing -- growing at double digits.

I think it is amazing to look at how much people are going to twitter.

When you break it down, how much is each user checking?

Among the things they do not tell us is how many power users, people like emily chang, are using or raw or.

On average, we are looking at numbers of 7.5 times every day for twitter users to be checking it on timeline.

Seven point five timeline views per day, whether their own were somebody else's. that is increasing.

It shows the service has been successful at delivering value because people are using it more.

To go to seven point five shows people are using the service a lot.

How does it translate into sales?

We know the majority of twitter users are abroad but the majority of the revenue comes from the united states.

One of the other interesting things they tell us, we, could the first one, what the revenues are like per 1000 page views.

That number, not only is it good, as much as $.97 last quarter, it has been increasing at a good clip.

You can also look at the value of the twitter user.

How much is a user with too twitter?

It has been able to generate $.73 for every user in the most recent quarter.

That is the number that has been picking up steadily over the lowest -- over the course of the past two years.

That is the kind of thing investors will have to pay attention to.

Cory johnson, thank you.

Coming up, junks going -- john scully says he and some investors were lining up a bid for back larry -- four lakh very.

-- for blackberry.

? we are talking all things twitter today as the company is expected to price its ipo in a matter of hours.

Our next guest is a could mean big exits for other companies that grew up around the service.

My partner cory johnson is back with us for more.

I spoke with an interesting and important guy in silicon valley, one of those longtime silicon valley investors who knows how things go.

Twitter could actually spawn a new ecosystem of other startups, ones that could go public themselves.

Here is more on his take.

It is a global -- mobile five form.

There is high levels of engagement.

People are communicating with friends or family.

As i said before, the most interesting story is the enterprise ecosystem building up around it.

Businesses are starting to embrace it in a meaningful way.

I would add zynga to that list.

For sure.

That was the consumer side to build a big gaming business.

There is all of these enterprises people do not pay attention to and they created just as much equity valley.

In the case of some, it was over $1 billion in total.

We see it happening in twitter.

Sprinkler is a batter a portfolio company.

Also who'd sweet as well.

I do the same thing, helping business -- hoot suite as well.

They do the same thing, helping businesses use it as a tool to make the business operate more efficiently.

When you look at investments in your role as a venture capitalist, when you see something like a twitter, maybe you would choose not to get involved because the valuation is not right.

So do you look for other companies that will benefit from something like that?

We do.

It can be its own platform.

Usually we can build a business around it.

It does not always happen.

Every once in a while you will see that.

How did you do research to find these businesses?

A lot of hard work.

We are always talking to entrepreneurs to ask questions.

We are trying to figure out if a platform emerges, what of the some of the outcomes of that.

What of the problems they create and how can we find entrepreneurs to solve those problems.

You have been involved oh with many ipos over the years, it is a tumultuous time.

Putting your nose to grind and not paying attention.

That is completely untrue.

I wonder from the venture capital side, what is going on with those involved in twitter?

Are they putting dollar signs next to things yeah, -- things?

I do not think so.

For them in this part of a much longer multi-year journey.

A lot of them vester's have been involved -- a lot of these investors have been involved a long time.

They look at this as an important event in the history of the company.

It is not the end goal.

It is one step along the way.

Would they be doing any kind of work on twitter?

What kind?

It depends in their role in the company.

It has to assemble the right board.

It has to but together compensation committees and audit committees, governance committees.

Each of the board members are assuming some of those roles in helping the business mature to a public organization.

I wonder, when you look at the valuations of some of these deals, the facebooks, i think facebook is in its own category.

But let's say twitter and look at what the net and groupon and some big, expensive ipos, you look at those value a in and what is your reaction to them?

-- do you look at those valuations and what is your reaction to them?

I remember when somebody invested in facebook at $10 million and everybody thought it was crazy.

He has made more than 10 times on his investment.

Companies are building these global platforms.

Other companies certainly are not.

That was the general partner at battery ventures with cory johnson.

Still ahead, why the former ceo of apple thinks blackberry can be saved.

John scully is next.

You can also watch us on your tablet, phone, and bloomberg.com.

? i'm emily chang.

Fair financial's bid fell apart.

The former ceo is now in charge of trying to turn the company around.

Earlier, tom keene and scarlet fu sat down with the former ceo of apple, john scully.

They asked him about reports he and his canadian partners are interested in a bid to my blackberry.

-- to buy blackberry.

We followed it very closely.

We never did make a bid because i finally talked to someone last week and he said his deal was going to close and so i said, let's wait and see what happens.

I thought he was having trouble on getting the finances.

Because fairfax was moving forward?

I did not think he was going to get the financing.

I was surprised when they actually did not have anyone by the company but they injected more cash into the company to save it that way.

And they have a seven year duration.

You and i know they are not going out seven years.

What was the strategic interest for of the future for blackberry that you observed that will assist to create value?

I think the company can be saved.

Here's the strategy.

First you have to decouple the hardware devices from the bes.

To do that you have to sell back to somebody like lenovo.

Lenovo can't buy the whole company because the chinese would not be allowed to buy a highly secured platform.

I have to ask you the same question.

What are the patents worth per share?

That is the critical plug-in right now.

I do not think that is the critical plug-in.

The patents are worth somewhere around and billion dollars to $1.5 billion.

The key thing is they have a network which they built years ago of about a 600 wireless characters.

We have a company which is building all of the byod secured messaging, for at&t and we said if we could put those pieces together we could have something really interesting, once you decouple the hardware device.

I want to go back to lenovo for a minute.

Lenovo actually pursued a blackberry bid aggressively of the canadian government and said no way because of national security sick concerns.

Now that john chen is heading up blackberry, does that make it more palatable to canada to sell off a part to its chinese buyers?

I do not think it has to do it john thain.

He is a respected ceo.

Just because he has a chinese name.

He has strong ties to asian companies.

The more important thing is the canadian government was not going to allow a chinese company to own all of blackberry.

But they might allow, and we looked at this, they might allow them own to -- might allow them to own the hardware company.

Lenovo could do a great job to sell it to their supply chain and sales organizations.

There is an outcome that could be positive and john chen looks like he has the right skills to be the person to do it.

What about you?

Are you out of the game?

The stock has only gotten cheaper.

That must be attractive to you.

If the company decides to sell itself, we would be interested.

In the meantime, blackberry is a licensee of our software, and we think we can -- who is we?

Who are you working with?

I have my own firm and i have canadian partners in that.

I am also -- i do not mean to interrupt.

Continue.

My partners are gordon the millon and they are based in toronto.

We are a canadian entity, which makes it attractive.

That was john scully this morning on "berg -- bloomberg surveillance." it is time for "on the markets." julie hyman has more.

How is it looking?

We are seeing a mixed market today, emily.

We are seeing the dow and the s&p trading higher.

The dow actually approaching a closing record.

In terms of individual stocks, first up, chesapeake, the energy company selling 600 million dollars this quarter and it's finding more for 2014. shares are down is the ceo tried to calm investors saying it will not be a fire sale price.

Also down today, abercrombie & fitch.

He recorded sales that fell by 14%. it is embarking on some restructuring plans to get the number back up again.

More on the markets in 30 minutes.

? this is the early edition of "bloomberg west." i'm emily chang.

Now for your top headlines, we have the results of some key races for governor in the united states.

Chris christie cruised to reelection, bolstering his standing as a potential presidential candidate in 2016. terry mcauliffe won the virginia governor's rates in th -- race.

Be blasio won in new york city.

Home prices climbed to 90% of american cities in the third quarter according to the latest numbers.

One third of areas had double- digit increases, buyers competed for limited inventories including fewer discounted foreclosures.

Bad news for video rental company block mr.. -- blockbuster.

It is closing all remaining stores and will also and it's a dvd by mail service in early january.

The franchise and other stores will remain open.

Back to the top story, the twitter ipo depends on advertising dollars.

As twitter becomes a public company, the question these days is what our ads really worth to marketers?

Jon erlichman is back with us from outside twitter headquarters in san francisco.

It is a difficult thing to measure.

It became an issue on the roadshow when investors were asking questions to management.

Some of the same investors were the one interested in the facebook story.

It has more than one billion users.

Twitter has 236 million euros.

What are each of them worth?

I always preferred the cream part of an oreo.

This was the tv ad aired during the super bowl.

This was the ad everybody talked about.

Made for twitter capitalizing on the super bowl blackout.

Twitter uses this example to show how it is shaking up the ad business.

65% of people on twitter are on their phone in front of the tv.

Those are moments we never had before as marketers.

American express, jcpenney, and dell are examples of brands betting on twitter.

They have succeeded to a degree that is the envy of every company on earth.

You do not see an advertiser or anything today without a twitter handle tilt into it.

When advertisers put money to work on twitter, they buy promoted tweets which pop up in your feed.

If somebody retweets it or follows the brand on twitter after seeing it, twitter gets paid.

Experts say that payment could be $.50 each time a user engages with a brand but during bigger events, it could be a few dollars.

Multiply that over and over again and you start to understand why twitter is expected to generate a billion dollars in sales in 2014 according to bloomberg sources.

What is the brand's return on investment?

When you run a promoted tweed, which is taking a regular one and putting into people that are interested, we see purchase intent upward of 40%. twitter recently opened its doors to outside ad partners for helping marketers figure out if it sounds of generating sales.

Simon runs a partner of twitter.

He also works with facebook.

He says it is always coming down to one question -- when you have a lot of exposure on twitter and facebook, do you sell more stuff?

Contends the answer is no.

That does not mean you should stop advertising.

But it might mean you're not doing things right.

Is for twitter, the see of cash it has raised has afforded us some wiggle room.

They have plenty of time and money.

I look at this and go, you know, they have done the hard part.

Creating the twitter brand, that was epic.

The challenge of creating a business model behind it is relatively less.

Meanwhile, there is the question about how platforms like twitter are influencing the world of hollywood.

For more on that site i am joined i mike gundy, the president of 20th century fox home entertainment worldwide and has led the charge in terms of how films are distributed.

What do you think about platforms like twitter and how they are changing how business is done in hollywood?

Good morning.

Twitter is an incredible fan engagement tool.

For example, our summer blockbuster was "wolverine." we are going to release it digitally november 19. in that movie, hugh jackman stars and he has 3 million twitter followers.

During the production of the movie, he gave them insight you could only get from somebody like hugh in the middle of production.

And then the director has 12,000 followers and he is giving a different kind of look into it from a filmmaker perspective.

So it really engages the fan base early on.

And provides a lot of value.

Obviously you have focused a lot of energy on the digital releasing of films, especially in the second windows after they have been in theaters.

We just heard emily chang talking about how blockbuster has decided to close all of its remaining domestic stores.

What was the moment for you when you realized the dvd business is a business that a lot of kids do not know about anymore.

We have to change our thinking.

Around the recession, 2008, the physical business really started to struggle.

It was because there are a lot of disney -- different business models involved, netflix with their movies by mail and now they are streaming in red box, low-priced rentals.

Obviously when you look at movies and books you saw a physical to digital taking over and the entire world is going digital.

The challenge with movies, the movie file is so robust, it is not like a music file which is zipped across the internet.

It requires more downloading and a more robust internet to move content.

You have pushed something called electronic sell through, which is basically if you want to get the digital version of a new release film a couple of weeks before it is on dvd, it will pop up on itunes and you pay $14 and it is there for your collection.

Tell us about that process and how successful it has been for you.

The pricing decision.

Everything we try to do is from the consumer back.

You're looking at two kinds of consumers, those that are buying physical, there are 90 million people do still buy blu-ray and dvd.

There is about 38 million by our -- people that are engaged in digital but they are not building collections.

We are looking for the benefit to serve that 38 million people.

It had to be in high death, they are future proofing their purchase.

It had to be under $15. if it was early, that was more benefit.

The reason is that consumer, that the digital consumer right now is content centric.

It really is the intersection of technology and content.

We have about 20 seconds, you are pushing for an ultra hd like device.

There is a moore's law with television sets, they will get bigger and more high def.

One year ago it was 65 inches.

Now you will see 100 inch televisions that are becoming very commercial.

To do that you need higher definition.

So we are trying to satisfy that consumer with great content that looks beautiful and sounds fantastic.

Mike, begs for joining us.

The president of 20th century fox home entertainment.

Emily, back to you in new york.

What does designing software have to do with designing a smoke detector?

We ask that question right after this break.

You can also watch us on your tablet, phone, and bloomberg.com.

? this is "bloomberg lastwest." i'm emily chang.

Tony has helped design the most iconic apple products.

Now is the ceo of the net, he is designing high-end sensors for your home.

The newest product is a smoke detector called nest -- called nest protect.

I caught up with them in san francisco and started by asking, why smoke detectors need a makeover.

Right now the government tells you you have to buy a smoke detector and you have to buy multiple of them.

What happens was those things is they beep at you.

They beat that you when you are cooking, when you are taking a shower and when you are sleeping to tell you the battery is dead.

We do not understand why it should be.

-- bbepeep.

We think it should be informational.

It gives you a heads up before it beeps.

It tells you, iraq ignite smoke over here.

You might want to check it out.

You're probably just learning this.

99% of the time you're probably doing something you know the cost to some smoke happening.

It should not cry wolf.

You have attacked a variety of design problems, whether portable music with the ipad, the heating in your homes, smoke detection, can you apply the same design thinking to these different kind of problems or does it require an industry specific thought?

I do not think there is anyone process but you want to look at these things differently.

Most people think of a thermostat as a thermostat and they add features onto it.

We think of these as a smartphone inside.

All of the things in a smartphone and what kind of apps can you layer on top?

What kind of experiences?

To think of this as a thermostat, think of it as a smartphone with thermostat capabilities or instead of a smoke detector, a smartphone with a smoke sensor.

How does the design process change and you're talking about hardware?

I think the process and length of time it takes to design something and to implement is longer.

Hardware is longer because you have to make physical atoms, where as apps you can make one and you can copy it quickly.

Process is longer but the design intent is definitely the same.

When you're getting ready to ship a product, how do you test it?

Do you do surveys?

Do try it yourself?

The first thing is absolutely you need to try it yourself.

This is a certification kind of effort where we have to work with underwriters laboratories and bsi in the u.k. to make sure we get it right.

When it is something about safety, we have to make sure people feel like we have done the testing.

This can be a beta application.

Nest is $249? you will need multiple ones for your home likely.

Your products are relatively expensive.

Apple is expensive.

Who are you designing for?

For a small number people?

Or for the masses?

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

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