Cory im cory johnson in for emily chang and this is Bloomberg Technology. A 105 billion offer hangs in the balance. The history of attack is turning hostile. The telik on patch made it the telecom match made in heaven is no more. What went wrong for americas fourthlargest wireless character. The massive document leak. Sidestepped apple billions in taxes. Multiple documents in the socalled paradise papers. We will look at apples involvement in offshore financing. Thet, more details about bid by broadcom to buy qualcomm. Broadcom has made a 105 billion offer. The qualcomm Closing Price before bloomberg broke this deal is saying it is ready for a hostile takeover if qualcomms board doesnt play ball. If the deal goes through, it would make broadcom the worlds thirdlargest chipmaker behind only intel in samsung. Sullivan, letks me start with you. It is a little crazy to think about. Weve seen a time of really big a dealsa deals big m in the past few weeks. I think what is going to be interesting here is that broadcom is contemplating taking this hostile. We havent really seen a big m a situation emily we just had this same conversation on bloomberg radio. Let me ask you. Help us understand what is different about the chips that qualcomm makes and the products that broadcom makes. The overlap is in the phone. If you connect to a cellular network, you are using a qualcomm chip. If you connect to your Home Internet using wifi, you are probably using a broadcom chip. Obviously, some similarities but not quite the exact same thing. Broadcom is very big in what is called switches, little chips that send information around data centers between computers. Itly it sounds like cory sounds like broadcoms emphasis on the movable on moving information from mobile phones and qualcomm more on the receipt of that information and the processing. Ian thats a good way to look at it. What is important here is how that is going to factor in to the considerations that regulators are going to put on this. If you talk to broadcom, not going to be a problem. I spoke with the ceo earlier today. We think we can see this through the regulatory process. Cory theres a tantalizing clue you just left us with. M a activity to and this white house, we saw the broadcom ceo say that he moved the company to the u. S. That was sort of a head fake because they already had facilities in california. This would concentrate a lot of power in one company and shirley put them in a better position to raise prices. Brooke i think that you are going to have one Company Controlling a very significant part of the market. This deal would have been impossible if you didnt have broadcom trying to become a u. S. Company. It is still trying to buy brocade communications. Cory that is important because it controls chips that are involved in storage. So you will have one Company Controlling what happens in storage and the management of information whenever it comes off a desk. Then you have the management networks, then qualcomm chips in the phones. You would really have from stem cpus, havexcept for broadcom sitting in the middle of all of that. Brooke then you would have chips that are used in the automotive industry. This would really be a behemoth. ,t does sort of make you wonder what were the behindthescenes the behindthescenes machinations going on here and this decision to relocate to the u. S. . Cory over a week or over a month. Brooke it really was just a few days, sort of whiplash. That one of the reasons qualcomm is so cheap right now is that it is not getting along with its biggest customer, apple, and that apple is threatening it shows that qualcomm might be apple might say, we dont need you, we are developing our own devices. It sounds like the broadcom ceo has worked that out. Broadcom thinks they can get a better relationship with apple off the bat. When you are asking these questions, you are basically asking, do you think i havent thought about this . The are kind of famous in semiconductor industry, dancing the dances. Qualcomm is getting into processes this year, into pcs and servers. Thats a lot of questions that are going to be asked come a lot of potential customers are going to be asked to weigh in. For him to be this confident would indicate that they have done work behind the scenes to kind of grease the wheels. Cory i dont think he lacks confidence. Maybe that helps the deal get done because qualcomm could argue, if we are bigger and stronger, we can finally offer a processor competitor to intel. That is certainly a part of it although our understanding at the moment is that qualcomm did not like this deal. They think this is a real lowball effort and they think the regulatory hurdles would be massive or at least very timeconsuming. We dont think they are going to embrace this one and they will have to go to their shareholders and convince them this is in their best interest if they want to get this completed. Cory thanks for joining me here in the studio. Coming up, sprint and tmobile call it quits with merger talks. Bloomberg technology is Live Streaming right now on twitter. Check us out weekdays 5 00 in new york, 2 00 on the west coast. Cory now, a story we are watching. Disney is set to hold talks to buy 21st century foxs movie studio and other assets. ,ccording to a person familiar the companies are no longer discussing the deal but fox and disney shares both rose on the news and both declined to comment. After have plunged today sprint hasnt had a profitable year in a decade, servicing 38 billion in debt. It would have turned sprint into a competitor big enough perhaps to challenge at t and verizon. To calm the tried nerves of investors. The sprint share dropped after merger talks with we cane fell apart, but buy more sprint shares at a cheaper price. We would like to buy them to our limit. Cory i dont think that was his real voice. Nonetheless, joining us, crayton harrison. Mes is a huge deal to because it means so much for so Many Companies in technology. Steve sticking with telephones, what does it mean for number three and number four two not come together . It means more competition, margin. L, lower profit whenever you have a market with four carriers go to three ofriers, competition kind slows down a little bit, things get a little more relaxed in the wireless industry. When you have four competitors, things stay pretty competitive. Numbernately for sprint, and not beingoney able to hold onto subscribers, that means they have got to get their act together. Cory what has happened with tmobile the last four or five years is really remarkable, at least to me. Theyve gone from being a pretty weak player to a very strong one, not just gaining market share and fixing their own finances and their own business models, but theyve had a dramatic effect on at t and verizon, and they didnt do it from a position of market strength. Crayton you talk about some of the things that now are sort of universal in the industry, like paying for your device separately if you want to, not as part of your contract, unlimited plans. A lot of this stuff, tmobile was the originator, at least the popularizer of in the industry. When tmobile started doing that stuff, it was number four. You will see sprint try to innovate in the same way while tmobile continues to push the envelope. Cory i always think one of the least reported numbers in all of technology is the Capital Spending of verizon, at t, and tmobile and sprint. Tmobile and sprint will spend a lot more money on the Technology Infrastructure which has to be good news for the tower companies, the networking companies, every bulldozer out there hoping to dig a ditch. This is good news because they will be spending a lot more money. Crayton i think those are among the happiest people today. If youve got shares in a tower company, this is your day. They live for Network Infrastructure in the wireless market. Cory i want to switch gears a little bit as you are there in los angeles. You are right down the block from the fox studios. Who could have imagined disney coming down from burbank, making a play at those fox studios . M crayton its a bit of a surprise. Its one of those deals where, when it first comes out, you start to scratch your head. One thing that fox has going for it is this international business. Obviously, disney is everywhere around the world, but they dont have the level of penetration that fox does in some of the and india. Europe another thing that is talked about more and more is distribution, wanting to get closer to the consumer, which is why they are doing some of these streaming services over the next few years. But, fox has a sizable stake in the sky in europe, one of the largest paytv providers. Maybe disney is starting to look for a more direct relationship with consumers through distribution. Cory it seems like it is such an acquisition. We know the talks are over now. G whilewould be ziggin the rest of the industry seems to zag. Be acquiring cable assets that are part of the fox time thatthe same everyone else is saying, cut your losses on cable, cut your cords on cable, bill flores skinny bundle. It seems like disney would be doubling down where they already are with espn. Crayton i understand what you are saying. But, if you think about it in terms of content assets, in terms of brands, it becomes kind of a different story. Fox, the studio itself, has things like the xmen, a marvel property. This is the sort of thing that disney might want to take a look at. Thank you for joining us. Coming up, and outgoing interview with the cisco executive chairman, outgoing. Hes going to share the lessons with us, next. Cisco has always been about startups. The Company Acquired dozens and dozens of startups, seeing sales grow from 1 billion to over 40 billion during his years at the helm. We talked to him about startups and what the government can do to encourage startups. John i think we are viewing this as transactions, not part of a bigger picture. All. , we are not at in the first five years of this decade, we all grew our Startup Community by 12 over five years. Our peers like australia, france, india grew by 60 comedy chinese grew by 100 . We are not entitled. We have to disrupt or get disrupted. You are now seeing companies such as france, which was the last place you and i would have done business three or four years ago, become the startup nation of europe. Do it byt transactions, they do it by combining the whole picture together. Startups, how does that tie into your tax plan your Education System, your security . The u. S. Is the only company in the world that does not have a National Digital piracy digital policy. We are behind. While tax policy changes , we are lacking the rest of the world in areas we must lead. I think these were a good first step that they were a step we should have done five, 10, 15 years ago. How startups will be the job creation engine. 40 will go away. Jobs, itgoing to get has to come from a Startup Community. We are in last place and we dont have a cohesive plan to tie it all together. Even as Silicon Valley seems to be the empty of the world, everyone i talked to says we are creating the Silicon Valley of the sand, of the ocean, of boston, israel. It seems that Silicon Valley is still held up as a model. What is missing . What needs to happen . John we talk about Silicon Valley being the example of the rest of the world, then boston 128 two decades ago. Youve got to disrupt as opposed to be disrupted. Its got to be across all 50 states, not just in Silicon Valley. I would argue Silicon Valley is out of touch with the rest of america in how we create jobs. , modigo around the world is looking at creating Silicon Valley is in india. He is talking about gdp growth of 7 to 10 . Jpmorgan came out saying they predict india will grow at 10 per year. India is growing because of modis digital agenda, job creation. France set a pace to do this across the entire country. We need to do it in every city in our country. We have to bring education with cano young people participate in the future. Cory is there something that can be done with cash repatriation that can encourage startups . The last time, it went into dividends, not necessarily hiring, rmb. Hiring, r d. It went into shareholders pockets. If the goal is to encourage investment, what needs to be attached to a repatriation tax policy . Had both thee opportunity but also the challenge. We have to think of how we solve a problem. We need a much more competitive tax system. Dropping the Corporate Tax rate for startups to 20 is a great start. Weve been got to combine two, when we repatriate money, will this create a chance for startups . We will see a market where startups see an exit that are as well. There is no golden single solution. You get to say, how do you combine this in a policy that combines start of engines with tax policy, with education, looking at a National Startup mentality, and how do we catch the imagination of republicans, not to argue about tax policy, but talk about the future in terms of the opportunity. Right now, throughout the central part of the nation and southeast, they dont believe they will have a better life than their parents. Frances changing their whole Education System around startups and digitization, partnering with cisco. They will do it first with pilots, then across the whole country. Why doesnt the u. S. Talk about changing the Education System which is broke . We are moving too slow, we dont have a national policy. This should be something democrats and republicans are all over. Repatriation and tax policy is just one element. You need to say, how do we change the future . Cory moore with ciscos John Chambers coming up next. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. You are watching Bloomberg Technology. Lets start with a check of your first word news. The house ways and Means Committee today began work with the tax overhaul plan. Committee chair kevin brady called it a monumental challenge but said it would help spur job growth and the economy. Cutsp to bottom, the tax is the most transformational tax reform bill since Ronald Reagan in 1986. Democrats say the bill prioritizes the wellconnected while raising taxes for millions of american families. Negotiators are reportedly extending the fifth round of nafta talks to allow more time to consider proposals. Defense secretary james mattis is facing a growing chorus of questions about what the next steps will be in the fight against Islamic State in iraq and syria. Mattis is in finland for a week of meetings about how to preserve peace and be sure islamic militants dont rise again. U. K. Prime minister theresa may is calling for a new culture of respect in public life after allegations of abuse in british politics. The scandal has already triggered be resignation of the defense secretary and suspensions of several lawmakers. Have started freezing accounts of some former top officials and members of royal family arrested this weekend. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. We are joined by Ramy Inocencio in new york. He has a look at the markets in asia. Ramy looking ahead to asiapacific, weve got centralbank action for australia as well as new zealand. Futures pointing up higher by about a half a percent in sydney. The rba is expected to keep its cash rate on hold that 1. 5 . The reason for this is that inflation is still stubbornly below that 2 , 3 target, 1. 8 for the third quarter. Andployment is down 5. 5 growth is expected to rise. Lets take a look at new zealand futures. Those are higher on the order of about a half favored a half a percent. The new zealand kiwi is higher. That is all right now. More of Bloomberg Technology coming up next. Cory im cory johnson in for emily chang. Microsoft has long been a dominant saw where company but its one Great Success in hardware is the xbox. Theres a line outside the xbox oft store at the one x. There are also increasing developments. Joining me is microsofts head of gaming. This is a change for you guys. Why the change . Gaming is a huge business globally, growing double digits. Microsoft has some unique aspects with xbox live, minecraft, the products that we build. This is a category want to invest in. Cory minecraft as an acquisition my daughters are obsessed with microsofts minecraft. On their phones, wherever they are, they take the games everywhere. It seems to me that is a vision of a modern success. A game came out of nowhere. It got to be successful because the gameplay is great. Not pretty but wonderful, modern legos or something. You hit on a part about players playing games across devices. Your family can play minecraft. Somebody can be on Nintendo Switch playing with somebody on an iphone. They didnt buy a device from us but they are using xbox live. For us, the console is an important part which is why we invest in xbox one x. Cory which brings us back to the launch of the device. Why spend presumably hundreds of millions, if not more, developing a new xbox console . You want to reach gamers on every screen. The Television Screen is an important place. Cory the most important . No. The customers the most important. None of the devices are the most important. We have, with xbox, a unique capability. Xbox one x, 4k console