Murdoch is said to be willing to pay more in order to get the owner of hbo and all that stuff. People familiar with the matter say he was concerned when a number of factors, including lambs and foxs share structure and the future of cnn. Them andng spoke with a reporter jeff mccracken. He was previously a managing director at time warner investments where he worked with various operating groups, including aol, hbo, time warner, all those. We started by asking what he thinks of the proposed deal. I think this means this makes a lot of sense for fox. What he has them is a shed a core assets. For fox it makes sense because they are buying a crown jewel asset. For time warner i can see why they created a lot of values. They are pushing back on a deal at this point. You have been reporting on this from the beginning. You know how this started to come together. Give us details. It all starts with a friendly lunch in new york. Jeff bewkes gets together with jay scarry and chase drops the idea of a big merger. One issue is what is the plan . Your contract has been up for 18 months. I think my shareholders are going to have concern about this voting structure. Dont get any feedback. Withly they sent a letter Rupert Murdoch addressing those concerns. We will get that done. We dont think your shareholders will care that much about the dual class structure because most of your shareholders are our shareholders. They addressed some of those issues. Still never got feedback from time warner until july 8 when they were told in a pretty terse reply, we are not interested, we want to go about our merry way. Lets go with the future of cnn. A lot of potential buyers have suggested google, yahoo , cbs or viacom. Neil having worked within the company, which of those seem most likely or realistic if this deal goes through . Valuable asset. Theyre valuing at 8 billion. That is only 10 of the value of the whole entity. Hbo,eal crown jewel is turner, and warner bros. Naturalhink about the buyers for cnn, disney is a natural buyer for a lot of reasons. They own some of the largest and most important Cable Properties that exist today. That set of properties gives them more leverage for agreements with ms owes and cable operators, whereas it is interesting to talk about google and yahoo . Cbs the other natural buyer. What about the idea that Rupert Murdoch doing this to just fend off other potential likers for time warner google, facebook, amazon. I dont think rupert would do the deal to send off other people. He feels like the timing is right. They passed a lot of the scandals that have been plaguing news corp. And the murdoch family. Is this uncertain environment in d. C. I trust the situation between at t and directv. I think he is seizing on a situation where he feels it is the right time. It is the right time if you want to borrow a lot of money. Interest rates have remained so low. A lot of things have come together in the same period of time. These do not have a great track record. We mentioned some of the cultural differences, do you think that there would be cultural differences to train time warner and 21st century fox and could those be surmounted . I was at time warner during that difficult merger. I can tell you that was very difficult to overcome. I understand the issues that could take place if a merger between fox and time warner happen. I dont think the newsgroups could stay as one company. Cnn would probably need to get sold to the transaction did happen. Culturally that is less of an issue. You have fox to joes and warner bros. , very different cultures. Different properties are within the Cable Networks. It is a really big question and i think a merger here would have to be done carefully and for a very significant time keeping the Company Separate is the likely outcome. What about the relationship between cuteness and murdoch . You were talking about will executives stick around, well just puke us stick around . Get aer they did not response, rupert sent a letter back. Stay onwe want you to going forward. It was clear that puke us would not run the Company Going forward. Clearly this is a murdoch or cheese carried operation to be going forward. A merger you think like this would reshape the industry . We know comcast is trying to buy Time Warner Cable. You havent seen a merger of more content focused players yet. I think the distribution consolidation is on the way. That has already started and it will continue. Consumers but for very good for those companies. It stifles innovation, there are and that is a, concern on this recent side. On the content side you are right. There has been some consolidation but it hasnt been to the same level. It is going to be necessary for it to happen. Disney has significant leverage given espn and other properties. Some of these other companies, whether it be time warner just a few years ago was trading in the 40 billion to 20 billion range. To be aobably going necessity for these content owners to consolidate over time. It makes sense from a business standpoint, im just not sure it makes sense from a consumer standpoint. How you expect us to play out . 20 century fox suggested they are willing to pay more. Time warner said they may not want to consider this small comcast and other potential suitors like at t are busy dealing with other potential acquisitions. How do you expect us to go . I think 70 are holders and fox. That is where the game moves now. He advisors at fox itself will be upon the large shareholders. Rupert is willing to up his offer. That is contingent on being able to engage with time warner and see if there is more synergy and costcutting. We are estimating 1 billion. We think it can be 1. 5 billion by getting access to the books. In and start to weigh lean on time warner, then you see something happen. Mccracken withf emily chang. Between fox and time warner may be the beginning of the battle. We talk about the regulatory hurdle this could face next on the best of bloomberg west. Welcome back to the best of bloomburg west. Potential regulatory concerns of the two sides agreed to a deal. What are the issues i can prevent it winning government approval . We started by asking if there are issues other than cnn that these Companies Need to be concerned with. I think if the deal goes forward, there will be a lot of issues outside of cnn. A lot of it will depend on trusting agencies to define the relevant markets. It will be everything from Hollywood Studios to Cable Networks to other assets that time warner and foxx have both in the United States and around the world. Talk about the Legal Framework with which the sec will look at this. The sec will look at this candidly. I dont think they have any Legal Foundation but that wont stop them. These are entities heavily regulated and it will take a good long hard look at it. And see how they are going to be able to affect the deal. They will do a Public Interest standard which is an amorphous term that will be whatever the fcc decides to do with it. It will look very heavily at the cable programming and also look a lot at the Bargaining Power and negotiations between the cable programmers and distributors. Which is really i think what is driving the recent mergers. Certainly comcast, time warner, at t. Directv is seeing about who can have Bargaining Power and negotiations in distribution and content origination. The sec is already currently looking at comcast. Joining us from new york, susan, how does this deal strike you from a regulatory perspective aside from the issue of cnn which presumably will be sold anyway . This is driven by enormous concentration on the distribution side of the marketplace. The bottom line is that hollywood is scared. Hollywood needs a lot of heft on its side of the programming table. This is not driven by cable . This is driven by the programming industry wanting to make sure that they can reach people that love their programming without having to pay whatever comcast and Time Warner Cable wants them to pay. They need to be able to control their own destiny. If hbo can go overthetop, it needs to be sure that it can reach subscribers. That will only happen if they have the power to make that true. Why should the sec not be looking at this . Fcc not be looking at this . That they dont have the authority to review mergers. Theyre served by the department of justice and the federal trade commission. You have hundreds of hardworking Civil Servants at these agencies that do a wonderful job of reviewing mergers and we dont need the sec to review it as well. Time warner has already said we dont want to consider this with other potential bidders dealing with other acquisitions and verizon, potentially. How does this actually play out . They have to be nervous the cousin as it goes through, they will control about 70 of american households. It will be the only choice for highspeed data distribution. If he wants to make sure hbo can get there, he has to worry about eventually being acquired by comcast. He will need some partner to control his own destiny. Maybe that is google. There are only a few players left on the board with whom we can deal. Why should or shouldnt the sec be involved here. When harold was a commissioner, he voted to approve all of the megamergers that have gone through. So he is presiding over enormous consolidation in the industry. The broad Public Interest mandate allows it to look out for the future of American Communications and that is extraordinarily important. It is very relevant for them to get a chance to take a look at this deal. You see this triggering a continuation of the state of megamergers . It is hard to predict the future and hard to know if there are large mergers down the road. Thank you to for noting my tenure on the commission. She mentioned that i dissented from every condition on every merger on the ground that i thought the sec had no authority to review the mergers at large. I do see that they have authority to review licenses just as they do for the license transfers that happen routinely every year. What are the issues that you think the sec specifically would address that the Justice Department doesnt . They can look at the future of overthetop video. I now theyre looking at interconnections between the netflix networks, the pipes and wires to reach comcast subscribers. Having expertise in that issue is going to help them evaluate if time warner in the future will have the freedom to reach subscribers. It gets to look at the entire ecosystem and explore a deal through that lens. Author of captive audiences. Still ahead, apple and ibm have put aside some longstanding differences to form a new partnership. We have details about the tech giants next on the best of bloomberg west. . Welcome back to the best of bloomberg west. It did her rivals since the dawn of the personal computing era but companies have put their differences aside in the interest of growing both businesses. Apple and ibm teaming up to develop apps that should be tailored to work with the Data Analytics and cloud services. On what this deal means for both companies, we started asking about how big a deal this really is. It is how the tables have turned. Ibm was a company that set the agenda for technology and apple and google do that. It is a very clear sign that we are seeing a much weaker ibm as a tech company. I have read a lot of stories about this being a great move for apple and the think it is a defensive move by apple because they were going to get jostled out of the market by android which is a lot more open and more flexible from an enterprising standpoint. So from that standpoint, this is a good combination for them. I said ibm is just another channel partner for them. Wanting to target walmart in the consumer market, they are using ibm to go into the enterprise. From that standpoint, it is a net positive for them. It still doesnt take away from the fact that android is more flexible and more adaptable for the enterprise. Will they be offering Android Devices in their enterprise solution . There was no indication about that. If every one of the fortune 500 Companies Sold an additional couple thousand ipads and iphones, it really wouldnt add to more than half of a percentage point of revenue. But it speaks to how big apple is. And what it could mean is the holdout of blackberry users that refuse to embrace any kind of apple product. The notion that ibm and apple compete is a 30yearold notion that does signify Something Different than the last boundaries of apples reach have fallen. The shift to mobile computing has created a whole new class of leaders. Those companies that are looking toward becoming the people that set the agenda for enterprise computing, you see, dell, hp. These are the companies that have fallen behind and started on the wing, so to speak. I think this is a positive for apple. Lets face it, i that is the better tablet in the market. The new Surface Device is an impressive device that does a lot of things that a laptop could do in the past. Im impressed by tim cooks ability to strike up vital partnerships and do outofthebox things to make sure the revenue stream keeps growing and i think it is very easy to forget that this is a company that is trying to become big. Apple is still trying to do something echo it is the Biggest Company in the world. A market share is not that great. They need to make more money and justify their business, i guess. We see them strike a deal with beats, photos with dr. Dre, photos with the ibm ceo. Is this a new apple that is more cooperative than steve jobs . I think john gruber put it well that this is not steve jobs, this is tim cook. You see the imprints on the company already. I think this is execution oriented on the idea of partnerships, more willing to be adaptive to the new world. Everybody looks to apple for new great product. Is smart to get the biggest retailer in the world telling your stuff. It would be a very big deal for these guys. Its a big deal for these guys to be out there and this notion that ibm needs this rally. They need to have the best solutions available. Im sure the corporate clients for saying we can get them somewhere else. They saw nine quarters where they didnt see sales grow at all. These ibm certainly needs a deal. What apple does is not seen very easily by the public. The tablets and the devices, they make all the technologies. We dont see it. That is the new apple. We have to get used to it. We think of it as just a bigger iphone but what happens underneath the screen is something that not a lot of other people do. Microsoft announcing the big round of playoffs, but what is next for the Software Giant . On the best of bloomberg west. . Welcome back to the best of bloomberg west. Microsoft Just Announced the largest mass layoff in company history. The ceo tries to remake the company. As many as 18,000 jobs cut over the next year that amounts to 14 of their workforce. More than 12,000 cuts are coming from the newly acquired nuclear unit. We talked about what this could mean for the company. At think it is less a focus on layoff and more on the quote that you just gave. We heard them redefine the strategy at a broad level of platforms and productivity. We started to see a change in the culture. It is exciting. It its a much richer focus on interacting with the communities out there, and the thing about culture and listening is you need to be able to execute against that. This set of playoffs is about simplifying and streamlining and helping the company execute. 59 are no caps on loan. They said this is proof that it was a bad acquisition. Is there more to the gnocchi a cuts in particular . I was referring to the other 5000 jobs and the types of jobs they have now cut. The gnocchi a thing is different. I think it is more looking back to that strategy of platforms and product entity than how much do we really need to be that handset manufacturer in that particular Strategic Focus that we are moving forward. I think there is going to be a greater emphasis on cloud, in particular the azure stack. Fast and increasingly data, the role that datadriven Services Play over the next 10 years. We knew the layoff for coming. We have been talking about more modern companies have built huge businesses on much smaller numbers where Legacy Companies like microsoft and hp have tens of thousands of people. Can a make not just one hard choice but many hard choices down the line . I think it is early to tell, but if you give them another month, you can give them a review. We will see a lot of positive early signs. Nobody wants to have to lay off one person let alone 18,000, but it was this area. You mentioned open source software. What does that mean to you . What i think it means is that microsoft is going to listen to what is going on in the community. Why are people looking at this software that is not Microsoft Software . And how can we have a role . I wouldnt be surprised to see than embracing some of the emerging. This Data Analytics world, we have already seen the background under server and tools that we will run the next on azure. If you dont know why its going on, how can you be relevant . That is a Culture Shift that is taking place. A huge Tech Community where you are. Describe the impact, taking over the ripple effect. How will that be felt . We can look at the shortterm and longterm. It is hard for people to be forced into this kind of transition but i think they will have a hard time with those opportunities. I think everybody is rooting for microsoft, and five months and, people are very encouraged, cautiously optimistic that they are making some early good moves and trying to inspire through this focus on cultural transformation, the steps that can lead to microsoft being a relevant tech c