Biggest ipo in american history. The apple ceo takes shots at Companies Like facebook and twitter. He says that apple does not scan your emails and believes in telling customers upfront what will happen to their personal information. First, the lead story of the day. Billionaire Larry Ellison is stepping down as ceo of Software Giant oracle and will become a chairman and chief technology officer. He is the worlds seventh richest person, and has been the only ceo in oracle history. He cofounded the company in 1977, growing into a world leader in Database Software with a market cap of more than 185 billion. Taking over for him are two trusted deputies who will become coceos. They stress continuity. They deserve recognition, they deserve the ceo title, and i am happy that our Management Team continues forward as a team. Oracle shares are trading down at afterhours. Joining me is bill, corey and san francisco, and the cofounder of a sun microsystems, which was sold to oracle years ago. Thank you for joining us. Scott, i have to start with you. What you make of this as someone who ran a company that Larry Ellison bought . I think that he is right, there is not a lot of big change. He will not be doing much different. Mark hurd is doing the same stuff. He has just abdicated the difficult fiduciary responsibilities of ceo to his two cohorts. I think he gets to do the fun stuff with less hassle. I do not blame him, but i do not think the way the company will operate nor his contributions to the company will change much at all. And yet giving them the titles of coceo, do you think that will change how they work with each other . Do you think that they can get along . Coceo titles have not always work, especially at technology companies. I think it will work fine. I think they have had a chance to Work Together for a while now. I think they are both incredibly loyal to larry, and i think that larry still has the ability to step in and break any ties. I really see it sort of as an announcement of larry shedding some of the less exciting and a more fiduciary and governance aspects of his role in getting to do the fun stuff that he has enjoyed. Cto is where his head is that. Fun stuff like sailing. What you make of this news . I agree with scott, i do not think there will be much change. Mark has been focused on sales and marketing, and mary has been in the garage making cool product. There has been a Clear Division of labor for quite some time. I do think that the company is under a business transformation from license to subscription. I just got off the earnings call, and they are talking about it is a transition, so they are guiding below the stream in terms of revenue. I do not expect much is going to change. They have Great Technology and i think that mark and safra have been doing this for some time. I think this is more headlines and fundamental change. There you have it. Is oracle in need of change . It is interesting. I think one of the interesting things that is not changing, im going to ask you, larry is giving the title of chief technology officer. He is turning over the title of ceo but keeping cto. Scott, what is larrys involvement with technology, and is it curious that he is keeping that title and that job . It is not surprising to me, he spent most of his time doing that. You did not spend time with analysts, with customers, running the operations. Safra has been the coo and mark has been the chief sales officer. He has always been the chief technology officer. He was the only one that had the fiduciary responsibilities of filling out the forms and signing off on the stock report documents and all that other fiduciary stuff. I think he has light in his load on stuff that he does not really enjoy doing, and gift you spend more time on the stuff he does enjoy doing, which is driving product strategy, getting involved with the engineers, and hanging out more with features and functionality and quality. I think this is just merely moving around some signature authorities. By the way, given his position in the company as chairman, cto, and major shareholder, the signature authority, in reality, will always go by him. Safra and mark were comfortable with the past and they will become purple in the future. Reactions from the head of cisco. Larry is one of the top ceos of all time. Safra and mark are a worldclass team. I look forward to a continued worldclass partnership with oracle. Larry ellison has such a largerthanlife personality, he has made such Great Stories over the last several decades. What will oracle be like without that personality coming to the job every day . I think that you are speculating what might happen someday, because i do not believe, at least if i take at face value what larry is saying and what the company is projecting out there, he is going to spend just as much time there as he has the last five years. May be a little bit less since he does not have to do all the fiduciary stuff, but i do not think his influence will be any less. He will focus on the things that he is good at likes to do, and safra and mark can do the things he does not. I do not think it will be any different, i think they will continue to plug along. I think he has figured out cloud, recurring revenue through subscription models. He is a smart guy and he understands how the industry works. I do not see any change. That me ask you about software and service. There is a lot of discussion about we had the deal announced right after the larry deal was announced, but we also of revenues from the salesforce and workday, but those are smaller businesses in oracle. Is Software Service a true threat to oracle, or will it always be at the side . It is not a threat to the technology. As larry pointed out, the Top Companies use oracle as their underlying plumbing. They run their core financials, their database, on oracle. I think what is hurting oracle is the Business Model transitioning away from perpetual to subscription. It is not a technology transformation, it is a Business Model transformation. They will be in this for the neck to several quarters, if not years. It is a big transition. We talked about this a lot with microsoft. We think oracle will take a lot longer to get in, they were the last ones to admit this big transition. As you point out today, this will kick off another major mna wave in software. We think it has started but it will further accelerate. One last question, scott. I am serious as to what it is like to get with Larry Ellison when he is trying to buy your company. What was he like when you were doing the deal with them back in the day . Well, we had an offer from ibm and the board was wondering if we could do better than that. I called larry, i actually called him, i was at a customer event and on the golf course. Through one of the halffulls of conversation, with me ask planning the situation in the challenge, he said, i got it, i understand, stay tuned, we will be back to you. Within two weeks, we got a deal that the board considered in always better than the ibm deal, and it was done and over. There was none of this bigger than life thing, larry just understood what we were saying, went back, got his team organized, they put not for together, they put it on the table, and the deal was done. Very efficient and very effective. Use it very efficient and very effective businessman, very bright and capable and quite strategic. And knows how to get what he wants. Larry ellison stepping down as ceo of oracle, staying on as chairman and cto. Scott, cofounder of sun microsystems, which oracle bought. Ali baba group conquered china and is now sitting on the largest ipo in u. S. History. We look at its global ambitions as we wait for the company to start trading tomorrow morning. I am emily chang, and this is bloomberg west. Alibaba is pricing its ipo at 68. That means there raising 28. 8 billion, making it the largest ipo in u. S. History, and it could hit a global record if additional shares are sold. It as a market value of nearly 168 billion, bigger than amazon. Joining us now, reporter leslie, who has been following the story every day. In san francisco, cory johnson. And stanfords charles lee joins us via skype. What you think of the price . It is close to what we expected. It is reasonably valued compared to some of the things that are trading there, like facebook. I think you would have a hard time seeing a hard time seeing his stay at that point after the market opens. This is what we expected, it couldve been more, but it is a lucky number. Eight is the lucky part of the number. Now we are looking at 9. 18. A lot of eights in there. It gives them that psychology, enough to demand a price at the high range of an increase. The whole point of doing Something Like that is to give investors a good feeling, pricing at the high end of a boosted range. We want to be in on this hyped up deal. That is the reason rather than just racing at 68 to begin with. A lot of people are saying that it is too cheap, what do you think . Are they leaving money on the table . Im sure the deal is being price theyre leaving something on the table so that there is something that creates demand and enthusiasm, so that it trades up in the aftermarket. My guess would be that you would likely see a trade up. I am sure it will be a wellmanaged offering. The irony is that when stock straight down, independently of one they are priced, it looks like a stale offering. How do you expect tomorrow to go . Smooth, hookups, big problems, like we saw when facebook started trading . I hope so. As a journalist, that was more fun to cover than a smooth ipo. We know that have been running tests at the New York Stock Exchange. Their listing their partly because of the problems with the dow and facebook. But this is a massive offering, and the price itself could raise some problems. If the investors look at this a this as a value, some of the people who plan to hold on might not want to hold onto them, might honor their fiduciary duty and get out when the getting out is good. I think that the size of the size of this deal really is going to make a big difference. It is going to change things, because there is so much stock being shuffled around here. How does alibaba compared to its peers, and who are its peers, as far as youre concerned . The question. Alibaba does not have peers, but the closest competitors in china. Over in the u. S. , we are looking at Companies Like facebook and maybe amazon and ebay. It is a unique package that is coming together on this one name. They are saying that it is a bit amazon and a bit google some paypal thrown in. Do investors know what they are buying . It is this big internet and media and from a cynical conglomerate. It is difficult to value, which is why youre seeing the discount even at the high end, as they need to encourage people to buy this thing because it is difficult to value. We will continue this conversation after a quick break. More on ali babas ipo when we return. I am emily chang, and this is bloomberg west. We have been talking about the alibaba ipo, priced at 60 a share, at the high end of the range. There with me to discuss, leslie, cory johnson in san francisco, charles lee, and jeff yang. When you look at alibaba, what you see as the biggest challenge Going Forward . Certainly they have raised expectations, but i think that was a part of their strategy. They came out on the New York Stock Exchange, and i think they are trying to make a statement by doing that. Theyre trying to say that we are going to be one of the most valuable Global Brands and we are here to stay. And think you will see in the next few quarters that they will try to prove to the rest of the world that they are a well governed, they are transparent, and they are one of the major platform companies. I think you will see them make significant acquisitions with the currency that they have. They have raised expectations, and they are going to have to start acting that way. I think you will see them focus on china over the next year or two, but they are strong global ambitions. I think a lot of investors leslie, you told me this left wondering about global expansion. They did not give a timeline. It was the when that people are interested in. There is tremendous Growth Potential in china, but there is so much pressure put on this relationship with the Chinese Government. So far it has been able to succeed but what if the Chinese Government changes its mind . They need to be another markets to hedge that risk. What do you worry about, charles, when it comes to alibaba . After the ipo, what will you be watching . One, this is a gigantic Growth Company that is priced to grow, so there are targets that they need to hit over six months and everyone will be watching. But there are regulatory concerns, too. They operate in china, you have to dance that very good dance with the Chinese Government. That is full of uncertainty. There is the regulatory uncertainty on top of the economic risk. Cory, how about you . Deep vestry in violation that they are giving at 60 a share, if you look at how that compares to other companies, what you see is a company that is growing faster than its growth rate. Compare that to amazon or ebay. Those are the kinds of companies that we look at when we look at valuation in technology. For a company that is growing so fast, it is not the most extreme valuation. But it is still pretty expensive. Pedestrian jew, but apparently 68 to them is a lucky number pedestrian to you, but apparently 68 to them as a lucky number. However long walk in pebble beach led to the alibabayahoo partnership. That story, next. You are watching bloomberg west, where we focus on technology and the future of business. There is major news for Software Companies today. Larry ellison stepping down as head of oracle. Sap is paying a 20 premium over yesterdays closing price. Concur makes software to help manage travel. A quick programming note, be sure to catch my interview with alibaba executive chairman jack ma tomorrow morning live from the New York Stock Exchange. 9 oclock a. M. Eastern right here on bloomberg television, i cannot wait to talk to him have you wonder just how this relationship started . With the initial conversations were like between jack ma and yahoo founder jerry . Hans, i know you know jack ma, you have been intricately involved with many of these Chinese Companies as they have gone from infancy to gigantic juggernauts. They became an investor in 2003, and then they played a role in connecting jack and jerry. I am on a board that has facilitated activities between america and china. There was a ceo summit in 2005, and that is when jack and jerry met up with each other. They had a long conversation and a hearttoheart talk. They decided that it made sense for the two to team up. Back then, the evaluation for alibaba was 5 billion. Jack took a lower offer in order to have control of the company. Today were looking at possibly a 162 billion company. We do have a quote from jack ma, saying that jerry and i took a long walk, and our discussions quickly accelerated when i returned to china which resulted in a landmark transaction between yahoo and alibaba. What are the personalities . How did they Work Together initially in over the years . Those to have a personality they have common ground. They complement each other. They are both very strategic, and jack has the cutting this to think ahead. Jerry sees the value in what jack is doing. In manager knows that, for a market like china, you need to have a local star managing in coming up with services tailored to the local. I do not think jerry gets enough credit for making that deal. Yahoo has been successful. When you look at the way the business works, do you see the alibaba guys doing things differently than yahoo . I think that yahoo and google and other companies in the u. S. Are quite focused in the areas that they are in, but in china, there is such a big a land grab every company is in everything. For jackie will not be enough for ecommerce. Also Financial Services and search. The ambition of the chinese internet giant has been more. Their ambitions will not be limited only to china. I think over the next 10 years globalization will be a huge thing. What you expect jack to do and alibaba to do with the money that they make on the ipo . It has been suggested that they could buy yahoo on the balance sheet, they have a plethora of choices. What they have done over the last several months has been interesting. People would argue that it is not focused, but i would disagree. I think they have a plan. That want to be much bigger and china, i know that is hard to imagine. Right now they are an Ecommerce Company with a Financial Services upside, but in china they could be any combination of the social networking or other businesses. And the rest of the world, only u. S. And china have the system that has the ability to expand beyond their own boundaries to tackle other opportunities outside of these markets. What about alibaba buying yahoo . Is that plausible . I think they will have a choice of things to do and will focus on emerging areas, whether in digital books and gaming or Financial Services or even search. I think they have a lot of choices ahead. You say they are a very focused company, but a look at the information in the filing, and they are in so many businesses in someone it races and different kinds of businesses. It does not look like focus to me. [laughter] i think that is strategic. They can afford to make some mistakes. My experience in vc is that you focus less on your losses and focus on the positives you can get. The world that you see in china is just the beginning. I think the rest of the world in the next 10 years will present an even bigger opportunity. I think they can afford to make some mistakes. As i suggested the comp