The countries failed to take a stand against china over the weekend because they could not reach an agreement. Global news 24 hours a powered by more than 2600 journalists and analysts in more than 100 20 countries. Im mark crumpton. Bloomberg west is next. Emily im emily chang and this is bloomberg west. To be a hitiphone and apple is enjoying a pop, but china sales continue to slump. How does it impact tim cooks strategies . Plunging after hours. We will break down the numbers. And a Chinese Company is known as the apple am a tesla, netflix of china and is now buying a u. S. Company for 2 billion. We will hear from executives later this hour. Apple shares gaining afterhours with a sales slowdown that was not quite as bad as expected. Backtobackfirst Quarterly Sales declined since 2002 but actual iphone unit Sales Beat Estimates coming in at 44. 4 million. I spoke to the apple cfo who to a mix oft companies developed in emerging markets, something tim cook just reiterated on the earnings call. Analysts our initial analysis says it is popular and sales going to customers new to iphone is greater than we have seen in the first week of availability for other iphones launched in the last several years. Emily all of this building up to next quarters report which part ofke up a small the sales for the i27. Joining me is ryan reese and ryan white from drexel hamilton. Not quite as that as we expected in the coming quarter actually looks quite good, which means that west quarter was the low point . Uest it seems like it there are some highlights and they are talking about pocket of opportunity in china. That market as a whole is basically flat in the are finding good opportunities. They highlighted some penetration into india and that is great because that has not been the easiest thing because of some legal issues. Cheaper iphone is finding new opportunities and you audience as well. Earnings call, they are talking that augmented reality and tim cook says they are in the ring heavily there. Want to talk about china and Foreign Exchange issues. They say it is clear the economy is going through difficult path that we look at the potential market offers for the longterm. Pointed out that business in china is only down about 2 . Or you worried about china are there positive signs and other countries around the world that are enough to offset that . Guest im not worried about china. The big thing we need to worry we need to member about china is growth has been significant. China mobile starting to ramp iphones and eight acre iphone with pentup manned and expanding 4g networks. The comps were impossible, so when you see a 33 decline yearoveryear, we said 25 to 35 , so this is a normal sequential sequential change, but it is normal on a year over year basis. We are not concerned. Emily i want to talk about the iphone as a because the average selling price of the iphone has declined and the order, it dropped to 595, a sequential decline of 47. It peaked a couple of quarters ago and they said they were prepared for this because they launched the iphone sc in this corner and willing the channel to meet the demand and they singled out japan, western europe and thailand, turkey, india and russia. They dont want this to cannibalize their Current Business and they say they are adding new users, but we dont know how many. Product an important and they are going to take this initial drop. We estimated it accounted for roughly 20 , so that is strong. Emily can that grow . Can grow. Hink they i dont know if i see it going past one third of their shipments in a single quarter. A lot of that depends on how heavily they put marketing toward these and so forth but this is a strong initial launch and the obvious result of cheaper product is going to bring down the estate. Annalee is the success of a cheaper iphone a good or bad thing . Guest i think the great thing. The number of new users that are brings into the apple ecosystem, it does impact your unit market share and with apple, there was gross margin guidance for the set timber order that was actually excellent. And when and even year you come on an even number, the declined by has over 200 basis points in the September Quarter and they are guiding to down 25 basis points. They may come out with a higher and iphone as well. Emily i want to talk about the watch. In my call with the cfo, he did not mention it and we did not about it. Is the watch doing well . Estimatesput out our that it was roughly one. 6 million in terms of volume. That is down significantly and coming off a year since the launch quarter. That market is challenged and i think the reason is people are trying to find what is the use case and theres a lot of hype about the secondgeneration coming this fall. This is not apple alone facing these challenges. They are just trying to figure out what is the use case and what is the demand for wearables in general. Ands competing with iphones other smart phone devices. Something that they talked about with their investment in the chinese made a of uber, apple Huge Investment and analysts are trying to make sense of that investment. Take a listen to what tim cook had to say about it. Cook we see it is a great financial investment. We think there are some strategic things the companies can do together over time, and we think we will learn a lot about the and the Chinese Market even beyond what we currently know and we have an Incredible Team there. That is the rationale for why we did it. Emily strategic things the. Ompany can do together what does that mean . They have a huge interest in the automobile market. I think they are hinting at something in that area. Just understanding what the china consumer is all about that they dont understand right now has potential, but i think it speaks to potential for the car for sure. Tim cook mentioned sales in india are of over 51 and they are opening their first retail store. Of 7 and sales of the ipad pro apparently of going to businesses. If they can get any access to what consumers are doing in china, just have a better understanding, that is huge. In terms of india, they have finally Broken Ground and it will be interesting to see what the consumer reception is to china as a whole. Much like many pockets of china, its much lower than even their introductory offerings. The ipad pro did the opposite of what happened with iphone and drove things up pretty significantly. Directionsdifferent now for iphone and ipad because of these new products. Specifically singling out improvement on the music streaming side of things. If there is one challenge you are watching, what is the biggest challenge to mark guest one of the concerns that is out there is the up great rate with consumers in the Smartphone Market has lengthened. I think what investors are missing here is we grew iphone 37 in 15 and we are monitoring a decline of 11 . That is about 13 growth over two years, so that slow down is really just comps. So you will see growth return in 17. Some people are looking at this klein, saying the cycle is elongated and this is big trouble for apple. It holds back a little bit of sales, but that is not the story. How long is the upgrade cycle . Emily we will be watching to see how big that am from the iphone seven is. Thank you. Coming up, twitter getting slammed in extended trading on a dismal forecast. We will give you the numbers, next. And among the biggest tech movers Linear Technology surging after bloomberg was first to report a pending deal for Analog Devices to buy the company. That deal was confirmed for 60 a share. This is bloomberg. Emily another stock we are watching verizon. The carrier added fewer subscribers and analysts predict it. Verizon is buying yahoo assets for 4. 8 billion in focused on finding new revenues through ad sales. The ceo explains the goal becoming a major competitor in the mobile media arena today. The next works and their sports channels see an opportunity to partner with us. They may already have nba or nfl rights and can work on streaming their games, not only through the traditional channels of bios or full bundles, but over aol and yahoo and over golf 90. As a waterfall of content moving through our different properties. Emily investors are focused on how verizon will pay to scale up to the likes of google and facebook. Verizon already has about 100 ilion dollars debt to pay down. Twitter shares plunging in extended trading after the Company Released earnings, down as much as 12 are sent. The company need Second Quarter earningspershare estimates are ported a big miss for it thirdquarter revenue. By a wide margin. The closely watched number of act of users edged, but will it the enough to boost ad revenue Going Forward . Tog us is and analysts analysts. Users growing slowly and that is a number we have been watching quarter after order, but now they are having numbers theyre having problem with revenue. Has to leadgement monetization and it is to remember twitter, their latest efforts are on services growing. Improving User Engagement is more critical and if their latest by streaming at 70 and captures the market, then they may have fewer eyeballs, but the quality of those eyeballs as more and. You will have longer viewing and singlescreen viewing with the marrying of tv screens with mobile devices. There may be fewer ads with the polity of the ads will improve and advertisers are willing to pay a bigger price tag and we see this across the broader Digital Advertising system where light touch is inferior to Customer Engagement and advertisers are willing to spend more money. So the economics are changing for twitter. Emily lets take a look at how the stock is trading, down about 10. 5 . Drops. One of the bigger investors are still not happy. It is quite unfortunate. We use it as an avid user constantly and we gave twitter the benefit of the doubt and downgraded the stock two weeks ago because we are just not sure its there. Seeing isre cannibalization of the revenue with new products cannibalizing you have tocts and understand that a trying to be niche or are they trying to go massmarket . If they are, at what cost is it going to come . Right now, we have jack dorsey strategicallyd it does not make sense to operate as an independent company or part of a Larger Organization for in our view, you think twitter could have a nice home in a company like disney where ory relationships converge especially on microsoft. Since thats interesting microsoft just bought leadin for 26 billion. Is there a company out there would pay the price for twitter . Guest i think twitter has a lot of work to do getting her house in order before they put on the market. They are currently trying to fix their problem with a bandaid and their latest ad campaign. They announced yesterday that they have 90 local brand recognition, but most dont understand what is twitter for and how do i use it . Theres a big gap between what twitter is hoping to deliver, which is a realtime social media commentary plat for which is what believe it is, a substitute for facebook. Need to fix their platform and User Experience and deliver on their promise of a Realtime Media experience and conversation before there can be any discussion about who to sell to. Week this is the second twitter is Live Streaming the convention and they have deals to live stream nfl games and Bloomberg Television shows, including this show, but facebook is making huge inroads into life. Take a listen to what jack dorsey said about the improvements they are making toward slow and they progress. Growthhat makes audience border notable as we can see only between the product changes we made and our growth. We are making the right decisions on our products and it gives us a foundation for future growth. Though twitter is making these changes, they have not had dramatic results yet. Do you think facebook threatens the stronghold twitter has had on life . Platformthink every threatens their stronghold, whether it is facebook, snapchat or google. Theres a lot of big scale players with a lot better measurement capabilities able to attract the budgets they are having difficulty attracting currently. That is why we think twitter does make sense as part of a Larger Organization and when you think about things they are trying to do, its a lot of nonexclusive content. It is challenging to differentiate yourself in a way you are a consumer thinking that the cost for five different forms, why should i go to twitter . Everyone knows what twitter is as far as its liberation of tweets across the world and donald trump has helped in that regard. Dailytimately, becoming a user, which is at the core of monetizing the service is a far greater challenge and thats why i think its going to cost a lot of money to differentiate yourself in a way to attract that must the content and be able to operate independently on a longterm basis. Unfortunately, we have to stay on the sidelines. Thank you both. We will continue to watch. Mobile i fell after they say their driver assistant technology will no longer be in test vehicles. Take a listen. Our work with tesla will not extend beyond q3. Parkintain the tesla wines, including a significant upgrade of several functions that affects our ability to respond to crash avoidance and optimize steering without any hardware up dates. Forward, it, moving is a paradigm shift in terms of function, complexity, any a need to ensure a high level of safety. There is much at stake to our reputation and to the industry at large. They elon musk says agreements with other automakers prevents it from keeping up with teslas pace of development. Later this hour, a chinese are not Company Setting it types of broad, snapping up visio. We will catch up with one of their executives ahead. Emily the irs is looking for information from facebook about thirdparty investors. The agency is trying to miss the whether they transfer of intangibles to it irish subsidiary in 2010. Officials were summoned several times to meet with irs auditors but the officials failed to show and not submit documents by the deadline. Its numberseases tomorrow. Maleg up, well hear from chip about their decision to double down on podcast. Theyou can listen to us on Bloomberg Radio and on sirius xm. This is bloomberg. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. Mark im mark crumpton. Lets begin with a check of bloombergs first word news. The rollcall of states is underway in philadelphia where in just a few minutes, delegates attending the Democratic National convention are expected to formally select Hillary Clinton as their parties nominee for president of the united states. In a step toward party unity, the voter the vote is being organized so that the home state of vermont will be able to deliver the nomination. Be hittingbama will the campaign trail this fall on behalf of Senate Hopefuls according to the director of the Senatorial Campaign committee who says the president will be deployed to help in close races. They also want to get Michelle Obama more involved and is reaching out to Bernie Sanders in an effort to bring his supporters to the polls, especially in the state of wisconsin. More than 180 athletes from the russian athlete teams have been barred from the Olympic Games due to the doping scandal. 67 athletes were excluded from the track and field team when a band was upheld at the court of opportunity or of arbitration for sport last week. It is 6 30 p. M. In new york and just after eight 30 wednesday morning in sydney. Im joined by paul allen were a look at the markets. Good morning. Has been up and running for 30 minutes in new zealand. A different story in australia are expecting gains at the open with futures indicating a right start in japan. In australia, we are keeping an eye on the metals group up with quarterly iron ore reduction figures. The big one today is the australian dollar. It is going to move in three hours time because that is when quarterly cci hours cpi numbers are out. Another quarter of deflation means to catch rate will be cut again, but a strong print means they will be on hold. Either way, the aussie dollar is going to move today. We were looking at an estimation of a 4 gain in cpi. 1. 3 ,tly, the rate is at a little lower than the reserve bank would like to see. We expect to see another month for growth in china. That is some of what we are watching around the region today. Im paul allen in the, australia. Emily turning to podcast the 2014 runaway success of the serial podcast created not only hit for the medium and a sponsorship darling. One company gained sponsorship that is because the name was mispronounced. By and they81 currently sponsored 10 other podcast. We were talking and could not episode brought to you by mail chip that is what we associate you with. It wasnt the first podcast you sponsor, but now you are sponsoring all of them. I had to change my twitter i o because of that. I think the whole thing behind the podcast is a testament to our creative culture, which is we always experiment. Podcastseen sponsoring for years and this was a lucky break. We sponsored this American Life and they were grateful for us investing in them early on. And when they did this one, they gave us first dibs. Emily how did it impact your business . Us and ask came to how do we want a promotion to sound . We