The pentagon is ordering an independent real of the 13 billion aircraft carrier, citing the ships reliance on new and improving technologies, the carrier scheduled to be delivered to the navy in three months. In new york, im mark crumpton. Bloomberg west is next. Emily im emily chang and this is bloomberg west. Coming up, a sweetheart deal turning sour. Taxes tax arrangements arrangement in ireland as the eu prepares to handle the biggest tax penalty ever. Who hacked the election . The fbi investigates hacks at a two state election boards. We will break the latest developments down. And its go time for commercial drone straight we will discuss the latest regulation as american businesses take to the skies. But first, to our lead. See you on the seventh, apple officially acknowledges its highly anticipated event next week. Every speck of the invitation is under scrutiny for possible hints of which product upgrade may be revealed. Next you run her ration iphones at apple watches also on our radar. Another story looming large over the most valuable Public Company in the world, european regulators could announce as early as tuesday that apple is on the hook for up to 19 billion in taxes, europes largest penalty ever. This would culminate a threeyear investigation into whether ireland gave apple a sweetheart deal in return for creating jobs there. Joining me to discuss, a senior analyst,research university of florida professor, an expert in International Tax laws, and r bloomberg reporter who covers apple with me in the studio. 19 billion, i believe thats what a j. P. Morgan analyst came up with. Vastly different. What are we likely to see here . This 19 billion figure has been around for a couple months. Revisesh times likely the figure up a bit. We think it will be in the handful of billions, possibly. Stage, we have to see what the action number is when we wake up tomorrow on the west coast. Emily how are you modeling this out . What is likely scenario . Isthe worse case and area 19 billion, if that happens, it is about 12 of the available cash for apple. Butnumber is a huge number, something investors dont give apple much credit for their cash anyway. In some respects, its a great thing to watch but really doesnt impact the valuation on the story. Thats how we would think about it, we are playing for the worstcase and thinking it is a 12 hit to their cash. Emily you are saying that worstcase scenario is unlikely. Why . A big issue is if the europeans play hardball too much , its going to deter apple and other companies from reporting. Ny taxable income in europe one analogy would be in iowa corn farmer who follows his corn to mexico, if the mexicans try and tax the iowa corn farmer, whats the justification for that. Theres an analogy here, why are the europeans taxing the income of an American Corporation . That note, the u. S. Government has stepped up its rhetoric in defense of apple. About ireland being a Super National tax authority, maybe indicating they are overstepping their bounds. Whether u. S. Companies have had tax havens in europe has been going on for a long time, and defrauding the u. S. Government of billions of dollars. The u. S. Ot as though government doesnt want apple to pay tax. He wants it to pay its tax here in the u. S. Is why it is hard falling in the american sense against the european authorities and against ireland, because it wants that money to go into u. S. Coffers. What exactly is your read on this particular situation of how serious it can be for apple . And not just apple, but other u. S. Tech companies. From a valuation perspective on the scale of 1 to 10, 10 being really bad, its probably a 2 or 3. This is something that will impact some of their cash. We are talking about getting cash back to the u. S. Thats the and goal ultimately for apple, and there needs to be some sort of tag for it. In terms of 3 severity. Ultimately they will have some small fine and hopefully in the next president ial cycle we will have some tax holiday where applicants will bring it act may be at 20 , back maybe a 20 , something more reasonable. Emily the European Commission has for some companies to the government of belgium, the government of the netherlands. What sort of cascading issues could you see after we get this decision from the European Commission . That any taxes paid in europe are a credit against u. S. Taxes. There is commented about defrauding the u. S. Government. I think thats too strong. This is tax deferral. Any taxes paid in europe would be a credit against future u. S. Taxes, and thats one reason the u. S. Government isnt in favor of apple paying more taxes in europe because eventually its going to result in less taxes paid in the united states. Emily the Financial Times reporting that margaret fester margaret fester has handed out a 130 page judgment to the organization, calling this illegal. She has taken a very strong anticompetition stance, and a lot of u. S. Executives, including the chairman of alphabet, has explained that europe is getting more and more difficult to work with. How do you see this progressing . It is agenerally difficult situation generally because of brexit traded theres an element of trying to ensure control of retains any number of different areas of policy. Tax is one of them. Trying to ensure that it doesnt disintegrate in a regulatory. Ense centralizing power and stepping authority for each commissioner there is certainly an element of like stamping her authority on the remit. Emily could use a broader International Tax reform as a result of this . Its possible. One analogy here is this is an intraeuropean issue, just as for instance illinois offered tax incentives to get going to toocate there had boeing relocate their headquarters to illinois. Partly the European Union is complaining that ireland is asking apple and other companies to pay a lower tax rate than germany or france. So, partly thats what this is all about. Emily any chance apple would actually ever leave ireland . , i think whats going to happen here is theres going to be some tweak in terms of how they charge u. S. Companies. They will probably still do some things through ireland and a year from now will have a higher tax rate and move forward. The one thing it points out from a broader european level is the difficulty you have in the European Union, there are so many different fiscal regimes across the region, and that points to one of the big problems with the whole organization, it makes it hard to have any sense of consistency. Emily alex webb covers apple. Thank you. Gene munster, Piper Jaffray great you are sticking with me. J ritter, university of florida, professor of finance. Thank you as well. Coming up, what hits are hidden in apples filing . We will break down everything we know so far. For takeoff. The new regulation that could get commercial drones in the air faster. Details later in the show. Apples september 7 product event is now confirmed. The company sent out these digital save the dates and as usual, it set the internet ablaze with speculation. The out of focus colored lights in the background and the use of the word see in the text led many to believe that we will hear about camera updates. Us, our Bloomberg News reporter market herman. A handful of scoops about what to expect in the leading up to this. The out of focus lights, depth of field camera technology, iphone seven on september 7. Any hints there . I agree with you. Those out of focus bubbles are pretty indicative of camera talk. I think theres a couple other things going on there. Theres two of the dots or whatever you want to call them that are really more in focus than the rest, they are right next to each other. It sort of looks like the dual camera set up we were talking about on the larger of the two models, and the round buttons are indicative of the shape of the home button. When apple announced the touch the invitation3, looked pretty similar and people realized after, though circles are in reference to that home button. We are here and that the home button on this years model will be pressure sensitive. Maybe its indicating that as well. Emily you have taken a much closer look at this than anybody else ive heard from. As you reported, we are expecting dual camera processing on the new iphone. Basically two cameras that merge two photos into one photo. Tell us what to expect. I know youve basically reported out the entire event. But as of now, where does it stand . To recap, we are hearing there will be a lot of ios and watch os talks. They will be introducing the new iphone. Maybe they will call for 7. Maybe they will call it the se. Design will look fairly similar to the iphone 6s and iphone 6. It will have a pressure sensitive home button, which will vibrate in reaction to how hard you press on it. There will be the new camera system, which has far better zoom and a much faster processor which works handinhand with the new camera. There will also be a new apple watch. Health tracking features as well as gps for more accurate running. Sure you have been paying attention to some of marks stories. You also get your own sources. Does this ring true to what you are expecting, you iphones, new apple watches, not huge design changes, but new features that mark just mentioned . Market covered it all. All. Rk covered it the headphone jack getting removed i dont think that will cause anybody to buy an iphone. Its one of those second or third level updates. At the end of the day, there is some important things you can do with just a better camera. It can be anything from just how you take pictures and videos to this idea of a device for augmented reality, which the whole pokemon theme is playing into. The groundwork for something a little bit more than might be at first blush. Emily how are you modeling out a potential boost in sales here . Obviously no major design changes. Some people might not like the fact that theres no headphone jack. How many new iphones are they actually going to sell as a result of these updates in the fourth order . Quarter . A fourhink of this as quarter update. In total we think they will sell 235 million phones over the next year. To put that into perspective, this will be the biggest cycle, the biggest wave of people with old phones coming into a cycle. We estimate theres 275 Million People who have phones that are two years old or older. A very ways, this is not exciting iphone upgrade. That pool of really old phones should power that through. What that means for the numbers, we go from down about 10 to 15 yearoveryear to up about 10 to 15 . You should see a dramatic swing back in terms of that very tough iphone 6s cycle. Emily we talked about how they are working towards building out their software and services, but you still reported some new hardware enhancements coming to the ipad. Tell us about that. These arent likely to be shown at this event on september 7, but apples working i bunch of new mac related products and new ipad features. Starting with the mac, they are working on the significant mac pro update we reported on earlier this month with a thin digital screen with the buttons on the keyboard the change based in what you are doing. That will be a big update for the hightech crowd. Were also hearing faster macbo ok airs. Also, apple is collaborating with Lg Electronics out of south korea on a new monitor. Sevenonitor would be 5k, times the resolution in the same amount of space as your typical 109880p television. So, those are going to be big updates on the mac side. Emily what does this mean for the bottom line . Ipad sales have not been growing the way they were. Beenok sales have healthier than many expected. What do you see . I think just dont overthink it. The bottom line is going to improve nicely. We talk about a 15 revenue boost from next to next year, and earnings should outpace that slightly. At the end of the day, this is still all about the iphone and these other products are collectively 35 of the business. Its about the iphone, the iphone should have a good cycle, and if we were wrong and we blow it on this one, we should catch up and have an even better cycle in 2017 with the anniversary edition. Emily any possible surprises . What could that one more thing be . I think youve done a great job reporting on all the features on this. I think its going to be difficult to be surprised. Maybe one other thing may be on the content side, some new partnership there, but thats a stretch. Emily mark, anything we dont know . Mark i dont want to speculate on anything we havent reported. When we do report something, you will be the first to know. News appleoomberg reporter and gene munster of Piper Jaffray, thank you very much. The fbi says hackers have infiltrated the election boards of at least 2 states, as officials warned that foreign hackers might try to meddle with u. S. Elections this november. What we know, next. Plus, hospitals are now prescribing patients a healthy dose of Virtual Reality. Why vr is becoming the more affordable option for doctors. Emily on todays funding board, a Digital Payments and ecommerce startup is raising 300 million at a valuation of 5 billion, more than double its premoney price tag. The latest round will be led by taiwans mediatech. Existing investors include alibaba. Its a bright spot for Venture Investments in india, which slowed this year after hitting an 8. 9 billion record in 2015. The fbi is investigating hack attacks on police two state election boards, one of which we know resulted in data being stolen. The more recent of the two hacks happened this month. Our National Security reporter is standing by in washington with the details. What do we know . What was stolen . Iswhat we know right now that two state election boards had intrusion. Last month in july, one of the states websites. Data was stolen. This month we know that a system for one of the election boards was breached. We dont know which states these were. The fbi has not come out and said publicly what they are. We dont know exactly what kind of data was taken. This is what we know so far. This kind of data is pretty comprised. It has put her registration information, some of which is public. Cyber criminals like to take this and put it up for sale on the dark web. So far the fbi has put out a list of ip addresses linked to these intrusions. They are trying to figure out who actually conducted these intrusions. The fbi is asking states to check with their election boards to see if they have had similar. Ypes of activity in their logs emily is this something a low level hacker could have done . Now analysts are going through the code. It doesnt necessarily seem like it is something super sophisticated. I was talking to one analyst today and was saying this is so widespread, countries across the world face this kind of threat in terms of criminal, cyber criminals trying to hack into elections and Voter Registration information because theres a lot of personal information that could be valuable for people out there who want to compromise peoples security. So we dont know exactly just yet, but were trying to figure out and that is what they are trying to link also, those ip addresses, seeing if it looks like something we have seen earlier in other kinds of talks. Emily we have been reporting the hack on the Democratic National convention, and potential links to russia. It is pretty clear that russia has been involved in some way. Is there any indication that russia or a state actor could be behind this . U. S. Have heard officiallys and diverse security firms mentioned that for a nation states may try to either meddle in u. S. Elections or try to hack into voting. Ystems, especially russia as of now, we dont know exactly if this particular intrusion on the state election boards are russia. Russia has denied being involved in the dnc hack. We have seen this state of incidents recently just in this year. Its been a longtime concern, whether elections can be hacked. We have written about that before. Its different this time that we are seeing we are a lot going on. Peopleats kind of are asking whats the motivation. Earlier we said dnc was linked to russia. Bloomberg news National Security reporter in washington. Thank you for keeping us updated. Coming up, commercial drones are taking to the skies at work speed. We will give you all the details. If you like Bloomberg News, check us out on the radio. Listen on the Bloomberg Radio app, bloomberg. Com, and in the u. S. On serious xm. Sirius xm. Mark must begin with a check of your first word news. One of Hillary Clintons closest says she is separating from her scandal plagued husband, former new york congressman anthony weiner. He resigned from congress in 2011 after he was caught texting intimate pictures of himself to women. Arisen. E photos have the fbis investigating hacking attacks on a least 2 state election boards, one of which resulted in data being stolen. Thats according to an alert from the agencys cyber division. U. S. Officials raised the possibility foreign hackers might try to hack into voting systems. Taking center stage in the president ial nomination of frances republican party, islamic each wear. Nicolas sarkozy says he change the constitution to allow nationwide prohibition of the burkini. Last week a top court struck down a local ban on the body covering garments. Gene wilder, the star of Willie Walker and the Chocolate Factory and mel brooks comedies, has died. He was suffering from alzheimers disease. June wilder was 83 years old. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am mark crumpton. This is bloomberg. Is 8 30 Tuesday Morning in sydney. My colleague paul allen has a look at the markets. Good morning. Paul good morning, mark. Some strong gains in the u. S. After a strong start on Tuesday Morning. Futures indicate a bright start locally on the asx in australia and the nikkei in japan. A lot of data out of japan today, the Unemployment Rate for july will be up. Its expected to remain steady at 3. 1 rate good jobs numbers mean