tv Taking Stock With Pimm Fox Bloomberg August 25, 2014 5:00pm-6:01pm EDT
>> this is "taking stock." i am pimm fox. today's theme is about being better. a multitude of multinational corporations in versions and how do shareholders take advantage of the u.s. tax code? how do investors invest in the corporate options? best buy shares doing better a day before the company's earnings release. 10 new product introductions from companies like apple turn better into best?
how about making a better tesla automobile? meet the man who retools of the tesla s. all of that and more. first, let's get headlines from carol massar. >> amazon has announced they are buying a live video platform for videogame companies called -- for nearly $1 billion in cash. you might recall they had 55 million unique visitors earlier this year. tivo is hoping to capture the companies of aereo, offering a new dvr that record over the air content. but has a49.99 service fee of $14 99 to a month and a one-year commitment. they can capture recorded content. after theshot up 26%
maker bought the company for $8.3 billion. they make a drug that has not yet been approved but shows promise as potentially the first drug for diseases. back to you. loony?burger king gone they want to acquire the canadian donut and coffee giant tim hortons. if you mean the king that makes its headquarters in canada where the corporate tax rates are lower than the u.s. i am joined by greg giannone up. cecraigjia mona -- giamonna. deal cannot yesterday in a that would make the third largest fast food chain in the world. the tax issue was what people are telling us is a big thing driving it for burger king and the other owners. >> what are the tax implications? >> tax inversion which is what we have heard about.
they will move the corporate headquarters up to canada where there is a lower tax rate. about 27% inaid 2013 which is a bit over what they would pay in canada. the feeling we got is that it is a part of a long-term tax break. you would get close to 35%. it is a bid to lower their tax rate long-term. >> is this a legal term? do they have to move any physical operations to canada? >> it doesn't seem like they do. it seems like they have to work it out so. till. there is a potential way they could get around some of the legislation that is being talked about in washington because they have had significant operations in both countries. assuming those two companies are combined. other companies take advantage of this disparity between u.s. tax law and the tax law in other countries, right?
>> absolutely, it has been a hot topic. it has been hot enough where the president is now commenting on it. people are expecting action had of washington. we will see if the headlines will bring those political headlines out of d.c. >> thank you, craig. let's turn to what happened to investors in the united states. could it be financially profitable if those companies move their headquarters overseas? do the inversions benefit shareholders or maybe there is pain? i am joined by dan wiener. he helps oversee $3 billion in assets. also, the head of 21st securities. the tax implications of a move to canada or to ireland or any other, what are some of the details? >> in this particular transaction, it would be the tim hortons canadian company which is acquiring burger king and all
the shareholders at burger king are selling their shares. they would be re-acquiring them afterwards. it is like they are selling their shares. >> what is the tax rate in the united states versus those overseas? >> it is how we tax worldwide income. in other countries, if you are headquartered in canada, you are not tax and what the subsidiaries make an united states whereas a united states you are tax and all the income you make worldwide. >> if you make this money overseas and you have to bring it back to the united states, that means the u.s. tax rate is higher than overseas. >> it is only taxed when it comes back so if it stays offshore -- there are billions of dollars offshore. there have been times in the past few decades with the u.s. government has offered the companies incentives to bring the money back at a cheap tax rate but i think the u.s. government doesn't want to do that. this is been a problem for a long time. >> the u.s. tax rate is 35%.
tax rate for corporations in places like ireland or the netherlands? >> i think there are some countries that are tax agents. i don't think the tax rate. i think it is what is an attack space. >> first of all, the 35% tax rate is a red herring because the gao came out and said of most companies on average pay about 70%. >> burger king is currently paying 27%. the tax rate in canada is 26.5%. >> the real thing that is going on is these companies don't want $1 trilliontaxes on that is overseas. we know in the global economy, these companies have become bigger and bigger worldwide. they earn more and more of their money -- i believe microsoft earns two thirds of its profits outside of the u.s. i am not saying they will invert, i am saying that is where the money is. they want to lower their tax
rates on that money. plus, they can do all the shenanigans to reduce income earned in the u.s. so that in essence they can be lending money from overseas to the u.s. subsidiary. the u.s. part of the company pays interest on that. they reduce their taxes here. it is a sham, i think. in terms of taking all those tax dollars away from the u.s. and still benefiting from everything your tax dollars by for you day in and day out. whether it is the roads and bridges and infrastructure. whether it is education for all the employees. whether it is the police and fire security. everything, everything. >> what does this do for shareholders? as bob said,rs, they are screwed. you may not want to continue to own burger king stock or any.
it is as if they said, guess what? we will tax you on all your gains, but you can still own the stock. shareholders have to pay capital gains on every gain they have had. butn't call it sinister what is tough is that mutual funds will have to generate -- are going to generate capital gains and distributed that at the end of the year. the mitchell fund companies have been very silent on this. that vanguard -- which i tracked closely -- they came up with. investors have iras so they won't do the taxes. >> if you're in a situation where the company's goal is to maximize profits and do these kinds of deals to lower the effective tax rate or the amount of tax they pay, shouldn't that be good for shareholders
because the shares will go up? >> when you see the tax tail wagging the dog that doesn't mean the transaction will be better for the bottom line five years out. five years out, maybe the deal will make sense or maybe it won't. burger king and tim hortons are great examples because they have been through two or three corporate restructurings over the last three or four years. burger king went private and then it became public. financial stuff making them better companies? shouldn't they take some of that energy and the money they are paying their lawyers -- goldman sachs will make $200 million this year alone just advising on inversions. shouldn't they take that money and into making it a better hamburger? >> is to miss the goal of the company -- to make more money? if the u.s. tax code allows this activity to go one, why wouldn't they do it? >> not to go into the history of
this, but the tax director of intel testified in front of idngress and said if i d started a company and set up the intellectual property outside the u.s. you would only pay taxes on the hardware they sell. they are in an anti-competitive -- position and the government to do something. >> doesn't the government recognized it would do just as you say and do it overseas? >> i think it is a bit of a pr issue. it has been building up. this issue of the shareholders having to pay tax in order for the future to be more tax friendly repeats. there are companies that left for be madbermuda. the warehousers --
shareholders have to pay capital gains tax for the benefit of paying no taxes in the future. this kind of tax -- it is going on right now. kinder morgan is going to be doing something -- they will stand there and do nothing and still be told that you sold a repurchase. >> to these tax and version deals -- are they similar to real investment trusts? they passed the income directly to the investor and they pay the taxes at the corporate level. >> of those are special situations. they have been established by the tax code as being legitimate. the tax does get paid here to the u.s., to the treasury. . it is not that they are cutting out a whole sleeve of income and that is not being taxed and that money is not ending up in the u.s. pockets. that money is being taxed here.
these are special -- >> beckett influenced the stocks. taking twot they are thirds of their profits overseas and you don't get a dime on taxes. >> i think that is one of the big issues. we don't have it integrated tax system. other countries, the dividends are only taxed once. here it gets taxed again and again. one of the big anti-competitive differences is the total tax on corporate earnings. >> i want to thank you very much. dawn wiener and bob gordon. coming up, more about corporate tax inversions. you can go to bloomberg.com to read more details. we have full coverage of the burger king-tim hortons combination and all the other stories related to this controversy over taxes and the u.s. government. coming up next, best buy reports its earnings tomorrow at 7 a.m.
>> this is "taking stock." best buy reports its earnings tomorrow morning at 7 a.m. eastern so as the company's turnaround effort working and how does best buy actually compete with amazon and other online retail rivals? i am joined by stephen baker, the vice president of analysis of npd group. also from san francisco, cory johnson. cory, what do we expect to hear from best buy tomorrow? >> it is not as important as the questions that might be answered. the questions that we are getting up to. what do the analysts expect?
the numbers are not that important. we really want to hear about development they are doing around key industry areas where they might be seeing growth. they have seen a lot of growth in consumer electronics -- last quarter up 29%. we want to hear about conversion rate, not sales growth which is the raw numbers that a lot of people look at when they look at the success of retail companies. and their ability to convert shoppers into buyers. the problem that best buy has in this era of technology where people will show room shop at best buy and buy at amazon. their ability to turn the experience of a visitor of the store into a customer. we have seen encouraging numbers out of this very difficult business. can that continuing what will that mean as we get closer into the holiday season which is also important for best buy. >> stephen baker, what you looking for?
themthink we will see perform in line with the industry. best buy is by far the biggest seller of consumer electronics in the u.s. the consumer electronics in is not a growth industry anymore. typically, it is down by a few points in the overall basis. when you're as big as best buy, it is hard to grow your business in an environment where the overall industry that you are competing is not really growing anymore. >> what about the introduction of a new apple iphone? what will that do? >> double do the same thing he does for everybody which is a generate a lot of excitement, generate a lot of traffic. that also means a lot of accessory sales for best buy. it is always a good thing for everybody in the electronics business. i think the great part we hope will come is that it will be something a little bit
different, and little more unique. a lot longer legs in terms of the interest levels for the consumer than the last couple of launches it had. >> cory johnson, the best buy consumer service business -- customer help, is that getting better? therom a we can see from conversion numbers, there are suggestions that will get a little better. you mentioned the iphone, that will be so crucial to the company because their quarter is a month off the calendar quarter. to quarter they will announce next time will end in october. ships iphone in the last week of september, that will not help a lot of companies. they may have a wonderful demonstrateto superior customer service or conversely, fall on their face with the launch of a product that should be a very big one
because a lot of customers have aging contracts, ready to renew with the new phone. the customer base is certainly there for the new phone if the product is successful. best buy is there to sell it. have they fixed their business enough to deliver a great experience in the store to convert customers or visitors into customers and customers of the iphone itself? >> thank you very much, cory johnson. my thanks also to stephen baker. talk to thext, we chief executive of a new york startup that is aiming to grab a share of the booming headstone market. details ahead. ♪
apple paid $3 billion to acquire beats. me to new york city startup looking to make noise in the market. joining me is the chief executive of masters and dynamics, jonathan levine. thank you for being here. the headphone business -- i mentioned beats -- $3 billion. why did you decide headphones was the place to be? >> i decided to go into it long before the apple-bead combination. i saw an opportunity in the market almost two years ago. people were going in one direction -- a lot of plastic, not a lot of durability or luxury materials. i thought i can make something that spoke to a different demographic. >> how do you describe master and dynamic headphones? >> we talk about being sound tools for creative minds. we are luxury brand, premium brand. we are taking a different course.
l, general all meta leathers. >> you also have features. you have two inputs that you can listeningdjust the experience between two different people. also, a lot of the parts are replaceable. >> we wanted to make something that was very durable, timeless. not just in design but over the years. a full metal, leather. whatever needs to replace the --e cables and year pads. ear pads. ports so you can share the music with somebody else. >> what about the cost? >> that model right there on the table is our flagship. >> this is the -- >> of ththe mh40.
it is $399. >> what about the quality? >> people describe the base as punchy and sharp. the mids are excellent as well. brand, reviewers have said we have hit the mark on both design, build, and sound. >> what about the weight? >> if you pick them up, ours have for heft. we think people like that. it conotes quality, craftsmanship and nobody is complaining. they are extremely comfortable. i wear them cross country have no fatigue whatsoever. >> what about the volumes? >> we actually just got it shipping about two weeks ago. we have grown past the projections. we are in 12 international cities and eight u.s. cities and growing seemingly daily.
>> this is "taking stock." now, for look at the headlines. i want to go to carol massar. >> we start with the housing market. showing that the u.s. has a rigor not having faster growth in the economy. 2.4%, which is weaker than what economist projected. bank of new york mellon is failing in its duty to argentine bonds which are refusing to pass
along that payment. investors are saying the banks are required to make the payment even though a new york judge says a subpoena is required to make them pay first. ap of valley could receive federal disaster victims following the strongest and earthquake in 25 years. the government is looking into the extent of the damage. wine growers could have special loans. back to you. >> saleen automotive makes american muscle cars -- mustangs, challengers, and camaros. now it is time for tesla. he will boosted the aerodynamics to create a super car with a price tag of about $150,000. i am joined by the founder in los angeles -- steve saleen. thank you for being with us. how did you get to be a gear head?
>> i think maybe you are born that way. certainly in my case, i was born very much interested in cars as i grew up into high school. i had a fascination with cars, racing in particular. that carried on through my adult life. >> you started racing a porsche out of high school? >> yes. that was my first car -- a 1956 porsche. i would participate in speed events. that led into selling it and trading up to a mustang. hen modified a mustang and took it to the racetrack. the worst possible thing happened. i showed up in my first race and then i won. it has been downhill ever since. my probably should've quit them.
i've enjoyed cars ever since. >> there was no quitting to when it comes to the collection. tell me what you will do to a tesla model. s. >> i have been doing this for a little over 30 years. this is our 30th anniversary. we started with the ford mustang. we've modified of that and supercharger and all of that. racingapplying the same enthusiasm, performance enthusiasm and build over the time on the tesla model s. the future ofzing automotive's and that electric cars are not a fad, they are a trend. we are applying the lessons we have learned in the past on the current model s. >> you are changing the hood, the handling, the suspension, the drivetrain? >> one of the things we always do is take the time to actually
look at improving the performance and efficiency of all of the vehicles that we have done over time. the tesla is no different. we start with aerodynamics. we look at what we can do to change the aerodynamics suddenly and sometimes not so subtly so we have better air flow, better functionality. we have done that by changing rear, the side skirts. back, we added a spoiler and a rear diffuser that helps clean up the air underneath the car. after that, we then go back in and we look at what we can do mechanically to the vehicle. wethis case on the tesla, changed all of the suspension, different springs, shocks, pivot bushings to give it a different
type of balance. tires put wider rims and to give us better traction. >> i want to find out what do people need to know about getting on the list to get one of these new machines=. >> we are taking orders. we introduced it at pebble beach last weekend and we started in order bank, taking orders. people can call us on our 800-number or on saleen.com to actually look at, to get in touch with us to place an order. >> you will let us know if elon musk order is one of the new model ss. steve saleen joining us. the professional golfer tiger woods has fired his coach. i am joined by michael.
what is this about tiger woods getting rid of his coach? it boils down to -- for the last four years, he has worked with sean foley, before that it was hank haney. and haney fired tiger woods now tiger woods is ending his relationship with sean foley. one thing stands out, tiger woods has not added to his total of major beak there is -- total victories. now you can point to the fact that tiger has been injured a lot. that is not necessarily sean foley's fault but today he made the announcement. he is taking the rest of the season off and he took today to take the time to say he is taking off without his coach. he had said he won't know who is his next coach will be. >> what will the code to do or not do to change his game? >> it is another set of eyes. a lot of people think tiger
woods doesn't need a coach, he is the best golfer that has ever played arguably. why can't he figure it out on his own? you can necessarily see yourself swing the golf club so a lot of times you have another set of eyes. sean foley is a very cerebral person. he talked a different language than most coaches. he was more interested in the sound you made, very technical when it came to the golf swing. tiger liked that. a little different than old-school guys. eyes,another set of someone who can tell you what you were doing right or wrong. >> thank you very much for joining me from atlanta. coming up, amazon is set to make its largest acquisition ever. we will take a look at the video game that amazon is looking to buy. also, time for clue number two. my mystery guest is watching her company take spake. this is taking stock.
>> this is "taking stock." amazon has agreed to purchase the video service twitch. it is interactive and a $1 billion deal. is the biggest acquisition for amazon and add an online gathering place for all of its video gamers. joining us to tell us why it is worth $1 billion is paul sweeney of bloomberg intelligence. is unique real-time research for a variety of industries and markets. you were just telling that when this deal was announced, you heard about twitch. you asked everybody under the age of 25 and they knew more about it than we do. >> they know all about twitch. reallying world has played a major media business. it makes sense that the social aspects of it, talking about
gaming, posting games, watching other people -- that social aspect will find its way onto the internet and that is what we're are seeing on switch and with amazon trying to get into that side of the business. >> why would they want to get into this business? >> one of the areas they could argue on the video side -- they are really getting into the video business through amazon prime. a lot of the areas they're missing is user generated content. think youtube. this is their initial dip into the cold user generated content side of the business. they are focusing on one niche which is a big niche and a growing one which is the niche of online gaming. >> this whole idea of online user generated information. you post something -- and it on a message board. this game is great and someone else says it is better than you thought and everybody gets involved and buys it. >> it is an online video platform where you can actually
watch people play a game, not just anonymous players but famous players for certain games that people will actually set their clock and watch them. they will try to watch some of these games to learn more about the games themselves so it is not just entertainment, it is a little bit education on the gaming side. everybody feels like they are getting value. it is a growing community, a younger male demographic community. as amazon things -- is thinking about monetizing their online video business, the need to think about aggregating big positive -- audiences. >> let us talk about making money when it comes to television because the emmy awards are on. >> people still watch old-school broadcast television. what has become one of the hottest commodities is the award shows. the emmys is one of the biggest award shows and they will be on tonight. they will get a big audience.
nbc will learn a lot of advertising revenue on early because it is a live event. live events on television are still some of the events that draw very large audiences, very passionate viewers and advertisers know that these viewers watch it live primarily. their advertisements are worth more. >> lori l will be a big advertiser on the emmys and the idea is for people to comment on what they are watching in real-time with other people around the world who are watching in real time. you get to write messages to each other and comment on what is going on stage. twitter's ofok and the world will tell you that some of the biggest nights of these award on shows and other events like the super bowl. they are gathering places for audiences kind of like the old days where people would gather around the tv set. there was a very big social media aspect to it. internetcasters and
social sites complement one another. >> almost $34 million is what they expect to make on this one night. >> that is right. for the oscars will make close to $90 million so these are big revenue generators for the networks. each of the networks really fight hard to get these award shows. >> if networks fight hard, the people that are attending, that are up for these awards will fight hard. you see these ads in variety. what is an emmy worth to a show? >> it can be worth a lot for a newer show or a show that is a little on the periphery. if there was a strong actor, strong performance -- something that can heighten the awareness of a show, that is one of the things in them he can do given that there are so many shows on so many channels. it is more difficult than ever for a show to break out of the clutter and establish even a minimally acceptable audience
that can guarantee a second or third year. winning an award is something that could make you break out. >> you have more traditional producers, studios. you have warner bros., nbc universal, abc and disney. now you have all these upstarts like netflix or hbo. >> hbo lead again with a number of emmy nominations. that is a function of the quality of content they have been putting on for the past 15 years. we are starting to see, not just the other premium networks like showtime investment in original programming, but also some of the basic cable networks that used to rerun. , those networks are investing in new original programming. the new online video entrants like netflix -- netflix has a handful of nominations. >> even yahoo! . >> they hired katie couric to be their news source.
it is not just the broadcast networks were the cable networks, it is everybody, including the online players that are investing in original content. i will tell you was a winner -- hollywood. everybody from the actors to writers and producers, everybody is fully employed. the hollywood folks love it because it is more content to be created. >> maybe everybody gets a trophy just for showing up. i want to thank you for showing up, paul sweeney, bloomberg intelligence. my mystery guest will be revealed next but i will give you the final clue. my mystery guest is part of an emmy nominated network. west, go on bloomberg behind-the-scenes and take a look at the new madden football game. madden nfl 15 comes out tomorrow. it is promising to be the most realistic game yet. improved graphics and lots of player data. that is coming up on bloomberg west only on bloomberg.
>> it is time now for mystery guest. my producers assure me it is a special one for me. we have kaluz -- clue number 1 -- my mystery guest once called p ditty i boss. jews watching her company take shape and she is part of the emmy nominated network. let us bring out the mystery guest. thank you for being here. >> hi. so nice to be here. p. didyonce called pdd you your boss. >> yes, i once worked for him. >> it says your company is taking shape. are you in the fashion industry? >> yes. >> are you a designer?
>> i make close just for men. men's -- >> i meant women. i am a women's company. sorry to throw you off. is the line available in the apartment stores across the nation? >> yes. >> have you recently been in a fashion awards show by any chance? >> i have not been in a fashion awards show. for menswear, this is for womenswear, is it evening waer? ear? >> it is considered every day wear. >> it says not only did you work for him and in shape but you are on an emmy nominated network.
>> i am on a television program. >> are you on one of these real heist -- real housewives programs? >> i am. you are almost there. my name is heather thompson. nice to meet you. my company is yummy by heather thompson. >> tell people what it is. >> it is really an everyday collection of essentials. it started out as a shape where concept. patents on unique shapes where i give women a new way to look at shapewear. you didn't have to be ashamed to wear it anymore. function and fashion mixing together in a garment that many women have confidence. >> i can date myself and say this is new updated version of things like spanks. >> modern solutions for women.
>> what about the actual material that makes this? ideas material is all new and fabrics as well. materials andold did the same old, same old. i looked at new fabrications, new ways of providing their function within design garments. this is my patented garment. this is how i exploded onto the scene. i designed it out of my own personal initiative. i had had two kids and i was working for beyoncé at the time. with two beautiful babies but a deflated innertube around my midsection. i developed this which is a great tank top. it has functioned in the middle that actually will stay in shape. >> by making with three panels, that is the secret sauce. >> i have utility garments.
also shaping into broths and intimate panties. we are launching our active collection. we are doing a launched tomorrow. we are launching activewear. so in the gym women, can feel their best as well confidently. it is all about fabric technology where it gives you shaping benefits and cools you down when you are warming up and warms you up when you were cooling down. a little understand more about the relationship between the celebrities. do you think that is essential if you want to reach the mass youet because obviously, may have a great idea or prototype, but then you have to get into these stores. >> it is a big challenge. my celebrity experience was as a designer. i created their collections.
it was when i took off my designer hat as a creative beyoncé and jennifer lopez and calvin klein, i moved into something that was selfish. it was an initiative which was products that can help a woman look and feel her best. this came from a design aspect, nothing to do with me working for celebrities nor does it have anything to do with celebrity bottoms. it is about the actual promise i deliver which works. >> what about raising money? >> i got a loan. i got a private equity loan from an investor who then partnered with me on the business. we are a privately held company. he believed in me and my idea. i borrowed some money and paid them back and here we go. thompson,r thank you for being here. chief creative officer of yummie.
live from pier three in san francisco, welcome to bloomberg west where we cover innovation and the future of business. i am cory johnson. is making the most expensive acquisition in its history spending $1 billion to buy videogame streaming company to which. twitch. it is part of the strategy to expand the definition of its entertainment. a settlement over