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tv   Squawk on the Street  CNBC  April 28, 2016 9:00am-11:01am EDT

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since we're done at 9, you still get to go to school. most kids get out of school but you still get out in time. >> it's great having you guys here. i don't get to see enough of you at home. thank you for being here. make sure you join us tomorrow, "squawk on the street" is next. welcome to "squawk on the street," i'm carl quintera.
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we'll break down all the mergers and acquisitions and wheel talk to miles white about his $25 billion of st. jude. >> a strong earnings report after the bell yesterday, the company shattered estimates and is proposing a new sale structure. >> and we'll take a look at how the day on wall street is shaping up. >> let's get to m & a. the deal valuing st. jude at $85 a share. let's keep a close eye on abbott labs stock. they expect to add to earnings. wheel have an interview with ceo
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white. and a cross-border hostile for medivation. we have plenty in the world of health care so to speak. jim, let's start off with abbott. by the way, they also have this o'lear deal on tap. that kaem prior to them signing a confidential agreement late in february to get this deal done on st. jude. they're talking big accretion. i'm looking at a stock that is down pretty dramatically. it's a cash and share deal. so it is going to have the effect of hurting the overall
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value of the deal. 4675 in cash and .8708 shares of abbott. >> let's see what dan miles has to say. st. jude, they particularly lack the scale, particularly against medtronic. st. jude said over and over again it's unfair somebody can invert in our industry. they do have i think better devices. i don't know if anyone would disagree with that. >> you think st. jude has better devices? >> st. jude. you never made money betting against miles white.
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you don't sell abbott, you buy it. >> the factors that have been in place last year during a great m&a year, this is largely cash, when you you're paying so little for what you're borrowing to pay cash, the deal is going to be a creati -- accretive off the bat, jim. keep app eye on that abbott share price. it's not good. >> this industry is ready for consolidation big time. >> e.w. on its own has been
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strong, boston scientific has been strong. who's next? >> the mid level companies trying to keep up with the medtronics. >> i can go on and on but everything that is moving our markets down is positive. whether it be mark fields this morning putting up a great number for ford. where is the playing field not level? it's the yen. so we get the yen strong. raising numbers caterpillar, raising number ford, for those of these health care numbers. our market is completely upside down today. having a little sleep problem lately. i saw when japan did what they did. these guys are morons.
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they're not just in pajamas, they're in feet pajamas. >> jim, the idea of not being able to compete against a company that has a lower tax rate? for st. jude. >> i don't want to say does it because dan starks told me it does, the ceo. dan is really straight forward. dan is one of these guys, he's david to the goliath of medtronic david. david, do you get david? >> sorry, i got it. and we haven't mentioned facebook yet. we're criminally negligent. >> we haven't mentioned facebook, we have to mention dreamworks is halted. we are expected to see a deal today and i think everybody will assume we are going to see a deal from our parent company announcing the acquisition of dreamworks. that is expected momentarily, one would anticipate prior to the open. from what i'm hearing the price
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will be higher given the stock is halted, higher than had been anticipated by some who were working off yesterday's stories about dreamworks. >> i don't know. hostile. santa fee hostile. >> you can act by written defense. mediva medivation is a delaware corporation. they went down the road before with genzyme. >> that helped them a lot. >> it helped them a lot. the 5250 bid is the same and here they are making it public for medevation.
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it's not that large after preemup over medivation. >> you have a $5.8 billion deal and we can't even get to it. the health care consolidation -- it's like a gun went off. you have valiant go down there and a guy's wears his hair shirt saying listen -- at the same time you have major companies making a deal, abbott making a deal. when will pfizer come back? >> moments ago you thought the valiant was the peak of negativity. >> it's like february 10 when we got the bottom of the market
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because bernie sanders won in new hampshire. when they're in front of congress, that tends not to be the beginning. it tends to be the end. how about the fact he apologized for higher earnings per share? someone apologized for raising numbers, valiant. >> some of the stuff they did was pretty egregious. >> you think, huh? >> i do, i do. i saw what they did with salient. >> i can tell you stories about that but i'm not going to tell because it's personal. this is an amazing market. remember yesterday what was everyone talking about, all the owe wreck? >> the deal is out on dreamworks. $41 a share in cash. that is well above the value of dreamworks. >> that's huge! it's as big as bristol myers.
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>> i can tell you, this deal came together very quickly. as has been reported, mr. katzenberg, who created this company and controls it with his 60% vote will no longer be a part of it. he will act in consulting agreement with nbc universal, with comcast but will not be a part of running the company at this point. that number is a big number, particularly for a company that's not expected to generate let's call it more than $200 million in ebidta. that's years out. maybe up to $300 million at some point. they will talk about efficient revenue sinnynergies and bring
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multiple ebidta down to a high single-digit level. it will be interesting what people think -- >> many people find it quizzical. >> i think they see the slate of the movies, what they can do in tv product, the distribution there beyond what they have. also, theme parks down the road but i don't think they're working that into any of the numbers. mr. katzenberger created quite an empire. he has a mammoth studio. there may be an ability to cut a lot of sgna. >> kung fu panda -- >> "kung fu panda" took me by
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surprise. apparently. >> i like "kung fu panda." i watched it with my daughter again recently. >> i was busy working on the bristol myers -- >> interesting. that tells you something about your life and mine. >> facebook proposing a group of non-voting shares, which would give mark zuckerberg more earnings on the company. >> we're focused on the long term. facebook has always been a company where we can -- early on we received general offers for companies trying to buy facebook and our structure helped us resist that. >> they would be class c shares, essentially given as a dividend.
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mobile revenue is up 75. >> clinic, clinic. you're talking about a company that was created for advertisers. it's very strange. i'm reaching for my phone. facebook is unique for this. this is what it works on. and the amount -- 82% mobile. you can order. you watch the canvas, the canvas ads and then you click. that's why i thought the most important thing on this call, everyone should go and read this is a lowe's campaign for a call to action with millennials. so there you go. millennials, yes, you really reach them tluch this device and they use this device and everybody else has been hurt by this device. apple has made these guys into a
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great company because this is what i use for facebook. why hasn't twitter done it? this thing is a juggernaut. >> the engagement for facebook is stunning. the average log on is for 50 minutes. you have to consider this is the first stop for millennials and many others to consume media period. so the larger issue also or question is can old media, so to speak, can you compete with these guys as this becomes more and more the norm, where you go to consume media? >> guardian has a piece out this morning that says mark zuckerberg owns the internet, plain and simple. >> that's a little aggressive there. >> i think it says a lot of great things about we go to
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where the eyeballs are but i think that they are sympatico. she says you want to augment your tv campaign, you come to us. tv is still the new tv. this is not an anti-tv. >> 75% of incremental ad spending over the last year has gone to facebook and google. they're splitting all advertising spending -- >> not even splitting. facebook is taking more it have. >> they -- lowe's, you are always see those ads. but the effective ad is the point and click here. >> if you're annoyed that zuckerberg wants to maintain control like this, your answer is what? go buy something else? >> more control. the more control, the higher the stock goes.
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i do not want to go up against this guy. do i not want to compete against him. most people say it's not just they built an apartment complex so they can hire all the science guys. but they also did something i thought that david would have mentioned right up front. david, they're using real accounting. they're using gap, they're saying that the expense of hiring people with stock matters. this was an answer to many of the questions that david raised at the beginning of the week. >> you know why they're doing that? >> because of you. >> because they can. >> do you imagine what twitter would report if they had done that? look, i wasn't contacted by twitter to take the top job yet. >> it's still early. >> going up against these guys, you know, this is like going up against -- this is like a death star. it's a death star for everybody else. >> going up against mike tyson
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when he was 19. >> man, mike tyson. remember him with the license and the driving? >> i just remember when he was 19. >> i met him. >> he's an intimidating presence. >> i always had this with me, mike tyson handshake. >> got it. when we come back, an exclusive with miles white on his deal with st. jude and andrew liveris of dow as they prepare to merge with dupont. paypal, raytheon, all of them pretty good, a lot of raises today. more from "squawk on the street" and post 9 in a minute. ♪jake reese, "day to feel alive"♪
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dow chemical just reporting first earnings topped expectations. this is the fourth consecutive quarter growth. i talked to liveris this morning. >> i think it gave us the opportunity to do this terrific deal with dupont. we have had, as you said, 14 straight quarters of earnings growth, our market cap has been rising, strong performance these
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last many years gave us the right to have the structure that creates three new focus companies, that includes the new dow, that will be very focused. if you look at the markets that grew on the quarter, infrastructure, packaging, our ability to grow margins in those businesses and the outlooks being so strong for those markets will focus downd, we're going to create $300 billion shareholder value. so sell, buy, i don't know what you would call it. let's call it a merge and spin to create three growth companies. >> let's object about where the merger is. i spoke to ed breen last weekend. the two companies are proceeding very well along the course of merging and splitting the three. we have a new anti-trust department activism. it's the most active they've been brg reagan. i'm wondering if someone might say this is creating a dominant
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c company. we can't have this happen, the farmers have to be protected, we got to stop this deal. >> dare i say it's exactly the inverse. this is a growth company that gives the farmer more choices. it's pro competitive. it's not just the seeds point you just made but it's the chemistry point. if you follow all the players in this space, the farmer looks for an integrated solution because they're getting less and less choices as, you know, weeds get resistant to current chemicals and pests get resistant to them and therefore the seeds that you used to have resistant to those chemicals are no longer available. up need different answers and different solutions and this new ad company will actually provide a pro competitive growth opportunity for farmers to have different suppliers. and integration costs. have you to scale up r & d. in chemistry, in biology, in big
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data. that confluence of needs by farmers creates the opportunity to create the number one ad player in the space competing with the othering about players. >> where are we in that cycle? the commentary is a little downbeat on that. maybe i'm a little too bullish. can you rein me in? >> i don't think i want to rein you in. if you look at our outlook on the markets i mentioned already, i'm going to throw in agriculture, agriculture is definitely going through one of their normal correction cycles so out there is the beginning, pick your favorite row crops, corn, soy, cotton, you know humanity is going to need more of those. you saw our results in agriculture. we had flat margins but declining sales because increased inventories, especially in latin america, which has its extra problems but
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we produced good margins because of our new product launches. it's back to the first question. new farm solutions, the farmers will need that for sustainable agriculture. despite all of that you look at our performance on agriculture and we were very, very happy with the margins we got there. >> that's jim with andrew liveris earlier this morning. when we come back on cramer's mad dash, we'll count down to the opening bell. coming up, miles white, his company buying st. jude on a $25 billion deal. futures still down off of the bank of japan. more "squawk on the street" straight ahead.
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this just got interesting.
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all right. we're doing one of those seated mad dashes. we'll go right to the opening bell. what do you want to talk about? >> earlier on money, there was a
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negative on sarepta, some sort of drug that could work. adam, who has correctly chronicled this thing the whole way from the street. this is saying that janet woodcock has spent time with the parent and the children of this terrible disease and that maybe this is the fda finally saying, listen, we can't reject drugs that can work. >> overriding the panel's recommendation, is that what you're saying? which happens. not often. >> the fda is saying these people are in dire need, you got to give them something. i think this would be great personally because the safety profile is very good. for a drug that may or may not work but would hurt anybody,
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give them something. what a crime it would be if it works and they didn't give it to them. anyway, pointing that out. anyway paypal. there has been a negative guy, gene muncer. he's starting to talk about his negative thesis being derailed. dan schulman delivering, delivering, delivering, muncer slamming, slamming, slamming. the idea of potential ecosystem deals with visa and mastercard, bring paypal into the card. this is the millennials' credit card money. don't forget venmo. i still use cash. i have checks. they're dynamite. i do think that paypal in an ecosystem and sarepta.
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>> i've seen your wallet. you have a george costanza wallet. >> sometimes he throws his money on the floor. >> that's about to explode, that wallet. >> there's the opening bill of the s&p. on the big board it is s&p global, formerly known as mcgraw-hill international and the ryder cup captains for the european and u.s. teams. you mentioned mastercard. >> we should go back to what charlie sharp, ceo of visa, when they reported, that stock was down 4. at the end of daft, it was down a buck and change. these two companies are doing very well. visa is hard to explain, they're getting costco from american express.
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american express was slamming costco. i wouldn't sell visa, i wouldn't sell mastercard, i would buy paypal. >> ford, record operating margins. north america op-net nearly doubles. >> i thought it was a terrific quarter. the operating cash flow 2.7 billion is terrific. europe pretax, ashia pacific, they've got suvs people like over there. south america, i don't know. valet reported a profit. i don't know how that could be. >> they did say south america would be the market not in the black for the year.
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>> it's an all-time record quarter after a record year. we grew our top line, we grew our bottom line. our tremendous performance across the portfolio of our business and we reaffirming our guidance to have year that is as good as if not better than last year. >> what do you think about these numbers being sustainable? >> i think they're fine. my problem has been from the beginning, the subsidizing nature of the japanese government. we all seem to forget that when you look that toyota and honda sold 2. 5 million and 1.5 million cars here. this business is going to come back to ford because that stronger dollar is going away that has hurt ford. people are selling what they should be buying. caterpillar is a huge winner, ford and gm is a huge winner
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here, ibm and hp are huge winner. coca-cola. you sell those stocks off of the end being strong? you go to college to get stupid? >> beats and raises out of aetna, out of raytheon. >> raytheon, this is the third straight defense contractor. i got to go on the conference call. lockheed martin was amazing. north r northrup drummond was amazing. >> i'm going to take over for a
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minute. the on tecontent, which is onlyg more highly valued, as in the case of dreamworks, but dreamworks is going to be up sharply given that $41 a share all-cash deal. they expect the deal to close in the fourth quarter of this year. it's a big price. when you look at the highest price targets out there, they were based on a ten multiple to ebidta being discounted back. there will be questions about how much our parent company is paying. having discussed this briefly with people involved in the situation, they tell me the sg & a at dreamworks was very high, we'll be able to cut there substantially and they see significant synergies on revenues, whether it comes from
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distribution, products. mr. katzenberg in longer will be a part of running the company on a day-to-day basis. he'll act as a consultant. that was probably a key part of this. each tried previously to potentially work a deal with soft bank or even hasboro. remember that one? >> yes. b >> but a lot of those had him still involved. but him being willing to walk away, that may have been key for comcast, who likes to run things. they don't want anyone telling them house of representatives to run it. you have to wonder whether when v viacom sees declines below the estimates on viacom, that's why the stock is down on 5%.
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>> do you want to reach the people who are actually trying to figure out whether they're going to be buying coke or pepsico or reach the people trying to figure out colgate, estee lauder. you can't go to viacom. if you were a consume product companies have to go to facebook if they want to get the word out. don't forget, facebook's integrated ads are actually liked. we're going too do fast load. >> facebook is the dominant platform in this world. this idea it will be the first place a lot of people go to consume media is a key consideration. it's got to be for the likes of viacom and everybody else. we're still dealing with the question of the bundle falling apart, though they did that dish deal last week and viacom up dramatically when they announced that new deal with dish.
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>> there's a moment when you go through the facebook hall where they talk about facebook live and they say anchors on tv sometimes get more viewers than they do on tv, facebook live. if they can curate questions on facebook live, it would be interactive tv. that's what they want to do, interactive tv. >> and viacom is not interactive. >> and they don't even have to pay a lot for it. they're not paying much for the content -- >> they would be paying you. >> they should be. >> i'd pay twitter. >> boundary light is a term used. >> their costs are in line. alphabet has to spend money putting people on the moon.
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what are they doing, a moon shot? >> just looking at lion's gate up 6%, dreamworks hasn't opened yet but you might imagine names like that are getting a boost by the multiple pay buyer for dreamworks. >> let's get to bob. >> what we saw was follow-through from the central bank actions over in japan. let's look at the overseas action. nikkei down 6%. you see the nikkei down. shanghai down a little, germany down a bit, spain also down. some of the big japanese names are down, a lot of the banks were weak overall. most of the autos, toyota, honda, nissan also down about
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4%. here in the u.s. most sectors on the down side but just fracti fractionally. tech just turn positive. health care and financials to the down side. the earnings picture, we're halfway through. this is the day we make 50% of the s&p 500. mixed reports. texas instruments was good. colgate palmolive was inline. they had been fading. consumer names weren't as strong as they were in the earlier part of the year. atria reaformed guidance for 2016. potash prices were weaker than expected and they lowered their overall outlook. conoco phillips came out. good news is a much smaller loss than expected, only a loss of 95
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cents there, much lower than expected. they did reduce their commodity spending plans. you see the stock has really recovered since the february lows when it was around $32. that's about a 50% move off of the lows. the important thing is we are at the halfway point for earnings. 50% of the s&p 500 has reported, down 6%. we started the quarter down 9% so it's improved a little bit. we typically get a 3% move. the hope here is q2 will end the earnings recession. if we move normally here, we'll end up roughly 1% on the s&p 500. there you see revenues still to the down side for both quarters. still no revenue growth. back to you. >> thank you, bob passani. >> let's go to rick. >> if we look at the ten-year,
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interesting aspect. all yields dropped yesterday. the two-year is coming back more slowly than the rest of the curve. that makes sense. the fed didn't seem hawkish to me or the market. just look at the dollar. the ten-year is getting back in the range it was, that 186 prior to the recent range. year to date doesn't chang the double bottom in the 160s. that's still there. the back row picture will continue to haunt investors, especially those newly long. let's switch gears and look at an april 1st start to the ten-year jgb. why? you can see it went down to minus -- i should save up to minus .04. it's back up to .07. let's look at the yen. if they did something, the yen would get stronger. it got stronger anyway, nervous investors. april 1st start to dollar yen.
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that's a lot of handle to drop 107 to 108. >> when we come back, miles white on his company's $25 billion deal to buy st. jude. today and "power lunch" at 2 p.m. eastern, carl icahn on m&a. right now, dow down 6 points. back after a short break.
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sole dea many deals, so man earnin earnings. on the phone, miles white, abbott ceo. i think people are misinterpreting your deal. they're driving your stock down. can you just explain where you get your accretion figures? i think can you turn the stock around. >> jim, i think it's first of all a super trans, faction for .
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you couldn't find a better strategically fit for us and st. jude. if we had done it a year ago when the m&a world was so forth -- frothy, we'd probably have a different background. you guys are having a target-rich day. the deal is accretive. it's nicely accretive. you don't do deals just for accretion. you do them for the long-term strategy and the fit here i think is exactly what both abbott and st. jude need. they've got a very well balanced business, they have some mature segments, we have some mature segment and between us we have a lot of growth segments, too. the customer still wants innovation and treatment. this deal does all of that with
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great balance. if you asked a lot of analysts and shareholders, they say this is exactly what we would have expected. the biggest question that i get is what are you going to do to expand your vascular business? this would be the answer that they'd all give you. frankly, i think it's right on point. >> but, miles, i had dan starks on, a repeated guest from "mad money" and he talked about the deal about how unfair it was for the inversion made medtronic just too hard as a competitor because they get such a freebie. how much better will this be in terms of competing against medtronic, no longer having to worry about the inverted status. >> in terms of competitiveness and breadth of products and quality of products and so forth, this makes us and st. jude together very, very competitive with medtronic. medtronic is a fine company,
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they have a very broad product line and now so do we. i think that enhances our competitiveness. their inversion is something they did for tax, i presume, i can't speak for medtronic. where that would make a bigger difference is if we were competing for properties, acquisitions, other things worth wide, they'd have a tax and profit advantage in terms of wa their performance would look like versus ours. we see that when we compete for foreign properties around the world. if you're looking at m&a and the profit they bring to the bottom line because of a tax advantage, clearly that's a motivation for them. but in our case, we didn't look at inversion. we didn't believe we needed to. we didn't believe that would be a good move for us. we were more concerned about the underlying strategic breadth to the business. to be honest, i think probably medtronics felt the way way. we're competitive, happen
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imcompetitiimkp -- happily competitive. >> why are you buying st. jude now? was it something that previously could not have been done? were they not done? >> you know, we didn't talk to them before, david. we never had any contact with them about this sort of thing until just before the end of the year. we didn't have contact with them about that. we've had a relationship with them commercially for some time. what we've seen over the last couple of years is the manner in which customers, particularly in the u.s. buy now or make selections of vendors is affected by the breadth of your product line and the strength of your product line and so forth. and that's changing. the competitive landscape and purchasing landscape, et cetera, in the united states. so that was a big factor for us. secondly, we've known st. jude or known their products and known about them for a long time. my view is this is the right timing. in fact, i think the timing is
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just right. they've had some lower growth and flat years until recently until they made a terrific acquisition and they have a lot of new products coming over the next few years. we're going to see a lot of that go to market and launch. i think the timing here is just right. we've never been a company that kind of ran with the herd and i've never telegraphed where we're going from an m&a standpoint or strategic strand point because i don't want to tip off competitors and so forth to what we're doing. almost to that exception, every major acquisition we've ever done has surprised our investors and it takes them a little time to absorb it. you look back a year later and everybody's a little happy. i took a lot the heat when i did the canol deal 15 years ago and that turned out okay. the world questioned why we
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invested so heavily in india and that turned out beautifully. i think part of this is investors maybe being a little surprised or surprised at the timing but i don't think they'd deny the strategic fit. from my standpoint, the timing's perfect. >> you mention of course your track record, which has been a strong one. in part perhaps they were surprised in the timing because you also have a large deal out there to acquire alear. i know you're not talking about it, some of the investors in olear are worried you're going to walk away from this transaction. why won't you give them comfort and they will them you're all in? >> everybody wants to put a pretext or premise or some assumption in a question and then try and triangulate on some question they've got. o'leer is working through its issues. it's not appropriate for me to comment on that and i've said
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not appropriate to comment. at the same time i said we have contemplated in our financing the ability to close both deals. murp murphy's law, same time. the timing of st. jude perfect and we have the capacity, we have the financing capacity, we have the ability to maintain investment grade credit and that contemplates both dreams and frankly right now that's as much as i can say about it. >> the reason you can't speak is because of the fcpa investigation or revenue recognition issues? you don't feel you can weigh in? i'm just trying to understand why. >> you're relentless. >> some people would call me that. >> i'm calling you that as a compliment. it's just not appropriate for me to say more. >> all right. >> miles, good to talk to you. all those things that miles said people liked, they made fortunes for people.
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>> david is relentless is takeaway. i think you guys are relentless versus relentless. >> mentioning the track record they have, it's a milestone. >> this guy has historically been the best. >> he was right about saying we have a target-rich environment. this month for u.s. health care, mao tse tu m&a is the busiest since july. >> i have to say evercore, and they're not even helping me out, but they've been advising a lot of deals. >> you're relentless in getting them to helping you out. >> they are not helping me out. let's go to dreamworks. they didn't have anybody, we don't need no stinking bankers at comcast, we got our own.
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we got cavanaugh and a bunch of guys -- >> who can get a deal done in two weeks? >> don't look at me. >> we can. you always can if you're willing to pay a really high price. now i'm walking a tightrope. i could be not here tomorrow. but i'll go down that road a little bit. people are saying the price is quite high. the market yesterday had come to its own conclusion given that the price would be lower. you can see up another 25%. deal expected to close toward the end of the year, they're talking fourth quarter. and steve burke talking about all the different opportunities that they see and, in fact, she's with us. so let's get to julia, find out what burke had to say. julia. >> thanks, david. i just got off the phone with steve burke, ceo of nbc universal. he said this deal is really about growing three parts of nbc's business. it will help them build on the
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success that illumination has had with the mignons franchise and help grow the theme parks and consumer products business. he talked about shrek saying those characters will be a big deal. the price tag, a heft he premium, burke pointed to the fact it should be based on dream woshs assets and cash flow alone because of the massive sinner jif potential. shifting from fox to universal, there are massive synergies to be had in integrating the two businesses. as for katzenberg's role, burke says while he has huge respect for katzenberg and the studio he built, because this is so much about synergy, it does not make sense for katzenberg to oversee
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that business. it makes more sense for him to move into a role where he has particular interest. just one quick note based on conversations i've had with a range of media insiders, this really seem to be taking a page from disney and the success that iger has had buying and creating media assets across multiple platforms. >> i remember pixar giving iger a hard time about it and that deal paid off so quickly. >> you were relentless about that. >> i was questioning because the multiple was very high and that has been nothing but money. >> chris meladandri is essentially going to bes mignon guy. that dovetailing is huge. >> what do you say about that?
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mr. walenda. he walks a tightrope. >> you want to see me fall? is that what you're looking for? you don't want to not see me here in the morning. >> every day one new person joins twitter. maybe two. through there's three new people on board on twitter right now. >> right now a billion people are watching facebook. >> facebook picked up a million people during our show. twitter lost three. >> what are you going to do on "mad money" tonight? >> i don't even know. will you give us a break? i'm focused on this show.
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domin dominos, communication is not keep. >> texans -- >> i love the texan quarter. they have four parts in napa phone, four parts in this. they managed to just get away from being captive to apple. >> when we come back, the cfo of ups. don't go away. ♪ i could get used to this. now you can, with the luxuriously transformed
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good thursday morning. welcome back to "squawk on the street." premarket was weak on the back of the bank of japan but the nasdaq has just turned higher, largely on the back of facebook, a 9%, 10% gain over there. a slew of health care mao tse tung -- m&a. we'll get to that later on. >> and multiple deals and it's the busiest day of earning season, dow chemical for this morning, facebook crushing expectations last night and ups
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cfo on why they might take a $4 billion charge for pensioners. and dreamworks finds a buyer, our parent, comcast, buying a production company for nearly $4 billion. more on that deal in entertainment ahead on the show. also ahead, the ceo of priceline resigning after an investigation revealed a personal relationship with an employee within the business. details on what's happening inside priceline still ahead. >> shares of facebook up about 9% after the company's revenue soared on advertising growth. with us this morning is morris mark, the president of mark asset management and a facebook shareholder. it's good to you have back. this morning. >> good to see you, carl. >> we were looking at sequential q1 mau auditions. are they dominating in the past couple of years? >> the growth becomes
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self-reinforcing because if you're on it and your friends are on it and they keep telling you you want to become friends this with person, it's almost essential that you participate just to know what's going on. it's a very, very powerful franchise. >> 50 minutes engagement this morning. one of the sell side firms asks is 50 minutes just the beginning? how sticky do you think this platform could be? after years of people wondering whether it was entering the days where it would no longer be cool? >> i don't know if it's cool. i just think it's really useful. i think the time spent will go up, as you do more with video, video tends to engage you longer, more intensively, and they find things that are more interesting. you've got articles that are just being put into the system. so if you get more of your news and it's more relevant, once again you don't have to leave.
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i think that the time spent will go up and i think the key thing is that this is international. it's just not united states, it's not just north america. it's amazing. >> so, as a long-time media invention, if this is a first stop for people to consume media and old media can't compete, what do you say? >> we still listen to the radio and there are still movie theaters. but the way i put it is electronic media is more interactive, it's more personal, more direct. it becomes a bigger and bigger part of your time and a bigger and bigger part of your life. even though they didn't get the nfl, i would expect over time you're going to see more and more live content directly on social media. >> is that a threat, then, to the providers of that content right now? >> i think if you own the content, it's great. i just think that this is a
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better way in a mobile world and a world where you can connect, you know, using good devices, both your video and your mobile screens. >> morris, has mark zuckerberg earned the right to propose something like these class c shares? >> absolutely. the way he's doing it is intelligent and he's showing his interests and yours are going to be intertwined for quite some people. >> he talked about the very ambitious, strategic moves, are those moon shots, to steal a google phrase. >> i don't think you want to forget messenger and what's app.
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facebook and instagram are group sharing. that's finding out what your friends are doing plural. messenger apps are a better way over time of interacting with your friends and individual businesses. you've got a prototype when you look at we chat in china and ten cent. i think what they're talking about and the level of exposure and involvement and engagement that they already have, unbelievably impressive. >> one last question. i don't know if you own any twitter -- >> no, we don't. we definitely don't. >> i'm reading into your voice. would you touch it at 14? >> i don't know. you have to look at it in terms of its franchise value. i would say it would fit great with google but i think google's hands are probably tied with respect to significant ak which significa -- acquisitions at this point. they have to resolve their
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issues with the eu. and that i think i'd take a look. >> morris, it's great getting your point of view. thank for coming by. >> thank you. >> down 45 points at the moment, the market digesting the economy grew at its slowest rate in two years and if held constant would give us a gain of just 0.5% by the end of the year. steve, this is shocking here. i know it's below expectations but given that the markets is just shy of an all-time record, some might be questioning what is going on here. >> we've been tracking the decline in the quarter for over a month. we started with this expectation for 2.3%. it's come steadily down with each report. i counted six or seven reports
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in a row that really ticked off gdp points until yesterday. we got one bump up for a bad reason because of trade. i think the market was prepared for this, which is helping to explain the market's reaction. and another aspect of this i think is that the market is looking through this. this is a pattern of first quarter weakness and there's pretty good agreement that there's at least some seasonality in this, some problem that we've had for a long time. and it has paid, i cannot guarantee it will pay in the future, it is paid to play a second quarter rebound. what that will mean for companies, they had this very, very challenging first quarter. when the pie is small, it hard to grow earnings. a lot of expectations for a 2% rebou rebound. >> my question is to which the ceos to blame for not investing. the nonresidential fixed investment is down 5%. is that because of energy or something else? >> there's a big piece of energy
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in there but the non-energy companies are not stepping up and investing. it's troubling short term and troubling long term for the economy. it's something that creates challenges in terms of gaining productivity and efficiency in the future. what happened in the first quarter, that big swoon we had in january, economists think it took a hit out of two things. it may be waylayed some spending plans. >> ben? >> we've seen a major risk at the expansion. at the beginning of the year it was global improvements. that's improved, financial conditions have broadly improved. i guess the risk has transformed into one where the economy, after two disappointing quarters has decelerated and is approaching what some consider
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to be its stall speed, the rate at which it's vulnerable and prone to adverse shocks. i think that's pretty much the rain risk out there right now. >> through that you would drive what message for the equity market? >> i think benign, slow, positive would be all adjectives i'd use. let me add an opposing perspective to those big down side risks, which is that this might be the longest and maybe the most disappointing expanse on record for the u.s. economy. we've had a global growth that is very slow and disappointing. we've had the vestiges, all of which has put us on an even keel and it's going to go longer. >> the economy is on a short leash. i think they're willing to give some exception to this fourth quarter weakness, but if the early data that we get for the month of april does not begin to
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show a turn around, i think people are going to turn tail. >> i want to ask you before we run out of time completely about the inaction about the doj, should that worry they're doing nothing saying it's up to you? >> there's the fiscal lever and monetary lever. it's fair to say the fiscal lever is being pulled. you know, policy makers on the policy said that's where it is.
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>> this morning, $41 in cash is the share price. it had dreamworks stocks settling in the $42 range. the $41 price tack represents a significant multiple to ebidta in out years. comcast is telling investors when you look at it from the perspective of adjusting for those synergies, you can get down to a high, single digit multiple to ebidta, which will be perhaps more powerful for those investors. the sale of dreamworks, a momentous occasion for jeff rre
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katzenberg. in this deal, he will not be a part of the company. he will stay on in a consulting role but will have no day-to-day management of dreamworks as it is consolidated within the animation/universal universe am comcast. of course the commonwealth itself expecting -- you heard from julia borstin earlier, the company expecting benefits in china, to benefit extending to even the theme park division where new attractions could be created off the backs of various characters and the like. certainly an important moment for the 65-year-old mr. katzenberg as he says good-bye to his baby, not without a big pay day, owning 9%, 10% of the
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outstanding shares. he controls the company and will vote in favor of the deal. no worries about that. the deal is expected to close late, let's call it fourth quarter of this year. and while it is big news, it is still not that large a dollar price. consider for the moment while comcast may get some heat on the price itself, it still represents probably less than half of what the company may spend in the incentive auctions and things of that nature just on spectrum alone. can you see dreamwork stock reacting quite positively and unexpectedly so to that $41 price. simon? >> thank you very much. ups is out with earnings today beating on both the top and the bottom line but the cfo is warning they could take up to add 4 billion hit if the central state's pension fund judgment goes a certain way next week. the cfo will join us after this break. ict arnold, the infamous traitor.
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. >> ups is warning it could take a hit of almost $4 billion if the central state pension funds moves towards slashing payouts next week and if they are required to make up shortfalls on those payouts.
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its cfo joins us, richard peretz. richard, welcome back. nice to see you again. >> good morning, simon. nice to be here. >> are you able to strip out the two effects of what the economy is doing in the first quarter for you and the structural growth that you're getting in e-commerce? >> simon, i think the big thing here is that while the economic indicators all come down at the beginning of the year to where they are today, there still is some growth. what really is driving ups right now is of course e-commerce and the features and services we've added to enable e-commerce to be more efficient. our cost per piece is coming down and we're creating great economics for e-commerce today as we hit expansion of margin that was driven by access point and some of the things we've talked about with you in the past. >> we always talk about international. where are you on international
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now? and is that being driven by what you're doing with the business, growing the business and investing in the business abroad? or is it more about export growth in the areas in which you operate? >> you know, overall internationally, it's really two pieces again. it's what we're doing within our network but it's also specifically looking at the yields in our revenue. we actually had some of the best yield revenue growth per package in international this year, more than we've had over the last two years. it is being driven by exports across, mostly within continent but it's all driving to an operating margin expansion and improvements on the revenue side and on the cost side. >> richard, many people will have seen some of the pensioners protesting yesterday, hundreds of thousands of them. it's a complicated story. essentially we're going to get a judgment as to whether or not they cut pensions because there
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isn't enough money in the pot, if you like. can you just explain why you might have to contribute $4 billion in that. for many shareholders, that will be something of a revelation this morning. >> yes. so, simon, i think the first important point is that it wouldn't actually be a contribution and it still has to be planned before any numbers would be finalized. but the essence of the arguments is that, first, there is a plan in front of treasury, second that it disproportionately impacts ups employees and third that we don't believe it follows the pension reform act of 2014. we're urging treasury to reject it, if not, we'll follow our legal proceedings. we did post a presentation to our web site this morning for
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anyone interested to be able to look at that and understand the issue. >> right. i do just want to try and keep as many people on board here. effectively you paid over $6 billion to exit the plan, correct, in 2007, but you committed at the time that if the benefits had to be cut from former employees further down the line, you would step in and make up that shortfall. so presumably there's the relationship with many of your former pensioners there, is there? >> it was the active employees at the time that we separated that are impacted from this agreement. it was a back stop provision that if benefits reduced, we would make up the difference. the interesting part of that is in 2008 when this was done, there was no laws to allow for a change in benefits once somebody was a pensioner. so what's happened now of course is seven years later congress passed a bill that allowed for a restructuring. the important thing is whether we left that plan was that ups money needs to go to ups
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employees. when we looked at it in 2008 and even when we look at it today given everything that we understand, it was the right thing to do then and it's still the right thing to do today. >> finally, richard, i'm curious. what kind of grade would you give amazon in their efforts to develop their own distribution? >> you know, again, amazon is an important customer but there are many important customers at ups. and every one of those customers have a different piece of logistics in house and other parts inside they hire companies like ups who do a great job of fulfilling for them. and we expect that for many companies, we'll continue to do that. up know, it would be hard for me to grade that. what i would grade is that we do a great job for them in the part of the fulfillment that we do and we continue to ensure that we're having a mutually beneficial relationship for both parties. we think that's what's important when we think about any large
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customer of ups's and any large customers at all. >> thank you, richard. richard peretz, cfo of ups in atlanta. >> and then this priceline story, we haven't gotten to it yet, darren houston stepping down after misconduct at the company. we'll take a look at what's happening inside priceline after a break. [ soft music ]
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e.t. phone home. when you find something you love, you can never get enough of it. change the way you experience tv with xfinity x1. welcome back. what a morning for m&a, the largest deal we've seen this morning is abbott's decision to buy st. jude. of course device maker for what was a deal worth $85 a share when it was announced this morning. some $25 billion bringing together of course a significant player in that area or in the diagnostics area in particular for the heart. the $85 price tag is 4,6 4 46.7
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cash and 0.8708 in shares. they're talking about the deal be be being accretive as much as 21 a share in accretion in '17 and up to 29 cents a share in 2018. the company is also ins process it seems of acquiring alear. abbott will fund the cash portion of the deal with a debt offering of a medium and long-term debt. this goes to one of the key themes overall in m&a, incredibly cheap debt markets are allowing the ability to
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borrow at very low rates. when you're paying cash or largely cash for a company, it's almost always going to be an accretive deal. that has been usually deading to the acquirer's stocks going up. that is not the case for abbott. and a decision in dispute, sonofi's decision to essentially go who is still to acquire medivation. they sent a letter on march 25th indicating its willingness to pay $52.50 a share to acquire medivation. it decided to come public. it said we don't understand the delay in responding to our letter originally. price we put forth represents a very substantial premium.
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it will be all cash, no financing conditions and in these circumstances we believe it's appropriate to make this letter public, which we are doing today. it is not often that we see cross-border hostiles. sanofi did see one with genzyme. the reason why you're seeing medivation stock not up that much is because news of this potential interest leaked a couple of weeks ago. there is the expectation that either sanofi will go up or there will be another potential buyer as med i vags looks to
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defend themselves. >> david, it takes us right to art. some of these companies either see value or are desperate for top line growth. which is it? >> i think it's trying to get the growth together. it's been a slow recovery globally and it's been difficult for some of thooefs companies to really put it all together. they look at something to complement their product line, if you would, and try to add it in. let's not forget, money is still very, very cheap, and there is some hint that eventually that might change so let me spend it while i can borrow it for free. >> you do not see june as likely, though, do you? >> absolutely not. >> why not? >> if you look at the wording, we've gotten obscured by the bank of japan's move but i think that wording was particularly cautious and they removed some
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things about offshore risk, but they also removed a couple of other things. they talked about in the march report some signs of inflation perking up, they took that out. and it seems to me that there's a great deal of caution at the fed and i'm still with the idea that they may not hike it all this year. >> and finally you were shocked by japan? >> absolutely. absolutely. not only did they do nothing, but they lowered their estimate of where their inflation would be. so that's puzzling. now, next month they're going to be hosting a g-7 conference. so i think they may have decided to postpone until then, maybe work everything together, explain to the other nations where they're going and what they're trying to do. at least what's the only thing that makes sense to me. >> thanks, art, good to see you. let's get to sue herrera for a
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cnbc news update. >> investigators trying to find out who is behind a deadly attack in syria. at least 14 doctors and patients were killed after a direct air strike leveled a hospital specializing in pediatrics. doctors without borders reporting at least two of the eight doctors working there were killed in last night's attack. >> back here in the u.s., a house committee narrowly passing a measure to make women register for the draft. the bill was intended to open a discussion on gender discussions in the military. >> and wall street is forecasting a final bill will be higher. >> and take a look at the dent
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in the american jetliner's nose. no reports of any injuries, except perhaps to the bird. that does it for the cnbc news update this hour. simon, back to you. >> wow. okay, sue, thank you very much. will the massive farmer deal trigger more consolidation in the space? that's ahead on the show. we'll hear from bill george. and also his take on the news the priceline ceo is resigning after having a close relationship with an employee. h! berr, der berrp... i help pay the doctor, ain't that enough for you? there's things major medical doesn't do. aflac! pays cash so we don't have to fret. something families should get! like a safety net! even helps pay deductibles, so cover your back, with... a-a-a-a-a-a-a-aflac! learn about one day pay at ♪
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. much of the travel industry rocked this morning by the news that darren houston who for four and a half years has run priceline, or at least its major division, from amsterdam is resigning after having a personal relationship
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that the board considered to be appropriate. the employee was not under his direct supervision but the board deemed it inappropriate. the interim ceo becomes jeffrey boyd. darren huston is an interesting person for many in the travel history. he was darrell schultz's right-hand man and then moved to microsoft where he led microsoft japan and led their global consumer operations. he moved over to, which is priceline's heart and sole based in amsterdam. he is 50, he is married and he's done a lot for the business. if you have a look at some of the stats as to what he's been able to do, he's almost trebled the number of employees during the time, took the market capitalization to $67 billion, a
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three-fold increase in the number of room nights that are booked and this of course is the ultimately the real profitability center of these online travel agency, your ability to sell those hotels online with potentially a 20% commission going through there. as i said, the operating profits up substantially as indeed was the gross profit. jeffrey boyd having been the ceo and chairman for some period of time. bo boyd is based in connecticut. the new ceo is open to question. for more, bill george, professor of management at harvard business school and indeed a cnbc contributor. good morning to you. thank you for joining us. >> thanks, simon. nice to be back with you. >> this employee was not
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ostensibly under his direct supervision. why then would that conflict with the normal code of conduct within an industry? simply because ceos are not supposed to have close relationships with any employee? >> exactly. i think that ceos, everyone is under the ceo. it's not just their direct supervision, but they have power over them and they have this code of conduct and i respect the company to follow its code. but having said that, i know darren, he came to our ceo program five years ago when he first became ceo, he is a terrific leader, a great marketeer, he understands the digital world, it's a huge loss for priceline. they're fortunate to have jeffrey to step back in but i assume it's short term. i think it's a tragedy for darren and it's a tragedy for the company. i'm just very sorry that it happened. >> when this type of thing becomes before a board, is there any leeway? if you really like the guy and
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he's really successful, is there anything the board can do or is it essentially a rubber stamp and everyone says good-bye. >> i think the ceo has to be treated exactly as everybody else. you can't as ceo be disciplining mid-level employees for conduct and not hold it to yourself. you have to be held to a higher standard at ceo. you saw a situation in the past that got in big trouble for boeing. i just think people have to hold the ceo if not anything, to a higher standard of context. good for the board for following its policies but very sad for darren. i think he's a terrific leader and i hope he'll come back on his feet. >> bill, moving on to more typical news of the morning, i'd love to get your take given you ran medtronic on abbott's purchase of st. jude. does it make sense to you and do you feel it will be a successful deal? >> not more typical.
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this is a very special deal. i give miles a lot of credit for getting rid of his farma business, which was not a strong pipeline and strengthening the diagnostics and particularly the medtech. now he's making some bold moves and st. jude, as up know, a very strong line of mechanical valves that have pacemaker and defibrillator business, they've done well as number two and three competitor to medtronic, they're distant in market share but they've worked hard and done a good job. but i think miles is bulking up and i think this is going to trigger a lot more consolidation in the medtechnical space, with
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medtronic with its covidian acquisition. striker's done some smaller deals, you have smith & nephews, you have edwards, outstanding company. i think you're going to see a lot more challenging. i'm not saying they're going to sell out but could you see more consolidation in the industry. >> medtronic converted and that makes a little buiit easier. do you think that played a role in st. jude's decision to sell itself? >> quite possibly it did but i think what really played the big role is you have all this consolidation going on on behalf of the buyers and they're getting bigger and bigger. look at the health plans, how they're consolidating. so the big providers are saying we can't just have a big line of product or couple lines like st. jude had.
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abbott had to get bigger. miles white, 16 years ceo, he made the move. even though the stock is down today but if they are frul accretive next year, the stocks will be rewarded by it. now miles has a strong way to compete, which he didn't before. now he does. >> we don't hear you saying valuations are getting frothy yet. >> yes, 50%, it's getting frothy. as mentioned earlier, the cash makes all the difference. the fact that cash is so cheap today. okay, he's doing little stock here, that's fine. but this is a high-cash generating industry. the companies generate a lot cash. medtronic used to have a lot of its cash trapped overseas. now it has access to that cash to do more. that is a huge advantage to reinvest the cash. i am just a strong believer these companies have to invest
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heavily in r & d. i don't like the non-r & d companies like valiant. that's a whole different tier of company. these are quality companies, all the ones i mentioned on this show are quality companies and you're going to see i think them finding ways to work together. another great company out there is boston scientific. these are all great competitors. i think you'll see some interesting things ahead. >> it's always a pleasure, bill. thank you for your time. bill george joining us on a multiple of subjects. coming up, the man at the helm of the conservative think tank will join us and mario is out beating on the top line, ande sorenson will join us on squawk al eley for an exclusive interview.
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milestone. more "squawk on the street" coming up.
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welcome back to "squawk on the street." the s&p -- leading the way is facebook up 9%. micron, paypal and western digital trading higher. tech is still one of this year's underperformers, down about 1% so far in 2016. it is take your kid to work today so i got a little bit of help. simon -- >> back to you! >> there you go. >> that's a lot of children. >> it is. none of them are mine. >> that was my next question. >> still got to get married. back to you. >> okay, okay. down 43 on the dow. let's get to rick santelli. thank you. >> thanks, simon. i'd like to welcome our guest on this thursday, douglas
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holtz-eakin. thanks for taking the time. >> thanks for having me. >> first advanced look at gdp, some internals, consumption, personal consumption expenditure. give us your take on this morning's data. >> the big picture is simple. if you grow too slowly bad things happen and they knock you down. the only good news is it's above zero. you can look at pieces above the inventories and say we get another 0.3%. we need a stronger trend growth, we don't have it and you're going to get quarters like this as a result. >> sometimes in life people think about many things they never say or never enunciate. let's go there. the world has increased by 67 to $60 trillion in debt.
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if you look at all the papers being written. we're quibbling over maybe a trillion and numbers are roughly correct. can i totally understand why central banks to create higher pricing structure or inflation. otherwise the debt is too expensive. is there anything in that argument that you would agree with? >> oh, i think we've seen this big debt overhang, harm economic growth. there's evidence can you get large amounts of growth relative to your economy. you grow more slowly, there's a penalty there. so ten tral banks, wheth-- cent going to push up deflation and there might be a way out of it. a better way out of it might be pro-growth policies so central banks aren't trying to do too much. the core inflation is 2%.
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unemployment is at 5%. >> now let's pick it up from there, doug. if that's true and think japan today, up from there, doug. if that is true, and think japan today, are we seeing the first signs of investors truly nervous about the amount and the lack of the efficacy of the current policy whether it is ultra low rates, inventories of the securities, managed market, because it is to e e m it does not seem, doug, that the central banks are going to stop unless they are forced to stop, and are we seeing the early signs of that, and your final observations? >> i think. so i mean, we saw a big equity market correction in the beginning of the year when the fed mentioned raising the rates by 25 basis point, but the investors are looking around to to see that the valuations are driven bay reach for the yield, increasingly risky positions, and fueled by cheap money, and this is is not a foundation that is built on the real growth.
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once you start to coming to the realizations, you are trying to get out of the position, and we are starting to see that around the globe >> doug, thank you for your comments and thoughts on today's market, today's data point, and the state of the central banking. simon hobbs, back to you. >> rick, coming up on the program, we are live from china in the country's manufacturing hub where they hope to become the global leader in electronic vehicles. what stands in their path? that is ahead, next.
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facebook earnings impact with tech stocks under siege will
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will china lead the world in electronic vehicles? they are pumping big subsidies into the sector hoping to do just that. and phil lebeau is in shenzhen chi china. >> we are here because this is the home of byd automotive. we have spent time with the folks looking at not only the assembly process, but the battery production and over
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60,000 electronic vehicles were sold last year, and they are hoping to double the sales this year, and expand the production, and two things are prompting the growth of electric vehicles're in china. there are federal and local incentives for often 15, $20,000 and direct rebate to the people who buy the electric vehicles, and also, if you buy an electric vehicle, you will get your license plate immediately, and registered. you don't have to wait for the auction or the lottery, and that is one reason when we talk to the executive at the byd they are bullish on the growths of evs over the next 10 years. >> and so with the particular year 2020, there will be 10% of the new sales car will be electrical. >> and yes, china has surpassed the u.s. in terms of the
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electric vehicle sales, and last year 188,000 were sold here, and that number is going to go up substantially here, and just 116,000 in the u.s. last year, but clear ri as tes-- clearly a tesla and gm ramp up the growth, it will grow. but make no mistake, china is plugged in evs. >> and thank you, phil lebeau from shenzhen, china. and now over to jon fortt. >> well, trading is touching all time highs on the earnings upside last night, and what does this mean for the tech overall? can facebook continue to turn in these kinds of growth numbers? also, we will take a look at the comcast, our parent company, buying dreamwork, and what does that mean for the content business, and what does it signal? and further, the tech wipeout, and everybody can't be facebook. what does facebook signal a
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silver lining for certain stocks? we will have all of that coming up on "squawk alley."
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this just got interesting. why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night.
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tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card legendary market master and berkshire ip vnvestor one-on-on with becky quick at the buffett's annual shareholder meeting on "squawk box" tomorrow on cnbc. good morning, it is 8:00 a.m. in the headquarters at a menlo park, and 11:00 a.m. in
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new york. we are live with "squawk alley." ♪ welcome to "squawk alley" and what a morning it is kayla tausche and john blodgett and fou founder and insider, and the market has repaired some bad losses from the premarket, but we will start with facebook, the shares are it hing a new high after profits and earnings top the estimates and thanks for the strong gains in the mobile ad business and revenue of facebook is up 57% year over year and gaped more than $30 billion in market cap today, a


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