tv Squawk on the Street CNBC October 6, 2014 9:00am-11:01am EDT
there welcome back. >> thank you. >> good to be back. >> it was really, really cool. i love -- i love scotland. glad they stayed i guess. >> beautiful. >> make sure you join us tomorrow. "squawk on the street" is next. ♪ ♪ good monday morning. welcome to "squawk on the street." carl quintanilla with david faber, sara eisen, simon hobbs. market hire all over hp news. earnings seasons kicking into first gear later this week. road map begins with hewlett-packard, splitting itself into two publicly-traded entities, one for pc and printer, one for services. hp's chairman and ceo meg whitman will talk to faber exclusively in moments. >> hp shares are higher this morning, but so are the market futures. indices looking to exstand a rally off of lack week's
employment report. >> the bailout trail back in court. bernanke, paulson, geithner expected to take the stand this week. a live report from washington. >> and bitcoin loses a fifth of its value over the weekend. we'll explain why and what it can mean now for future of a controversial crypto currency. >> first up, shares of hewlett-packard jumping in the premarket. confirming the company will split itself into two publicly traded companies. services businesses take the name hewlett-packard enterprise. david's going to have a live interview with hp's chairman and ceo meg whitman in moments from now. we'll find out when this all began and why they couldn't have done this a few years ago. >> a lot more detail. you know, carl, for broader takeaways here, it is interesting focus on of course following announcement from ebay last week, and you know connection between these two companies, john donohoe taken over from meg whitman as ceo at ebay. and also in the interview i did
with him last week, citing so many of the same reasons that meg whitman cited to me when we were able to speak late last night about this perspective split, namely agility, increasing speed of the marketplace in terms of responding to needs of customers. one has to wonder with ebay, with hp, a much more significant split, creating two fortune 50 companies, whether going to see other companies perhaps consider it as well. this whole idea of creating more agility, creating more focus, so many things that you hear will that translate into other companies that also feel now is the time? activism, i think that it plays a role on both sides here. ebay we had an activist, carl icahn, beaten the first time but might have been another activist, perhaps at ebay. here the activist was chairman of board until not long ago until he had to resign due to health reasons. the shadow of activism is
casting a long oning activism is casting a long shadow, i should say, over boards who have perhaps are feeling more pressure to act, more quickly than they might otherwise. >> does it drive growth? that's the big question. ibm shedding its business. does that increase focus drive growth or a way to ramp up more m&a for each of them? for instance, people looking to emc. >> i don't -- i don't know. i mean i guess we will see whether in fact growth comes from these decisions. let's get to it joining me if an exclus interview, hewlett-packard's chairman and ceo, meg whitman. always good to have you. i know it's been a few long nights for you. meg, we've talked many times, in fact, every quarter, sense you took over as ceo, happily, we have spoken. >> yeah. >> you have talked about one hp often and you have talked about the power of the combined forces
at hewlett-packard. and now, of course, talking about the combined power of having separated them. and so i'm left to wonder, as others are, admission in some way your turnaround has not succeeded? >> actually, quite the opposite. today is only possible because the turnaround has succeeded. think about what we have accomplished over the last three years, a rebuilt balance sheet, an innovation pipeline that is significantly improved over three years ago. i would argue best in class in the industry now. inspired workforce, new leadership team, renewed confidence of partners, customers, shareholders as well. but we have to gather ourselves as one hp. but now we're in the position to take advantage of what's going on in the marketplace and position these two companies for growth. they go after quite different market segments and we now have the opportunity to align rewards and results, to respond to customer needs faster with these two big companies.
we're excited about this. i think it's going to be better, offering for customers and partners, career opportunities for employees, and we believe it will create real shareholder value. >> no stranger, of course, to those who followed the company closely, as a possibility. yet you chose not to do it when you took observe, to do it the year after, the year after that. why now? >> first we had a lot of work to do to get hp in fighting shape. a tremendous amount of repair work, gathering ourselves to be able to compete in the new world order. and now, the time is right as we think about what is the next phase of this turnaround? we're in year three of a five-year turnaround. your call that fy-'15 was an accelerant year, we think the best tactic to continue the turnaround journey and position hp in into great new companies that are real scale and have a chance to make a difference on a
go forward basis. before a few months ago we were not in the right position to do this. this is a very big undertaking for a company of any size and scale. we now have the leadership to go to market, the innovation engine, the balance sheet, and the confidence of our various constituencies that allows us do this. so, it is the right time now. and it wasn't when i first got here. i don't even think it was a couple of years ago. >> well, you know it's funny, it may not have been as little as six weeks ago, you and i were sitting on this very set, talking about your most recent reported earnings. and i asked you, you know, what about the idea amongst your board, perhaps, that if the turnaround doesn't work, will you consider splitting the company? here was your answer. >> our objectives to execute the turnaround strategy that we laid out three years ago and we're working very hard on that. but as i've said to you before we obviously have to prove that thesis. but we believe providing end to
end solution for customers is a very important value proposition. so, again, we've got to prove thesis but feel good where we are in the turnaround. >> so, meg, did you no longer prove the thesis that providing an end to end solution for customers is a very important value proposition? >> listen, we think this is the best alternative for our customers and shareholders. the market has changed dramatically in terms of speed, and we're in a position now where we can pursue the turnaround to hewlett-packard, by the way the brand remains on both companies in one form or another, and we're in a better position to get focus companies who can respond more quickly. think about this for a second. the competitors for printing and personal systems business are almost entirely different than the competitors that we face in our enterprise group, our enterprise services business, and our software business. so more focus, more agility, tying rewards to results. we think is going to make a big
difference and propel us on the next level of the journey on our turnaround. we're so pleased with where we are today because, as i said, if we had not done the hard work, if we hadn't executed the turnaround as one hp, we wouldn't be in a position to take advantage of the next opportunity. >> you know, meg, i'd like to explore this idea of the speed of the marketplace because it is something i heard from john donna hand, the man who replaced you as ceo at ebay, last week in articulating the reasons to split paypal and the marketplace business at your old company. what does that mean when you and he both refer to the speed of the marketplace increasing? give our viewers some sense to what you're talking about in the real world. >> yeah. so every 10 to 15 years in our industry there are big, enormous tectonic plate changes where things speed up, profit pools are in play, new competitors emerge. you can go all the way back from the mainframe to the client server environment, client server to web 1.oh i had a front
seat at revolution i saw the speed happen. from web 1.0 to web services, and mobility, we're on the cusp of another enormous change. everything about how compute is being bought, paid for, sold, applications are written from, you know, a licensed model to a sass model, how employees and customers interact with technology. and you can just see the pace of change. and there's technology that is enabling that change that wasn't available four, five years ago. whether that is cloud or the ability to take huge data sets and gain insight. so we have to take advantage of those changes. and if you're not careful, you'll be disrupted and you've got to stay on your toes and be able to respond much more rapidly when the industry is in a more normal state. and that's, by the way, great thing being in technology. but you've got to be set up to go grab those opportunities and make sure you're on your front foot. >> right. to be fair, though, you may say
these two companies will be more agile, but they're enormous, talking about enormous employee bases and 57 billion in revenues on one side, 58 billion on the other. are they still too big to be able to response to the market opportunity? >> no, they're not too big. the good news is they still have scale, distribution scale, purchasing scale, go to market scale, but they are now more focused, first, hp, hewlett-packard enterprise will be completely now focused on the enterprise space. really on the strategy around new technology for enterprise, while the printing and personal systems business will be some consumer business as well as the enterprise business, but in the device and printing area which has different characteristics. by the way, both companies have incredible innovation road maps and he i think they'll be able to pursue road maps better than we are currently configured. and you have to remember, continuity of leadership is an important thing here. i'll still be the ceo of
hewlett-packard enterprise, and i will be the nonexecutive chairman of the board of hp ink. i'll make sure where there are insert gis that we can take advantage of, whether supply chain other things we'll take advantage of that, but where the companies are better served to go 100 miles an hour against respective markets they'll be able to do that as well. >> meg, you've talked about fiscal year '15 as being year after acceleration in the plan you put in place three plus years ago, a five-year plan. in your earnings call this morning, and associated materials, you've indicated it's going to be a flat revenue year in fiscal '15 versus fiscal '14, constant currency headwinds but flat. was that a reason that you're not photog see that acceleration that you are now pulling a lever of the splitup? >> no, it wasn't. yeah, we said that 2015 we'd flat in constant currency
without enterprise services the company would grow. the revenue growth was not at issue here. really it was, what's the best way to set businesses up to compete for the long term? how do they become more focused competitors with a customer focus that is unique to the markets in which they serve? so, we actually have a positive outlook for 2015, and we, you know, think these companies can grow and beyond 2015, into 2016, 2017. so the revenue flat revenue 2015 was not part of the equation. >> it was not. so it wasn't as though -- >> no. >> we're not going to hit the original goals i set out years ago, therefore we've got to do something else? >> no, no. this we undertake a strategic review of the company every year with the board of directors and we had seen the market change, we had seen how much stronger we are, how much stronger the company is, how our go to market capabilities have improved, innovation engine and felt like this was the right time to take
advantage of setting up, too, as you said, scale companies but more focussed and more nimble. >> meg, separately, but along with today's announcement, you updated us on your restructuring efforts, which began in 2012. under that plan originally 36,000 targeted lay-offs, you moved to 45 to 50. now today you're at 55, another 5,000 potential lay-offs at hewlett-packard. is there going to be more from here? i would think particularly when you have you leading one company and another leader of the other company focusing on those employment ranks, is there even more lay-offs to come beyond this additional 5,000 for hp? >> well, pleat give you the context of the reshaping of the workforce at hp. as you recall, what we've done over the last three years is we have invested in i.t. systems, redesigned processes, we have changed our go-to market, we have focused our r&d while we
have at same time r&d spending increased. we are seeing results of the i.t. investments in that business process re-engineering and even more opportunity for efficiency. and efficiency is another watch word for companies today. we live in a very competitive market. we have to have the leanest, most effective organization that we can have. so when we see opportunities, we obviously need to take advantage of them. and it makes us stronger and a more competitive company. so, we, i think for 2015 in terms of this restructuring we are done. when you split companies apart, often there is again realignment of the workforce, but we'll see how it goes. we'll know or. we're going to take each business now and say, knowing what we know now, what's the cost vuk tstructure, how to go market, how to leverage the supply complain between the two, and making sure that we set these two companies up to win.
it's one of those great opportunities that you have to really say, what's the right cost structure, right focus for these two companies as they go off to win in their own markets. >> well, sounds to me, from that answer that conceivably there are going to be more job cuts to come for the companies. >> we have to organization the companies to win in the market. we're more efficient than we were three years ago, as you can see, but we have to set companies up to win, that is our mission. >> you were asked on the call about dissynergies. so the question is, what about any dissynergies now as a result of agreements between two sides of the businesses? and, as you say, go-to market power of bringing a fuller portfolio of products to your customers? do you lose any business?
>> so here's the thesis on d dissynergies, recall back in 2011, we were spinning off potentially, it wasn't even a definitive, the company was potentially spinning off pcs, and the biggest dissynergy was the brand because printing was staying with remaining company and pcs going off on its own, there needed to be a new brand for pcs. it's costly to build a new brand. this time we are separating our printing and personal systems business, which is where all of our consumer facing businesses are, they will be hp ink with the blue logo, so they will not have to build a new brand. on the enterprise side, hewlett-packard enterprise. we take advantage of the hewlett-packard brand there. so the good news is, that's one big dissynergy we won't see. supply chain was another d dissynergy, not as big as the brand, but we'll mitigate that potential by having a supply
chain agreement between these two new companies. revenue dissynergies, there may be some because we did get some benefit from going with a full portfolio, but we think that's really manageable. i.t. has to be split, that will be a one-time cost. but this will give both companies the chance to have a clean sheet i.t. organization that is uniquely suited for their business. so, there will be some d dissynergies, but lie tell you the teams are committed to working off the dissynergies as past as humanly possible. it's a different situation than it was august 2011. >> meg, you're going with the hewlett-packard enterprises company, as its ceo. a, why did you choose hewlett-packard enterprises and, b, why not go with a name perhaps that's different on that side? i get hp inc, keep the branding but a different set of customers? why did you choose that side to go with ceo and are you going to
stick with the name? >> yeah we love that name. hewlett-packard enterprises and hp inc both have the strength of the iconic company that everybody recognizes worldwide, everybody loves hp, our customers from the beginning have said we want hewlett-packard to win. so i think that was the right decision. and i decided to, with the support of the board, go to hewlett-packard enterprises because i have a passion for the enterprise. i have a passion for the new things that are happening in cloud, the data, security, mobility, and converged infrastructure. we also had a fantastic executive who has deep domain expertise in the personal systems business and printing business over the last couple of years, deon weissler. where are my skills best suited? where is the breadth of the talent and the board and the management team felt like this was the right answer. and, again, yes, i am going with hewlett-packard enterprises but also, as you know, being -- i
will be nonexecutive chairman of hp inc, i'll make sure that that cup's off to a good start as well. >> finally, you have been in the job over three years, as i've said. you've talked to me oftentimes on air about the complexity of the organization. you know, is this a conclusion, then, based on your decision to split the company and the boards that hp was simply too big and complex to effectively manage? >> well i wouldn't say it that way exactly. what i would say is these two entities are better suited to compete in very rapidly changing markets with two quite different customer bases, even within the enterprise, and and we will be two simpler companies by reducing scale. but i think the major thing is we are strong now because of our turnaround efforts, we're in a position to undertake this, and by the way, it's an enormous undertaking in a way that i know we won't miss a beat with
customers and that we will make sure that we do this in a really planned and thoughtful way. and i think we've set up two companies that can win in the future in their markets and that's very exciting. >> meg whitman, as always, very much appreciate your willingness to come on and talk. meg whitman, chairman and ceo, least for now, and for probably another year or so of hewlett-packard. meg, thank you. >> thanks a lot, david. gra great to see you. >> carl? >> all right. fascinating interview. a lot of people commenting, no matter what you think of her strategic or tactical views, year-to-date of 25%, two years up 258%. you can't argue with what she's done with the share price. >> no. i mean, to the extent that she discusses putting hewlett-packard on the right foot to then pursue this split, you'd have to argues that has been reflected in the stock market. a company that had a great deal of debt and little cash flow,
for example, and now generating a lot of free cash flow. i can give you the numbers. numbers are significant, free cash flow yield, attractive, many would say. that goes to the financial health of the company and the firm footing she's been able to put it on. >> you painted it at the beginning the lead indicator for what is happening in tech. others were doing this, ibm, notably way before. talks about rapid tectonic speed of change in technology, cloud or licensing, and that was not apparent in august 2011, that's not strictly true, is it? they're late to the game on this, david. >> that was a question for ondonohoe as well, when it came to paypal and, come on, haven't you see the future? it's not as though things have change that dramatically over the last year. certainly you could have seen. it's a fair point, simon. if you believe that they truly felt like they needed to get these businesses in a position of strength to be able to do this, then perhaps you
understand regardless of what changes they were see why they close now. >> the stock's down 25% over the last 5 years and from the highs. >> when we come back, which rebel leaders and innovators expected to change the face of business over the next 25 years? the cnbc next list of trailblazers. take one more look at premarket as dow comes off its best day in seven months. more "squawk on the street" in a minute. greenline do for you?ity just take a closer look. it works how you want to work. with a fidelity investment professional... or managing your investments on your own. helping you find new ways to plan for retirement. and save on taxes where you can. so you can invest in the life that you want today. tap into the full power of your fidelity greenline. call or come in today for a free one-on-one review.
let's bring in art cashin over the ubs to talk about the action today but some of action last week. good morning to you. >> good morning. >> the dow had its best day in seven months but the worst weekly loss since august. how much work is there still to do for the bulls? >> i think they've got two challenges, s&p resistance around the 1980 area, 1978, 82, and above that 1985 to 88. they get through those, they can say they've reclaimed the high ground for sure. and move on from there. so from a technical basis, you know, it's getting back to what is resistance had been form of support that was broken in we'll take a break and come back to art after that. very busy week, of course, on that. tag: sooner or later, everyone needs a helping hand,
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>> a lot of fed speak. >> ten speakers, by my count, fed minutes. dealing here with an earnings story for the markets or a macro story? >> you'll shift into earnings, people will look to see not only third quarter results but the outlook for the fourth quarter. here on the floor, there is some lingering concern, not in the markets, about a geopolitical event, and for example, if isis were to move into baghdad, i mean, we still have a very large embassy staff there, over 1300 people, that could send real shocks through the market. we don't think you're on fully steady footing quite yet. >> friday's rally, really helped cut what was a bad week. still second weekly decline, but that jobs report, but was it a game changer as far as u.s. and global fears, the fact that money continues to pour in here as our economy outperforms? >> it certainly encouraged people to believe that the u.s. is still the strongest in the
whole neighborhood. but again, there were distortions in there, out of 248,000, 230 were people over 55. [ bell ringing ] >> thank you very much. good to see you. art cashin of ubs. there's the opening bell. here at big board, dollar general celebrating its 7 path anniversary and over at the nasdaq, new jersey delegation made up of four u.s. congressmen. keep your eyes on movers. david, hp a big one. as you mentioned, will result in two companies with $50 billion in revenue, huge. >> yeah. 48 and 59, i think -- 48 and 49 in the fortune 50. untested ceo will be running one, know meg whitman the nonexecutive chair of h hp inc., the pc and printing business. stock up 5%. we didn't talk about it in our interview but also contending
that the peer multiples on ear side higher than what hp gets credit for and in separating them out and giving them purer play, if you will, they will garner higher multiples to their earnings in the stock market, hence higher price. that, of course, oftentimes a reason for doing splits, although meg whitman did not cite that specifically as a reason behind this. >> talk about care fusion, one of the top gainer, the top gainer, in fact on the s&p 500 at open a big deal going in medical equipment players today. becton paying $58 a share in cash for care fusion, both involved in pumps and cath they ares and ininfusions. the acquire and acquiree are gaining at the open there is belief they're moving into fresh areas to help hospitals better deal with insurers on the one side and drugs on the other and therefore have resources to better manage both and therefore
the future could be brighter for both. you see care fusion, up 24% at the open remember the offer is $58 in cash. >> 6% premium to friday's share price in more importantly to your point, simon, becton stock up over 7%. one of the things we've seen consistently in the market is that oftentimes shares of the acquiring company go up. you can't understate how important that is psychologically to the team doing the deal and sending i signal to other teams that might consider doing a deal, my stock price is going up, i'll be rewarded, and that does build momentum for a busy fourth quarter, at least judging from people i speak to in the industry. they expect it will be, but we'll see. >> certainly for ipos, a lot of ipos for the fourth quarter. >> eight alone this week, including dave and buster's which we think will price on thursday. a lot of you grades and
downgrades. downgrades barclays cuts colgate to equal weight. peers playing catch up, that's down 2%. mcdonald's, cut to equal weight as well. target moves from 102 to 96, talking about weakening fundamentals, market share loss in the united states, even as they do that, they take burger king to overweight, keeping price target at 38. the food business -- >> the burger king upgrade, cite the deal with tim hortons, like the synergies of that, analysts are coming around to than they like that. tim horton is growing and exposure internationally, especially canada, a high point. mcdonald's continuing losing share and that's the analysts' read. they've found it hard to find a meaningful catalyst for a turnaround in mcdonald's sales which the community has been waiting for. >> this consistent rumor of an activist in mcdonald's, but i haven't been -- >> nothing confirmed.
>> i haven't been able to unearth if there is one, who it might be, if there is something going on. certainly something the market keeps in mind, i've heard that quite a bit. don't forget years ago bill ackman was in there, failed largely to get mcdonald's do -- >> what did they do? change the menu in. >> wanted to take owned and operated stores and create a reit, if memory serves. he was involved at the time which he got involved in a couple of other situations, notoriously, jcpenney, which did not work out for either one. >> hanging in there so far this year. >> raised $3 billion in permanent capital, holy grail. >> perhaps push for management shakeups. thompson failed to turn around declining same-store sales growth. >> a big ship to turn around did he get dealt a tough hand?
>> who, ackman? >> no, thompson. >> thompson, it's like following babe routsa babe ruth, skinner had a nice run. keep your eye on hog, rbc ups to outperform, one of the best gainers this morning, reports called keep calm and harley on. he new full suite of products. that's photog result in share gains. think the valuation is reasonable. take a look at oil today, too. 88.74 on west texas, brings to mind ubs upping conoco to a neutral. they cut their price target to 78, saying valuation is closer to peers. but west texas closed, settled 90 for the first time since 2013 on friday. talk about, if you're a skeptic on the u.s. economy, one thing you have to consider is benefits of having energy this cheap in the country. >> it's interesting to watch the energy companies roll out
earnings, revenues unpressure with the low oil gases. they've managed to keep prices up here. energy companies are among the top ormperformers on eps despit the lower oil prices. >> we haven't mentioned german manufacturing. i'm curious to get your take. we've talked about multinationals when jim is with us in the morning, saying stay way from them. the economy's slowing. europe may be in recession. how much do we read into the numbers? >> i don't have the figures but we do have a manufacturing report for germany, manufacturing key for europe's largest economy. >> factory orders amiss. >> but the month before was very good. so if you even it out, yes, it may not be as bad as it look. what's interesting, though, to the point you make, about the broader move that you've had on the dollar here as we go through earnings season. you've got three key policymakers of the fed amongst the ten that are going to speak this week. what they say about the dollar, of course, and the negative
impact on the economy and therefore the likelihood that rates could stay lower for longer may be very important. that may be a key theme, that and wage growth, as they move the goal posts so they don't have to raise rates. >> last three months, during the earnings period, dollar up 8.5 versus the ear euro 7.5% over the japanese yen. will that hit earnings in the third quarter? there is a lag time. trog hear what they have to say about guidance. >> forward looking statement. any ceo will hedge their bets and say subject to move on the dollar, including mcdonald's? >> bob pisani, see what's move on the floor. >> a modestly positive day. most major indices to the upside. what's go on in brazil because the election results there were a bit of a surprise, not only is bill marusoff. in a run-off, but mr. neves.
the candidate for the people who are in favor of moving the stock market to the upside. petrobras, biggest stock, up 13%. mr. neves promises to be more investor friendly and loosen the grip the government haze on petrobras phone company up. ebreaer up. ewz, you can buy brazil in the form of exchange-traded fund. there's a three month. it's plunged in the month of september, as pooling fairly well. this surprise has got people talking and rare you see the brazilian market up 7% in a single day. we'll keep an eye on that. iron orr chatter over the weekend. they want to ramp up iron ore production by 30%. this i intuitive but makes sense
in the world of the mining industry. the idea now is increasing production, you can reduce costs overall. how do you do that? use more driverless cars, fire a lot of people, lower costs overall. so costs are around $80 a ton, down 25% this year. a lot of lower cost producers are ones that survive, like a rio tinto. others are in trouble. if you drive costs down by increasing production, you're fine. they're talking about driving costs down towards $30 a ton from $80. that would be remashable. maybe towards $20. so this reducing costs ramping up production, does make sense if you are one of the last survivors that are out there. you can see, building up fractionally. earnings season, you were mentioning that, key thing here is we'll hear good things from companies which big u.s.-based operations, but it's little
rougher outside the u.s. remember, 50% of revenues for the s&p 500 occur outside the united states. i think we'll have cautious words for companies that have heavy expose sure over in europe. there's the vanguard vgk, etf for europe, that's trending down. you'll hear that as well. another issue out there, and that's china, softer as well. the world bank was talking about lower gdp production than expected for this year as well as next year in china. plenty of companies between europe and china that have significant exposure in the s&p 500. that's a bit of a achille's heel we'll be hearing this year. put up yum, yum brands reporting tomorrow. great example. 53% of yum's revenues are out -- in china. only 23% of yum's revenues are inside the united states. i think that's going to be a major issue from them, remember, yum struggled since they had problems with poultry supplier
back in december of 2012. probably see same-store sales down 10% or more, estimates vary all over the place. talking about numbers in china. that's fgoing to tomorrow, thats a key. it wasn't just yum, even mcdonald's reporting issues going on in china. keep an eye on that. the dow's up 82 points. back to you. >> thanks very much, bob pisani. if you're joining us, our lead story this morning hewlett-packard, which at 6:30 this morning, press release announcing its plan to split into two companies. now the split will take some time as these often do. a great deal of work that needs to be done to create two companies prior to it being split off in a tax-free manner to shareholders. once it is done, a year from now, hp inc. will comprise the company's personal systems, pc business, and printing. revenues roughly $57 billion with operating profit soon to be or based on historical numbers
of 5.4 billion. the other side, hewlett-packard enterprise, led by meg whitman, current chairman and ceo of the combined company, revenue there of $58.4 billion, operating profit $6 billion. it is expected to be the faster growing of the two companies, perhaps we'll have a different capital structure with a different shareholder base. but at the begin, they're going to have the same shareholder base, given you get shares of both if you're a current hewlett-packard shareholder. meg whitman has been ceo now for over three years. a roughly five-year turnaround plan she's discussed and described many times in her many interviews with us on cnbc. the decision to split the companies a sign that the turnaround plan has failed. >> today is only possible because the turnaround has succeeded. think about what we have accomplished over the last three years. a rebuilt balance sheet, an
innovation pipeline that is significantly improved over three years ago. i would argue best in class in the industry now. en spired workforce, a new leadership team, renewed confidence of our partners, customers, frankly shareholders as well but we have to gather o's as one hp. but now we're in position to take advantage of what's go on in the marketplace and position these two companies for growth. >> and citing in many ways the arguments that were cited last week by john donohoe, the man who runs ebay, faster marketplace, need to be become more agile and focused for both companies to respond to the speed at which things are changing in terms of what the customers on both sides actually want. a couple of things that have gotten loss in the mxix a bit. additional 5,000 lay-offs. 55,000 total head count reduction and as she pointed out in the interview, perhaps more to come -- >> you pointed out, she failed to deny possibly more.
>> fair to say, there will be more to come once you have the leadership teams looking at workforces. and looking at flat revenues fiscal year '15 over fiscal year '14. some would hope that would be the acceleration year where you saw revenue growth. she cited continued run-offs in accounts in the enterprise business. so that may be contributing to it. >> we would naturally assume hpq the acquirer in the market. once they split up, are they the a acquisition target? is emc bigger. >> no, not revenue wise. >> market cap, maybe. >> because it owns, you know, so much of it is tied up in the -- in its ownership. it's $58 billion market cap of -- the name's escaping me -- emc. >> i'm sorry. >> no, that's all right. i've got so many different
things. own 80% of the company that elliott wants to sell. you know the name. >> bertha obviously higher there, health care companies rocketing. >> a lot of the health care companies rocketing. talking about meg whitman making that move at hp, meg whitman and the board. could marissa mayer come under more pressure at yahoo! along with the board to do similar things, splitting up? a couple of reports over the candidate weekend talking about not just what are they going to do with alibaba profits but the structure of the company itself and a split is one of the things that people inside and outside the company are reportedly talking about. but you are talking about big health care moves today. a company that has gotten some emergency approval for an ebola treatment, of course, ebola in the news with a couple of people here in the u.s. being treated for that, and certainly the situation continuing to be huge
in africa. tekmira cut on a valuation, the stock has rocketed this year on the fact that some of its drug has been used for treatments. other big movers include intuitive surgical on upgrade from goldman. we also have mylan labs, generic hiv drug. tesla, looking forward to announcements on its cars. micron giving back, despite positive review in barron's. macao turned out to have a good golden week, not wiwithstanding problems in hong kong. that is helping wynn resorts. >> simon, back to everybody. thank you to all viewers, if you wonder whether people are watching, they are. vmware, thank you on twitter, e-mail, thank you in ways you've contacted me, talking about what emc owns. potential m&a, i asked whitman when i spoke to her last night, we didn't get to it today, she
expects if there are opportunities both companies will take them or overall hp will take them now. you can't wait on those things. so you can't rule out whether it will be transformative is another matter. >> all right. when we come back, hank paulson, tim geithner, ben bernanke, bracing for a different type of testimony, taking the stan in the aig bailout trial. a live report from washington coming up. charlie, the demand on this network, it is increasing by the second. it's crazy, huh? and people are relying on it more than ever. we cover more than 99% of all americans. i know, i can't imagine living without it. it's a place where people can come share knowledge and ideas. it's beautiful. that's deep charlie. my selfie just hit a hundred likes...(gasps) a hundred!
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bailout trial in a lawsuit hank greenberg is alleging that the government cheated his shareholders in the company's 2008 rescue. ben bernanke, hank paulson, tim geithner all expected to take the stand this week. our own mary thompson is in washington with more. these guys are going to be grilled by david boyce, if you've seen david boyce in action in a courtroom, this is going to be spectacular. >> reporter: it's really going to be an interesting week, simon, just as you said. about 15 or 20 minutes ago, court was in session, opening with judge thomas wheeler turning to mr. boyce and saying, i see you have a new witness today, with a smile. there was laughter in the
courtroom. referring to hank paulson, who will be on the stand today. boyce opening his line of questioning, taking paulson out to before the financial crisis where paulson new of a pending crisis in the housing market. you can see by his line of questioning how he's going into what the government's response was during the financial crisis, how he's going to focus in on some of the actions taken when paulson was treasury secretary, specifically loans that were made to other companies who were suffering during the financial crisis. the reason being, one of the alleges is the government did not treat aig fairly because it charged it higher interest rates on those loans. now, paulson declined to speak to reporters when he arrived here at federal claims court, a little bit 9:00 a.m. today. he is expected to be on the stand most if not all of today. his successor at treasury, tim geithner who ran the federal reserve during the crisis will follow him on the stand today or
tomorrow and former federal reserve chairman, ben bernanke, will take the stand wednesday and thursday. greenberg, who ran aig for 40 years before resigning in 2005, alleges the government violated aig's fifth amendment rights with that bailout. last week's opening statements hi lawyer acquitted the high interest rate loans of the government's taking of 92% stake in the company to extortion. the government's attorney replied that aig shaif sharehol were ungrateful because the company would have failed had there not been a bailout. the first glimpse of the line of questioning taking with mr. paulson. as i said, court got under way 9:30 and i'll be back with updates throughout the day. >> thank you so much. when we come back, gas prices at four-year lows. how low can prices at the pump go? we'll talk about that, one reason the rails are at record highs today. dow's up almost 75 points. we'll be right back. you know.... there's a more enjoyable way to get your fiber.
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for the extra activities that, for most kids, are a normal part of growing up. not everyone can be a foster parent... but anyone can help a foster child. espn and tnt on a new nine-year television contract. julia boorstin live with details. >> reporter: that's right. nine-year deals with both turner and espn, now these deals, more
than doubled the amount that the nba was being paid by its media partners, sources tell me that now this will bring the nba's total annual take from these deals to $2.5 billion a year. now the key thing here with the deals they greatly enhance the amount of digital content that the nba will be providing. so for espn, that means nba and espn will work on over the top digital service, details not worked out. but we can expect a lot more digital direct to consumer offering there. in terms of turner, which owns the bleacher report, that website is getting a lot more content from the nba as well. this, carl, speaks to increasing value of live sports in an era when so much else can be recorded and watched later. it's all about the value of live suppo sports, as we saw nfl rates increate. >> a lot of the contracts are getting extended farther and farther out i'm thinking back to
nbc universal deal with the olympics which goes, i think, 30 years, something like that, to 2030, something? >> it is a long-term deal. i mean, you know the feeling, of course, is that almost everything is dvr able except live sports. >> team val use going up themselves. >> they're going to do over the top solution which goes against the orthodox si that we take for granted. >> a sports programming and over the top solution, you make it more viable. >> we'll get the hp plan to split into two. what will it mean for the stock? keep it here. you know what my business philosophy is, reynolds? no. not exactly. to attain success, one must project success.
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"squawk on the street." road map begins with hp, splitting into two companies. hear what ceo meg whitman had to say about the split during our exclusive interview. >> markets on a roller coaster the past couple of weeks. we'll hear from tom lee, what he has to say. >> and exclusive interview with liberty interactive ceo, greg
maffei. >> talking to him a little bit as well. he did something that's virtually indecipherable to understand, except when you bring the ceo to explain. but that's liberty. let's move on to our top story, hewlett-packard's decision, the board decision, of course, senior leadership decision to split into two. hp inc., comprising personal systems, pcs, and printing, roughly $57 billion revenue company, and hewlett-packard enterprise, to be run by the current ceo of the combined company, meg whitman. but b pat russo nonexecutive chairman of that board. whitman nonexecutive chairman of hp inc. run by weissler, i believe i'm pronouncing his name properly but i may not be. we did speak to miss whitman earlier on the program, of course. we have talked to her often over the last three plus years she's been running hewlett-packard and asked her about any plans potentially split the company.
she has responded that one hp was the strategy, they were following, the benefits that accrued to the company were significant from keeping it together and of course then we asked her this morning, why the change? >> we think this is the best alternative for our customers and our shareholders. the market has changed dramatically in terms of speed and we're in a position now where we can pursue the turnaround of hewlett-packard -- by the way the brand renames on both companies in one form or another -- and we're in a better position to get focused companies who can respond more quickly. think about this for a second. the competitors for printing and personal systems business are almost entirely different than the competitors that we face in our enterprise group, our enterprise services business, our software business. so more focus, more agility, tying rewards to results, we think, is going to make a big difference, and propel us on this next level of the journey on turnaround.
>> investors are responding positively to this decision, of course, conceivably, if you have two separate companies and they are capable of performing at level just described by miss whitman, you will get higher multiples and the peer groups for both companies, as she said, competitors are very different for both businesses, do trade at higher multiple than currently given to the combined hewlett-packard, hence the belief that separating them out will create value. we will see. it will be at least a year or let's call it roughly a year before the split actually takes place, giving you construct capital structures for both companies and do a lot of different things in terms of agreements and all sorts of other things that are required. one thing that we'll l. happen, though, does appear to be more lay-offs on top of additional 5,000 that were just added to the restructuring plan that was originally announced by the company back 2012. i asked whitman whether there will be more job cuts.
>> we live in a very competitive market, we have to have the leanest, most effective organization that we can have. so when we see opportunities, we obviously need to take advantage of them. it makes us stronger, and it makes us a more competitive company. so, we, i think for 2015, in terms of this restructuring, we are done. now when you split companies apart, typically, we've looked at other ones that have been done, often there is, again, a realiment of the workforce but we'll see how it goes. we need to take each business and say, knowing what we knee what's the cost structure, hoe to go to market, how to leverage the supply chain between two and making sure we set these two companies up to win. >> she didn't answer the question directly, but do you have any doubt that there won't be more lay-offs? once the two companies are aligned -- >> synergized. >> yes. >> do they cut salaries running
smaller companies? >> no, i don't believe so. still very large companies. >> the next question is, now that you have this theme, david, it's trendy to split, ebay, hp within one week. who is next? the big old school tech should get smaller and nimbler to froe. >> i have to think about names. there's more, i have a feeling. when i first started in the business, it was three is a trend. we're almost there. one more a real trend. i expect we'll be talking about the trend soon. >> a guessing game. broader markets. it look like u.s. stocks are extending the rally on monday morning. tom lee is here, founder and head of research, former u.s. equity strategist with jpmorgan. you have a target for the s&p 500, 2100 by the end of the year, are you not shaken by what we've seen first week of october? rocky, two straight weeks of
decline for u.s. equities? >> it was a rocky couple of weeks. we saw a deep correction, small caps but it's healthy for markets to correct that way and as we noted friday, i think the setup for rest of the year for the next three month is quite constructive. we believe 2100 is possible. >> your favorite sector is technology and health care. i know you don't talk about individual stock but was hewlett-packard splitting in two, ebay splitting in two do you like these moves? they seem to be shareholder-friendly in the near term. you want to see more of this activity? >> yeah. i think this is highlighting a theme where we -- when investors look at valuation opportunities in technology, this is a way for multiples to rerate because you can look at pure play businesses, you have management focused on optimizing returns on the assets of those specific businesses. so i mean, it's very good news, again, technology, i think, has many years to run because it's a sector that the multiple is much
lower than it's been historically while returns on equity much high somewhere this will improve returns on businesses. >> earnings kicking off in full. watching yum brand tomorrow with overseas exposure, pepsi has a big exposure to russia, that's on thursday. q3 earning per share growth 5%, what's your call? >> i think companies will surprise us to the upside. a handful of companies have exposure to strong dollar hurting bottom and top line. but historically, the dollar moves have had a lot less effect on earnings than you thip pmis turning up are more important. underlying demand is improving in the u.s. profit growth surprise to the upside. >> on the subject of dividends and the chase for return, it's not actually the technology area that is growing most rapidly at the moment. it's cyclicals and industrials increasing dividends almost twice the rate of technology.
what do you think about that area of the mark at the moment, given the move on the dollar, given the great strength of the u.s. economy compared to everyone else? >> historically, you know, when you have strong dollar you want to look at dollar centric industry. so i think small cap is going to lift off from that, consumer cyclicals and domestic industrials. but one of the things that will probably happen over the next few years the fed kind of moves towards normalization, that the market does shift away from a dividend preference. i think when we look at opportunities, it's about free cash flow yield, higher ones, and where can the p/e rerate? some of the parts types valuations make a lot of sense in tech because of the type of businesses and strengths each of the individual ones might actually have. >> tom, when you have small caps start to roll over, everyone -- a lot of -- the common notion is that's a sign of the broader market is going to roll over as well. but russell is a canary.
explainy that's not true when it underperforms for a long period of time. >> it's true. disturbing to people to see the small caps underperform this year. over the past six months, it's been 1,000 basis points or more than 10% versus s&p. and it's true that that market tops happened. how far, the nine times the russell's underperformed the s&p, since its inception which is '79, only two of them associated with wabear markets. small caps underperform because of rotation, we've had movements across markets that have rattled people and it explains why small caps underperformed but it's an extremely bullish signal. when you see small caps do this badly and you look at, say, history, what does it mean? 80% of the time the s&p's higher, talking annualized return of 12% or better. >> bullish, from tom lee. good to see you. >> thanks for having me.
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the street." intuitive surgical, higher after upgraded to buy from neutral at goldman sachs. the company's single site needle driver cleared by the food and drug administration, that leads to scarless surgeries through a single incision. stock trading up over 4%. back to you. >> for more on hp's confirmed split, we want to bring a senior research analyst, joins us from new york. good to see you again. >> good morning, carl. >> are you surprised at all by this? >> a little bit. i mean obviously it was leaked into the press last night. but you know, hp had been marching along recently well and meg whitman, the ceo, said repeatedly we are better together than apart. so this is -- this is something that's been speculated by the investment community but the timing and, you know, the seeming change in tone from hp was a surprise. >> is it a tactical strategic move out of strength or weakness?
>> the company certainly saying it's out of strength. you know, i think that's debatable. the company has -- hp has been rumored to have almost bought rack space, hosting company recently, there was obviously well documented reports about the company nearly merging with emc. and now you know this decision to split the company in two. so collectively, the data points suggest that hp has been looking to make a big move, and you know, it's -- and this arguably may have been one of the -- one of the options further down on the lisp and so, i think it's difficult to say that this is n unequivocally from a point of strength. >> you know, tony, if you listen to what they say, they will tell you enterprise, part of the business that meg whitman will be ceo of, enterprise is the future, dealing with businesses and services and software, that's where we want to be.
but actually it's the principal business, which does reasonably well, i wonder if it's an admissi admission enterprise has not been set free to do what it's supposed to do on the cutting edge of technology that is driving this in particular. >> yes, you're right in the observation, simon. over the last 12 months the pc and printing business has grown 4% and the remainder of the enterprise company has grown at minus two. recently it's been pc and printing that have really been the growth parts of hp. i think in terms of liberating the enterprise business, there's certainly some belief in that, and i think that historically separations or spinouts created management incentives and afforded more degrees of freedom. now that said, one of the limitations that the enterprise company at hp will face is, it will not benefit from roughly the $4 billion a year in operating profits that printing
generates. so, on one hand there may be more degrees of freedom. the other hand less cash flow to go out and do acquisitions without having printing under the same roof. >> tony, in my conversation wealth meg whitman this morning, and interestingly in the conversation i had last week with john donohoe, who runs ebay, they both came back to the same theme, which is creating agility for companies in an increasingly rapid-fire marketplace, if you will. i'm curious, amongst the companies that you follow, is that true? >> i think to a certain degree. but i'm not so sure that the tech industry has ever really been a state changing industry it's always been incredibly dynamic. many people point to cloud and big data as being true revolutions. but arguably the client server era was a true revolution, arguably virtualization and all
of that it brought in terms of data, architectures were revolutionary. it's really unclear if it's notably different now than it was in the past. i do think that, you know, companies are putting forth and espousing this as a rational. but the proof points aren't exactly there, in my opinion. >> if it's true, e pay and hp turn out to be correct in that view of rapid-fire changing technology landscape, how does a company like microsoft or cisco, these big, sprawling operations, sort of justify their structure? how do they look at what's happening today? >> right. i think the case with ebay and paypal's differently -- a little bit different. it's the more classic spinout where you had this company that is arguably shackled by a slower growing company, paypal, shackled by ebay, and liberating it would allow it do more partnerships, grow faster, et
cetera. i think with hp the thing that's puzzling in the separation is the businesses, in terms of growth profiles are not dramatically different. and so the notion of a traditional spinout, when you do it, where there's different sets of investors that you want to market to, different cash characteristics, different growth characteristics, i don't think that really holds quite to the same degree in the case of hp. for the other players in terms of what it might mean, i think if you look across all industries, you often see patterns of consolidation, and then patterns of breakup, certainly we saw that in the financial industry, the drug industry. when you see major players starting to move towards, you know, splitting up and focus is better, you know, invariably, others in the industry follow. so, it it will be interesting to see if some of these larger behemoths, ibm included in there, look to try and find ways to release value.
clearly a stock market's reception to both ebay's move and hp's move initially, at least, have been positive. >> where does it leave you in term of advising wlants to do here? is this going to create value? >> you know i struggle with the strategic rational. one thing that was not really talked about in hp's presentation is that there are synergies, particularly in purchasing and in distribution for this company. three years ago hp actually said they thought there were 1 billion a year in annual d dissynergies if it were to spin out the pc business. i do think that is, you know, potentially a hidden liability in this deal. now, that said i think the marketplace generally is receptive to vehicles that will allow more degrees of freedom, create incentives for management teams to be more aggressive and more bold, and so i do think --
and hp stock is very, very inexpensive, the single least inexpensive technology stock in the entire s&p. i think what is generally viewed as a positive move, splitting and spinning off, is being modestly well received by the marketplace. and that's to be expected. >> that's too bad, we were going to ask him about one other name as well, toni covers apple and the company that supplies sapphire to apple, it's filing for chapter 1 bankruptcy reorganization, recall apple did not use sapphire in the iphone 6. other than that, we'll find out more why that led them to chapter 11 maybe later this morning. >> it's using it in the apple watch, correct? did t. has supplied them in the past. >> fifth american to contract ebola in west africa arrived in the country today as the first patient to be diagnosed on american soil continues to fight for his life in a dallas
history. live outside the cdc in atlanta with the latest. meg, over to you. >> reporter: good morning, simon. a little more than a week after the first u.s. patient was diagnosed with ebola, thomas eric duncan remains only diagnosis here on u.s. soil, in critical condition, treated in dallas. his condition deteriorated over the weekend. 48 of his contacts are being monitored, 10 of whom are close contracts. ashoka mukpo diagnosed with ebola in liberia has been flown back to the u.s. for treatment arrived in nebraska to receive treatment at same hospital that treated dr. rick saker, mother american infected in west africa. the cdc is considering strengthening screening at u.s. airports for people coming in from the three affected countries there. cdc director tom friedan spoke with us about that this morning. >> wish we could say, we can do things that make the risk in the
u.s. zero, but as long as the outbreak is spreading in africa, it's not going to be zero. we can reduce it here, look at all steps that might do that, but we have to stop it at its source. we're seeing signs of progress in africa. >> reporter: now the patient being treated in dallas, tom mass eric duncan, has not received experimental drugs though many worked on in the earliest stages. dr. friedan emphasized that vaccines are an important part of the equation. >> i'm encouraged two experimental vaccines that are going through phase i trial, to see the dose and safety concerns. we need to get those into the field for efficacy trials to see if they work in africa, as quickly as possible. >> reporter: now glaxosmithkline working. as for the situation in the u.s., friedan emphasized that no
patients here new york contacts here, i'm sorry, have shown any symptoms. back to you. >> thanks very much. tekmira, sort of leading experimental treatment, down sharply in today's action. up next, gas prices in the united states falling to less than three bucks in some area of the country. crude oil continuing to slide. just how low can it go? (vo) rush hour around here starts at 6:30 a.m. - on the nose. but for me, it starts with the opening bell. and the rush i get, lasts way more than an hour. (announcer) at scottrade, we share your passion for trading.
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dropping to a nationwide average now of $3.28 a gallon, the lo t lowest since february. can the trend continue? joining us, founding partner at again capital. welcome. >> good morning. >> do you think we can hit $3 a gallon on gas? >> on the national average, absolutely. it's in the works. we have 10 to 15 cents a gallon working its way through the system right now over the course of the next week or so, it could be -- that could pick up further. >> how low are we going to go here, do you think? >> it's a perfect storm in terms of surging crude oil output and supply and weakening demand in europe and china that's combined to a one-two punch. we go as low as $2.85 at least on the national average before things settle out. >> wow. the heart of it, for many people internationally, of course, is this decision, the surprise decision last week for the saudis to basically start a price war with everyone else in
order to keep volume of sales up. is that a major structural change? is opec crumbling before our very eyes? >> opec is under pressure, simon. the bigger news last week the cartel was surveyed to be pumping 31 million barrel a day, which is huge, it was up 800,000 barrel daze from the previous month because of rebounds in libya and iraq. that was the bigger news. the saudi discount, though, that they gave to asian buyers was important because the saudis aren't pulling back yet. production went up as well in the face of the falling oil prices and there's more of that to come disharmony in the cartel which is great for u.s. consumers to hear because a lot of resentment about the saudi position, how they were able to pump out full blast over the last couple of years while other companies had production problems and couldn't benefit from high prices. >> we hear about the u.s. energy revolution, how that's reshaping supply and demand equation, putting pressure on prices. can you quantify that for us? the fact that the u.s. is now a
major oil player, that our refiners are pumping at the highest levels in ten years, where would the price of oil, brent or wti, be without that? >> extraordinarily higher. in terms of -- the dynamic going on now, the amount of increasing u.s. crude oil exports, exporting alaska north slope crude oil out to asia now for the first time in a decade, and they're moving oil out of the u.s. gulf coast, minimally processing it, getting around some rule, oil prices upwards 120 to $150 a barrel in my estimate achatio acgiven the trouble in the middle east. isis is on the move. a concern that would be magnify if it wouldn't for the oil we're getting. >> as the price of oil declines, what projects get canceled? where is oil the most expensive to produce? where will supplies be cut
first? >> and that's going to be the worry, simon. i think you know, certainly more traditional drilling in the u.s. offshore, for example, will be impacted. and the worries going to start be for canadian and our fracking industry could get harmed. the saudis play hardball for market share and are willing to suffer a lower price for a time -- >> hang on, john. the assumption had been that maybe the saudis were trying to do the white house a favor to drag the price of down to hurt the likes of russia. you're saying something different that it could be to get shale projects canceled here in the united states? >> a collateral damage effect. back in 1978, the u.s. domestic industry got ruined. and really didn't come back until the shale revolution came to be. so, i do think that the saudis are taking a hard look at what's go on and saying, we can suffer a lower oil price.
they do need a $90 a barrel price for their budget but cost of production's down around single digits. they can tough it out for a while. that's what we have to worry, harming our domestic miraculous recovery here. >> john killdorf. >> more of the cnbc next list wl who will be changing the face of business. waldorf has a new owner. details when we come back. whenwork with equity experts who work with regional experts that's when expertise happens. mfs. because there is no expertise without collaboration.
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all day today, cnbc unveiling its next list, leaders and innovators expected to change the face of business over the next 25 years. to bring us more of the next list, name some names, andrew ross sorkin. >> thank you. for week we've been working with our expert advisory board to compile the list of leaders for the future. results are diverse, global group, innovators from fashion to finance, countries from the u.s. to turkey. let's take a look now at the movers on the listen. ♪ >> expanding into china, being
global is another aspiration that we have that we're working on. really being the trusted family brand for millennials all over the world. ♪ ♪ >> you have to continually try new formats. we're obsessive. our focus is making people think of it passing on to their friends and sharing it. ♪ >> liberating china, but using my way to improve china.
♪ ♪ >> the ceo has power or is quirky because they listen to the community. i actually carry no. >> got to love penn there. for more coverage, head over to cnbc.com/next. guys who would be your all-time, like, quick vote to be on the list like this, do you think? >> i was surprised to see jessica alba, myself. >> really. >> she's the most clicked on name online right now at cnbc dolly len. jessica alba.
>> doesn't surprise me there i liked your interview with the gentleman from inc, the easiest call, elan mucon musk. >> he's had three companies. i imagine in the next 25 he'll have a fourth, if not a fifth. we'll see what he does. >> mark zuckerberg. these -- some of on the first 25. >> bedid something different. we -- if you were along the first 25 list, which was looking back at last 25 years, probably by the way easier list to put together, there's hindsight and 20/20 vision. if you're on that list, you're ex-o ex-officio. we want everybody to comment and let you know what you think of the picks and if there's other pick. >> i like that doug mcmillon is on here, technology hot shots, young companies, start-ups. new ceo of walmart.
>> away from tech, too. i'm thinking we have dan lobe in terms of finance. is he the next carl icahn? we'll find out. technology, we think of technology as it, where innovation lies. but people like jonathan gray at blackstone, he may become the next steve schwartzman. we'll have to watch and figure this out in 25 years from now. >> it's all on our website. thanks for bringing us highlights. the next list of cnbc 25. let me show you a live shot of the waldorf hotel, the waldorf astoria, here in new york. hilton worldwide announced it's sold the property which takes up one block of manhattan a chinese insurance company for nearly $2 billion. remember, this is where the president stays when he comes to town because it still has a disused subway station in the basement, therefore two exits. talking about selling it for a long time. i last asked the ceo of hilton
about his plans for the waldorf when i interviewed him in june. >> the waldorf is a complex asset, both in terms of what we could do with it from a use point of view but also structurally what make sense for the waldorf and we're just not there yet. clearly, what we're looking to do with real estate is maximize the value. >> sure. >> we think we're in a very nice part of the cycle for growth and operations work he have a bunch of value enhancement opportunities including the waldorf. >> they have a contract, robert frank, to run the hotel for the next 100 years, did i see? >> yeah. >> wow. >> you talk about maximizing value, that's exactly what they did here. conrad hilton once called it the greatest of them all, now the waldorf is the most expensive of them all. hilton worldwide selling the wall door for $1.95 billion, the highest price paid for a hotel
in the u.s. and perhaps the world. waldorf has over 1400 room, 1.4 million per room key. hilton will operate the waldorf under the name for 100 years, still the waldorf, and hilton is keeping the waldorf brand which has 27 hotels around the world. for comparison, the most expensive stay alone in the hotel in the u.s. the peabody hotel in orlando sold for $717 million. this, far more than twice than the cosmopolitan hotel and casino, blackstone bought for $1.7 billion but that's a casino. what are they getting here? of course a trophy property, a full block of real estate in the heart of manhattan and as you mentioned they get the hotel where the president stays. foreign buyers here had been flooding the new york market. looking for safe investments to generate income, hotels fit that bill. some people comparing this to when the japanese buying empire state building, big trophy
properties in new york. everybody says this time is different but smells like getting tour to high 1. 95 billion for one single hotel. >> yes, i think the analysis from suntrust about 32 times earnings, which does seem quite rich. what's interesting here, you would know the asset-like model popular, hyatt selling of a hotel in washington this week. whats interesting about hilton is they're not returning cash to shareholders. what they have said is, for tax reasons, we'll spend money on other properties here in the united states. i think under the rules, robert, they have about six months to do that once the deal closes at the end of the year. the rush will be on for them to spend that money, which is different from what the other hotels have done. >> fun to watch. also interesting to see how they renovate the waldorf. they announced, and he highlighted this in his interview, renovate the waldorf and that's a hotel that could
use a trim up there and nice to see what they do. the other waldorfs are brand new and look much better. >> it's all about retail space, i believe. >> didn't paris and nikki live there in. >> did they? >> thank you. >> thank you, guys. another spin-off, liberty interactive's board approving its split into two groups. greg maffei live when "squawk on the street" comes right back. when change is in the air you see things in a whole new way. it's in this spirit that ing u.s. is becoming a new kind of company. one that helps you think differently about what's ahead, and what's possible when you get things organized. ing u.s. is now voya. changing the way you think of retirement.
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my best take here is, i mean you are freeing up or creating pure play qvc, which conceivably will down the road create a higher value for that. is that a fair conclusion? >> i think you're right, david we have a more focused qvc with opportunity for investors to look directly at its result and also has our 38% stake in hsn, it's the leading player in video commerce, and investors are responding well to that this morning. >> does it clear the way for qvc and hsn to get together completely? >> i don't think that is the result or that is our goal. our goal is to give investors more clarity and more choice around our assets. we'll see what the future holds, but as i said, we're very happy holder of 38% of hsn and we have been for a while. >> liberty ventures received digital properties. they're being valued at what i believe 1.5 billion, also
contributing $1 billion in cash. seems to be a high value, based on i think 80 million ebitda, .8 of revenues. how do you justify the multiple you're putting on those properties that are being transferred from one entity to another? >> before we get to that the lead-ins had it described inaccurately. we have two tracking stocks, one is called lenza, one called liberty ventures, creating a pure qvc, and liberty ventures is going to receive assets and $1 billion of cash. now, to get to understand the values i think, first, ebitda numbers probably, if you look at most the forecasts for 2014 and into '15, you're ebitda numbers are very light. >> okay. i'm using trailing. what do you feel comfortable with saying multiple is for people who want to follow.
>> we feel comfortable the multiple is well in line with industry numbers and we had a financial adviser come and look at fair value for both sides of the house. we're very rigorous in trying to ensure that liberty inactive and liberty ventures treated well and the board had to approve it on that basis. >> right. liberty interactive down sharply, linta is up quite nicely. i'm getting 67 million shares of venture stock, if i'm a linta holder aren't i just going to sell that? isn't that going to create selling pressure? >> exactly right. first, the total group is up today if you take market value. but you're right, there's some blowback between the shares that are being issued to the linta holders like .14 share of venture given to each holder and some holders might be ex-abouted to sell. but we're not looking at this for one-day trade. liberty ventures had a great run
over the last year, year and a half based on growth in expedia and based on the growth in trip and some degree based on our splitting off of trip, trip shares into liberty trip holdings. some holders of ventures might have hoped that we were going to fini finish liquidation getting expedia out or the like. this, in the short term, creates selling pressure not only because of liberty interactive holders who may not have wanted the stock in the short term but disappointment in venture holders looking for a quick pop. we think this is a great way to add value in long term. you may have seen the trade working with pro flowers into ftd. i think other digital commerce assets have exciting opportunities. secondly, we built a bigger war chest at ventures. we think, in our experience has shown, having a larger pile of
cash, having more flexibility to do broader, bigger, more interesting deals where there's le competition in big deals is a great opportunity and we think there's more of those ahead. bullish on ventures. >> $2.7 billion in cash by year end. a couple other things we've talked about in the past. obviously sirius continues to be a question for many shareholders here. will you revisit the buy in transaction you set aside i believe early this year? >> we have to plans to do that today, obviously. we are seeing the liberty stake being increased by the share repurchase of sirs you as we're naturally gaining on our ownership position and remain excited about sirius where it's headed. >> another one-time part of the stable of properties stars i believe -- you're still chairman
i think. recent speculation about the potential sale of that company, is it correct? is starz for sale? >> obviously we can't comment on all those sort of rumors. starz is very well positioned on its own and yet as we said in the past, both john mullen and i, one could imagine there are partners who would be helpful to the business. >> greg, as always, appreciate your taking us through these various transactions. look forward to seeing you in person at some point in the not too distant future. >> that would be great. thank you. >> thanks, greg. >> up next on "squawk on the street," paulson and bernanke set to take the stand. hank greenberg's legal battle against the government. all the details on that trial after the break.
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do want to check on the price of bitcoin. the currency everyone was watching it after in the last few sessions it managed to lose nearly a fifth of its value. as you can see it's rebounding a little bit but people took note as the price of bitcoin did fall below $300 and i know all of you on the desk are going to give me a little grief about this, but i want to say that this comes at an interesting time because
increasingly retailers are accepting bitcoin. we've seen some big ones like dell, like some of the on-line retailers, all say they're going to accept bitcoin and some say that's putting pressure on the price because as they accept bitcoin, more are paying with it, those retailers are converting it into dollars to add up to their profits. go ahead, simon. i know you have something. >> i just -- who cares. i mean i don't understand why we focus on bitcoin rather than the square or the platform. i don't understand what you're trading becomes so important. it's how you trade it, surely, whether that's paypal, whether that's square. that's the future. not whether you have to define it in a currency. >> that's a good point why a lot of bitcoin believers and people who say that this is the future of payments or infrastructure say it's about the technology, not necessarily the price. >> it can't be the future if it has those price swings. >> people just haven't -- it's not mass adopted yet.
people don't understand it. >> give it time. >> everyone is talking about it. >> patience. >> let's send it over to jon fortt with me on bitcoin. what's coming up some. >> i am, sara. a great show coming up. we're going to talk hp, revisit the great interview that david faber did with meg whitman about the upcoming split. kara swisher will join us to weigh in and we've got technology investor roger mcnamee who's never short of insight on topics like these coming up.
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"squawk alley." joining us roger mcnamee co-founder of elevation partners, great to have you back. john steinberg ceo of the daily mail north america, kayla tausche is back. welcome back. john fortt as well. the big story, hp announcing it will split into two companies and cut 5,000 jobs. shares of hp rallying on the news this morning. hp will split into two publicly traded entities. the pc and printer business using hp inc and services with hewlett-packard enterprise. david faber talked to meg whitman in an exclusive interview this morning. here's what she said. >> another enormous change. everything about how compute is being bought, paid for, sold, how applications are written, from, you know, a licensed model to a sas model. how employees and customers interact with technology. and you can just see the pace of change. and there's technology that is enabling that change tha