>> wow. real quick, banks, i don't know if you saw, they are cutting out saturdays for the young people. are you making your kids work on saturdays? >> i don't make our kids work or not work any time. if you love what you're doing, it's not work. >> i'll see you there. >> thanks, david. that does it for us today. right now it's time for "squawk on the street." ♪ i'm going to knock you out ♪ i'm going to knock you out i'm going to knock you out ♪ good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at the new york exchange. what a morning we have in store for you the ceo of charter will speak to faber on the bid for time warner. big bank earnings and decent retail sales. ten-year yield huddles around 2.85 and europe's largely in the red as the nikkei fell 3% overnight after our bruising here yesterday. our roadmap begins with earnings

season, jpmorgan and wells fargo out with mixed results and we'll tell you exactly what you need to know. charter communications says it wants to buy time warner for 132 bucks in stock and cash and twrawrm says how about 160? we'll get a reaction and exclusively interview with tom rutledge in a few moments. google is buying nest labs a maker of smart thermostats and smart smoke alarms for $3.2 billion, it would be the second largest ever in google's history. first up stocks are trying to bounce back from that poor start to the week. the dow coming off its worst day since september and experiencing its first 1% drop in three months. s&p and nasdaq posting their biggest drop in over two months and the bank earnings are in the spotlight, jpmorgan and wells fargo out with quarterly results. we can talk about the bank or some of the internals, the

mortgage internals, there's a lot to talk about. >> all people seem to care about perhaps we are out of the banking wilderness and we're going to begin to talk about normalized earnings power. this has been threatened. we've been thinking one day we'll come in and say, do you know what, i think jpmorgan has $7 earnings power. every time you do that you begin to think it's wait legal fees and more settlements and wait, there's still too many people in mortgages. i'm actually seeing the possibility of putting a number on earnings. i think one of the reasons i can see that is because net interest margins were actually up. and that's, again, what people -- they make -- they get your deposit. they invest it somewhere in the yield curve. they don't put it in a hedge fund anymore and they're making a nice profit and that's all somebody seems to want. the mortgage original numbers are horrendous. too much risk. >> even if we "x" out or put to the side all of the money that jpmorgan has spent in resolving madoff and the whale and mortgage originations and

everything else, it wasn't the greatest quarter. it was fine. >> we don't have the growth yet. we don't have a lot of growth yet but we saw a 10% increase in deposits. >> a lot of people think the deposit number is stunning. >> i know, you get the margin doing better. david, you'll talk to a ceo who is making a tender bid. >> not a tender. just an offer. >> offer, offer. if you're going to tell me that this is one of many. there's a division, i don't know how many people are left in that division, jpmorgan, but that division will drive gross margins. if you really tell me this is the year of equity, equities bidding for other equities, and making -- making some sort of transaction, wow. >> you're talking about the old corporate investment bank is that what you mean? >> remember that? >> yeah, i do remember that. banking revenue $3 billion down 4% from the prior year and investment banking fees down 3% from the prior year and driven by lower debt underwriting fees down 19% and lower advisory fees

down 7%. >> it turns. >> looking for a turn would obviously be very helpful especially off of your -- you didn't have great quarters last year i don't believe either. >> if net interest rates have bottomed, that's what people really care about. when i look at commercial industrial loans, maybe there's hope here. maybe people are going to take loans down and build something. all these thinks seem to be in the future provided the retail sales we're seeing is not the precursor of something more negative out there and the change in psyche. i don't know. i like the number. i like it. >> you mentioned the legal expenses. only $800 million in the quarter down from $9 billion in the previous quarter. didn't give a lot of clarity where reserves stand on the jpmorgan front. but you're not saying we'll see a clean quarter in the next quarter. >> but i think 2014 may be a year where we begin to invest in bank stocks based on earnings not just, well, wait a second, we get a reversal of some sort of reserve that's taken or perhaps this is the end of the

government going after. no, i mean, we'll be able to say, there's a pretty good item in deposit growth, not bad in investment banking. there's some lending going on and that would be the beginning of what used to be the way you invested in bank stocks except for this time the guys own a gigantic percentage of the share in banking. >> it brings to mind something said today, s&p spree correlation is down to 77% and last year's average 83% because in a world where central banks begin to pull back, you have the market that you used to have, right? stocks used to trade differently as a group. >> right. and what will happen, though, is that i think we're going to go back to concentration. remember, these banks bought a lot of other banks and we never thought -- i remember during the great security pacific downturn when you had bank of boston and all these banks going under and no matter what happened the survivor banks, the acquired banks were quite conscious they couldn't have more than 10% share of this country, they were

even worried about concentration in california. take a look at the concentration of jpmorgan and wells fargo, if we get a turn in this country, people will say, listen, it's absurd that these guys have so much market power. >> yesterday the biggest decline since the 7th of november, but we could have cited any of those reasons any day for the last few months, retail, it hasn't been good for a while. the multiple seems to be getting a little bit stretched and yet yesterday for whatever reason now it was. we do have the jobs report that people are still digesting from friday. >> i think it was seminal. people tried to asterisk it, saying don't worry about it, don't worry about it, don't worry about in the face of the acena had been on "mad money" maybe a month ago saying things were good. you get this kind of precipitous decline, a bon-ton, still the bench, blaming slick roads, icy

roads. >> icy roads. i saw that. stock was down. >> there you go, the old icy roadish you o isissue. >> the one thing retailers never run out of is excuses. >> the excuses per share here said i think it's very high. now, where was the excuse per share of macy's? what did macy's really do to make that number? how about we investigate. >> yes. >> right? >> i think it's called selling a lot of stuff. >> if we're going to investigate the long line that i had to wait at on the g.w. bridge, i want a federal case against macy's because it doesn't seem right that they did well. there's something up there. >> in the meantime, david, you're about to have a very big morning in a few minutes with charter. >> we'll be speaking with tom rutledge ceo of charter communications one of the larger cable companies in the country that wants to get a lot larger, of course, it was late yesterday where charter released a letter in which it stated it had negotiations with time warner cable in which it offered most

recently about $132 a share in cash and stock in the company and been rejected and is taking its case to shareholders. it's a bear hug of a sense. of course, part of a story we've been following. we first brought you news of their first foray in june. what did you do now? and how do you succeed in purchasing a company that says, yeah, we'll take a number. the number is 160. how about 100 bucks a share in cash and $60 a share in stock and offer us a collar on your stock as well. >> how is it possible charter was bankrupt a few years ago and now it's able to raise this kind of money? how does it happen? >> it reorganized in chapter 11 and its debt holders took significant stakes and then liberty 27% owner and controls a number of board seats and you're off to the races and plus they hire a guy known as a very, very

strong operator that being mr. rutledge who previously ran cablevision's operations and was a very senior guy at time warner cable prior to that. >> what about this industry that they can make so much money? weren't we supposed to be cutting our cords and using arrow and going any way other than tethered line? >> it sounds ridiculous now. >> thank you. >> we're in this pure land grab now for this last mile. you have muffey on a few days ago, one of the questions for rutledge does he expect other players to come in? >> one being, of course, comcast, consaldation and the idea of it since we first told you about it back in june has contributed a rise in all of the stocks, time warner and comcast and the whole group up sharply because they do want -- or investors want to see consolidation. >> the last number comcast parent company of this network, showing basic cable going up again. >> i wouldn't -- i wouldn't get

too excited about that. >> too excited, charter -- this thing could go out huge time warner. >> it's also trading at quite a multiple charter. >> does anybody care about service? >> is that part of -- >> i think so. >> interesting question, yeah, yeah. >> maybe they come in and do better than time warner in terms of not -- >> you have a lot of different homes, you would have a lot of different providers. carl and i probably only deal with the same. >> my mexican provider is my best provider. >> really? >> i don't believe that. >> it never goes down. holy cow, they really know how to do it there. >> that's just a big insult to the u.s. my mexican provider. >> you can use domino's in mexico. comes just as fast. meanwhile we're going to after the break we'll talk about a lot of the calls today. this upgrade of google and the downgrade of microsoft. it all feeds to the same place, the nest.

the nest deal with google. the bid from charter. people have been asking why such a down day on a day where m&a showed life. >> wasn't it incredible that beam is worth a lot more? i came back and said that, wait a second, there's core worth to the companies you are throwing away but we did see a giveup. everyone shops in this country and you just felt like, wait a second, obviously things aren't good, so nothing's good. so, nothing's good at starbucks, nothing's good at disney. i think the companies may be surprised. i think there's a secular change in how people shop. nest, by the way, frank blake came on home depot and said we've got the new smoke detectors, you wave at them and they talk to you plaintively and they drive a lot of traffic and it turns out to be nest. it was nest. >> fascinating. i keep thinking about privacy. nest knows when you're moving around your house. i go into my living room, my

xbox says hello to me. >> what do you have to hided? >> i have nothing to hide. i'm going to give them everything. >> everybody knows everything. i read that the book "the circle" it freaked me out. >> i read the orwell book, "1984." >> 30 years too early. and when we come back tom rutledge takes their takeover to the time warner shareholders. we look at what we're trying to do with nest protect and our nest learning thermostat, we're trying to reinvent unloved products, products that you use every day or you may ignore every day and try to bring them into a modern era. >> we talk to nest ceo tony fidel, two months before google announced a bid to buy his company. take another look at that interview. futures trying to rebound from

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visit truecar.comoney,com,t and never overpay.yer's remorse. a good deal or not. "okay, this is the price," and you're like. welcome back. charter communications continues its push for cable consolidation trying to get time warner cable to come to the negotiating table to talk a deal. joining me now in an exclusive interview is charter communications ceo tom rutledge. tom, thanks for making the trip down here from connecticut. >> thank you, david, glad to be here. >> time warner cable said we've

been to the table with you and guys and we give you $160 a share, that's what deals get done at. pay 160 bucks a share and we're yours. why not do that? >> well, for one, we've been at this quite a while as you know and when we first approached them, more than six months ago, their stock was trading $96 and it's almost run up 40% since we initially approached them. and we think that we've been at this process a while. working toward the price that we've gotten to. and that it's a rich and fair offer. >> why is $132 let's call it that a rich and fair offer? they say it's seven times and they point out that charter trades at 9.2 times ebita, but a higher multiple than you're willing to pay to take control of that company. why does that seem fair? >> when you think about what's been going on, since we started talking to time warner cable

they lost more than half a million customers. it's a troubled situation. and we think when you look at the cash component that we're bringing, when you look at the appreciation that we've already put into the stock through this process, and you think about the fact that as part of our offer which is not an all-cash offer, 45% of the company will still be owned by time warner shareholders, so those shareholders are going to participate in the synergies that we deliver. they're going to participate in the nols -- >> net operating loss that you bring to protect profits. >> that's right. and they're going to participate in a turnaround situation that improves the operation of the company, stops the subscriber losses, improves the customer services and creates more value than they would get with a pure cash offer. >> you know, i've spoken to some of those shareholders. who agree in many ways with many of the things that you just said but not at 132 or $135 a share, at least that's what they tell

me. their expectation is if you truly want to own this company it may not be $160 but it's got to be a lot up from here. are you willing to go higher? >> you know, we feel like we've come a very far way and we've wanted to seek engagement from the company. we have not really gotten engagement. i think that their $160 response is a nonserious response. >> why is that a nonserious response? again, it's a huge company, l.a., new york, 11 million subs. why wouldn't you if you were them saying, hey, you want us, you got to pay the nice price? >> new york and l.a. is right, but, you know, in the last two years they've lost the equivalent of an l.a. in subscriber losses. so, there's a big job to be done in terms of turning it around and that process is going to cost money. it's going to require investment. it's going to require taking the company all digital. and it's an enormous amount of work. so, the other thing that you need to consider is that most of

the cable deals that have been done have been done as all-cash deals. when you look at the after-tax effect of our offer, it's actually higher than most of the cable deals, in fact, all the cable deals that have been done in the last five years, so it is a rich offer when looked at in an after-tax environment. >> we keep referring to it as an offer. really what you sent yesterday was you sent a letter that referred to conversations that referred to an offer. >> we have made offers. >> you made offers. i don't want to get caught up into the semantics of it. >> offered. >> why not offered a fixed ratio, for example? why not have offered some sort of a collar on the stock component? why not give us something yesterday that was a little bit more specific in terms of delivering value? >> well, i thought it was fairly specific. but what we're really seeking to do is talk to the shareholders and get the shareholders involved and ask the shareholders to let management engage with us. because they really have not

engaged. and the board has not engaged. and the issue before us is that we've come through this process for six months. we haven't been treated seriously. we have a very good offer that will create a lot of value for shareholders. we're seeking engagement. >> the board has engaged with its advisers i can tell you that as somebody who's been following it closely. they seem to be very solidly behind the idea that it's worth a lot more. are you willing to go to a proxy might, the windows for which opens nominating directors next week? >> well, we're not there at the moment. we're making this offer to shareholders and asking shareholders to get involved. all of our options are open. but we think that if the shareholders look at the offer that we have and ask management to engage, that the shareholders will recognize that the offer is a good offer and that it actually creates more value than the alternatives. >> but, you know, you keep saying it's a good offer. i mean, yes, the stock is up from $96, no doubt.

by the way, your stock is up sharply. comcast parent of our network is up sharply. the whole group is up, so they don't see downside to $96, they say, well, maybe if there's no bid and the stock's $115, $120, why should we take such a small premium on that as an unaffected stock price? >> well, i'm not sure i agree with that. i think to some extent time warner's performance is an outlier. in fact, it is an outlier. its distinctly negative, it shouldn't trade at the same multiple as the rest of the industry until it's fixed. >> the what do you do from here? hearing you, tom, saying you think it's a full and fair offer. you're not going to win on $132, i'll put my 27 years of experience behind the fact that you're not going to win at $132. >> we think if the shareholders look at the offer that we've made, that they will come to a different conclusion than you do. >> they say -- this is the advisers that i'm speaking to

from time warner cable that you could go up to as much as $110 in cash, is that true? >> we can borrow money. it is true. and -- but you have to think about this deal from the charter shareholder perspective and the time warner shareholder perspective. the company -- we have a fast-growing company and we've turned it around. and it's taking off. and the reason the share price is high is because there's a lot of potential value in the company that's going to be created. so, when you think about charter shareholders with the fast-growing stock and a valuable stock, how do we manage the charter shareholder accretion as well as the time warner cable shareholder accretion. you've got to manage both. so we've got to be disciplined about what we did. we don't need an m&a deal to make charter successful. we're on a success track already. >> what about comcast, again, the parent of our network? my understanding is that charter and comcast have talked.

talked in general about the industry and consolidation. they're still out there. they're still looking at this situation. would you consider making them your partner? have you spoken to comcast about some sort of a way to go about acquiring time warner cable? >> well, it's true, we talked to comcast all the time because we're in the same business. but this deal, this offer, is charter alone. >> of course. >> and that's our offer. that's what we're here to talk about. we're not here to talk about any potential other offers. >> have you talked to comcast, though, at all to try to sideline them? because they seem to be a potential threat here, not to mention their potential willingness to participate keeps time warner cable stock price fairly high. >> it may. and obviously they have poe tenality. but, again, this isn't about them. this is about our proposal to time warner shareholders and we're trying to get time warner shareholderses to consider our proposal. >> you have a large share holder in liberty.

they have been fairly active as well in this effort at least, meetings in denver with large shareholders of time warner cable. are you all on the same page? who is leading the charge here? >> charter is the company leading the charge. i mean, it's our company. liberty media's a major shareholder with 27% of the shares, but ultimately the whole board of charter has made this decision and is behind this decision to go forward with this offer. obviously having a sophisticated investor like liberty media with john malone and greg maffey is a plus. they know this business inside out and they know what the value is and they've talked up the value obviously. and clearly the whole industry is looking at consolidation and values have risen since consolidation has begun to be discussed, so they really contributed to the whole rise in value in the whole industry and that's appreciated. but ultimately this is a charter move. >> and if this doesn't happen,

does the entire industry suffer and everybody's stock price go down? >> well, i don't think so. charter is on a growth trajectory. i think we have an exciting future and great potential. and so, you know, obviously stocks go up and down for a variety of reasons, but ultimately it's about creating value and that's what we're doing. >> tom, very much appreciate you taking the time to come down here. we'll be following this closely. thanks for be withing with inu. >> thank you. >> thank you. >>

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♪ [ tires screech ] chewley's finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. get the most extensive charting wherever you are with the mobile trader app from td ameritrade. a couple minutes before the bell on a tuesday. cramer's "mad dash" ahead of the open, intel will open up 2% out of the upgrade on jpmorgan talking about the things you've been talking about. >> buying intel after a hiatus of about 20 years. that's about as long as jpmorgan's been negative on it. i think it's an important call, two reasons one thing is pc sales have bottomed, okay? i'm just pointing it out you can make all the little -- be a

little smug there. you're not part of "mad dash." >> go back to your chair! >> i'd like to be part of "mad dash." sorry. >> tell me about pc sales. >> but jeffries says the quarter will be good and some of this is because people say, do you know what, intel has recognized that they missed the boat in mobile and now they're getting aggressive. it always seems to be chatter that they're about to win some big account. let's hear what they have to say on the quarter, new ceo and new sheriff. but jpmorgan, wow, i thought this would be when hades freeze over. >> they take the target from 20 up to 29. the other side is they think they're going to start to provide more realistic guidance with a new ceo. >> please, please. everything is always great. everything's always great with intel. that's the old days. finally i think they've gotten original and i like the call. i like it very much. >> actually a lot of analyst action in large cap tech which we'll talk more about. >> i think david has talked about activism.

there's a lot of guys upgrading the texts that people have kind of forgotten about. i think they're all trying to find the next riverbed in juniper. >> listen to elliott, that's all. those guys are keeping very busy over there at that hedge fund. >> there's the bell. and a look at the s&p at the top of your screen. by the way, the breadth yesterday, the worst since december 11th. so, it's got to be an improvement over there. down here at the exchange today, ringing the opening bell. credit suisse celebrating the launch of its commodity benchmark and commodity rotation exchange traded notes. over at the nasdaq first trust celebrating its nasdaq rising dividend achievers. >> microsoft got the downgrade, you could argue, well, a couple of pennies. yesterday was the hiccup day. people attacking me on twitter because i recommended stocks. i love that. the anger, it doesn't mean today is the day it turns. i'm just saying that you've got a lot of people who have been holding on for 2014 and

yesterday said, i cannot take it anymore. and that's the beginning of what can be a rejuvenation. >> you mentioned the microsoft, citi takes it to the a neutral. they keep $35 as their target. they say -- unbelievably they say if an outsider is named ceo, stock goes to the low 40s. if an insider is named, it goes back to 29. i don't know how they came up with that. >> inside, outside, i mean, what i'm hearing is of those two candidates, it's the della inside and then there's an outsider who i'm not sure who it is. i believe they're coming in for sort of final interviews this week with the board. that's a little -- a little nugget for you. but we'll see what occurs. or whether there's -- whether there's a plan "b." i don't know. >> i didn't like the call. the call basically said everyone who works there is a hack. you get anybody who comes in parachutes in, you know, joe blow parachutes in is going to do a better jonathan the gb tha

that's been there. they do some things right. >> they do, yeah. >> the joke yesterday after google but nest that microsoft was working on a deal to buy life alert. they mean that in a bad way, horrible, horrible joke about microsoft being late to everything. >> it's a good one. >> i know. >> microsoft is pro-chirp. they like it when a chirp goes between 3:00 and 4:00 in the morning. i made a comment about macy's yesterday. macy's was a better quarter but some people are taking everything i say literally, the irony is macy's is in the department store and they are doing better. home depot did tell me that this thing is driving traffic this nest. so, i mean, there is a sea change here. if you have a product that's a winner, maybe working. game stop i thought that they had a lot of products that were winners. i'm not giving up on game stop. they said that this first quarter was going to be bad, not that great last time.

now they quantify how bad and how suddenly everybody hates it? >> it wasn't good. >> no. >> they quantified it and now we really know. >> that's kind of my point. i mean, there's one -- you got to get a little realism. lulu said things might be rocky and lulu reports a rocky number. and people say, can you believe how rocky it is? sometimes when they guide lower. they mean it. it's not everybody is doing the underpromise, overdeliver, and sometimes they are underpromising and underdelivering. they are doing underpromise and underdeliver as opposed to overpromise and overdeliver. >> you mentioned google, and wells goes to outperform. their price target was $900 to $1,000. and they go $1,300 to $1350. and that's the high on the street along with bernstein. the low i think is eight something. >> anything they do with their money is additive, basically. someone said today that they're

raising their -- they're more positive on google because they're going to have higher revenues. if you buy a company you'll have higher revenues than if a cash sits earning nothing in your jpmorgan account which is why jpmorgan is making so much money. >> yeah, although people seem to have confidence somehow in their strategic decisions when it comes to m&a even though they seem to be slow ithrowing darts over the place. >> i had comed on recently and they do this kind of thing. adt, that's the -- >> security and home security. >> they have a system like this. >> right. >> at&t has a system like this. >> but they're not working on self-driving cars. >> no. >> and glass and -- >> no. >> -- robotic technology. >> google -- >> youtube. >> what does google really want? they want to have a cell phone that makes it so if you lose it it's basically dead because it has everything about you. >> you'll have your cell phone app implanted in your brain and

that will go off. >> do you have the app that tells you where your cell phone is which you embed in your kid's cell phone so you always know? >> "wall street journal" has a story about wearable technology and can text your mood how others are feeling. >> that's ridiculous! that's ridiculous! oh, i'm happy. come on. >> jim's good today. >> triple schizophrenic. no, don't talk about schizophrenic. i know, that's a reference to dom day de luis. >> the fit bit i get. >> they'll know everything about you. we are this close to totalitarianism. >> you are really going for it. >> i'm going all in on it. >> as for the banks, wells fargo is the only real down name, down 1%. jpm's up over 1% and bank of america seemingly benefiting from whatever is going on with almost 1.5%. >> wells fargo has had a series

of reports and they're greeted with little neg test and then you look at it a few weeks later and it's up. i think that's important. remember, they are much more of a mortgage player and that means we just haven't seen the kind of volume that we used to have. i would not sell wells fargo. i would not sell it. >> you said yesterday you liked that the banks were coming into the season cold. >> that really helped. because we see what happens with retailers where they come in hot. the banks have not had a good 2014 so far, so i think that they had a little room to go higher. >> speaking of retail, national retail federation out with its final holiday sales figures. courtney reagan is at the exchange conference in orlando with the numbers. morning, courtney. >> reporter: good morning to you, carl. that's right, i just heard from the national retail federation, they are actually just crunching the numbers from rest of the report but the headline number is the holiday sales from november and december grew 3.8%, slightly short of what they had

forecast of growth for 3.9% for a total of $608.1 billion and for all the negative numbers looking at the current quarter, holiday season shaped up fairly well at least almost in line with expectations and as soon as we get more details from the national retail federation, we'll bring it to you, but for right now holiday sales for november and december increased 3.8% over last year for $601.8 billion. back to you. >> all right, thanks very much, courtney reagan. wanted to take look at shares of time warner cable, up 2%, first active trade in the stock after charter yesterday released a letter in which it said, hey, we've been to the negotiating table with you but you don't want to negotiate. so, shareholders our last offer was and it was about 83 buck a share in cash and the rest in stock. although no fixed ratio, no collar. i asked tom rutledge, charter's

ceo, earlier right here on "squawk on the street," why at this price it's a compelling offer for time warner cable shareholders. >> when you look at the cash component that we're bringing, when you look at the appreciation that we've already put into the stock through this process, and you think about the fact that as part of our offer, which is not an all-cash offer, 45% of the company will still be owned by time warner shareholders. so, those shareholders are going to participate in the synergies that we deliver. they're going to participate in the nols -- >> net operating loss. >> and they'll participate in a turnaround situation that improvei improves the operation of the company and stops the subscriber losses and improves customer services and creates more value than they would get than with a pure cash offer. >> many of the shareholders agree with many of the sentiments they just don't

necessarily agree with a price that was right around where the market was trading the stock yesterday. yes, time warner shares are up sharply, of course, since the conversations or at least the first foray was made as i reported back in june to glen brit, then the ceo of time warner cable. but all the cable stocks are up and for time warner cable's part, it is saying we believe a multiple of eight times our forward ebita, what we expect to earn this year, is more appropriate. that's where cable deals of size get done and that leads us to $160 a share. mr. rutledge in our conversation, of course, indicating time and again he believes right now that this is an offer that is full and fair. no way it's going to stay at this offer. the question is how much do they walk it up. how much is time warner willing, if at all, to come down and what it would consider to be real value. and do they go to a proxy fight to try to really involve and

give shareholders a voice here. the entire board is up and the window of nominations will be open for a month, rutledge did not commit one way or the other of that and that is obviously part of the timing why they are coming now. i will say this, though, if it had been another buyer, you'd be criticizing it and saying it's nothing more than a postage stamp offer. we don't have a fixed ratio. we don't have a real offer. we don't have a price. we don't have financing, i should say, that's been paid for, it's john malone and greg maffey and tom rutledge and shareholders are listening closely. >> i'm glad you mentioned that, when i'm listening to it, i'm saying, hey, listen, take it or leave it, guys, he's not going higher. but the reason why the stock is up is because the people involved as you said are such serious -- these are not people who need to go -- you don't need to have some letter from credit suisse if you're these guys. >> no, their financing from what i hear could take them up to as high as $110 a share cash

component, that's the belief of the sources close to time warner cable who with be encouraging that. we have a low offer and an incredibly high ask and no reason for comcast to show its cards in any way. but my understanding is little has changed in terms of at least it continuing to watch with interest what develops here as it tries to make a decision as to whether -- >> the government doesn't care, right? you don't have overlapping -- >> you don't have a doj. you don't have caps on subs, but you would have an fcc potential issue. you would conceivably have another consent decree something that comcast i am told is vehemently opposed to having to deal with yet again remember its current consent as a result of the nbc universal purchase i believe extends to 2016. >> i just mention that because

here we got the weather channel being booted. we know that time warner -- >> your friend is your enemy is your friend, that's true. >> someone obviously there's winners and losers in this and it just seems like these companies are so powerful, people at home, i think feel they're very powerful. >> they do. although mr. malone, the -- one of the pioneers of the cable industry has certainly introduced and rutledge said this the concept that we need consolidation. one way or the other, we need it as an industry. >> at $61 billion the bid would rank as the third largest ever u.s. media m&a media talking about size here that's for sure. let's get to bob pisani on the floor. dow is up 31. >> good start to the day coming off of the highs. financials leading, nice sign. tech and even energy stocks which had a horrible year, metals are doing well and all the stocks that had a horrible year are sort of leaders so far today. you heard courtney talking about retail sales. want to highlight the december retail sales numbers the government released were on the mixed side, i saw clothing,

food, internet sales up, furniture and department stores down. here's the key question, how much are the stores losing to online and they did publish the final retail sales for 2013. very interesting total sales a little north of $5 trillion that was up 4.2% for the year. unadjusted. internet sales were up 10.3% okay you can see it internet sales are slowly gaining. in terms of the percentage of sales, still modest. internet sales in december were 9.1% of total retail sales, in december of 2012 it was 8.6% of total retail sales. it's creeping up but wasn't as fast as anticipated. take a look at a number of the retailers today, for the most part the retail sector is trading slightly on the mixed side. most of these started on the up side and now you see they are mixed. kohl's had a horrible day yesterday. most of the retailers have had a terrible year. in fact, very large swaths of the s&p 500 sectors are having a very tough times for very specific sector reasons and you'll see retailer stocks have

been hurt by markdowns that are now extending into january. the energy stocks have been hurt by low oil prices and a glut of natural gas and the telecom and homeowners and interest rate stocks have been hurt on the uncertainty of direction of interest rates and the emerging markets, the commodity markets and steel and coal stocks have been hurt by the weakness in china and sector specific issues are hurting large parts of the s&p 500. there's only one clear winner financials are moderate winners depending on what you're looking at but really it's health care and right across the board we saw nice rallies in biotech once again, rallies in medical devices, hmo stocks, even hospital stocks have done a little bit better so far in 2014 and that's really the only clear sector that emerged. as for the bank names today, put up the banks, amazing talked to a couple of traders who trade bank stocks and how completely in line most of the commentary was from jpmorgan and wells fargo, particularly wells fargo

right on the button there, and most of the traders feel that's the real problem. we can hope that the volumes will ramp up but with the low rates and higher volumes still will affect the margins. we need higher rates to really get the companies into higher profitability territory. guys, back to you. >> all right, bob, thank you so much. bob pisani. let's check out action in commodities. sharon epperson is at the nymex with crude almost up to 93. >> that's right. we'll start with gold, because gold prices are modestly lower after u.s. retail sales data. we saw gold get above the 12.55 level in the previous session but was unable to break above that, there seems to be the dichotomy going on between the equity market and gold prices and we'll see if it continues in today's trading session. we're watching oil prices and a mixed market there as you mentioned we are seeing the u.s. oil prices, wti contract approaching that $93 a barrel level. and we're waiting for the u.s. inventory data to come out on

wednesday that's expected to show another drawdown in crude supplies. meanwhile, we're seeing more barrels come back online from libya. that could be part of the reason why we're looking at the pressure here on the brent crude price. in terms of natural gas, for the last three sessions we've seen natural gas come up from those lows and we're looking at natural gas up about 10% in that period of time. we're expecting to see a pretty big storage withdrawal on the report that comes out on thursday, that after the very, very cold temperatures that we saw in the past week. and we'll see, though, if natural gas can approach what we saw for those highs above that $4.50 mark. back to you guys. >> all right, sharon, thank you very much, sharon epperson. when we come back, the co-ceos of chipotle, their foray into pizza certainly getting pizza hut's attention. and dunkin brands looking to expand. and we'll get an interview with the ceo there.

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there's a look at google

today spending $3.2 billion to acquire nest labs. nest makes smart products like thermostats and smoke alarms that communicate with their owners. google's second largest acquisition ever behind the $12.5 billion purchase of motorola mobility back in 2012. nest ceo tony fadell who is widely credited with playing a key role in making the ipod appeared on "squawk on the street" just two months ago. >> the ipod was really just a cd player that could play more songs wherever you went. the cd players were kind of, you know, commoditize at that point. and then when you look at the iphone, you know, kind of the midmarket phones were also commoditized. people were just kind of texting and doing their thing, but they were free, commoditized phones and no one thought they could break out of that barrier. so, if you look at what we're doing there with smoke alarms with and with thermostats we're triering to do much the same thing, reinvent unloved products. >> google and nest is the topic of this squawk on the tweet,

we're asking you to complete the following sentence now that google has a foothold in your home it will now be able to blank. tweet us and we'll get your responses later on in the morning. there are some legitimate worries about how much information they'll share about the customer because we're not talking about things you're putting on your computer now, you are talking about walking through a room in your house. >> right. also i think that -- i think this is the newer generation is much more comfortable giving out information. if you ever look at people's facebook, they tell you everything. i feel that this is in the end we forget a lot of people hate their electric bill and they hate their heating bill. you can get this and save your -- save a little money on heating. i spend a lot of money on heat because i don't even know -- today i woke up it's 30 degrees, okay, now it's 50. i would like to get in there right now and shut the darn heat off. i don't need it, maybe -- i would use this. >> yeah. no, it's -- absolutely. i want to quickly take a look at shares of family dollar if i

can. down about t2%, jim told me earlier there's a downgrade, research at least that may be krting to it. it's been an interesting stock. the stock was down sharply last week and it came back a lot, sparking another round of questions whether there's something coming here in terms of a deal. who was the buyer of a lot of that stock that kept it from falling perhaps as much as it seemed to be early in the day when it reported those lousy earnings. i can only tell you at this point that people close to the situation indicate no talks between family dollar and dollar general. going on right now. and did want to put that out there. given it was interesting to note the buying that took place, jim, when it became particularly weak. that being family dollar. so, there will be no shortage of rumors here about consolidation in this particular part of the retail industry. but nothing that i've been able to come up with at this point indicates there are any ongoing talks. >> you don't want to be in that stock.

the stock should have gone down more. another one of the quarters in this period that has been so bad. >> cfo did say they are adding 1,000 new skus at the conference yesterday. 5% to 7% new store growth. >> you got to be careful with that group. they used to have a wide open part of the company, dollar general, in california, it's a better operator. >> the dow is up 18. we're going to get to 6 in 60 with jim in a moment. (vo) you are a business pro. seeker of the sublime. you can separate runway ridiculousness...

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let's get to 6 in 60, 6 stocks in 60 seconds. we've not mentioned the downgrade of general mills. >> morgan stanley said you got to let it go. >> deutsche on eclipse. >> this has been a terrible stock. iron ore and mining and they are saying, listen, the restructuring is working. >> deutsche wants to buy mo more moran. >> this is an orphan drug company. i don't know if this will hold this current price. >> the china comps out of yum. >> people misinterpreted this. it was really pizza hut that was weak, not kfc. kfc is the driver. we think it's a driver. >> your thoughts on celgene. >> you got a lot of guys

reiterating buy, i thought its presentation was terrific, but biotech has gotten out of favor and wait until it gets lower. >> and jpmorgan cuts. >> these things have been straight up. oh, yeah. you can see that. right? okay. >> what's tonight on "mad"? >> whoa. we got the incredible hot stock it's been cooling. this company has a long -- a way to be able to have long lasting anti-schizophrenia drugs. and walgreens, unbelievable how well they've done with the different deals they've had. the ceo is remarkable. i doubted him for about 15 minutes and missed about 50 points. >> the remodelings blow your mind. >> i go into my dwayne reid and it used to be jpmorgan's house, i get lost it's so fabulous. they have sushi, too. not bad. >> we'll see you tonight, 6:00 and 11:00. >> thank you.

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what can you tell us, jim? >> it came out as plus 0.4. it was expected as plus 0.3. stronger than expected. last month it was revised to plus 0.8 over an already strong plus 0.7 last month. the market is interpreted it as decent numbers. business inventory is interesting because the only time we can interpret it as a good number when we believe overall sales will rise with business inventories. the s&p and rallied two full handles on that. and the ten year didn't do much. came into it about 2.849. back to you, david. >> all right, thanks, jim. now on to one of our key stories of the day, of course, less than a day after charter communications finally came public with, well, we can call it an offer of a kind for time warner cable. this has been a long-running saga that would seem to have a lot left in it at this point as well. the offer in the low 130s a

share for time warner cable. shares of which are up a bit this morning. certainly programs not what time warner cable shareholders were hoping for and they continue to hope that there will be a lot more to come, but that remains a question. also a question, whether or not charter and its partner liberty will try to run a proxy fight to unseat members of time warner cable's board of directors. the nom napg nations for that board will come up in a window that opens next week and close about a month later the middle of fore. i asked charter's ceo tom rutledge in an earlier interview right here on "squawk on the street" whether the company will, in fact, run a fight to unseat directors as part of its effort to buy time warner cable. >> we're not there at the moment. we're making this offer to shareholders and asking shareholders to get involved. all of our options are open. but we think if the shareholders look at the offer that we have and ask management to engage, that the shareholders will

recognize that the offer is a good offer and that it actually creates more value than the alternatives. >> for its part time warner had indicated it was open to an offer of $160 a share for the company roughly eight times it's expected e eed ebita and is simo other multiples in the cable industry when a change takes place. time warner indicating their expectation that charter could pay as much as $110 a share in cash although it asked for $100 and the remainder in a stock with a collar symmetric 20% either way guarding the value overall of those shares for time warner cable shareholders. i asked mr. rutledge why not go higher and why not include more cash in any offer. >> there's a big job to be done in terms of turning it around

and that process is going to cost money. it's going to require investment. it's going to require taking the company all digital. and it's an enormous amount of work. so, the other thing that you need to consider is that most of the cable deals that have been done have been done as all-cash deals. when you look at the after-tax effect of our offer, it's actually higher than most of the cable deals, in fact, all the cable deals that have been done in the last five years, so it is a rich offer when looked at in an after-tax environment. >> push for consolidation, of course, in the cable industry will be continuing. one key question mark remains our parent company comcast and whether it will choose in any way to play in an ongoing drama the likes of which, carl, we've yet to see anywhere near the end. >> i think that's good news for all of us and especially watch you work today, david. thanks a lot. mixed results for jpmorgan and

wells. >> jpmorgan executives are wrapping up a call with analysts and the overall take is surprisingly rosy, they say the worst of the litigation risk should be inside it with the worst case estimate coming down to $5 million over its outlaid reserves already. they have clarity on the regulation like the volcker rule and they are also optimistic about meeting the fed's 5% leverage ratio and giving money back to shareholders even though they largely stopped doing that in the back half of last year but all of that helps lift an earnings picture from the numbers isn't incredibly positive. you hove mortgage originations and the derivatives accounting hit net income there. they saw some business demand picking up and asset management outshining them all with 15% jump in revenues and roughly for profit. though expenses are rising in that area as well. on the conference call, the cfo

said the asset management unit saw gains from a seed capital investment rising in value. the speculation that is that's the digital growth funds investment in twitter which went public in the fourth quarter, it's unclear, though, and the bank did ink three settlements and it sold a third of its legacy stake in visa stock and its iconic downtown building to offset some losses. and wells fargo managed to beat the street on a dollar per share on $21.9 billion in revenues in line with estimates, but the fears of the repercussions of rising rates on the mortage market have been and will continue to be extreme. the earnings from mortgage banking shrunk by a half from a year ago, and applications for mortgages down by more than half and they are cutting costs to offset that, guys, but you can only do that for so long and executives are beginning their call with analysts and we'll see what they say on that. >> i'll let you get back to the wells fargo call, thank you very much for the moment. let's bring in two guests to talk about the results from

jpmorgan and wells and david katz is here and todd hagerman is senior financial services analyst and managing director at stern a.g., gentlemen, good morning. >> good morning. >> let me kick off with you and jpmorgan more importantly, how do you feel about the results? >> you know, thankfully there were really no surprises in the quarter which i think was a bit of relief for investors particularly after all the legal settlements that we went through over the course of the quarter. the fact that their potential liability as they say it related to reserve or legal paying down sequentially was very encouraging. again, they talked up the prospects of increasing the capital return to what the shareholders here in 2014. business activity notably didn't really fall off a cliff. for the most part given the challenges with the government shutdown, the taper debate and so forth. yes, capital markets was weak but not too much of a surprise quite frankly. i think all in all the outlook is what people are gravitating

to. it keeps investors expectations on track into '14. >> interesting. david, you and your clients own both jpmorgan and wells fargo which is partly why we have you on the program. you know, david, fbr makes the point that you bid up the banks and the banks have had a good run on the basis that the economy is improving, that there's going to be higher interest rates and they'll have loan growth. but they're not glivedelivering they? jpmorgan is making banking loans flat on the quarter and commercial banking is just up 1% quarter on quarter. do you look at the run that you've had and question whether it's unsustainable? >> we don't. we actually think the banks will continue. they'll not continue at the pace of last year but we do think the stocks are going to be one of the leading groups this year. in terms of your question mortgage activity is down because of the rising rates the first part of the equation. for rates to continue to rise, jamie dimon says you're going to need a better economy and a better economy many areas of the

bank are going to do a lot better. in addition the net interest margin which has been under a lot of pressure for all banks is going to start to do better. more normal yield curve. we're feeling pretty good about the ankbanks. if you look at the banks over the last six or eight quarters jpmorgan and wells fargo in particular they've beaten the numbers on the bottom line. the stocks haven't done much the first day and maybe gone down a little bit but over the next quarter they've done quite well, so we would buy into any weakness on both of them today. >> what about the fact since the start of the year the ten year has moved lower and in other words rates have moved lower, we're into more of a situation that predominated during the middle part or early part of last year instead of the kind of picture where rates are moving higher? we saw the wells net interest income wasn't all that great and i just wonder how much longer the situation can persist because it was their high cash balances in particular and that's a phenomenon throughout the industry that were a drag. >> right. one of the clear theems that came out of the jpmorgan call

this morning the fair optimism was back end loaded if you will. in other words, the revenue environment remains verile challenging for all these companies. as you mentioned with wells, a lot of excess liquidity. they're really having difficulty deploying it in higher margin-type assets, you know, business activity and so forth, so the first half of the year undoubtedly's going to be a struggle. and by the same token, you know, you can only go too far or so far in terms of expenses. >> right. >> wells in particular, you know, the expense line just didn't move as much as what investors really looking for with respect to the structural change in mortgage banking. >> okay. let's bottom line it, todd, which is the better investment from your point of view, wells or jpmorgan? >> i clearly like jpmorgan right here. you've got nice leverage, some

improvement in the economy. wells is weighed down by the mortgage uncertainty. >> david, which is your investment? >> we like them both. we don't think you have to make a bet on either. >> nice to see you both. >> thank you. >> thank you. in the meantime, dow's up 48 points. >> check out shares of intuitive surgical which has had a tough time of late. the maker of those robotic surgical systems offering preliminary sales guidance for its fourth quarter and fiscal year 2013 that's above analysts' expectations. sales declined year over year but less than those analysts had thought thanks to an increase in surgical procedures performed by those da vinci surgical robots, the stock is up so far, kelly, in today's trading. back over to you. coming up next people are still making doughnuts. the ceo of dunkin' brands joining us live for an exclusive

interview, we'll talk to him about the state of the consumer and how the company is staying competitive. "squawk on the street" will be right back. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve.

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a dunckin' doughnuts plans o expand west with hundreds of new stores planned this year but will consumers buy into the new coffee buzz. courtney reagan is out at the icr retail conference in orlando, florida, with an exclusive interview.

good morning. >> good morning, carl. i'm joined by nigel travis. i under you have a new expansion plan. you are moving west. what are the financial implications and how are you going to get folks to pull away from what they are used to doing and getting their coffee from starbucks or somewhere else? >> great questions. we have 213 stores west of the mississippi. we've announced on the back of a record year of openings last year. we opened 371. the next year we're going to open, well, the guidance is 380 to 410 and what that means we'll open more in the west. we're seeing great unit economics over there. in fact, some of the top line revenues are higher than they are back in our home territory of boston. and the franchise economics as a result are very good. we've got huge demand. we got a huge amount of signings already for this year and next year so we feel very bullish about development. i know you are talking about dunkin'. i have to squeeze in,

baskin-robbins, first year since 2006 we had positive net growth and this year we're guiding even a little bit higher. so, we're kind of excited about both brands in the u.s. >> and your other big announcement this week is the loyalty program. why now? why haven't you done a loyalty program before and what do you expect to get out of it? >> i think we're one of the leaders in the qsr space. there is obviously a couple of other loyalty programs out there, but we're a franchise system which means we have to have the infrastructure in place and the same point of sale equipment so we can build loyalty on top. in 2012 we introduced our mobile app. we've downloaded over 5 million. had 5 million downloads of that. that is the entry into what i call one-to-one marketing. loyalty is the next phase. that comes out in the 27th of this month as you mentioned. we're excited about that. we've had it in 300 test stores. i think people are going to love it. it's very simple. you basically get for every dollar you spend five points and

every 200 points you get a free coffee. >> who doesn't love something free? it always tastes better when it's free. we've got a lot of things at play and minimum wage increases coming into play in a lot of states and higher health care costs and consumers still spending in a number of discretionary areas, what's your outlook on the consumer? >> i have been increasingly bullish, i am pleased in congress they seem to be coming to a debt ceiling. as i've said on your channel before, i'd love to see immigration reform because i think that will be a real boost to the economy. so, i feel very good about the consumer this year. and i think that's going to continue to grow through the year. i would love to see the 3% gdp growth, but for us i think a lot of people are going to come in and they're not only going to get their regular coffee, their regular breakfast sandwich but the affordable delights like the

doughnuts, by the way, doughnuts are trending back up, so we're very bullish about this year overall. >> i under that. i like doughnuts, too. i believe simon has an exchange. >> i am reading the analysts' notes from the session and am i right that you are basically saying to people behind closed doors, we expect to hire minimum wage because we are able to offset it by not having reduced prices for a cup of coffee and because the margins are so high on breakfast sandwiches? >> what we've actually said, simon, is that we believe the minimum wage will go up, so there's no point fighting that. we also believe the minimum wage is important because we want to hire the best people in our stores. it's interesting we actually sat down and discussed all this with our franchisees recently. we're totally aligned. but in terms of pricing increases, the guidance we've given at thin meetings, you wou

expect a 1% increase in prices but we'll gut it at differentiated products where we are clearly different and breakfast sandwiches are one example and we won't increase the coffee prices because coffee has a lot of competition and we want to keep the great value that people think about dunkin' donuts. >> i'm sorry, nigel, i am catching up with the back end here. i thought the price for beans had plunged and coffee prices should be falling through the market. have i got that wrong? >> coffee prices are at a historic low. when coffee prices were going back up in 2011, we didn't actually increase them, so that's the reverse of your argument, simon, so we feel that we've kept very steady. our prices have been very steady. they're a great value. they're a great value against some of our well-known competition and we intend to stay there. >> i've got a question, too, what is the for the future of dunkin' brands? the chinese fund maker is

hinting they are looking at a u.s. coffeemaker as an acquisition target. is it dunkin'? >> i've said several times no comment to that as one does. but they're a very small company, so all i would say is we've had no discussions. >> okay. >> what i would say, though, is that we think we've got a great, great future. i've obviously talked with analysts here, and some of their predictions about where our stock can go in the future is off the charts even for me. they see the growth we have with dunkin' comps, dunkin' growth in the u.s., baskin-robbins now which we really pulled back as i said before and then international. we're fixing dunkin' international. i'm excited about some of the early results of the work that we're putting in place there. baskin-robbins international is going to continue to be a growth story and we've got some other plans that we're not yet ready to reveal. >> okay, i hope you'll come to us when you are. >> we will. >> i think kelly has a question. >> hi, nigel.

howard schultz in a memo to starbucks employees recently talked about how they were not immune from a drop in foot traffic during the holiday period and i wonder if you can comment on that and the kind of locations you have versus starbucks and whether you guys see investing in, for example, cards and mobile payments as an area that is equally important to the focus that starbucks has put on it to kind of guide you into a more web and mobile-based future? >> well, firstly, what i would say is that, yeah, we think of ourselves as a little bit of a technology company now. i came from the pizza industry. when i went to papa john's, we had online pizza ordering at 6%. when i left it was 30% and it's now 45%. so, i've seen if you like the future with technology. howard is absolutely right. we've got with our app mobile payments, our customers love it. it speeds up service. we're going to use it for our loyalty program. and i think technology really is the future. even baskin-robbins we've been testing in san diego and detroit

online cake ordering. we had great results. we're going to roll that out later this year. so i really do think technology is the future. and what i would say and this has come out from the conference here is i think starbucks and us maybe separating ourselves from the rest of the field. >> thank you so much for joining us, nigel, really appreciate it. lots of good insight, you'll come back to us soon when you're ready to tell us about the new plans for the future. >> thank you so much. speaking of technology, cybersecurity threats increased companies are looking clearly to protect themselves. you see it on an hourly basis. we'll tell you which stocks stand to benefit and if there's a way for you to profit from the present situation, that's right after the break on cnbc. [ male announcer ] this is the story of the little room

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welcome back. the rise in cybercrime has a lot of companies worried and new data suggesting firms will be working to improve their security now. which stocks are set to benefit, josh lipton joins us with more on that one from san jose. morning, josh. >> hey, kelly. hackers are making headlines and that has chief information officers feeling nervous. cios are now ready to spend more safeguarding their companies which could mean good news for some security vendors. morgan stanley just released results of a survey of cios and found that network security remains a high priority for them in 2014. these executives expect an average of 8% growth in network security this year versus 6% last year. the recent hack attacks against target, nieman marcus, skype and snapchat have made it clear how real the threat is, but even before the recent data breaches companies have known they had to do more to protect themselves. analysts in a survey of i.t.

managers last summer found that security ranked number one in their priority list. the question for investors which companies are best positioned to capitalize on this stronger demand for security in the new year. keith weiss at morgan stanley said his top pick is fortinet, it faces easier comps and looks attractively valued. fbr is sticking with fireeye, it's enjoyed a run since late september but they say it will take share from mcafee and juniper and cisco over the next eight months and some are bulled up on infoblox and it disappointed the street in november but the recent pullback gives investors an opportunity a name that could play a big role in network security. carl, back to you. >> it's been an interesting space to watch this week, josh. thanks a lot. google invading your living

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about an hour into trading some of the stories we're talking about 7:30 on the west coast and 10:30 on wall street. intel is the bigger gainer on the dow up 3%, and jpmorgan upgradeing from overweight to neutral and that intel will improve margins and returns by focusing on areas where it has an advantage.

shares of game stop down 18%, lowering its profit forecast for the holiday quarter as sales of new software came in below expectations and american airlines youannouncing it will change american eagle to envoy effective in the spring in the effort to give the carrier its own distinctive identity and reduce the confusion. >> you need to say it with a french accent, envoy. envoy. google announcing its $3.2 billion acquisition of nest, the smart home electronics company currently carries a smart thermostat and a smoke detector. jon fortt joins with more on this. it seems like in november we were talking about the interesting story behind nest and how quickly now google is the company who swept in to buy it. >> it was just november, that's right. it seems like it. it's kind of crazy. >> funny how that works.

>> $3.2 billion that's a little bit more than google paid for double click and took over the display ad market, the biggest private acquisition google has made. i don't think there's any way to justify it financially. fortunately google doesn't have to because they don't answer to shareholders in the way that most companies do and these days a company like google takes more heat for not spending money than they do for not spending it. >> it's not like they are spending the entire pile on a company that doesn't represent a strategic investment in the future. >> this is something larry page wanted. he feels it will make google better and he had the money so why not. you talk about tony fadell, really interesting guy. he and his wife both worked for apple. both close to steve jobs. he was very much part of the brain trust developing the iphone and other products. he talked with us about what he's trying to do with nest. let's listen to what he had to say. >> you look at what we're trying to do with nest protect and our nest learning thermostat, we're

products that you may ignore every day and try to bring them into a modern era. >> i think part of the challenge for google here with all the brands they've got now, motorola, they've got google hardware, now they've got nest. people are going to wonder how much of the data is being shared back and forth, they want to be in my car as we learned at ces, in my house, on my face, in my wrist and pocket. >> they want to be the operating system wherever you are. >> they do. but tony is saying the nest data will be separate nfrom google data. >> for more on the big acquisition of nest let's bring on the cnbc news line evan wilson analyst with pacific crest securities and jon will stick around. evan, good morning to you. >> hi there. >> jon said it's hard to justify financially the deal. can you do that? >> well, i think we need to realize that we're in a world where $3 billion wasn't enough for google or facebook to

acquire snapchat it puts in perspective, you know, that squares valued at $5 billion and drop box $8 billion and lending club is $2.5 billion. this certainly fits within that comp group and while you can't give a revenue multiple, you can't give an ebita multiple, it's one of the hot tech companies that fits into the classification. >> you made a point for a company that's faced a lot of criticism on the design of hardware, this actually gives them a little bit of a leg up that might actually float over into other products, right? >> yeah, for sure. there's two primary business models for monetizing software these days. one is advertising. the other one is selling hardware. google's very good at selling advertising, but not so good at selling hardware. what nest gives google the team of people with a proven ability to combine that software internet services and hardware into one and a monetizable and highly successful consumer product. it gets google a team that knows how to operate with the apple business model that so many

people like and it's something they've been criticized for historically. >> evan, how do you grade google's ability to digest acquisitions? i mean, i think the press is tending to give them a pass on this one. we like tony fadell and know his history, and it's kind of unassailable. they spent a lot of money on motorola and continue to. that has not made a dent in the smartphone market. how is google doing when it buys things these days? >> it's a great question. longer term it's really hard to say if it's going to be broadcast.com or pets.com, i think probably not but it's hard to tell. one thing i can tell you that people said they paid too much for youtube, that they paid too much for android, they paid too much for double click. now they're saying the same things about motorola and some people are saying that about nest. but google is one of those companies it's very clear is kind of skating to where the puck is going and with those big acquisitions looking smart in behind sig hindsight it's hard to bet

against them. >> one of the acquisitions they made was ita which was a fairing engine in the travel industry which basically returns data so you can run an online travel site, it was very controversial at the time. now we learn because the head of ryanair let it slip in an interview with the "irish independent" yesterday that google is working on a price comparison site for airlines. it may become some sort of online travel agency. that is a nightmare scenario for many people within the travel industry. because of the latent power that google has already in search and there was an assumption that they would restrain themselves in their aggressiveness. have you read that report? i mean, what would your view be of them going further into online travel and, you know, basically challenging priceline and expedia and orbitz and all the rest of them? >> so, it definitely absolutely saw the report. travel is one of those areas that people talked a lot about for google around the time they made that ita acquisition but

hasn't gotten as much focus yet even though they have good products in the space like google flight search. i think it's clear that they're still focused on that. i wouldn't be surprised if you saw a new product come in 2014. and when you think about ways for google to add big chunks of that total address market, you know, and travel is one of the biggest and i think they want to be in shat spathat space and it that they can aggregate it into one. >> how devastating would it be given the market power they have to the other players in those view? >> i don't follow the travel space typically, but for those players they are watching google very, very closely. >> awfully close to an all-time high today on google. evan, thanks so much. evan wilson, over at pacific crest. and jon, thank you to you as well. let's send it over to dominick chu for a market flash. >> investors looking for the next nest have honed in on a company called control four which provides automation and control solutions for connected

homes. now, keep in mind it had a market cap of around $400 million before google acquired nest yesterday. but it's surging nonetheless, up 20 plus percent. some traders looking towards ancillary trays on nest. control four is one of those. those shares surging on that bit of news. back over to you. >> speaking of markets, we're slightly higher on 39 points for the dow welcome relief for many as 2014 hasn't been such a great performer so far. we'll talk about earnings season next on cnbc. mine was earned orbiting the moon in 1971. afghanistan, in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families

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morninglander seeing earnings grow a more modest 5%. welcome to you both. >> good morning. >> christine, has anything changed since the reports we got this morning? >> well, we're actually seeing a tick up in the estimated s&p iq consenn us expectation. we're at about 5.5% for the analyst expectation. that's ticked up due to the strong results this morning from jpmorgan and wells fargo. but overall, as we know, analysts are very conservative in their early estimates. over the last 12 quarters we've seen by the end of the season that initial estimate actually ticks up about 4.5%, so that's where we're getting our 8% to 9% range. we believe this quarter will be no different and will follow that trend and, therefore, by the end of the season we should see an overall growth rate that's in between 8% and 9%. >> all the same as we head into the back end of the earnings season, chad, the know cuss will shift to retailers and the figures this morning in the retail sales report along with

every other indication we've gotten from the traditional players in this space is not a good one. do the investors want to be exposed due to the headlines that could hit? >> the consumer discretionary will do well in 2014, we should see perhaps a 5% kind of earnings growth number on the consumer discretionary sector. as well as top line growth around 3% for that sector. but more important, in aggregate, for this quarter that we're reporting on, the real story is really revenue growth. and we've had this lackluster revenue growth in 2013, and for 2013 q-4 you should see revenue growth around 1%. >> chad, though, is that revenue figure really what the market cares about? if you look at the case of alcoa, they beat on revenue and missed on earnings and they got punished for it and i'm hard pressed to see a high profile example where the revenue figure has mattered more lately. >> i think where we are right now is where you have

profitability at historic levels and what you really need to see happen over the course of the next 12 months is a revenue push-through where you're not growing at 1%, 2%, but rather 4%, 5% revenue trajectory. we believe you'll get to that point in 2014 as the global economy starts to gradually improve. we're not out of the woods yet, but we do believe that has to be the main driver for the market over the course of the next 12 months. >> chad, why can it not be the driver that the ceos actually take the $1.8 trillion of cash that they're sitting on and invest it in the economy rather than buying back stock at half a trillion a year? >> well, i'm hoping that would be the case, okay, we're forecasting investment spending to increase gradually actually even more than gradually over the course of the next 12 months and that will reignite, okay, top-line revenue growth as well as economic vitality. over the course of the last 12 months you've really had limp kind of revenue numbers,

historical margins that have been quite high, but a lot of buybacks. and, you know, that financial engineering could only last so long, especially when you have market multiples now at a historic range where they're not cheap, nor are they too expensive. so, you know -- >> yeah. yeah, i understand. i was just going to say, christine, i understand the case for bigger picture as to why revenue growth is important here, but simon makes an interesting point, which is if you're trying to talk about the gears that will really help the economy get going longer term, investment would seem to be an important piece of them and one that lagged last year and no one can really figure out why. do you see any early signs that we might get a pick-up there, and do you think that investors should try to reward companies for doing that? >> yeah, i do. and we've looked a lot into the share buy babb backs and how th calculate earnings per share. we adjust for the share buybacks, a lot of people's concern last quarter in most of

2013 was that share-backs were really driving the record levels earnings per share that we were seeing. that's not necessarily true. but i would agree with chad that we really do want to see that revenue number pick up. we thought -- >> christine, let me interrupt you because you're saying something really important here. we came into this by saw saying, we had record earnings per share, are you saying you crunch the numbers and even if you amount for the massive amount of share buybacks which flatten the earnings per share, we are still at record earnings per share? >> i would say the share buybacks have added just a bit to the -- to the earnings per share overall number. just the way that we personally calculate our methodology adjusts our divisor that we use in the denominator to account for the share buyback, so i would say the $27.79 that you're expected for the fourth quarter is a pure number and is going to be the seventh consecutive record for quarterly earnings growth for the s&p 500 which then leads to the $109 earnings

per share estimate for 2013 which, again, is the third consecutive yearly record that we've seen. >> right. >> i would say that this is a pure record. >> and that's an important point to make. quickly, chad. >> it's about the quality of the earnings and really what we need to see in 2014 is top-line revenue growth and economic growth and earnings going higher because revenues are going higher, okay? and if the quality -- if the earnings are just coming in because of buybacks, then, you know, that's nothing too impressive. >> right. but i think christine was making the point that there's more than just buybacks there, yeah. >> right. >> all right, thanks, guys. got to go. christine and chad this morning as we work through earnings season. >> in the meantime take a look at twitter, obviously having a very rough 2014 so far. take a look at the chart. what's the next level investors should be watching for in this stock? we'll have more on that when we come back. the dow is now up 51 points. in. someone stole her identity and opened some credit cards in her name. checking her experian credit report and score allowed

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next is every second of nbcuniversal's coverage 0f the 2014 olympic winter games. it's connecting over one million low-income americans to broadband internet at home. it's a place named one america's most veteran friendly employers. next is information and entertainment in ways you never thought possible. welcome to what's next. comcastnbcuniversal. visit truecar.comoney,com,t and never overpay.yer's remorse. a good deal or not. "okay, this is the price," and you're like. analysts all over the place for recommendations on where twitter is likely to trade. let's look at the technicals to see if that can give you guidance moving forward. dan fitzpatrick is president and technical analyst with stock market mentor. what do you think about twiter? >> i think twitter is about

impossible to value. and right now it's in a trading range. i think this is really important. there are estimating all over the place. the highest one that i've seen was a recent one by the goldman sachs analyst to 65 bucks. but the stock's trading between 55 and 75. it's actually in kind of a healthy phase. they've been drifting. there's not enough data to get a good technical picture. we have healthy consolidation at the low end of the range. as long as the stock stays above $55 i think it's fine for the next month or so as it trades around into earnings. if it falls below that level though, here's the problem. everybody that bought in that big cluster about 55 a losing. nobody likes that. there's probably going to be some selling. but the stock is going to move really big into earnings. i think everybody is going to be surprised either to the upside or downside. >> you know, dan, we could debate what technical analysts

can tell us or not tell us. >> yeah. >> while i'm assuming it can't deal with is an external shock. am i right in think that some of the lock-ups expire on twiter in about a month's time and, therefore, you've got the extra supply that potentially could come on into the market an upset all the assumptions you're making? >> absolutely. simon, you're right on point. one of the things that bothers me when i see some folks talk abo about charts is they seem to think they're predictive like pulling out the tea leaves and getting the chicken bones and candles and picking prices. they're really not that way. they're more informative. it gives me an idea of where the investor psychology is based on where they bought. such as we have our big high there at 75. that occurred on huge volume. the stock is going to have to get back to that level to -- for us to really see whether investors have a bigger demand for this stock after the earnings are known. so it is -- i abs routely agree with you there's a lot of unknowns.

and we just have to approximate as best we can. >> dan, look, if i turned it over to you and i said, look, from anything that you could pick as a technical analyst, what looks the most interesting to you at the moment? what would you bring to the table? >> you mean away from twitter? >> yeah. >> i would bring a couple of biotech stocks. biotech has been a big story in 2013. there could be investor rs ride now that are rolling their eyes saying, okay, that's so last year. well, you know, the trend is still intact. the story is still good. i tend not to be a fan of particular stocks or sectors but if they're working, you know, i'm going to stick with them. gilead is one that i think has a lot of potential. it's in a really, really good solid confirmed up trend. and as a technician, that's what i want to see, simon. i want to see stocks being bought at higher levels on each dip. and right now with the stock at kind of bumping up against resistance at $75, that's a really healthy, healthy sign

right now. if the stock pushes above there, if there's enough demand to push gilead above 75, what we have is we kind of erase this big data point that i see where there was a big volume spike back on december 10th and institutional distribution. so we need to get passed that. >> okay. it says from the notes here that celdex is another one that you're interested in. >> the thing about celldex is that the market was weak and celldex was strong. biotech was weak and celldex was strong. it's been trading in a really, really tight range. and you like to see stocks trading in tight ranges because that volatility is narrow for only so long. we don't know exactly when. i'm sure some guys in my seat might be able to predict it. i'm tell you right now you can't. you can't predict it. i know that there's going to be a big move in celldex and the way it's trading.

it seems like that move is going to be to the upside. they have a really good pipeline. strong pipeline. i think there's a lot of positive catalysts going forward that can really give the stock a big juice. >> okay. clear calls, dan. thank you for your time. >> okay. thank you. >> thank you. keep the tweets coming. google spending $3.2 billion to acquire the maker of smart products like thermostats and smoke alarms. communicate with their owners. complete the following sentence. now that google has a foothold in your home it will be able to blank. tweet us at squawk street. [ male announcer ] we could say a lot about the most track-tested is ever... but the truth is... we don't have to. the experts have spoken. now it's your move. ♪ tdd#: 1-888-648-602121 tjust waiting to be found. ties tdd#: 1-888-648-6021 at schwab, we're here to help tdd#: 1-888-648-6021 bring what inspires you

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in a little dorm room -- 2713. ♪ this magic moment ♪ squawk on the tweet on a tuesday morning. google is spending $3.2 billion to acquire nest labs. it's a maker of smart products like thermostating and smoke alarms that communicate with their owners. brings us to this morning's squawk on the tweet. we're asking you to complete the following sentence. now that google has a foothold in your home, it will now be able to what? stan writes, open the front door to let the nsa in, literally. meadows writes, put the toilet seat down for my wife. and jonathan says, now that google has a foothold in your

home it will now be able to watch me watch an ad before i can change the temperature. we can joke all we want. some argue that's exactly where they're headed, guys. >> as bob johnson says, now that they're in my home they can search for my lost keys. >> yes. >> that's a really good idea. it could continuously film you to know where your keys are. >> and post that on youtube, which you can later watch in your self-driving car. >> people aren't joking when they say every time we report headline, how can i opt out? i don't know what the answer is anymore. i don't know. >> there's no national debate about that. >> starting to be there. >> there isn't. you don't see people really angry about it. >> the nsa spurred a lot of it as welcoming from a separate dimension. there's a sense that someone is always watching. >> people may want to opt out of electronics retailers today. game stop we talked about but best buy, electronic arts, flooding to retail, too. family dollar, bed, bath and beyond as we continue to get

incredibly conflicted signals about the consumer. >> we did get the numbers for the holiday season. 3.8% i believe was their final reit. >> volume, not profit. >> no, of course. total sales. >> that's the great stone to be unturned, for example, macy's. what were they actually selling to get figures like that and what profit, what margin? >> true. see you later on. if you're just joining us, here's what you missed earlier on. welcome to scattered showershowers "squawk on the street." here's what happened so far. >> we believe this is the single best place in the world to invest and we're looking for investments here. now, we think china is very attractive, too. some people are upset about the fact that china's growth might not be 10% a year or 9% a year. we still think it's attractive. it comes in a little better than expected. plus .2 for retail sales advance sales in vermont. x out, to . 4.

decent numbers. >> it wasn't the greatest quarter. it was fine. >> we don't the growth yet. look at the concentration wells fargo did. we get any turn in this country i think we're going to start people saying, listen, it's absurd that these guys so so much marked power. >> we think that move back this process a while working toward the price that we've gotten to and this it's a rich and fair offer. the shareholders are recognize that it's a good offer and it creates more value than the alternatives. >> we've got a lot more in the west. we're seeing great new to economics over there. in fact, some of the top line revenues are higher than they are back in our home territory of boston. >> and the franchise, you can know as a result of very good. good toousz motuesday morni.

live here at post nine. trying to get back some of what we lost yesterday. of course, the s&p's worse day since november 7th. getting back 12 points. up to 1830 and dow is up some 66 points, that's close to a session high. intel rallying this morning. jpmorgan upgraded the chip maker to overweight saying the pc market will stabilize this year and intel will focus on areas where it has an advantage. and then shares of cliff's natural resources, deutsche upgraded the iron/ore who deucer to buy saying it's a well position to long term growth. road map this hour. jpmorgan and wells mfargo repor. we will tell you what it says about the sector more broadly. plus, the next time you buy a smoke detector you could be buying from google. the tech buyer buying a company making smart smoke detectors and thermostats for over $3 billion. what is google up to inside your home? and what does the future hold for chipotle, healthier

menu, pizza business? we'll talk about that and a lot more with the co-ceos of chipotle in a few minutes. first up, david faber. had an exclusive interview with the ceo of charter this morning. what a story that is all over every front page of america. >> it would be an enormous deal when you throw in debt of $61 billion. that being the latest, if you want to call it an offer from charter communications, made public yesterday in a letter and a press release that accompanied it. charter putting on the pressure after try torg six months to get time warner cable to a negoti e negotiating table and get a deal done. however, the two sides have had talks and, in fact, time warner cable for its part says we talked with them back on december 27th and we told them what it would take to acquire this company. $160 a share in stock and in cash. about 100 bucks in cash is what they asked for. the rest in charter stocks with a collar. and they weren't willing to do that. no, in fact, charter is far from

that in its offer at this point. i asked rutledge why we he would put an offer of that type at that level when they were asking for so much more. >> we feel like we've come a very far away and we've wanted to seek engagement from the company. we have not really gotten engagement. i think that their 160 response is a nonserious response. >> why is that? again, it's a huge company. l.a., new york, 11 million subs. why wouldn't you, if you were them, say, hey, we you want us, you have to pay the nice price. >> new york and l.a. is right. but you know in the last two years, they've lost the equivalent of an l.a. in subscribe er losses. there's a big job to be done in terms of turning it around. that process is going to cost money. it's going to require investment. it's going to require taking the company all digital.

and it's an enormous amount of work. >> a lot of work that mr. rutledge, of course, and many shareholders agree would be better suited to do perhaps in the current management team at time warner cable. for its part, time warner cable is simply saying, deals get done at eight-time multiple on the ebitda, the key measurement for many cable companies. if you look at what we expect to earn this year in that metric, that gets to 160 bucks. you could do as much as 110 in terms of financing for a cash portion. the rest could be in stock. we will talk. we will see where we go from here. rutledge would not commit to a proxy fight but said they're leaving their options open. the nomination deadline for a proxy fight to argue for board seats would open next week and be open for about a month. carl, a lot more to come here, of course, on this, including whether or not our parent company comcast, which continues to watch closely and examine the situation, chooses at some point

to play. they can pay more than charter. the question for comcast becomes one of a regulatory nature. >> right. >> would they be able to go through the hurdles put in front of them by the scc, not the doj but the federal communications commission. >> as charter takes this, a lot of people are saying you should write a book on how the mechanics of m and a happen chapter by chapter. this is one fascinating example of that. >> it is. it's a good one. it's going to be a long story. it began in june. of course, as we first told you, and it would seem it's going to be expenned for some time. >> you've got a long weekend coming up. you're going to have three days. >> yeah. and you two may go and read it and three other people? >> cnbc single, i like this. like this. in e-book. think about it. >> i'll think long and hard. >> thanks, david. meantime, jpmorgan did report earnings this morning. getting more details on the firm sale of the commodities business. for more on that let's send it over to kate kelly. good morning. >> six months after announcing plans to sell the physical

commodities business, jpmorgan is getting close to a deal. they narrowed the field to just a handful and the group includes the private equity firm blackstone as well as macquarie and castleton commodities. final bids are due next week. depending on whether they want some or all of jpmorgan's business, the price tag zest mated at between 1.5 and $2 billion by people who know the business. assets like power plants and metal warehousing company, again, depending on what the bidder takes, the buyer is likely to take with it jpmorgan commodity's current management team. that includes the headmasters and all in all, carl, this looks like a quick turn around for a deal announced only in july. >> kate, thank you for that. so much to watch this morning. kate kelly bringing a piece of it from headquarters on jpmorgan. jpmorgan shares are up slightly this morning. and wells fargo, they're to the

negative after both banks revealed earnings as the other financials prepared to announce later this week what should investors expect, what should they do here. let's bring in dick, rafferty capital research. your initial thoughts here. do you think early reaction is justified? >> no, i think that wells fargo had a superb quarter and i think the stock should be bought and i think the people that people are having with wells fargo is they can't seem to divorce the company's relationship to the housing market to look at the whole company. if they look at the whole company -- why should they? the housing market is part of the whole company. >> but it's not a big enough part to shape earnings. in other words, if a company has, you know, seven record quarters in earnings in a row, including the current quarter, if their loan volume is increasing dramatically, if the ability of the company to control their cost is very good, in other words, if their income leverage is improving, why would

they focus on housing and forget that there's a whole other company there which is producing more in groetd thwth than housi losing is revenue. >> he said the expense line with regard to wells didn't move as much as hoped be on the mortgage side of the business, in particular. so there is a sense perhaps that they weren't being more responsive to the slowdown that could persist here now that the re-fi boom is behind us. >> revenues went up, expenses went down. how bad can that be? revenues went up because the core business did better. more loans made and the company's expenses were under control. is that a bad thing to happen? i think that basically by over emphasizing, you know, mortgages, people are tending to lose what's happening in this company. in addition to which this company should be increasing pretty dramatically its dividend and its share buyback this year unless the federal reserve stops them. so not only are you going to be getting record earnings again in

2014 after getting hit in 2012 and 2013 but you're going to get an increase in the payout to the sharehold shareholder. that's the reason to buy a stock. >> what about jpmorgan, more positive reaction certainly for that name but they of course have been through a difficult period with headline risks, tons of litigation, that they've had to reserve against. where do they go from here? >> i think the issue at jpmorgan is harder for me to figure out because basically i think jamie dimon said pretty clearly in the conference call today that the revenue growth of the company will be impacted by the derisking that the company's taking. in other words, when they sell a commodities business, when they get out of student lending, when they can't do proprietary trading, they sell a mezzanine loan business in asia, what they're doing is impacting their revenues negatively. and the desire, the hope is that the company can control its costs in a fashion that wells fargo is so that basically they will be able to continue to show

earnings growth. i think it's still unclear as to whether this company can do that, number one. and number two, i don't think it's anywhere close to ending our -- its litigation problems, its fine, its lawsuit, et cetera. so i'm a lot more cautious on this company. >> and opposite read from the markets earlier response, dick. thank you for fleshing that out for us this morning. dick bove, have a good one with. >> thank you. >> i want to draw your attention from boeing. i want to look at the intraday chart here. taking a hit. japan airlines is saying they detected a fault in a 787 main battery and charger. this was on a flight that was scheduled to go from bangkok -- to bangkok, i should say. discovered it two hours before departu departure. and that's going to take some wind not out of boeing down 2% a moment ago but the dow as well. in the meantime, google extending the reach into the home buying a maker of smart thermostats and smoke alarms for

over $3 billion. why exactly is google investing in your home? el woo talk about that in just a moment. in today's market, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price, maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. afghanistan, in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy.

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designed to treat other broadband contact along the pipes equally but the u.s. court of appeals in the district of colombia found that the fcc lacked the authority to impose any discrimination rules because it failed to classify broadband internet as a carrier service. it was based oob suit by verizon. and threw out the fcc rule that barred providers from blocking internet traffic outright. it is a blow to the concept of net neutrality. something the obama administration has trumpeted from day one. so far no comment. we're waiting for more reaction specifically from the fcc. they saying they are going to look at this ruling and pursue all of their legal options including possibly appeal. but a big blow to the net neutrality rules of the fcc and potentially big implications for verizon and other major telecom providers. carl, back to you. >> half on the, thank you for that. big news not just for the carriers but the media companies

as well. point out, of course, cnbc b our parent is comcast and jon fortt, we'll see if thises has legs. it is a large step in a long story. >> we have to break this down into plain english. this is basically a battle over whether netflix has to pay more to stream content in their home. base case scenario, maybe netflix pays and get that streaming content on a higher speed connection because netflix wants to get it to you. the cable companies would argue, hey, this is like a case where you have to pay the same amount to get any package delivered to your house no matter how small or how big it is. doesn't make sense. why would netflix which takes up all this bandwidth get to get that into everybody's home for free. why shouldn't they have to pay in most people in silicon valley say, look, this will allow the big companies who have a lot of cash to get their stuff to you meanwhile smaller innovative start-ups an ideas won't be able

to get their content to you as easily. they might get crowded out. >> at the same time, though, if netflix has to pay for the bandwidth it's using won't they have to absorb it or pass it on to the consumer? it would make it easier maybe for a cheaper more nimble rival to undercut them or content being so important on netflix it becomes prohibitive. >> it's a toll road. it's like a rich gets richer scenario. netflix is paying out the nose for content. perhaps they might have to pay to get that content to you. not great for them but this is far from over. it's a politically dangerous for anybody to start jocking up the bills on the content coming sga your home. >> on a difficult where the cable is top news, i mean, that, again, that last mile to your house is where all the action is, jon. it's just incredible. >> the dumb pipe is looking smart today. we'll see. we'll see where it goes. >> jon, thank you. jon fortt. google, another tech story,

acquiring nest labs. the founder is tony fidel, the man who helped create the ipod for apple. tony was on "squawk on the street" in november. here's what he had to say. >> look at what we're trying to do with nest protect and nest. we're trying to reinvent unloved products. products that you use every day or you may ignore every day and try to bring them into a modern era. >> for more on the deal, senior editor and we want to remind our viewers that nbc is a minority owner of. >> we've been talking all morning long about what you could do with $3 billion, what google could do with $3 billion. why this? >> i think basically nest is the leading smart home start-up. and google gets excited about anything that has smart in the description. i don't think that you can see that google wants to run ads in your home. google wants to know what temperature your house is at or help you protect you from fires at home. but i do think that the smart

home is looking for some kind of platform. there's a whole bunch of different companies trying to do it. i imagine google thinks it would be well positioned to be that company. >> liz, it's jon fortt. it seems like last week we were in vegas doing pieces about the smartphone, as it was. but take us tell us where this is happen. now that google has made this big bet on it, how might they accelerate the process? >> i think it's coming back to android most likely. i mean, jon, when you and i were in the smart home there were a bunch of different devices tied together with different apps. it's more complicated. >> let me interrupt you for 60 seconds. i want to bring people tape of the president today meeting with his cabinet. apparently a meeting focused on the economy. this is a spread taken just a few minutes ago. is there sound? >> -- the help that american families need in order to get

ahead in this economy. and so i would urge that congress pass that funding measure as quickly as possible so that all of these agencies have conservatively around their budgets. congress is going to have some additional work over the coast of the next several weeks. specifically it's important that they do something about unemployment insurance, although we've seen improvements in the economy and job creation in our economy. i think we all know there are a lot of hardworking americans out there desperate lly looking for job and unemployment insurance is not only important for them and necessary for them but good for our economy as a whole and will accelerate our growth if we go ahead and get that done. we know we need to get immigration reform done. major piece of unfinished business from last year. so congress is going to be busy. i'm looking forward to working with democrats and republicans, house members and senate

members, to try to continue to advance the economic recovery and to provide additional letters of opportunity for everybody. but, one of the things i'll be emphasizing in this meeting is the fact that we are not just going to be wait for legislation in order to make sure that we're providing americans the kind of help that they need. i've got a pen and i've got a phone. i can use that pen to sign executive orders and take executive actions arounded a vin straightive actions that move the ball forward in helping to make sure our kids get the best education possible, making sure that our businesses are getting the kind of support and help they need to grow and advance. to make sure that people are getting the skills that they need to get those jobs that our businesses are creating. and i've got a phone that allows -- >> that is the president in a cabinet meeting making some apparently remarks on the economy today on a day where he's about to meet with the miami heat and congratulate them for winning the n brks arkba chp

last year. liz, apologize for the interruption there. we were talking about google and nest. i assume this means the eco system of android gets a little more sticky today, right? >> i think it's maybe not today but sometime in the future. for now google says that nest is going to operate as an independent company. of course, pending regulatory approval. and it will be run by tony fadell is well-known for being an important apple executive around the time the ipod and iphone. so they're getting a strong product leader. he's actually -- tony told us yesterday he will report directly to larry page through this independent unit. and they'll figure out how they're going to combine forces. but tony also emphasized that the reason he agreed to join up, i mean, he's a wealthy man many times over, is because he's interested in using the infrastructure and the kind of -- all the resources that google can provide that he would have to do replicate as a start-up. >> yeah.

the creator of the ipod now reporting to page is not lost on people. that's for chur. liz -- >> no, but interesting ---ist just going to say interestingly, apple didn't seem to be very involved in bidding on nest which was a surprise to a lot of people. >> yeah. >> apple doesn't buy a lot of fully formed hardware products. it might buy chip designs, things like that. yeah. >> liz gains, thank you so much. jon, thank you as well. last week we gave you an inside look at chipotle pizza. a new fast kashcasual pizza pla. is pizza the way forward for ch chipot lerks e?

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let's head out to orlando, florida, and bring in courtney reagan again who is joined by the co-ceos of chipotle for a cnbc exclusive. >> that's right. we've got a lot to talk about. i am joined by steve els and monte moran. we do have a lot to talk about. let's talk about the gmos. you're getting rid of them in your ingredients by 2014. how is it going? how does that change the financial implications of the cost? >> i wouldn't think about the removal of gmos as being a significant hurdle financially. but for years now we've been committed to what we call food with integrity. so the removal of gmos is a natural evolution of that. but well over ten years ago, 12 years ago or so we started to buy pork that was raised outdoor, without antibiotics or growth hormones, that led to looking at the other meats and removing antibiotics to buy more organic produce, local produce, seasonal produce.

and again, we call this food with integrity because we know buying these kinds of sustainable ingredients tastes better and customers are interested in more healthful ingredients. and so now the natural progression is to look at gmos and remove those. >> you think we will see gmo freebie this year? >> we don't know when we will announce. there's a couple of minute ingredients that we have, lea vening agents in our tortillas, for instance. but these are just recipe changes that are forthcoming. we're excited about this announcement. >> monti, you and i were talking about pizza earlier this morning. jane wells was in denver and was able to taste the concept and take a taste of the pizza. i understand expansion plans for that slow. you guys are not looking at really expanding quickly. isn't that market getting crowded? are you worried you're going to misthe boat? >> we focus on what we're doing with chipotle or shop house or the pizzeria. the goal is to provide an

incredible customer experience and build teams of topper formers who are empowered to deliver great standards and have terrific ingredients that are sourced responsibly and sustainably raised. and serving those in an environment that's relevant, authentic and fun and delicious. so our thought with all those concepts as with chipotle is to build each restaurant to be a terrific dining experience and not to hurry up and take a bunch of ground or anything like that. >> so we have to talking about commodity costs, too. we're at a conference at a lot of investors and they're worried about the cost of sales, what it's going to look like and do to the profit margins. beef prices going up. what's the plan? how will you hedge against that? either of you? >> in terms of commodity costs? >> yeah. >> we really are -- we're in some respectses in same boat as everyone, in the sense that many commodities costs go up, sometimes our goes up. we have ingredients that we're buying that are like naturally raised and organic ingredients,

locally raised ingredients. no t matter what happens we've got a strong economic model. we've got great volumes coming into the restaurants and we have the ability to invest in these ingredients. we don't see that as something that's going to limit us in any real way. >> so as we look at the consumer landscape going forward in 2014 a lot of companies are talking about it was a challenging holiday season. we know that minimum wage is going up in many states around the country. health care costs are going up. how do you think that impacts both your cost structure and consumers coming to chipotle stores? >> you know, we have not been effected by this. we have had strong same-store sales growth and gone through some tough periods. the reason i think we're able to do that is because we've developed such a strong connection with our customers. >> okay. >> we offer some very, very unique. we source sustainably raised ingredients. we prepare them according to

classic cooking techniques in front of them and serve in interactive norm mat. it's very accessible. it used to be if you wanted these kinds of foods you would have to go to fancier restaurants and sit down and take time and spend a lot of money. well, this is a whole new way of looking at fast food and there's not a lot of it out there. so we continue too see more and more customers finding chipotle and those who have already found us are coming more often. so so far, the model is working for us. >> good to know for investors, too, that are listening. i read one time you felt guilty after you kept opening the chipotle stores because it was strain from your passion. >> as it turns out, as it turchturns out the passion is feeding a lot of people really good food. we're excited now to not only serve people with chipotle but now with shop house, our southeast asian version which is so unlike your typical fast food

chinese restaurant. this is the flavors and ingredients from southeast asia. and so we have curies and beef lob and chicken saute. >> i wish we had more time to talk about shop house. some time we will but we have to go. thank you for joining us. steve ells, montdity korks-ceos of chipotle. now to you back in the stock exchange. >> thanks, courtney, and to the co-ceos. now, we've got breaking news, i believe michelle caruso cabrera joining us from headquarters. >> news coming out of paris where french president is addressing reporters making the first comments about all ledged affair reported by celebrity magazines last week in france. he held a very long news conference, 50 minutes where he talked about the any but the very first question from reporters was, is valerie

trayweller, his long time companion, living in the palace with him, is she still the first lady of france? his response was, each individual in his private life goes through difficult periods, but private matters should remain private. this is neither the time nor the place to answer these questions, but he then went on to promise that he would clarify the status of his partner before his planned visit to washington, d.c. in february. once again, french president hollande making a comment. we're showing the video of the celebrity actress that he was spotted with going into her home or into an apartment in the middle of the night, julie gia, footage of photos in magazines also week. this is dominated what was supposed to be a conference about the future of the french economy, carl and kelly, which isn't so good right now. in this conference he sounded almost right wing and republican. he's going to sound right wing to the french because he's advocating tax cuts, less red

tape for businesses and lots of other things that sounds very different from when he campaigned on his socialist agenda. >> that is a fascinating presser. we'll keep an eye on it, thank you for that. according to some reports microsoft is ready to cut its losses on windows 8, dumping the brand an announcing a new one later this year. so could this new product be the window of opportunity to get microsoft back on track? we'll talk about that in a moment. close to session highs now. dow up 72. [ male announcer ] the new new york is open.

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welcome back. let's go to simon hobbs and european close. simon? >> kelly, the fact that we're up 74 points on the dow here has lifted european to the close. good industrial production figures for the eurozone today and inplace in the uk coming back down below the tar get 2%. you have had some profit taking on the peripheral banks today. no wonder these guys here have all doubled in the last six months. they're slightly lower. you've seen some of the fund managers in the uk effected today. that's partly because one of them, this one, that is in particular exposed to emerging markets had $3.5 billion of assets under management removed at the end of last year. only 4% of the total but still it brought the stocks down as you can see. meanwhile, if you look within the wholesale distribution sector in the uk, it's in negative territory and

mckesson's bid in the united states fail to get enough support. they will get some sort of deal moving forward. within the broadcasters, another big day for rupert murdoch. ubs upgrading the stock, still saying it could be bought by vodafo vodafone. italy's largest private broadcaster, belief there basically, guys, berlusconi's problems are separate arguably from that company, though the allegations were in part related to it. >> exactly. let's bring in bob pisani with a look at what's moving back here at the big board. good morning. >> good morning. a lot of people are asking me why are we rallying? it doesn't take a lot to move the tape higher when there's not a lot of sellers around. yesterday we had moderate to slightly heavy volume and that was part of the problem throughout the day. today there just seemed to have gone away. 200 million shares on the floor of the new york stock exchange. that's a pretty modest start to the day. look at some of the major sectors. the groups that have had the

toughest time this year, for example, commodity stocks, i mean, energy stocks are moving up today. they've had a terrible start to the year. steel stocks and coal stocks influenced by the weak start over in china. china was down almost 5% this month. those stocks are turning around today doing better. beaten up sector rsz doing better. as for the banksz, well, for jpmorgan and wells fargo you couldn't ask for a more boerg report. they just nailed the numbers and metrics perfectly. you can see almost no move in the those stocks overall. i think the ceo of wells fargo was just on the tape saying 2014 will not be a breakout year for the economy. although he's optimistic it will not be a breakout year for the economy. we're going to hear that a lot, i think. bottom line for the banks, until the rates go up, the banks are going to see significant spreads. we need higher interest rates. that will really help the banks out. nicole paultre until then, tough time for them. airlines, $90 oil, stay on there. stabilizing around there.

that's been helping the airlines. this is one of the big winners all throughout the year so far and still modest gains here today. retail sales for december were on the mixed side but again, this slightly positive momentum. the lack of sellers is helping retailers overall today. here's what's important. we'll wanted to know how much more is internet sales take ak bite. the government published the final numbers for 2013. up 4.2%. put the full screen up. 4.2%. internet sales up 10.3%. so there you can see internet sales is mattering, guys. internet sales in december as a percentage of total sales, 9.1%. that's up from a little over 8% a year ago. not as much as i thought but slowly but surely you can see the impact that internet is having on total retail sales. back to you. >> bob, thank you. our bob pisani. got breaking news on boeing. let's bring in phil lebeau on the phone.

phil? >> we've got another 787 dreamliner battery situation. this is coming out of the airport in tokyo. and what you have is a situation where a jal dreamliner, which was going to be flying to bangkok. no passengers on board. smoke was seen coming from the fuselage while it was parked at a gate. they went and they inspected. they looked at the battery inside the dreamliner. one of the eight cells after they saw a battery malfunction light come on on the planen one of the eight cells was not functioning properly. jal notified boeing. boeing is aware of the situation. we've called boeing. we don't have a comment from them yet. what we have is a situation where jal noticed some smoke coming from the fuselage of a plane parked at a gate. there was no passenger on board. nobody was in danger. and once they inexpected the battery they found that one of the eight cells was not functioning properly. remember, these are the batteries that have been changed

by boeing as part of the changes implemented last year so that you would not see a situation where if a cell were to break down that you would need a broader fire. still a lot of things we don't know about this situation but that's the latest that we have at this point. carl? >> phil, just real quick. despite the changing of those batteries this does seem reminiscent of the prior incidents, doesn't it? >> it does seem reminiscent. what we need to determine is did the battery malfunction the way it's supposed to. you never want a badry to malfunction but if a cell goes bad the changes that were implemented were put in to keep the battery from having a huge fire erupt. in other words, they put panels between each of the cells so that if a cell was to malfunction and in the past might have led to a larger fire it was supposed to be contained. that's what we need to determine. did this battery malfunction and any type of possible fire there, was it contained the way the it

was supposed to with the change of that boeing implemented last year. >> okay, phil lebeau with the latest on boeing. shares down 1.2%. weighing on the dow. thank you, phil. and just as a side note, dow up 65 points but the nasdaq is up 1.2% or 50 points that the hour. if it was the same proportion for the dow we would be up almost 200 points here. keep that con next in mind. retail sales coming in better than expected last month giving the economy a lift heading into the new year. can that trend continue now that we're passed the holiday season? we'll have former ceo of sears canada mark cohen in a moment. brace yourselves people. because this hotel has some amazing.... footwear. and how about the 5 pound barbell at this resort?

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coming up at the top of the hour we're getting answers to three critical answers facing investors right now and big deals happening from google to the kalk companicable companies mark's phil is on the hunt for value. you might be surprised from which sector he's hoping to got it from 2014. >> look forward. thank you, scott. retail sales coming in slightly ahead of estimates. this is a sign of brighter times ahead despite mixed holiday results. here at post nine with us is mark cohen, former ceo of sears canada, sears ro buck and company.

professor of marketing at columbia universities business school. >> nice to be back. thank you. >> can i ask off the bat. you teach a leadership -- a course on retail leadership. target is dealing with a major issue. they represent the breach of credit systems that now a lot of retailers are going to have to deal with it sounds like this year. are they handling this issue correctly and is this going to weigh on retail sales more broadly? >> well, it remains to be seen how they ultimately handle the matter. this is unpress debted although there was an early breach some years ago at tjx that should have been a wake-up call for the industry and maybe it was. this is a form of economic terrorism that the industry really hasn't seen on this kind of scale before. and though it does remain to be seen how many of the 70 million customers are actually impacted personally, this casts an enormous paw on the retail business.

>> and the holiday sales figures are coming in okay. so about a 3.8% increase. it's a little bit shy of estimates. december retail sales report this morning meanwhile looked okay but also pointed towards people buying necessities to some extent, not discretionary items. what can you tell us about these trends? the retail sales almost had to come in okay because all of that inventory or all of the stores shelves have to be sold certainly between november and the end of january. the real issue is the gross margin which is a reflection of the level of diskoubtding that's taking place and that's really going to be problematic this year. >> we thought holiday was rough and others are coming in now express and so forth saying traffic in january was challenged. >> a tough holiday season almost always brings a tough spring with it. >> is that true? >> there's no reason for any kind of uplift typically unless

there's some forward momentum coming into the christmas selling period and there certainly wasn't this year. >> that may be true for a lot of the traditional players but what about the fact that e-commerce that online space was up 9% that we're seeing a huge shift it seems and feels and looks like towards the amazons of the world in a way. in other words, is it just a distributive effect that we're seeing at play here. >> the customer continued to migrate over to the internet and that's not going to stop. the retailers who have successfully created presentations of their brands on websites that are attractive and that work well got tremendous benefit for that this holiday season. at the end of the day there's too many stores, too much square footage, too much inventory. and in a tough economy that's really pr really problematic. >> finally, a difficult week for sears. disappointing holiday sales. s&p puts them on negative watch. people watching the cash burn this year. do you think they get to the end

of the year okay? >> i'm sure they'll manage their way through the end of the year. they still have quite a few stores that are on the market up for sale that probably will give them the cash they need to keep their balance sheet alive. at the end of the day they don't have a forward strategy. they haven't had one for 12 or 13 years. and gig is almost up. >> enough said. mark, thank you for being here. important time for retail. getting breaks news ones the larks as well. let's get back to dominic chu with that. >> as we talk, two bits of news. first of all, it reported that they delivered 600 cars in the fourth quarter of last year. 20% above prior guidance. you can see the shares responding very well to that bit of news. also though tesla motors is issuing a recall on certain 2013 model s vehicles as adaptders, cords, or wall outlets could

over heat. there could be of the wear update, mailing owner's replacement parts. those two headlines helping to drive those shares on balance to the upside for tesla. keep an eye on those shares as the afternoon progresses. back over to you. >> thank you for that. thanks to a contract dispute directv has pulled the weather channel off of the air, meaning it's no longer available for nearly 20 million viewers. nbc's al roker was not shy in giving his opinion on the story this morning. he tweeted, let's see directv viewers whether from a 30 plus year trusted source or from a 1 1/2 year old broadcast from someone's basement. hmmm. how long could this fight between directv and weather channel last? we'll talk about that after the break. i c an reach ally bank 24, but there are no branches? 24/7. i'm sorry, i'm just really reluctant to try new things. really? what's wrong with trying new things? look! mommy's new vacuum! (cat screech) you feel that in your muscles? i do... drink water.

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as the clock struck midnight directv's 20 million u.s. customers lost access to the weather channel which is partly owned by cnbc's parent nbc universal as two companies are stuck in a negotiation standoff. our julia boorstin is live in los angeles with more on that. >> good morning. the weather channel directv have walked away from the negotiating table. the weather channel says it's unwilling to take the more than 25% price cut directv is offering and directv says with so many ways to access weather information including on mobile devices anywhere any time, the weather channel isn't wot as much as it used to be. they don't want to pay as much to carry it. directv says it will continue to provide weather coverage on

rival weather nation. the weather channel says it can't accept the significant discount directv is demanding and appealing viewers to reach out to congress siding it has public safety and preparedness for storms. ceo predicts tens of thousands of customers will drop directv. >> yesterday just with the threat of this we had 2 million people visit our website. a million of them took action. they flooded the call centers at directv. and people are canceling their directv service for this. i think there was a gross miscalculation that people could get by with the weather forecast simply on a mobile phone. >> directv said in a statement, quote, consumers understand there are now a variety of other ways to get weather coverage, free of reality show clutter, and that the weather channel does not have an exclusive on weather coverage. the weather belongs to everyone. now, on the heels of massive winter storms, enough customers complain or leave directv to influence negotiations. kelly? >> all right. one to watch for sure.

thank you, julia. it's tweet time. google spending 3. billion to acquire nest labs. nest makes smart products like thermostats and smoke alarms and communicate with their owner and their devices. complete the following sentence. now that google has a foothold in your home, it will now be able to blank. tweet us at squawk street. we will read your answers when we come back. mine was earned orbiting the moon in 1971. afghanistan, in 2009. on the u.s.s. saratoga in 1982.

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squawk on the tweet. google spending 3 billion bucks to buy nest labs. we asked you now that google has a foothold in your home it will now be able to what? will write, shoot down incoming drones, of course. richard i dids, not only photographing your house from the outside but also inside. phil write, watch my every move. no kissing. it's actually a pretty good selection of answers we got today. >> yeah. indicative of how people feel about this. >> hits people where they live. you have a big show coming up. >> such a busy day with the earnings. we're going to talk to the wells fargo cfo tim sloan. a lot to discuss with him about the way that bank performed in the fourth quarter and what happens this year amid mortgage headwinds. >> meanwhile, we're going to get a bed set up here so you never

actually have to leave the house -- or leave work, never go home. >> i was joking with some of the guys around here about this this morning. they said we spent many a night on the floor of the exchange. >> yes. see you this afternoon. >> sounds good. >> kelly evans making her triumph return. scott wapner and "halftime." >> thank you. our starting lineup today. josh brown, joe terranova, steven wise and simon baker. officially a yankee. congratulatio congratulations. let's gets straight to the game plan. value play, bill on where he sees the best deals. wheeling and dealing from the charter offer to google's nest egg. we'll breakdown what it means and which stocks to own right now. we do begin though with three critical questions facing investors with the year off to a rocky start. number one, there it is.