lightly. i think on balance they heard the shareholder voice, the performance measures in the system, and hopefully they continue to grow for the neck decade. >> go become one of the 6800. >> join us tomorrow. right now it's time for "squawk on the street." the street." ♪ good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer at the new york stock exchange. david is at the active passive investor summit in new york city and what a morning for it with the flurry of deals we've seen in the past 24 hours. more from david in a minute. futures are flat. the s&p going for its first six-day win streak since september. lot of earnings including mcdonald's, harley, utx and more. ten-year crept up to 2.72 and europe getting back to work today with gains around 1%. road map with pershing square

and valeant pharmaceuticals teaming up for allergan. we'll explain. novartis unveiling a restructuring plan amid a flurry of deals involving glaxo and lily totalling $28.5 billion. netflix says it will raise prices for subscribers as the jump in earnings pushes the shares in premarket and slew of dow components reporting, mcdonald's, united technologies, we have it covered. shares of allergan are surging as we said bill ackman backing pharmaceutical bid to acquire the maker of botox, valeant offering 38.40 a share in cash. since february, ackman's pershing square amassed a 9.7% stake in allergan, but all the discussion guys, today, is about the role of the activist investorer. the times calls it the boldest move yet from an activist. >> absolutely.

i hope to hear from david. we were going back and forth last night about how does someone kind of basically know there's going to be a bid and be allowed to accumulate stock. classically that would be front money. if we had an sec that was on the case i think they would opine on this. they're not going to. this is going to be blessed i believe. everything will be fine. it's unfortunate because i don't think it is the way that things should be done, but being right and being legal, are two different things. david, am i wrong about that? >> nop. i think you're right, jim, in the sense at least that people are taking a close look at this and wondering, how is this something that is allowed to happen? that being said, it is and it is legal. they have formed a group that is valeant and bill ackman. you may ask why did valeant need to form a group with bill ackman. couldn't they have purchased the stock and options purchased by mr. ackman to take the position on its own and the answer might be yes, but in acting with mr. ackman, perhaps they -- he gets the toe hold for them and

validates their currency. of all the reasons that may be the main one. he is going to hold $1.5 billion or more of stock after the deal occurs if it occurs. he's going to take his allocation all in stock or at least elect for it, he may get cash, it's one third, two thirds in terms of stock to cash ratio and he will be a significant shareholder in the combination should it occur. but you're right, jim, it does look funny in that he can put up a little over $3 billion. by the way, they both needed to file hsr. he took about $75 million worth of stock and bought the rest through these very low cost options which is one strategy to do it. the reason the stock moved is you had the -- you had -- the people ginchts options had to buy the stock and allergan's stock moved up from an unaffected stock price from 116 to 148 during the period of furious buying he did after he passed the 5% threshold. but you're right, i mean to come

back to your original point. yesterday's conversation, throughout the night on twitter, you and i were having it, how is this something that's allowed? it is. it is legal. in fact, it's been done once before. ralph whitworth did it after waste management in i think the late '90s he's here, i'm going to be speaking to ralph later, another well-known activist. >> it's not without precedent entirely. >> no. >> clearly herbal life has not made ackman gun shy about pulling different tools out of his tool bag. >> this is a brilliant deal and here's why. about the face and the eyes. because valeant has bausch and lom. we keep hearing botox. it has a fantastic business. david, the ceo, came on "mad money" when the stock was at 88 saying listen, we do not have res stay tis patent problems. that had been the worry for dry eye. botox works. not that i know this personally but i've had him on many times.

botox works from here to here. restylane works from here to here. allergan does have a problem called ju va derm, not sold as well as res sta lin. res sta lin is why valeant bought meta sis. you would have full face and eyes. it's brilliant. allergan spends $1.14 billion a year in r and d, 16.5% of revenue, dramatically higher than every single major company that people are worried who follow valeant. they slash the r and d, take out the cost, you don't need two sales forces to sell to dermatologists and you have a home run. >> coca-cola talks about share of stomach. you're talking about share of face. >> this is about face and eyes. looking youthful, it is about seeing well, and it makes a ton of sense. >> david? >> jim, very well said i think in terms of the synergies, as much as 25 to $30 a share.

there are those who do not believe in valeant who would point to its tax rate as being really its main asset. it has a bermuda tax inversion. a canadian company as well. it's able to take cash back unless our u.s. companies and use it for acquisitions. they're paying less than 5% in taxes. that will go up. the blended rate should they succeed in buying allergan will be in the high single digits. that has been a key driver of why they've been able to do deals. they take out a lot of costs and by the way, bill ackman would tell you, i think these guys are great managers, like the 3g of the guys who run 3g which he's had experience with of pharmaceuticals. others would say all they do is slash costs and have a tax rate that many would say is unsustainable and without doing deal after deal after deal as they run through the costs and benefit of the low tax rate they have to keep getting bigger and bigger. if they succeed with allergan, a

$100 billion company, only imagine what's next. >> these guys, valeant is a roll up. a lot of people who don't like valeant but they keep being. herb greenberg writes for the street, he has been adamant they have to keep doing deals. they keep doing deals. i come back, david is right, we are seeing this over and over again. the tax code is a joke. it's a joke. we've seen how many times have we seen these companies. >> a lot. parago and endo. the tax inversion thing is as significant a part of the story as the activist which is a milestone in many ways. it's been done, but i think these tax inversions because also, let's not forget, there may be an opportunity here, at least allergan will look for an opportunity to have a white knight or somebody come in, who can compete with that tax rate? unless you have an inversion already, unless allergan tries to find an inversion of its own. this plays an important role here, one we've talked about a lot and we have to keep talking about it.

it's just not right in terms of what it means for the pharmaceuticals. >> you think senators are watching? you're like, rise above? >> well, regardless of whether it's right or -- >> no buttons. >> just a scam, man. but it's a legal scam. it's really incredible. what's legal is often far worse than what's illegal. david has this right. look for glaxo, got a war chest, maybe glaxo comes in. >> novartis striking -- >> they're doing a big deal today already glaxo. carl, let me get into the m and a tactics. allergan is going to be up. we're talking about a deal that is exceeding $45 billion, the move up in valeant stock keep an eye on it. the path here, they've missed the annual meeting. you can act by -- you can act by 25% to call a special meeting but you need a 50% vote to actually vote out all the directors. so this could be a battle at the same time with the stock moving from 116 to 166, it's going to

be difficult for allergan to say no, thank you. the question is what they will choose to do. they will have some time to figure out a strategy. of course we're going to be following this battle a long time i have a sense to come. >> one last thing. the analyst, many, many analysts downgraded the stock from 120 down to 80. as david came on "mad money," over and over, said don't worry about patent protection for the op that mall drug. he was right. once they got the patent protection and not worried about the generic this thing has been on fire and then scott wapner reported the talks had gone on, congratulations scott. david owns this story. this is amazing. we're not done. >> just beginning. >> novartis striking two separate deals. the swiss drugmaker acquiring to acquire glaxo's oncology products unit for $42.5 billion, divesting most of its business to glaxo and selling animal health division to lily for $5.4 billion in cash. a complicated trio of deals.

>> main take away you this industry regarded as a value industry and overnight it's an m and a value growth and whether it be pfizer doing astrazeneca, bern stein says that's doable, eli lilly in the game. merck's animal business is for sale. david talked about a huge number. these companies are undervalued by the street because they do not have the great growth. if lily's animal health, has got this business that is not as good as merck's, who knows how much merck's consumer and animal health business is worth? >> right. consumer is a big name. recit is the name i keep hearing about. we've been waiting to see what novartis would do with this. somewhat complicated in terms of forming the joint venture and glaxo as well with the big transaction, jim. but there is a lot going on in pharma. no doubt about that. i would pour a little cold water on pfizer and astra zen ka,

yesterday's story we had to entertain as a result of the sunday times of london. >> bernstein says it can be done? >> it's doable. i want to know, the brokers did not have blow away m and a. do you think in the last 48 hours, did everybody just make their numbers in the investment banking industry? >> it helps. i mean, you know, don't forget at financing here. you have $48.30 a share in cash for allergan as part of the consideration that valeant is offering. that's going to be financed to the likes of barclay's and i think it's rbc if i'm not mistaken. bet a lot of banks want to get involved in that. you will have defense, of course, in the side of allergan. not sure who's been hired up there yet. surprised allergan wasn't on this more unless i'm mistaken. it wasn't just 18 months ago. they came to them, valeant came at the beginning of this year. we kind of knew it. it was out there. they need to do a big deal, valeant so i'm surprised allergan we hadn't heard about

them yet. banks will have work. >> we were worried about the res stay sis patent. botox is a miracle drug and they have a lot, migraine drug, incontinence drugs. >> more broadly why is all of this happening in such a hurry and does it mean we're in for a larger story when it comes to m and a this year? >> i think these companies are sick and tired of having a low multiple, low growth businesses, where they have to -- they have to shuffle, there are way too many large pharma companies. it's happening at a time when the bioteches are -- >> all that money coming their way anyway. >> these guys, people historically -- these companies wanted to buy biotech companies, witness the way that they have historically gotten. bristol-myers, built itself on a biotech buy buy buy. the biotechs got too big, merging with each other. glaxo has been stuck at 52.53, novartis has not been able to talk their stock up. this is the way to get things going. no longer flat lining they're

going. >> with all of that we'll talk more about -- >> they need tax inversions. >> yes. >> we'll talk more about earnings including results from mcdonald's, of course. we'll talk about netflix's numbers last night. how the stock is reacting on both of those fronts and also ahead, david's exclusive with valueact ceo jeff uben. hear what he has to say about buying allergan. we'll find out if today is another turnaround tuesday. more "squawk on the street" in just a minute. just a minute.@@

netflix reporting better than expected first quarter earnings. total up by 4 million in the period. company intends to increase u.s. prices by new subscribers by a dollar or two and expressing opposition of nbc's parent comcast and time warner cable. netflix ceo reed hastings on last night's conference call. >> we're concerned about what happens when the combined entity, if the merger were to go through, would have with, you know, over 60% of u.s. homes passed and over 50% of u.s. homes subscribing to cable internet, and, you know, that's a worrisome factor. so we think it's more in the public interest to either not

have them merge or if the government goes ahead with it, to at least put some significant merger agreements, settlements in there. >> comcast has response to that, quote, netflix's opposition to our time warner cable transaction is based on inaccurate can claims and arguments. there has been no company that has had a stronger commitment to openness of the internet than comcast and we are the only isp in the country legally bounded by the fcc's vacated neutrality rules. one of the benefits will be the extension of net neutrality protections to millions of additional americans. it was hastings' fiercest statements. >> he cites at&t as being the slow one. brilliant by reed. what he's saying is listen, congress you're going to bless this thing, throw us a bone, man. come on, give us a little juice. don't -- otherwise comcast is too powerful. i thought it was a completely

gratuitous attempt by reid to make more money of which he will be able to get. my favorite line what was an amazing conference call other than he said listen, think france won't like pus? the mentalist is the biggest thing, said with a little irony. total addressable market which we always talk about. how about human beings that enjoy tv shows and movies. hey, 7 billion people. this call was brilliant. i love him. great sense of humor. >> why not. i did think it was interesting as well when asked about -- and carl about competition from amaz amazon, talked about it being complimentary, part of an echo system, which on the face you might say come on, but at the same time when you think about over the top offerings and what you have on your tv, your digitally wi-fi enabled television it is potentially an echo system.

there is something that does ring true there in terms of that comment. but it's interesting to think about, of course, in light of the overall concern and changes taking place in the landscape as we watch over the top. in other words, people pulling out video and sticking with broadband proliferate. >> does bring us to their guidance for q2, right. look for 1.12. street at a dollar. comcast today adding video subs for the second consecutive quarter. >> here's a little odd one. could it be about jason business, taylor schilling, laura, one of my favorite, orange the new black the star of the conference call. i was amazed. thought it would be house of cards. talking about getting the finest programming, better calls saw. this was a conference call and i have to tell you, the original programming is working. david, this thing is going to take europe by storm. the fact that they're putting a price increase, i think they could charge much more and the amazon thing was funny, basically, listen, we're all

frenemies, get along. i love you, you love me, we're a happy family. wow. >> that's a good barney reference right there. >> thank you. >> cantor and -- >> cantor and rayjay do upgrade it. cantor says the subgrowth even though they're already in a third of u.s. domestic households is impressive and the 24% discount off the high. >> like espn. everybody's going to have it. my favorite comment by bank of america and merrill lynch, they are taking the price objective from 226 to 246. that's what happens when you have an underperform on a red hot stock. value. >> that hurts. that hurts. when we come back cramer's mad dash as we count down to the owing bell. busy day. we've not gotten to mcdonald's yet. an interesting miss and we'll talk about what it means for the ceo in a moment more "squawk on the street" from the nyse straight ahead. [ male announcer ] this is the age of knowing what you're made of.

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♪ s just about seven minutes to the bell. let's get jim's mad dash ahead of the open. mcdonald's misses. >> doesn't matter because there's a secret sauce here, carl. >> the dividend? >> yes! this is a value play. 3.25%. you're being paid to wait until they turn it. i began this, you started to get the quarter was getting better all the way, i like global comp sales, increasing 0.5%. we had a bottom in mcdonald's, last time they reported. this has become one of the

ultimate value stocks with growth. really good balance sheet. never know what they're going to do. this stock is one to own simply because it is a sleeping tiger. >> yeah. people want to compare, though, u.s. comps down 1.7 to chipotle's 13 plus and they wonder if you can't fix the restaurants, jim, then does don thompson turn to the balance sheet. >> i think he does. understand that chipotle quarter. i love the 13% comp but go through it they had a gawk apocalyp apocalypse, meat, cheese problems. who can go to the suppliers and say here's the price that i'm paying? chipotle does not have pricing power to be able to deal with the people giving them organic. mcdonald's does. i still love chipotle. the 13% was amazing. understand, mcdonald's is a power. when they sit down with beef, they say beef here's your price. >> absolutely. >> how about facebook and this analyst move today? into this is incredible. they report april 23rd, tomorrow. this is one of those, credit suisse is hold the buy, time to

rebuild your facebook models, sells at a discount to the s&p 500 on 2016 numbers. basically saying, you should buy ahead of the quarter. now, we know buying ahead of the quarter has been fraught but this upgrade, time to rebuild your facebook, street models to conservative, doing video, people keep forgetting about the instagram. >> yep. >> this basically says facebook is taken over the world. now taking over the world does require a lot of smart guys. facebook does have it. this was one of the upgrades. this is probably the most i would say bullish upgrade i have ever seen the day ahead of a quarter. >> yeah. >> putting your -- his neck is in a noose in a guillotine. you better be right stepien. you better be right. you are out there, partner. >> we're going to revisit that in about 48 hours. >> smoking. >> when we come back, the opening bell in about 4:30. don't go away. ♪

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you're watching cnbc "squawk on the street" on this tuesday. live from the financial capital of the world. opening bell set to ring in just about a minute or so. busy day for earnings. busy day for pharma, m and a, the s&p is up seven straight tuesdays, jim, and we're less than a point from break-even for april which as we know has been a wild ride. >> yeah. and this big fpharma, these are big members of the s&p. glaxo was the winner in the deal with novartis and i see that biotech is going to have a hard time staying down given the fact that the multiples that some of these companies are paying for various businesses make it seem like that gill adis cheap. we have earnings later in the week we're worried about. >> some have said we've gone from a biotech bubble to a pharma m and a bubble is that fair? >> no. when you have -- yeah, well,

they're paying 11 times rev for some of them. stocks selling at low multiples so if that's a bubble i mean what's -- geez, maybe anything at 12 times earnings is not a bubble. >> there's a look at the opening bell and the s&p right at the top of your screen. at the big board, new york, reit incorporated selling its recent listing at the nasdaq, pdc energy, gas oil and exploration company. >> they have good drilling which i like very much. they're drilling in places where there's a lot of oil and people don't talk about. >> one name to watch at the open will be hog, 1.21, shipments up more than 7. asia pack up 21. the winter did not stop people from buying motorcycles. >> what a wonderful story. american company putting up unbelievable numbers. this is one of those quarters which tells you that there is a lot of capital going around. people are a little wealthier than you realize.

people do not need a hog. my friends who have them swear by them, of course. >> a seven-year high on hog. the former hdi, and they keep their shipping guidance intact. bull market as nicole said, bull market in motorcycles. >> wondering polaris, you have to go in there, they make snowmobiles, a lot of other stuff you don't nieecessarily need. i'm not saying -- let's call them discretionary. you don't need a harley-davidson, people who have one say yes, you do. >> how important both allergan and valeant are going to be up at the open? >> you know, valeant makes the business doing exactly what they're doing. this is part of their cost of doing business is what they do. i totally understand. david was talking about the -- any time you have a situation where you've got that tax dom soil thing going for you you raise numbers when you acquire anybody that doesn't have that. raise numbers, valeant, if they get the deal done i totally get why it's higher. >> travelers, 295, beats 216. revenue was in line.

10% div hike. >> travelers you always have to worry about what they say in the conference call and whether there is price cutting and property casualty, my favorite company in the industry. i think that fishman's really just a remarkable guy. those of us who have used travelers know you pay a premium because they tend to be the only guy in town for a lot of businesses. i hope they pull it off in the conference call. last time the conference call was downbeat, a big reversal in the stock. please wait for the conference call before you take travelers. >> yeah. >> we mentioned netflix obviously in the past half hour. that's a 9% move today on netflix. that's more than it was up in the afterhours last night. >> yes. the stock had been down heavily coming in. there had been remember the great trade that was going on was to short everything high multiple. suddenly all the people were short everything high multiple are scrambling furiously trying to figure out we got bagged, got bagged in the industrials, we got bagged in the high multiples do we have to cover tesla, do we have to buy solar city?

is amazon going to be good? of course just appro po of that, we have positive chatter, amazon, deutsch bank says you have to buy amazon. software service names. morgan stanley says this is the time for work day. work day down yesterday. the key one to watch is fireeye. unbelievably. unbelievably they -- the insiders, the company they bought, files a gigantic secondary. the fireeye people have been punished. they must have fire in their eyes. >> utx, 132 beats 1.27, close to an all-time high. >> can we just say -- i'm going to put it to people now. those who have been saying there's no revenue growth go look at the united technologies, the number, how strong pratt and whitney, these are revenue stories. lockheed martin not a revenue story, defense. those who say there's no revenue growth. i'm calling them out here. empirically they've been wrong. only through about -- we have -- very small part of the earnings season so far but the reeve new

beats are extraordinary. the united technologies doing incredibly well. they bought a company but they are on fire. i like them. >> a good one to mention. you mention lmt, 287 beats 253. they see pentagon spending declining 6% this year. they bought back so many shares not the point. >> they keep buying back stock. it's a cash machine. some of our allies are feeling you know what we got to start defending ourselves. i think one of the subtle issues behind the defense contractors is you know what the united states may not be the warrior for the world. some of these other countries have to bulk up. lockheed martin good quarter. houston doing a great job. doesn't seek any publicity. she's welcome on our show. >> alan mulally according to the journal is going to leave earlier than some expected as early as july. here's "usa today." helped ford fly. >> he did. >> mark fields the coo probably going to take over. >> i like mark fields. been together with him many times. he's a stead yes auto happened, has good ideas.

involved in all aspects. seamless transition. mark, a local boy. local boy made good. he is not from detroit. he's from around here. >> already running some of the meetings that mulally used to run. >> mark's been involved. i saw mark and met him at the super bowl last year, met him a number of times. he's a consummate insider who will be a terrific spokesman for the company and i don't mean any slight toward alan. he's been on "mad money" multiple times. mark fields you will not skip a beat with that company. >> some of the interesting color in the journal piece the board was a little unhappy with mulally's flirtation with microsoft which some argue went on a little longer than it should have. >> that hamlet thing to be or not to be, alan, i sent alan a nice e-mail this morning i left out the hamlet illusion. the hamlet thing, nobody likes hamlet. i mean the play is good. okay. the play is good. but it's got that kind of how was it mrs. lincoln feel about

it. >> i wish you had been here yesterday we talked about micron in your absence up again today. another almost 3% here. >> a classic game of chicken. will the other guy start building flash plants? will they buy plants. i got a lot of heat when i said i liked micron. herb greenberg took the other side. back away from the other side. if they are not building foundries this goes much higher. if they are building foundries it's a game of click be and the stock dinz. >> one retailer not putting together many new stores is home depot. gets hold to buy at bmo. that's going to be in the top ten list. >> positive story. what's more important wane hood, one of my favorite analysts had been bearish about home depot some time. obviously adding one store this year in williston. what is interesting about the upgrade he cut numbers for 2014. he did boost for 2015. but he's now below the street 2014. stock has pulled back.

those who think i'll buy it, beware if wayne hood is right you have another number cut. frank blake said over and over again it's planting season you have to get better weather for home depot to blow out 2014, he left wiggle room wayne hood, but he is the best. >> finally our own parent comcast we mentioned 68 cents. does beat 64 cents. you mentioned revenue growth up 14. cable revenue up 5. nbc revenue up 29. >> nice. that's a lot of things going right including the olympics. my favorite number for the comcast parent company of this network operating cash flow up 10%. that is remarkable. a lot will be returned to shareholders. david cohen who i know from previous dealings, candidly from other -- from politically things, because he worked with rendell. >> former chief of staff. >> nice guy too. am i allowed to say that? david will get that thing through congress. they have to give netflix a couple smackers somewhere i don't know. i like david very much.

i like his wife too. >> with all of that dow up almost 15. mary thompson with us on the floor today. hey. >> carl, kind of a lack luster open given all the news and not only on the earnings fronts but m and a space. the dow and s&p and nasdaq all positive. the nasdaq the winner on percentage basis up about 16 points right now. a little weakness in the energy space as well as reits and banks today. other than that, kind of broad very modest gains today. the s&p, of course, on track now with the 2-point gain plus for its sixth straight session and very close, about 1% from its all-time high. quick check of the dow movers. several reported earnings including mcdonald's, disappointing. you can see its stock down slightly. travelers coming in with very strong results. but its stock pulling back as well. citi cautious on the outlook for travelers saying they're not sure if they can sustain these results they reported in the first quarter. united technologies raising the low end of its guidance for the year. the company helped in the

quarter by restructuring or hurt i should say by restructuring costs. raising the low end of its forecast for the full year. we highlight merck and pfizer because of all the deals in the pharma space. valeant and allergan and also the news about glaxosmithkline and lily and novartis, kind of trifecta that they are doing today, the trifecta deals they are doing. harley-davidson, the company's stock opening at a seven-year high after the company came out with better than expected results. said benefited not only from strong u.s. sales but worldwide sales as well. as you can see its stock up 7.5%. lockheed martin coming in with better than expected results of 287 a share. the company also raised its full-year outlook for the year thanks in part to restructuring efforts at the company, up over 1%. xerox coming in with earnings and revenue that beats. nevertheless the company lowered its full year outlook. the company transitioning and that has proven difficult to a document management company, its

share up 1.4%. let's touch on intuitive surgical because it did receive fda approval for its surgical tool, stock up over 3% on that news. just two quick stocks i want to mention, specialty stocks, allegheny technologies with a wider than expected loss. the company's ceo saying he does believe it's turning a quarter. stock off 1.25. cell lan niece which is a chemical company better than expected results its shares up. the dow up 27. >> mary thompson. >> a check on energy and commodities. jackie deangelis is at the nymex. hey. >> good tuesday morning to you, carl. let's start with what we're seeing in the energy pits here. some moderate selling pressure right now at this point after both benchmarks hit a seven-week high. we are seeing profit taking here from traders. now they are saying that they are watching geopolitical tensions, keeping an eye on it. that's adding to some of the price support but also seeing

some downward pressure because we're expecting crude oil inventory report from the api tonight. expecting to see a build again in weekly supplies. addison armstrong at tradition energy saying when we look at the supplies right now, versus the five-year average, we're 7% above that level. so this market does have a lot of supply in it right now. meantime we are watching wti prices, they are trading just around $103 a barrel. last but not least want to talk about metals. we saw early buying in the gold pits but wasn't able to sustain. still well under 1300 despite the weaker dollar today. carl, back to you. >> all right. jackie, thank you very much. jackie deangelis. when we come back the battle over darden's plan to spin off red lobster. david with an exclusive with jeffery smith, co-founder and ceo of starboard value and then later on we'll talk with shark tank's kevin o'leary. get ready for fireworks on that when "squawk on the street" continues. continues. those little things still get you.

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welcome back to "squawk on the street." i'm david faber at the active passive summit in midtown, manhattan. we have a great lineup of guests starting with jeff smith the managing member, chief executive officer of starboard value. by the way, a fund that is -- we did this interview last year, i think you doubled in size. >> about that, yeah. >> almost $3 billion. >> that's right. >> all you activists getting so big, throwing your weight around in a lot of different areas these days. >> we've been fortunate and we have terrific investors. >> let's start off with something you've been visible on your opposition to darden's plan to separate its red lobster business essentially. transaction seemed to be entered into relatively quickly or an idea by management after some not particularly good quarters. you've been leading the charge against that.

there is a solicitation a couple days ago trying to call a meeting of the board. >> we believe we will. it is a high hurdle. we need to receive support from over 50% of the shares outstanding which is actually a really large percentage of the available votes. a large retail component here and shares that are out on loans so getting over 50% would be an enormous percentage of what's available but we're confident. >> okay. if you succeed in doing that as you say a significant vote it would be in a sense of if you do manage to get to 50.1%, what then? what will then take place in terms of your ability to actually stop a transaction at this point is not required to have a shareholder vote to go forward? >> right. so look darden is a terrific company. a lot of value at darden. the challenge here is that the red lobster separation as proposed could really harm that value in multiple ways.

we need to stop it. it's not a great idea. >> what are the multiple ways you talk about when you say it's a terrible idea? >> spinning off red lobster as stand-alone company we believe could destroy as much as $800 million in value. it also will track about $800 million worth of darden's real estate. you have to put those two together and you're talking about pretty large delta in terms of potential value, but more importantly than that it's just not the right operational idea. so if you're going to spin off a business, look, we're in favor of spinoffs if you have a large conglomerate which darden is, spinning off one of the assets or several of the assets could make a lot of sense to get operational focus, but to do that with a struggling business, red lobster is a terrific franchise, it's a terrific concept, but it's struggling right now. high seafood prices and the

operational performance hasn't been good. traffic patterns have been declining. so they're right that it needs more focus, they're right it needs to be turned around, we agree, but to spin it off as stand-alone public company and have a new ceo have to figure out how to turn around that business and in the public spotlight as stand-alone public company while they have to be distracted meeting with shareholders, research analysts isn't the best idea. >> if you're successful in actually having them shelf this idea, it is interesting to see an ac vi test advocating to keep a company together, typically they try to act to separate companies, do you want to see management change clarence otis retired as the ceo? >> clearly there have been operational and strategic issues now and that all starts with the top. so as a shareholder, our power, our control is with the board. our power is in theory at some point to be able to nominate directors and potentially replace the board if they're not

doing a great job in overseeing management and how the business is being run. the biggest decision for a board is in choosing the ceo and continuing to choose the ceo and i think there are strategic and operational issues. is mr. otis in a hot seat? i think he is in a hot seat. >> it would seem to me you would hope to perhaps accomplish a great deal simply through the consent. if you are successful that sends a message. boards hear that message long before a special meeting even is called. there can be action. i have no idea if that will take place here. i would assume that's your hope? >> yeah. this doesn't make a lot of sense for us to have to jump through all of these hurdles. you're absolutely right. again, the red lobster separation doesn't make sense. shareholders are voicing their opinions vo strong lir ly they're not in favor. we've had to go to lengths to receive over 50% in the shares to call the special meeting. you would think that management and the board would have gotten

the message long before now change would be required and that the strategic decision is not the best one for shareholders. >> want to take you to the present moment as well. we're at, of course, every year we get together a lot of activists at the conference, talk of the morning as you might expect yesterday's news from bill ackman and valeant, following by news of the hostile offer for allergan. some saying this changes the face of activism because for the first time, first time in a long time or in memory have a partnership and that is what it is, between a corporate and an activi activist. something we're going to see more of? >> it's tough to tell this early. i'll say there is an opportunity. so we have heard from private equity firms, strategic buyers they've been frustrated for years but we hear from them when companies don't answer them. >> so when companies give them --

>> when companies approach them, those potential buyers get frustrated. without going the last step and using the tool of potentially going hostile, then they are just left being frustrated. it's akin to passive shareholders. passive shareholders can talk to management and ask for change, ask for change but unless you're willing to go to the next step and do something about it and potentially replace boards or make an offer or become active you're going to be frustrated. it's not surprising that buyers that want to buy assets are willing to go to the next step and possibly be hostile and i'm not sure it's a huge leap for them to team up with activist investors who are skilled in knowing how to do this. >> although, this is leaving a bad taste in some people's mouth. the volume of e-mails i've gotten from sophisticated investors and bankers and everybody involved in m and a over the last 24 hours or less than that saying how is that -- he able to do this? he is by the way, that being bill ackman. it is perfectly legal to form this group, bought the stock,

bringing things to the so-called partnership, but it doesn't feel quite right he's able to go out with knowledge that conceivably at some point down the road the stock will get bought by valeant and he had knowledge the fact that they were making the hostile bid. >> i'm not a lawyer but i would say as long as you're working with the attorneys and part of the same group and you are doing this together, then you're able to trade on your own information which is what this is. so i agree with you, it seems legal, but from the outside perspective i understand why people might have questions. time will tell. i think it's very, very interesting. >> it is indeed. jeff smith, appreciate it. hope we'll see you within a year given we've done this on an annual basis. jeff smith from starboard. the fight for darden something we'll be following closely, perhaps in a couple of days, carl, send it back to you. >> david, sounds great. david faber. when we come back stop trading with jim as the s&p has gone positive for april.

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stock will be up the most of any stock other than allergan today. why? this is a cannabis stock. i am shocked at this. of course, it's not necessarily -- it's not a medical marijuana stock. they have a novel platform. epilepsy company. when people ask me, jim, what marijuana stock do you like? i always go cannas business, gw pharma. stock had basically -- it was up the most of any stock i follow, came back. this is a timely upgrade. people are going to buy it at 103 price target. people will go for every one of these penny stocks, forget it. if you like cannabis, it's gw pharma. bold, bold recommendation by morgan stanley. >> what's their target 103? >> 103. >> probably going to be there in 48 hours. this is a real company, it is a -- there's a lot of pent up demand to play medical marijuana stocks. you want a real company that

dabbles in it, it's gw pharma. >> keep our eye on that. >> mad tonight? >> three of the controversial stocks out there. rich kiner from kinder morgan, dramatic under performer, gme paul raines, people short that thing, one of the heavily shorted stocks and david lesar has not done tv in a decade, halliburton has done a smoke show quarter and he's coming on to talk about it. i feel like we did the boston marathon, congratulations. >> see you tonight 6:00. existing homes after break. don't go away. ♪ [ girl ] my mom, she makes underwater fans

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welcome back to "squawk on the street." i'm diana olick breaking news from the realtors, existing home sales in march barely moved, down 0.2% month to month to a seasonally adjusted annual rate of 4.95 million units, home sales down 7.5% from one year ago to the slowest pace since july of 2012. what's interesting in this report is the regional divergence we're seeing in home sales. sales popped up 9% in the northeast and up 4% in the midwest but they were down 3% in the south and down 3.7% in the

west. why? prices. prices are jumping much higher in the south and west regions that's hitting affordability and dropping sales. prices gains not so big in the northeast and the midwest. that's why you're seeing sales coming up. speaking of prices the median existing home price in march was $198,500 up 7.9% year over year. that rate increase is slowing a bit. we were seeing price jumps in the double digits over the past several months. that's coming down. again, though, homes in the lower price ranges are really falling. sales down 18% in homes priced under $100,000. what's selling? the million dollar homes. inventories are rising slightly up 3.1% in march from a year ago. sara? >> thanks very much, diana. we'll have to see what happens as the spring selling season continues for housing. now to the news of the morning, big deals. friendly deals and hostile deals in big pharma. meg is busy today, back at hq

and meg, let's go through some of these, the three-way friendly deal announced this morning. >> yeah. absolutely, a $28.5 billion three-way pharma shuffle that happened this morning between novart novartis, glaxo and eli lilly. novartis is buying glaxo's cancer business for $16 billion. in exchange glaxo is buying novartis' vaccine business for $7.1 billion and novartis selling its animal health business to eli lilly for $5.4 billion. on top of that novartis and glaxo partnering in consumer health care. this is a swap the trading that's going on, among these big pharma companies. each trying to beef up in areas where it's strong and getting out of the areas where it's not competing as successfully. >> the focus. the laser focus on some of their businesses seems to be the theme. the one that involves bill ackman not so much for the activist which is unusual for itself but what it would mean, a tie up of allergan and valeant.

>> this is a fascinating merger. yesterday market caps of $42 billion. valeant has been on the acquisition spree part of its strategy, buying companies, getting out of r and d, cutting jobs, selling the drugs more efficiently and making more money that way. they've said they want to be ap top five big pharma company in the world by the end of 2016. they would need a market value of $150 billion. this one would get them about $90 billion. merger biggest acquisition valeant would ever do and they get the blockbuster botox, $2 billion product for allergan in facial fillers, getting rid of wrinkles but therapeutic sales, that's more than half their sales. >> botox big sales. what's driving pharma? there are major health care changes in the country. is this about cost efficiencies? >> it's about that. it's also these companies have gone through big changes in the last few years, losing top selling products, patent protection on those.

analysts are saying today who i'm talking to, this is a repositioning of these big pharma companies as they go through the patent clips, kind of trying to put themselves in areas of strength going forward? >> all right. we'll continue to watch more pharma deals in the pike, thanks very much on the deals of the morning. pharma sales up in europe and the u.s. today. >> shares of netflix are moving higher this morning after it reported quarterly profits last night that exceeded expectations and, of course, said that it plans to increase prices for subscribers. new subscribers first. but eventually everyone. the senior analyst at fbr capital markets. good morning. >> good morning. >> i guess the crucial question is, can you raise prices by 1 or $2 per user per month and still drive subscription growth at the rate that the market expects it? what's your view? >> okay. i think you can. i mean to be clear we have a market performer of netflix for valuation sensitive but we've done survey work of consumers and people like netflix, they're

using netflix, as much, much or more than hbo and your hbo subscription will cost you 10 to $15 more on your cable bill. netflix around $8 in the u.s. consumers like it as much or more than hbo. >> pacific crest last week put out an upgrade and at that point estimating a $1 increase in revenue per user could actually raise the operating profit for 2016 by 84% to $1.6 billion. the question becomes, can reed hastings take that profit or does he need effectively to enter an arm's race with everybody else who seems to want to produce original video from yahoo! the right the way down. >> i think with netflix you have to assume they reinvest in content. they're spending more than hbo on content. that's a big part of why consumers like them as much or more than hbo. i push back on that thought that it drops purely to the bottom

line. you know, i think they're going to have great earnings growth n place of expanding leverage but it's not pure leverage. the contribution margins are not 100%. >> we should mention, of course, that reed hastings last night who has an interesting relationship with our parent company comcast, became the first big media company to oppose our parent's acquisition $40 billion acquisition of time warner cable. the argument seems to be in part that he had personally no choice but to be forced in into paying interconnection fees through the comcast system and then our own parent company has come back with quite a spicy statement suggesting that a lot of the claims that he made were inaccurate, that his arguments were false, and importantly, that netflix wanted to unfairly shift in comcast's view the costs from its customers to all internet customers and said look he came to us to do a deal because he's using his size to

his own advantage. what do you make of that relationship between comcast and netflix and where it eventually takes them if comcast does do a deal with the likes of apple to stream content and basically hits back at netflix's core business. >> well look, i think that, you know, this is getting to the political realm. with all due respect to your parent company and netflix, neither entity is really on the right here. this is big corporate titans looking for leverage in a politically and economically. i think economically netflix has a lot of leverage if you want to sell a broadband area you need netflix to work well on that service otherwise consumers won't be interested. what reed is trying to do is set the groundwork for regulators to puts conditions on comcast to protect his relationship with comcast. so right now what they're spending for access to comcast is not very large in the grand scheme of what they spend on

content. he doesn't want that to change. he wants regulate tors to put safe guards in. they will have over 50% of all broadband homes in their footprint. they would have cloud to exercise leverage given there's not a lot of broadband. he has a reasonable argument there. >> this has been a roller coaster for the stock recently. it lost over $100 a share. >> right. >> quarter of its market cap. where do you think we're likely to trade from here? what is the valuation argument? >> look, i'm arguing for a $393 price target which is saying that international is worth a little more than domestic. i think you have to squint and think really hard to make a valuation argument. the stock is going to be largely momentum driven. the international momentum is good argument for the stock to hang on to the gains it's had for the day but hard to sea a great risk/reward argument from

here. >> barton joining us from fbr capital markets. >> great. >> coming up on the show, what day to be live from the fifth annual active passive investor summit. cnbc the exclusive broadcast partner, keith meister is next, the founder of corvex management, and jeff ubber, valeant pharmaceuticals, largest shareholder. what day after they announced a bid for allergan along with bill ackman. the investorer who rattled microsoft's board, jeff ubben, coming up on "squawk on the street." street."

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welcome back to sho"squawk the street." i'm david faber. we are joined by keith meister, managing partner of corevex management. activist fund with $5.5 billion under management. jeff smith, last year half that size, you are growing so quickly. you know what, i love to start on this idea which is sometimes you hear it's a bubble. you guys are not an asset class, activism is going to jump the shark soon. and these incredible appreciation of assets amongst the funds is going to stop. your response? >> i would say we're in the business of investing in great companies going through change. so i don't think it's a bubble. i think it's just very right for

today. we can create bona fide ar ba trojs in investing in a company trading at one value because the market has a certain expectation of the future and if we can help that company create a different path forward, change how they allocate capital, think of m and a, corporate structure, tax structure, balance sheet we can help create a new outcome, a new path. we're fundamentalal investors. we can hedge our risks we don't want to take and invest in great businesses going through change. i don't think it's a bubble. what's changed a lot over the last year has been the willingness of other institutional participants to support active investing. the reason for that is quite simple. it works. why is the stock going to go up over the next 12 months? it's going to go up because -- or the next five years. >> that's -- you said 12 months and then five years. the chorus is growing here, whether marty lip upon, i'll x

him off, joe per rel la it's 12 months and then 24 months later we were knee where. how do you respond to those who say short term is the key to activism and you create value over a short period of time? >> i would disagree. i would say the engagement of the joe -- the idea of getting all shareholders to interact with management to share views, so that companies can take actions consistent with creating value long term makes sense. if the activist, bill ackman or carl icahn has to be the leader, they're only as effective as getting the other institutional share holders to buy in. if bill ackman is successful with allergan, it's not going to be because it creates a short-term pop, it's not going to be because a handful of hedge funds support it, because the market supports it broadly because allergan will have to avail itself of the synergies from valeant, avail it self from

the tax ar ba traj or better yet find an alternative of their own that's better. he identified an opportunity. a great business that wasn't using the right capital structure, wasn't using the right corporate structure, wasn't taking advantage of its opportunity, so this is a real positive. he presented a different choice. it's a good choice for valeant shareholders, valeant's stock is up a lot today. great choice for allergan shareholders. what allergan's board should do shouldn't just say yes, study it as a possibility. >> they've been saying no to valeant for some time and it was valeant that i mean -- ackman was interested in valeant as an investment and he will be a significant holder here if in fact this all goes through. it was valeant that was unsuccessful in getting allergan to engage. is this a game changer? there's a number of people here, you can hear them a lot of the conversation is about this partnership. really the first we've seen of

this type certainly in a long time, if ever. does it change the nature of the relationship between corporate america and activists and the future of perhaps hostile bids? >> i hope so. what i mean by that, i don't know if you'll see a lot of other things that look like this. i think they were a rare set of circumstances that created this opportunity. what is the bigger picture? the bigger picture is, bill ackman partnering with a company valeant to help them have an opportunity that they could not have on their own, and to also provide an opportunity for allergan shareholders. i would say, you know, in the larry fink vernacular or in the marty lipton this is a win win. a new opportunity is being presented not short term but it's long term for both companies. now there may be better options and the board of allergan should study that. if they are allergan shareholders will get a better chance. but what bill was able to do was partner with a company to create a new opportunity, a new option, for two sets of investors. one of the things we spent a lot

of time thinking about is m and a. should be more m and a, more opportunities and lots of reasons we know why deals don't happen. and here, a company that wanted it to do m and a was able to give themselves what they thought was a path. you've covered hostile takeovers for a long time. >> i have. >> they're hard to get done. >> they are extraordinarily difficult. hardly see any of them any longer because of that. >> to valeant's credit they were able to come up with an innovative structure, if they're unsuccessfulful they get compensated. >> 15% if there is a topping bid. people are pointing to the partnership, even though it's legal doesn't feel right. ackman buys most of the options, buys a significant a stake in the company knowing, of course, he's part of the group so it's not insider trading, knowing the bid is coming and immediately can print a billion dollar profit so to speak on paper. how is that fair? >> i make two statements. firstly, this is the bona fide ar ba traj of actors. if you're going to do something

you can act on it. it's not someone else's information it's your information. if i change the way i describe the opportunity and said ge or ibm wanted to make a hostile bid for xep xyz and before they made that bid they bought 9.9%, great, happens all the time. >> valeant could have done this on its own but chose not to. >> because valeant wasn't sitting with $5 billion or $4 billion on its balance sheet. bill ackman happened to be. they were able to figure out a way to be a partnership. whether it's about the valeant/allergan situation, probably rare, or importantly what we're doing at corvex reaching out to the companies we're invested in, we have capitals, ways we can help you, somehow activism has been portrayed as good guy versus bad guy, right. the activist versus the corporation. that's the wrong dialog. the dialog should be how can the public market investor, corvex partner to create value. every once in a while there will be a commonwealth where we have to fight against what we would describe as bad actors and have

fundamental change in -- >> glad you took us there. only a minute left. let's get to commonwealth in this. i followed it. you won a consent to solicitation. the second we saw, larry robbins also at glen view having one won as well not that long prior to you. throw out the board and now what? who's running it and what's the strategy? >> commonwealth is a $5 billion reit that has 155 assets, 55 million square feet of real estate across america. related partner with us, presented an idea, saw a path to remove the board. there were a bunch of reasons i won't get into for why the discount existed but misalignment of incentives. we brought in sam zell to be chairman of a new company and his former cio at equity office, david, to be ceo and they will run commonwealth as a best in class reit the way zell has run his previous reits. the management of the company will be up to them. and my opinion of what they want

to do with the company is rebuild an equity office. $7 billion platform to take and reallocate capital and grow in the commercial office space with collectively in sam's words getting the old band back together, old guys from equity office back together, reallocating capital and using commonwealth to create a real living business. for us we're thrilled to be long-term shareholders we have best in class management and what this shows me take the optimistic side of this, we took a situation where there was really bad assets, bad actors really undermanaging good assets and with the support of nearly all the institutional shareholders, support of iss, glass lewis, we twice were able to run consent solicitation, 70% plus the vote, vote out the board because we showed a good plan. a plan about shareholders taking back commonwealth and we're optimistic about future. >> we could talk for a lot more time but i'm glad we were able to spend some time with you and cover quickly the landscape of

activism. keith meister, one of the larger important activist funs funds out there. back to you. >> thank you so much. still ahead david will talk with jeff ubben founder and ceo of valueact on the board of valeant with a bid this morning for rival allergan coming up this morning. plus mcdonald's results are out. missing on both the top and the bottom lines. comps just barely positive. blaming weather, of course. challenging industry dynamics. stock has been all over the map just below 100 today. we'll dive into that next. n you? yes sir. alright. let's share the news tomorrow. today we failrly busy. tomorrow we're booked solid.

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good morning to you. >> good morning. >> thanks goodness for europe. how long can they carry all the water here? >> over the past six months europe has turned positive which has been a pleasant surprise. obviously investors want to see the u.s. turn positive which unfortunately has been negative for the past five plus months. people like to play the european recovery trade, mcdonald's the way to do it with 40% of their profits out of europe. >> is the u.s. getting an inordinate amount of attention and do you see comps turning significantly positive in the near future? >> the u.s. tends to get unusually large amount of attention. i guess not surprising because it's another 40% of their profits. most investors are u.s. based. you know the factors that have pushed it modestly negative the more challenging broader environment and competitive set neither will change on a dime. in the short term people are expecting the u.s. to re main modestly negative. europe to remain modestly

positive. >> mcdonald's will tell you, we could use a little inflation here. especially knowing what margins have done in asia and u.s. we know food is getting a little more expensive. do youing think they've r they're going to have the -- do you think they're going to have the where with all to raise their margins? >> food is the biggest component for them. they expect their basket to be up 1 to 2% in europe. that's modest. they can cover that level of inflation with pricing. i don't think they want to go meaningfully above that by any means. their value is their message. they're somewhat limited from that perspective. >> you got it overweight, price target of 115. what leads us there if it's not comps turning positive here, how much pressure is don thompson under at the franchisee meeting and does he have to start reaching into his bag of tricks? >> yeah. i mean i don't think anybody believes don has made any big

mistakes during his tenure. i don't think he's under any immediate pressure. with that said they did acknowledge in their press release this morning that they're looking at means to optimize shareholder value whether it be the balance sheet with leverage or how much of the restaurants they own versus franchise or g and a cuts. they have alluded to those things. those should provide a level of support in the near term. we want to see the fundamentals turn as well. in the near term they've touched on other avenues for opportunity for shareholder value. >> quickly want to ask you about the breakfast market. very much in focus. yum reports after the bell, i'll be covering it, they own taco bell, aggressive move into mcdonald's turf on breakfast. 25% of u.s. sales for mcdonald's comes from that market. is that at risk to losing share from the likes of taco bell and starbucks? >> mcdonald's market share on breakfast is huge. that 25% of sales is the envy of everybody else and we've seen wendy's, subway, others go into breakfast more often than not ultimately exit breakfast.

it's hard to break. taco bell's push is going to cause pressure in the short term. the question remains whether they're targeting the same customer. it seems like you're talking about a different customer base. obviously a different type of product. so only time will tell. mcdonald's is aggressively looking to protect the breakfast share. >> is there better risk/reward in a chipotle or some of the other starbucks, dunkin', where does mcdonald's fit in your spectrum of favorites some. >> yes. we don't expect mcdonald's to be our best performer by any means. within the quick service world we believe expectations are fairly low from a fundamental perspective. at the same time you have the lowest valuation in the industry. you have the -- among the highest dividend yields and now this balance sheet optionalty which should provide a level of support. rather own a discretionary name, but for those who want to play a globally defensive multinational

qsr mcdonald's down an out and we have expectations for slow but steady improvement this year. >> the growthy world. i like that. >> yeah. >> new term. jeffery, thank you so much. >> thank you. >> jeff bernstein joining us from barclay's, big report out of mcdonald's. dominic chu, a market flash this morning. >> what's going on, carl? we're watching shares of harley-davidson this morning. they are roaring ahead here after the higher end motorcycle maker reported earnings and sales that came ahead of wall street expectations. harley was helped by better retail sales of its motorcycles. it also said it would ship between 7 and 9% more cycles to its dealers this year over the same time last year. again, some nice upbeat news and, of course, we will have more with the president and coo of harley-davidson on closing bell. >> after the good numbers and good stock market reaction up almost 7.5% for harley-davidson. thanks very much. market check because we are looking at the sixth straight day of gains for u.s. equities

and it's really across the board. the s&p, the dow and the nasdaq. carl you were mentioning that s&p level to watch. >> closing high for the year is 1890. >> not too far away. >> ten more points and basically talking about the highest close of 2014. given where we've been in april, we were in the red for a long time, s&p now in the black for the month as of today, so we'll see how much of this continues. >> we're looking at almost half percentage point -- half a percent of a rally for the s&p. the nasdaq up almost 1% and we are on a hot streak, it's the best winning streak for u.s. stocks since back in july. see if that can continue and close out near the closing highs. coming up on "squawk on the street" an exclusive interview with valueact's jeff ubben, one of valeant's largest shareholders. hear what he has to say about the hostile launch this morning. [ bagpipes play ]

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photos or videos allowed inside. we would love to give you a live look but unfortunately we can't do that either. i will tell you there are about 100 people inside, some shareholders, but a lot of employees from citi's mortgage unit which is based here in st. louis and why they are here today. just moments ago, we wrapped up prepared remarks from ceo michael corbett and turning it over to the vote on the key issues for citigroup. some of the headlines out of his remarks he did say it has been tough times for the mortgage business here. activity slowed dramatically as rates have increased and mortgage activity has dried up. he talked about the fraud in the mexico unit saying that, of course, it only takes one person to jeopardize everything you've worked for in your firm's credibility but that citigroup is working on every possible avenue to recover the funds they lost there and to punish the perpetrators in that situation. corebat did acknowledge the issue is the fed's rejection of its 2014 capital plan.

and, of course, shareholders have not loved this news and they know they have to wait for almost another year until they get that bigger dividend or buyback because corebat said instead of resubmitting that plan they're going to try to hunker down and fix the problems and resubmit it next year. s they've been here before. the 2012 plan was rejected and had steep consequences for vikram pandit. at this meeting two years ago shareholders rejected pandis's pay package of about $15 million. then the board had to regroup and figure out how much they were going to pay him and how they would penalize him for the vote. shareholders said we're not going to pay someone that much when they can't deliver on these results. that vote will happen. corebat made $17.6 million and even though the turnaround of citigroup is under way shareholders will be expected to vote on these issue today. we'll have the results at 12:30

eastern time and follow me on twitter and on cnbc almost every hour with updates from citi's shareholders meeting you can't get anywhere else. back to you. >> kayla, fairly safe to assume corebat doesn't have problem with the compensation, it will roll through unlike before? >> well, it's unclear at this point, simon. i mean of course we know when pandit's compensation was rejected several months later he was ousted by the board. now we're not expecting that to happen here because he's just taken the raines. but there could be some sort of ding to his pay, maybe decrease one of his cash bonuses. we don't know exactly what will happen. only the results will tell us what could happen. shareholders could vote it in. we don't know. votes are being cast right now. >> it's real public service having you there. thank you very much. kayla tausche from outside the citi shareholders meeting. coming up on the program, a cup sharing program, a cup sharing program, in new york. it's kind of like citi but for your morning cup of coffee.

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you are looking at a live shot of air force one has taken off from washington, d.c. president obama is headed to washington state where he's going to be meeting with families of victims of the deadly mudslide in the state this afternoon and then he is headed to asia. he's there for a four-country tour of asia in the president's -- let's stay in washington, eamon javers has breaking news for us. >> good morning. that's correct. the supreme court now upholding the state of michigan's ban on affirmative action. the supreme court ruling today that the voters of -- in that state were well within their rights to block racial preferences. an excerpt saying, deliver brative debate on issues such as

ray shall preferences may shade into ranker. does not justify removing certain from reach. democracy does not prove some are too divisive or profound for public debate. voters getting their way and has implications for states acos the country. we're waiting for a couple more rulings from the supreme court today. we'll keep our eyes on those and bring them as we have them. >> thank you very much. the view from d.c. on the earth day you might be shocked to learn in this country roughly $16 billion paper cups are thrown out each year. that's billion with a "b." now some entrepreneurial students from the school in brooklyn hope their new cup cycle initiative could help reduce that waste. currently in a three-day test phase called good to go a reusable cup program, think of it as city bike to go for coffee. joining us is katherine who is the chief executive at the school which is dedicated to

teaching social entrepreneurs. good morning. >> good morning. >> what was the idea? >> the idea was basically to create a program that would allow its users to reduce the paper waste from single use cups but actually giving them the same convenience that they have with the single use cups. and the whole program basically works the way that you get your to go cup which is reusable. you get your coffee like you're used to but when you're finished instead of tossing it away, you return it to any of the participating return locations. >> or the train stations i believe. >> yes. right now we're piloting so we have return location at the train station and coffee shops. basically what we want to find out is how do people use the system and where do people bring their cups back mostly. >> what are you finding? >> we just started yesterday. we had i think a really

thrilling start. we started in the morning we already got rid of more than two-thirds of all the cups we have in our pilot. we got great feedback from all the consumers so far. and i don't have the final numbers of returns from yesterday. but in terms of feedback which is really important for us as well in terms of do people like the idea, will coffee shops participate in it and all these factors, and all of that is going really well so far. >> some might have questions about the sanitary aspect of all of this. how are they washed? how clean are they when you get them? >> absolutely. and, of course, we understand that concern. and therefore we're working on ways to have them cleaned and sanitized so they're meeting the standards of regular industry cafes and restaurants. so it's industrial dish washers and sanitation taking place to make sure that nobody will, of course, have to worry about

that. >> i guess the question is, whether you could expand it, you know, towards a city wide scheme whether you need the public government behind that? is it possible or just businesses come together do you think? >> it would definitely be possible to also have businesses come together for this. but we actually have worked with the city government in this program that we're running with the do school from early on to make sure it's in line with what the city supports and we have seen very good feedback on their end as well from the sanitation department. they want to reduce the waste. >> it's a fascinating initiative. let us know how it works out. the coo of the do school. thank you. >> i have to say i'm guilty of the paper cup. >> absolutely. >> thank you. >> good to see you. >> next up an interview, exclusive with valueact's jeff ubben, one of valeant's largest shareholders. hear what he has to say about the hostile launch this morning.

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mfs. that corporate trial by fire when every slacker gets his due. and yet, there's someone around the office who hasn't had a performance review in a while. someone whose poor performance is slowing down the entire organization. i'm looking at you phone company dsl. go to comcastbusiness.com/ checkyourspeed. if we can't offer faster speeds or save you money we'll give you $150. comcast business built for business. welcome back to "squawk on the street." i'm david faber at the active passive summit. want to talk about activists at it for a long time and are, in

fact, one of the biggest in the game, well, then you have to talk about valueact capital with $14 billion under management jeff ubben the fund's founder and chief executive officer. nice to see you. >> good to see you again. >> we skipped you last year even though you had big news at the conference when you took at the stake in microsoft. there's big news again involving one of your large positions. this time -- >> we save it for this conference and you. >> i appreciate that. thank you, jeff. valeant. you've owned that stock for eight years. you've been involved with that company for a very long period of time. one would assume you were aware given the size and your partner mason is on the board, were aware of what was going on here in terms of this transaction. tell me why this is something that shareholders of allergan and valeant conceivably should be viewing positively? >> you know, mason went on the board in 2007 and was part of

the management change and basically brought in with the board mike, and mike pulled all the levers we saw power management could pull and proved to us over the next two years there was an interesting consolidation opportunity in pharmaceuticals. mike was buying gross profit dollars at three times and using debt, 6, 7% to do it. earnings went from a buck to basically 8 bucks over this period of time. this is a guy that, you know, as soon as he's about to close the deal, he's already got the names attached to the cost savings. so he's -- the speed and execution that mike brings is really fantastic. so allergan and valeant are a perfect match. it puts us 40% in health, number

two behind al can. >> owned by novartis. >> yeah. >> number one in derm number one in aesthetics, private pay consumer driven businesses where the physician/patient relationship is still key, which is really really not where pharmaceuticals is generally these days. so it's 70% private pay, which is really interesting. it's 25% emerging markets, you know, when you put the two together. so it's -- it's a deleveraging transaction, so you're down somewhere around three times debt-to-ebitda. so we think it's a powerful combination, and mike is the right guy to do it. >> to those who would say, jeffrey, in fact, valeant is nothing more than a rollup that relies on an extraordinarily low tax rate, given it's bermuda now, usually barbados exclusion that they had, and cutting costs at all costs, but then it has to do the next deal. because then it runs out of runway, and once the music stops for this company, you better be

out of there, because it's going to be an ugly show. >> we think that the model of acquiring r&d is proven. i mean, mike's been doing this since 2008. and we're still showing, you know, mid-single digit organic growth. and we're doing -- we're building our pipeline differently. >> are they real -- new products, though? can you name new products introduced by valeant? >> well, the bausch & lomb pipeline was actually fantastic. it's grown 10% in new products alone. >> and so, with allergan, it's your belief they won't necessarily cut out the future? i guess, that's what people believe that, yeah, you can show great accretion, incredible growth as a result of, of course, the favorable tax rate, but getting rid of the future. but just keep going, because one day -- >> we're talking about high single digit organic growth, the combination, we believe that. >> right.

you believe that. now, i believe the proxy's been filed. i believe mason, your partner at valueact, on the board, is no longer on the board of valeant, is not running for re-election. why is that? >> yeah, that's a good point. mason is doing the microsoft board, and that is consuming a lot of time. of the valeant board seat, it's about as, you know, stressful as any board seat you could imagine. there's a lot of meetings and a lot of action. so we really need to reallocate mason's time to microsoft. i mean, there's an element here where we've kind of originated with mike this strategy of rolling up, to use your words, consolidating a pharmaceutical industry where there was a misallocation of resources. there was too much r&d with not enough return. we went at that, right? and we brought this strategy, put it in place, executed on the strategy, and after eight years, it's a little bit time to hand

off to bill, who big ackman, came to us with the structure that was very tactically interesting to us. allergan was not responsive to our calls. and we identified the target, and so -- so innovative structure on bill's part and -- >> why does valeant need bill ackman? you say you've been a part of this country really from its outset in terms of the new management. why does valeant need big ackman? they certainly didn't need him to acquire the stake -- >> it's a blocking position. it's 10% of the votes. these are not easy to win. you know, we think -- you know, it's some cash but a lot of equity, so the allergan shareholders can participate. we think it's a higher probability of success to own the shares going into the announcement. >> and you use the word handoff to ackman. does that mean you guys are

going to -- once you step off the board -- reduce your position in -- >> no, we love the combination, for all the reasons i described. we have a big position. >> it's the second largest position in your fund, certainly you're one of the largest shareholders. >> right, we think there's more to go. there's allergan and more. >> what, pfizer? merck? we could be $100 billion company. what's next? >> yeah. the one thing is mike has proven that the execution's there. and so, you execute and then you look to see what else there is to do. >> a couple of minutes left. can we talk a little microsoft here? again, a year ago, you took a sizable dollar position. as you say, mason, your partner, is on the board of microsoft. they haven't closed the nokia deal yet. i'm curious as to your thoughts, a, about new ceo, and, b, about whether you endorse what was not his strategy, but is this nokia deal that they are going to close in the not-too-distant future. >> yeah. you know, sacha is perfectly

allianced with our interests. he grew the service and tools business double digit. he launched the cloud. he made decisions around the azra cloud that's un-microsoft-like. he made it an open-source software, so we brought in lennox. he's allowed mobile apps in the cloud, you know, to work on the android and ios system. he's forward thinking, not defensive around the windows franchise. that sort of stuff really is powerful, and i think the market's understanding this is a different company with his leadership. there's a lot of tough discussions still to go around the device strategy. and i just -- we're on the board. i can't really tell you where we end up. the board is still to work through that stuff. >> so it's still a question mark

to a certain extent as to what happens? >> mm-hmm. >> with nokia? >> mm-hmm. >> you distinguish yourself, jeffrey, and valueact has, by being very long term in nature. i mentioned it, eight years in valeant. microsoft, conceivably, you'll be in there for many years. >> mm-hmm. we bought more microsoft at 37 on the back of the announcement. >> what do you own in that thing, like $3 billion worth? >> 2.5 plus, i'm not sure exactly. >> yeah. does it -- all of the other guys crowd your space a little bit? you know, i mean, meister now has $5.5 billion, geoff smith with 3 billion. you've been there way before them taking these very long-term stakes. does it make the landscape more difficult -- >> they don't crowd my space, because we really do our own thing. we don't -- we really kind of run away from other activist deals and focus on companies where the institution ownership, like a t. rowe and cap re, have been there for a long time. they become really galvanizing for us and helpful.

i do have a problem with the cover -- the media coverage being so extensive. i mean, we got to the point where 13-fs, when we have a small farm team position, causes us to have to pay more. >> the stock runs up. >> and that's a problem. i have six fronting investments, but i can't get them graduated to a core investment partly because the market's been robust, but partly because people are watching everything that we're doing. i think it's a mistake, because we're really long term. i mean, our companies -- motorola is doing good stuff, but, you know, we've been there three years. we've made the portfolio smaller and more pure play like with the recent transaction with enter price business, but the company is going through a tough spot in their markets. you know, we have to work through that. we'll be there for many more years. >> yeah. >> the idea that you follow us because you expect something to happen tomorrow is -- you know,

i think that's misguided. >> well, that's a good place to end, although i could talk to you for a much longer period of time. but this is tv. >> yeah. >> we've gotta go. thank you. >> good to see you again. >> you, too. jeff ubben. >> allergan shares up 16%, best performer in the s&p market. nasdaq and dow all higher. "squawk on the street" will be right back. [ male announcer ] what if a small company became big business overnight? ♪ like, really big... then expanded? ♪ or their new product tanked? ♪ or not? what if they embrace

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good morning. it's 11:00 a.m. on the east coast, 8:00 a.m. out west. here's what we're watching today. arguments starting in a supreme court case that could change the future of television. we'll go behind aereo's case and what it could mean for broadcasters everywhere. the most useful way to think about apple isn't as a tech company but as a movie studio. walt will explain to us what he means by that in a few minutes. price hike in netflix not scaring off investors with the stock soaring today. can anything stop the company's upward momentum? and from the boston marathon straight to your television screen, we'll talk to the first american to win the marathon in over 30 years. that's a little later on this hour. all right. joining us this morning, kevin

o'leary, chairman of o'leary funds and an investor on "shark tank." kevin, good morning to you. >> great to be here, thank you. >> we'll start out with aereo. major supreme court case starting now on capitol hill, with aereo facing off against some of the top broadcasters in this country. aereo allows over-the-air programs to be watched for a monthly fee, meaning you don't need a tv to watch any of the local programming. aereo says this is the future of broadcasting while the networks say it's simply stealing. kevin, i was trying to think, what would o'leary think about this? i know you have a libertarian bent from time to time. i know you're also a fierce protector of copyright. where do you come down? >> i look at this as innovation. and, you know, i ask myself as a consumer, do i want to be able to watch content on any platform anytime anywhere and the answer is, yes. this company has found basically a loophole in the law using some very artful use of technology

that allows it to skirt the issue of ownership of that fee. i don't think the supreme court is going to go against these guys. and i'll tell you why. innovation is crucial in maintaining technology advancement for anybody, including the incumbents. if this law actually gets upheld, they'll have to advance to provide it. and in a way, i agree with that. i think it's very creative in the way they've done it. they're going to force the change. it does make me ask a question as an investor, in the infrastructure of media, is there a risk premium i don't see? in other words, is it riskier than i thought to invest in established cash flows and maybe the answer is, yes. >> interesting point you raise there. one reason why the court may actually side with the broadcasters, the obama administration actually came out, filed a brief, supporting the broadcasters, saying aereo is liable for infringement, kevin. i wonder if this could provide heft to their argument? >> i think that's a little

unfair. it's like putting advertising in front of the supreme court saying and suggesting that the president endorses one side or another. which i don't think he does. i just think that would be unprecedented to do that. i think we have a good system here. i believe that they will side on the law, which says to me -- and look, i looked at what these guys have done. and they've been very creative in using technology not to infringe on law. and so, you can argue the spirit of law issue, and that's exactly why we have a supreme court. but if this does not advance technology, if the ruling actually retards advancing technology on the side of consumers, we made a big mistake. >> what happens to retrans fees, in general, kevin, if this goes aereo's way? >> i have a big problem with net neutrality, even with the comcast deal coming. as an investor, i believe in the fundamental truth that when you use something more than someone else, you should pay for it. so if we're going to be

streaming everything on the internet inperpetuity, i should pay more and i think that's a flawed concept. that's the core of the debate. if you use more of something in a capitalist society, you have to pay more. end of story. >> if you were -- i mean, you are on a broadcast team, right? you have a show that runs on a nbc-universal unit. if it was your copyrighted material that was being transmitted by aereo, i have to imagine you'd be at scotus today fighting as fiercely as these guys? >> yeah, and i'd have some knowledge of a probability of loss, that would force me to work out a deal. there are no long-term enemies or friends in business. there's just long-term interests. and if this is the way that we're going to provide content to everybody in the future, i'm going to figure out a way to make money doing it. and if i have to make friends with my enemies, i will do that. that's the nature of capitalism. that's why the court should side

on advancing technology and making it better for consumers. everybody, where we position for profitability, after that. and that's the right thing to do for america, i think. >> well, we're going to have to see what they decide later in the summer. >> that's barry diller's argument, by the way. shares of netflix. the stock soaring after 2q earnings top estimates. netflix announcing they'll raise prices for new consumers by $1 or $2. prices for current netflix users will stay the same for a, quote, generous period of time. 44.9 million subscribers. kevin, for those who were bold enough to step in front of the quarter, it's paying off today. >> it has. you know, i look at netflix as a stock that's priced to perfection. i think there should be and will be more volatility in it, because this model is going to be pursued by everybody. i'll give you an example. last night i sat down to watch a film in my family basement, and we decided that we were going to

look on netflix first. it wasn't there. i had to go buy a premium service. in the case of last night, it was apple. but it could have been vudu or somebody else. there's lots of competitors, and content is all that matters. i'll tell you what the problem is with raising the price on netflix. when you start saying i'm going to be in the content business, fund production, that's a different risk. you know, carl, that not every show that's created, that hollywood produces, is a hit. that brings that risk model into netflix. which i don't think many people understand. hollywood is not a great place to make money. >> but wouldn't you agree, kevin, that as far as the internet-video boom goes that we're seeing, netflix is in the best position to win from it? >> not if you tell me they're going to put a significant portion of their free cash flow into developing their own proprietary content. the long-term industry of movies -- >> but that's what's attracting the subscribers. people are loving the original content programs. >> but that's because they've had a couple of hits. wait until they go for a decade and have the same results that

everybody else in that business has, which is basically a 7% or 8% return, if you're lucky. making movies, making content, making tv is a crappy business, bottom line. >> for 7.99, it's still, i think, one of the great bargains in media right now. kevin, if you ran this firm, i imagine you would have hiked prices a while ago. >> definitely i would have. 7.99 is very inexpensive for the risk they're about to take on. that's the way i look at it. i keep looking at this saying to myself, you show me one ceo in hollywood that gets to keep their job for an extended period of time after they've had three losers in a row. they get whacked. you don't want to see that happen to whoever's running this. this is a subscription business, not a hollywood production business. that's where i differ with the philosophy. >> what happens if this price hike results in slower subs? people are going to be watching out for that now for the next couple of quarters. >> they basically told you they have to raise prices, because they believe the only long-term sustainable model is to have proprietary content. carl, i say it over and over

again, that's a different business than just providing a subscription and cureating content. they're going into curation. >> and that's for sure. adobe gave us an interesting look at facebook ad business. in the first quarter, revenue per visit from social media was down for twitter, for tumblr, for facebook. engagement jumped by double digits led by videos thanks to the new autoplay feature in the news feed. kevin they report later in the week, we know pricing has been good in the quarter, and now this. >> look, i think the company has done one thing they promised to years ago, that they would solve for the mobile ad business they didn't have when they went public. check the box on that one. the problem i have on facebook, and we've already stopped talking about it, is doing $19 billion deals that i believe are dilutive in the short term,

not accretive. we don't talk about that anymore. you could have bought those users by just paying them and buying somebody else's mobile business. and this is at the heart of the decision to be a shareholder of facebook, is the dual voting clash share, which everybody ignores. you don't have a right to guide this company as a shareholder. you have to just -- >> why not? >> -- you have to believe. >> why can't you believe that they can monetize like they did mobile advertising, the instagrams and whaesapp they bought for eye-popping numbers? >> it's that i, as a board member, don't have a say in the best option. if you look at the big media companies, a lot of the decisions work until they don't. when you do $19 billion transactions, you're not necessarily betting the farm, but down the road, if that idea didn't work, you better have a whole bunch of other ones that did, because that's very, very dilutive. and i'm not saying this management team isn't fantastic. i just don't like the premise of not having one vote, one share.

there's something un-american about that. >> yeah, that's -- we can say that about a bunch of different companies. kevin, you've told us before you don't like to hold equities that don't pay a dividend. would you make an exception for facebook given the growth it's had over the past year? >> no. you know, i believe that if a company makes money, and i'm a shareholder, why is it wrong to send me my portion of the profits every quarter? why is it that if i want, i'd like to get my cash, and then i'll reinvest if i wish. i really believe that the essence of why you put capital in harm's way is to get paid while you wait. and companies that do not provide any form of capital return in the long run, in my view, and they have for the last 40 years, have lagged. 70% of the market's returns over the last four decades came from dividends, not capital appreciation. that's all i need to know, carl. i don't have to take the risk of today's hot stock that doesn't pay a dividend. show me the money! that's all i care about. >> that's where a lot of the market is headed right now, at least psychologically.

kevin, always so good. hope to next time get you on set. >> thank you. >> don't put a tv in front of him on "shark tank." >> kevin o'leary joining us from canada. apple known for being a maker of smartphones, tablets, computers, and a whole lot more. when you look at apple as an investor, should you think of it as a tech giant or perhaps as a movie studio? walt mossberg says a movie studio. he'll explain after the break. i'm type e. my golden years will not just be gold plated.

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take a look at the consumer discretionary sector. a big winner this morning. dominic chu has more on that. harley davidson has to be helping this group. >> it is. the discretionary stocks are helping. the push coming from two names. we've been talking about it all morning. harley davidson is one of them, but also netflix, both surging in trading, up between 6% to 8%, after both had upbeat earnings reports. they're among the best-performing stocks on the overall s&p 500 today, as well. rounding out the top five are casino giant wynn resorts, also advertising and marketing company, interpublic, which is up on earnings, as well, and, of course, cnbc parent company, comcast. today, carl, a nice day overall for the consumer discretionary stocks. >> all right, dom, thank you very much. dominic chu. does apple's product cycle work like a movie studio? that's what walt mossberg

thinks. he says apple releases new products and produces sequels. but he says time is running out and it's time for a new franchise. walt mossberg, the co-executive editor for recode, nbc is a minority investor, and a content-sharing relationship. good morning. >> good morning. >> i would argue, on your way to critical of apple over time, but these may be the strongest words yet? >> well, no, i just think it's a way to see it. it's a way to look at it. you know, there's this kind of debate -- there was always this kind of debate about, is apple doomed? is it done? or is apple perfect? and there's just nothing to be concerned about. and i think, obviously, neither of those positions is correct. i think it's helpful to look at it as if it was a movie studio. you know, you bring out a big blockbuster like "spider-man" or "the godfather," and bring out

sequels that often make more money and are better. in some cases, they're better, the sequels. but after a while, people become tired of the sequels, you have getters who bring out their own new franchises, and you have to come up with a franchise, a new blockbuster. of course, steve jobs, who really cannot be replaced, and it's not tim cook's fault that he's not steve jobs, but steve jobs had a way of figuring out how to knock these out of the park every few years and do things that other people had not done, and then live off the sequels till the next one. >> right. >> all i'm saying this morning is, you have to understand that. it's not because they're idiots or they're doomed. they have a certain way of doing it that looks a lot like a movie studio. but now, it's kind of getting to be time for a new franchise. >> what do you think the new franchise should look like? >> well, it should look like something that doesn't look like what other people have done,

or -- and this is an important subtlety -- apple has often taken things other people have done but not well or in a disjointed way, and pulled it together. it's not like nobody had ever made a tablet before the ipod -- the ipad, or nobody had ever made a music player before the ipod. but they pulled it together in an elegant, integrated way that integrated the hardware and software and the cloud services. and so, there are a number of opportunities for that. and we've -- you have speculated about them on your air. we've speculated about them on our website for years. one has to do with, of course, television, reinventing the television. and there, i think, there are problems they run into with the companies that control the content like nbc or others. there's one really interesting thing that hasn't got as much -- hasn't received as much discussion is they appear to be working on a mobile payment

system which might finally make -- make the smartphone kind of the ubiquitous way of paying for things. another is they seem extremely interested in health and in monitoring health. again, are there other companies doing some of these things? yeah. but with the iphone, with the ecosystem they have, with the possibility of a really sophisticated wearable that goes along with it, they could -- they could create a franchise there. so i think there's opportunities. i think there's a lot of skill. i think they have just gone through a tough transition period, tougher, i think, than people know, just because of the secrecy of the company. and now, i think -- i think it's time -- you know, i think they will -- they will do something. i don't know what it will be. >> my question to you is, okay, let's take this apple as a movie studio, sort of idea. >> sure. >> if i'm an investor, movie

studios don't trade like technology growth stocks. they don't have the same kind of excitement and enthusiasm. and when you talk about franchises, i mean, you're talking about different product categories completely new innovations, also a little bit different than just releasing a new movie franchise. so how should investors think about this idea? >> you know, you'll notice that in that entire reasonably long piece, i did not talk about stock. [ laughter ] and i have no -- >> we're down here at the exchange, walt. come on, we're talking about the stock market. >> i have no idea how to translate what i think has been this amazingly influential company's pattern. really, i think they are the most influential company in any industry in the last 15 years. and -- but i have no idea -- i've looked at the -- first of all, i own none of their stock, because it's unethical for me as somebody who covers them to own any of it. but i watch what happens. i watch cnbc.

i see the prices of the stock. and i look at it and i sometimes say that's ridiculously high, or that's ridiculously low. i mean, it's extremely volatile. i have no stock advice on this, except think about it as a company that has in it and has in its history the ability to up-end an entire business. and what i'm saying this morning is it's getting to be time for them to try to do that again. >> yeah, it has been a while, some argue, walt. a great prism to look at the company through. thank you so much. >> thank you. >> walt mossberg talking apple. the tesla model now available in china, and ceo ilan musk was on hand. what is the future? hear his answer to the question next.

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welcome back to "squawk on the street." i'm david faber with some breaking news involving darden. i can tell you now that sources familiar with the situation tell me that starboard, the activist fund that owns more than 5% of darden shares, has succeeded in a consent solicitation to call for a special meeting of darden's board of directors. sources tell me that starboard has received consent from 54% of the outstanding shares of darden, which would allow the company to deliver those consents and ask for a special meeting. darden would be obligated to hold that special meeting within 60 days of receiving the consent. again, i am told 54% of shareholders have voted in favor, or given their consent for that special meeting, at which then they would consider a

nonbinding shareholder proposal to basically not split the company up, or to actually hold a vote at some point on whether or not it could be allowed. but much more important, what this really is is a definitive rate of the shareholder base of darden saying, we are not interested at this point in this company being split up. of course, that split-up is moving ahead at this point with a division of the red lobster division being separated from the remainder of the company. we'll keep an eye on darden shares, but again, we can tell you it has succeeded in a rarity, although something we are seeing more of, a consent solicitation. this time not to throw out a board of directors, but simply to hold a special meeting. back to you, sarah. >> all right, david, as you speak, the stock popping. darden restaurants, the intraday, up 1.5%. meantime, the tesla model is available in china and elon musk was on hand for some of the first sales. phil lebeau has more in chicago

with more on what china means for elon musk and tesla. >> huge potential, sarah. huge potential. mainly because it's got a couple of things going for it. we'll talk about that in a bit, the fact that china is a huge market, as well as the pump for e.v.s. but this was the scene earlier today in beijing as elon musk was on hand for the delivery of the first model ss that have been sold in china. selling price? approximately $122,000, which i know that sounds expensive, but most people are saying that's not a bad deal compared to other luxury vehicles in china. here's what he told us earlier today in beijing in terms of the demand he expects in china. >> as far as our sales in china, it's difficult to make precise predictions. what we see right now is pretty strong demand. i think probably more demand than we can fulfill this year. >> as a result, they're already taking some vehicles that might have been shipped to europe or

here in north america and shipping them over to china. tesla expects to sell 35,000 vehicles worldwide this year, about two-thirds of those overseas, mainly europe, but also developing in china and asia. and because of the size of the market, and because it makes sense to sell where you build, elon musk says they're likely going to start building vehicles in china, within the next four years. keep in mind, china, huge potential here. not only in terms of overall sales of autos, but electric vehicles in particular. the government has set a target of selling 5 million electric vehicles in china by 2020. right now, in beijing, because there's so much congestion, guys, you have to win a lottery in order to get a license plate to buy a vehicle. but they see huge potential throughout the country. shares of tesla up today more than 5%. this is the beginning, guys, of seeing how quickly sales ramp up in china. believe me, a lot of people are expecting sales to ramp up very quickly for tesla in that country. >> that's going to be fun to watch, phil. thanks a lot.

our phil lebeau talking tesla today. when we come back, activist investors have been in the headlines a lot lately, but are they really good for companies and shareholders? we're going to pose that question to ralph whitworth in just a moment. chairman of hp. plus, the bell's about to sound across europe in about a minute. simon's on deck when we come back. ♪ [ dog barks ] ♪ [ male announcer ] imagine the cars we drive...

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markets are higher here.

dow's up almost 90 and green in europe, too. simon will bring us that. >> we have some deep green in europe, as, of course, it returns from a four-day weekend. so a lot of catch-up in many senses there. consumer confidence for the euro zone also coming through now at pre-crisis levels, which i think is a surprise to many people. so higher, as you can see, across the board. an outperformance in the nordic region, partly because, of course, everybody is really focused on what's happening with pharmaceuticals, so many of the big plays are centered around there. the news over the weekend -- the report over the weekend, the potentially pfizer bid, bid $100 billion to get its hands on astrazeneca for products, has livened the biotech sector in europe. a lot of the guys making gains in the wake of that talk. and still navartis buying the oncology products from glaxo smithkline, as you can see, selling the vaccine business, doing a joint venture on the consumer health care, and the

animal division going off to eli lilly. pharmaceuticals a big focus. under that m&a activity, some people might say to you, actually we're quite concerned about the quality of the earnings that are coming through in europe. certainly philips electronics, as reported today, and was actually down about 8% at one stage, because it's disappointing with its results and guidance moving forward. the ceo saying, look, we're taking losses on the translation through this very strong euro, into which we have to repatriate our products around the world, and also, he says, they have specific problems in emerging markets like russia. take a listen. >> when we talk about less momentum in the market, it is actually a china that has had a slowdown. we see the situation in russia affecting our business. and then, there are many smaller countries that are under pressure that have volatile currencies and so on. europe is, i think, fully bottomed out. we saw some up ticks in the

south european countries, which is giving us confidence. but then, at the same time, the northern european countries are not yet getting into second gear. so europe is still flat for us. >> as far as the euro is concerned, one footnote, of course we're still waiting for the european central bank to possibly move on qe, citi says now it believes more than a 50% chance there will be big asset purchases. in the meantime, guys, bmy me n melon, is now planning to charge people interest on -- charge people to hold their euros in case we go to negative interest rates. i think i got that right. >> yeah, it makes sense. interesting the european recovery theme, as we saw that with the mcdonald'searly er earlier. top activists are gathering in new york city for the annual active-passive investment summit, discussing top investment ideas and the fight

for shareholder value. david has another news maker for us. hi, david. >> thanks very much, sarah. we're joined by one of the earliest, perhaps a pioneer if you want to call him that, though he's not that old, in activism. ralph whitworth has been running the firm that time, $7 billion fund, of course, that takes large, long-term positions. you also obviously sit on boards, including right now, you're still the chairman of hewlett-packard, in case you didn't know that. >> yeah. >> ralph, let's start off with comments you made in the presentation you gave here, because i think they, at least, made a little bit of news, and it's always helpful to have you clarify it. you were asked about mondelez, 500, $600 million worth of stock in that company. you didn't seem particularly pleased at this point with the management. i'll give you the opportunity to say, are you happy with management? or do you expect perhaps they've got to do better? >> sure, david. of course, it's always good to be with you. well, you know, somebody asked me the question, they said, you

know, do you communicate with management? we said, of course. and they said, you know, they've got some challenges there. their margins are inferior to the peers. and there's just blocking and tackling that needs to take place. the market's been waiting for it. they're starting to lose patience. and they've -- so then they said, well, can this management team get this done? i said, well, the jury's out. >> what does that mean, the jury's out? >> the jury's out. they need to get traction and start to move these things. if they don't, you know, there might need to be changes. >> sounds like a threat to me. >> no, no, no, no. that's a risky thing to change management. we don't like to see that. we hope that this team gets this done. but it does need to move. and they know that. they're very aware of that. and they're working hard. so we'll see. >> right. are you happy that there's another activist on the board in the form of trian? does that help you? >> sure. nelson peltz, nobody knows that industry better.

and he'll do -- he'll help her a lot. irene rosenfeld, who runs the company. >> sure. >> so that's a great thing. >> all right. let's move on. you did spend a lot of your time talking about spx. i remembered from years ago, of course, it was described as a mini-tyco, when it is not what it used to be, having spun off so many of its businesses, what's the opportunity there? >> the opportunity there is a big one, a big upside. we've been involved with it for about a year. we've got an option to go on the board. we've got another option to put a board -- to nominate a director next year if we need to. but they need -- those businesses -- 90% of the assets are below cost to capital returns. and if you look at their peers, you know, they're just way inferior to emthis, the way they're running the assets, and they did lousy acquisitions and wasted shareholder money. they're working hard to get this stuff improved.

if they do, there's, like, 60%, 80%, 90% upside in this stock over the next couple of years. this is a big opportunity. but it will depend on a lot of hard work. it's stuff in their control and they can get done. >> all right. do you believe in management, though? how important is it given you've been doing this longer than anybody. give me a sense here. how important is management to getting everything done and sort of following at least what you believe can be the ability to create value for these companies? >> well, it's people all the way through the organization. but it starts at leadership. you know, if you're a school or church or wherever, it's all about leadership. and so, it's true at spx, and mondelez and across the board. so, yeah, we looked at incentives. we think about incentives a lot, because that's what drives people and we look at who the people are. and they've been there for a while. so some of this stuff is on their watch. >> how much impact can you have when you're on a board, even if you're, let's say, just one board member? >> a ton, yeah.

so if you come prepared -- the way to be a good board member is to be likable, but everybody knows you're not there to be liked. and if can you pull that off -- which is that -- you know, you have to thread a needle there -- >> right. >> -- then you'll get a lot of stuff done. if you come prepare and have your research and you're respectful and you present it, you get it done. one person. >> all right. well, you are one person on the board of hewlett-packard, and you also happen to be the non-executive chairman of the company. the last time i had meg whitman on, who happily joins us every quarter to update us, i asked her, she indicated you're no longer interim. i kind of asked and got an answer that indicated to me you're there for a while as a chairman, is that right? >> i'm there as long as they need me and for the foreseeable future. we have a great dynamic on the board. we have a great board. we added new members last year. meg whitman is probably the most outstanding executive in

corporate america, if not around -- >> there has to be a learning curve, even. >> oh, yeah. >> but this is a huge organization. >> you cannot believe the way she's absorbed this. i mean, it's, like, her learning curve, and just the last board meeting, i was sitting there going, wow. >> why? what was the wow? do you remember? >> no, just the grasp of this very complex, large, global organization. and she's got it. and you need that. we were talking about leadership earlier. and she's got a lot of good leadership skills, and she knows the business, knows the people. so we're betting on her and her team, and they are getting traction. >> they are? >> and you know, they're just kind of hitting their pace. >> you really believe that? you're in there for a lot, about $1 billion worth of stock, i believe. >> yes. >> you can't sell. you're on the board. >> yeah. >> and you may be on the board for a while to come. obviously, you believe there's a lot more upside i would assume

in hewlett-packard, even though it had an incredible year last year? >> yeah, it's still one of the cheapest stocks out there in the s&p. and it does surprise me that these large investors are willing to leave this asset sit out there like that. >> well, what -- >> and trade at this low multiple. they're concerned about the -- >> they still have no top line growth. >> right, and that's a big concern. that is stabilizing. cash flows are improving greatly. the organization -- you know, when we look at other kind of leading indicators that we might see internally versus externally, our employee base, you know, when we do engagement surveys, has just moved, i mean, like, hugely. so it's a different company since -- in the past couple of years, since meg's been there. two and a half years. we came about the same time. >> right.

>> and, you know, it's gotten some recognition. the investors have given it some recognition, but they should be giving it more. >> well, we'll, of course -- they will, i assume, after they put up quarter after quarter of improving numbers, and especially top line growth. real quickly, ralph, some talk of the conference is bill ackman. his partnership with valeant, first time we've seen that in a while. but you did do something similar about 14, 15 years ago when you went after waste management, didn't you? >> yeah, we did something very similar. we went to the third largest company in that industry and proposed to them a joint investment in waste management, which was the largest company. and then, we would take that and approach waste management to merge. now, we did this more behind the scenes, a little different style -- >> it wasn't a hostile bid. >> no, no. >> in fact, you got -- >> we got the job done. we merged these companies. and ran it, did a big turnaround, painted the trucks green and white, and rebranded it.

yeah, we started out with a similar approach. >> you think it makes sense to you? there are some who look at it and say, well, ackman was able to pocket a huge profit and they're kind of scratching their heads, even though it is perfectly legal. >> i haven't looked at the deal that closely. there are smart people around there, and they'll -- go they haven't figured it out, they will. you know, they smell value, so i assume it makes sense. >> all right, ralph whitworth, as always, appreciate your time. >> you bet. >> ralph whitworth, as said, they've been at it longer than just about anybody and has a track record better than the s&p's returns over those years. >> great stuff, david. david favor at the activist-passivist investor. one year after the terrible tragedy at the boston marathon finish line, meb keflezighi became the first american to win it. he'll join us to talk about the history-making run in just about 30 minutes. [ bagpipes play ]

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big boost after last night's earnings, but could one thing they're doing actually be the best reason to own the stock? we're going to speak with a top analyst about where he thinks it is headed next. that's coming up. but right now, let's get a "market flash" from dom chu. >> all right, brian, we're checking out what's happening with the overall stock market. we're a hair away from the records in the s&p, but one with a fresh record high is energy. among the stocks that are helping the cause are names like baker hughes on the oilfield services side, and then hess, eqt, payne. the one thing the stocks share in common today is they're trading at fresh 52-week highs, at one point. so a nice day for the energy sector overall, sarah. back over to you. >> and the s&p up, well, .5% right now. dominic chu, thank you very much. up next, the crew wants to be one of the largest financial planning companies in the country. and now it's moving one step closer. we'll talk to the business trying to make financial planning easy for everyone. raised another $28 million in funding. when we come back. we come back. [ male announcer ] the wright brothers started in a garage.

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watching the markets closely here. nasdaq was briefly up by a full percent, netflix and tesla. >> records within sight. learn best is the start-up on a mission to make financial planning a consumer product for the masses. to that end, learn best recently announced a new strategic funding round of $28 million sks bringing its total to more than $72 million.

alexa vaughn toebl is the ceo and she joins us now. congratulations. another $28 million in funding. >> thank you. >> talk about the growth you're seeing in your business that's attracting new money. >> so i think the coolest thing we've been able to see is our program, the learn best program that can take any household, whether you make $50,000 or $1 million and put you through a seven-step process connected to an expert. we're seeing customers get healthier. not only are we expanding across the web but we launched our program which allows you to get access to learnvest and a few pilot programs up and running. >> you're talking about increasing to a different level, a scale, right? >> he ya, market share and being able to grow by tens of thousands at a time. >> we talk so much about percentage of households that have stock in this country, how many households are watching us. is that necessarily a factor for demand? >> yeah. >> for your services? >> when people think about financial planning, we talk

about investing advice, which unfortunately for the 98% of the country, having, you know, great advice for their extra money to invest outside of their 401(k) isn't the problem. the problem is juggling the mortgage and credit card debt and the kids' 529 plan, while thinking about retirement. as the whole world has zigged and focused on investing, we focus on creating a financial-planning platform that does everything else. >> are you getting more questions about certain types of things, rising food costs, how will i manage my grocery bill? >> one thing that's really important, as learnvest focuses on the mass, there's 40 million households out there. one thing to remember, 74% of the country lives paycheck to paycheck. 30% of people who make over $100,000, people are spending more than they have, and it really puts them in a pinch. when we talk about extra money, i'm talking a well educated mass affluent struggling to figure out what to do with the extra

$100,000 they can get together and where to put it. that's the biggest question we see. if i have extra money, where should it go? >> "barron's" did the top 100 financial advisors. when you look at the themes -- these are high net worth clients, the average financial advisor they surveyed, 55 years old, been in the business something like 30 years. you're offering something different. >> yeah, a completely new market we're creating to make basic financial planning a true consumer product. i want it to be as accessible as a gym membership, as weight watchers, we pulled on the former ceo of weight watchers as an advisor. it's making something available to the masses with a $500 a year subscription. >> you were on the program a long time ago. you're a lot smaller than you are now, and we'll continue to watch the evolution. it's been an amazing story. >> thank you. >> alexa, the ceo of learnvest. when we come back, the next guest made history yesterday becoming the first american to win the boston marathon in over

30 years. meb keflezighi will join us live in a few moments when "squawk on the street" comes back. why relocating manufacturingpany to upstate new york? i tell people it's for the climate. the conditions in new york state are great for business. new york is ranked #2 in the nation for new private sector job creation. and now it's even better because they've introduced startup new york - dozens of tax-free zones where businesses pay no taxes for ten years. you'll get a warm welcome in the new new york. see if your business qualifies at startupny.com

welcome back to "squawk on the street." we want to call your attention to shares of dillards, the retailer ticker up about 6%, just off the session highs. the stock was mentioned positively at the active-passive conference that david faber is attending. in that conference, mick called the company worth possibly $1 55 a share if they're able to spin off the real estate holdings. dds shares in focus on the heels of positive comments, mercado capital, saying it could be worth $155 a share if the real estate is spun off, carl. back over to you. >> we will watch that one, dom. thank you so much. for the first time since 1993, an american man has won the men's side of the boston marathon. 38-year-old three-time olympian meb keflezighi of san diego crossed the finish line yesterday two hours, eight minutes and 37 seconds. meb joins us this morning by phone. member, congratulations to you.

what a race. >> thank you so much for having me. it was a great day, not just for myself, but for boston, for the united states, and the world. it was just better than last year. >> you looked like you were in total control by mile 17. you had about a one-minute lead and a lot's been written about what was going through your head in those final miles. the phrase boston strong, right? >> correct. boston strong, the bombing last year, i was in the stands, four victims had lost their lives, and half minute before the explosion i left for an appointment. and ever since then, i've been thinking how could i do a positive contribute to boston, and the boston strong has been in my head every day, and i'm so happy i was able to have victory in front of the 32,000-plus. >> meb, your victory was also a win for sketchsketchers. i found this fascinating. especially since skechers

doesn't sponsor a lot of athletes and you used to work with nike. why did you work with skechers after breaking up with nike? >> i've been working with skechers, and had been with nike a long time, and skechers gave me the opportunity to be a partner with them. ever since i was skechers go run, speeds we just launched, it's been phenomenal boost to my career and almost 39 years old, and nike felt i was probably too old. you know, with skechers' partnership, things have gone well. just ran my fastest time ever. yesterday, the boston marathon. and i have two previous before that also in new york and houston at the trial. it's been a great partnership to be able to work. and i think they're helping me mekally. >> finally, meb, 19 kenyans have won that race since '91, and now you as an american. is the era of kenyan dominance over? >> well, it's just an honor to be able to win as an american after 31 years.

greg myers, 1983. yeah, the kenyans were second and third this time. i feel -- we all train hard. but yesterday was my day, and especially after what happened last year, i couldn't be happier to carry that torch for the united states. >> and we couldn't be more proud of you, meb. thank you so much for your time today. congratulations again. meb keflezighi. >> thank you so much for having me. >> and the oldest. >> yes. >> an inspiration for older athletes. let's get back to headquarters, check in with brian who's filling in for scott. >> hey, carl, hey sarah. congratulations to meb and the city of boston. boston strong. >> welcome to "halftime report," everybody. here is the roadmap for tuesday. citi in st. louis. citigroup shareholders getting their chance to question the ceo at the bank's annual meeting. we'll have reaction from outspoken analyst mike mayo. streaming profits. netflix surgen on better-than-expected