tv Squawk on the Street CNBC July 23, 2014 9:00am-11:01am EDT
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big hardware tech in? don't think we're there. >> i'm going to cry. there's a lot of m&a activity going on. >> yes, there is. >> what did tim say? mention he saw something or -- >> no. >> thank you. >> my pleasure. great to be with you. >> appreciate it. >> make sure you join us tomorrow, and "squawk on the street" is next. good wednesday morning, welcome to "squawk on the street," i'm carl quintanilla with david faber, and we roll on this morning with pepsi, boeing, delta on the back of microsoft, futures do not look bad, 10-year yield in the new range, a slight bump in mortgage applications, but it's a light day for data. europe with a slight gain despite the flight ban to tel-aviv and two reports that ukrainian fire jets have been shot down. we begin with earnings, apple
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beating consensus, short of expectations, but cook says he's not worried. >> microsoft missing consensus. saying the dpaen is still in the midst of a bold and disciplined effort to focus business. >> boeing and delta beat expectations, delta's ceo on this network this morning commenting on the middle east. >> pepsi came in on a streak despite a decline in carbonated drink sales. >> apple had earnings of $1.28, a nickel above. just shy of consensus. ipad sales came in low of expectations, same for the current quarter, and last night, tim cook spoke about sales on the conference call. >> sales met the expectations, but they did not meet yours. our sales were gated in part by channel inventory and market softness in certain parts of the
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world. >> two consecutive quarters up double digits, 12.7 this time, down 9, and two years ago, ipads up 9300%. >> right. i want to call this is transition story. we watch tv shows, we watch them on this series, like, that goes on, say 13, 14 show, and there's an episode where nothing happens, but a transition episode setting up for the next. this quarter was a transition quarter. if you make a judgment on it, you miss out on iwatch, the giant new screen, the huge bill, on what the ibm deal will do. come back, say, you know what? given the fact of transitions, it's interesting. sales, 35 million, another 13% growth. i like the fact that brazil, russia, india, china very
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strong. 94 mac, selling well against an industry not doing well at all. you have the highest growth rate in zent quarter so people buy the stong. >> people focus on new products. the larger screen, 80 million iphones preparing to potentially produce. one would expect the bigger that screen, perhaps less reason on the mini ipad front to buy that that the sizes are not different unless they are on that front as well, also an expectation. >> i think one of the analysts yesterday said they consider this new large screen phone its own platform. all right? it's not going to be a phone, but a new category. >> the samsung killer and ibm deal is a blackberry killerment company on the offensive in its quiet way. job was never afraid to canni l cannibalize product. cook never afraid to cannibalize
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product. the call was assertive, describing the good capital allocation, and not beating the chest, but i think the reason why i'm putting it like this because i think people want to -- they -- people want to sell the stock on headlines. as there was with microsoft, the stock down a buck and a half, no, this is a quarter a prelude for good second half. >> 164 billion in cash. >> yeah. i know. >> enough for 500 dollars for every man, woman, child, in this country. and the new ceo. >> they have borrowed against the cash pile, outside the united states which we talked about many times, which gets us into other conversations about how apple is taxed and inversions, but that's confers for later in the show, but they barred against it, returning the capital, but it grew. last quarter, of course, first quarter is shrank a bit. this was up, what, over $14 billion. >> still at 26 billion.
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>> still 26 billion domestic. >> the scary thing is they could buy back $5 billion in a quarter. doesn't matter. >> no. doesn't even matter. >> it doesn't. >> that's bigger than the vast majority of companies. put it in perspective, say, all right, why isn't it at a hundred bucks? the answer's not a hundred bucks because why not at 90? people are afraid to sell ahead of the launch. too much excitement. >> all right. let's talk microsoft as well as we said also out with its results. it did miss the street's estimates in terms of quarterly operating profit. that was 58 cents a share. bottom line impacted by expenses to incorporate the hand set business. revenues above forecast, add in revenues, adding in losses. they said growth in the cloud based offerings, and the ceo on last night's conference call.
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>> we accelerated our commercial cloud business to a 4.4 billion dollar annual run rate. and perhaps more importantly, we made bolden disciplined decisions to expand the call and platform company for the mobile first class first world. >> there's a lot of positive things. i spoke to a couple large shareholders what they see in the enterprise part of the business, real business, cloud part of the offerings. nokia, why obama -- why that deal was allow to oture when you think about it p zblp worried about earnings per share 1234. >> no, what a waste. problem is by 16 they break even. >> he's the problem with trying to understand this. the whole thing is that it's x, everyone's accepting that. the reason why is because amy -- this was the cfo, and the key line in this whole conference
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call comes when they go, weapon kept focus on rigorous operating expenses. this is the line i love. we grew revenue 9%, more than twice as fast as operating company, that grew 4 %. holy cow. >> right. that's where the focus, i think, the hope of many investers is that continues to be the case. on the balance sheet. on cost. on maybe future capital returns as well, but on that, that differential you just described. >> being run, clearly as a country club and now a ymca camp. just, you know -- >> have as much fun at ymca camps, by the way. >> we, e like them. >> cloud is supposed to kill the margins, that's what everyone is worried about. obviously, they -- it's not happening to them. this is a quarter that went from people in the head sines saying, wow, what the heck is going on here, to say, you know what, amy hood has your book, dell does
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interesting thins, but clark has your back. i like this call zplp good to moe, boeing anticipatories at 224, beating forecast, and dow raise the full year guidance by a lot, actually. citing strong jet orders, and delta above consensus as profits expand my more than four points. boeing, commercial margins 12-plus. oc operating cash flow down year over year, going from building three dreamliners a month to ten dreamliners a month. pouring a lot of money in. >> the guy up that you did get is from margins and tax rate. people don't like that, revenue numbers in line light. i step back and say, look, the stock up a couple bucks, still down, an under performer. people are not going to like the quarter. sounds crazy. they are not going to like it. >> despite that full year view.
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790 to 810, and now 715 -- no, prior 715, 735, and now 719 to 810. >> this is a company having trouble analyze earnings. that is extraordinary. as soon as you saw the revenue number was in line, as soon as you read that it was taxing and free cash flow was no change. say, okay, they don't have a right yet. do i think the stock should be hire? absolutely. is it going to be hire, no. >> delta, beats by a pepny, perceives up 5.7. factor is 86 3, if the airplane feels full to youings you know why. a year ago, 84.8. >> what a great interview on "squawk," and is it going to soar? you have a beat of 10 cents, using that -- airlines, used to
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them beating, but they have integrated, bought a ship in order to move oil. got their own train or refinery. your swing factor is that you need to keep your fuel expenses down. why i go back to what i said about boeing in the quarter is because you need fuel efficient planes. delta did the most of any airline in the world. >> more upside. >> terrific interview. >> speaking of the interview, he mentioned this ban, this 2446 ho-- 24-hour ban, and they will not fly again today, listen. >> we routinely at delta establish no-fly zones. today, for instance, we're not flying to israel. we will not allow a flight to be dispatched over iran, iraq, ukraine, seen ya, afghanistan, or north korea. we make the decisions and have an obligation holy independent i
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any geopolitical or regulatory mandate. >> it's been more than 20 years since we had a ban. benjamin netanyahu called secretary kerry saying reverse this decision. obviously, this -- hamas is impacting trade in the economy. >> it's faa. do what the faa says, right? >> as for the airlines, they are an investable sector. it was based on oil prices, and i assume capacity will come back and labor. capacity will come back, but right now, constrained. by the way, you can't talk about boeing and build planes that quickly. >> when you have the structures that broke or changed the agreements, you had deals done, consolidation made it so you think some of the -- there's
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competiti competition. >> low cost carrier entrance, yes. >> we don't have it to get a new plane. this is what what happens right now. go to the break, see how much delta made. i have a guy who has ten planes, you do the pilot, you do the gates, and next thing you know, there's another airline. >> you would be the guy directing them with the flashlights and maintaining them and flying them. like you do at the m. ? of course. >> and carrying the bags. >> and load bags, of course. >> reservations, i know how to do that. i can handle seating. it's not happening because you can't get planes, why the market loves boeing. >> a big day for tech, innovation landscape and more with the technology engineer, jaywalker, later this morning. facebook after the bell, and hear from the dominos ceo told cramer about the social network last night on "mad money," did you know s&p's up and down
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north american soda down two. we got to get used to that, i guess. >> yeah, you do. people scramble and what did coca-cola do? they were flat. in the end, we're trying to figure out what metric moves. this is a consumer package good company, and that group is horrendous, as we know, and so in the end, they did boost their target 8% from 7%, and that's a big win, ogranic revenue growth at 3.6%. if you go over q 1 against q2, there's disapointment, a tougher quarter, and this stock goes up in part because many, many money managers need a good stock. they look at pepsi, they don't have it, i don't like kimberly, not getting it from general mills or conagra, oh, pepsi, this is good. they want x, and interest is y. no, hey, look, this is one with
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growth. i'll buy this one. that's why it's up. >> interesting. ogranic revenue up 3 preponderate 6, and people are knit picking. >> that's the correct word. what i do, just so you know, this is what i do, i have q1, didn't talk about the earnings, where's the apples not to the apples. take a look. they got -- you won't like what you see. quaker, for instance, three in the previous versus quaker now flat. the problem with doing all that is you're just splitting hairs. you need a growth stock in the group? all right. >> that's the name you step on. >> i do that too, david, don't you? get the previous quarters release and compare side by side. >> i do do that with the financials, sometimes. goldman, you need that, but never know with pepsi. he does it with every single one. >> i'm insecure. >> that makes up an app entire
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conference call. >> it's helpful when you don't sleep, and i need sleep. it's not good. it's not good to me. people like you inhabit the world. >> i wake up hungry, i go to bed hungry, i think i should eat something. >> facebook coming out after the close, and cramer and the pizza chachb ceo, patty doyle, last night on "mad money." >> seems to me the dollar in facebook gives you more bang for the buck than whatever you do with twitter. >> has been a little. we do well with paid search, banner adds, worked for us, and basically, we balance it out. we have the analytics to move digital dollars around. we can see exactly the return on investment that we're getting to those, and so if we start seeing something not work as well, we shift dollars quickly and get the return off it. >> it's going to be an interesting print.
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ptig taking the target from 68 to 80 ahead of the number. >> dominos just smoking. one of the things -- i lost weight, by the way, made a joke he was off the cheesy bread, but he's totally committed the product. what makes me excited about dominos is pizza hut because they are doing poorly. be careful, i had ipg on the same show. he also was saying, listen, i think we can get more bang for the buck facebook. no one wants to slam twitter, but pizza hut is now with ipg. it is a donor, shared donor, he called it. he called it a shared donor. >> talk about share, though. the big picture, ipg, you mentioned, of course, making decisions. >> right. >> it's not all new money. it's coming from somewhere, some from good old analog, advertising on cable networks? i mean, 12 million in revenue on facebook, whatever the number's
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going to be this year, i don't know. >> digital -- >> not all just new money. coming from somewhere. >> online past offline this quarter. that was the transition. ipg is newly innocent in the center saying it is digital, the market is growing, but the money in digital is lingered, facebook, they report. i don't want to say, oh, cramer says buy facebook. it's google. it's not as much twitter because people have a hard time getting a return on investment on twitter. don't short twitter because i said that, but they are comfortable with facebook. >> we have fox going after time warner right now, not seen as a concern necessarily, but i wonder about the bigger picture in terms of exercising. >> fox's story in the paper, listen, they are not willing to go to a hundred because of the balance sheet, but they could do it with stock. >> listen, i've reported on this last week, we can go in more
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details, but there's a lot of back and forthright now. is there a willingnd to lever up at fox? depends who you speak to. disciplined is the word they use. i have not heard anyone say they want to get to a hundred, and the tone from the time warner side is notable, i'd argue, but we got a ways yet to go here. you're going to see -- ewe know, you see incremental reports like that, don't draw too much from that. too many conclusions from that. >> poll the reporters, price is 96. no, that's not what happens. >> no, no, not right now. >> the story made it seem. >> when we come back, cramer's mad dash, opening bell, a look at futures and keep our eye on reports of two ukrainian fight every jets shot down this morning. more "squawk on the street" straight ahead. just take a closer look. it works how you want to work.
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get live squawks right in your trading platform with thinkorswim from td ameritrade. you're watching cnbc's "squawk on the street" live from the financial capital of the world, opening bell in 60 seconds. dozens and dozens have posted. of course, a big night tonight with facebook, qualcom and others, and boeing is already out this morning. jim? >> you know, biogen. this is not a small cap stock. >> no. >> a breakthrough drug, and sales much better than expected. you'd think with the stocks that are just up, up, and up, they can't go up anymore. no, because the companies have growth. money managers take a growth
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over a dividend any day of the week. >> beats by 18 cents, and we are going to talk with the ceo later this morning. quick, there's the opening bell and look at the s&p. down here at the big board, cys investment celebrating the fifth listing, and biopharma company doing the honors. >> whirlpool, you get the home sales up, you can make a coraltive. down on a big estimate cut. they've been in the sweet spot for a while. no sweet spot now. >> misses 290, revenue's a miss. record operating income in north america. >> right. >> latin america down 22. asia revenue down 9 on the constant currency. it's hard to justify set the planet. >> they have a big brazil market. spoke at the conference,
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delivering alpha, made a strong case for brazil. maybe someone wants to get in front of that train and buy whirlpo whirlpool. >> starting to see echoes of mcdonald's, taken to a neutral, removed the target the 107. rbc cuts estimates, do not expect recovery in domestic comps until mid-2015. >> yet, there's the stock, a stone wall. it goes down a little, but people keep thinking they got the fire power to do something major, and in the meantime, you get paid a dividend while you wait. i don't know. i come back -- the choice here is let's just call it chipolte against mcdonalds. i prefer growth over dividend. it's the chipolte versus mcdonalds. they want growth, not dividend.
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>> explain electronic arts, 19%, looked for a 4% loss, revenue beats, one of the worst performers. >> was not perfect there, and there's a lot of momentum going, and when i see something, these are expectation stocks. we have to keep going, okay? i had them on last week, and there, they have much more momentum than ea. price target raises 35 to 40, but at the same time, you know, people thought they were going to do 51 for the quarter and do 50, you know, you can't move up when you cut the guidance. >> emc had a conference call this morning. of course, you may recall a couple days ago we learned that there's a significant position. i think the stocks, i'm not completely clear, call it a billion dollars, not a billion
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in capital. the ceo on the call of the mc says they agreed to meet with elliot, a meeting scheduled for next week is what i reported. open to dialogue with the shareholders, emc under valued, they want to realize the value. accelerated buy back by a billion dollars. the quarter, by the way, in line, increased the outlook by a penny for 2014. >> well, it's a play. i'm saying the pressure's on. >> will be on. you'll see more of this lining up towards the fall, and then annual meetings. i mean, you need to get the proxy deadlines, a ways away, but get them in line to have an act in the campaign. >> he's great, i knew the guys, mr. e., mr. morino, they are not wedded -- i don't think that's a dig your heels in. a new ceo could come in, not unlike ballmer, but just do it. i would not sell emc even though
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it's up. could be friendlier than we realize. >> could be. >> especially as you say with the exit in february. >> right. >> may have spent too much time talking about herbal life, but that move yesterday, up 25% carl tweeted out, and talk about something backfiring in your face. kaboom, title of the graphic. >> down 3% today. >> walker had chapman on. this is what i said on "mad money". guys, nothing to do with herbal life. not even involved. it's like from "hitchcock." it's not a company, it's just a stock. when you had chapman come on the show, saying it's a $300 stock. you had the squeeze, and you had
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the day before a clrksckman say it's a fraud, a pyramid scheme, he's going to wipe it out. that was the goal to wipe the company out. we have not heard the last word. >> he'll go to the ends of the earth. he is a per sis tent fellow. >> in 2020 -- >> still holding meetings. >> at 300 he'll come out and reveal the actual chain letter that started it all. >> i will say this. my understanding is his puts expire in january of 15, and it will be very expensive to roll them, so you may not be able to do this forever. >> somebody said his epitaph will say, "i was right." that's how persistent he is. >> no, it's "i'm still right and will be after this." he does not play by the rules, right? i'm more right than ever, and there's not going to be a date. >> still right on target
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although he was wrong, he was right. >> he was more right. >> 95% down, but he was right. >> again, the company plays a minor role in the story. someone said to me, tweeted me, said, i've used the product. really? is it -- how irrelevant is that? >> let's get to michelle caruso-cabrera for breaking news from ukraine, i believe. hey there. >> we have video uploaded to youtube reportedly by the pro-russian separatists. they say it shows one of the two ukrainian fighter jets shot down today in eastern ukraine. watch and listen. okay. nbc has not been able to verify the video, but once again, according to the translation that we have gotten through the listen don bureau, someone there speaking russian, it's the pro-russian separatists claiming it's video of one of the two su 25 fighter jets shot down.
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on the video, they are heard saying, the whole field is scattered with wreckage, where's the parachutist? gone. we'll look for him, is he in the ukrainian territory? we don't know. we need the black box, every plane has it. where is the pilot? if there's no blood, could be far by now. in the ukrainian territory? look, signs this was a plane shooting at civilians, shot down by us. the peoples republic forces. we found the catapult, the parachu parachute, but the pilot escaped. at the end, carl, there is a warning. look at this ukrainian so you do not dare to fly here. so several things we have to point out. very close to where the malaysia plane went down where the two fighter jets went down. after the crash, the fighting has not stopped in eastern ukraine, and they try to attempt to bring down planes. what's not clear is what height was the plane flying at? how did they bring it down?
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low enough for a rocket propelled shoulder fired rocket or was it a much heavier piece of military equipment if the plane was flying higher than that. guys, back to you. >> michelle. thank you, incredible video. that environment is just -- it's a mess in terms of the collection of evidence from the mh-17, finding the cockpit sawed in half, michelle, obviously, a number of bodies still not returned. some finally getting to the netherlands today. >> yes, watching that situation as well. finally bodies are returning. there is progress, yet at the same time, we continue to receive reports that the separatists, according to the prim minister of malaysia, are continuing to interfere with the investigation as well. it's incredibly difficult progress on one front, but at the same time, the situation with the crash in taiwan, an incredible morning, carl. >> michelle, i have a feeling we'll be back to you shortly.
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michelle caruso-cabrera at hq. dow down 31. bob is on the floor. good morning. >> microsoft, and apple, not big market movers, but earnings stocks today, boeing raised guidance, and people asked, boeing was down initially, what was going on? i think they did not raise the cash flow guidance. they are conservative in that, maintaining that, and conservatives think they'll raise it later in the year. there was an extra 400 million in tax payments, and backlogs fell quarter over quarter. a couple things floating around in boeing. elsewhere, the earnings, i love the big industrial material companies that reported. wrighter traded down here at the open. dow chemical, norfolk southern beat generally the numbers coming in better than expected. once again, that's why we see the overall numbers starting to come up. the big issues, what the heck happened to whirlpool? you talked about this, but not
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only did they miss earnings and revenue expectations by a surprisingly large number, part of which they blame on china, but they also lower their full year guidance, again, partly blaming china. here's the problem i have. they are not a huge part of their overall revenues. you talked about how important latin america is. there it is. the revenue by region for whirlpool. latin america's huge, ema, europe, middle east, and after ri ka, 16 %. asia is 4%. i don't get the idea of blaming the problems on china. what is happening, i see, is growth and expectations for growth particularly in north america are modest. they are talking about north america unit shipments, 5%, and prior to this expected to rise 5%, but prior to this, 5 to 7%. growth expectations ratcheted down. this was a monster stock in 2012 and 2013, up 1 00%. again, it's true. it is a proxy for the
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remodelling/building business, and we see how it's flat so much this year. i just want to talk about the fact we have low volume, low volatility business. you think nothing's going on. that's wrong. keep the eyes open. there's a huge rally going on in emerging markets. the last couple months, especially this month, brazil, mexico, south africa, indonesia having an election, europe is generally down, s&p up 1%, so we are seeing rotations back into emerging markets. i've enconcerned people to pay attention to what's going on. i said yesterday we are seeing rotations in the material names, steel stocks and aluminum stocks, and iron ore stocks moving up. there's an etf for that. dtb, copper futures, other base metals. look at the rally that's had so far in the last month. this is bias the on global auto sales doing bet e and people are bying more metals in the last
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couple months, good signs of the global economy. back to you. >> thank you very much. did want to come back to a theme we've been talking about here for, well, probably over a year at this point, if not more, and that's inversionings, and certainly m&a relating to future or more transactions with u.s. companies redomiciled for purposes of reducing the tax rate and able to access cash overseas and the cash generated from the international businesses. there are going to be more. in conversations with bankers over the last few days, you can expect to see a number of newly announced m&a transactions that will include so-called tax inversions. that seems a certainty. one question i continue to have and not certain of, will they break out beyond what has been the confines largely of pharmaceutical industry deals? yesterday, in a senate panel hearing on taxes highlighting
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the roadblocks to reform here. they cited based on their own research, the possibility of the another 25 or so inversions. of course, every analyst and firm out there has a list of potential inversion candidates based on how much money generated outside the united states, but this train continues to move on, and if you do believe that perhaps next year there will be legislation that comes to the flr, and it may have a retroactive phase to it, meaning it could go back to the beginning of the year. you want a deal announced now to potentially close by year end. that is sort of a key. roger altman, of course, investment banker, this is what he had to say earlier on "squawk box." >> i think there's more inversion senate mergers because the outlook for any legislation to limit them or block them, at least this year, is probably 0. >> that, again, is the reason, but if you believe next year may be a different story, you want to get it done. if you rely on or need approval
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from the antitrust authorities in china, by the way, may be too late, but you have four or five months to get a deal closed by the end of the year. look at how many we're talking about. forget abbvie-shire last week. the avid businesses that are spup off. the drop down, asset drop down deal, salix, medtronic, another one. they are all out there. there are more coming. now, you know, we've spoken suchb about inversions, jim, forget about apple reporting today. we forget about ip, another way to avoid u.s. taxes, and, in fact, amounts to larger dollar amount. royalty streams go to ireland. the move to intellectual property of foreign domiciles, even u.s. corporations that are u.s. taxpayers, they generate
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overseas cash because they move the right p, not because they sell a lot over there. >> it's an unfair system. we have the highest corporate tax rates in the world, but that also -- there's a lot of corporate tax lawyers out there finding ways to cut the bill. guys with the best corporate tax lawyers win. when i spoke with st. jude, competing against med tronic, he said it's unfair. >> right. >> we play by the american rulerule rules. >> the key thing, the competitive advantage conferred among the companies who make the move, not because of what they generate in the u.s. is not taxed at the u.s. rate, but they have access to overseas catch on what they generate and bringing back tax not to be taxed at u.s. tax rate to be helped with future acquisitions. rick santelli at the cme group in chicago, rick? >> thank you, david. the treasury market continuing to do what it does most of the
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year, and the range established in may between the 18 th and 28th. the intraday is lower, fell from higher yields, two-day chart reveals more. we work down in yields, but definitive chart is the chart that's going to focus on the may 28 th closing yield so we'll start the chart on the 19th, see it on the left there. that 244 is significant. very significant. may gives us the reigns. treasury's been in 266 on top, 244 on bottom. the it continues to stay in this soft range. to contrast, we talked about the boon ten year spread. it's kept you out of trouble with regard selling looking for higher rates. look at the chart from the same may 19th date, and there's a much different market as the yield continues to move down and the spread actually is not expanding or -- i should say shrinking as much as it was with
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regard to the difference in yields. there's no shrinkage at all, hanging around the levels that we should pay attention to on the fives, 30s, 60s, a flatt flattener. look at the euro versus the dollar. these are the lowest levels of the euro against the greenback since november, call it eight months. it's euro centric, but this is only the best levels the inversion, best levels in a month and a half so we continue to monitor the break out that potentially brings on the dollar index. let's go back to david and carl. >> thank you so much, rick santelli. when we return, amazon's fire phone. the reviews out today. is it a game changer? talk about what writers have to say about it, and you'll hear from some of them when "squawk" continues. [ male announcer ] don't just visit miami.
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fire phone no more than an interesting first step. in the tests, the features less useful than expected, frustrating, and arriving seven years after the debut, amazon's entry lacks key functions. apple and samsung include. here's the journal, the $199 phone packed with a number of bells and whistles that seem clever for a day. amazon is taking worthwhile steps to simplify the android system, but on the smart phone fundamentals, it stomacheumbles. the times say it's attractive to those who find themselves overwhelmed by the do it all super phones. when you forget about the marketing, it's something much more interesting, a phone for the rest of us. a mixed, you could argue, see the word "gimmicks" a lot in the summary of the reviews today. >> i like an ecosystem. i like my iphone. i just think that the numbers
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you got last night, it's a crowded feel. i just keep coming back to how well apple's doing. don't trade apple. own it. it's doing everything right including smart phones. obviously, amazon's the smartest company in the world, still, i love my kindle. i'm inclined to buy whatever amazon puts out, but it's tough to go against apple when apple's on its game. >> yeah. >> very tough. >> all the price target raises, today, on apple, bernstein, r raymond, james, isi, all going up price targets. >> thanks for that. >> i think that's important. there were some people saying, hey, listen, one more guy says good things about apple ahead of the quarter, it's going to make it too high, but, you know, it was a transition quarter, and everyone knew going in. there was no real reason why. i guess people felt that, well, you know what? they are not going to blow the
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numbers, maybe it goes down, i have a chance, maybe that was going on. when we come back, gopro wants to be a content company, we'll talk to kelly slater later on "squawk alley" to talk about how the ride is going. we'll get stock trading with jim next, and dow is down 27. we'll be right back. ♪ ♪ [ male announcer ] if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for at the summer event, going on now at your authorized mercedes-benz dealer. but hurry, offers end july 31st. share your summer moments in your mercedes-benz with us.
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comcast business. built for business. time for cramer in stop trading. >> you're going to see a stock down hideously. it's embarrassi ining to me. there's a lack of credibility here that's rather extrords their, a lot of downgrades. looking at an analyst, transcript of an analyst meeting saying china strong, business stabilized, business is quite good, and i have to ask because none of what was said in the key moments at this analyst meeting were true. they were -- i just -- i don't understand it. the credibility of the company's in question, and there's a lot of answers that must be given about how you could have a may transcript at odds with what really happened. that's how you get a stock down like that because people today are just saying that company has
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no credibility anymore, and they are dumping it. this was at one time one of the finest proprietary semiconductor companies in the world, and after today, let's see what he says. trying to be as diplomatic as i can. this is very upsetting. >> keeping pace with the s&p until this moment. >> very upsetting. >> tonight on "mad money," we'll listen to that. >> what's fun is we have the number one villain today, and we have jack hartung from chipolte. >> i heard of them. >> great he's coming on, but that don't cut it. >> chipolte comps up 17. >> there you go. i'm going to have to be doing k just waiting after what they did to the charitable trust today. >> see you tonight, "mad money" at 6:00 p.m. mic microsoft up next, don't go away.
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strategies live to tell us why markets here in the u.s. seem to shrug off all global turmoil. >> also, the founder of priceline, pioneers in the technology, jaywalker, joining us on apple, microsoft, and what's in the pipeline. >> starting with apple this morning, shares are higher following q3 reports, following iphone sales leading to a 20 % gain, and ipad sales at the low end of wall street's forecast. last night, the ceo, tim cook, spoke on ipad sales on the apple conference call. take a listen. >> they meat our expectations, and they didn't meet yours. they were gated in part by reduction in channel inventory and in part by market softness in certain parts of the world. >> let's bring in walt, a wireless research analyst with btig. walt, following the tweet, live twiet tweeting the call, appreciate that last night. are you worried about the ipad's
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slow down and relationship with ibm can revive that? >> it will help, but it's an iphone company, and one of the things that drove the iphone business over the past seven years is the amount of subsidies wireless operatings provide. looking forward now, wireless operators ran out of opportunity to upgrade people from feature phones to smart phones. they have to generate revenue, one could be subsidies on ipads or pushing them through leasing programs that tim cook talked about last night. the whole thing with the earnings call and numbers, yes, zeroed in on the numbers for ipads and iphones, but, to me, just an exercise in clues what we get for the refresh at the enof the year. what did you discern? >> talked about new products and added the word "services" last
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night for 2014. there was not much in the revenue and gross margin, but the research and development levels, we noted, 4% of revenue. they have not spent that revenue since back of 2006, and that, obviously, was before the launch of the initial iphone. >> what does that tell you? >> i mean, listen, again, they've been talking up these new products and services. i think eddy talked about saying, hey, we'll have the best product seen in the past 20 years. hopefully, we'll see something delivered in the last five or six months of the year here to live up to the expectations and drive additional revenue growth. >> were the china numbers, obviously, very, very strong, a surprise to you, and does that sort of raise the upside potential of the international expansion here for apple? >> i mean, iphone numbers last quarter was an upside, flagging china then. it's an expectation of what they can deliver. we're excited about the 2012, 2013 situation where wireless operators in the u.s. and
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developmental markets push back on the upgrades of the customers, now in this going forward, they changed the policies, and they allowed customers in the leasing programs to upgrade more often so that is what gives us more confidence in the iphone7 6 and the numbers you see. china increased distribution is a strong critter, but additional upside of upgrades from the developmental market is interesting in the stock. >> just as we tick through the business units, surprised that a shrinking pc market they sold 4 .4 million mac products? >> the best growing, as far as unites are concerned, growing this quarter. yeah, surprising, but people talk about the halo effect of buying a mac and get an iphone seven years ago. now maybe you have a reverse halo impact in the fact everyone has iphones and certain extent bought tablets, having a positive impact on the company's ability to sell macs. i think that will, obviously, continue if ibm can further
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penetrate in the enterprise with their significant sales force that ibm has. >> overall, investors like the stock headed into the fall. yooem you sound optimistic. where is it going? how much potential from here? >> going to new product launches returning to growth. last year, earnings a negative 10%, next year grow 10%, potential for growth if they deliver new product. a couple quick numbers. when at&t, their biggest iphone custom customer, was restrictive in the upgrade policies, only 20 % of the base could upgrade their phones. you know, you had three people in the family plan, saying, okay, i use the kids' upgrade to get a phone for myself. with the new leasing programs, 60 to 70% of the customer base can upgrade the phone. that's a positive impact not just in december quarter, first fiscal quarter of next year, but into fiscal 2015.
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that should help potentially improve growth. it's the recipe for multiple expansion for the stock. >> good boipt there about the upgrades, matters to me, especially. walt, good to see you, thank you very much. wamt on apple. >> thank you. >> moving to shares of microsoft trading flat on the session overall after earnings missed last night rkts but revenue, overall for the group topped analyst expectations. on the conference call, the ceo stressed the new vision of mobile first, cloud first. >> our cloud os represents the fastest growing opportunity for mic microsoft. quarter after quarter, we drive growth and customer adoption. our service product benefit from our public cloud. the fact that we use our service to run our cloud make us service softs ware the most capable enabling others to build and
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operate their cloud. >> joining us here on set is rick sherman, managing direct and head of research at mira securities. good morning. >> morning, simon. >> talking about the cloud in a moment, but the quarter, for the most part, staggering, nokia dragged $700 million. staggering number. >> 66 cents against the street's expectation of 62. trading in the aftermarket, people looked in the core number, core business hit on all cylinders, tools business up 14%, windows business that was down up 3% on a flat year over year pc sales, and even office did well. office consumer was up 21%. it's, like, back to the future, you have the core business doing well. bad news was nokia. will lose 25 cents a share in earnings this year. >> right. dpl think it breaks even next year, but i think that's optimistic.
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? i think it cuts a billion dollars in cost. some are not as pleased it has as high as it is. amazon launching a smart phone to drive people to the ecosystem. do you think nokia is a good buy for microsoft? possible to cut that many people and stay at the cutting edge of smart phone technology and compete with apple or samsung? >> that's half the employees, really the manufacturing, which they will be outsourcing. it's disappointing to the street you caught 12,000 people out of nokia who don't do anything to cost structure because you outsource it to manufacturers, and cut 6,000 people out of microsoft, 6% of the work force, and your costs go down 4% in the core microsoft, going to sub si diz the nokia losses. nokia was an acquisition that no one likes, and i'll give them a year, and if it's not working, you know, shut it down. >> we had a discussion about amy good, how nice it is to be a exwith her watching your back.
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trading, of course, near at a 14-year high, yielding 2.a, what happens now with the balance sheet in more leverage to pull? >> disappointed they did not announce the accelerated share buyback program. they have over 60 million in net cash if you even have to repatriate the cash and pay tax on it. i think that the september board meeting is typically a time when they raise dividend so we'll see if they do some more shareholder friendly things on the september time frame. i anticipate a bigger dividend or use the cash to accelerate buyback or combination. >> what about the big strategic push towards zploud last night, the ceo said, look, total annual revenues on the cloutd reach 4.4 billion. that's a drop in the ocean, isn't if? >> yeah, it is. good news is the margins rise in the business, grew triple
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digits, caning traction in the cloud, but with the move to the cloud, the core server and tools business grew 14%. that was surprising to the street because we've been hearing for years that on premise, it's dying, going to the cloud, but they are doing well in the cloud and premise is doing well. >> you rated $50, partly as a result of the cost reductions at the head count falling. i mean, what view do you take of the price target now if you do get news on the share buyback, inclined to change the deal? >> yes, simon. we raised this a couple weeks ago anticipating head count reductions. it did not deliver as much as we wanted because it went to nokia. the stock sells now on a $3 number for calendar '15, three multiple point discount to the market, so if they can start using their cash to repurchase stock and accelerate earnings growth, deliver mid-single digits revenue growth, double dimt etf growth.
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for a big name, this is one managers begin to resinate. they have to deliver the next stage now, which is more share repurchases. >> good to see you, thank you for the time. >> thank you. two big earnings stories this morning, boeing and delta beat estimates. phil lebeau has more. >> 20-point drop due to boeing being down today because a lot of people look at the earnings for the first quarter saying, sure, you beat the street by a wide margin, 24 to 201, but look at the numbers and revenue board, revenue just a little bit below expectations. people say, look, you had a $400 million tax benefit in there, a charge for the ticker program, and there's questions people look at. first of ul, the two q commercial airport margins above 12 %. nobody's companying about that, and the fact they raised guidance to 790 to 810 per share full year, 75 cents increase from where they were.
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looking at boeing and analysts raise questions why they did not raise the cash flow guidance for the year, questions on the backlog, no doubt they will be on the conference call starting in 15 or 20 minutes. delta beat the street, 1.04 a share, compared with 1.03. on "squawk box," richard annerson talked about the decision to suspend flights into tel-av tel-aviv. this is what he had to say. >> we routinely at delta establish delta no-fly zone. we're not flying to israel today, for instance, noptd allowing flights dispatched over iran, iraq, syria, ukraine, afghanistan, or north korea. we make those decisions and have an obligation to make decisions wholly independent of any geopolitical or regulatory mandate. >> look at shares of delta, keep in mind that it's a nice little
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pop, by the way, if you will, up more than 3%. keep in mind that the dot, head of the secretary of transportation, is holding a conference call to discuss topics today, no doubt the issue of the no-fly into tel-aviv, no doubt coming up, carl, and keep in mind that in terms of not allowing u.s. airlines to fly into tel-aviv, that expires at 12:15. is it extended in other airlines said they will not fly for the next 24 hours. interesting what decision the faa makes in the next couple hours here. back to you. >> if that comes up, we'll get back to you. tensions escalate as rebels shoot down two ukrainian fighter jets. we have a live report from russia, and global chief strategists say why markets are not reacting to global turmoil. dow's down 29. back in a minute. ok, how about 10 gigs of data to share, unlimited talk and text,
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obviously, a lot of geopolitical concerns around the world, but not impacting the market. the question is, why? we are talking about that from black rock. russ, good to have you. >> thanks for having me back. >> interesting piece by you in the ft. you call it the warm blanket of central bank accommodation. is that what it's all about? >> that's largely it. you know, we have an environment where volatility is below average for some time despite
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all of the rise in geopolitical risks, and it's hard to reconcile the two. to me, what squares the circle is the fact it's an environment, not just the fed, but the european central bank, bank of japan, could be monetary conditions extremely loose, and when money is cheap and available, volatility's below average. that's what we are seeing today. >> we've got, obviously, an economy that potentially could be flat for six months, depending on how the second quarter comes in. unemployment coming down, but tapers are happening. do you believe a rate hike is an early '15 story, and does that make stories like way we see now more acute? >> i think you'll see a rate hike sometime in 2015. i'm not sure if it's the first or second quarter or if it matters much. yes, that'll start to change the conditions at the margin. again, we'll have very easy monetary conditions for a long period of time.
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the fed is likely to take their time, but, yes, at the margin, you will see app environment where money is not so cheap, and all else equal, that should affect volatility. >> when you talk about the central banks of the world, tapering over, easing the pain, numbing the pain from the geopolitical tensions, whatever bad news we get, i think of the cost. at what cost does this happen? how does it play out? how do you prepare for a day when central banks have return to the normal functions of interest rates, rising rate, and markets have to return to reacting to news? >> the truth is it's a ways off, but this is the right question to ask 6789 there's a couple things. is there a cost? yes, arguably, there is. keeping rates this low for this long, and the fed acknowledged it. you run the risk of distorting asset prices. why i don't think the stock market is in a bubble, there's parts that are extremely expensive, tight spreads in large spreads of the credit
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market in large fact to the people stretch for yield so the cost is you distort asset prices and seeing effects like that throughout the equity market and the fixed income market today. >> let me take you short term, if i may. deutsche bank frames it differently saying the geopolitical risk created a stall in the equity market rally. look after the previous seven con sesecutive sessions, we movn the opposite directions. in other words, we can't make gains. some suggest putin may be pushed into a corner, weakened at this stage, and that that gives way, potentially, for a rally if he deescalates the environment. do you agree with that? >> i would actually have a slightly different perspective. it's possible that you can see that scenario, but reality is you're in an environment where investers have been conditioned to buy the dips. the last three to four years, whatever the perceived crisis,
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whether it's europe or u.s. fiscal issue or emerging markets, you sqbenefit from buyg the dip. we see the same meni aialt ment. there's long term ramifications, it's not clear they affect the global economy day-to-day. what changes that is a spike in oil prices because then it's a clear transmission mechanism between geopolitics and the company. >> surprises people to hear black rock say the stock market is in a bubble, russ, what's that mean for the bond market? >> the target is not in a bubble. >> not in a bubble. >> it's not in a bubble, no, just to be clear, make sure nothing else, that's clear. >> saying that with all the impact of the central bank action and the fact there's high cost to this and someday we'll get out of it. >> in the -- at the aggregate, equities are between reasonably valued to a bit expensive.
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i don't argue with that. there's pockets of the market, biotech and social media, u.s. small caps expensive, but at the aggregate, stocks are on the expensive side of average, and they are no longer cheap. we're not in a bubble, there's pockets, defensive companies, the credit market, yes, valuations have become extended, and central bank policy contributed to that. >> oh, yeah. it's quiet, too quiet as you like to say at the end of the piece. a good piece. >> thanks again. pepsi higher after seconds quarter results beat on the top and bottom lines, but bigger problems under the surface? we'll dig into that when we come back. the cnbc realtime exchange market snapshot sponsored by ber interactive brokers.
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ukraine's defense ministry says pro-russian rebels shot down two of the its fighter jets today not far from where passenger plane mh-17 was shot down last week. we have the latest from moscow. jim, over to you. >> reporter: hi, simon, that's right. two of the su-25 fighter jets confirmed by ukraine shot down 1:30 local time, in the afternoon, just an hour after the bodies of the m-17 victims left ukraine, and they fell, the pilots fell in an area in the region, and that's the very same regime area where the mh-17 came down as well. now, there is unverified youtube video showing separatists in front of the one of the jets,
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they say, burning still on the ground, and the separatists say the ukrainian pilots managed to eject and get away, and they are going to look for them and then arrest them. now, these shoot downs, simon, are not new, in the days before the mh-17 crash. rebels had taken out at least two other war planes, and i believe at least one military cargo plane. if you recall, in the alleged intercepted t ee eed telephone conversations we saw, after the mh-17 shoot down, belowed they said initially took out a military 26, and then the realization hit them, and then, of course, hit the world that it was a civilian jetliner with massive, massive losses. back to you, simon. >> extraordinary events, jim, live in moscow.
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straight ahead on the program, one of the pioneers of tech, founder of priceline, jaywalker, weighing in on apple's big push on research and development. what could be in the pipeline for the fall? we're back after this quick break. ♪ ♪ [ male announcer ] if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for at the summer event, going on now at your authorized mercedes-benz dealer. but hurry, offers end july 31st. share your summer moments in your mercedes-benz with us.
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boeing's best beat in the entire 15 years of data, that s&p capital has. a lot of that coming out of big tax gains, unclear if they knew about that, and operating cash flow, year over year, cut almost in half as they plowed more money into the expanded dreamliner production. watch for that. meantime, getting inventories from jack ie. >> the department of energy coming out with a weekly crude inventory report. we have a draw down -- hard to see from here -- but looks like we're down 4 million barrels at this point, which is a little bit more than expected. looking for a draw down of 2.6 million barrels, trading higher at 40 cents, higher 20 cents on the wti before we got this number, so 102.84 is where we are. you notice the august contract expired, trading september now, a little bit lower than where we were yesterday, but traders are
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expecting this to rally from the high 102 range to the 104 range. what traders are watching here, of course, geopolitics, very important right now. flight suspensions in tel-aviv adding to the nervousness here, and the inventory not helping here either. we are watching this traed. the brent rice prices near the back of the 108, the spread widening out again. near 103 here, up 50 cents in the last couple minutes alone. back to you, simon. >> thank you very much, a take away from tim cook, pumping unprecedented amount of cash into research and development, 1.6 million in june, up 26 36% on last year, more than an apple iphone refresh in the product line for fall. >> we're hard at work in
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investing heavily on exciting opportunities across our business and we have a pipeline of product and services we can't wait to show you. >> jaywalker, founder of priceline.com, most prolific inventors with 450 patents to his name. good morning. >> thank you. >> you love innovation. what hope is in apple's pipeline? >> consumers expect real, new ideas from apple. that's the challenge. no matter how big your company is today, get innovation from inside and outside. look at why they spend billions to buy ideas from the outside. looking for patenting inventions they put to theirs to m prove products, create sales, create jobs, and improve the economy. that's key. >> you tauouched on the idea it not worth research and development in the company and better to buy it. recently, of course, they appointed steve to the board of apple, former vice chair, and at this point, they believe the
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strong experience, especially in m&a extremely valuable as apple continues to grow around the world. should they buy in innovation. >> absolutely. you can't use your rd budget. you have to bring innovation from the outside, and the only reason you bring it in to have exclusive use to it or competitive advantage. you need patents, the new ideas that are taught to everyone, but owned by someone. the more patents we have, the more jobs we create. the more new products. the more improvements we get, and, ultimately, it's our patent system. >> a lot of the patents lie idle. if you read the book on jobs, mimics best ideas from the ideas he saw language wishing in the research and development labs of big tech, nobody, nobody was taking those to market. ? what jobs did was improved them. the way the patent system works is you teach the invention you create to everyone, and everyone else improves that and patents
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the improvement. what jobs did is not just take thanks from xerox park, but added to them, making them smarter, cheaper, more intuitive. that's what inventors do, improve other people's products if you get them to market. the problem is the licenses system is totally frozen. even if you invent something, you don't get a license unless you sue or threaten to sue them. i have to run a super bowl ad to afford a product. no one can afford to sue. the big guys play with bills, but the inventors, the backbo s backbones, jobs was a small invenn tore, going ballistic when samsung copied him. i'm an inventor. they will not copy my stuff. he had to go to court and spend years and years, and when it was down, he couldn't get what he felt he deserved. that's broken. >> what's next for apple?
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the iwatch? bigger screen iphone? >> i think the next area is get more involved in your life. what matters most is your health. apple and samsung realize the great battleground is health information, it's the information not just of your social network, stocks, weather, or friends, but the information of you, your children, and your parents. health data. the reason a watch is important because it's the last link before i get real health information from the inside of my body. that's where you see apple going. >>. >> chip sizes down to the atomic level. will we ingest them? >> no question about it. when you look at what's coming out in the world, you'll see k incredible activity with incredibly tiny censors to wear like a band-aid, take like a breathalyzer, use hair. the world is changing in the data space enormously, and it's
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around health. >> one of the things that drove the success of the iphone was the apps. if you are going to drive the success of these, health technology, wearable technology, investable technology, do you rely on pharmaceutical companies? >> it requires creative inventors. they use a band-aid exterm sensse sensors, see your text messages that you are depressed, that you are mot moving, sedentary. we all leave data streams in our lives, and inventors are clever in the economy to interpret data streams and people like apple and google and others want that research and development in their shop. they can't do it all. they have to bring it from the outside, and, ultimately, that means you need a strong patent system, and we have way too few patents in america. they keep it as trade secrets. if you spend $20,000, you don't get the licensing revenue. keep it as a trade secret.
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>> good to see you, jay. >> thanks for having me. >> jaywalker. pressure on for pepsi, and the ceo, and she delivered. by reaction, pepsi shares up 3%, a beat on top and bottom line. bottom line 132 against 123 estimate, raising guidance by a full point, investors are happy. go deeper into the report, the ballet, you see, driven by operating profits by cost cuts, increased productivity. there's concerns about there about the sales growth in frito lay, the snack division. growth engine of the company, slowing a bit. i talked to johnson, cfo, you'll see that accelerate in the back half of the year with new flavors. david and i sampled yesterday, the new wasabi ginger. we liked that. >> pretty good. >> tasted more like sushi. >> not bad. >> i didn't go for the cap chino
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chips. >> walking around the office with those. no real takers. >> your desk is now having located it over flowing with gifts from consumer product companies. >> i get the snacks and beverages. i have a lot of warm soft drinks at the desk, you the point is with the new chips, new dogs, johnson was clear to emphasize they are more profitable because they pack more in. they have pricing power, and, obviously, the big overhang on this stock and on this company is nelson who told us at delivering alpha he's not backing down, and he is considering a proxy fight calling it a maybe. also this morning in the financial times, a shareholder of 250 million in shares wrote a lerts to the board of pepsi asking for nelson peltz to take a seat on the board. did not advocate splitting the company, but pushed for that. i asked the ceo about that, does
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not want to comment on any individual investor, but look at the multiples. the stock is driven by way more than an activist investor. multiples, especially when you compare them to other consumer staples and to the s&p 500, saying it speaks to the earnings power and what they continue to call the power of one, keeping snacks and beverages under one roof, david, but it's not going away soon. >> no, but it's getting the stock up, and if they continue to do that, they'll have the stronger argument, one thinks, in terms of larger shareholder base. >> it's up more than 7 % on par with the rate. it's been out performing, and they continue to beat when it comes to the earnings. >> wanted to move on to another stock. it's up just a limit today. this is biotechnology, a $is 1 .7 billion market, now worth
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6.7 billion. that is because this morning the company put out news that it's investigational breast cancer drug in a -- hit a primary end point in the late stage phase three trial improving survival by 33% compare to the placebo in women with early stage positive breast cancer. it's used along with a long time drug from rosch, but this contributed dramatically to a stock our own jim cramer said was shorted, real questions about this, and pfizer owned this drug. in fact, back in 2011, reached an agreement to basically give the drug to it. all right, you bear the costs of the trials that are still to come. we will continue to do that as well and take royalties, and so they gave away what is now a
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nice revenue produce ir or might have been. pretty this release of the very positive husband, what it is here, pfizer redid the loyally agreement with puma biotechnology to get a royal toy now in the low teens and have p ur uma take on 30 billion in additional costs in legacy trials so they gave up 30 milli million.
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saw the value of the holding jump from $7 per contract to, get t(this, a hundred 65 per contract a shortfá while qago. that's 2300 percent return in >> you don't want to miss that. coming up later on "squawk alley," dow positive, intraday high, apple led a 52 -week high, back in a minute. if energy could come from anything?. or if power could go anywhere?
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food for thought in form of the chart. this is from leverageloan.com. i like that website. throw the chart on the screen. this shows leverage loan, that's following six-month low in june. see the chart? why is this important? well, on the website, here's the boilerpla boilerplate. the management of low mutual funds contracted by 2.6 billion in june, shy of 170 billion according to data own fund filing, the largest dollar amount of august 2011. something to pay attention to, you know, in the current market that we are finding ourselves in, whether me in the news business or investors, they are digging a little deeper because as i said, market signals are lost to some extent, but all the liquidity in the system by central banks. now, we're going to switch gears
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to another area of food for thought of the wonderful alpha conference, we had secretary jack lew talking about how patriotism ag r aspect of tax collection ought to be considered. i just wanted to weigh in briefly on this. of course, you catch more flies with honey than vinegar. you don't want the inversion process to occur, we have to make changes. a shame they addressed this, but never got off the ground, but the food for thought is not about that. you can't build a fence around companies, but entice them to stay. chicago, huge jurn funded liability. that's pension problems. many of the citizens are lifelong democrats, of course, that's their right, vote for any part they want, but citizens that have done well making money in illinois, california, the democratic states that find the same issues regarding under
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funded littlfund ed labie blts, they go to state with little or no taxes, a form of individual inversion. i don't know what the answer is, but i find this parallel fascina fascinating. back to you. >> yep, that economic patriotism, rick santelli, thank you. up next, the company's restructuring efforts continue. there's one issue. there's no ceo. we'll talk to the company's president about that and how to turn the around after the break. ♪ ♪ [ male announcer ] if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for at the summer event, going on now at your authorized mercedes-benz dealer. but hurry, offers end july 31st. share your summer moments in your mercedes-benz with us.
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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." what's happening with young brands, resporndsing to prelim results of the food service supplier that sold them expired meat terminating all dealings with osi china and ericed for kfc and pizza hut to have alternative suppliers. may be temporary shortages but expects to be minimized and short term in nature. shares up half percent on today's trade. >> thanks. and speaking of consumer company, shares of footwear company crocs surging after second quarter earningsbeat analysts estimates despite the company's restructuring plans including cutting nearly 200 jobs and closing many stories. here for a cnbc exclusive
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interview, andrew reese, principle and exec tev officer of crocs. we note by your title, andrew that there is not a ceo of this company, correct? you're searching for one? >> that is correct. the board is still looking for a ceo, but we're not waiting for that. they've got a search out. it will take a little time, and they're determined to find the right person. but it's very clear what we need to do to continue to improve the company, and improve the profitability of the company and we're marching ahead. >> on some of the steps you're taking in the restructuring process, how are you positioning crocs for goethe? pa growth? i know it as a consumer. you expanded in so many areas of footwear that just weren't selling? >> exactly right. the basis of the restructuring is all about focus. we need to focus in a number of different areas. focus from a product perspective, really get focused back on our core molded heritage, focused on new key product lines we'll bring to the market. get focused gee raskly.
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we're extended to about 90 countries across the globe. there are five that really matter. we need to get focused in terms of channels and closing between 75 and 100 stores. and we need to get focused in terms of overhead and cut about, you said, shy of 200 jobs to really reduce our overhead and allow our key resources to focus on driving the business, and generating growth in the future. really the mantra is focus. >> what type of new products are you thinking about at this point? is it an extension of the footwear, the classic clogs with the holes in them? >> we need to do both things. we need to continue innovative in the classic clog and other molded footwear. new silhouettes, style, color, and innovations in that category, but beyond that. it's casual footwear. we've had tremendous suction with styles like the busy day, a simple flat women can wear with yoga pants and casual looks
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they're wearing today. tremendous success with a line of wedges. a series of products we've had success with. we need to build on that success and build out our casual footwear range, as well as -- >> who is your consumer? i see a lot of children wearing crocs. then mario batali, beneficial to the brand moop is your core customer you're trying to go after right now? >> so we trade across the globe, and focus on north america for a second. our core consumer is middle america. it's your family consumer. yes, children, about 30% of our business, but also we have a big adult business. so it's a mom who's wearing a comfortable shoe, a casual shoe, and wants to be fun and innovative. >> how long will this take? when will you return to levels of profitability you can be happy and be excited to tell your shareholders about? >> it's going to take some time. we'll see -- we'll see improvement in our performance later this year into next year and in terms of our
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profitability. and we'll start to gain growth in '15 and into '16 and we've talked to our investors about a profitability target of getting back to the industry norms of about 12% operating profit and i think that will take time but we'll absolutely get there. >> 2017 is what analysts are talking about. is that right? >> that's what they're talking about. that would be reasonable. >> andrew, thanks for joining us on the update with crocs. the president of croc. simon, back to you. >> when they've really made it, when sarah eisen wears her crocs to work. straight ahead on the program, elevation partners, joining "squawk alley," live with his take on apple, facebook and google. we'll be right back.
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♪ and welcome to "squawk alley." i'm carl quintanilla, joining us here at post nine what a treat. roger mcnamee, co-founder of "shark tank" investor and kevin o'leary, great to have you jon fortt and kayla tausche with as, as always. an intraday high a few moments ago, not far from within a little more than half a percentage points of s&p 2000. keep our eye on that. s&p tech sector hitting its high evidence level since november of 20000. now the best performing sector in the s&p this year. of course, on a big week for tech earnings, and then tonight, facebook after the bell. some key questions. will they beat expect aces for the ninth quarter in
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