good morning. it is 8:00 a.m. at nest headquarters in hall palo alto california. 11:00 a.m. here on wall street. "squawk alley" is live. ♪ very superstitious ♪ writing's on the wall ♪ very superstitious ♪ welcome to "squawk alley."

nick bilton joins frus from out west. another busy morning. time warner just to start. rallying after earnings and profits did top estimates. and revenue got a nice bump. time warner announced a couple weeks ago it has plans to offer hbo as a streaming service without a cable subscription in 201 2015. on the call jeff bewkess saying we're positioning to stream video now. not the word television. it's video now. >> my question, does this foretell 2015 where finally the plates start to shift where the focus isn't just on content and selling that in the more traditional way and dabbling in digit distribution methods but as hbo go goes unbundled.

is there more of a push? does apple television become more a possibility because content providers are willing to try new things. >> cbs's digital channel i think goes live tomorrow. nick is this going to work. >> what's interesting is we've been focused on looking at whether hbo will become a digital subscription. what we're not looking at is there is a whole separate channel these companies haven't even come close to getting on yet. and that is social media. facebook has been out and about. mark zuckerberg was out in l.a. meeting with companies and he's had companies up there meeting with him. and 1.3 billion on that network. imagine if hbo cut a deal and said we're going to start showing game of thrones on facebook. right now hbo has 28.7 million subscribers. imagine how many more people they could reach going beyond just television in your living

room. >> nick, what happens to advertising in this subscription driven world? because even though there is so much advertising that makes up revenue at the company like time warner, it is going down. subscription revenue is going up. content costs are rising as well. it seems like that is where the focus is. and i'm wondering if you think a company like time warner can use that to highlight some of the strength maybe at turner, some of its other properties. >> i think advertising, what you are going to start to see is more and more eyeballs that are going to seeing these things. and maybe the advertising dollars will go down, you know, per hit. but then at the same time you are going to reach more users. so you have the ability to grow your revenue through that. i think the other thing is if you look at cable television, while it is dying, it also shows us a little about the future. there are millions of the different ways people make money on them. over the top, cable subscription, paper view, all the different things that exist in the cable world.

and that is going to happen in the digital too. not just they allow people to pay for a subscription on the web. maybe you will get it on your mobile phone or ipad or on multiple devices. lots of things will come from this. >> the criticalics or the cynics argue that bewkes was not ready to go this far. but his hand was forced after murdock left. and they are saying they are going to operate through distribution partners. >> i think they are late. i canceled cable five years ago and it was quite possibly the best decision i've ever made in my life. i don't have to pay the 1400 dollars a year. i get things when i want them how i want them. and i think you are seeing this more and more. and you are seeing, if you look on the piracy networks. the things stolen are not movies. it is television shows. because that is what people can get access to.

h hbo, time warner. they have been several years behind and now they have to scramble and catch up. >> they do say the best takeover defense is your bottom line. but often times more successful as the defense when it's growing before the event happens rather than after. >> we'll see. tesla getting ready to report earnings. the company expected to post a loss in the quarter. elon musk has been in a war of words with the journal at least over sales figures for 2014. i wonder if you have a take on this nick? and also musk's comments about the stock being overvalued. >> it's interesting. musk and the journal they do not get along very well. they have been going at it for some time about the value situati valuation of the stock. when they start to introduce the

suv model and the lower cost model, i think that is going -- things are going to change then. but the problem is can they do it quick enough? it is interesting, you are seeing a lot of competition in the space now. every car maker is now offering some sort of electronic car. and that is only going to happen more and more. and the prices of these electric cars from competitors. bmw has one less than $40,000 and tesla's is 100,000. and unless tesla can speed up they will be in a little trouble next year. >> it's interesting. here is another thing. different from content but another thing people want. but the question is distribution for me. elon musk is making all these moves to get battery technology good enough and ready to go mass market. but is he going to be able to sell in enough places to take advantage of that by 2017 when the goods asupposed to arrive? does he have to move a franchise model and change his stance in

some way to get enough cars in front of enough people? >> that is something he's really battling with. one of the things i've learned from watching these tech company is you can't fight everyone at the same time. you have to pick battles. and maybe when it comes to distribution, he is going to have to give up a little. until he gets to the point where he has the infrastructure and has the number of cars and he has the ability to reach a larger audience. and i think that -- i don't know. but elon musk is elon musk. you tell him he can't do something and he is going to do it and push as hard as he can. and this is another example of that. >> when you think about the wall street analyst estimates they range from 300, to $400 a area. currently $234 but some 20% shares outside outstanding are held by people betting against the company between now and 2017 which is what much of the valuation is predicated on. so not to say they maybe that it

can't reach these the lofty targets at that point. but between now and then it seems they have a lot of ground to cover. >> they do have a lot of ground to cover. and i truly believe the way they are going to do it is not with the expositivee iitive ivitive lu the lower cost where they can reach a lot of people. and in the process they can grow the battery technology by selling more cars and reaching more people. and also are going to be able to figure out the dealership method because they have more and more cars they have to reach the audience with it. >> final, speak of it have elon musk the tesla ceo has been sounding the alarm about a.i. at a recent event, he said we are summoning the demon. >> it's funny. elon musk is a character. sometimes he says things you actually wonder if he's stoned or something like that when hes

the talking act robots attacking the earth. this is where area i completely agree. artificial intelligence a scary thing. we have this theory. there is a book out super intelligence and it lays out the scenarios for what artificial intelligence could be. and right now siri is this friendly thing but in the future it could be robots roaming the earth and killing human beings. and it could be things we haven't even thought about. driverless cars that get a software update and freeze on the highway at 80 miles an hour. these are things that are pretty scary when you think about it. >> as long as sky net doesn't go self aware. that is when it gets really bad. >> but that could happen. >> nick, good to see you. nick bilton of the "new york times" t. another big story is republicans seizing control of

the senate, controlling both houses for the first time since '60. >> good morning carl. sweeping victory last night for republicans in house and senate races and the big news here is in the united states senate look at the numbers as we have them at this hour. a pickup of the seven seats for republicans in the senate. 52 seats to democrats 44. two seats still undecided. we're going to be looking at the runoff in louisiana and outcome to be determined in alaska as well. but the republicans will take the senate in the democrats. and look at the house of representatives as well. gains in the teens of seats for republicans in the house. and that means the speaker of the house john boehner will have a bigger majority to work with as he deals with barack obama for the last two years of his term. and carl, as you know, the results are really going to shift the balance of power away from the white house and towards

capitol hill. and remakes obama's final two years as he deals with a hostile congress. he had democratic control of the senate before. the question now becomes what if anything can pass in this very polarized environment. is there something that a re republican senate and house can agree on that president obama will sign? or are we looking aed two years where the congress passes bills and the president vetoes them up to the 2016 elections. that is the question here this morning carl. >> eamon javiers. check out crude. it's up some after reports about an explosion. >> i was down in the pit this is morning and traders bringing these headlines. they are rumors right now there was a pipeline explosion in saudi arabia. but sometimes the rumors run wild and people are speculating what could be behind this. we do not have confirmation

there was an actual explosion. so this is something we're following and looking into. prices up $2. down a little now about a 1 .37. but anything with saudi arabia right now impacting the oil markets on traders minds and important to watch. back to you. >> we'll get more from you as the story develops. oil has been one of the main drivers of the stock market which at this point is off its highs. the dow hitting an interday high up 95 earlier now up just about 68 point. shares of tripp advisor slipping after earnings and prophet came in below estimates. they were also hurt by a 60% jump in marketing expenses. and the fire eye down also. impacted by a customer shift to subscription based products and

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coupons.com proving to be a deal. shares trading higher after upbeat earnings after the bell and better than expected guidance for fourth quarter as well. steven joins us live from palo alto. >> great to see you. thanks for having me back. >> loss narrowed in the quarter. digital transactions up and you raised your outlook was chz one of the biggest things investors are looking for. but what do you think worked this quarter fur coupons. >> we really started to see two things take effect. one is we're just tart starting to benefit from the network effect we've create override the past many years where all our products are starting to work together. seeing consumers on mobile,

which is fantastic for us. on web, in store, real time notification, all those things are coming together. and we're also starting to see the benefits of our retailer iq platform. which we just started to roll out but volumes increasing there as well. >> retailer iq. one of the biggest criticisms was that an consumer activity is increasingly mobile your core business is still requiring them to print out coupons. talk about the transition to the digital platform and how soon you think that is going to be your core business. >> what we've told people in the past and continue to see is that within at most five years, at least half of our volume will come from pure digital transactions. and mostly mobile. and retailer i.q. is leading that. and we're seeing mobile attractions in pure digital and

other parts of our business as well. what we said yesterday and it's terrific is 70 prkts% of the retailer platform is taking place on mobile device. and for mobile, for coupons.com, the economics around mobile are the same as the economics around the rest of the platform and any other devices. >> seems like five years is a sort of a long time when you think about it. is that because consumer behavior isn't changing fast enough or you need more retailers on board. >> it is a slow to move industry. it's 40-year-old try and hasn't changed much and all though the rate of change is accelerating it does tame time for companies and consumers to all adopt and change to a new way of doing things. however that being said, like we said yesterday, 70% of the usage of that platform is on mobile. and we all know that newspaper circulations are continuing to decline. and mobile adoption is continuing to accelerate. sol when i say at most five

years, it is essenticertainly g happen faster. >> seems like investors haven't quite bought into the story whole hog yet. but digital payments and loyalty, it is starting to come along with things like apple pay. your take on apple pay on these emerging forms of payment and how that might affect your business into the next year? >> any adoption of digital technology is good for our business. and you will see that primarily in our specialty retail business. where we just launched our brand new coupons.com app with real time notifications and the geolocations build in. and it's designed for very quick instore checkout and saving money. the more people use wallets, the more digital currency and things like apple pay the better for coupons.com. >> you raised your outlook for

the fourth quarter at time when many retailers are lowering their outlook. what do you think is unique about the consumer that you serve that might benefit your company versus other companies? p. >> we did raise our full year guidance as well. and we did that because, again, we're starting to see consumers across all of our touch points. there are also macro effects taking place here. with gas prices as low as they are across the country. consumers have more dollars to spend in holiday season and we're heading into the fourth quarter that is typically very good for retail generally and certainly for us. >> we appreciate you stopping by this evening, steven boal of coupons.com. crossing its ipo price for the first since its ipo. we'll here from nest ceo tony

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it is day two of the web summit. the largest tech conference in europe. our seema modee is there live. catching up with very big names including the ceo of nest tony fadell. >> that's right. nest sold its smart thermostat to google for $3 billion earlier this year. the big quest is what is next. expansion seems to be top of mind. >> for us the future is getting products to countries we are not in. we're in 135 countries. but we don't even sell there. so that is important us to. and now we are announcing a the

breakthrough partnership where people can get free nests in installation by signing up for a plan. so these are the big things. is get free nests out to everyone so they can save energy. >> not just tech geeks and leaders here. a lot of personalities from holiday and music and sports here evaluating opportunities. and also here to learn about the latest and greatest trends in tech. we spoke to actress eva longoria yesterday. smashing pumpkin's drummer is here. now the ceo of an online digital content company. and pro skateboarder tony hawk we caught up with. >> through these connections, web summit i've been able to see what i feel like is coming that's important that is going big. so i've been able to invest in like nest and blue bottle and most recently north, which is kevin rose's new company.

and it's more through my friendly contacts that -- you know, it's networking. >> so that was interesting. he just basically said that he's not really resorting to financial advisers to basically understand where to invest in tech and in the consumer space. he is basically just evaluating opportunities based on what his friends tell him to look at. also in terms of the content he's making. he is saying advertising is becoming one way to monetize content. so something interest from tony hawk. >> tony hawk venture capitalist. great stuff seema. we'll see you later this week. elsewhere in europe markets are about to close. simon hobbs is here. >> quite a strong rally today. the oil and gas service sector. equipment sector coming back after we stabilize on oil. the big picture is equity markets up in europe. and the data looking increasingly grim. we have the pmis came through

indicating price cuts from companies. retail sales down for the euro zone. strip out germany which is often erratic and the trend is upwards but the pressure is on day after day with this relentless drum beat of bad data for the euro zone. in u.k. we had good figures for marks and spencer and increasing full year profitable. the stock had though a troubled year so far. tomorr . you have a rally today but bear in mind where we tame today. partly because the european commission was cutting growth forecasts for europe. but also because of the reuters story which was entitle president draghi's erratic communication. as many as seven possibly ten

members are against government bond qe and angry with draghi for suggesting there should be a target of a trillion euros expansion of the balance sheet. it raises the bar on what you are going to get in terms of government qe from the european central bank and will no doubt overshadow what happens tomorrow. the infighting, citi is suggesting the perception they are providing is over played. in public they are committed to expanding those extraordinary measures unanimously. and that is a statement and must be true. the question comes back again to what the new measures might be and clearly government bond is a high bar. they may increase the ltros or whatever. but the focus particularly on americans of government bond buying may be misplaced. did that make sense? >> i think so. >> draghi is going to be put

through the ringer by the journalists. it's difficult to make the big bold promises. >> and he's let people down before. thanks simon. when we come back the $2 billion company that makes money every single time someone activates their phone. ceo is going to el tell us how works. but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running.

if you have ever activated an iphone or synced your information across devices our next guest is probably behind the technology that made it happen with customers like at&t time warner. synchronos is the tech company you did not know what you were using. >> thanks for having me today. >> walk us through how this works. >> we provide software that allows you as a consumer to activate your device on whatever carriers network you want and timeout provide you to backup and restore all that real valuable user content on the device. the soccer game of your son our daughter's event and we store that and make it available across all your devices. >> so you have incredible granularity in terms of whose

activating what, when where and how. >> a few years ago when you started to see the tablet exchange whuns once the pricing plans changed and they became part of the family share plans. so we see lot of trends. >> how would you characterize the cycle we're in now? >> i would say from a proliferation of new devices we're seeing all kinds of not just tablets and smart phones but the digital connected car, the connected home. and you are seeing a lot of consumers want to pull all that information together across different devices and make them work together. and i think the key part that we get involved in, is allowing that data that's stored once. and consumers really expect it today. >> we've got qual com earnings after the bell. lots of questions about the overall health and state of the

smart phone market. >> it's a huge phenomena me the terms of each device launched, the cascading effects of the old fives, becomes fours, sixes etc. we see that more and more prevalent. here in the united states although the iphone is a predominate player in the family share plans. in all the share plans 90% have at least two operating platforms. the mother and father have an iphone and the son or dour have a different device. >> all the providers are in a war for customers and cutting prices and giving away models for free. are you seeing a any discernible patterns of a flight from customers from one provider to another. >> we haven't seen a huge amount

of churn per se. but i do see the mobile operators this time around as it relates to the wireless technology are really putting their foot forward to protect that customer experience. and one of the product thas provide today is allowing you to have that information and if you are storing that information at that carrier, we find typically 25 to 35 lower basisis points churn rates. so in other words they are focused on churn and how you keep it down. you have to have competitive rates but if you can find ways to make that customer experience we have some providers that allow you to take that video of your son or daughter soccer game and it can show up on your set top box. >> one thing apple even admitted. think don't understand as well as they would like. is the replacement cycle for tablets. what do you think that will look like? >> we're starting to see this

year probably slowing down a little bit in terms of the need to recycle them. what we find is interesting though on the iphone when we see stores. a large amount of users use the iphone just for phone. they don't have itunes. it is traditionally used as the basic foun. so the tablets we're starting to see a longer cycle versus a few years ago. when the operator allowed you to operate or upgrade quickly. we saw the average device in the hey day down to six months. >> what impact are you seeing from the early upgrade plands plans. >> are people activating more older phones? what benefit is there? >> we're seeing anywhere from one to two additional devices per plan connected in. because the family share plans, if you have a certain amount of data. i think it is a great analogy to electricity. plug in as many as you want you have one rate to consumer it.

that trend continues today. >> you got to come back. like every day. you know everything. steven thank you so much. >> thank you for having me today. >> steven wald ris from synchronos. >> tomorrow's ecb meeting, all spotlight will be on mario draghi. i like to look at the markets to define what may lie ahead. i see the euro under pressure. is that a clue? mario draghi and opec and cartel talks after the break but i di i'm mike, and i'm very much alive. now my doctor recommends a bayer aspirin regimen to help prevent another heart attack. be sure to talk to your doctor before you begin an

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. top of the hour. billionaire investors peter thiel joins us. with his thoughts on everything from the elections to the mobile wallet wars. and the dean of valuation with three stocks he says are overvalued. and with all eyes on oil we've got your commodity play book with a four star fund manager >> swishers discusses the birth

of uber. as well as unconventional methods used to take on the taxi industry to government regulators. uber ceo has been criticized but could it all be for show? one venture capitalist it is, that word, as a tactic not a strategy. he says look i'm a passionate entrepreneur. like fire and brimstone. interesting he's delineating his strategy to that degree. because he does have a reputation jon. >> yeah for using that tactic a lot. it seems to be working for uber in general. i've certainly used the service. i do think they have to be careful as they expand, like quality of service in san francisco i hear is coming down. so it will be interesting to see. as there are more cars out there. as people use it more. the quality of the cars, the

cleanliness, the timeliness. it will be interesting to see if he uses the passion to keep quality internally up as much has he he's used to it bang on regulators and etc. >> he doesn't find them to be productive or rereally needs to be there which is having given how local politics is so important for their business model. but i guess he figures his battles are better wajd elsewhere. >> and gurley mentioned changing the face what it's like to live in l.a., making it more like new york where you can call have up a car and have it take you somewhere. and kara swisher at 11:00 a.m. tomorrow right here on cnbc. let's get to the cme group and rick san tell. >> yeah a new governor today. and all i can keep thinking about is whether you are talking about detroit or illinois, a lot

of democratic rule over the past many generations and we see we haven't ended up in good places. i hope the electorate didn't put a new republican governor in place just to have somebody to point to when the stuff hits the fan. exciting for the marketplace. tomorrow ecb meeting. for mario draghi he is centcenter s. i keep going back several weexds to the imf speech he gave. basically calling on politicians to do their part h. e can only do so much. on the other hand he has put the ecb into a tight spot. when you talk about qe, you build this diction expectation. it starts to price in markets

and if you decide not to do it all of a sudden there is a amount of volatility that puts a lot of pressure and that is the place i think the ecb is at. and simon does a great job talking a talking about europe and downward pricing pressure. imagine a used car lot. if you don't sell cars you lower the price to sell the inventory. that is part of the process. by tomorrow some of the head lines that come out are things like dyisinflation or deflation they are move down wrong road. growth you need growth. no matter what type of oil you look at. prices are going down. and the notion when you look at the middle east. let's take opec and saudi arabia, their production costs much lower. so they can ride this out. maybe we're going to be putting,

you know, some of the dark empires under the gun here, whether russia, iran, venezuela. but the bigger picture. let's not miss it. competition versus car tells. competition is better. remember saudi's production might be lower but the lavish --. three quarters of a trillion dollar war chest. let's see what the burn rate on that is going to be. >> thanks rick. we're keeping our eye on oil after a spike i recallier in ea session. last time prices fell this much what happened to u.s. production? m.c.c. is back on hq with or. >> we talked about the recent decline in the price of oil. but it was worst in 2008 and 9. 2008 to 2009, holy smokes. from 135 down to 35 dollars a

barrel. at one point the king of saudi arabia was hoping oil might return to $50. what happens to u.s. production back then? it is an intuitive question to ask. two things to remember. the current decline isn't nearly as big as this one. and the shale oil revolution was in infancy. but this is net production gains of oil in the permian basin back then. it goes negative for only a very short period of time. what are net gains? what you have to do and what this chart shows is what is the difference between new wells coming online and old wells that are producing less over time. there is a net gain there. and when you see it go negative, that is the first thing that is going to tell you there is lower investment going on in the sector. the eagle ford basin as well in terms of 2008, 9. slightly negative but the chart

also shows how much the industry was in infancy. it went negative. fully recovers. and final the bakken shale in north dakota. that also went slightly negative but only for a couple of months guys. and once we started to see oil come back, it really improved dramatically and recovered dramatically. look at oil production in the united states since back in the 1920s and when you see 2008 and 2009 in context you see drop off but we're back in the level wes saw. >> it's quite a chart to put it in context. thanks for is that story. when we come back if you live in a state with legalized marijuana, our next guest wants to help your meals get a little greener. magical butter. a crock pot for pot. the man behind it when we come back.

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welcome back to "squawk alley." shares of tesla moving lower. near session lows now as morgan stanley says investors are nervous about earnings after the bell today. the volumes for tesla's model s could be under pressure in the u.s. also expected to lose a penny a share on sales of $889 million. those shares currently down 3%

in the trade and kayla, options traders are already pricing what could be a plus or minus 9% move in stock on the heels of this report. back to you. >> the one thing we always know it will be volatile. voters in oregon or, alaska and washington, d.c., the latest to approve medical marijuana. joining is the founder and ceo of magical butter. extracting botanicals from the plant to be used in cooking oils, butter and lotion. >> so we have the product here onset. it looks a little like the thermostat. but how does it work? >> it's very simple. just open the lid up. put your ingredients in, replace the top. it is all stainless steel

construction. this is a blender a digital thermostat and overthroe serns. it's very easy. put the ingredients in and set the temperature and time. and it does everything else for you. once it is done you go ahead and use our love glove. and our filter bag and pour the ingredients from here into your catch container. use your love glove to keep your medicine and your hands clean. the machine is self cleaning so you rinse it out. put about a quarter teaspoon of the dish soap and set it. >> how did you determine a product for a market like loo. >> it was design as the necessity for a friend of mine. and the studies are showing cannabis works exceptionally

well for crohn's disease. and i had a great career and the demand pulled me away from that. >> i baked cookies for my son's class this other day. if somebody puts the wrong amount of pot in something. they can get really sick. how do you make sure people use it the right way. >> the beautiful thing about cannabis, you can't overdose. you can have side effects and they can be negative. but i like to tell people you walk into the pool rather than run into it. start with a little and increase daily until you get to the desired effect. and our machine is microprocesser controlled. so if your plant matter is consistent your end result should be consistent. so it is a walk thing and learning curve. when you go to the doctor you

adjust. >> the drivery mechanism, how does the potency different from smoking. other edibles. do you use less for the same effect. >> great question. and the answer is yes. when you inhale cannabis you burn it and a lot of the thc burns off. when you ingest it it metabolizes in the liver and goes from delta 9 thc to another type and becomes up to nine times more potent. if people act like adults this isn't a problem. if you buy a bottle of tequila and slam that it's a problem too. so. >> it's the if people act like adults. >> $175, correct. >> how big are -- legalizing

marijuana, does that take a product like yours beyond mainstream medical use. >> we are a mainstream product at this time anyway. through there is a lot of political dysfunction when you look at cannabis laws across the country. and with so much fragmentation, every state that becomes legal it becomes easier for us to get out there and help people. i wish my home state of florida had come through as well but we'll get them in two years. >> gary we appreciate you stopping by. and best of luck with the product. >> well she shook off the haters in spotify and now taylor swift's new album is setting records.

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that's why we created programs which encourage people to take their medications regularly. so join us as we raise a glass to everyone who remembered today. bottoms up, america. see you tomorrow. same time. another innovation from cvs health. because health is everything. we have an update on earlier reports of the pipeline explosion in saudi arabia. reuters is quoting the security source is saying that the fire occurred during repairs and there was no attack on the pipeline. i think the exact language is

the source of the fire was quote, not the work of terrorist. was up about $2 when the story first hit but since off the highs and you can imagine a lot of people who might very short crude tried to cover when they got the news. taylor swift's new album has sold almost 1.3 million copies this wreak. she took theist gram to voice gratitude that's -- 14 years for any album. that is a big deal. >> i am impressed. 1.3 million albums. the numbers are just incredible. >> 1989 numbers back when people were actually buyi ining albums >> i love all the stats that say this is the most since taylor swift's last album. >> yes. somebody wrote in in 50 years

what taylor swift song is going to be part of the american song book. >> she doesn't dance with snakes. she's not swinging around a pole. that's good for pop music. >> yeah. dow is up 81 and the president speaking this afternoon. let's get to headquarters, wapner and the halftime. >> carl thank you very much. let's meet the starting line. joe terranova. jon and pete najarian, stephen weiss, he is live in denver at the schwabb impact conference. we do begin with a sweeping win for republicans in last night's midterms and what that means for the markets. stocks up today but much of the focus remains on crude oil