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it's 8:00 a.m. at apple, 11:00 a.m. on wall street. "squawk alley" is live. ♪ welcome to "squawk alley." jon fortt, kayla tausche here with us. lot going on the. the dow up some 65 points. a lot in terms of the nasdaq as well. apple close to flat line after a tough morning. price target upgrades at bank of

america. some of the decline might be note to a bearish an dri hargraves who says iphones seemed to be priced in with more likely to flow after the strong first quarter. andy, good to see you again. >> thanks for having me. >> you've been a tough one to convince, especially coming into the apple. or the iphone 6 launch earlier in the year. what about the cycle don't you like? you just don't believe that the six is not going to get more new users than replacements. >> we've always been pretty big believers in the iphone 6 cycle. our issue is what comes after. and specifically that yeah, you are that much closer to market saturation at the high end and you are probably going to pull in some demand with this cycle in terms of replacements and that makes the comp a lot tougher. and growth then looks like it decelerates significantly into

16. >> you admittedly say shipment demand looks or the above even your original estimates. and even going through the first quarter of next year, which is what other analysts have said they expect. already the product cycle seems to have a longer tail than we usually see. >> yeah i think the tail is similar to wh what we usually see. no doubt the iphone 6 is extraordinarily strong cycle. off the charts really. but we've known that now a couple months and we have to look beyond that. especially with a name like apple which is such a big portion of a lot of people's portfolios. you have to be thinking about not just the next couple quarters but years. and that's where we see the problem. >> looking at the couple years and we understand apple's recent cycles that yes you have a big holiday quarter then things tend to fall off. what makes you think that the

iphone 6 s, 7 cycle won't be just as strong? >> the new user growth has been coming down the last couple years. and one of the things we think you are seeing in this cycle is an acceleration in that number based on share gain from android. and it is just because you have a large screen format for the first time. so you get a little bit of a bump. but the problem is the long-term trend is still down. so you when you get a bump up you take demand from future quarters and it makes the growth that much more difficult. >> a lot of bulls andy, argue this is not just another phone cycle, that it is going to be followed one a one-two. a watch, apple pay. those individually county move the needle but we haven't seen a cycle like this before. >> you know i think the watch could move the needle, technically. i'm not a huge believer in it. because of the functionality we've seen so far looks a lot

like the functionality from fitness bands and those at apple scale are tiny. so we're going to have so see a lot more functionality there. and iad, apple pay, the numbers aren't that big relative to iphone. and they are not going to make up for the lack of growth. >> provoked a big discussion today andy. thanks. >> thank you. >> walt mossberg over re/code. good to see you this morning. >> great to see you carl. >> let's talk iphone growth and whether or not we are at a growth cycle top. you believe it? >> first of all i don't know how you can possibly predict. the company has been exceeding expectations for as long as i can remember. and with all respect i just

don't know how you can make a forecast like that. i will just point out one thing. this is a premium product. we all know that. it is not going to compete heavily in the low end of the market. but the high end of the market, people with money to spend, even in emerging markets, is growing. and this is a saturated, mature market here in the united states and they still do quite well here. but my god, you know, china, the middle class in india -- lots of other countries where the numbers of people with the money to spend on an iphone and the desire for the prestige of that growing. >> even at these price points? not like these phones are coming to market at a lower price point, walt. we've sold to most people who make over say $15,000 a year in

this country. and on this planet. >> you are right. it is a small part of the 7 billion people on the planet. but it is a large market. and look, i've asked apple publicly and privately about their overall share in phones. is there a share level below which they become not a viable platform for developers and so forth. and they just constantly shrug it off. so they aeither they are makingf the biggest blunders in history by not going down market or they're right. i just don't know. i think there is room for growth even if they stuck to the premium sector, as long as you take a global view. >> walt, how much more growth do you think the iphone will see at the expense of the samsung which is seeing erosion f its market

share. seems like that is one of the added benefits that apple is getting maybe we hadn't put to our calculations for the stock before. >> kayla, i think that is a fantastic point. their biggest competitor as you point out has been samsung in the premium sector. and samsung is struggling. it is -- to me it is a little opaque to know exactly what's going on at samsung. because they don't break out the numbers in quite as much detail as apple does. and apple doesn't break it out in total detail. but, you know, something is shifting there. iphone sales look like -- i mean, i still see lines outside apple stores for iphone 6. and it's december. and samsung is warning and reporting trouble. so something is shifting there. now, there is another factor. and that is someone at least of the chinese-based companies --

and i hope i'm pronouncing it right -- jomi makes kind of a premium phone at a lower price and as they move out of china they could pressure apple. >> walt let's move on here. it does seem like it was a good cyber monday for big retail. jumped 16% year over year. the top 25 retailers seeing 25% increase in online sales. smaller retales saw less impact but growing about 5%. i'd love to get your opinion on how you think the retail season is coming in through the prism of online and tech. >> through that prism i think it's coming very strong. i read some of the reports saying kind of down about brick and mortar sales on black friday. and there are all kinds of reasons for that.

online sales, our reports led us to believe that online sales on friday were very strong, up as much as 20% over last year. and it looked like it was a good day yesterday too. and i think the distinction between online and brick and mortar is also fading a little bit. i know that i spent some time with the folks at best buy a few months ago. and they were saying, hey, they have given up on the idea of caring whether you close the sale in the store or you do it online. and of course and they actually ironically had an outage on black friday. but they are putting a lot of money into trying to say we don't care. and in fact we're going to use our stores to ship the online stuff you order. so i think we're seeing a blurring of lines. i think online is just mainstream now. and it's much easier to buy. if you know what you want, let's

take a samsung phone or iphone, where it's pretty much you know what it is, you know how much you can spend. why go to a store? why not just get it online? >> good point. >> and i think that's what we're seeing. >> yeah. finally you reviewed myris. a gadget that lettous sc outout you scan your eyes to bog in and others. >> i love the idea. and i think they have good technology. i think the implementation is kind of low at this point. it like a hockey puck you hold in your palm and has a permanent chord. works only with computers so it's kind of clumsy to travel with. i also found that it didn't -- it didn't recognize me nearly as quickly as it promised it would.

and they say i may be an unusual case or whatever. but i think they have got some future things coming that could make this a bigger deal. one is they are working on a wireless version. but more importantly they are working on some deals to get this embedded right in a laptop. and if this was on the top bezel of your laptop it would be great. >> i've got a question about biometrics. we've had a number of start-ups trying to do other metrics of that it. touch id works pretty well as you said on the iphone. is there room for another biometric method to cover other people who don't use apple products? or do all these other things fall by the wayside. >> i think there is plenty of room. and if the people at eyelock, which is the company that makes

myris are right, their thing is more safe than touch id. but i would say touch id on the iphone is the only widely accepted, reliable, easy to use biometric thing that's ever been promulgated on tech devices. and so we have one. it doesn't mean there isn't room for others. and if they can build it in and get it so that it is super easy to use and super quick to use -- and that is a big if. your question is, is there room? i think there absolutely is room. yeah. >> thanks for covering so much ground today. see you soon. >> take care. >> walt mossberg joining us this morning. >> meanwhile we have breaking news. let's get to mary thompson at headquarters. >> the business round table is out with his t it's fourth quarter ceo economic outlook index. ceos are slightly more

pessimistic in the third than the fourth quarter. they expect to decrease capital spending but forecasting higher sales as well as increasing hiring. for 2015 the ceos expect the u.s. economy to grow at a rate of 2. 4%. unchanged from last year. what are they most concerned about? well, taxes and regulation. if you want to hear more you are going to wan to tune into squawk box tomorrow. we're live in washington d.c. at the business round table ceo summit. look at the head liners we'll be speaking with tomorrow. you will want to tune in once again to squawk box. >> when we we come back, three years after his death apple co-founder steve jobs is a star witness in court kind of. we'll explain. and the latest twist in the hp autonomy saga. coming out swinging, the founder of the saga with acquisitions a -- accusations of his own.

and the president of reebok and head of ufc dana white join us later this hour. "squawk alley" back in a minute. (vo) watching. waiting. for that moment, where right place meets right time. and when i find it- i go for it. (announcer) at scottrade, we share your passion for trading. that's why we give you the edge, with innovative charting and trading features, plus powerful mobile apps so you're always connected, wherever you are. because at scottrade, our passion is to power yours. ♪ my baby drove up in a brand new cadillac ♪ ♪ my baby drove up in a brand new cadillac ♪ ♪ look here, daddy, i'm never coming back ♪ discover the new spirit of cadillac

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apple defending itself from testimony that includes co-founder steve jobs. josh explains live in oakland california. >> well this case has actually

been making its way through the courts for ten long years. but today it finally apple is going to have to face the music in this courthouse right behind me. they have to fend off allegations it violated antitrust rules between 2006 and 2009. what plaintiffs allege is there was this ipod upgrade in 2006 that illegally shutout the competition. company likes real networks from the mp 3 markets. after this upgrade music from those companies wouldn't play on apple's devices so at that point the argument goes consumers are locked in and they could charge more money because it was exerting a monopoly over the market. if you talk to apple they are fired up about this case and really make three points. one they will say these were totally legitimate product upgrades to these ipods. two there is zero evidence of any harm to consumers.

and finally they say there is no monopoly power that apple exerted over that portable digital music player market. bottom line how much money are we talking about here? plaintiffs estimate damages $350 million. damages could exceed $1 billion if antitrust allegations are proven. apple is at the courthouse this week taking a stand. you will hear from the head of marketing, eddie q. also, and also as you mentioned a video deposition from the late steve jobs. opening arguments begin in 10 minutes here. we're going to be inside the courtroom bringing you head lines as they happen. >> thanks josh. we'll check in with you later on. when we come back, whose the blame for hp's multibillion dollar autonomy debacle. founder mike lynch has his own idea and he's with us to explain everything. r

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. quick alert here. the a.p. confirming earlier reports that the president has chosen ashton carter as defense secretary nominee. don't expect an announcement today but barring last minute changes he is the nominee. previously served as deputy before leaving the administration. >> u.k. based software company autonomy sold to hewlett packard for over $11 billion in 2011. three years later an accounting writedown. today autonomy founder mike lynch is calling for u.s. regulators to examine what he believes show hp's false representations to the market, unquote, about that writedown. and joining us is michael lynch,

founder of autonomy. michael, i've got my questions about the due diligence that hp did ahead of this acquisition. but also about what's seemed clear in the ways autonomy recognized revenue. there was hardware autonomy included in revenue that apparently was given to customers at a loss to boost the top line. also this deal with the vatican that apparently was never signed but that you counted as revenue. what really is the problem here you think with what hp is saying? given all that autonomy did that was fuzzy. >> well let's remember back in november 2012 we had this massive $5 billion writedown. and for the last two years lots have people have been here how do you get that number? and what we have today is finally the answer. we have a revelation and a document which is called the rebasing exercise. and hewlett packard referred to

this document in many court filings as the basis of the writedown. it's incredibly detailed. goes from individual deals all the way up deal by deal and shows the deals that have been taken out but hewlett packard in order to produce the numbers and the write down. and those numbers all reconcile to the numbers they have been saying. but the really key thing about this document is for each deal that is moved it gives the reason it is moved. and the reason these deals are moved are things like not compatible with u.s. gap. now the important thing about that is autonomy was never a u.s. gap company. it was european accounting. and the hewlett packard knew that when they bought the business. nowhere does it say fraud in this.

so deals were all paid properly and what you have is the basis of a writedown but the reason being given doesn't bear any relation to hewlett packard's own document that shows the calculation for that reason. >> ie believe we've got hp's response that we can show the viewers now. let's put that up on the screen. hp saying the same fertile imagination that was behind a massive fraud is apparently still hard at work. making up stories. we would encourage mr. lynch to spend as much time as possible with the authorities. >> so what hp would i say believe is that the reason for the size of that writedown is because they assumed certain things about the revenue numbers that were in the documentation ahead of time and that they would be able to accelerate those with their expended workforce. but when they actually got a look at the numbers, the revenue they thought was there based on your representations was not actually there. what do you say to that? >> well the revenue was there.

and what this document shows in black and white, unequivocally is that the revenue was there and it was correct and the hewlett packard has removed the revenue because of differences in accounting between u.s. gap and ifrs. it is there in black and white in their own words. the reason that is important is that you can go forward and you can for example decide that you have different views of the synergies. and one of the problems that hewlett packard had in this deal is it put an astronomical amount of synergies into the deal when it decided to do the deal. when it mismanaged the business and it would no longer deliver on those that is what led to the writedown. but one can give the real reason flr the writedown. they have give this concept that somehow there is a fraud. two years we've wait forward details in this and now in this document we actually understand what they are saying. >> what is the source of this

document, mike? because if this existed and it is in fact true and you say it does in fact show some of this revenue was legal under u.k. accounting standards, why not discuss that with hp in years past when they were taking the writedown? why wait until now when we're in a protracted court proceeding after they have already taken the writedown and i'm wondering about the timing of this and the sourcing of this document that you have uncovered recently. >> it should be stated that the document comes from long after i'd left hp so i didn't have access to it. and someone at hp is very concerned how this matter is being misrepresented and has made that document available. i sure you if i'd had this document sooner i would have absolutely made my knowledge of it available to people. >> this is going to take a while to play out. you can tell.

michael lynch thanks for joining us. let's bring in simon hobbs. >> the drum beat continues to thursday's ecb meeting. producer prices falling 1.3%. thursday will be important to see when draghi is speaking for whole of the governing council. but probably it won't come if it comes until jap aftnuary. it's ironic one of the major markets in negative territory is the german dax. it hit a fresh high above 10,000 and fell back. and that is where we are at the moment. there it is. oil and gas has been one of the major moves higher today. the relief rally catching up on yesterday and you saw some of those plays just now. the big news within europe is the south stream pipeline that

russia had started to build between its central east european -- between its asian operations under the black sea. here this is the map. under the black sea, through bulgaria, into the bottom of italy and up as far north as austr austria. a $22 billion project has now been canceled. one reason is that it bypasses the ukraine. and therefore the rest of the european union had been holding up on a lot of the permits to build that. he now says he'll do it via turk turkey. it was going to supply 10% of the natural gas for europe. saipem has had no word as to whether its contract is null and void now or whether they will honor it.

the lufthansa strike ends tonight in the meantime. >> two campaigns setting out to change the way consumers tap into the net. you get to decide which project you would fund. jolla is the first crowd sourced smart tablet. allows the community of users to create and share new apps and functions, allowing the tabl et to continually evolve. the goal, $380,000. so far raised close to 1.4 million. lantern taps into the global satellites to the get data. it stores the information around the world gives users free internet data from any location.

the campaign goal, $200,000. currently nearly 300,000 in funding. who should be this week's tech crowd leader.

welcome back. cyber security firm fire eye has released a report identifying a the cyber ring carrying out attacks against public companies in attempt to gain the stock market. how safe are our stocks? kevin mandia is the ceo of fire eye. kevin, this appears to be an attack trying to get information out of corporate systems, inside information. and then trade on it. is this unusual? the first time you have seen this? and how did you discover it? >> it is not the first time i've

seen this. there's always been intrusions to try to get information that can help you economically. so this is nothing new. what makes it interesting as we respond to incidents and collect data, in this particular case we saw over 100 companies impacted and the attacks are interesting in that there is no malware involved. these attackers are reading your e-mail and doing these attacks in a very efficient way. i think the scope got big enough and we had good enough indicators to protect these compromises that we had to communicate it to the public. >> so how would an enterprise know whether it's been breached in way? traditional security software or other measures necessary? >> there is a couple things you have to do. first and foremost the challenge is most companies try to make

e-mail very available to their employees. anything we've learned from this, it is that you need two-factor authentication to get your e-mail. we can't just let people collect their e-mail and read wit a user id and password. we have to add something to that. but right now to get the activity go to the log files and look for peopreading your netwo. and they used the torr network. and it you see that network exists solely to remain anonymous. those ip addresses are addresses you would see in the log files. and it's not easy to detect this. and by the time you do someone is already reading your e-mail. >> you say there are signs that the network originates in either western europe or the united states and they have a

background potentially in invest banking. what sort of clues lead you do that conclusion? >> i've read some of the e-mails these folks sent. and here is one thing i did notice. the e-mails, the spear fish are perfect english. and that is rare. ten years ago when we got spear fishing you would have the dollar sign on the wrong side of the numerics. misspellings, poor grammar. these emails are written by english native speakers. that's different from private attacks. we're going to learn more about this group. they are not going to stop just because of this report. they are going to change their methods and i think there will be more news emerging. but right now they have native english speakers working for them. >> and somebody who actually took notes in english class for better or for worse. i want to ask you about this sony hack which i believe you have been been brought on to

deal with. how sure are you in fact that north korea may be behind this and is this an era where we have governments potentially attacking countries not just for secrets and retribution. >> i can't comment on sony dreektly but it is a era. we had the -- when you have no risk of repercussions to hacking into the united states the attackers themselves are going to get more aggressive. and i think we're going to approach those boundaries and learn more about the aggression other sovereign nations are taking against the u.s.? >> quite a dangerous space. always changing. kevin thanks for joining us. >> thank you. >> when we come back, reebok and ufc announce tag major

partnership earlier this hour. the president of reebok and the head of ufc dana white are with us to break it all down later on. but first rick santelli. >> pension benefit guarantee corp. happy birthday. it was passed and put into law in 1974. so it's 40 years old. how is it doing? that is the topic of today's santelli exchange. and if you want to find out if it's healthy, do you know -- robot butler, can you shut the shades? oh and could you turn on air conditioning i'm starting to sweat. i'll just do it myself. useless. that's nice. set's the mood.

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control your entire home without your private data ever being shared. introducing wink. it's like a robot butler, but not as awkward. we're debating a big call on stocks which one bank says are super expensive and right for a fall. are they? is $100 a barrel oil dead? >> citi says yes. plus jeff bezos down on amazon. the stock down 20%. can he restore faith with investors? >> according to reports uber hired goldman sachs to raise money from the bank's my money net worth client. could end up raising hundreds of millions in dollars in debt to support the balance sheet and the expansion. all on reports that uber is

close to raising new equity funding that would value the company around 35 to $45 billion. the financial times says this is convertible debt which you don't normally do unless you have equity to convert. >> interesting to watch. let's check with rick at the santelli exchange. >> i've been getting a lot of emails about the pension benefit guarantee corp. and there was a great article just in the "wall street journal." a federal guarantee is sure to go broke. one line, it's's net worth is negative 62 billion as end of september. and negative 69%. it's celebrating its 40 birthday. it's private. and on its website it's pretty clear the government is not

responsible for any of their liabilities and they collect no federal money. why where have we heard that before? gses, governor sponsored enterprises. i've been on record in the eighties when i worked for a large investment bank we dade did a lot of business with banks and they understood that should any of this activity go broke the government is going to pony it up and the many feel the same way. there are two facets to this program. one is the multiemployer, which involves all the union where many companies managing many pension plans and then the inningal employer where it's one company managing one plan. on the latter, on the multiemployer, right now it has

1.8 billion of assets and 44 billion of liabilities. i'm not saying anything is going to go wrong here but last year as you saw in the header, 62 billion -- 69% asset ratio. it was in the red 35 billion last years. the reason i bring it up is once again at the time where we have executive orders, we have tax reform not getting done, immigration reform not getting done, here is another issue that gets kicked down the road. and it really shouldn't. because once again, if there is any hiccups in the marketplace we all know that programs like this, private companies like this are going to need assistance. where doesn't congress get to work? welcome back congress. 40th anniversary of this corporation, i think you need to get to work, make sure that the taxpayer isn't going to be on the hook again. back to you. >> rick santelli, thanks so

much. reebok is stepping into the octag octagon. coming up next on a brand new partnership. this is a burrito made with chocolate, soybeans, and apricots. what kind of chef comes up with this? a chef working with ibm watson, on the cloud. ingredients are just data. watson turns big data into new ideas. and not just for food. watson is working with doctors and bankers to help transform their industries. today there's a new way to work. and it's made with ibm. ♪ my baby drove up in a brand new cadillac. ♪ ♪ my baby drove up in a brand new cadillac. ♪

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>> a long-term six year deal. exclusive contract between reebok and ufc for reebok to provide the sportswear. with me the presidents of reebok and president of ufc. matt o'toole and dana white. i'm not an expert, matt, but i'm pretty sure that the fighters in ufc don't wear shoes and wear very little clothing. outline how this is going to work. >> you are correct. fighters in the octagon are not wearing a lot of clothes but they are training in a lot of product that is really important to them. and ultimately this is how they spend most of their time. fights are limited as an event but the real life as an athlete as a person training and creating the right body and ability for the sport. >> clearly dana, matt wants to get to your community describe whose watching.

>> 18-34-year-old males when it started but now it is changing. this season of the ultimate fighter is our first ever 115 champion also crowned on december 12th. like he was saying, they might walk in and fight with not a lot of clothing but these guys are the beth conditibest conditione athletes. they train in and have do their cardiovascular, the weight training. so the sport has evolved so much in the last 15 years since we got involved. and now over the next six years the apparel will. >> talk how rebook has got involved. getting away from the under armors and the nikes t traditional football and running. >> we've dedicated to fitness and partner with most amazing fitness providers likes

cross-fit and reebok spartan race and now with this amazing organization, the ufc all to really inspire our consumer, people working out every day to be a better version of themselves. and we even introduced a new symbol, the delta. and that's symbol of this transformation that occurs when you work out and live a fit and healthy life. >> there was a recent report on your parent company flagging issues with the injuries influencing of revenues of the life events. e have you lost some of that momentum that you had. >> i wouldn't say we've lost any momentum at all. we just went into mexico and other countries globally. but we had a rough year in pay per view because of the injuries. and we're working on that now. and we never saw that there could be this many injuries in a year. so now we're really starting to work on injury prevention. and it is an a big issue for us.

>> i think my colleague jon forth hadfort has a question for you guys. >> for my money ronda rousey is the most exciting fighter out there and there's tons of room for the women's apparel and someone to make an impact. how much of this is going to be you developing women's active wear. >> this is the absolute right question. women are the ones who are really taking this discipline of training like a fighter and using it as a way to stay fit. and no better symbol of that than ronda rousey. she's amazing. and authentic and down to earth as well as an incredible athlete. >> what about ufc to that question? with all the negative attention around violence in the nfl and the fact that john mccain a long time ago called it cock fighting you still have that stigma. >> we never really get that

question anymore at all. and people understand this now and it's bng rb become a lot more mainstream. but realize this. the ufc has been around for over 20 years. there's never been a death or serious injury in the history of the ufc. >> and how big is your women's demographic. >> it is very big and growing. like he was saying about ronda rousey. she's a game change ner sports. changing the way that women look at themselves and think about themselves. there's never been a scenario ever in the history of a world where a woman could beat a man and now there is. >> hey i box. i i told you. >> i know. it's changing and it's empowering little girls. women these days were growing up, you play over here. the men play over there. rhonda is changing ufl that. >> and matt i have to ask you about your brand under adidas. it's been a bright spot.

talk about the management. because there have been reports reebok is up for sale and there is a consortium of buyers wanting to step in. >> rebook is going through a the resurgen resurgence. sixth consecutive your of growth. our success is really starting to build and i think this is why other people are starting to take notice. and if there is interest in re bok it is not surprising because we're definitely a brand on the move. >> congratulationes on the deal i know you are both excited and i know you have a lot of fans eager. the president of ufc dana white and president of reebok matt o'too o'toole. >> when we come back a major blackout in the city of detroit. [ male announcer ] your love for trading never stops.

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can help light a way forward. so you can make your move, wherever you are. and start working on your next big idea. ♪ breaking news out of detroit. mary thompson is back at hq. >> it appears theres a fairly major blackout in detroit. it is affecting about one hundred buildings right now. the mayor's office is going to hold a briefing a little later. but a lot of the buildings

effected have been municipal buildings in detroit along with joe louis arena. and there is a blackout. it's affecting about a hundred buildings and the mayor's office will have a briefing. we'll keep you updated. thank you. google backed genetic testing company coming to the u.k. the company strug wldgled with n in this country. >> we're a medical device. so we're going through the medical device process with the fda. >> interesting discussion this morning. all the questions involved and

whether -- what kind of regulation you node when you are getting answers to questions like this. >> sounds like not the end of the road here in the u.s. >> hard to keep up. dow is up 67. let's toss it over to the judge. heel take over the halftime. thanks so much. welcome to the halftime show. let's meet our starting lineup for today. stephanie link, josh brown, and jon and pete najarian. our game plan today looks like this. citi's oil guru ed morris says the days of $100 a barely are over and he's here to tell us why. >> bezos speaks. on the future of dal