zblrks ♪ ♪ ♪ welcome to "squawk alley" for a wednesday, what a line-up for you this morning, the ceo of twitter, dick costolo first on cnbc, benchmark's bill gurley, john bourbon with passport capital. tim draper of draper fisher jervon. joining us is tim draper, with us as always, john ford, kayla tausche. tim, good morning to you. >> thanks for having me on your show. >> welcome to our new home. you're going to start with twitter, down another couple of bucks after revenue did miss estimates. monthly active users came in lower than expected. the company telling investors to reduce expectations for the rest of the year.

shares did close down 18% yesterday. after analytics firm solarity got an early copy of twitter's earnings and released. trading was briefly halted before the company released the full report later on. nasdaq telling the cdc that an operational issue caused the early release of the data and one report was that twitter is the company that can least afford a move like this. >> absolutely. not only was the news bad, but the early release of it i was a little surprised to see it down november 4.5% this morning. given that even where the analysts took down their targets, a lot of them were in the mid 40s versus the lower 40s. where we see it trading now. but really, twitter now has to adjust the story they were telling. we kept seeing them outperform on the revenue side and fall short of expectations on users. this is a different kind of problem. and also the whole direct response issue, the pricing issue, our advertisers seeing

the value it will take to pay a little bit more going down the line. not a demand issue, a supply issue, costolo said. given what we've see facebook turning in. given what we've seen google saying about youtube and how well the ads are doing there. you hope for a better story from twitter. >> is this a problem from the company's strategy or a problem with the company's execution on whatever that strategy is? it does seem like yes, the results were magnified by the early leak of the quarter. but the quarter wasn't that great. >> well i think there's only one twitter. and we're going to always have twitter. and i think it's a great service. and i think that there are probably business models they haven't considered that might end up bringing them a lot more money. and maybe down the road this is undervalued. it's just quarter to quarter. sometimes they don't perform the way you hoped they will. >> you don't see any existential issue for this company, clearly the way some do in.

>> no, i'm still tweeting, i'm still looking at twitter. i have a lot of twitter followers. >> are you seeing ads that reasonably should be targeting you in. >> no. so maybe there are things they can do there? >> or maybe there are other things that they can do. but boy, you've got this huge audience. you could do a great things with a huge audience. you guys do a great thing with a huge audience. >> we enjoy using twitter and i enjoy using facebook, too. the question from a start-up perspective. we're seeing things like peri scope and meerkat. challenges for twitter monetizing certain areas, does that make one platform, another platform more attractive to start up. or does this not matter for their ecosystem as much as investors paying attention to the day to day. >> i think that is an accurate statement if people are not

enthusiastic about one platform. they might program to build something on another platform. so that is, that could be damaging. >> i think there's some amazing companies that are now being built on these social network platforms and i think that's going to really make a big difference. >> microsoft was built on the obama platfo ibm platform and then an apple had this great platform and then all of these apps came after that. there will probably be app platforms that other people start building other things on. it's part of the natural progression of entrepreneurial life. >> the circle of life. >> i don't think anyone is arguing that twitter will go away or platform will go away or it's not a powerful platform to say the least. but two weeks ago we were having a debate of whether it should be a stand-alone company.

whether another company could come in and acquire it. one of the other arguments was it was pretty rich, but it got about $6 billion cheaper in the last couple of days. do you think twitter stays a stand-alone company, or do you think it gets bought? >> i think there are a lot of companies that would love to have twitter in their portfolio. apple, facebook, google. they would all love it. i don't know if the team wants to sell it. combined with somebody else, maybe enough a little spark of ideas would come and improve the situation there. >> that really is due to a very small group of people for sure. speaking of twitter as we said earlier. ceo dick costolo will join us in a first on cnbc interview later this hour. we all look forward to that. twitter not the only company moving on earnings, shares of go pro having one of the best days since going public. after profit topped revenue estimates and rated to outperform over at raymond james.

samsung in the green even though profit fell 39% year over year. one bright spot for samsung, mobile operating margins jumping over 10% in the quarter. that was good news. >> we saw this possibly coming a bit after qualcomm again reported. we've been talking about that, they said apple and samsung both are gaining strength in the premiums here. crowding others out. apple we see now is a lot stronger than samsung. samsung kind of prereleased the results. we get a little more detail here. we see that samsung's growth is in the mid tier versus the high highhig higher end. samsung pressured, we saw some of their other businesses, particularly the components, the chips and displays still remaining strong. the question is can they turbo charge their galaxy s 6 and 6 edge and get some momentum back. >> go pro used to be the most heavily shorted stock in the

entire equity market. a couple of months ago, 60% of the shares were out on borrow on short interest. about 37%. still heavily shorted. when you show that you can grow more than half your revenue in international markets, you're not an october-to-december phenomenon like some pessimists had been saying about this company. they really showed that they know how to operate. and tim, i'm wondering what the debate is about go pro in the valley, if there is any debate about the company? >> well, no, we don't see a lot of debate there. but i do recommend to my students at draper university, that they should not think in terms of shorting things. it's just, it's living dangerously and if you're trying to short something, there's always this incredible creativity that can possible up and absolutely destroy the shorts. and the shorts are always very popular during one time, where it's like 2008 or 2001, the

shorts have a wonderful time, but all the rest of the time, you know, optimists win. >> last night it's funny. the shorts seem to be popular between around 4:15 and 5:00. but when they gave the guidance on the call. you saw the stock go from down quite a bit to rocketing up. what's amazing to me about go pro is you don't see a lot of hardware companies, start-ups coming out that actually have margins, can maintain growth. the popular wisdom was consumer electronics, it's a low-margin business, you have to focus on software and just do software if you want profit. how much is a company like go pro and the success they've had, absent of whatever stock gyrations, influencing entrepreneurs who can thinking more, i can do something with hardware and build a business that people are interested in. >> i use a pebble watch. and this company we funded and it was almost out of business. and they say we don't we try this kickstarter thing. they put it on kickstarter and in three weeks they got $10

million. five million of free money and five million of preorders. at that point we recognized in the venture capital business. that hardware and consumer hardware were going to be big opportunities. we were almost avoiding hardware at all costs. you have inventory and you have accounts receivable and now you have an opportunity to be prepaid. so indy go go and kickstarter are making it so that whole business is changing. >> are they going to have go pro-like margins? >> they already do, they have great margins and they can create great platforms for growth later on. they can all become the equivalent of apple. >> tim, you're backing something called the fixed california challenge. a shark tank for government reform. do you want to explain it? >> i created this six californias and got people thinking, hey, maybe there's a better way to governor. i had the prime minister of

estonia come to draper university and say, just by instituting digital signatures, he saved 2% of his gdp and by using digital voting, he, he the young people all started to vote and by having digital identity, he lowered the crime rate. so all of a sudden all of this virtual governance is starting to happen. and so i got very excited about it and now i'm calling for entrepreneurs, govtech entrepreneurs or people with ideas to completely transform government. and those ideas could come in the form of start-ups, they could come in the form of government proposals and they could come in the form of nonprofits. >> is this meant to change policy, tax policy or change efficiency within government? >> all of the above. the idea is you've got an idea,

i brought up six californias, that was my idea. there are other ideas out there. other people who really have great passion for some way to transform government. and bring us into the 21st, 22nd century. the change is happening faster and faster throughout the world. and our government is still living back in the 1980s. >> you mean the state government, california? >> the u.s. government in the 1960s, the california government is in the 1970s or '80s. we've got a long way to go and all of these other industries, have been completely transformed. yours has, mine has. by the internet and all of these new technologies. government has forcibly kept us, kept itself from changing. they fight to keep themselves from changing. and we really need to change it. because governments are now starting to compete for the people of the world. and it's time to do it. so this is kind of a fun,

interesting way to bring new ideas in so that everybody can see hey, well that's something i might want to back and i'm going to kick-start it myself with some money and some, i might put another initiative on the ballot. somebody comes up with with. >> thank you for coming in. good seeing you. elsewhere in the markets, major averages are drifting lower today. dow and s&p down for the second day in three. nasdaq down for the fire department straight day. those major averages, still in the green for the month of april. dow is down more than 100 points after we saw the gdp print of .2% for the first quarter. all eyes now will be on the fed statement coming out at 2:00 eastern. meanwhile, shares of starwood hotels rallying after the company hired lazar to explore strategic alternatives saying quote no option is off the table. earnings in the latest quarter also beat on the top and bottom line. those two issues helping starwood hotel stock up nearly

8%. carl, david faber reporting this morning that there had been some hedge fund momentum in the stock and perhaps this is the company being proactive about that. >> a lot of great guests coming up this morning, the ceo of twitter, dick costolo will join us in the first on cnbc interview to break down what was obviously a pretty tough earnings report for the company. plus later, sacha nodela giving us a flims of microsoft. and he's one the biggest names in venture capital. an early investor in uber, benchmark's bill gurley will join us. ♪ [ radio chatter ] ♪ [ male announcer ] andrew. rita. sandy. ♪ meet chris jackie joe. minor damage,

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♪ ♪ welcome back to "squawk alley" coming to you live if our new home away from home which we celebrated officially last night. the address, one market in san francisco. we're watching shares of microsoft trading down this morning. as the company kicks off what's arguably its most important event of the year. the annual build developers conference. the ceo takes the stage late they are hour, just about 15 minutes and expect big changes for windows and mobile. joining us now is five-star

equity research analyst and managing director at goldman sachs, heather bellini, heather, it's a treat to have you here in our studio. your expectations for build? >> expectations for build, a lot of what you said, it's going to be a big focus on windows, a big focus on mobility. a lot of question what's going to happen with windows 10, in terms of driving people 0 to upgrade to the latest operating system when it ships this year and questions on pricing, which i'm not sure will get addressed today. >> sachin nadala has done a lot to change the perception of the company. i'm wondering how you see the second leg of his tenure to get developers on board as allies. >> i think he and you know amy hood have done a great job in the rest of the development team in trying to change people's perceptions, i mean i've heard it even on your show, you have mark benieff. people that used to not be big fans of microsoft becoming big fans. you see oracle and those things

didn't happen under the steve balan boll mer era. we from a mobility perspectivor, we still need to see them have a bigger platform to make people want to develop first. that's why windows 10 is bringing all of the operating systems under one umbrella. >> do you think that sachi is really turning microsoft into an enterprise company, in a way that it wasn't before? the way i look at it. consumer is still there, but he seems to have it contained, to a degree that it wasn't in previous years as an on-ramp to enterprise. is that fair? >> i always felt like microsoft was an enterprise company first. and consumer just kind of got dragged along. i think now a days trends happen and consumer that drive towards the enterprise. so i think you have to be relevant in consumer. because a lot of consumer trends turn into enterprise trends, it just takes a lot longer given the i.t. departments that large

organizations have. >> a big question on valuations, the running conversation in this town. >> on the one hand, people have said about this earnings season and some results, the results from sales force and facebook, that people are buying in to the paradigm shift. that we're going into an era early days of big data and so forth. but the other that cash burn rates are too high. what is it? is it somewhere in between? >> i think the next guest you have is probably a far better expert on that topic than i am. but i yeah we've seen that in our conversations with venture capitalists and private companies just trying to figure out what is investor appetite for cash burn was actually much greater about a year ago, 18 months ago. it's definitely changed. in terms of the appetite people have to want to invest in the companies that might be pushing twoor, three years out before they get to cash flow profitability. >> we talk about valuations, but amazon is one that often gets thrown into the mix. as one that's incredibly richly valued. it's been around for two decades

at this point. how much patience did amazon win by opening the kimono on cloud? >> well, so heath terry is our amazon expert and you know, i think what people are getting with amazon is they're looking at the bigger picture. their ability to keep building and growing into new markets, cloud is just one of them. they're obviously the leader there with $6 billion in revenue. you know, they gave you some profitability stats. and that's a huge market that they're cannibalizing, existing i.t. spend. so if you look at it in terms of market opportunity it makes sense. >> you mentioned pricing and the fact that we probably won't get clarity from microsoft on windows pricing. how important is it for us to understand how the treatment of windows leads to on-ramps for office 365 and the in the enterprise for azure and some of the other things. >> i think that's key. the microsoft over the next five to ten years is problem i had going to monetize a lot differently than they did in the

prior ten years. that's what we're hoping to learn about is to get some more clarity from people like satia and amy hood to find out how that progression happens and what type of hit do they take now to hopefully generate a lot more over time. >> we'll start to get some of those clues later this hour. heather, good to see you. heather bellini from goldman sachs. well, when we're going to get europe's close, it's going to be eventful in about nine minutes, simon is at the nyse with more. >> when the u.s. sneezes, the rest of the world captures a cold. check out the folds you have in europe. diving on the gdp data we got in this country. three key trades in europe, which are being questioned. one, the equity rally, up 16% so far this year. the second is the euro's fall moving away from parity and bonds are moving in the wrong direction despite the qe that you have from the european central bank. let's look where we are on the euro. look at the move, one cent 57 on

the session, above 1.11 as you can see. you have to ask yourself as the euro rises, whether you've changed direction. because the two macroeconomic policies from each central bank are not as divergent as they were or at least the u.s. aggression is softening on the u.s. interest rate. the euro is heading higher, obviously bad for exporters and undoes the rally you've had in equities on that basis. check out where we are with german bunds, a number of the big bond markets have sold off and therefore the yields are rising, the yields in germany heading up towards 30 basis points as you can see. obviously it's still very crushed down. but bill gross was saying it was the short of a lifetime. despite the fact that the european central bank is engaged in 60 billions of qe every month. >> the credit squeeze is over in europe for the thirst time in three years, bank lending rose

in march. tiny, but moving in the direction the ecb wants. the earnings in europe were pretty poor today. the bottom is clogged one these guys. bbva you know, second largest bank in spain. a rough day for europe. back to you. >> all right, thanks, simon. from uber to snapchat, start-ups are delivering products and services to users in the blink of an eye, how is the instant economy reshaping silicon valley? >> bill gurley is benchmark capital. snapchat and grub hub among others, thanks for being here. let's start off with uber. it looks like we might get merchant delivery from uber. they've got cars all over the place. we've seen them start to move into package delivery. now maybe they become part of the instant economy even more.

do you think that's where we're going to see a big move from them next? and how big a part of their business is moving things three years from now? >> up until now, i think it's mainly just been about moving people, and as we've learned more and more about how the economies evolving, how cities are changing. that opportunity alone is massive. and all the most recent financings i can tell you the presentation deck had zero in for these things. now that said, travis section treemly experimental. you've seen them experiment with everything from kittens to christmas trees. and i think as what you're seeing now is jurt expansion of that it's an ambitious company. they view themselves as a platform company, and they have announced many months ago over a million rides a day. so the number of cars that they have out there, and the algorithms and the technology they have, i would argue gives them a head start. >> what does it look like. are we going to see an uber api

where other companies can build that into their apps as part of their delivery service. do we see the app becoming part of the platform. we talk about how apps are goes to become a platform. >> you'll see the api and other companies will be able to integrate with that. so it will be a one-button thing in a b 2 b way. >> who should be on notice as uber grows? a fedex, a general motors, tax companies? >> i think that's an interesting question. i've been studying a lot of stuff recently about how our cities are evolving. this isn't something that when we made our series a investment i was thinking about. but there's a lot of broad demographic trends that are coincidentally very positive for uber. so kids aren't getting drivers' licenses any more. the number of 18-year-olds with driver's licenses has dropped from like 43% to 28%. car ownership in 18 to 34-year-olds is down 30% in less than ten years. >> you always tell the story about the check that people send you when they, that they, when

they sold their car. >> when they sold their car. and i think what we're witnessing is, from 1950, to five years ago we had this urban sprawl that was happening across america. and now that's retrenching and we're going back to a reurbanization. you guys are in san francisco, not down in palo alto and university avenue, right? all the start-ups are here. the young people want to live in the cities, we've designed america for cars, some cities have like three and a half parking spots per car. a study from ucla said 30 to 40% of the people driving are looking for parking. all of that stuff can change and go away and we can remove congestion and pollution. morgan stanley had something where they said 96% of cars are idle. like this massive capital asset, that we mostly don't use. >> watch out for parking garages. rental car companies, car companies, i think there's a lost things that could change. >> you've been consistent and outspoken about warning signs

and this valuation dynamic. now you're talking about dead unicorns. how many and which ones? >> someone corrected me and said, they've all raised so much money, maybe it will be zombie unicorns instead of dead unicorns. it may be true. i think the defining difference in this tech cycle is the fact that private companies can raise hundreds of millions of dollars. that didn't happen in '99. this never happened before. i read an interesting speech that trucken miller did in january where he argued that very long, extended periods of low interest rates could lead to other asset bubbles. maybe that's what we're seeing. but the risk is we've never run this experiment in silicon valley. we've never had companies burning -- you can't raise hundreds of millions of dollars and not spend it. so the burn rates are remarkably large. when we have companies become public with large burn rates wall street doesn't like it yet the same investors are funding the companies in the private market with large burn rates and

creating the dynamic. i'm not quite sure how it all lands. it's certainly something we think about every day. >> we got to talk about a company that some of our viewers might not have heard of. cyanogen. it's a flavor of android fully developed that doesn't have google within it. is this the future? does google need to be worried about this company. given so much grounder that gaining in india. >> i think it's one of the most interesting things in the tech market is the cyanogen story. google gave away android when this they made it open source. when you go back to when the iphone first shipped and working with at&t, they were very heavy-handed, apple was and everyone wanted an alternative choice. the way google seduced the world was saying it was open source. later the strategy worked with the gsm contract they're trying

to back-step on that open source promise. and lock people in. so that they can monetize. and we're finding a large group of companies, hand set manufacturers, carriers, other portals that would like an alternative. and because it was open sourced in the first place, having a valid fork that has a huge community behind it and look we've been very lucky to be investors in red hat and my sql. companies like that, so we've seen how to do this open source business model. it's very exciting. because all the big players in the market care a lot about this issue. so it's kind of a "game of thrones" thing. >> it has a potential to do to google what linux did to microsoft or sun microsystems. >> thanks so much bill gurley. >> thanks so much. coming up, he's got investments in companies like yahoo, facebook and solar city. his fund was also one of the best performers in the first quarter, up more than 12%. john burbank of passport capital

is with us. not a frayed to make bold calls. twitter down 4%. after an 18% drop yesterday. and twitter's ceo dick costolo will join us live to address the latest quarter. can it make a dentist appointment when my teeth are ready? ♪ can it track my crew's performance, and protect their heads? ♪ can it tell the flight attendant to please not wake me this time? ♪ at cognizant, we see opportunities for every company. to meet the new digital demands of their customers. can it process my insurance claim? like, right now? can it download a track while i'm sampling it? can my keys find me? with the power of digital, analytics and automation,

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i'm sue herera with your cnbc news update. ben bernanke is joining bond giant pimco as senior adviser. he announced he would be a consultant for hedge fund citadel said he would restrict his wall street advisory roles to just those two firms. french president has decided to increase the country's military budget. it's in order to combat terrorism. the increase will allow the defense ministry to cut 18,000 fewer jobs than previously planned. and anheuser busch has apologized after upsetting consumers with a label on some of its bud light beer bottles. it read quote, the perfect beer for removing no from your vocabulary for the night. social media users said it promoted date rape. danica patrick's sponsorship

by go daddy is pulling their sponsorship. and that's your cnbc update at this hour. let's get back to "squawk alley." thank you for that update. john burbank's pass part capital was one of the best performers in the first quarter. what is burbank's strategy for the rest of the year. david fab certificate outside here at one market plaza with passport capital founder john burbank to get details. david, i'll send it down to you. >> you can feel the sunshine on my back. i think it's shining in your face a little bit. john, good to see you, first time we've done something on this coast. and are you housed in the same building we are. we look forward to -- >> good location. >> i want to talk a bit about the growth of the city since you've been here for a quarter-century. not that you're old or anything. let's start off with the big

themes in the market. one that you particularly benefitted from. kayla mentioned your performance in the first quarter. positioning the portfolio to assume a higher dollar. things have changed a little bit. i wonder are you changing your strategy or how are you approaching things? >> we've been positioned since the third quarter for things that are benefit or not hurt by a stronger dollar. we thought that was the driving factor. it surely was in the first quarter. we like u.s. equities, we like chinese equities, we felt like if the dollar kept raling, those wouldn't be hurt on a macro basis. that changed march 18 when the fed backed off from their hiking stance. since then we've had a big reversion trade and a weaker dollar. you're seeing how weak the dollar is against the euro today and against some commodity currencies. so we've had to, we've been short, we had been short a lot of companies, that get hurt with a stronger dollar, commodities,

emerging markets, we decided to cover a lot of those shorts fearing this bigger reversion trade. because there's still people that are long the dollar. it could be a matter of time. if the hiking does happen. now it's forecast for september instead of june. they i think we're going to resume a stronger dollar as the rest of the world cuts and eases. right now it's a positioning, a crowded trade that's getting unwound as the fed gets more dovish and the economy is weaker. >> we saw the gdp numbers were not particularly good. so how much do you then change your portfolio, or do you simply sort of hedge around the edges, given you still seem to think the dollar is going to remain strong, if not get stronger? >> yes. i do think with time the dollar is going to be stronger. or you would have to believe the fed is not going to hike and is going to resume some sort of qe. >> which seems unlikely. >> it seems unlikely. the rest of the world has gone to extraordinary easing pe inin policies, with negative rates in europe and almost negative in

japan. however, there are a lot of people who think these policies are going to lead to a reinflationary uptrend and gdp growth in the world. so the price action is leading some people to believe that things are going to actually be better. when i don't think that's really what's causing it. i think it's just an unwinding of what was the dominant factor in markets. >> so you don't believe that we're necessarily going to see growth in other parts of the world as a result of free money? >> i think it's a lot of zero-sum growth. euro is lower, yen is lower and it benefits those countries. but at the expense of u.s. companies. i think the reality is we're just in a slower-growth world. with following nominal percentage returns, and that's the way we are. there's a lot of secular trends coming together and we just don't have that cyclical recovery that's expected, that is what traditionally happened previous decades. >> that we've been waiting for, it seems like for a long time.

the extension of that would be we're going to have low rates forever. >> demographically it supports that, in the rest of the western world and china. we're at a point demographically that we've never seen before. >> what do you mean? >> people are olding, they're aging, population growth is very low. we had a demographicer in our office. europe just started to lose population i believe this quarter. these, these trends are pretty profound when you extrapolate them. that combined with other things in the market, technology is increasingly one of them. but also the globalization of labor, with china coming into the world and hurting incomes here. lots of factors. settle that's been going on forever. >> it has. >> it's not like it's a new trend. >> it has, but if your economic models go back 100 years, the first 90 or so didn't show this. and you know, these new things that have happened in the world,

are really, are just different. demographics are different. globalization of labor is different. increasingly technological change that's essentially deflationary, it's just different. >> right, of course a lot of that change takes place in this very city that we're looking out at. and continues all the time. well when i look at your portfolio, though, and i see one of your largest holdings is cf industries, fertilizer -- >> not exciting. >> explain it to me. >> it's a benefit from the very low natural gas prices. relative to the rest of the world. they earn dollars, they have almost 40% of the nitrogen fertilizer market in the u.s. very good margins, very good prices, it's not an exciting story, but it's a dependable commodity story and it's returning capital to shareholders aggressively. they've bought back a third of their shares in the last decade. a boring story, but a good story. >> not so bore something vip shop. it's like a ten-bagger already,

which begs the question -- don't be greedy, man, why aren't you selling it? >> in two years it's been a phenomenal story. we think china internet is an extraordinary story. it's the next best story in technology. you know, the retail infrastructure in china is very small. this is like tj maxx and ross stores online this is the way chinese shop for cheap apparel. and of course, china makes the world's apparel. >> they do there's another company called alibaba. why, if you want to exposure to that, wouldn't you be buying that? >> well they have, it's complicated. they have a number of issues and problems and i think also -- >> you don't like the vie structure in. >> i think alibaba's listing supported the v.i.e. structure. that's i'm not as concerned about. i think it was a well-hyped story. they're also, they're spending money pretty aggressively. they have to show their growth. we like ten cents a lot better

than alibaba right now. but in general, the theme of china internet is a good one. >> talking about the internet and i mentioned at the beginning of the interview, you've been here for 25 years. you think the growth for this city and what's going on is only at its infancy. >> well, technology has changed, until the internet, i think technology was a pro cyclical gdp high-beta industry. you sold you know, gadgets and chips and widgets. and as the gdp grew more, people ordered more. the internet happened and suddenly investing in technology changed. and i could say that you know, the internet is going to turn 21 this year. in 2000, it was six years old. and to expect you know, the next ten years what happens from a 21 to a 30-year-old. is very, very different than all the investment you have to put into you know a 6-year-old, a 10-year-old. so i think what's going do happen here is deflationary outcomes. i mean technology now, the services, the applications, don't have value unless it's

inflationary. so i think because human capital comes from all over the world to san francisco, primarily you know to monetize their ambitions and participate in this ecosystem, i think the outcomes you're seeing in twitter, uber, you know facebook, et cetera, are just going do keep happening. but increasingly more industries. so in a way you have to be here to see it and understand it. we want to be long change. and we want to short gdp growth. this is a way of being long change. >> john, as always, appreciate your time. thank you. >> thanks. >> john burbank from passport. kayla, back to you. >> the internet growing out of its infancy. a great stuff as always. when we return, a duff day for twitter, with shares down nearly 5% this morning, ceo dick costolo will join us in a first on cnbc interview. it is up next.

coming up, so much happening in the markets today. the dollar is dropping, feds meeting. we're covering all of it plus twitter getting hammered after earnings. the analysts who says sell, the trade another says buy. they square off live on the stock. did the accused trader really help cause the flash

crash? we'll ask a former colleague. carl, see new 15. >> thanks so much. twitter shares down another couple bucks this morning as the company reported first quarter revenues that fell below estimates. company of course also lowering its full-year expectations, joining us here at one market is dick costolo. the ceo of twitter. dick, good to have you. welcome. >> thanks for having me. >> was it a rough afternoon yesterday? >> well the combination of the of course the third party who manages our i.r. site leaking the results before the market close, as you get ready to go into an earnings call, that wasn't particularly pleasant experience. but look we had a slight miss on revenue, anthony and i talked about it on the call. we've got a great revenue engine. it was due to our direct response business. those products are new, they're less than a year old. we know what we need to do there. think we'll see improvement. >> what do you need to do there sm. >> it was a combination of as we

mentioned on the call. measurement, creative, and tartitart i targeting of our dr products. we've got the biggest brand advertisers in the world. we're ramping spend from them quite well, quite nicely across the world. we need to keep grinding away on our dr products. >> you've heard this from analysts on the call of we've heard it from investors all day, we've had this discussion of m.a.u. and disappointing m.a.u. guidance and results for over a yeerks almost two years and you've made changes. why has it taken so long to kick in? >> think you you want these things the moment you roll them out and the first iterations of them. we've launched instant timeline when new users come to twitter we've always talked about the gap between awareness of twitter and engagement on twitter. we want to be the case when new users come to the platform, they get it right away and we think instant timeline is a great

innovation. we would have loved it if version one worked right on out of the box. it's great on engagement. new users are retweeting and it's been neutral on retention. it will be a learning product for us. >> you said visibility in april in terms of m.a.u. is low. >> we're not seeing the trends we saw in q 1 around organic growth, seasonal growth we saw in q. we didn't see it in april. we wanted to be forthright on the call and we were that april is not seeing the same visibility. >> does it seem like the past quarter where we did start to expect a reacceleration of m.a.u.s, was that an outlier? >> we don't know what may and june are going to bring. >> that's people's concerns? >> of course. i understand that. and that's why we're he we wanted to be clear what we're seeing in q 2. in the instant timeline and log

data experience, address why should i use twitter, when you can come to twitter and see in the log-out experience and how to use twitter with the instant timeline. as we reiterate on those, i'm confident we'll bring the same iterations, like we did with ad targeting. we did a lot of work between version 1 and what it looks like today. >> there's a sense on the sell side, that in the words of one, advertisers have hit regarding twitter an r.o.i. wall. they're just not getting in front of the consumers they want to. they're not getting the return on investment. they're wondering if it's a good spend relative to other opportunities in social. >> i wouldn't characterize it that way. as anthony and i talked about on the call it was a demand issue where direct response advertisers, we did things for example like we made it, we moved down the funnel on website lead gen cards. when an advertiser pays us for a lead gen ads, they want to get a

click to their site. we were previously charging them for any engagement with that add. a f a user replied to them. if a user favored the tweet or retweeted them, they would pay us for that. in order to improve their r.o.i. and make it an even better spend for them. we're now only charging them when a user clicks through to the site. so that's better value for the advertiser and we expect to see over the long-term, cpes rise there. >> stocks had a big move over the past couple of months. in some part because of expectations that a partnership with google would expand, right? you got double click, you got google search. have been conversations about doing more, google taking a stake of any size? >> i would never comment on any third-party conversations like that we've had. so i would just say that we have a great and growing relationship with google which i'm really excited about. we have a similarly great and growing relationship with apple. we referenced again on the call last night that not only does the google deal launch in may,

we expect the search deal splif to launch in may. but we're integrated now into spotlight search and osx and ios. which is going to drive a lot more traffic to us and improve our logged-out traffic. and as we think about expanding our total audience. like to the google relationship and the apple relationship. >> what do you say to investor who is argue look it would be a great fit. they need social, you've already got a head start in the relationship. i mean should they tamp down those expectations? >> we have to think about running the company that we're running. and i have every belief that twitter is a wonderful, beautiful independent viable long-term company. we have a great long-term strategy. we rolled it out on analyst day for all the analysts in november. we're very clear about where we think we're going over the long-term. we have every belief that we're going to go execute it against that plan. >> we've been through this ride a couple of times regarding you. is dick c. on the hot seat so to speak. i tweeted that you were going to be on and someone tweeted back why, to say good-bye?

>> let me tell you something, let me back up and set the stage for this. the great thing about running twitter is long before we were public company, i have people telling me every day you know, you're a genius, you're a moron. i have a cleric saying twitter is the root of all evil in the world. i have isis announcing that they should send lone wolves to assassinate me and jack and ev and all of our employees. so you better have a thick skin and really want to do this to have this job and have confidence that what you're doing is going to pay off over the long-term and we have that. >> have dorsey or williams expressed any interest in changing strategy, direction, management? >> no, the board and i have, are super-close together on what the strategy of the company is and where we're headed and what we need 0 do. i think we're all aligned on the fact we've got the right strategy and the board loves the road map ahead of us. >> the last time dorsey had a bit of a tweet storm in support

of you. would we expect that again, some affirmation of your leadership? >> the board and i have had a number of conversations about things like this. i don't thing those things are particularly helpful. it's like a, it's like an owner of an nfl team says this guy's got my full support. you know the next day, that's it for them that guy. look, the board and i are aligned. that's the only thing that matters. as long as the people inside the company believe in what we're doing, and they do. and as long as the people inside the company understand the strategy and know that the board is aligned on that strategy, then we're going to ignore the external noise and focus and execute. >> speaking of external. how much time do you spend worries about an outside activist coming in and demanding change. >> you can't worry about that when you're trying to run a business and focus on the long-term. otherwise you'll focus on the wrong things. when you think about the previous quarter, we could have kept charging direct-response advertisers for any of these

engagements, even when what they wanted was lead gens and quicks through to their quite -- clicks through to their website. that would have made us another $45 million. statistic right thing with the business? >> no, we're going to do the right long-term things for the business. >> periscope, millions of users in the ten days? >> in the first ten days, a million users logged in. >> what's the hope for periscope. how does it fit in the puzzle? >> periscope and vine together are native mobile video products that we see more and more online video talent, youtube stars and the like. moving to. to create. we think that periscope fits beautifully both as an online video talent creation tool and as complementary to the twitter, live in the moment this is what's happening right now in your world. so as we think about the future of those, and driving more native mobile video into twitter and expanding consumption across the twitter ecosystem, i love the way that those three

products, vine and periscope across the twitter ecosystem work together. >> one of my questions to you was does periscope somehow cannibalize vine or vice-versa? >> no. not only can they co-existent, i think they make each other better. we see the vine stars moving to periscope and doing things like let's live-broadcast the making of the next vine we're going to make. so you see the interplay working nicely. with the addition of niche, the service agency we bought that really helps this online video talent build their careers, we've gotten out two of the most powerful native mobile video assets and the service that helps those folks grow their careers in our ecosystem. >> there's been some complaint about inconsistency of metrics, i know you don't agree. but were you stalking about timeline views for a while. then you weren't. some argue it makes year-ago comparisons difficult when they talk to you on the call. how do you respond? >> the got rid of timeline views, we were explicit about this again in our previous

quarters and analyst day. it's not something we optimize for. so there are things that we're doing that we know and will intentionally drop, drive down timeline views like making more media-centric timelines and media-centric experiences, we don't want to have the market and folks outside the company thinking about something that we don't optimize for ourselves. >> before we let you go, the nasdaq issue which they issued a statement on today, is there any recourse for you? can you address it later on? >> whenever you outsource something to a third party, the reason you outsource it to a third party is they have competencies in an area you don't. and you hope these kinds of things don't happen. so it's absolutely something we need to talk about. >> how do you find out about it? >> anthony walked into my office as we were getting ready to do the earnings call and let me know what happened. >> and your reaction was? >> we need to find out quickly whether it was us or the third party and take action based on

whatever we find. >> everything you knew what was coming, knowing what the results would be, know whagt wall street reaction would be. this was the last thing you wanted. >> it was like when you it happens, you think to yourself, it's not particularly fortuitous timing. but it is what it is and we're dealing with it now and we'll follow up on that. >> we've known you, as a private company, we've watched you go public. we've watched obviously the volatility in the stock. as of the quarters have gone on. is it worth it? has it been worth it to be public? i'm dead serious. >> as i've said before to you, look, this is the most fun kiloliter in the world to run. you couldn't ask -- fun company. you couldn't ask for a better thing to do than to get up in the morning than run a company that's impacting lives so dramatically. if you were on twitter two nights ago, you saw, with periscope, with those two apps, you saw everything in baltimore unfold before your eyes. there's nothing more fantastic than being responsible for that. >> but the argument goes, that

the street does not allow you to plan for the long-term. because of days like today. >> it does if you focus and execute against your long-term plan and help everybody understand what's going on in the short-term. if you lose focus on the long-term plan and start to pay solely attention to, we have to make these changes that aren't right for our customers in service to the short-term, that's where i think you lose your way. >> it's a cliche to ask you about what do you worry about, what do you worry about arrival doing something. but there is a school of thought that argues what if facebook for instance, pivoted to a broadcast model? what could they do with a much larger installed user base? >> i think in many ways they have pivoted to a more public model. they encourage posts to be more public now. the news feed is sort of optimized in many cases for more public posts, i think that kind of thing has already happened. >> would you expect them to buy meerkat? >> i'm not going to speculate on what anybody else should do. i'll say that the beauty of

periscope for me has been that when we saw it as a prelaunch company at the end of 2014, this an imagination of what could happen and what could be so powerful about it. and even said, you know, things will happen on this platform that we can't even imagine yet. as they did with twitter and that's already happening in just the first month out. so it's delightful to be able to see that kind of thing unfold as you would hope it would. >> what about the message it sends to developers, like a meerkat, that if you get too big for your britches, we will find some way to make you go away or embolden a kpet center. >> well we had already had relationship with periscope and knew what we were going to do there. we're going to invest behind the product that we've already that we've already acquired. and are going do it rate on. so that was a very frankly easy decision for us. >> you like one market? >> the view is -- a little bit bitter than my view. i have a view of a wall. >> we've been hearing that a lot

lately. we appreciate you coming in, dick. a lot of attention being paid to you, as you know. >> thanks very much, carl. good to be here. >> dick costolo, the ceo of twitter. that does it for "squawk alley" for this wednesday. coming up at noon. let's get back to headquarters and scott wopner and the half. ♪ ♪ welcome to the "halftime show." let's meet the starting lineup for today. joe terranova, senior managing director at vert is managing partners and john and pete najarian are the co-founders of option monster. we're joined by paul richards, the head of fx north america over at ubs. steve liesman is our senior economics reporter. #twitter fight. analyst who says sell, one who says buy. we'll battle it out. flash crash, a man who worked with the