♪ ♪ good friday morning, carl is out today, joining us from san francisco is our own jon fortt who has been there all week. joining me for the hour at post 9, david faber pulling extra duty on a friday afternoon. we start with what else but amazon shares continuing to soar after the company posted a profit. and gave upbeat guidance for the current quarter, revenue rising 20% helped by strength in web services and amazon prime. the company's market cap surpassing that of walmart. it's been a good year for amazon, shares up about 80% in 2015. jon fortt, the company has been telling us for over a decade, it is investing in the future.

that's why its margins are so low. has the future arrived for this company? >> every once in a while amazon sort of pokes its head above water and decides to show a profit for whatever reason. i don't think that's any guarantee that we should expect to see that every quarter. but there are a couple of trends here that are worth noticing. one has to do with margins in north america. they were at 5%. that's changed from 4% quarter over quarter. 3% year over year. said that has to do with prime driving traffic and efficiencies, things like robots in their fulfillment centers, driving efficiency dropping to the bottom line and amazon web services got a lot of attention. less than 10% of overall revenue. but it points to the future. it's growing 80% and has a fat 20% operating margin. it surprises people, because the cloud is supposed to be monetized. amazon, even though it drops prices is the leader and is managing to squeeze profit so

those things excited investors. >> operating income up 407% this quarter. kara swisher of re/code is joining us, good to see you. let's ask you about amazon. we've talked about the symbolism of the market cap surpassing walmart's, that? the future of online retailing. that this is a cloud company, an infrastructure company. what is the amazon of today, given where we're seeing the engines roaring here? >> well, you know, what jon said, they made $92 million. that's hardly anything. google made close to $4 billion in profit or something like that. i think they're kind of screwing with you all, too. they can make money if they want and they aren't going to make that much money because it's a retailer. the stock has nothing to do with it. it's worth more than amazon, that's just a side light. i think the issue is what businesses can they really do well in? like aws, the web services and what businesses are going to be sort of not very margin-friendly, which is the retail operations. so you know, jeff bezos wants to

grow and grow and and presumably thinks someday he's going to drop the hammer and make a ton of money. but the fact of the matter is that retail is a tough business and it's always going to have slim margins. they kind of screw with people every now and then and pull out a profit and everyone goes wild. they're capable of making money, they just choose not to. >> $92 million. david faber, know this company better than anybody, are they screwing with us? >> they are treated differently than every other retailer in the world, period. you know, $92 million. it's an infinite multiple. if walmart had anything like their multiple to revenues, it would be worth a trillion dollars. that said, that's been the way it's been all along. and bezos, when he's needed to, he's focused on investors, he hasn't needed to in quite some time. when there was jeopardy many years ago, perhaps even on the liability side of the balance sheet and the like, but he's got

everybody believing it. and as long as they can continue. i don't know what the terminal multiple is for this company or where the end comes or where you're discounting cash flow back from. but it seeps kooeps going and every so often they like to put up a number to show us that they can. >> the performance you've got is the founder premium. jeff bezos is still in the driver's seat. when you look ate cross some companies that had a big boom in web 1.0 in the mobile era, a lot of the founders aren't in place. there's a little of the elon musk effect. if you're betting on somebody in retail. forget about online retail, are you going to bet on ebay, which we see splitting up now? or are you going to bet on amazon which has a portfolio of businesses, all of which growing and working together. nobody is right now arguing that aws has to be broken apart from amazon. a lot of that is because of jeff bezos's reputation and leadership. >> if walmart put up numbers like this, they would be killed. jeff bezos has that in his desk

drawer, the $92 million. maybe he just pulls it out. the question is just like with google, they decided not to pretend they're playing around with all their money. they're not doing their moon shots and invisibility cloaks and time machines, they got super serious and brought a super cfo and said we're interested in costs and transparency. we'll see. we'll see. >> you think this is a temporary phenomenon? >> yes. yes. i think he's done it before and you all forget. i unfortunately am super old and have watched bezos do this for years. he makes beautiful products and that's the key. is the great product company. but so is walmart. so are a lot of companies, he gets treated dimpl just because. >> we did have jim stewart of the "new york times" on last hour talking about the new prestige of the silicon valley cfo, the ruth porat, the abilitiny nono of twitter.

is the cfo in your opinion becoming more important? >> ruth porat is a fantastic executive, long-time reputation with wall street. they're hiring people that wall street can talk to, kind of like hiring a trains lanslator in a way. snapchat slooking for a cfo right now. so it's an important function and a lot of the companies, cfos have a big role. at facebook, the one that just left certainly did. at google for a long time, patrick has had a major role in the operation. so they are important executives here. i don't think that's a new think, but it's a very important role in these companies. >> they've been soothesayers in the past week. so a position to watch. earnings parade has continued, visa, starbucks among those beating. pandora having a good day today. shares rallying after market yesterday and rallying today.

shares topping expectations, thanks to solid advertising growth. you see the stock up 13.5%. on the conference call, pandora's ceo addressed the elephant in the room, apple music. with any big launch like this and the noise in the marketplace, there could be users that experiment with it and short-term impact. but we don't believe there will be any long-term impact. jon fortt apple music launched in june. they're saying any impact wouldn't be felt in this quarter. potentially in the current quarter. >> yeah. and we'll have to see how this plays out it doesn't help that jim dalrymple came out and said apple music frustrated me. i've been using apple music. it's got some frustrations for me, too. i've switched to pandora for some radio listening. we won't know what the impact is until around september. then some people who initially

tried apple music for free will be off of the free dole during that month. will they pay for apple music. or will a considerable number of them who weren't used to paying for streaming services say what can i still get for free? maybe they go to spotify, pandora and those services get a bump out of that. but it's not a foregone conclusion that apple music will be a big winner. apple has plenty of work to do on that product. >> we're seeing pandora's streaming service loses money. it lost $16.1 million in the most recent quarter douxt think it can turn that around even with a competitor like apple in the room? >> it's not apple, it's the music industry that's overcharging. they've never, still haven't worked out the licensing fees that are onerous and very hard to build a business. it's tough especially when you don't have enough size. apple has size, think the product they've turned in is not something they should be scared of. it happened years ago when microsoft came out with an aol competitor.

we opened it up and thought it was a trojan horse, we thought the terrible product was a fake product. it wasn't a good product and nobody was using msn. it's not a foregone conclusion that these companies can create great products and apple music is difficult to use. and jim, a big fan of apple, for him to say it, as another blogger said -- ouch. i bought spotify premium in the middle of this because i tried them both out and it still has got a lot of kinks, just the way apple maps do, just the way itunes does, a lot of the software is not as pleasurable as its devices. >> kara, who do you think that size argument helps, spotify, ultimately? >> i think spotify is a fantastic product. can any of them get big enough to pay the fees. the ongoing fight between the music industry and what they want to be paid and the artists and what they want to be paid creates a difficult situation

for a company to make money. apple has to have have comparable product to spotify to compete. the product has a lot of issues, it's super-confusing, jim is right. he lost a lot of songs and stuff like that. and everybody has similar experiences. and you know to be fair, apple is trying to pull off something rather big here and the question is, do they have the firepower to do that from a software point of view. they still have software issues with a lot of, i just switched to a mail product because i can't stand apple mail any more. >> it feels to me like apple music has crammed three or four different apps into one. the radio thing, they should make that separate. your own music, maybe that's separate. when you put all of it together you end up with some of the sync issues that jim said he experienced where he lost almost 5,000 of the songs that were in his library from cds he had ripped or things he had bought. that's the outcome you don't want. you can bet with somebody as close to apple as he is they're

scrambling in cupertino, figuring out how to fix something like that ahead of the new iphone launch in september. a lot of new users will come online. you don't want those people losing music and coming back to the iphone store saying hey, i got a problem. >> we won't know the impact of this until the free trial period rolls off. pandora, we should note, down 45% in the last year. even though it is seeing a bump from better-than-expected earnings today. so we should put that into a broader context, kara swisher, thanks as always for joining us, have a great weekend. we want to check the markets, right now we're in negative territory for the dow, down 78 poins, the worse-than-expected new home sales did a little to take a leg down in the market. down by .1%. meanwhile, anthem announcing it will buy cigna in deal worth around $54 billion.

anthem and cigna trading to the down side so far. anthem by 2.5%, cigna by about 4.5%. starbucks is rallying after earnings came in above expectations. the company announcing it's boosting its buy-back program by 50 million shares and announcing that about a quarter of all of its purchases happened in its mobile app. coming up, youtube's ceo speaking out on original content. advertising and its competition with facebook. she will join news a cnbc exclusive. plus juniper shares on the rise. according to a new study your smartwatch will be hacked by the end of the year. being a keen observer of the world has gotten you far, but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform,

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youtube's ceo speaking out on original content, advertising and competition with a facebook in a cnbc exclusive interview. she spoke to julia boorstin who is live in l.a. and has more. >> that's right. watch out netflix, youtube's ceo is upping the ante and the fight to make youtube the ultimate content powerhouse. >> we're going to be developing a bunch of youtube originals and so we hired suzanne daniels from

mtv to help us develop those programs. we're impressed with her work and we think she's really familiar with our demo and youtubers and she's going to be able to help us take some of her knowledge from developing content and grow it even more on youtube. >> with more youtube stars starting to create and sell movies off of youtube, wojitski explains how she wants to keep those creators happy and profit from their success. >> there's no one format we're going to do. but a lot of times our youtubers when they'll have a lot of users and a lot of subscribers, they'll start to think about how can i do even more. and so we go to them and we talk about well what's something you've always wanted to do? have you wanted to do a scripted comedy? or maybe there was a movie or something that they've always wanted to do. so then we can work with them and find a way to make that happen. >> on the heels of youtube

driving google's better-than-expected quarterly results, wojcicki explains how she wants to grow their revenue, not just by growing advertising, but by seeing that users of the free service can be convinced to pay. >> we see a lot of opportunity to continue to bring more advertisers to the platform. and so a lot of times some of our biggest advertisers, they're getting on youtube for the first time. and so we're working with them to understand how they can continue to change their creatives. so they can work really well on youtube. how can they, how can we continue to optimize the platform. and the other thing that we're doing is we've talked about doing subscriptions, so right now we're working on a subscription service and we think that long-term youtube can be ad- and subscription-supported. >> i asked her about the new threat from news services offering early access to videos before they're posted on facebook. and of course, the big new

threat posed by facebook, i'm sorry, posted on youtube and the threat also posed by facebook. >> i think everyone has a different approach to what they think is valuable for user to pay for. and you know, we have been that's why we've been reroo working our music key service. and so we, we think that you know, our goal is to enable our advertisers for our creators to be able to generate revenue with advertising and subscription. and you know we'll certainly see how all of this plays out. and if it turns out there's one model that's really successful in the future, you know we can always look to it and try to adopt it. >> how concerned are you about facebook? >> well facebook is always, facebook does you know, they're a large player. so i think it's always important to look at the competition and to take it really seriously. that said, like this is a really

big space. and so you know, we pretty much any way you look at it, time of users, advertising dollars, subscription dollars, just very large. the tv market. and it's moving to online. and so we think there's going to be a lot of opportunity for different players to come into this space. >> she also might be interested in acquiring some of the newer players in the space. she said she finds a product that both would help users and also creators as they put their content on youtube, she's going to want to talk to them. guys, back to you. >> thank you very much. up next, shares of juniper network are rallying. the ceo joins us next on "squawk alley."

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welcome back. juniper networks reporting better-than-expected second quarter earnings. shares seeing a nice gain this morning. the company benefitting from

growing demand for cloud computing. but can we expect a repeat performance next quarter? always looking forward to next quarter. rami rahim is the ceo of juniper networks and joins me here. this was driven by cloud and some other segments, so there's talk about you know, service provider hadn't been performing well overall for you guys or for cisco over the past several quarters, we see a lot of upgrades on the street today. tell me about the impact of cloud and cable in particular. how strong is that? how much should we expect to see that continue for the next few quarters? >> sure, when you think about our second quarter results which we're pleased with, they were driven by the solid diversification that we saw across a number of key vertical segments that includes cloud and cable and also includes a number of key enterprise customers that drove our business. this has been a deliberate strategy by june peiper that's

playing out nicely. impact has been fantastic. not by accident, as a matter of our strategy. >> when you look at amazon's results yesterday, people paid a lot of attention to their cloud revenue up some 81%. their profitability also working very well. in that segment. does that work against some of the enterprise buying that you're seeing. a lot of the enterprise ceos that i've talked to lately about their plans going forward. they're talking about moving to amazon or maybe microsoft, does that mean they'll be buying less juniper kwinequipment and you'l selling it more towards amazon. >> this movement towards cloud delivery is affecting everybody. everybody is moving in that direction, more more or less. the large cloud providers started there. many of the small and medium businesses are starting to move their infrastructure over to public clouds. some of the larger enterprises will move to more of a hybrid

cloud architecture where they develop their own clouds for their own internal applications and data sets and use some of the public cloud providers as well. all of this represents an opportunity for june per. at the heart of the cloud movement is in fact a high-performance ip network, what we specialize in. >> it would seem to pressure your margins if it's fewer customers with a lot more leverage. who are the ones who are increasingly buying the equipment of we've seen it happen in servers and many other areas with when your customers get particularly strong. how do you make sure that the trend ends up benefitting you marginwise longer-term. >> it comes down to diversity strategy. >> we're focusing on cable, cloud providers. it's the diversity in our product offering and the diversity in the customer seg thamts we're going after that helps us you know, keep our margins healthy and grow revenue. >> talk about what you're seeing

outside of the u.s., as we close. europe, clear lay lot of volatility in asia. we saw from ibm just a few days ago, they had a lot of trouble in what they called growth markets, what are you seeing? >> when we look at our global presence, north america was actually a very strong performer for us in q 2 timeframe. europe, in a large telecom operating standpoint has been good for us. there's volatility with respect to currency. but that actually hasn't really affected us all that much to date. we're keeping a close eye on it we transact primarily in u.s. dollars, it's not a huge issue for us. asia china is a challenging market for us. it's a great market in terms of opportunity. in fact as most number of internet users in the world and growing. but it is a challenging market from a geopolitical and competitive standpoint if subtract china out, our asian businesses are actually growing. >> it helps to be the underdog

sometimes, it is good to see a strong quarter from you. the ceo of juniper, rami rahim. thank you for joining us. >> thank you for having me. let's count you down to the close in the uk and across europe. stocks are finishing to the down side, they had been mixed earlier in the session, eurozone pmi and chinese manufacturing activity data coming in weaker than expected. there was a turn in the markets in asia toward the down side that helped move europe. we're seeing the selloff in commodities across the complex. it's taking effect on the market as well. minors are taking a hit on the china news, bhp billiton and rio tinto among those falling in london trading, bhp down 4%, you can see others in the 5% range. britain's vodafone issuing upbeat guidance and achieving quarterly sales growth for the first time in three years. but german chemicals giant basf posting an earnings miss there the stock 600 is underperforming the s&p 500 for the week.

with just a couple hours remaining in u.s. trade. europe stocks down 2.75%. the s&p down 1.5%, but still negative on the week. coming up, shares of amazon skyrocketing after the strong earnings ron report. why one analyst says he thinks the stock has nowhere to go but up. but it is not the device that is mobile, it is you.

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here's your cnbc news update at this hour. the transportation department has launched a price-gouging investigation involving five airlines that allegedly raised fares in the northeast after an amtrak crash in philadelphia disrupted rail service, the five airlines, delta, american, united, southwest and jetblue. senate republican leaders will use a must-pass highway bill to start another fight over the president's health care law. senate majority leader mitch mcconnell plans to introduce an amendment to the transportation bill it fully repeal obamacare, that would likely set up a vote for sunday. the fda is calling for more information on food labels about added sugars, right now consumers can only see how many grams of sugar are in a product. the agency proposing adding information about how much the product adds to the daily recommended intake of sugar. and american flags were hoisted and billboards bearing welcome measures were raised in nairobi where president obama is

due to arrive this afternoon. let's get back over to "squawk alley." shares of amazon soaring after the company's second quarter results surprised the street. our nest guest raised his price target on the company by $100, to $650 a share. joining us is ubs managing director aaron sheridan who has a buy on amazon. eric good to have you. you're not alone in having a buy on the stock. i would like to start off giving at least a sense of caution. if you had any to offer what would it be? what would concern you? i can go back, i guess a year ago to their third quarter where they surprised some people with not a particularly good quarter. we're currently in that quarter right now. >> i think at the end of the day, do you have to know that amazon is a company that's investing to grow. so if there's any note of caution, it's that there is a long list of agenda items where jeff bezos and the team want to invest for the long term. this is a company not being

managed quarter to quarter. whether it be international expansion, film expansion, continued investment in aws there are going to be investments in amazon. i think revenue growth not necessarily maximizing profit margins every quarter is more the mantra of this company. >> all right. that all said then, what exactly is it that you embrace from this quarter more than perhaps other metrics, if there is one, whether it be revenue growth or the slight profit or margins and cost perhaps a bit lower. margins higher than expected? >> well it's a mixed shift. you're seeing two big mix shift teams in amazon. aws is becoming a bigger portion cloud computing business.heir that is driving a reacceleration of overall revenue growth and really, surprising people to the upside on both the profit and on the revenue side. and in the e-commerce business, you saw reacceleration in paid units and on the top line. and i think the top line reacceleration allows amazon to

feel like investors gain comfort with them continuing to invest for the long-term. >> eric, i can't help but notice this big pop in amazon after the earnings results, the big pop in google, with facebook also popped. we're going to get results from them next week. is there a point where something causes people to get queasy about the multiples here? north america has been strong for so many of these players and the ones who have less sploes spoes yur to china and russia still doing well if we see any sort of a slowdown in north america, is that the issue? you know throw netflix into the mix, too. all these high multiples, is there a possibility even though their fundamentals might continue to be pretty strong, people just get nervous and that has an impact? >> it's possible. i can't rule it out. i would say based on our client conversations, investors are gaining comfort that the large-cap names and there has been a divergence in performance year do date between large-cap

internet names and small and mid-cap internet names. the large-cap names are the ones that continue to work. people are gaining comfort that scale wins out in the long run and scale showing through in better margins and in gaining market share. you are seeing the larger players in the internet space like amazon and facebook and google gain share. and i think you know the multiples in our view are not unreasonable for those names. so you're getting scale beneficiaries with margins going up at not unreasonable valuations and that's why you're seeing inflows into these names. >> eric, it would seem that you would expect some air to come out of the stock. your price target is 550, that's below where it's trading right now. >> we raised our target from 550 to 650 today. so we think you've got a fair bit of room to run on amazon. >> what's a fair multiple for this stock? when i talk multiple, i suppose i'm talking more about revenues than i am earnings, given it's almost infinite when it comes to

earnings. >> it's interesting, i think investors are also pivoting to looking at the stock on some of the parts. you have two very different businesses, you have a very fast-growing but infrastructure-intensive business in cloud computing as you guys were talking about before the commercial break. and in cloud computing people are sort of analogizing it to tech hardware, sas companies and willing to give it a multiple. we took our valuation from 80 billion to 105 billion of aws. and on the e-commerce side you're trading right around 1.4, 1.5 times revenue. we don't think that's unreasonable to pay for an e-commerce company that's still growing e-commerce revenues north of 20%. >> 105 billion on aws? we've got about ten seconds, but just give me the quick and dirty on how you get to that number. >> 81% revenue growth. the street thought that would be 50% revenue growth. it was a 17% beat on aws revenues and margins improved

dramatically. >> that's interesting. see if pressure starts to come to the company to try to split that out. eric we'll leave it there for now. thank you for joining us. and that 550 price target i was mentioning was from a july 14th note. so just a week ago that got upgraded to 650 this morning. smartwatch users listen up. our next guest says your wearable devices are vulnerable to hackers everywhere. how to make sure you stay protected. but first, rick santelli, what's on your mind today? >> well, fed fund futures just rallied a boatload, two-year notes just rallied a boatload. 10s and 30s didn't rally hardly at all. what's going on?

it was jason. it was jason. it could've been brenda. . housing hiccup, we're trading today's weak sales numbers. plus taking positions on net week's monster earnings calendar, including facebook and twitter. and rumble in the jungle, trading amazon's big beat. who is winning in the cloud wars and is the stock still a strong buy after today's big surge. that and more at the top of the hour on the halftime report. >> well at&t out with earnings and it was a beat, that stock up about 3% this morning. the company added 410,000 post paid customers in the quarter. average revenue per customer came in better than expected. at&t said it added 331,000

prepaid customers. analysts had expected the company to lose about 27,000 customers. those they did lose, it was more of the feature phones and having spoken to cfo john stevens earlier this morning saying that we've added over 600,000 post paid, excuse me, prepaid, post paid and that of course was the more important component for at&t. which is getting closer and closer to closing the directv deal. which they increased the synergies up to 2.5 billion now. >> when are we expecting the deal to close? >> any day. the fcc has more or less signed off it won't take long to wire the money when they get the okay. >> thanks, david. let's get to the cme group, rick santelli has the santelli exchange. >> one of the big debates, it pretty much encounters a lot of the word traffic on cnbc is to tighten or not to tighten. that is the question. and believe me, there's not only a lot of verbal debate. there's a lot of trade that goes

on. yield curve trades, a variety of ways to put your thoughts or your opinions on what the federal reserve and its path to normalization may look like. but today, maybe we're given an extra clue, because fed staff seems to have released some of their projections and yes, we could talk about gdp. i want to talk about fed funds target. before we get into specifics, let's think about a couple of things. first of all, did anybody see today's housing data? it wasn't spectacular. we had fairly spectacular existing home sales. we've had a lot of pretty good, not so good, middle-of-the-road data over the stretch of the first six months of 2015. the real issue is is the economy performing in the six-month stretch in a way ha would give sufficient ground cover for the fed to normalize and raise rates or do they need one at all? what happened today, was it an accident? i think with the slowing of the economy, you know in chicago,

we're a cynical bunch. we don't believe in accidents. this was released and it was much more dovish so here's what was basically released. fed fund targets at the end of the year, 35 basis points, some were thinking 50, others were thinking it would be like where it is. at the end of next year it will be 1.26. at the end of '17 it would be boiling temperature, 212 and at the end of 2020, it would 3.34. it might be a bit dovish. maybe it was thrown out there because of the iffy data. we're supposedly data-dependant. consider this, we saw fed fund futures in december rally sharply and look at the following charts when i'm talking. 2-10s, it didn't flatten, it steepened. 5-30s, it steepened. look at the individual parts, look at a two-year note yield. want to know what time everybody noticed that? could you tell by the 2-year note yield it moved from 69 to 66, not a huge move.

look at 10s and 30s, they had a little volatility but they hardly moved at all. we learned certainly things, was this a balloon ha we're supposed to be aware of that the softer data may be impacting the long-term projections in more dovish fashion? it gives us clues as to you want to observe if you're trying to handicap the markets and the yield curve for the fed. the response was interesting, but not necessarily totally enlightening. because a lot of the long-end activity has to do with the way i started this conversation. weaker-than-expected data on many fronts. accompanied by decent data, but certainly not the best six-month blend to raise rates that we've seen over the last several years. david faber, back to you. >> thank you, rick santelli. up next, could hackers be targeting the auto industry? concerns causing more than 1 million vehicles to be recalled.

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welcome back. fiat chrysler recalling 1.4 million vehicles related to the report of get this -- a hack of a jeep. earlier in the week. involved even remotely turning off the transmission, phil lebeau is in chicago with more. what's going on here? >> jon, this is partially a technical recall. remember the day after this came out, fiat chrysler came out and said we're offering a software update. we want people to have the software update. any time you do something like that you have to technically issue a recall. that's what they've done here.

1.4 million jeeps are being recalled. and this is for models 2013-2015 years. a number of different models, we're not going to list them all there it's a software update. and again, it's a voluntarily recall. you don't need to go into the dealership. can send you a usb device so it will update and fix the software which will prevent your vehicle from potentially being hacked in the future. and that's what it deals with. it deals with remote manipulation. remember the folks at "wired" magazine profiled how two hackers took control of a 2014 jeep wrangler and then had you the vehicle being remotely controlled. they knew that they were going to do this. the owner of the vehicle knew they were going to do it. it was demonstrated on tuesday. chrysler is saying look, we're going to make sure that this software patch, which involves the you-connect information and radio system in the car. we're going to make sure that that is fixed so nobody can remotely hack the vehicle in the future. we should point out, jon, there

are no instances that have ever been reported of a vehicle being remotely hacked without that owner's knock. this was a demonstration that was done earlier this week. and also, jon, we should point out we had one of the hackers on the air. melissa lee interviewed him. he said he's more concerned about texting and driving than he is about a vehicle being hacked. it is very difficult and highly unlikely. but it does highlight something that the industry needs to work on. which is making sure that the cybersecurity safeguards are in place. >> all right. phil lebeau, fascinate stogory. seeing fiat chrysler respond with an onboard update. hackers gaining access to data of millions of personality profiles on the website ashley madison. one company says your smartwatch could be next, according to data security firm pk ware out with its data breach predictions, joining us this morning is the

ceo. how dark is the dark side of the internet of things? >> security breaches have reached an epidemic level and there needs to be a different approach to solving this problem. time and again we're seeing thieves and snoops exploit gaps in these networks and systems. it's going to continue to happen. whether it's ashley madison or you know, jeep chrysler. >> "wired" magazine, which published the jeep hacking story and pursued it, is getting some flash for what people are calling stunt story telling. but consumers don't seem fazed when their data gets attacked by anyone else. do you think we've gotten to a point where we need stunt story telling to show consumers how dangerous these things are? >> i believe anything that brings visibility to this security breach and cyberattack issue is goodness. and whether it's you know ceos of major companies or our federal government, we need, we need to pay attention to this problem and approach it

differently. >> miller, is there any good reason that you can see why these cars should be engineered in such a way that someone from a remote location sort of dialing into the car should be able to even do things like shut down the transmission? i mean i can see why they could have read-only access to do some diagnosis. understand what's going on with the car. but it seems like a fundamental security flaw to even be able to do this. isn't it? >> well, you know, as far as the computer systems that control cars, i'm probably not in a position to comment on that. what we do know about this particular breach, though, is that the system of the car was accessed by a hacker and that access is a problem that needs to be solved. and there are a couple of ways to do that. and that's the problem that should be focused on. >> an increasingly inter-connected world where we talk often about the internet of things and we've only just begun, really, what is the

change that you then believe needs to take place in order to actually perhaps make people safer? >> sure. so it's interesting you bring up the internet of things. we're releasing some predictions on the next wave of huge vulnerabilities from a breach perspective. and you know, the smartwatch and wearable devices are a category that really does trouble me. >> why? >> it goes beyond fit band and fuel band. i think about internal devices like pacemakers or external devices like insulin pumps. all of those devices are network devices that stream critical and life-sensitive saving information to the cloud. and that information is being streamed without being protected. and that's really scarey. >> you mean somebody could actually -- i'm going to stop your pacemaker unless you pay me $10,000, or $100,000. is that a a real possibility? >> today that possibility exists, absolutely. >> how do you come to your

predictions? you also say there's a possibility of an electoral campaign being breached. or potentially ip involving the release of a new technology product. >> so you know kayla, i spend, we have 30,000 customers, 200 federal agencies that we work with. i spend my days in this dialogue. with ceos and federal agency heads talking about what they see their security concerns and vulnerabilities actually are. so i'm, i'm communicating things that firsthand accurate information i get from the people in charge of these systems and networks. >> jon's got another one. jon? >> miller, that gets to what you just said about wearable technology and pacemakers, gets to the heart of what i was trying to get at with the car. do there have to be, i hate to say regulation, but at least -- widely understood protocols that there are certain types of devices that you just don't get remote access to to determine

what they do next. being able to read them and understand what they're doing, sure that needs to be protected. that's one thing. but being actually able to remotely control something, that could be dangerous, could it not? >> you know life threatening, jon and you're spot on. i don't think this problem is going to be solved in the public sector through regulation. i really don't. i think this is a problem that's worldwide and has to be solved in the private sector. without getting too deep on you know the specific technology involved. but two things really have to happen. multifactor authentication to allow only one person to access these systems is critical. and then once the systems are accessed, the critical information has to be armored and secured and protected through strong encryption, that's the answer and our, our government and other state's governments aren't going to solve this problem through

regulation. >> it starts with a conversation and thanks for bringing that conversation to us here on "squawk alley" today. >> thanks for having me. >> miller newton is the ceo of pkware. wait until you see where the silicon valley elites spend their summer vacations. we're on bubble watch.

it's summer, most of us like to vacation at the beach. but silicon valley vacations in a whole different way. josh lipton is live in lake tahoe with more. josh? >> well kayla, lake tahoe is only about three hours from san francisco. and it's long been the playground for tech elites like oracle's larry ellison. but now developers are building private communities to appeal to the next wave of tech elites, welcome to martis camp. this community is based near the north shore of lake tahoe, home to heavy hitters from apple, google, facebook, as well as venture capitalists and start-up founders. >> we're really catering to the people that are changing the world. and we're helping change their lives. and you know, as plugged in as they are to be able to create this amazing technology that we're all using, they're coming up here, and really unplugging a

bit. and really engaging with their family. and i think consequently conjuring up interesting ideas while they're kind of away from their everyday life. >> this 2100-acre resort boasts an 18-hole golf course, 26 miles of trails for hiking, a private ski lift to nearby northstar and access to lake tahoe itself. business is booming. this year the club already sold 77 properties for $140 million. there has been some $1 billion worth of property sold since the developer started the community in 2006. if you're interested in becoming a member, you're going to have to pay up. the homes start here at $2 million. they've sold for as much as $15 million. membership dues, $10,000 a year and if you want a membership to the golf course, it will cost awe cool $130,000. guys, back to you. >> all right.

josh lipton in sunny lake tahoe on this friday. thanks. that's that's all for "squawk alley," david thanks for being here. >> i'll go engage with my family. let's get to melissa lee and the "halftime report." ♪ ♪ welcome to the-ha "halftime report," jim lebenthal, josh brown, kate moore, and dan greenhouse, chief global strategist with btig. our game plan, sticker shock -- today's new home sales disappoint as buyers hold back in june. what's the best trade on real estate? social circle, traders take their positions ahead of twitter, facebook and linkedin earnings. and amazon surging on a profitable quarter. the company is killing it in the cloud. there's a flood of analysts raising price targets on the stock today. it's amazing the chase that we're seeing today on the