good morning, it is 8:00 a.m. at twitter headquarters in san francisco, 11:00 a.m. on wall street and "squawk alley" is live. ♪ ♪ ♪ ♪ welcome to "squawk alley" for a wednesday morning, joining us, jon steinberg, ceo of the "daily mail," and julia boorstin

and jon fortt making his way back from out west. you know why we cued the billy joel at the top, shares of twitter had their dose of honesty. extending their losses, revenue up 61% in the quarter. executives voiced concerns about user growth. here is jack dorsey the interim ceo on last night's conference call. >> chronic initiatives we mentioned in previous earnings calls like instant timelines and log dot experiences have not yet had meaningful impact on growing our audience or participation. this sun acceptable and we're not happy about it. >> joining us this morning from one market in san francisco, colin sebastian. good morning. >> good morning. >> people are noting the clash between last night's call and the media rounds they did in the prior quarter where they were enthusiastic about the game plan and about the product. why the u-turn?

>> on one hand twitter is, there's a tale of to sides of twitter. on one hand, adam bain's team, on the revenue site of the business is performing extremely well. twitter beat expectations on the top and bottom line for the second quarter. but really the issue is and continues to be, the struggle to accelerate user growth. and the problem with that is, twitter is not yet at scale. so they cannot compete effectively against facebook or google for ad dollars and if they can't accelerate the user growth, ultimately the advertiser revenue dollars will hit a wall and we have the change in sentiment here this morning. >> from my perspective as i was looking at the transcript of this. i felt good about it. because they were finally owning up to the problems that a lot of us have been talking about all along. it seemed to me like they were living in some alternate version of reality. slowing user growth is really okay. they were kind of big enough. people shouldn't be paying

attention to monthly active users, it's as if they got on board with what everybody else has been looking at. we do want to be a mass market mainstream service, that is what we want. we're not getting there, we're going to try a bunch of new stuff and we're not sure when it's going to start working. isn't there in a way a positive side to them facing up to those facts? >> yes, there is. i would agree with your characterization. that's a key reason we've been cautious in the stock since last year. hearing management team as you put it 'fess up to the reality of the user trends, is on the one hand encouraging. on the other hand, we don't see a lot of upside potential in the stock until some of the new initiatives, in the fall with the launch of project lightning to see whether it does have a positive effect on twitter. keep in mind, twitter has more free advertising exposure than any other platforms or websites. with hash tags and twitter

handles and that has not converted into the mass market usage. wire still skeptical. >> the question is when whe will we see all of the changes start to add new users? the stock turned negative when nodo said there's going to be a considerable period of time before you see the impact if these changes. when do you expect to see the user base actually grow, is it going to be next year? >> i think what they can say at this point is that at 300 million users, we effectively have a large-enough sample size to gather the news. the question is can they build a giant news experience where people go to find out what's happening in the world. i think nodo took the stiff medicine in a big dose, it can't have much more down side at $20 billion. >> how is that different from the whole syndicated metric that costolo was trying to use? >> i think the syndication is an ad network play they could do. think having a giant logged-out

home page that everybody can go to to get the news. it's google.com as posed to an ad-type experience. investors need to be wary. if the sentiment stays negative, people are going to get whipsawed. >> colin, would that work, preserve the model for those people who are on it, like it, and whom they don't want to leave? >> well certainly 300 million people is a decent number. and if that's what twitter is that's fine. and we need to recalibrate our expectations. but one issue i had with the commentary from management last night, despite the fact that they did 'fess up to some of their head winds, is they still characterized the opportunity for twit nert same light as facebook. and so investors are still being led down the path of one day twitter can be as large as facebook. and we think that part of the story from last night still is a challenge for us at least. >> i love that if you're going to be a public company, if you're going to have the kind of

exposure that twitter has, if you believe that this, i believe anyway that this is plumbing, that they can build some really interesting experiences wirks not swing for the fences? if they're content to be a little niche play, we're a mom and pop greasy spoon restaurant on the lower east side is that worth billions and billions of dollars? >> is that like saying that tgi friday's can be as ubiquitous as starbucks, right? >> but the step-back and look at trend that's going on right now. you have apple news, apple going news. twitter is better positioned than just about anyone to be the destination point toor all the news on the web. if they can execute, you're going to have a lot of value. >> but they haven't yet and they've always been positioned that way. meantime all the other competitors are getting into that space which raises big questions. >> colin, one last question for you, does your price target account for minimal user growth

over the next year? >> extending into 2016 as well. >> all right. appreciate that, colin sebastien. next up shares of yelp. getting crushed this morning. down more than 25%. earnings missed estimates. company gave a lower-than-expected forecast for revenue in the current quarter. 2015 has not been kind. shares down 55% so far this year. jon they've stopped giving monthly metrics. lebchin leaving as chairman. people are looking -- you found a bright spot in twitter. no the sure you found a bright spot in yelp. >> hard to find a bright spot in yelp. i feel like the product experience hasn't improved. it's been getting worse over the past couple of years. when i look at yelp reviews, i've got got to run my own mental filter, on do these people really care about the food or is there some other issue in here, service some side thing that they're ranking this restaurant on, i have to look at

the number of reviews, the recency of them, they could have fixed a lot of that stuff. it's interesting to me, one of the notes i saw, not sure if it's mark mahaney's or others, that yelp is suffering from the unicorn effect. a lot of employees that they need, are getting offers from others. yelp is having to pay more to keep talent. the one possible silver lining, it's interesting that lebchin chose to leave yelp and stay with yahoo. does that open up more possibilities for them to get some kind of a deal done with such an active investor stepping away? >> lebchin does have his hand in so many different things. i'm less concerned about the fact that lebchin is leaving his role on that board. i think yelp is a lead anywhere the local advertising space. but you're right, the product has to be a good service. and if you really want to review of a place to go, there are

other places. >> where's the positive? with facebook. yelp is exiting the brand advertising space, $8 million of their revenue. there was $107 million in local. basically with the level of targeting you want with a big unit there's no competing with facebook. i think that's a very positive sign going into tonight for facebook. facebook is a huge sucking machine taking targeted advertising out of the ecosystem. >> not positive for yelp, positive for facebook. >> were you asking for a positive. >> everything is positive for facebook. >> jon is mentioning facebook, strong expectationsor big growth in mobile ad revenue. the march 2, 100, 9562 at last print. you like the targeting, you like -- >> let me give you my in the trenches assessment of the past quarter. facebook is no longer digital advertising, they're this is what i'm doing on facebook.

now let's talk about what i'm thinking about in digital advertising. mahaney said stain gram could be $2 billion in 2016. a survey of preferred media distributors, buyers, that makes him put up a 15% sequential ad revenue growth estimate against 13%. the sequential ad revenue consensus estimate. think there's upside going into tonight. >> and i think the key area to watch is going to be video. this is going to be the first quarter where we're going to see real results from video and we could see guidance about how big video could be for facebook moving forward. the most valuable type of advertising, smeshl i had on mobile. >> one thing that has skeptical -- expenses. because facebook got a nice little pop on the back of google's earnings programmatic strong for google. you would expect the same trend to be strong for facebook. has facebook had a run up to this point. google talked about expense discipline which surprised people. facebook had already talked about how they were going to spend, they've never been really

out of control spenders. do they even have the inclination to say that they're going to cut back on costs? and if they say they're going to continue to spend, might that disappoint investors? >> the only thing that makes me nervous for tonight is i look at this number daily active users over monthly active users. the number of people that are on monthly. it's been all-time high the past few quarters, in the u.s. and canada, it's 77%, it's been that for two quarters. a high bar to keep jumping over every quarter. our investors are going to be a little upset if it drops to 75%. probably not but i'm just raising. >> twitter, not growing. google, just basically shutting down google plus at this point saying it didn't work and facebook has continually hit new highs as far as user growth so with that backdrop they're really strong. >> water or coca-cola. every single day. >> or email. >> jon, good to see you. >> a quick check on the markets, session highs, dow sup 83. shares of gilead rallying after

profit and revenue topped estimates, the drug maker raised estimates. panera, profit and revenue came in below expectations but the company said sales are accelerating. and we're seeing an upside reversal once again the second day in a row, in energy, that might be a reason we are having this nice little rally here midday. when we come back, microsoft takes a step back to move forward, the headline of walt mossberg's review of windows 10. with enough rough quarter under its belt what can twitter do to turn things around? nick billton will weigh in and alibaba laying out a $1 billion challenge to amazon. why the cloud is get morgue crowded.

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welcome back, windows 10 launching today and the reviews are in. re/code's walt mossberg calling it a solid evolutionary operating system. but warns users they should wait on the upgrade until more bugs are fixed. joining us now is re/code co-executive editor walt mossberg. and walt, tell me big picture, where do you see this operating system? because we tend to see a hit from microsoft, and then a miss. you know for every xp, you've got a vista. for every windows 7 you've got a windows 8. is windows 10 going to be more in the camp of the wow, i really love this operating system?

or some other camp? >> i, well that's a good analysis, jon. but i would say it's not going to be wow i really love it i think it's going to be wow, this is, this is an improvement this is comfortable this is familiar. and yet it has some new things. so i'm going to upgrade to it. and therefore, i think it's going to be, there's a very good chance of recovering for them. from the flop that was windows 8. it's one of those cycles. >> well walt, i mean the pc industry needs more than, this feels kind of familiar. they need something that's going to cause people to say when they look in the best buy or whatever store they go into -- i actually need to upgrade to a new pc, instead of buying an ipad. instead of just getting a phone. is this going to be enough to do that given that you've got the edge browser which replaces internet explorer. the start menu is back, you've got cortina in there, you can draw on web pages.

is all of that stuff going to mat centre the newer pcs will let you log in without a password. are people going to find that compelling, do you think? >> well, the last thing i think may be compelling, i did not get a chance to test it. there are few pcs that are equipped to do that yet. because you need special cameras and special sensors. the other stuff, you know, i really, i don't think the edge browse certificate almost entirely catch-up, the writing on web pages is not going to have broad appeal. some appeal, no the broad appeal. i think cortina could be the big deal. but i have to say, it was very buggy in my tests it didn't work about half the time. so you know, i, and there's one other really important thing here that i think has to be mentioned. in the past, for decades, microsoft has not cared very much about upgrading. they've wanted you to buy a new

pc when a new version of windows came out. this time they really want hundreds of millions of people to upgrade and there's a hid reason. and the reason is, now they've got it organized so if you write a new app, a new style app, that runs on a pc, it will also run on their phones. and their phones are as you know, a giant flop. so they need more apps on the phones and they hope to get them through the pc so they desperately want everybody to upgrade. but if everybody upgrades, that depresses sales of new pcs, at least in the short run. >> so what do you think this is going to do in terms of the phone business? do you think this going to have a positive impact? >> i think it will have a positive impact. but i'm doubtful that it will rescue windows phone and make windows phone a major contender

to android and iphone. >> walt, i like what i see of windows 10 so far. obviously i haven't tested it to the degree that you have. i've had a bit of a walk-through of it. i really disliked in windows 8, the fact that had you to switch between a tiled touch mode and the old desk top mode. it felt like were you dealing with somebody with split personality when were you trying to get work done. this version feels a lot smoother, cleaner and they'll have pcs with intel's new sky link chip down around $500. that's almost an impulse buy electronics price point. toor me back to school, holiday period, it's intriguing, a possibility that some of those consumer who is used to upgrade pcs, every three to four years, now have waited five or six, might see this opportunity to pull the trigger. >> i think you're right except for the fact they're making it

so easy to upgrade. this will run on the same specs as windows 7 which came out in 2009. >> this is attractive and i intend to upgrade, i think you hit it on the head in terms of them solving the dual personality problem they had in windows 8. here they've really put it in your control. they have a thing called continuum. if you have one of those two in one machines, if you pull the screen off to act as a tablet. it will prompt to you switch into the windows 8 tablet-y mode, instead of forcing you to have both modes running at the same time. they've done a lost things right here. and i'm certainly going 0 upgrade my windows 8 machine. but i'm not going to even if given the opportunity and they're rolling it out gradually. even if given the opportunity i'm going to wait a little bit. i think there's a lot of bugs in this still. >> walt, i read a lot about this, but i haven't tried it out

myself. i remember when apple launched siri, it was such a big deal. cortina, how does it compare? do you think it's on the same level? >> i think it's in some ways it's not. i mean there's some things that siri can answer and do that cortina cannot. but there are some things cortina can do that siri can't. cortina is meant to focus much more on your daily activities. siri is a broader, movies and stuff like that. it also, there's a lot of overlap. as well as by the way, google's voice interface google now also overlaps. one big difference is that apple has not put siri on the mac. and now we have core tanna on pcs, i think cortana is a huge selling point. it will demo well in the stores. if you read my review, it

doesn't work about half about time. and i even got a message popping up on a $1500 new dell laptop that microsoft sent me. they sent me two of them. and this happened on both of them. i got a message that popped up that said hey, cortina, this microphone wasn't designed for cortina, it may not be able to hear your voice commands. so there's some things that still need to be worked out. i think cortina is a big deal, the start menu is a big deal. the untangling of the two interface sass big deal. the question is, will people upgrade or go buy a new pc? i don't know the answer. i think most analysts are thinking -- there will be a short-term hit to sales. which are already down 10% or 12% year to year in the last quarter.

>> walt mossberg from re/code, thanks so much for joining us. up next, alibaba making a major investment this morning. aimed at amazon. details, when we come back. [ male announcer ] some come here to build something smarter. ♪ some come here to build something stronger. others come to build something faster... something safer... something greener. something the whole world can share. people come to boeing to do many different things. but it's always about the very thing we do best.

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europe about to close, let's bring in simon hobbs to count down to the close in the uk and across europe. >> european stocks rising ahead of the federal reserve decision, 2:00 our time this afternoon. a height of earnings season. two interesting things appearing in results. one is the effect of the lower euro which is boosting profitability. you see it at bayer, and i mean peugeuot is making a profit for the first time in four years. but at the same time you're seeing the slowing growth in some of the emerging markets hitting others. for example volkswagen with

china and south america and russia. meanwhile phytech in this country has surged, a bellian chemical maker, $5.5 billion for that company. it makes lightweight materials, they want to expand their footprint in this country and in greece today, keeping a wary eye on what is happening there, the greek prime minister has given an interview in which he's warned about the split that exists within his ruling left wing party saying it could force early elections. the cerisa party is holding a big meeting to try to sort out its differences and stay in power and support the prime minister. but they're going to hold potentially a referendum on the weekend. which could complicate the debt negotiations. more on that as it happens. meantime we're still awaiting word as to when the greek stock market will open. it could possibly be tomorrow after the ecb ok'd that. with some guarantees or some restrictions on that.

this is, whoa, this is the quack on the street -- "squawk alley" logo. i was going to show you where we are on the etf, the greek etf, grek. which since we had the close five weeks now is in negative territory to the extent of 19%. some indication of where the stock market might open were it to open tomorrow. had in the meantime the ecb has left the emergency lickedty assistance to the banks, you're nodding, jon. >> like for us to never miss a branding opportunity so flashing "squawk alley" out there makes some sense. >> thank you. >> we're getting reports from "reuters" that greek stock market unlikely to open this week. maybe, yeah. >> interesting. that may be because the ecb is pushing for a recapitalization of the banks behind the scenes. maybe. when we come back as you know, shares of twitter continue to slide. does the company really have a long-term plan to turn things around? 31.39 was the low last night. 31.30 the low today.

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. good morning, i'm sue herera with your cnbc news update. new england patriots owner robert kraftization he was wrong to trust the nfl in the deflategate case and he roo grets not appealing the penalties against his team.

he says he can't understand why the league has suspended his quarterback, tom brady, who he calls one of his greatest stars. treasury secretary jack lew telling reporters that the chinese government's reaction to its falling stock market will signal how dedicated the country is to reform. he says he hopes they stick to their economic reform agenda. amazon has a special air space strategy for drones. it's proposing drone zones between 200 and 400 feet off the ground. it also includes a 100-foot no fly zone just above that as a buffer between drones and other aircraft. and bmw's mini unit recalling some 35,0002014 and 2015 cooper and cooper s hardtop cars in north america this he don't meet the side impact crash tests and the automaker says that could expose rear-seat passengers to a i hoo ehigher risk of injury.

twitter's two top executives announce jumping ship to youtube and drop box on the conference call which was periscoped, jack dorsey said things aren't all bad at twitter. take a listen. >> i definitely agree that periscope is the next big thing. but we have no, we have no plans around, no plans to share around monetizing it just yet. one of the amazing things about what we've done with twitter and with the team has has pushed is the monetization fits perfectly within the service and makes the service better. we're always looking for opportunities to do more of that we would hold the same high bar to what we do with periscope and related properties like vine. >> weighing in on all of this the man you want to hear from. nick bilton of the "new york times," the author of "hatching twitter."

good morning. i want to get your take on this one line out of nodo, that is we don't expect to see sustained meaningful growth until we reach the mass market. cramer's point this morning is you've already reached the mass market. everybody knows who you are. what did you make of that line? >> well i completely agree with that point. it's interesting. so they added two million users, let's put aside the sms users. they added two million users the last quarter. in 2009 when twitter was the talk of the town. they were on "time" magazine, "oprah," all of these different tv shows across the country and world, they were adding about two million new users a week. sometimes more. and what happened is people signed up, they didn't know how to use it and they left. so you have reached the mass market. but the mass market didn't understand how to use the product. finally, the thing i will give them credit for is for admitting that this time on this call. i've never heard them admit that people don't understand how to use the product. >> they admitted it. there was so much negative on

the call yesterday what do you make of this new tone that nodo and jack door dorsey are taking? is this taking out the trash before they appoint a new ceo? >> they definitely threw a few people under the bus on the call yesterday. it would have been nice for them to give dick costolo, some props, considering that the $500 million in revenue was probably a result of his decision-making. they seem to say we haven't run a good ship in the past and the marketing has been wrong and the messaging has been wrong. my theory is if that's the problem if the ceo is not doing right job, then it's the result of the board that needs to actually make those changes and they haven't done it quick enough and jack dorsey sits at the top of the board. to throw everyone else under the bus didn't seem too fair. >> nick, you know like you i've been watching these companies, following them for a long time. the thing that makes me queasiest is when management's version reef at seems completely divorced from what investors and

maybe the people covering the company see. to me the two realities seemed to come together for the first time in quite a while in this call. are there positives there? you've been critical of twitter. recognizing or defining what it is and what it's going to be. did they get closer to a version of reality that you recognize? >> absolutely this is the first time i've heard this you know i've probably interviewed 1,000 people that have worked for twitter over the years. and i've never heard the same thinking from any of them. some of them think it's the greatest product in the world and some of them think it's a mess and for the first time yesterday we heard that they kind of got what the rest of the world is actually realizing. i came across a quote by charles darwin of all people yesterday. that made me think, this is really interesting. because i think you think about these companies and why they don't succeed. and you know, darwin always said with, with animals and so on it wasn't the smartest, it wasn't the biggest, it was the ones that were capable of adapting to

change, the ones that succeeded and i think this is twitter's lesson right now. it's been around for nine years. it has not changed. fundamentally as a product and if it doesn't, it's not going to be around nine years from now. >> speaking on that point. one tidbit that's been passed around by rich greenberg at btig is daily active users in the top 20 markets down 3%. is that young people, just saying i've had it, i'm moving to snapchat? what do you think that's about? >> i think it's an overall thing, actually. in my personal opinion. what i've heard from some of the reporting i've been doing is that people are kind of, they're getting a little burned out on social media. they're getting a little burned out on twitter specifically because of the mean users, the fact that the product hasn't changed and so on. but it's across the board we're seeing some of this happen. and as far as the younger users, they are the most fickle of all. they can be on twitter, and in droves one minute, on snapchat in droves the next, they tend to move around in flocks.

and can switch six months at a time. to i think that this is something that's happening across all social media. >> so nick, i know you've been monitoring the overhaul of twitter's management and i'm curious what you're hearing in who the next ceo is going to be. they obviously haven't given us any update. i know a lot of analysts were frust yated not to get any update on where they stand in this process, where are we? >> i think what kara swisher reported yesterday was 1,000% correct. adam bain was offered, no the on paper but the board approached him and said would you be interested in being ceo. he said he didn't know if he could do it for a number of reasons. there was a discussion with jack dorsey about him being ceo and jack said he didn't think he could do it. it didn't come out until later is that the reason why is because square had filed an ipo. and where it stands right now, the board has been doing some searches and haven't come up with anyone. there's a few people at google that they'd like, but they're not going to leave.

i was thinking today, one person i would put forward would be mark andreessen, he gets product, he gets businesses, he's created the twitter storm. bring on mark andreessen, let's see what he could do. >> i'm sure he'd love to take on that job. my last question for you, nick is how do we judge twitter going forward? is it three to six months from now, have they built another periscope? some other product on top of what we've known as twitser? they seem to have admitted we've put twitter out there. we've tweaked it all sorts of different ways and it's still not growing. we've got to come up with completely new things to see the growth that we want to see. >> well i think that's one way of looking at it. one way of, if you're asking from an investment standpoint, i think if you're invested in this company you better you know turn off your tv, not look at your computer for at least a year. and see where the stock goes. i don't think that we're going to see any major growth in that company, for that the next 12 months at least. as far as the company itself is

overall. if you start to look at what mark zuckerberg has done, he's got whatsapp, approaching a billion users, he has instagram, a billion-user company. he's diversifying across all of these different products as the world is diversifying itself. and so twitter i think should do the same thing. if they want to focus on twitter, great. but also focus on periscope as a business and vine as a business and maybe start monetizing those things. >> nick, good to see you as always, see you next time. nick bilton joining us from "the new york times." in less than 30 minutes, yahoo is expected to reveal a brand new product at an event here in new york city, we're going to go there live but first rick santelli, what are you watching today? >> will know on this fed day, everybody is talking about the global economy as well as the domestic economy. and nothing epitomizes this topic better than china. and they have an army of technocrats running the country. should we be thankful for that? should we be envious?

i'll have something to say about it after the break. think this one you're going to want to hear. ♪ every auto insurance policy has a number. but not every insurance company understands the life behind it. those who have served our nation. have earned the very best service in return. ♪ usaa. we know what it means to serve. get an auto insurance quote and see why 92% of our members plan to stay for life.

coming up with twitter shares getting pummeled today what is our josh brown doing with the stock now? we'll find out and look ahead to facebook's report after the bell. plus commodities crush, we talk to goldman sachs's head of commodities research, jeff

currie on whether the downturn is here to stay. or whether oil is bottoming and one the barron's top ten financial advisers tells us where he's putting some of his billions to work. see new about 15 or so. >> let's get to the cme group, rick santelli with the santelli exchange. busy afternoon ahead, rick. >> it's going to be a fascinating afternoon and there is no press conference today. however, if there was a press conference today, i have a feeling there would be questions about china. there would be questions about the global economy. now i don't know the answer to these questions. and what they most likely will be regarding would be how much credibility, attention do we need to pay to the current issues and glide path of the chinese economy as it affects the global economy. >> as all of that affects the u.s. economy. you could be all about the u.s., we don't elect people in

government to directly toss all the issues in the united nations. but of course we need to be part of that same type of dynamic. but one thing would come up of course, and that's chinese stock market. and i've heard a phrase -- several times over the last few days, and it goes something like this -- thank god that china has an army of technocrats capable technocrats to navigate these very dicey economic waters that they are trying to row through. and my comment to that is -- yes, thank god for the technocrats in china. because it's that and the crony capitalism are probably the only reasons why they're not kicking our butt. yes, exactly. because i'll tell you what, there's some real positives in china. just the fact of how many iphones are sold there is a positive when you think about it. the very existence of an alibaba is a positive. the huge movement from farms to

factory, armies of workers, people lifted out of the middle class. that's a positive. and all of those positives basically could be almost confused with free market capitalism. but it's still cronyism in the form of communist party pulling the levers and the army of technocrats. if it wasn't for that, i think they would pass everybody by like a ferrari next to a tesla with a dead battery. and i think we need to get back to the notion that it is crony capitalism and a small, finite group of leaders that run elected. whether they work for an organization like the epa or the government of china that gives us our biggest problem. so yes, thank god for all the technocr technocrats, when it comes to free market ka capital illism, that's what the market should pay more attention to. julia, back to you. >> rick, thanks so much. coming up, shares of cloud company akamai taking a hit after missing earnings expectations, the ceo is with us

next on "squawk alley."

in about ten minutes yahoo is expected to unveil a new product in new york city. morgan brennan is there with more. >> yahoo is getting set do

unveil a new consumer product. we don't have all the details of the product but here's what we do know. it is live text, now yahoo launched a live text app in hong kong with the apple itunes store in hong kong. we know it's a mobile messaging app that brings together text and video, but no audio. and now this would also make sense because we've been getting reports that yahoo has been looking to revamp its messaging services. but we're not going to get details about live text and what that looks like when it launches here until the event starts at noon eastern. back over to you. >> morgan, thanks so much. now let's take a look at a two-day chart of akamai, the stock taking a dive after reporting an 8% drop in profits due to stronger dollar and rising costs. what will it take to turn this story around?

tom leighton is the ceo of akamai. google has long had its own means of delivering content. you've got facebook and others, netflix has been able to put pressure on the delivery infrastructure. they're capable of doing some of what you've done in the past. what is the longer-term bull case for companies like akamai, growing bigger when you've got big companies able to create their own delivery networks? >> well at akamai we're doing it in a way that has higher quality, and lower cost and better performance. and that's why our business is so strong. and why it has such great prospects for the future. and of course as more content comes online, and there's a lot of potential content to come online with broadcast ott, video over the top, that benefits everyone in the ecosystem that's delevering content. >> when you see comcast, the parent company of this network

among others, doing stream, but not over the top exactly. using ip networks and a dedicated piece of that to do it, is that good for you or is it bad for you? do you think others come in and go over the top in that benefits you? >> su know, i think a lot of the major broadcasters are pretty excited about moving their premium content online, over the top, over ip. and you know, it's hard to know exactly when this is going to happen and how fast the adoption rate will be. but there's a lot of buzz in the industry now. and that development is very good for akamai. because we do deliver a lot of the video over the top, and that comes over the internet. >> as we see the surge of these over-the-top services, what's the biggest challenge for new making this transition as everyone is bringing video online? >> you know it's scale, it's

cost, and it's quality. you know when people think about broadcast quality, that's like at five 9s, your tv never rebuffer, maybe if there's a big thunderstorm outside, you've got satellite, it gets interrupted. but otherwise it just always works. and the internet historically has not been that way. that's why we put so much effort into delivering a broadcast-quality experience, that looks even better than tv. >> where are you when you look at the broad ecosystem of different companies trying to deliver that high-quality content? where do you come down on the degree to which it should be regulated? does it help you to have certain kind of regulations in place? or does it hurt you? >> you know, the recent net neutrality rulings i don't think have any impact on akamai, cdns were specifically not regulated. unless they're owned by a major carrier. in which case they would be regulated. but akamai specifically is not

regulated. even though we make the internet better for everybody and we deliver a fast experience, we not you know, subject to the fast lane kinds of rules. so i don't think regulation has any impact on our business at all. >> tom, you talk last night about major investments, obviously you talk about cost for the providers, but there's also cost for yourself. how do you know when it's too much? well, you know, we do operate the company within certain parameters and we've talked about our desire to operate the company at about 40-41% ebita margins and we are making substantial investments, we do want to be ready for ott, if it happens, which i think a lot of people believe it will. if it has adoption. which i think a lot of people think it will. we want to be ready in terms of the capacity there. we are fiscally responsible. but we're investing heavily if our infrastructure and also in our people for innovation. so we can deliver better experiences over the top and even so we can make it be lower

cost for the ecosystem as a whole. and of course we talked a lot about the call about the investments in security and how that's paying off. and how the very bright future you think for security being delivered as a cloud service, and enterprise networking in the future. >> tom leighton, ceo of akamai, thanks so much for joining us. when we come back, alibaba taking aim at amazon, more on the company's billion-dollar cloud bet. i thought you said you were gonna test drive this buick first. i am test driving it. for 24 hours. where's the salesperson? at the dealership. nice buick! i guess that test-drive last night went well.

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alibaba is going after one of amazon's core businesses, the company says it plans to invest $1 billion in cloud computing globally. setting up data centers in the middle east, japan and europe much one exec says it hopes to catch up to amazon in four years. a billion dollars in the cloud game, not a lot of money. microsoft has invested multiple billions, still trying to catch up with amazon. i talked to a number of ceos in the valley last week who talked about how amazon is still ahead

of microsoft in numerous areas. amazon is about to pick up big business. even in alibaba does get pretty good, a lot of those ceos are not putting their business on alibaba. >> this is just what viewers just said if you're a u.s. business, are you going to put your stuff on a china cloud? versus one can you get here domestically? i don't know. nice reversal to the upside. a lot of it happening on the back of energy. some defense companies, northrop is up almost 7%, raytheon, as the u.s. stops being policeman to the world, the universe of buyers for all things defense gets bigger. other countries have to buy weaponry on their own. aerospace looks pretty good. >> yelp still down 28%. and twitter shares down about 13%. >> maybe they're clearing out space for facebook. maybe. >> are you looking for a blow-out tonight? you mentioned the experience worry, going into the print. >> i think people already expect some big things for facebook.

so the bar is pretty high. but we'll see what they say on expenses and whether they turn out some really huge user growth number and profit number indeed. >> looking for 47 cents, instagram, mobile ad revenue looking for over half a billion dollars already. which seems like not long after you were wondering if they were ever going to monetize. let's get to headquarters, scott wopner and the "halftime report." thanks so much. welcome to the "halftime report," let's meet the starting lineup. steve weiss, jim lebenthal. pete najarian and michael block of rhino trading partners. our game plan looks like this, crushed commodities, goldman guru jeff currie is back on a cnbc exclusive on when and if the worldwide wreckage will end. top adviser, number six on barron's list of the best of th