good morning. 8:00 a.m. at yahoo! headquarters in sunnyvale, california. and "squawk alley" is live. ♪ good monday morning. thanks for joining us here on "squawk alley." carl is out today but jon fortt, kelly evans both here. good morning. also joining us from palo alto today, tim draper, founding

partner. first up as we look at a relatively calm day in the markets, we have to look at yahoo!. the internet business could be in a combination of microsoft and private equity firms. discussions are in the preliminary stage with microsoft potentially providing some backing. i also want to give you a little bit of news this morning, because i spoke with some folks familiar with the sales process at yahoo!. that was categorized as being in the militantiddle, of the first with first round bids not having come in yet. but according to the person familiar with the process, it is on schedule per the sales committee, and the level of interest, i'm told, is high. but, of course, anyone working with a company to try and drum up interest is going to say it is high. but certainly, that is going to be interesting to watch as investors say the sales process is not going quickly enough. but tim draper, i want to ask you about this microsoft news. is this 2007, 2008, all over again? >> well, no.

i actually think that this is the beginning of maybe some consolidation. this typically happens when an industry gets mature. things consolidate, and then the companies get a little bit sloppy. they create a worse service at a higher price. and it creates a great opportunity for startups like the kinds of things draper associates back. >> tim, the reuters report seemed to couch this potential microsoft backing of private equity bids as being about protecting the search business. of course, they have a partnership with yahoo! but it seems to me there's also a cloud angle here in that microsoft, with -- as you're trying to go up against amazon, needs it tenants for its cloud, and yahoo! despite its struggles, is still a really big tenant. how much of yahoo!'s value has

to do with that as we should think about who might be interested in either acquiring pieces of yahoo! or backing bids? >> yeah. i think yahoo! is probably worth more in pieces. there were lots of different parts and pieces to yahoo!. they have provided a number of different services over the years. and i think different pieces are going to be valuable to different groups. i think it makes good sense for microsoft to look through those pieces. and i think it makes sense for other companies to look through those pieces. so i think, you know, there will be bitters for yahoo!. >> tim, where microsoft is concerned, it has backed private equity buyouts before, put $2 billion into silver lake. bloomberg reported it wouldn't be likely to consider something in that realm. but is this a new type of financial venture for microsoft? to be plugging money into these types of deals? if, in fact, it would happen? >> i was sort of curious about

that, too. whether they were concerned about department of justice coming down and getting involved in -- because it's sort of -- microsoft used to be sort of a monopoly in technology. and maybe this is a way they can do it, and feel like they've got an arm's length involved. but i don't think it is -- i have never seen it before. so it's new. >> interesting, though, jon. obviously, microsoft and yahoo! are very familiar with each other. you mentioned their businesses. antitrust concerns did come up in 2008. but this time around, both companies are in very different positions. and i'm wondering if you think of the best shepard for yahoo! at this stage of its life journey being a telecom company, which has been talked about. a cable company. a new media company. or, perhaps, someone like microsoft. >> microsoft getting involved makes a lot of sense, not so much i think because of search.

though that partnership does have value. but because of that cloud issue, microsoft needs tenants on as you're. could learn a lot not just from the search traffic but media stuff. so in a way, giving a potential tenant money to pay you rent could make some sense. >> yeah, well, as i reported, we are in the middle of the first round for this sales process. but certainly we're in the early stages. we'll find out a little bit more about the fate of yahoo!. but moving on now, next, despite bernie sanders' great weekend in the polls, hillary clinton and donald trump still expected to be the nominees come november. tim, i love your take on the valley's approach to the election so far. because it seems a foregone conclusion the valley supports hillary clinton, but i'm wondering as you watch the rise of donald trump, what is the feeling? is it resignation, is it rationalization, or is it the acceptance that you will need to get behind someone like him who

is potentially going to garner the nomination? >> well, i can't -- i can't speak for the whole valley. there are an awful lot of people here. but i can say that people are looking for a new kind of government. they are seeing that there are all sorts of new technologies that our government has not brought into the system. there are all sorts of new ways of governing. interesting opportunities are happening all over the world. many different governments that are challenging the best way of governing. i know singapore has been very active in new ways of governing. korea has been very active in new ways of governing. estonia, new ways of governing. and i think the american people are saying, hey, wait. where is our leadership here? why don't we look for a new way of governing? and that's where you see the rise of people who aren't sort

of central to the insider view of government. i think -- >> yeah. >> it's time for government's to change. i think we need our governments to compete with all the other governments out there. and we need to be efficient and effective and use technology. and feel like there's -- we're in the heat of competition. >> so tim, last up, when i saw you in san francisco, we were talking about the clinton fund-raiser at fernose. is hillary clinton the kind of candidate who fits what you're talking about? >> oh, i don't know. i mean, i think all the candidates have something kind of interesting to them. they're all trying to shake things up in one way or another. and i think they should see that kind of -- i think we're going to see some real changes, almost no matter who is elected in government.

it seems as though the -- our government is starting to fall under its own weight. i've never known why the government is a union now. i mean, i feel like that's -- that shouldn't be the case. >> yeah. just to clarify that, that fund-raiser -- >> bosses are running the country, and it doesn't matter who gets elected. >> fund-raiser wasn't at private home, john. >> i'm looking through some clips, and i believe seven and a half years ago, you openly said you were going to vote for a democrat and you're a long-time republican, supported george w. bush. so i'm curious, given that you're saying now it seems like the government has become union-like and not in a good way, are you jaded about the democratic side, are you jaded about the republican side? have you decided where you're going to fall in this election cycle? because i hear a lot of positive

things out of the valley around hillary clinton, as one might expect. bernie sanders, as well. some fear around donald trump. but i mean, you're a bit of a barometer, i think, at least, from the republican side out in the valley. >> yeah. i actually -- i feel like it's gotten to be a duopoly. and when you have a duopoly, you get bad service at a high price. and i think we're paying a very high price for bad service with our political party system. and i think we need something different. i think we need a big change. and this has been a very surprising election, and i think it's -- >> so is that bernie sanders? you're going to vote for bernie sanders? >> i don't know who i'm going to vote for. >> okay. >> it's still up in the air. >> well, i know a lot of your portfolio companies are companies trying to disrupt regulated industries. it's so important for you guys to have someone in washington that you support and feel like supports your businesses. but tim, come back as the election cycle progresses.

we'll be interested in your thoughts. >> okay. terrific. thanks for having me on the show. >> tim draper from dfj. meanwhile, virtual reality is here. facebook's oculus rift launching today, along with games and movies, all for the price of $600. plus a pc, perhaps. julia boorstin is live in l.a. with more. >> well, jon, facebook is betting they're here to stay. oculus rift on sale for $600, that launches with 30 games and hundreds of thousands of movies and photos and other immersive experiences. while there are already less expensive devices, including google's cardboard already available, today kicks off a competitive high-end headset market. due out april 5th. sony's playstation now launches in october. and apple last week awarded a

patent for a vr headset. facebook's rift has a head start but for now the market is limited by the fact most pcs won't work with it unless they're fairly new and equipped for hard-core gaming. here's what these tech companies are playing for. the pc gaming market was worth $28 billion last year. and the total augmented and virtual reality market is projected to reach $150 billion by the year 2020. and analysts seem optimistic that facebook will make its $2 billion acquisition of oculus two years ago pay off. raising the price target for facebook earlier this month, valuing oculus at $4 billion. now we're waiting to see how mark zuckerberg brings oculus mainstream. >> i'm here on the floor of the stock exchange. you can see pandora trading down a little more than 9%.

so in the world of streaming and of content over the internet, a really interesting juxtaposition we have happening today. virtual reality making its debut. pandora in with a new ceo and way back to the old tim west westergrin. back to you guys at post 9. >> thanks so much, jon fortt. we'll continue to watch that market cap at $2.5 billion. two gaming heavyweights on the future of facebook's oculus rift. the former ceo and co founder of zynga will joining us. and fear of a cyberattack after seven iranians were linked to an attack on banks dam in new york. what to watch for. and uber's travis kalanick on china, plans for an ipo and much more in a cnbc exclusive interview. we'll have more from that coming up in a moment. "squawk alley" will be right back.

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the threat of cyber attacks is real and growing. a new report from intel security shows that new ransom ware attacks surged 26% in the last quarter of 2015. meanwhile, the federal government is stepping up the fight against cyber criminals. last week, charging seven iranian hackers for a series of attacks on u.s. banks and a dam in new york. >> we will continue to use every

tool at our disposal to investigate the malicious cyber actors so we can attribute their actions down to the country, the government agency, the organization and individuals involved and charge them publicly. >> no matter where they are, we will try to reach them. and no matter how hard they work to hide their identity and trade craft, we will find ways to pierce that shield and identify them. >> joining us now, intel's security's chief technology officer, steve grobman. thanks for joining us this morning. >> you bet. >> i want to start with ransom ware, something that can affect literally anybody, where software gets on your computer, perhaps through user carelessness, and then a hacker takes your files hostage. there is a big spike in incidents of this. any particular reason? is it just that it's been effective for the criminals? >> that's right. i think the interesting thing about ransom ware, it's a very effective way for the cyber criminals to monetize their

cyber crime. so instead of stealing data where they then need to go through a fairly complex process to sell that data on the black market, with ransom ware, they're essentially getting paid directly by the victim. and because of the success of primarily consumers up until now being impacted and then paying, it's actually created an environment that creates incentives to do more and more ransom ware campaigns. and we're now starting to see the shift from not only consumers but even soft target organizations and businesses like hospitals, universities, police stations. >> steve, this morning we learned -- or at least i learned something about google dorking and how these iranian hackers targeted this new york dam. how vulnerable are key infrastructure points to something like this, basically somebody trolling the internet and being able to get in? >> you know, the critical infrastructure is made up of a

very wide range of technologies, components, that have many different types of infrastructure. we also see tremendous variability in who is managing, who is securing these capabilities. so it's a combination of government and private industry. so when we look at what it really takes to secure our critical infrastructure, it's a nontrivial endeavor that all of these different groups need to up their game and actually start working together and do things like share threat intelligence. really share the playbook that the bad actors or potential attackers would use to go after these different targets. >> steve, at the consumer level, it does feel like for better or worse, consumers have gotten used to certain types of attacks. namely the democrat denial of service and potentially the financial institution cyber attacks. we heard in those charges against the iranian hackers that

46 financial institutions have been affected by that. people are looking at their credit card statements, they're looking at their bank statements all of the time. but what's the risk we get too used to the traditional types of attacks and these hackers find us somewhere else? where should we be looking? >> no, that's right. we do see what the attackers were purported to be able to do. in this case, take one playbook and execute that playbook against a wide range of financial institutions. and part of what we need to do from a defensive standpoint is help mitigate the amplification of these attacks. and it's one of the things we actually talked about in our report, how different types of institutions can share what we call threat intelligence. it's essentially the methodology that the attackers are using to execute something like the denial of service attack we saw so that when one of these banks gets impacted, all of the others can do a much better job

defending themselves. >> yeah. working together through shared intelligence. a common theme vowing all sorts of threats. steve grobman from intel security, thanks so much. >> thanks so much. steve liesman back at headquarters. what's up? >> we have a massive downgrade to our first quarter tracking. cnbc rapid update for gdp here. we are now tracking 0.9%. this is the only average on the street of different forecasts for the gdp tracking. we're down 0.5% in the short. but augustus, i think this ranks as one of the largest single downward revisions, all coming from a disappointing personal spending number we got. not the february number, the revision to january from 0.4 to flat for the month of january on consumer spending. we still have a range of 06 to 2.3 and the fourth quarter actual was 1.4%. so you can see we're slowing from the first -- fourth quarter to the first. here are the revisions.

all of them downward. but some very, very big ones. steven stanley at amhertz down 0.9% to track 0.6. the atlanta fed down 0.8% from 0.6. folks, this has lost a full percentage point because of the disturbing durables number last week, as well. this number was tracking above 2. now it's tracking right below 1%. some commentary we got just very quickly. actions saying if they can go lower but mark zandi at moody's saying this is not at all assistant with measured gdp growth. that's from the other side. and action economics suggesting maybe we have further to fall on this number. kelly? >> wow. not -- already quite low, steve. thank you. steve liesman, update on gdp. when we come back, uber's travis kalanick talks business in china and his plans for a ipo or thereof. it's next.

welcome back. uber ceo travis kalanick sitting

down with our geoff cutmore for a cnbc exclusive interview. here's what he said about business in china, a major point of emphasis for the company. >> we're very young here in china. and we're still in that investment mode. the good thing, though, when you have profitable cities around the world, those profitable cities can then help us to invest more deeply in this country. so you take like the top 30 countries -- sorry, the top 30 cities that we're in around the world. they -- we're already generating $1 billion in profit from those 30 cities a year today. and those cities are growing by 2 x, 3 x, 4 x per year. and so that is sort of the fuel that allows us to go to places like china and invest deeply to make the system work and to work in a big way. >> all right. so you can tell they're trying to emphasize just how much money they're making. plenty of investors still

focused on how much are you spending in your expansion plan. >> venture capitalists have put the estimates for their losses in china at about $1 billion a year. and rising. and it's a winner take most market in china. there are so many riders. but they are plowing so much money behind that. they recently did this capital raise, which we reported on jon where maryland mentioned morgan stanley to their retail investors. and some of the folks familiar with that situation were surprised at how closely uber was paying attention to when exactly that money was wired to their accounts. and exactly when they could start spending it. this is a company that needs capital. >> it is. i think it's important to note that he specified that in the top 30 markets, how much profit they're making. but they're fighting a multifront global battle here when it comes to rights. not just in china, but also in southeast asia versus grab --

formerly grab taxi. so they're trying to do not only the tradition cars, like taxis. they're also trying to do bikes now, and trying to do this ride sharing thing. a lot of companies, living social and others included, have sort of crashed against the rocks when finding these multifront wars. by no means assured. >> his earlier comments about how he's not looking to ipo any time soon also creating quite a bit of buzz. and moral obligations to employees and investors who have their stock tied up. he wants to do that as late as possible. interesting stuff. meanwhile, apple unveiled the iphone last week. and preorders are starting to roll in. so will the more affordable iphone se be the big winner for apple this year? darrion an e. we focused so much on apple and what this could mean for its customer base as they are upgrading to the new se. but i'm curious about your research on which suppliers could benefit from this new

model. >> yeah. actually, apple's entire ecosystem should get a small business from the iphone. at the end of the day, it's not going to be a huge product. 15, 20 million units so four or five personal apple phones in a given year. some could work well from this, guys like texas instruments on the analog side. there are a whole suppliers that get a benefit. but it's a small number of the unit base right now. >> so do you think if an investor wants to play the supply chain trade of this, they should wait until perhaps iphone 7 comes out this fall? >> i would think so. that's typically the bigger up side you get out of the ecosystem more often than not. i think if you're playing apple versus the supply chain, the iphone 7 has been a better point

to play. one of the points i would point out, the iphone se price is attractive. we do think apple would look for the supply chain to share some of the pain with them, especially with its low risk margins. i think the se could have a negative impact on gross margins. i think the 7 would be a much cleaner product for apple and supply chain to work. >> i'm curious why you say 15 to 20 million units of the se, given that apple took the unusual step of saying during the presentation they did 30 million units in 4-inch phones in 2015. so either you think people are going to opt for the 6s they really just want a slightly cheaper deal and that's why they were buying a four-inch phone or you don't think despite this lower price the volumes are going to go up for the four-inch phones that much. why do you say just 15 to 20 versus at least the 30 they did in 2015 in this form factor? >> no, that's a fair point.

the number we talk about is incremental. so i do think that 30 million base, runs on four-inch, should sustain that momentum. the 15 or so number we talk about, that's roughly our sense -- 140 million-inch phones that are three years or older. the 15 is a reflection of 10 to 15% base migrating. we do think that 30 million -- 15 to 20 million would be an incremental number for the four-inch phones. >> we're going to continue to see this on the preorder for the se and new ipad pro. we appreciate your time this morning. >> thank you. admit doorianan e. >> this is the time we usually bring the european close but most of europe is closed today due to the holiday. back in business tomorrow. interesting how they have a holiday after our holiday. >> they also had our holiday. >> i like how they do it over there. >> always sneak in a few extra days. next, two of the biggest names in gaming to break down

facebook's oculus rift. the ceo and co founder of zynga will join us when we come back.

good morning, i'm sue herrera. here it your cnbc update. nathan deal vetoing allowing refusal performing gay marriages, saying it was discriminatory. >> we should simply heed the

hands-off admonition of the first amendment to the united states constitution. when legislative bodies attempt to do otherwise, the inclusions and omissions in their statures can lead to discrimination, even though it may be totally unintentional. >> opponents of a new north carolina law that bars transgender from choosing bathrooms sued the state, challenging the measure as unconstitutional. the american civil liberties union among those filing a federal lawsuit. cnbc's parent company, comcast is among the companies publicly objecting to the law. the supreme court rejecting former illinois governor, rod blag's appeal, letting stand an appeals court against him. he is serving in a federal prison in colorado. and donald trump has a new grandchild.

daught daughter ivanka giving birth on sunday. it's the third child for ivanka and husband jared kushner. many happy returns to both. and that's our cnbc news update this hour. back downtown, john, to "squawk alley." >> thank you, sue. modern virtual reality has arrived. the oculus rift hit the road today, delivering what some believe will fundamentally change the world, at least the digital world. but is the technology ready to go mainstream this time? joining us here at post 9 is zynga co founder, and former ceo at electronic arts. john, let's start with you. is oculus simple enough for the mainstream to really embrace it or is it going to be the early adopters for the first couple years, maybe even the first version before this really goes mainstream? >> first off, i think oculus is absolutely amazing. it's an experience like you can't even imagine if you haven't tried it. so i think it's going to make a

massive impact. having said that, i think it's going to take a couple, three, four years before we see mass adoption at the level of hundreds of millions of consumers or billions of consumers around the world. >> tom, you agree with that, or could this explode the way social gaming did just a few years ago? >> i think this is actually going to explode. this -- you have to remember, vr has been in demo mode for over 20 years. zuckerberg said, hey, this is going to happen. so three, four years ago, bought oculus and now everyone is falling behind him, htc included. >> we've been working on electric cars, though, for over 100 years. >> right. >> there are some technologies people always like the idea but can't quite execute. at least with the social gaming and mobile phone, you had to have it to make phone calls. making text. why do i need to be involved with vr and is it really feasible beyond the people who just like it for what it is? >> honestly, i base most of my thesis on one very basic

question. when is the last time you bought a gadget that created awe and wonder? like the first time you used a mobile phone, first time you used the internet, that's this category. >> but john, before you buy that type of life-changing device, you have to get your head around spending $600 in this case. do you think enough people will be convinced that this is worth that right now? >> i think it's actually more than that. so first off, i agree that this is massive. i mean, literally massive on the scale of television for the first time. or the internet for the first time or mobile phones for the first time. i just don't think it's going to take off all that fast. it's going to take a while. couple reasons. there's great content like coming out with the oculus rift. and my company is making some things like creating content in the world of virtual reality. you're literally a god inside making things. but having said that, it's not just the $600 headset. it's also 1,000 or $2,000 pc and

there's not that much content yet. so my sense is, it's going to take off like this. it will be a little slow. it will gain momentum towards the end of the year, 2017, 2018 so i couldn't be more excited about the potential for changing everything. i think we shouldn't get ahead in thinking this is going to be under the christmas tree at holidays. i don't think it's going to be that big that fast. three to five years, it's massive. >> and tom, because of that cost issue, does that give a real advantage to sony? because a lot of people, more than 1 million consoles are out there already. they have 400, maybe 5, 600 bucks to get the fuel experience on top of that to pay. not that many people have a high-end, modern pc in a location, you know, not in the office where they're going to want to do this sort of vr gaming. how much of an issue is that for how this takes off? >> i think it would be a bit of

an issue, but much less than everyone is expecting. i think everyone's tech budget is actually going to stop going towards a new mobile phone or new tv, et cetera. it's actually going to get changed to go to vr. i really think this is going to be the biggest christmas want, probably for the next five years. >> i love this. all of a sudden i'm thinking, wait a minute, maybe this is all like a second, you know -- new lease on life for the pc industry. >> it could be. it actually could be. >> people have to go out and say, wait a minute, i don't mind shelling out for a new pc, i haven't done that in 15 years. >> when is the last time you bought a computer and it did something amazing? >> if you're a parent, how scared are you about your kid having something on his or her face where you're not necessarily clear on what's on that screen and is that at all an impediment, maybe more for the pc versions, like the oculus, than for the playstation version that is more closed? >> i don't really think there is much of an issue there. content and parents managing what children watch on television, what they game with, what they do on the internet,

that's been there for a long time. i think parents really understand that. and i think, frankly, this is one of the few things where the parents are going to put it on their head, just like the kids. and they're going to -- their minds are going to be blown. this is really that big a deal. so i agree with this notion that it's just spectacular. the challenge right now is what's going to be spectacular? there are some great games coming out, interesting experiences. but the point here is when you put this on your head, you actually feel like you've gone someplace else. it's a little bit like the who will ideck from star trek. you feel like you're in another place. that is such a spectacular experience that it's going to -- for the people that can afford it this year, willing to wait for the content to come, it's going to make it as great as it can be. it's going to be pretty special. so i don't think the parents are going to be any more concerned about this than they are over the internet. they're going to love it. >> yoga pants, by the way. that's the last time i felt awe and wonder buying something. so there might be some opportunity out there. >> well, imagine how that's going to feel in virtual

reality, kelly. tom bullock and tom rick tella, thanks so much. up next, a year after ellen powell's case, gender diversity in the valley is pretty much the same. still not that much of it. we'll take a closer look at why. first, rick santelli in chicago. >> i'm watching output on population. growth in trinkets throughout the country. i love chicago. but it does have some issues. and the residents seem to be clashing with policy. should they stay or should they go? that's what we're going to talk about after the break. i'm only in my 60's. i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i looked at my options. then i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare, you may know it only covers about 80% of your part b l exmedicanses.

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gnome coming up on the halftime report, why some exclusive cnbc data has people talking about the chances of a recession. what it means for the markets. plus a five-star portfolio i can't manager with five dominant stocks he says will survive a down turn. and our funds with a small number of concentrated positions. a big risk for your money? mike santolli investigates. we'll see you at 12:15. in the year after ellen powell's case, gender diversity still an issue in the silicon valley and elsewhere. josh? >> among top vc firms, women represent only some 8% of senior investment positions, according to a report from the information and social capital issued late last year. i did speak to one

well-respected vc over the weekend who says it's an education pipeline problem. fewer women study the hard sciences, he says, so there are fewer candidates. others argue that san tell road is a boys club where hiring women is not a priority. >> there is also a place with making money that things like diversity don't matter to them, even though they should. because all the data shows that when you have diversity, you have great erin no elevation. you have greater productivity. greater economic growth. so they'll be better served asking tough questions. and that's why it hasn't changed. >> now, the information and social capital did score firms on gender diversity. poor scores, bain capital, lightspeed, general california catalyst and sequoia. sequoia acknowledging they have no female investing partners in

the u.s. three in india and two this china. pao is encouraged to see more initiatives and groups included in tech diversity efforts. serious conversations around pay equity and tech and beyond are happening, she says. a lot more work to be done. pao highlights caper capital whichin inquiries companies to sign a diversity pledge. time will tell if that and similar efforts really actually translate into greater gender equity. guys, back to you. >> everything, though, starts with a conversation. so we'll see where this gets us. josh, thank you. josh lipton in san francisco. let's get over to rick santelli. >> when it comes to the country and the issues that we are dealing with, both financially, economically, there is a lot of different regulartory issues. it's next to impossible. you just don't pack up and leave. country is a great country. has issues. maybe the hopelessness comes

from the issue we're not making big dents in problems that not only politicians, political class, but everybody sees. and some of them are low-hanging fruit. so there's always a scratching of the head. but when it comes to the house you live in, and what town the house is in, and what state the town is in, you can have happy feet, which is the title of this. this weekend, i was reading a great article in the "chicago tribune." and the title was, "chicago area sees greatest population loss of any major u.s. city in 2015." now, as i started to read the article, i have to say, that you really need to see the trend of growing, neutral and shrinking populations for this to sink in. because the numbers are pretty small. i mean, let's start with chicago itself. chicago metropolitan area is probably 9, 9.5 million people. chicago and suburbs. right out to indiana and wisconsin.

now, 9, 9.5 million. how many do we actually lose? the raw number is really small. about 6,200. 6,200. but statewide, even though there's only seven states that lost population -- this is all in the article and source -- this is census bureau owe census department. but it did triple, even though it was one of seven in 15, went to over 22,000 in 2015. the common reasons? you're going to like these. a property taxes, good schools, and the biggest issue maybe of all, unemployment and crime. now, weather was listed, but i have to say, i don't mind the weather. there is not much that could be done with the weather. but the point here is, we are now going the wrong way. and when you look at the impasses that the governor has to deal with to try to get things better on a budgetary basis, the notion that the rear-view mirror is getting more money, things that are already done, services that were

already -- occurred, are being paid, maybe at the expense of expansion of the current opportunities and services of the city. and the reason all this is so important, and there is lessons to learn here, is that it isn't just a numbers game. this much deficit, raise taxes to try to equate it. they're both moving targets. and that notion really never seems to come in the commercials we see going into election season. but it's the reality. and many states and cities like chicago are living it, and it's bound to get a little bit more aggressive. jon fortt, kayla, back to you. >> we'll toss over to kelly. >> thank you so much. and thank you, rick. coming up, is the struggling cloud sector turning around? our next guest just closed his cloud company. more on how they're doing in a moment.

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welcome back. our next guest is building on the business cloud. companies like master card, ebay, last week bringing funding to more than half a billion dollars. josh james, ceo. welcome to "squawk alley," josh. >> thank you very much. >> and help me understand what is it that you guys do? and by the way, you were hoping to be public already, correct? >> no, i had a public company we ran for three years. and it was a great ride, sold it for $2 billion to adobe. and the one thing i wish i always had was the business cloud. and that's what we created at domo. and really, it's facebook for

your business. i mean, imagine if you woke up and it a text message and it said here's how your inventory changed, sales changed, employees, open head count and that's what we have and it's right on your phone and changing the way everyone runs their businesses. >> it makes it sound like it could be a competitor in anything from sales force to slack. why is domo, you think, able to raise funds, and continue to grow the valuation of the company at a time when many other so-called unicorns have fallen by the wayside? >> one of the things most interesting about our business, our business is growing, same-store sales growing at 200%. so when our customers get in, they start using more and more and more of it. and really, i think it's a testament to -- at my last company, created the world's first marketing cloud. and i've been in the cloud for 20 years. and the one thing that we're kind of a victim of our own success. all of the cloud companies. you have all these data and different clouds. how do you get data just in one

place? and that's what we did. take data out of your private networks, virtual clouds, put it in one place, it looks the same and everyone is interacting with it. so i think investors are just excited about the opportunity. because it literally -- i mean, i have one investor after our conference last week called domo palooza. and one of my investors said this is going to be the biggest enterprise software company of all-time. >> josh, that would be very -- that would be very big. i'm curious why you decided to be so secretive about this business cloud move that you've been working on for several years and are just now releasing? how competitive is the business intelligence and analytic space. we know everybody is racing to be able to visually show these data points and allow businesses to work with them. but what is it about your method that was so important for you to keep secret? >> yeah, i think the biggest thing is because of the success we had last time, there were a lot of people watching us. and we just wanted to keep it under wraps. we had -- we actually got up to

over 1,000 customers and they had all signed ndas, so we were kind of preventing our growth a bit. but once we finished the products and rolled it out last week, we were really excited to see what happened. and in terms of competitors, there's going to be competitors. we just don't have any yet. we created the world's first business cloud and part of it was raising the money, half a billion dollars and investing that aggressively to take the data from different sources. it's kind of like we didn't want to go and create another flip phone. we wanted to create the iphone. but we did that for business. >> josh, thank you. and now people doing their business on the iphone using your software. appreciate you joining us, and a congrats, of course, on the latest fund-raising. ceo of domo. >> thank you. up next, the bidding war for starwood hotels continues. the latest there. and take another look at pandora. sliding after replacing its former ceo with founder, tim wester green. that stock down 10%, and "squawk alley" will be right back.

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the bidding war for starwood hotels continues. simon hobbs with the latest. >> kayla, we're waiting for two things. first the board of starwood to say this is a superior offer, and to react. in the meantime, the holding statement from marriott, in which they question the financing of the deal and at the same time, the timing of any required regulatory approvals. the latter is really perhaps more interesting moving forward. one, the idea that the chinese insurance regulator might say this deal is too big. too much of your property would be overseas. but there's also a suggestion now in the marketplace that there may be a regulatory problem in this country, particularly that proximity of some hotels to certain government locations. they got the okay to buy the waldorf, but at the same time the president doesn't stay any longer. the question is, would the authorities here require the

chinese to sell hotels that are close to military installations? that's at least what people familiar with the situation are putting there in the marketplace. >> ceo of marriott saying the deal they reached in november might have been too good. >> they have upped is it since then. >> simon, thank you. kelly, john. thanks to you both. noontime on the east coast. over to the halftime report. ♪ thanks kayla. fears the u.s. economy may once again be facing a sharp slow down. with us for the hour today, josh brown, stephanie link and pete najarian. we begin with exclusive new data today revealing a dramatic down turn in activity this quarter. it comes after a surprisingly weak revision to consumer spending, raising some troubling new questions now about where the economy truly is heading, and is if a recession is back now on the table. we beginit