good monday morning. thanks for joining us here on "squawk alley." carl is out today. john ford is live in miami, florida. he will join us a little later on. with me at post nine for the hour, simon, good morning to you. also the co-founder of palantir, joe lonsdale. thanks for coming in this morning. appreciate it. first up, markets are mixed, dow just entered positive territory. big week for tech earnings with ibm and netflix set to report after the bell today. it's sure to be an interesting earnings call for netflix in

particular, where reed hastings has to answer questions about new competition from amazon. amazon announcing it will offer prime video as a stand-alone service for $8.99 a month. before this the only way to get amazon prime video was with an amazon prime membership for $99 a year. let's talk earnings first, because there seem to be this rotation into the ibms and intels of the world, what we have been calling gray chips, some of the formerly out of favor value names. what is the proposition for growth for these companies? >> i wouldn't call ibm a value name. when warren buffett bought burlington northern he was making a bet on the american economy. >> we knew i.t. spending was going to go down, ibm trying to refashion as a cognitive play. how much does that play into the messaging it gives to investors? >> a lot of people have been saying they are struggling because of the cloud and all this kind of different names of what's happening. really, what's happening is ibm

is not able to compete with the new technologies coming out of silicon valley and is getting clobbered. i would be really worried about ibm the next five years. >> maybe i misheard you at the top. did you say buying ibm was a bet against the american economy? >> exactly. >> why would you say that? >> basically the biggest trend right now in the american economy is every industry is being transformed and updated to reflect what's possible in technology the last 30 or 40 years. that's happening through the top companies, with the top tech cultures. ibm is a sales driven culture. it's kind of like this fake old tech company that tries to p pretend it's tech. it's getting clobbered everywhere it works. >> what about watson? they like a big song and dance. are you not persuaded? >> they sold to a lot of big banks and pharma companies. there are other companies coming in who are modern tech companies they are struggling against. that's the challenge. >> if there was a strategy out of this, what would it be for big blue? >> it should be that people

running the company should be technologists, not sales people. they should try to figure out how to hire top engineers in top engineering areas. it will be tough to be a sales driven company competing in tech areas. >> more on ibm this afternoon. the cfo will join "closing bell." it's a company that is always on defense, whereas netflix is able at least until perhaps now to play offense. what would you say? >> netflix has known amazon would be doing this for awhile. amazon is a scary company to compete against. they have a lot of resources. they have always called, bezos referred to it as an all you can eat strategy. this is the first time they have broken off and sent their battalions after netflix. he's thinking about competing against netflix which is scary for them. >> shows you how much amazon values its own content.

$8.99 a month to get prime which includes your two-day shipping for anything else you want to buy on amazon. that's $10.99. that's only two bucks. >> he may actually be trying to make users realize what a good deal prime is. it may be the same strategy where he wants everyone on prime, but he says look how great the content is and you will get an even better deal if you sign up for prime. >> do you see this as a really spicy shot across the bow? >> this is something reed hastings anticipated in 2012. everyone knew this was coming. for now it's not the best pricing so he probably just wants everyone to stay on prime but it is scary for netflix. >> how does the competition develop, then? we see it very much in a u.s. context but obviously the netflix, you can replicate what's happening here and the world, there will be incumbents in other languages locally athat may be better at when they do if they are to be challenged in this way, surely. >> that's the question. is there a better answer with the content deals they have locked up. amazon is trying to prove the barrier to entry is not as big as they thought. that's what the market's trying to figure out here.

rnl >> interesting to see what hastings and company have to say. up next, embattled theranos ceo sitting down with maria shriver this morning on the "today" show, apologizing and taking responsibility for the issues plaguing the company. >> i feel devastated that we did not catch and fix these issues faster. i'm the founder and ceo of this company. anything that happens in this company is my responsibility at the end of the day. we stopped testing and have taken the approach of saying let's rebuild this entire laboratory from scratch so that we can ensure it never happens again. >> joe, you can apologize as a ceo as much as you can, but until you can fix these issues and convince regulators that you know how to operate a company in this type of an industry, how much can you survive this reputational damage?

>> i think it's a really unfortunate thing she's going through because i think it's a really talented company. maybe a little too secretive and maybe a little too much where the press really loved them and now they are getting attacked too much as well. >> there is something broader here. correct me if i'm wrong, this is a $9 billion valuation on the company. which to most people watching seems like an awfully large amount of money to then be easy with forgiveness. is there something wrong about how some businesses are valued on the west coast? >> you have to understand what it actually mooneans. it's actually a call option. when insiders were putting in money at that valuation they knew they could get the money back so it was basically a call option. >> in the way it raised money. >> exactly. they didn't go to insider investors, they went to people who gave them a much higher valuation. doesn't mean they're a bad company. they are a pretty high valuation and people paid a lot. >> are they overvalued hugely? >> people might have paid more for that call option than they would have today.

doesn't mean it's a bad company. >> you have to think about what lessons silicon valley is learning from this, whether it is being too confident about your disruption in a regulated industry. how to build a board that can give you the advice you need. what take-aways are companies you are invested in looking at? >> she actually has one of the very strongest boards you will see anywhere with leaders of all these industries. you know some of the names on the board. >> but the criticism -- >> did they know what was in the business to the point that you are making? she attracted the great -- did they know the heart and soul, the dna of the business? >> they knew she was a great leader and there was a lot of potential for the company. it's obvious things got ahead of themselves. if anything, it's a lesson for the press that put her as the most important person ever before she actually achieved things. i think she's very competent leader but there's still more to prove. >> the criticism was she stacked the board with heads of state and had a lot of headline type names, but very few, if any, licensed medical professionals. >> i think she also had very few

true silicon valley insiders. it was smart of her to get people to help her with the industry with these big names but she also needed to be more open and transparent with what's going on in the valley. >> how fine is the line between drinking your own kool-aid because you have to be confident in what you're doing or refusing your own advice? >> you have to drink a little of your own kool-aid. it's the only way to attract people. maybe they could have had more transparency. >> a prediction for where the company goes? >> i don't know how much cash they have on the books. there's a lot of competent people. if they have enough money they can turn this around. >> that's the question for a lot of these companies. it will be interesting to watch. thanks for coming in today. appreciate it. joe lonsdale. now let's turn our attention to oil. no deal, of course, at the meeting at dohar from some of the big countries that supply oil. news that continues to hit the price of crude although we are substantially off our lows as we

trade. look at that, down $1 overall. pretty close to $40 a barrel. brian sullivan is live in dohar with more. take it away. >> reporter: yes. thank you. you can thank striking kuwaiti oil workers for that drop. listen, the sun is setting here in qatar and that's sort of a metaphor for the hopes for a production freeze because the sun has set on that after yesterday's rather bitter meeting. min sisters were left to lick their wounds and reflect on what's next. first you have to look at increases in output from iran. it's really the reason the deal did not get done. saudi arabia wanted to limit iran even though they weren't here at the meeting. a lot of the ministers simply said they could not feel comfortable with that. iran is trying to mitigate the impact of sanctions and get back to four million barrels a day.

iran might lift production. saudi arabia suggested they might raise output as well, they have another million to million and a half additional barrel capacity that they could put on the market and if we see iran go up, perhaps saudi arabia will play a game of brinksmanship and also increase production, perhaps as a punitive measure against iran. the reason that oil is not dropping more as you noted, is because of this strike in kuwait. oil workers in kuwait are striking right now. there's a thought that maybe a million to a million and a half or more barrels per day could be taken offline. here's the thing. this is why it's kind of a maybe in terms of the price drop. kuwait telling the middle eastern news agency today they could be back at full production within days and indeed, might try to increase output. so if you are an oil bull because of kuwait, your hopes may be short-lived. for now, everyone left and the next time we meet is june 2nd in

austria at a formal opec meeting. remember, this was not an opec meeting but a summit, if you will, put together by qatar to bring everybody together. the next meeting officially in june. however, there was some talk and some chatter and some rumors that maybe between now and june 2nd, this 18-member group because we have 11 of 13 plus opec, russia and some others, could maybe meet again, perhaps in nigeria, perhaps elsewhere, to try to create another deal. in tints he interim, the sun ha on a deal. this is probably a bad idea for countries like venezuela. i will lay out the bear and bull cases for oil going forward following this doha no-ha as i'm calling it. >> safe journey back. thank you very much. brian sullivan reporting. just watching the market here, making an attempt at 18,000 on

the dow. you will be aware the last time we did that was july 23rd, 17,957. obviously there's some relief as far as the energy stocks are concerned that oil hasn't further fallen partly because of what is happening in kuwait. meantime, shares of morgan stanley negative after earnings topped estimates. investment banking a weak spot. fixed income and investment management results were better than expected. bigger picture here, of course, is that morgan stanley rode the financials rally last week. >> meanwhile, this week cnbc is live from the emerge americas conference in miami. john is there with a look at when we can expect. >> reporter: i'm going to have the chief operating officer of hyperloop transportation technologies coming up a little later in the show. a lot going on here this week. we had colin powell onstage

earlier today. we will talk to tony hawk, the skateboarding phenom and entrepreneur later today. you see that on social. i will bring you some of that tomorrow as well. there are startups on the floor running the gamut. startups that are looking at technology to monitor blood pressure, some corporate security work going on here with at least two factor authentication, coffee brewing, also portfolios in the cloud for modeling clients to try to take more control of their digital lives. dancers and jugglers on the floor as well. interesting connection between technology in the u.s. and latin america. a lot of people coming here wanting to make that connection with countries and opportunities in latin america. of course, miami is a great place to do that. lots of coverage coming from here. very fresh perspective on what technology can do, particularly in the mobile and cloud era coming out of this conference. back to you. >> see you in just a little bit. looks like an exciting agenda.

the emerge conference. when we come back, deadline day for yahoo! with preliminary bids for the tech company due today. a look at the timing and some of the front runners for that sale. plus how close is elon musk's hyperloop to becoming a reality? and an amazing medical breakthrough. a doctor using a computer chip to help a paralyzed man start moving again. the doctor who performed the surgery will join us live. "squawk alley" is back in a moment. this car? came courtesy of james and patricia thompson. this tv? margaret and tom lee. the championship game ball? that was sebastian diaz. good guy. and all i had to do was ask for their money and pretend i was investing it. their life savings is now my lifestyle. female announcer: don't let someone else live the life you're saving for. find out if you're dealing with a registered investment professional at investor.gov. it's a great first step toward protecting your money. before you invest, investor.gov.

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we want to take you live to midtown manhattan where thousands of verizon workers are striking today. you can see on your screen a sea of red in new york city. some 40,000 workers have been protesting to save middle class jobs for the company. of course, these are familiar scenes to people who live in new york city. it's been happening for most recent days. simon, one question is whether their optics of verizon bidding for yahoo! a deal that would no doubt result in job cuts at a time when they are obviously facing this backlash from

workers. >> these people are with verizon fios and installation. they have been on strike since wednesday. there's a lot of issues they are concerned about. of course, after bernie sanders addressed them, a very strong rebuttal from verizon's ceo as well, the criticism the company is facing. the yahoo! bid, though, clearly is a focus for many. today, of course, is the deadline for first bids to buy yahoo! or at least parts of the struggling internet company. so which suitor is in the lead? this is a real setup for you, josh. take it away. >> reporter: well, while some 40 companies had initially expressed interest in yahoo! only a handful are now left. that's according to the "wall street journal" which reported over the weekend that time inc., google parent alphabet, comcast, parent company of this network, at & t and barry diller's iac interactive all have opted not to make a bid.

which suitors are left? a host of private equity firms including tpg, bain capital and advent international reportedly still interested. but the team says verizon could now be the best possible acquire. they argue that verizon could gain scale with ad agencies by selling a combined aol/yahoo! media package as well as integrate search technology across verizon's mobile network. analysts say yahoo!'s core business could still attract as much as $8 billion. the company does boast more than one billion monthly users. that's a lot of potential people to cross-sell products and services to. a yahoo! deal also carries real risks that could worry bidders. e-marketers estimates that digital ad revenues will fall 14% this year, the biggest drop in seven years. adding to the uncertainty, of course, there could also be a nasty proxy fight with activist investor starboard value at the company's shareholder meeting

this summer which might result in tossing out the company's board. yahoo! will report earnings results tomorrow after the close. weak q1 results are expected but investors will be focused on any insight the ceo can now give about this ongoing sales process. back to you. >> thank you very much. up next an amazing medical breakthrough. a doctor from ohio state using a computer chip to help a paralyzed man start moving again. the doctor who performed the surgery is with us next on "squawk alley." they may want the latest products and services, but they demand the best shopping experiences. they're your customers. and by blending physical with digital, cognizant is helping 8 of the 10 largest u.s. retailers meet their demands with more responsive retail models... ones that transcend channels and locations, anticipate expectations... creating new ways to engage at every imaginable touch-point. it's a new day in retail, and together, we're building the store of the future. digital works for retail.

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it could be a breakthrough in brain technology. a doctor helping a paralyzed man regain feeling in his limbs by implanting an experimental chip into his brain. the doctor is director of ohio state university's neurological institute, from where he joins us now. good morning to you. >> good morning. >> could you explain to us in

layman's terms what you have been able to do here? >> yes. there was a patient who sustained a severe spinal cord injury that made him quadriplegic so he had for five years, no movement below his elbow, so no movements in his forearm, no movements of his hands, and with our trial, we basically implanted a microchip in the brain that detects his thoughts of movements, and within milliseconds, makes sense of those thoughts and translates them to an external wearable sleeve garment-like device that allows him to move his hands so for the first time in five years, he's able to pick up a cup to his mouth, be able to brush his teeth, to be able to even swipe a credit card and to even play a video game such as guitar hero. >> how much learning was there on both sides of this in order to get to the position that we see on the television now which is remarkable. i imagine he had to re-learn a lot of stuff and presumably you have to interpret whatever the

neurological signals are again and again? >> exactly. this required learning on both directions. the patient's brain was re-learning as well as the machine learning. so the software was learning brain signals as was the patient's brain learning so as time went along, he went from two years ago having simple opening and closing of his hands to be able to now perform complex movements and taking a cup to his mouth or brush to his teeth or telephone to his ear. >> can he feel? >> he has no sensation below his elbow down. >> so in other words, he has to presumably it's his eye that has to receive all the information as to how you grab something or the pressure that you put on it. that's a very difficult process for this guy to go through. >> it is, and that takes time and that's where the machine learning and the software is developing and his brain is also evolving over time. it's a combination of both the patient's brain and the software that are working together to

improve his function. by just thinking, he's able to very quickly within milliseconds make purposeful movements and is in control of his body and his hand, that he was not able to move for five years. >> what's the downside, doctor, to a procedure like this if it doesn't work? >> so the downside, this involves a surgery have yyou ha implant a small pacemaker and there was a small risk associated with that. if it doesn't work he's not going to be able to get movement. this is still investigational. our hopes to apply this for patients at home. right now he has to come into the laboratory but our hope toys make this wireless and to be able to have this system at home so that patients, millions having disabilities, physical disabilities with spinal cord injury hopefully, stroke or traumatic brain injury, to be able to use this system at home in the future to improve their functioning and independence. >> because it would seem that there would be a lot of people

watching this segment who are paralyzed themselves who would think get me on board on the next experimental trial so i can see if something like this would work, but just to be clear, it's not for everyone? >> that's correct. there are very strict criteria for inclusion in this study by the food and drug administration. our hope is this research as it continues and there are many groups worldwide working on this technology called brain/computer interface. as this technology evolves, we are going to be able to get better and we are hopefully going to be able to help many more patients in the future. >> thank you for sharing that with us, sir. it's astounding technology. >> thank you. up next, a big week for tech earnings. ibm, netflix reporting today after the bell. what should we expect from both companies?

good morning. i'm sue herera. here is your cnbc news update. the supreme court declining to hear a challenge by a group of authors who contend google's massive efforts to scan millions of books for an online library violates copyright laws. they had argued that google books illegally deprived them of

revenue. a drone operated by a japanese agency capturing the dramatic footage of the extent of some of the landslides triggered by powerful earthquakes that rocked southern japan. take a look at those long cracks in the ground revealing the fault lines that caused the two quakes to erupt last week. oscar pistorius will be sentenced in june for the murder of his girlfriend reeva steenkamp. a high court judge making that announcement today. the minimum sentence for murder in south africa, 15 years in prison. storms have dumped more than a foot of rain in the houston area, flooding dozens of neighborhoods and forcing the closure of city offices and the suspension of public transit. the area receiving up to 16 inches of rain in the 24 hours throughout this morning. that's the news update this hour. you're up to date. back downtown to "squawk alley." meanwhile, europe closed just a minute ago. let's get that with simon.

>> they made gains throughout the session. initially they were way down by what was happening with oil. now you have relatively broad-based markup across the board. the banks are clearly a focus. the banks have been shifting around, as have other sectors but perhaps the most prominent. couple of stories doing the rounds there. one is that the spanish are now going to bid a billion dollars effectively to buy the parts of one of the portuguese banks that they don't already own. this after they failed to get an agreement with the richest woman in angola over the weekend. it actually hasn't traded for some time. it suspended which is why the line doesn't go further. you can see it made gains in the clear interest there was around caixabank. the italian banks have suffered badly recently. italian banks and insurers are doing relatively well today. they set up the fund in the private sector from the government, but in the private sector, to help the banks each of the big banks to put a

billion euros in. this fund will now underwrite, for example, the $2 billion vincenza cash call so now you have the payback coming through. euro credit is relatively flat overall but other issues within the italian banking sector have made gains. as far as the uk is concerned, we had news that house prices in the uk have hit a fresh all-time high. that after the finance minister recently of course changed the rules specifically on buy to let so there was a rush through that obviously has pushed prices higher. for his part, george osborne today has launched the treasury's argument as to why the uk should stay within the european union. the projection, and it is controversial, is that leaving, would cost households $6,100 further down the line. you see him making his case. what's interesting at the moment is we are in the official campaign. the big banks are not able to give opinions in public for fear

they would be in breach of the electoral commission. don't forget, president obama rooifs arrives in the uk on thursday where he is likely to break with tradition and say the uk is better to stay within the european union. >> not for lack of trying that the bank executives haven't been saying anything. we certainly have been trying to get their statements on it. interesting to see in a few months. see you in a few moments. chip makers ibm and intel are both expected to report their earnings this week. both companies are in a state of transition focusing more on data centers and transitioning to the cloud but how will the slow demand for computer chip business affect earnings? dan morgan is a portfolio manager. his firm owns shares of both ibm and intel. appreciate you joining us. what's going to be a very busy week. let's start with ibm. this is a company in the middle of a multi-year transition that has to answer to investors on a quarterly basis. i'm wondering what you think

investors will hear tonight. >> well, you're right. ibm is definitely in transition. everyone is going to be looking for evidence that this transition is in process. last quarter, their software revenue was a little bit weak and software encompasses about 40% of what they call their strategic imperatives. obviously we would like to see some improvement in the software group going into the quarter, and you know, right now, we are looking at 50% projected in terms of total revenues coming from this strategic imperative segment which is the cloud as a part of that within software, and then the question is can they continue to execute and show evidence every quarter that they're on the right track without losing people who say you know what, it's just not going to pay off for you guys. that's the challenge. >> a lot of these large cap tech companies as you know well, have been able to point to foreign exchange and say their revenues

would have grown more, x foreign exchange, x the currency impact. we did see a stabilizing dollar. i wonder if you think that will finally be a tail wind to these companies. >> well, hope so. ibm has had negative growth in revenues for a really, really long time, even when they were growing the bottom line by buying share backs and doing things with their cash flow because they have tremendous cash flow like hp. i think this quarter, we are looking for about a negative growth rate of about 6.9% but you're right, hopefully the currency will start to switch the other way and start to benefit these companies, but i think ibm's problems are a little bit more than just what's going on with the currencies. >> of course. we heard from palantir earlier on, one of the former founders, and he was very critical of ibm as perhaps he might be, given they are in a competitive space. can you see, fundamentally if you look at ibm, a way out of this?

are they doing what they need to do? will they again be a great investment, in your view? >> you know, it's kind of interesting because you go back and ibm has a history of going through these what we call kind of valleys or troughs. you look at the tech bubble, you look at -- i don't know if you were in the business in the late '80s but they had a huge pricing war in the mainframe business with a lot of foreign competitors. we had the big movement off the mainframe over into client server environment during the '90s. every single time they have been able to bounce back. they did it by getting more into services, less into the mainframe. you bring up the million dollar question, which is can they do it again, can this strategic imperative work for them. we look at this stock as a dividend stock, as a turn-around play. we look at something that is three to five years out. we are willing to give them the benefit of the doubt because they have done it in the past. obviously we would like to see continued evidence every quarter that they are executing. >> it's been a quiet gainer this

year, up nearly 11% in 2016 alone. do you think that is on the back of many people sharing your thesis that it is a good play for a dividend, for a safety stock, or do you think that has people saying i want to own this from here on out? >> well, i think you're right. i think it's a dividend play. it's also a free cash flow play. there is some benefit to the tremendous cash flow. the big thing is, you have a multiple on ibm of anywhere between eight or nine times earnings. the question is does the street start to assign a level of a premium to that multiple like they have with other companies that are going through transitions, microsoft with office 365, oracle is starting to go through transition, other of these old tech smokestack stocks that again, do we start to assign ibm a higher multiple because of this ability to execute on these imperatives.

again, so far, it looks like the market is looking forward and thinking that they will eventually execute this strategy. >> that recalculation is taking place behind the scenes. we will see what they come out with after the bell. dan morgan, thanks as always. >> thank you. here we are on oil, of course, you will be aware that over the weekend, some of the oil producers, the big oil producers, failed to get an agreement but now we have erased what were much heavier losses. not least of course because there is an interruption to supply from kuwait. more on that on cnbc throughout the day. first, rick santelli, what are you watching? >> you know, this week and next week, bank of japan meeting next week, we will look at the upcoming meetings and through the rear view mirror to past meetings to see what's priced

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let's get to the cme group. rick santelli and the santelli exchange. rick? >> thank you, kayla. let's go to the white board, shall we? the big three developed economies meetings coming up. of course, this week, this thursday. we have the ecb, the 21st, and the previous meeting was the 10th. if we look at the fomc meeting, of course it's next week, next tuesday and wednesday, the 26th, 27th. previous meeting, march 16. the bank of japan, next wednesday and thursday, 27th and 28th. previous meeting, the 15th. here's why i did the previous meetings. in a second i will show you three charts for currencies and three charts for equities. these charts are going to start by area, central bank, the day before the last meeting. so we can see how the markets are flowing and sort of what investors are looking or expecting. i guess number one, of course, is the euro versus the dollar.

of course we started this on the 9th. if you look at it, the best way to explain it is it's definitely firm but it's kind of ranging, unable to break through that top. with regard to the dax, making that be the stock market of choice for europe, definitely strong. strong. no way around strong. if we look at what's going on on the second pairing of charts, of course, this is with regard to our meeting coming up, if we look at the dollar index, boy, no doubt about it, it just does not look good. it's weak. if we look at what's going on with our stock market, strong, strong, strong. i pick the dow. last, the pairings of course for japan. maybe these are the most fascinating. the 14th, day before their last meeting, if we look at dollar/yen, the yen is really strong. it's been the water cooler talk really off and on for the last several months. if you look at the nikkei, also very fascinating because of course, we know that the central banks may not all be on the same page in terms of normalization

but with our federal reserve mostly on hold, lot of hawkishness just drained out of that marketplace. what we have indeed really is a strengthening equity markets. maybe japan is the canary in the coal mine. they have thrown everything including the kitchen sink and the neighbors, all their kitchen sinks at the marketplace. to watch the way the nikkei is turning down a little bit might be super fascinating along with the counterintuitive notion of their currency strengthening. i guess if we were to look at everything that i just showed you, the market that may be the most vulnerable is that counterintuitive move on the dollar-yen. maybe the dollar will finally strengthen but the other big issues are the stock markets of the world. i would take the dax in particular. mario dragi probably isn't going to do more easing. that's what all my good sources that always seem to be in tune with this say. how exactly does it play out in

the interrelationship between equities, foreign exchange and interest rates? i think the dax is it and the key interest rate level to watch will most likely be on boons. anything above 20 basis points is definitely unexpected activity. back to you. >> rick santelli in chicago, thank you. up next, how close is elon musk's hyperloop to becoming a reality? jon fortt is talking to one company trying to make it happen.

hundreds of startups heading to miami today for the emerge americas. jon fortt is there with a special guest. >> reporter: i'm here with bibop gresti, one of the companies working on the hyperloop idea. i want to dig in with you on the business model behind this. really interesting to me. you guys are working on something midway between san francisco and los angeles. those of us who spent time in california know there's not a lot midway between san francisco and los angeles. if you are able to build out this residential and commercial oasis there, it's going to be a lot cheaper than living in san francisco certainly or los angeles. how much of that is the business

model behind hyperloop transportation and enabling people to live in places they couldn't live before? >> first, thank you for having me here. we are not building the valley. we are building the transportation system of the valley. we are not connected to the buildings. but we immediately married the vision of their builders because we are actually building something that is the first full scale prototype. that can be the first piece en route to connect los angeles to san francisco. now, the business model you were referring is about creating a sustainable and efficient and fast way of moving people. if you achieve this, then you want to live in los angeles or san francisco or somewhere in the middle where you have sustainability because you have renewable energy that power your city and you can be 18 minutes from los angeles and 15 minutes

to san francisco, you probably want to live there, right? our business model is also to increase the value of land by being able to put something that doesn't disrupt the land but it's a business also for the landowner. >> how many things need to go right for this to end up being a profitable enterprise? lot of the numbers i see are 28 people will fit in one of these pods, you can run so many pods, one every six minutes. how full will you have to have these things at peak to make enough money to justify the cost? >> so first, our cost, sxwroeprd cost of construction is five to ten times less than normal cost because the main cost is the tube. we are working already to bring it down on a level that it will be very efficient. now, when you build a system like this and you are able to produce more electricity than we consume because we have

renewable energy like solar, wind, kinetic energy, and geothermal, the combination of this allow you more electricity than you consume. >> you must have a certain amount of ridership you will need in order for it to make sense even at the reduced cost. >> yes. when you are profitable per passenger, per capsule and you are not limited to 28 because we can design capsule bigger, you can saturate the system by adding a capsule departing every 30 seconds. in reality you start to be profitable way before. >> are you here to connect with latin america? >> oh, yeah. latin america for us is a very fundamental market. they need an infrastructure. as much as i have seen, there's so much interest about the hyperloop. very happy to be here. >> talking hyperloop with a big market and lots of possibility. we aren't just talking about moving bits. we are talking about moving

atoms as technology advances. back to you. >> we will have exclusive coverage live from the emerge americas all day. coming up on "power lunch" we will be with aol's co-founder steve case at 1:40 eastern. coming up next, a scary story out of london, where a jet was apparently struck by a drone as it approached the airport over the weekend. the full story when we come back. audi pilotless vehicles have conquered highways, mountains, and racetracks. and now much of that same advanced technology is found in the new audi a4. with one notable difference... the all-new audi a4, with available traffic jam assist.

the supreme court hearing a very politically charged case on immigration this morning. hampton pearson is live outside scotus. this is about the plan by president obama to spare four million illegal immigrants in this country deportation. >> reporter: right you are. 26 states in the house of representative challenging administrative actions taken by the obama administration that have an impact on the immigration status of some four million plus undocumented immigrants who are here right now. we never saw the court more divided in terms of the arguments on this case.

the court's conservatives led by chief justice roberts and justice kennedy challenging essentially the notion that the government administratively may have overstepped here in creating this special set of regulations, if you will, that allow these four million plus folks to remain here in limbo but still not be deported. at one point, justice kennedy saying to the government quote, this seems to be a legislative function. it's about discretion and we're doing it backwards, where the government has taken action first and the legislature has not had a chance to react. on the flipside, justice sotomayor leading the challenge on, if you will, and somewhat supporting the government action, challenging the state of texas and others, saying look, we have got in all total some 11 million people who are here in the shadows and who are also realistically part of the economy. what does this do in terms of their total status and in terms

of executive power versus legislative power, what happens if every time there's a portion of a government regulation that an entity like a state does not like, it can bring some kind of challenge. that's how divided the court was. legally, it's going to seemingly revolve, a lot of time was spent on the question of standing. does the state of texas and others even have standing to bring the case. if the answer is no, that would be a win for the administration going forward. back to you. >> thank you so much. the supreme court is hearing that immigration case. their term ends in june so a lot to learn and decide between now and then. pepsico's cfo was recently added to twitter's board along with martha lane fox. he was on "squawk on the street" this morning. we asked him about his vision for twitte eter take a listen. >> when the twitter opportunity

came along, this is from a media perspective, what i learned there actually i think comes back nicely to pepsico and hopefully with what i bring to the table in terms of my experiences, i can help twitter have its best days in front of it. one thing i will say is with a platform of 320 million users, active on a monthly basis, that's a powerful media platform. i think there's lots of potential in that business. >> 320 million users and one, when johnson was appointed to the board he joined, began tweeting for the very first time. for someone -- >> he joined the board without having tweeted before? >> correct. >> interesting. >> he and internet entrepreneur martha lane fox will take over two board seats from peter curry and peter churnin in may. we will wait to see how that turns out. netflix earnings after the bell, international momentum, whether they will be free cash flow positive or at least not announce a loss, we will see. >> yes. the price changes as well,

obviously is a key focus for many people. whether they will actually lose many of their subscribers but there's only a $2 hike. >> only a $2 hike. they would say it's been well telegraphed but they have been having a problem so we will see to what extent they expect that to affect churn. it is nearing noon on the east coast. that does it for "squawk alley." let's send it over to scott walker. welco report." our top trade this hour, the good, the bad and the ugly and what matters more to the rally in stocks. with us for the hour today, jim leventhal, pete najarian and joe terranova. morgan stanley's stock has been moving higher today. oil sliding sharply on the doha disappointment. then there's the ugly. citi, the latest big firm to take a knife to its u.s. growth