good morning, it is 8:00 a.m. at tesla in palo alto and 11:00 a.m. on wall street. "squawk alley" is live ♪ ♪ good thursday morning. welcome to "squawk alley." i am carl quintanilla with

morgan apple has a new magic number, the stock his a high, closer to being the first publicly traded company worth a trillion dollars. investors looking for 207.04, thanks to a new adjusted outstanding share count. comes after the latest earnings beat an upbeat outlook with us, roger mcnamee >> how are you, carl >> doing good. a friend tweets, he wonders what the drag on gdp is as we watch every tick of apple. how significant is that number let's just get that out of the way? >> it is a really big number, carl could you have imagined ten years ago any stock would be worth that obviously this is the result of fiscal policies in the united states going on a long time that

essentially enabled the stock market to get most of the economic benefits of this amazingly long cycle we have been in. from apple's perspective, you think of how many times people counted them out the last five, six years, iphone is mature, it is dead, the watch wasn't working, whatever excuse people had, i'm impressed as a shareholder, you know, i can tell you they've done this the right way, particularly relative to other giants in the tech industry. look, it is just a number at one level, right still, it is a trillion dollars, a big number. >> when you say the right way, do you mean organic r&d versus m and a? talking about privacy differences between cook and zuckerberg >> all of the above, carl. the way i look at this, this is not something where they go out and promote their way to a high multiple apple tends to be in the show me

world, right they deliver results and let people make a choice about it. and that's old school. i'm old school i'm a big fan. the products for all of the concern people had in the transition away from steve jobs to tim cook and the notion that somehow they would lose their magic on product, that hasn't actually happened. to me the future for apple is it remains very bright. i think there's a very real chance as this privacy stuff becomes better understood, consumers will shift away from android and to iphone products and to the apple ecosystem simply because apple has demonstrated a serious commitment to its customers, not treating them as users, not treating them as the product but treating them as actual customers. >> roger, what do you think the psychological impact of an apple hitting the trillion dollar mark could be in terms of other

companies potentially doing it, amazon, alphabet, some other big cap tech names do you think if we see one cross the threshold, do we see more behind it? >> i think we're going to see amazon cross it before long. i suspect the magic of the number will disappear. i think the real question is how long does the market cycle last, and morgan, i don't have any idea on that if it lasts another year, we'll see several other companies challenge that number. obviously if the market cycle ends, it may be awhile once somebody goes across it, it is like the four minute mile after awhile, it becomes routine. >> roger, apple can only get to a trillion dollars in the context of a market whereas et valu -- where asset value is going up in 1989, hit peak market value

that was the same percentage of s & p, as apple is now adjusted for inflation, 950 billion now. the difference to me is that apple as an economic entity is so much larger than microsoft was back then in terms of quarter trillion dollars in sales and the rest of it is this market in terms of leadership here on firmer footing financially? >> i would hope it is relative to apple at least. the point you make is important. the pe multiple on apple has always been below the s&p 500, and the cash position obviously is gigantic. in an environment where on average we anticipate that rates are going to go up, all those signals are positive for apple microsoft at its peak had a lot of expectations built into it that turned out not to be true i am not sure what expectations are built into apple other than they'll continue to in people's minds plod along relative to

other technology giants, not growing as rapidly, not putting up flashy promotional messages in my mind that's more sustainable than what you typically see. i think google has a similar story in many respects >> roger, we talked in recent years about plateauing the innovation do you think it changed with facial recognition and advent o 5g or if this is a space that will have content pushed through it from now on >> carl, i think that is the $64,000 question for apple smart phones are a mature category. i do think 5g with the internet

of things creates new opportunities to essentially make everything around us communicate. i think automobiles are probably the single most promising aspect as amazon and google have shown, you can put speakers in the kitchen and put other things around that will be part of that ecosystem. apple is particularly well positioned there internet of things is so dangerous relative not just to privacy but all kinds of other issues of theft of data and that kind of stuff that apple, i just trust them so much more than other people i don't think they lack for opportunity. i don't see anything that looks like the iphone. once you have the iphone as you suggest, the ability to add services around it is huge and they're doing a surprisingly good job of that >> switch to tesla this morning. up for the day best day since 2015.

company losses doubling in the recent quarter, but burned through less cash than expected, and elon musk promising a profitable second half of the year, apologizing to analysts on the call scott gallaway joins us. >> good to see you. >> did he impress you last night, musk? >> probably the most valuable apology in the history of mankind. i believe we have gotten to a point where because of idoltry of innovators, his behavior has been inappropriate i listened to the audio. it sounded like someone was ripping his spleen out as he was apologizing. but look, at least he is listening. clearly someone on the board who was sober said boss, you need to apologize. and the company was waiting to -- so the most valuable

apology in the business. >> one thing i would suggest, i want to be careful about taking elon at his word relative to cash position going forward. there are a lot of reasons to question whether the manufacturing strategy is mature enough to go to cash flow positive in the near term. i look at it, and they did a lot of really important things to get the unit volume up, but most of those burned cash, not grew the cash i think as long as he has this amazing brand, this is a stock to watch i don't think he has broken the code yet on manufacturing. i say this without being intimate with the company, but manufacturing is hard, a specialized discipline people that are good at it have a very different personality from elon musk. >> you mention the innovators, what's fascinating about tesla,

hardcore fans believe it's a mission on behalf of human kind to get this right, and the other side says 50, $60 billion market cap, has to show it can perform financially and operate this business correctly as a product company. it is an interesting clash at the outset, and where does the state of the battle sit now? >> we sort of transitioned from an economy or markets mostly what i call fundamental driven to a situation where if you're fortunate enough to be a company to jump to light speed and are no longer valued on fundamentals, you're valued on vision and growth. tesla has both of those in spades this isn't an investment in a company trading seven times revenues when every other auto company trades .2 to .8. if this was cut in half, it would be overvalued. you invest in the tomorrhomas en

of my age. there are two entities that just overwhelmingly bring out a very aggressive reaction, and it is when i tweet about one of two entities one is trump and the second is tesla. the moment you talk ill will about either of those things, thousands of bots, humans, i don't know who it is descend on you. the passion around this company is unrivalled. >> you mentioned a difference between companies that are valued on discounting cash flow versus call options for growth we know which companies are which. has amazon made the cross-over, and can tesla do that? >> amazon, justify amazon's valuation as any company, even if it is cloud, tell me how you get to $880 billion. they have absolutely replaced -- i think the transformative moment was jeff bezos letter to investors where he said i am

going to focus on nonperishable things for customer value, going for the long term, even if it doesn't mean earnings. i would bet, i think every time they report a profit, he calls top leadership into a room and said you screwed up. green light everything, reinvest 100 krenl 100 cents on the dollar into the consumer experience. why not do that as long as the markets allow it with tesla, they can reinvest 120 cents on the dollar. there's a protected class of companies that don't have to play by the same rules, tesla and amazon fall into that category. >> in light of that, play a game of would you rather. would you rather have the sort of slow and steady considered less visionary from a market standpoint ceo, maybe apple, or have a divisionary that delivers on promises but fervent base of

investors and consumers? >> if you're asking me, i would tell you today you can have both for myself, i go for steady solid businesses because we're late in the market cycle and i think as long as the speculative fervor is out there, guys like amazon and tesla are going to continue to be excellent stocks but eventually the market is going to have different issues it worries about than the ones it worries about today when that comes, everything will be hurt. you'll get slightly less hurt in apple or amazon or tesla >> before we let you go, last fiem y time you were on, you were selling ex >> i am sick of barking at the moon i got angry at elon musk, i am selling my model x word has it, he is still

sleeping at night. >> hard to believe >> see you soon. how much did the cbs board into and when did they know it the latest on misconduct ons.gations facing ceo les move how it can impact the company when "squawk alley" comes back stay tuned

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cbs board learned about the sexual misconduct several months ago as they hire two female attorneys to investigate the allegations. jul julia boorstin joins us with more. >> they learned several months ago the lapd investigated an alleged sexual assault after he disclosed the investigation to board committee, it hired an outside law firm to investigate. the firm concluding no further investigation was warranted, according to the "l.a. times." prosecutors say they declined to file charges because allegations were beyond the statute of limitations. we reached out to cbs on this issue, they declined to comment. this is after last night's cbs board announced it hired two female attorneys to investigate separate allegations of sexual misconduct made against moonves by six women in an article in the new yorker mary jo white, former chair woman, leading the

investigatio investigation. announcing the hiring of the firms, the company issued a statement saying moonves will have no role in the investigation and the board took no further action regarding moonves' role running the company. the board noted it takes these allegations seriously and is committed to acting in the best interest of the company and shareholders and is confident the employees of cbs will continue to perform at a high level as the process unfolds now the big question is what moonves will say in cbs' earnings call today at 4:30 p.m. eastern. back to you. >> very big question, julia. we'll be here for it, so will you. thank you very much. fitbit reporting better than expected results will it effect the growth outlook? we speak to the ceo about that be right back.

look at shares of fitbit the company reported a boost in sales from the burst of smart watch. james park is the ceo and joins us this morning. good to have you back. good morning >> good morning. thanks for having me >> pretty good action after the bell market, but down 5% today what do you think is spooking investors, although it is admittedly a weak take you talked about potential for profit the second half of the year >> yeah. right now clearly the market is weighing heavily on companies that are effected potentially by the possible tariffs and especially the increase announced yesterday. that said, we're actively working on several ways to address the risk, including working with our value chain across the board we'll be testifying before the u.s. trade representative in a few weeks where we feel we have several compelling argument for exemption or relief. >> you say your guidance

excludes both the potential impact of tariffs and benefit of any tax refund payments. explain to investors and viewers what the impact of tariffs would be to you. >> it is premature to comment on the tariffs. we are working on base to address the risk that said, if you go back to q 2, we had a great quarter. the sixth quarter meeting our financial commitments, revenue above our guidance beat on eps and cash flow. the momentum of our smart watch was incredible we told investors that smart watches would be 50% of our revenue in the second half of this year. we hit that milestone early on q2 versus sales 55%. smart watches overall 55% over revenue. a lot of momentum. we outsold, versa, did samsung

and smart watches combined in north america. >> whose buying the versa. i ask because we saw strong growth in wearables. >> i think we have a targeted and focused customer who is really interested in health and fitness. one of the reasons that versa is doing incredibly well in the market is it is hitting the sweet spot of price point, mainstream form factor and design and feature set focused on health and fitness and you can see that from sales results. >> james, fourth quarter still typically outsized importance in terms of volume of sales how does it look now, what do you think the category will look like seems the last couple of years hasn't been as much buzz around holiday time just in general about the wearables. >> overall, wearables is a growing industry what we're telling investors is that in q3 we expect to break

even and expect to return back to growth and profitability in the second half of the year. it has been awhile since i could say that i'm happy about that data point. it goes to show the strength of the overall industry and fitbit in particular. >> how far do you think your arguments are going to go with the trade rep and any hearings you might be involved in, and do you have any edge on whether or not would be back channel discussions with the chinese are actually taking place? >> again, we're working on a wide range of options to address the risk and the issue, and it is a little premature at this stage to speculate on how everything will turn out >> when you talk about supply chain, where are your products made >> they're made in a combination of different locations and manufacturers. again, this is an issue we're actively working to address. >> nondevice revenue, you say relatively immaterial in 2018,

but what is the potential there? >> yeah, we're very optimistic about the potential and growth of nondevice revenue one of the things i highlighted on the earnings call is that our paid premium revenue actually grew 34% year over year. we're continuing to invest in nondevice revenue and it is showing up in our results. >> james, going to watch it closely. tariffs are one of the overriding narratives of the day. dow 113 on that. talk to you soon james park of fitbit. let's get to seema mody for the european close. >> stocks in europe closing lower with the italian benchmark index the worst decliner, down 1.7% currency is also a big topic of discussion the pound in focus, trading lower against the u.s. dollar, despite bank of england raising interest rates for the second time since the recession

boe officials say build up inflation outweighed on-going concerns around brexit and rising trade tensions. now, the increase in rates takes the benchmark to the highest level since 2009 the boe president cautioned the bank would take limited and gradual approach to rate hikes going forward. that's why the pound is lower three-quarter percent. the lire falling to a record lower after the trump administration announced new sanctions on turkey justice and interior ministers yesterday over detention of the u.s. pastor andrew brunson. brunson is charged with supporting the group turkish president blames for orchestrating the attempted coup in 2016. and let's talk about barclays, european banks have struggled. it is a bright spot in the last three months, tripling profit,

posting the best quarter in more than three years upbeat results are not convincing investors stock down 3% in part due to continued mixed performance in international arm. the stock down 9% in 2018, and you'll see the european financial banking index is down 2% today, and over 11% so far this year with the ecb keeping rates next to zero back to you. >> thank you very much sue herrera has the news update. >> indeed i do thank you very much, mike. here's what's happening at this hour at a work force development event in washington, senior white house adviser ivanka trump says she disagrees with president trump's characterization of the press. >> i have some sensitivity around why people have concerns

and gripe especially when they sort of feel targeted, no, i don't feel the media is the enemy of the people. a successful operation that killed seven armed operatives that crossed into israeli occupied territory in the golan heights. subsequent search of the area yielded several assault rifles and explosives. a staff at the eiffel tower going on strike in dispute over long lines at the paris landmark a new system allows half the tickets to be booked in advance. in the past, it was only 20% workers are complaining that that is creating monster waiting lines. you're up to date. that's the news update back to "squawk alley. mike, back to you. watching apple it is within a dollar a share of hitting that trillion dollar valuation. that magic number on the share price is 207.05.

tesla ceo elon musk upbeat, despite the largest quarter loss ever a deep dive with the analyst that clashed with musk last quarter,nd a former zip car ceo as well.

take a look at shares of apple, up more than 2.5% price is $206.82

according to revised share account, 207.04 is what it will take for the company to hit the trillion dollar mark in terms of market cap it would be a historic moment. let's bring in tony, analyst at bernstein that covers apple. what do you think? hit a trillion dollars today what is your take in terms of where we go from there if so >> look, the trillion dollars is clearly a milestone. apple had a strong report yesterday. i think there were a lot of positive things for investors to take away from that. one, the company is buying back a significant amount of its shares two, we're seeing very strong price realization on iphones which is a testament to their product and to their brands. and three, i think numbers for next year might end up being too

low in terms of what expectations are they may be able to -- all those things suggest that apple can continue to perform well if it does, the stock should continue to do well. >> tony, your note from yesterday, you have target price of $200 that implies it will move lower. explain that >> the market goes up every day, we don't move price targets every day. we feel comfortable the stock will continue to move from here. >> tony, where do you stand on the discussion about whether apple as a stock can fundamentally get valued higher on structural basis because of maybe growing appreciation of services business, even though it is less than 20% of overall revenue now? >> i think that will take some time for investors to get more comfortable. you've seen a little of that rating and the stock is towards the higher end of the historic range. i think the dilemma investors struggle with, the iphone is

still 65% of profits, and drives a big part of that the company is vulnerable. 75 or 80% of profit screen to iphones. there remains a question mark whether high end smart phone market can ultimately grow i think it will take time for that business to become a bigger part and take some time for investors to feel more confident about the fact that iphone perhaps can be a stable business going forward. >> 206.80. watching every tick here there's been some discussion, dissection of your comment to scott walker that apple's best days, if you had to choose, you said would be rather in the past than in the future did you mean that in the context of a law of large numbers or is there something about innovation overall that is naturally -- have we naturally peaked on that

front? what did you mean by that? >> partially a law of large numbers. there was a period apple stock went up 100 fold in 15 years i doubt that's going to happen in the next 15 years where the stock goes up 100 fold from a trillion to 100 trillion dollars. from investor stock perspective, apple appreciation in the last 15 years is single most stock appreciation story of the last 50 years i think from that perspective, investor perspective, those days won't be repeated. the company is a different kind of company 250 billion in revenue, a trillion in market cap you're by definition going to have slower growth rates going forward. doesn't mean the company won't be big errger or won't have more outside influence. i think you have to be careful what the context of the question

is >> tony, broader markets, the dow is down 90 points on concerns around trade. possibility that $200 billion of goods from china, tariffs could be raised to 25% in coming months i realize that didn't effect apple and their chinese business in the last quarter. is there a point where this becomes a risk to the company? >> there is. look, everyone is in the smart phone industry is largely manufacturing phones in china, so you would have tariffs for all players. from a competitive perspective, it wouldn't impact apple that said, if tariffs are enacted in the u.s. or something commensurate in china for phones, iphone prices would go up and there's elasticity for every product. you would see replacement cycles extend and that could pressure

volume it's clearly an issue that could happen again, we might see that impact through tariffs in the u.s., so current tariffs don't really impact any apple products except for the watch and apple tv, but they could extend more broadly to include the iphone. while china could potentially tariff apple products, i think the bigger issue is could they react to tariffs in ways that could simply make it more difficult for american companies to do business in china. and that could have an impact as well look, we doen't know what mighty volume of. there's risk to apple and the broader industry from escalating tariff war here. >> stick with us joining the conversation, bringing in scott griffith thanks for joining us today.

as we watch apple inch closer to the trillion dollar market cap, 999.23 billion now, what are your thoughts? >> i think it is incredible. we were on stage back when the iphone launched with steve jobs, one of the first apps on the iphone to think that was a little over ten years ago, to see the market cap and progress they've made is kind of an incredible run. i think the thing i watch now is what's the future, where is growth coming from it does feel like we hit a close to saturation point on smart phones and the iphone and i agree with tony's comments, growth is sort of the stagnant in that front at some point. the future of transportation is shared, it is autonomous and electric i think that's an area where apple could start to exceed expectations in the next three

to five years probably with new, interesting things that are coming if it is about sharing, autonomy, electric, they know a lot about technology that will support that, and i think it will be an interesting growth curve for them to watch that >> scott, it sounds like, and i heard this from critics that you don't think apple is behind the ball where autos and connected machines and vehicles is concerned. >> well, i think they have a lots of share of mind for the customer already and are well positioned to do something really exciting, but i think now they haven't talked a lot about it right now, i would say google has by far the lead, they have so much data in the autonomous operations, but i would never count out apple on that front. >> tony, you talked about how apple remains predominantly an iphone company, has the financial wherewithal to do what

it might choose in other areas do you think strategically the company ought to look in a boulder way at areas like autonomous drivers or other ways to get in the car? >> look, i think there have been investors that levied criticism against apple that if you look over the last ten years, both their r&d and inorganic investments have lag years r&d was as low as 2.5% of revenue, it is now 5% of revenue. that's dramatically lower than peers. if you look at acquisitions, apple spent maybe 1% of free cash flow on acquisitions whereas most large tech companies on average spent about 25% of free cash flow on acquisitions i think conceptually and directionally apple could have been investsiing more in the lat

ten years. to tim cook's credit, he's dramatically accelerated r&d as i mentioned, it was about 2.5%, now it is 5 plus% -- 5 plus percent of revenue. if you think back in context, apple probably could have or arguably should have spent more both organically and inorganically. looking forward -- >> i was going to ask. >> not to do a deal. >> tony, if you think they should have bought something, what should they have bought >> look, there are many examples where they went into a space, arguably on their own, then changed their minds and bought something. that was the case with streaming music, with beats. they've had somewhat of a false start in cars. they had project titan which

employed up to 2,000, 2500 people the mission was to build a car they now scaled back to autonomy ten years ago, looking at buying a tesla, hindsight is 20, 20, ten years ago looking to buy sonos or streaming music space would have made sense. these are areas to some degree apple ended up playing catchup given formidable resources, it may ultimately come out on top hindsig hindsight where apple perhaps could have made investments earlier. >> scott, as tony mentioned, the argument out there awhile that apple should have bought tesla, we had investors on in recent days that continue to make that argument do you think that's even a possibility or something apple should be considering right now? >> in today's market cap for tesla, even though it dropped

prior to yesterday's earnings call, it is 50 billion plus market cap business. that's a big play. i don't know that they want to buy an electric vehicle manufacturer i think the value added for them would be tech software and data. i would look more at operating platform i personally think they ought to be more interested in lyft or uber to get in the space that's where the data will be collected. when autonomous vehicles exceed expectations of consumers, it's going to be ten years from now that's when data really matters. and that's when user experience and hardware matters they passed on things like other software and early entrants into the space. i think right now it will end up being a big play if they decide to do it >> tony, on the other hand you could say well, apple is at a

trillion dollars, sticking to what it knows, essentially creating products with a direct connection to customers and all the rest of it is there a way to say that the huge opportunities that the entire tech industry sees, venture capitalists, whether it is mobility or delivery of everything to the doorstep, it is hard stuff. maybe apple is willing to watch it go by for now >> look, we can't criticize apple given the success of the company in the grand scheme of things this is a company that continued to grow, despite size. it has an incredible brand and has done so organically, its guiding principle is they focus on doing things they're best at, and what they have been best at is making great products and services and focus on higher value products and higher value services and that served them well yeah, they have to be careful

about losing that focus. losing the focus of controlling the end to end experience, focusing on the higher value consumer, and as scott mentioned i think they've been very thoughtful about participating parts of the market that are relatively capital light and relatively high margin and that continues to be the opportunity for them >> tony, there's so much discussion about the el-- you wouldn't need to buy a new plane, we know what boeing's back order log looks like now. do you see the replacement cycle having a negative effect or is there a corner we're not seeing behind >> i do think that we have had some ee long agenlongation cycls

last three years have been between 210 to 220 million they have been flat to slightly down for the last four years my belief ultimately is that that's in part reflection of elongating replacement cycle if you spend more on a phone, you're likely to keep it a longer period of time. i also think as we progress in a device evolution, it becomes increasingly difficult to differentiate one device from a predecessor. will iphone 16 be different from the iphone 15. if there isn't a compelling difference, there's less incentive to upgrade tim cook acknowledged there are areas they have seen ee losome that in the replacement cycle. that's the question for apple

going forward. >> tony, scott, stick with us. we're going to bring in gene mon munster. given the fact so much apple revenue is the iphone, are thousand dollar phones the new normal is that what we should expect from here on out >> i definitely think there's an appetite for that above a thousand apple will come out with a more expensive phone. obviously asp in the june quarter was a robust market. that's probably a level of detail that misses the bigger picture about what's going on with the apple story, thinking about the thousand dollar. i think there's something fundamentally much different going on there's a relief investors are having, thinking about specifics of a phone, getting more comfortable at the idea that the iphone is a stable business.

it doesn't need to grow. >> gene, as you're talking, 207.05 is the high tick of the day. apple for the first time in history, a company worth $1 trillion morgan said a few moments ago, historic moment. to see this happen after talking about it for so many years is amazing. >> cleared it by three-quarters curre cent obviously everyone agrees it is a number in space. the question here, does it start to feel like a culmination moment or stop along the way it is going to be just this line out there that you have three or four other companies that can see on the horizon now >> does it close above it. >> another more immediate question absolutely >> gene, what do you think now that we hit a trillion >> i was thinking what would

steve jobs be saying now i think he would probably not say much he might smile, but he would be very proud that's the first thing i think of today, he brought this company back from the brink 28 plus years ago this created a companyculture, s people's lives and might sound like -- not like a little off here, but i think that is really at the core of what has happened here just have these products that value experience, the privacy and so on. i guess my initial thought is just thinking about what would steve jobs say right now and separately, i think there's a lot more to go on this story i think this story could be two or three times bigger in the next decade than it is today instead of this shift that's going onto apple as a service. not just a services business, but their hardware business, operating like a service and even though we're past this

psychological point, i think there's an upside to the stock going forward. >> you know, scott, gene just raised something that's been a key point. and that has been that the bears of apple, for years now, have said minnesota timberwolvtimint. is that argument insignificant does that argument need to go away >> if you're asking me, i think i was just about to say, i remember back when tim first took the role. there were a number of questions, not a creative guy, he's a more innovation in product. and we're not likely to see the excitement that steve created. and i don't think tim will either i think they should all be very proud of this. but i think it certainly validates the choice to bring tim in as the ceo. and the execution and team work that he's done to get to this

level. and i don't think this is a stopping point, personally i think it's one of the most amazing companies in the world with lots of room here for expansion, as we talk about earlier. >> tony i wonder what your assessment is right now, kind of investors mind-set with regard to apple as you talk to clients. there's a story line out there it's almost an underowned stock if you consider berkshire hathaway owns 5% the company is the biggest buyer of it. it's the biggest stock in the media. investors don't own enough but do they actually believe in a multiyear story here does it seem like a financial engineering play or those are big numbers? >> i don't believe there's a financial engineering play but i do think investorent attem sentiment around apple has been blase over the last six or eight months and the debate circles back to

iphone, iphone flat for the fourth straight year it's a key driver of the company, you know, what can i get excited about. so, i think for the last six months, my sense would be that there's been relatively lower interest in apple, particularly among long only investors. >> let me just interrupt for a second, tony, respectfully, and i'm on a totally different side than being an at analyst today t still talk with those same investors. i feel like there's a shift going away from every anxiety with the iphone. albeit there would be a terrible miss on the iphone, that would be bad i feel though as long as there's a stable business and generates a substantial amount of cash and services that that's enough. would you agree or disagree with that >> i'm not sure i would agree with that, gene. i mean, we saw the stock take a big hit in early january when people were fearful that the

cycle was going to be weak and i think for the most part, people feel pretty comfortable about the next year because prices will be robust. and i can assure you, if iphone units are down more than 3% next year, regardless of what happens in the rest of the business, the stock doesn't work and that's the ambivalence that i think investors feel now do they feel a little better that apple's been able to take price? absolutely do they feel good about buybacks do they feel good about supervises yes. but when push comes to shove and you see it how people get anxious when data points come out of asia. if there's a belief that the iphone can't grow units on a go forward basis, that really troubles investors >> yeah, i would agree that the decline for a couple quarters, that would be bad. i think if investors need a comfortable zero to 5% growth over a year, they're thinking about it more holistically over

a year, i think the stock continues to move higher >> yeah. that's an interesting debate given how many random headlines we hear from nikkei regarding supplier checks. we want to check with two people here but first to josh lipton, and talk about whether or not any of this, josh, and the historic mark, is a topic of discussion within the company >> you know, i just kaulgcaught briefly, as you know, with tim cook, we didn't raise that question, and i know cook has been asked that before and clearly said it was a big emphasis of his. which i don't think is that surprising as you guys have mentioned it doesn't fundamentally change anything with cook and i think that's what they're focusing on. i think it's a big milestone for the company. >> and we talked about valuation yesterday.

we asked certainly analysts on whether or not this milestone acts as a cap or sentiment is it meaningless? >> i do think it's meaning less. from a surprising perspective, getting to 1 trillion didn't change the valuation if you manage to get to a trillion, more cash than any company in history they have done $300 billion in cash over the last six years that's amazing to be able to do that much cash and still get 1 trillion >> aswath, the same question to you, what is the cycle impact of apple hitting a trillion dollars? from an investor standpoint does it make it potentially more likely for other big teg nach ns like amazon which gets tossed around to move there as well >> i don't think so.

this has been a long time coming i mean, apple has been close to this number for a while now. from that perspective, i don't think it changes that psychology i could be wrong i'm not good on pricing psychology, but i don't think it changes the psychology of the market >> aswath, you said it was striking that apple has reached this level while distributing $300 billion in cash over recent years. couldn't you turn that around and say the way it distributed it by raising its dividend and buying back a lot of stock perhaps had a role on the way the market is valued in the company on the positive side >> i think it is being valued as a cash cow the reason why i think it's so impressive that the buyback hasn't had an overjaall impact is that the shares have dropped over the past six years. with the fewer standing, you got to make up for stock prices. others are able to deliver price

appreciation of theremaining shares. >> that is how the math works, i guess. the question comes from now, does the market value the cash that apple still has in any way, except to say, just hand it to us or is it seen as something as a strategic, you know, war chest >> i think companies earn the right to be free and in this case, apple, because of its success, has a chance now to go out and try something else, as long as it's not outside their -- the zone in which they're successful so, i think the market will cut them some slack if they decide to experiment and try something new. but as i said yesterday, i hope it's not a big acquisition i'd like to see them try to expand their business model out of the smart phone but it will take a lot of doing. but i think they have the benefit of being successful and being given the benefit of the doubt right now. >> i have to augh, as someone told us this morning, that hitting the mark, and managers

don't think about this kind of stuff. and when it's a penny above the mark >> right it clicked there and then it's back, absolutely >> back to 2.06 1/2. not to say we might not reverse it again during the course of the morning. our thanks to tony, obviously, scott, josh, and the conversation is going to continue with wapner and "the halftime report" crew. the s&p managed to hang on to a two-point gain >> and that has been the pattern, right the premarket selloff on some trade frictions seems like they haven't really lasted. so, whether it's just muscle memory or not, of course, apple's not hurting the s&p and the dow either it seems like, you know, that's still the pattern right now until we see realities of impact of tariffs it doesn't really have that much of an effect. >> the chance for it as well, the laggard, of course, is the

dow industrials it is those that become lightning rods like it or not, for the trade to beat in any headlines around tariffs that are dragging that average lower right now. >> drama will continue this evening. obviously waiting for that cbs earnings call which we expect les moonves to be a part of it let's get to the judge and "the halftime report. welcome to "the halftime report," apple hitting a trillion dollars in cap. a historic move. somewhat some have called the greatest stock appreciation story in decades part of the question is what happens next pete i go to you i know you're a big supporter of the stock. the significance of you of a trillion dollars in value? >> i was just listening to the professor as he came into us $1