good morning it's 9:00 a.m. in boise, idaho it's 11:00 a.m. on wall street and "squawk alley" is live ♪ good wednesday morning welcome to "squawk alley." i'm carl quintanilla with morgan brennan. jon fortt is live in las vegas from ces a lot more from jon in just a few moments, including a

sit-down with micron's chief, sanjay mehrotra. we're going to begin with the major averages continuing to kut some recent losses on hopes of surrounding u.s./china trade talks and recent dovish comments from the federal reserve just today, fed president bo bostic, a patient approach is now warranted. joining us in a cnbc exclusive is callster's chief investment officer, the largest educator-only pension fund, $219 billion under management chris, good to have you back good morning >> good morning, good to be here >> we've sort of followed you as we've gone through the end of last year and now into the new year i wonder what you make of this run, if you think expectations have been set low enough, as we now await some q4 earnings >> oh, i think they have i mean, that was the worst december in history. so, i think that we're going to see a moderate january and at least expectations have come down from where we were in

august and september where they were euphoric maybe now they're a little bit more realistic >> so has anything happened with the balance between equities and fixed income >> in our case, we thought that equities were overpriced back in september and august now we think they're more realistic, so we're actually feathering back in to keep in our asset allocation range, just like rick santelli's chart showed of the double top, we've liked bonds throughout most of 2018 we're a little more cautious in 2019 and have used that double top to take some profits in here but as he just showed, we're not quite sure how low rates can go, before they bounce up. but the trend in 2019 is going to be for higher interest rates. >> in light of that, chris, you mentioned that you're feathering back in, i think is the term you just judas, to the equity markets. what do you see as attractive opportunities right now? >> well, morgan, when we come into the market, we're buying the entire market.

so we buy the russell 3000 index as an entire politic-- block we're almost 70% passive in the usa. we also have been keeping our eye on international it's been so week in europe and japan has just been flat throughout the year. so we think there are going to be opportunities, but those economies are still almost in recession mode and the markets are certainly in recession mode. we're also keeping our eye on the emerging markets you know, the question is really about china and its economy. so for us, we want to stay invested we're naturally long, because i have a 30-year investment horizon, but the question is, how do we gauge that you know, we've got some exposure, but i'm not really ready to ramp up and put risk on in this kind of an environment >> what do you think the credit markets are telling us right now? we just had this data from deal logic showing that we had no junk bond issuance in december, first time that that had happened since the financial crisis and that so far for 2019, for investment grade bonds, it's the

slowest start to the year, also since the financial crisis >> yeah, morgan, you know, from our perspective, fixed income, we think is -- was attractive, but we're concerned that rates are going to climb you know, the high-yield bond market is so compressed, yields are so tight and credit, investment-grade credit and in high yield, i think that market's treacherous, and one that people have to watch. we know the fed will probably tighten at least once and twice, somewhere in '19, so rates are going to go higher and that's going to weaken the bond market. i don't think it's going to be negative, a huge negative number, but i don't think you should expect a giant return out of fixed income. you've got a window of opportunity when you had that double top, but we think that bottom line is going to hold in terms of yields and they're going to start rising, which is bad for prices >> we spent a lot of last year talking about f.a.n.g. and specifically facebook in your case, chris. i wonder, let's game out, you

get some kind of deal with china before march do we actually return to an era in which like last summer, i mean, there's just ewe fauria surrounding those four or five names? >> well, carl, first, i'll take the beginning assumption you made that we get some kind of a deal with china. i mean, we're optimistic today, we like what we hear but, boy, the uncertainty in these trade talks has just been crazy. the way this is negotiated just doesn't -- it's not rationale. the negotiators are finding some balance, but then it's got to get to that oval office desk and then who knows i don't know that they returned to the optimism that we saw last summer, at all but i think what we're seeing is some more realistic growth america tease got to realize that china really does matter. it's the number two economy in the world. and so when they slow down, and it's hard for us as investors to gauge how much they're slowing we can't trust the economic statistics there's not a lot of good

measures, but we've really got to watch that. so i don't think they return to the euphoria that we saw before. i think that was overblown but maybe now we're at least in more realistic views about how those companies are going to grow you guys have said this morning, the earnings forecasts are going to be more measured than we've seen in the past >> do you think that's why the russell 2000, the small caps that tend to be more u.s.-focused have been the best-performing index so far to start off 2019 >> i do, because small-cap stocks really are the growth engine of the usa. and you've seen them, you know, at times, really outperform and then really underperform so they were due for a block period of good, strong performance. and when you look around the world, there's not any gdp growth, other than in the usa. so we've seen the growth now it's going to be a struggle, though, i think in 2019. i don't -- i can't forecast that they will outperform the large caps the large caps struggle from the global economy being so weak >> one last point, chris

on facebook specifically you've been critical. back above the 50 day, and decisively this time, that's kind of new. what do you make of some of these predictions that, i don't know, there could be a management change or at least change in board structure, or even just that a change in sentiment could really lift valuations once again? >> well, sentiment drives that kind of a stock. but i think from our perspective, it's the board change that's what we really need we need a stronger board over management so there's more oversight of the company they really have very serious problems they have impacted global social issues and people have used their product to affect change in politics. and i think they have to take some responsibility for that i'm glad that it's above it's trading average on a 50-day range, but the question is, what's the next news story to come out about that stock? so to us, it's an absolute governance discussion and the governance has to change at the

top, at the board level. tha they've got to step up and take more control of that company, and be more responsible for how their product is used by outsiders. >> it will be another big story for the year chris, come back soon! chris ailman with calstrs. thanks >> thank you let's get back out to jon fortt now in las vegas with more from ces and some of his interview highlights from yesterday. hey, jon >> reporter: hey, morgan after ibm ceo ginniry metty got off of the keynote stage, she sat down with us one of the things we talked about is new ground that ibm is trying to break in artificial intelligence, broad ai, and she said something interesting about the application for business how customers are now not just looking for innovation, but they're looking for cost savings from this technology take a listen. >> you know, i was with delta, walmart, exxonmobil all joined me and a number of us were talking about this i do see with clients today, they're looking for two different value propositions

that i think line up with what you just said. if i look at a longer arc of time, you had a lot of focus on innovation innovation. today, what i see clients asking for is innovation and productivity at the same time. i think that's a signal of how people are feeling and they want to look at things that do both of these. that's definitely something i see. for us, i feel very good we're good in both ends of that spectrum, of being able to help people with cost savings as well as innovation. but you definitely see that move amongst what people are focusing on >> reporter: perhaps signalling a bit of a shift in the economic winds. i also got a bit of time with all-state ceo tom wilson he also happens to be the chairman of the u.s. chamber of commerce talked to him about, they're getting ready to put out their talking points agenda for 2019 that's happeningtomorrow, but got a preview particularly when it comes to the issues of tariffs and the impact on u.s. businesses of all sizes. here he is >> there should be standards around how quickly you put them in place, right?

like, businesses can adapt if you can put a 10% tariff in, give me a couple of years. i'll figure it out do it in two days, too much disruption, too much uncertainty. that's what causes our markets to get upset that's what causes people to stop investing so we really need to come up with a way in which we can just trade on a longer-term basis and get governments to act in what's the economy's best interests, not just their political best interests. >> reporter: not taking a position so much on the tariffs themselves, but the need for visibility and stability from business, guys >> yeah, jon, it's interesting to hear from all-state, given the fact that we don't talk about insurers very often, but they are some of the biggest collectors and analyzers of data, as well. >> reporter: indeed. >> all right jon fortt, thanks. we'll see you more throughout the hour amazon founder and ceo jeff bezos announcing his wife mackenzie and he will divorce after 25 years

robert frank has more on what that means for the richest man in the world robert >> yeah, morgan. and, of course, more importantly, the amazon share price. bezos tweeting this morning that he and his wife of 25 years, mackenzie bezos are divorcing. he says, this will be amicable, saying, we see wonderful futures ahead as parents, friends, and partners in ventures and adventures bezos owns just under 80 million shares or around 16% of the company. and in washington state where they live, it's a community property state, so that means that all property and debt that they acquired during their marriage will have to be divided equally in court if they cannot reach an agreement now, the bezoses were married in 1993 amazon founded a year later in 1994 so that means that mackenzie is entitled to half of his entire stake in the company, worth today about $132 billion now, he also has blue original,

he owns "the washington post," they have a ton of real estate, including homes in seattle, beverly hills, washington, d.c., and new york so all of that has to be sorted out. my guess is, this will be settled privately, way out of the courts we may never know the terms. and so far, the most expensive divorce in u.s. history is that of steve wynn and his wife, elaine, in 2010, estimated to be around $1 billion. and of course, harold ham writing that famous check to his ex-wife in 2012 for $975 million. this, of course, will probably be a lot larger, but we may never know the dollar amounts, because knowing bezos and this tweet suggesting they remain cherished friends, they probably worked it all out already. guys, back to you. >> yeah, wouldn't be surprised meantime, shares of amazon are trading just about flat. robert frank, thank you. >> thank you when we return, micron feeling the pressure of china trade tensions to close out 2018, down more than 25% in the

last three months alone. that said, it is up 5.5% right now. so is a turnaround coming? the dow is up 106 points, the ayitusgrn,p n the ee u7. st wh alerts -- wouldn't you like one from the market

when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today.

fidelity. i am a techie dad.n. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. welcome back to "squawk alley. i'm jon fortt. with me here live in las vegas at the consumer electronic show,

sanjay mehrotra, the ceo of micron sanjay, always great to have you. apple and their warning, samsung and its warning. we've got issues in the smartphone market, we've got issues in data center, with memory, as well. yet your stock is up better than 5.5% this morning. i wonder if this is because investors are starting to realize that what you warned about in december isn't a micron-specific issue, perhaps it's more of a macro, industry-wide issue. is that continuing to be your read >> that's absolutely right we announced our earnings december 20th. and at that time, we were one of the first ones to come out and talk about some of the challenges related to inventory jump adjustment in cloud, in inventory as well as on the graphics markets we also talked about cpu shortages impacting demand in the near term. and we also talked about smartphone unit weakness on the high end so these are some of the factors, confluence of factors that resulted in our guidance that we provided for our fq2 in

december, to be somewhat weaker than what analysts were expecting. ho however, to be very clear, these are not micron-specific issues these are issues related to our industry we expect them to work through over the next couple of quartz smartphone unit demand, yes, tepid. but what's important to understand is that the content within the smartphones, the amount of memory, the amount of flash storage that is needed actually continues to go up, because of multiple cameras, because of the ai-driven features in the phones so, yes, i mean, near-term, some challenges, micron continues to execute well on its plans. and we do expect demand environment to improve in the second half of november 2019 >> you do? so this is great you've proven to be sort of a canary in the coal mine on this. and investors suddenly have all of these questions and you're reminding us that you told us so back in december, but you still see this as something where the industry is adjusting.

we see these reports of production cuts, 10% out of apple, et cetera that i saw as a relatively good sign, because when you see a hardware maker miss, if they're poorly positioned, they're cutting production a lot more than 10% in order to get things rebalanced you think this is temporary? >> yes you know, because the long-term demand trends related to cloud and ai is in very, very early evenings, ai driven servers need six more times dram and two times more ssds in them and we are in the early innings and over the court of next several years, going from less than 5% of servers being ai-driven servers, going to 50% by over the course of the next several years will drive more demand for memory and storage. >> for memory and storage. >> similarly -- for memory and storage, i mean dram and flash same thing in smartphones. while the unit demand may be somewhat challenged, particularly at the high end, the content continues to

increase and then, of course, you see here at the show, autonomous vehicles, right? >> talk about that >> yes >> where should we look? i mean, autonomous vehicles is one area, though i think the rollout of those clearly has taken some time. it's not like we're getting full autonomy in the next couple of years. then we had amazon's head of voice on with us yesterday, talking about, he's meeting with a lot more than just the smart speaker stuff about embedding this capability in bike helmets, in all kinds of different devices. which of those, between autonomous and the 5g-enabled, you know, other devices, which of those do you expect to have the bigger impact on your business >> you know, that's the exciting part about us, that our markets have now diversified, and micron, certainly, is executing well to broaden its portfolio, to add high-value solutions, to be able to address all of these markets. and all of these markets are megamarkets. you know, cloud in the early innings, you know, certainly pc continue to do well. mobile phones, smartphones, autonomous vehicles, iot

look at cs, right? the big thing sheer all about ai it's about 5g. it's about, you know, the driverless vehicles. and iot. all of these trends definitely point to need for more memory, more storage all of these applications, in order for them to deliver the value for their experiences to address the end markets, they need more memory and more storage. so all of these are massive markets for us >> even though streaming is the primary use case that we're seeing there, apple recently announced that they're putting itunes on samsung tvs. there's got to be some buffering there. there's got to be some room for sophisticated -- >> are you seeing more demand for d-ram from tv manufacturers, or is that pretty stable >> all of these consumer markets related to tvs, as well as industrial iot, surveillance cameras. all of these devices need more memory and more storage. in fact, at our investor day

back in may, we had shown an example of surveillance cameras that when they become more and more, a ai driven, they will require more memory and more storage. that's the exciting part it's really the whole realm of ait, these devices will certainly need more memory, more storage. and as cloud becomes more ai driven, more data driven, more intelligent, it unleashes innovation with these iot of devices, and it drives a virtual cycle of growth and innovation >> finally, as this party gets going -- no. i want to go back to data center because you talked about the smartphone market, specifically, and how that was kind of a temporary dip that you see from the mega -scale cloud providers, where we're seeing this dip in memory demand, are you still convincedthat that's a short-term thing or is that a broader macro issue? >> no, in terms of the memory, as we just discussed, right? it's really due to inventory adjustments by our customers d-ram prices had been going up,

so those customers built up inventory, and as the prices in demand and supply caught up, now they are bringing down their inventory levels, so what's important to understand is is that the end demand by our customers in their applications continues to be very decent, okay it's really near-term, our demand to us, in terms of shipping to our customers is somewhat impacted. and that's because customers are consuming their inventory. and over the course of next couple of quarters, we expect that consumption of inventory with them will be caught up to bring their inventory levels to normal levels, so what they will be shipping out in terms of d-ram and flash will be caught up with respect to what we are shipping into them so over the couple of quarters, we expect balance and second half of the year, we expect demand trend to be further than in the first half. >> sanjay mehrotra, a establish outlook on what's gong on here,

the stock is now up better than 6% guys, back to you. >> yeah, a key interview today, jon. thank you for bringing that to us from vegas. after the break, jim cramer sitting down with apple ceo tim cook t ther will joining us nexwi the highlights we have a lot more "squawk alley" still ahead don't go anywhere. everyone, look at your phones. the design thinking, the digital engineering, security, blockchain, and we will be first to market! yes. when we do we launch? unfortunately, in 2 or 3, hours. why the delay? cognizant is helping banks use digital technologies at scale to advance speed to market.

as you know by now, cramer sat down with tim cook of apple yesterday on "mad money" to talk about the stock's decline and the state of innovation at the company, which involves the watch, of course, and headphones take a listen. >> the revenue from wearables is already more than 50% more than ipod was at its peak now, this is a product that everyone, i think everybod would say, ipod was an incredibly important product for apple, full of innovation, and probably the trigger for the company getting on a very

different trajectory and into other markets. >> this as a report out of the nikkei asian review says apple will cut its iphone production again by up to 10% cramer joins usthis morning from san francisco, as he continues to report out west jim, is it time to start thinking about them more as a wearable in service as opposed to a phone company >> i've got to tell you, i think it will cross over it's not there yet one of the things that tim left out in his own humility is that there's supply constraint. there's supply constraint on the air pods, but also supply constraint on the watches. had they been able to produce more, i think you would have seen it more as a more important line item, particularly because we know how cell phones are doing, which is not great. although john fourn fortt in th excellent interview, they were talking about how down 10% is not that much, i kind of agree with that. sky works down yesterday 10% in terms of orders and revenue is up today >> along with a bunch of other

names in the sector. >> jim, what that great wide-ranging interview last night. one of the things that it really sort of highlighted to me, especially when he pointed to the comparison with the ipod is, just how much revenues for this company have grown since the peak for the ipod. >> yeah, look, i kind of feel that this should not be an 11 times earnings stock, because what's happened is that it's covered by people who are tech people and they just look at it as if it's hardware, look at it as if it's micron. sanjay me rtold you a good stor. the analyst who is cover it, absolutely not they think that it's the darkest day they've seen and i'm not buying it. i'm not buying into the darkest day theory >> meanwhile, jim, people are still trying get their heads around the accounting on services and this

reclassification to account for amoretization. but i see katie huberty is out today saying, she sees the deceleration as temporary and attributable to apple care, specifically how much do you worry about that >> i do worry. i think that the deceleration, once it was broken out correctly in the report yesterday made me pause. but -- and katie huberty was the first person from the sell side to really point it out but when she said it's temporary, i'm going to give her the benefit of the doubt, because i think she's one of the closest analysts to apple. so even though it is deceleration and growth, if it is temporary, if it's just apple care, you're going to see that service stream be more and more and more important look, apple's cell phone business is so big, it's really hard to be able to judge what else they're doing but these analysts are so clueless, you would -- if the cell phone business drops off a cliff, then suddenly the revenues from service are going to be bigger as a percentage of the pie and they'll like it more how wrong is that! jim, before we let you go, i

just want to recap some of these comments around china and the fact that they saw slowing growth and then that turned sharply further down in the quarter. likely exacerbated by those u.s./china trade tensions. that seems to be like one of the big things that investors are trying to parse out here, whether it is apple, whether it's fedex, some of the other companies that we've heard commentary from on china slowdown, and what that's meant from a trade perspective is how much of this in china has been a longer-term slowdown for that economy and how much of this is actually trade >> fabulous question, morgan i'm going to defer on the macro side to samsung. samsung, apple's mortal competitor, indicated that there was a slowdown and then you overlay the trade talks, where you know that there are people who say, you know what apple is a conspicuous u.s. company. maybe i should just buy huawei as a source of really a patriotism, while these talks are going on

i don't think the party wants people out there buying american, when they're trying to negotiate. i think it's a subtle issue, there is no boycott, not talking about anything like that but i am saying that just as we were regarding huawei as an outlaw, they regard huawei as a treasure so it maybe the right time to look like you were buying huawei, or buying huawei in order to be able to say, i'm chinese and i respect what our country is doing >> yeah. some analysts have been trying to quantify the impact of that in china and india, but that's a difficult nut to crack jim, such great stuff. >> isn't it? >> we miss you "mad money" tonight at 6:00 p.m. eastern, jim will be joined by the ceo of constellation brands, after they missed estimates, of course, their guidance relatively weakened. one of the losers on the s&p today. let's get to liesman today he's got some remarks from fed

president rosengren. >> rosengren saying the fed can wait for greater clarity, saying there's no need for the fed to hike if the economy weakens. that's an important qualifier. he says stock prices could portend a decline in growth, but then he goes on to question what the market's saying. saying the market sentiment may be, quote, unduly pessimistic, noting the data has been more optimistic than markets have suggested. he says, among other things, monetary policy remains accommodative. the strength from '18 is likely to carry over into this year he says the consumer is still strong, employment is strong and his view is, quote, the more optimistic view will prevail we'll get the minutes at 2:00. i'll be looking for a few things in there, what the fed says about the risk to the outlook, including global growth and trade. is there flexibility in the balance sheet? what it thinks about all of this market volatility. and of course, what the forecasts are for rates. and then, guys, a lot of fed speak today, a lot more tomorrow take a very quick look here.

we have barken in the morning, followed by bullard in the afternoon. the fed chairman speaks at 4:45, charlie evans at 1:00, and richard clairden at 7:00 so five speakers tomorrow. by the way, carl, rose nrosengr voter. he'll move to the voting spot in january. >> so really quickly, how do you put rosengren in context with bostic and evans >> some guys are leaning towards hikes like rosengren thinks the hikes will be coming evans says he forecasts three hikes. bullard, of course, said we're one hike away from recession so he didn't want to hike at all. >> we're keeping you busy again this week, steve, thank you. steve liesman. european markets just closing. seema mody joins us now with today's action hi, seema. >> hello, morgan global markets often move in tandem and that's more or less

what we saw today. a very strong session in asia. that helped europe move to the upside, closing higher across the board there. this as the eurozone currency continues its climb against the dollar, now at 1.15, that's the highest level we have seen sincesinc mid-october of 2018. vallejo up nearly6%. what's interesting is that it comes as data out of germany continues to paint a concerning picture. exports and imports dropped in the month of november, economists say due in part to trade frictions and a slowdown in china finally, check out shares of ted baker, the uk retailer reporting strong sales over the holiday period thanks to high promotional activity and more items being put on clearance the uk retailer up 28% in today's trade. carl, tomorrow we'll be keeping a close eye on not only that fed talk, but china inflation numbers. back to you. >> all right seema, thank you very much let's get a news update from

sue herrera this morning back at hq good morning again, sue. >> good morning, carl. good morning, everyone here's what's happening at this hour a former israeli government minister charged with spying for iran will serve 11 years in prison israel's justice ministry says gon gonan sgaev agreed to the deal he served under rabin in the mid1990s the owners of new york city's chrysler building is putting the iconic art deco skyscraper on the market the abu dhabi investment council paid $190 million for a 90% stake back in 2008 actress and activist rose mcgowan charged with felony drug possession as reached a plea deal with prosecutors in virginia she will plead no contest to a reduced charge of misdemeanor possession of a controlled substance and as a result she will avoid jail time and prince william flew a

helicopter to a london hospital as he celebrated the 30th anniversary of the capital's air ambulance service. the prince, who is a former chopper pilot, was named the patron of the service's anniversary campaign you are up to date that's the news update this hour back downtown to "squawk alley." carl, back to you. >> all right, sue, thank you very much. when we come back, take a look at netflix today. stocks up big since goldman add it to its conviction list last friday and we'll talk to the analysts behind that note, that goldman's heath terry. he'll sit down with us in just a moment a very quick dip into the red. dow is now up 117.

welcome back to "squawk alley. internet stock valuations hitting a six-year low last month before seeing a sharp rebound to kick off the new year part of that story being told by netflix. up big since goldman sachs added the stock to its conviction buy list, saying shares have nearly a 50% upside over the next 12 months those shares are down fractionally right now but one of the best performers in the s&p 2019 so far so is now the buying opportunity investors have been waiting for on netflix with us now here at post nine is kei heath terry. thanks for joining us today. >> thanks for having me. >> lay out your bull case for netflix for us >> you know, for us, it's just continued growth in subscribers, right? we all know about the ubiquity of their content and the value that it's adding to the platform if you look at analyst expectations right now, the

expectation is is that they added more subscribers in 2018 than they'll add in 2019 that's not going to happen, in our opinion. they added 50% more content, we expect, over the course of this year, just based on the cash that they spent. there's simply no way that they can add that much more content and not see it have a positive impact on subscribers. >> they're going through a lot of cash right now, right they're spending a lot of money on new content and in the meantime, we have more competitors either jumping into the market or poised, for example, disney, to jump into the market how do they maintain market dominance? >> i mean, a lot of it's distribution we were talking about ces before you look at all of the netflix integrations that are being done out there. it's nearly every device that we have access to now has a netflix app sitting on it. and that makes the service that much more valuable they get the way we all use it what are we getting more entertainment out of for $9.99 a month than netflix and i think that value proposition, particularly should we be going into a weaker

consumer spending environment, is going to be a huge advantage to them when it comes competitively. everyone's charging $9.99 for their service. no one's providing nearly as much content as netflix is for that same $9.99. >> why is there so much hand wringing about theatrical strategies, roma, and whether or not they need to even worry about that right now >> that's one of those things that's important to creators and you look at the way that netflix is pulling creators on to the platform with shonda rhimes joining, ryan murphy joining, that kind of stuff is really important to them it's also the same reason they bought a billboard company in l.a., so they could make sure they get that kind of exposure so it's important to their content strategy s to consumers, doesn't really mean that much >> we know you like netflix. you cover quite a number of companies in the internet space, what else do you see as big opportunities and what would you just steer completely clear of right now? >> when you look at the other things that we have on our conviction list, amazon's on that list, google's on that list, alphabet's on that list,

paypal, grub hub you know, these are companies that we sort of see as secular winners, share gainers, companies that are continuing to disrupt the industries that they're in look at amazon, the number of retail store closures we saw last year, hitting a record after the record that we set in 2017 you know, that's only going to continue to push things in their favor. that's sort of our strategy around internet. those things fell heavily out of favor in the second half of last year, because the market just wasn't paying for growth, but we think what you're seeing in the first few weeks of this year is, investors still want to own winners and that's what those companies are. >> there's been some dissection today of amazon, seasonal revenue deceleration coming out of the holidays. what's important what levels are important? >> investors want to see this stay a 20% grower in their retail business. >> that's the magic number >> that's sort of the magic number q4 will be lower than that because of the historical mix that they get of slower-growing categories during the holiday

season but 2019, they have to stay above that 20% retail growth number that's something that we think they'll do if you look at the value that's being added by the platform as they just continue to expand fulfillment and logistics capabilities and then you get the aws kicker, which, you know, we're almost to the point where that part of the business is more valuable than the retail business and may even be in some of our -- in our numbers. and that -- the strength that they're seeing there is only getting more meaningful. >> we -- i can't believe i'm bringing this up, but bezos did tweet about his divorce today, and we've been having discussions about, is a change in ownership structure material. is it? >> one of the things that we've written about before as it relates to that structure is, aws runs into a lot of conflicts, customer conflicts because amazon has such a wide portfolio of businesses. so if you're in the health care space and amazon is the reason your stock is down 20%, it may come, and it may be a

consideration when you're thinking about what web service business you're going to pick, who you're going to partner with and so we wouldn't be surprised to see a splitup like that happen at some point pinpoint may not be in the next 12 months, but we do think longer term, they find reasons for that business to operate on its own >> heath terry, thanks for joining us today >> thanks for having me. >> goldman sachs >> a lot more from cme later on. we're back after a quick break

i'm scott wapner here's what's coming up at the halftime report at the top of the hour we'll discuss what has to happen to keep the momentum in stocks going. plus, another big call on a big bank just ahead of earnings season it made our call of the day and is the bottom in on apple? stocks made a nice comeback lately is it sustainable? we'll debate that, as well, all coming up at noon on the half. morgan, weh'll see you in about ten. >> thank you, scott. after the break, at&t communications ceo john donovan sits down with jn ohand julia out in las vegas don't want to miss that. stay with us the experts at rootmetrics say is number one in the nation? sure, they probably know what they're talking about. or the one that j.d. power says is highest in network quality by people who use it every day? this is a tough one. well, not really, because verizon won both. so you don't even have to choose. why didn't you just lead with that? it's like a fun thing. (vo) chosen by experts. chosen by you. get six months apple music on us. it's the unlimited plan you need on the network you deserve.

now buy the latest galaxy phones, get galaxy s9 free. i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪

hey, batter, batter, [ crowd cheers ] like everyone, i lead a busy life. but i know the importance of having time to do what you love. at comcast we know our customers' time is valuable. that's why we have 2-hour appointment windows, including nights and weekends. so you can do more of what you love. my name is tito, and i'm a tech-house manager at comcast. we're working to make things simple, easy and awesome.

welcome back to "squawk alley. we are live at the consumer electronics show in las vegas. . we're live at the consumer electronics show in las vegas. john donovan, 5g, device demand top of mind. >> 5g is the new battleground and the subject that is in focus this year. the battleground in terms of content partnerships as well as roll it out. give us an update in terms of where you are. >> in december, just last month, we launched the first mobile version that's standards based you can buy a device and get on the network for 12 cities. first part of this year we'll roll out in another 7 cities we're well down the path we've been announcing some of these use cases that we're doing

with businesses and just this morning we announced we'll work with the dallas cowboys to get 5g into at&t staid kbrdiustadiu. rush hospital in chicago where we'll try to transform health care inside the provider hospitals. we're really excited about the opportunity to continue marching down this path >> you are facing a lot of criticism today for both verizon and t-mobile for marketing your upgraded version of 4g as 5g they say it's misleading why are you doing this >> the fact we have beach front property inside their heads makes them smile that's really just not the case. if you think about the history of our industry, the top part of that phone has always given the indication of the network information. in the early days the number of bars told you where you were coverage wise. when you were paying per

megabyte you look and say can i get the wi-fi network. that's always been the information available to the customers. for us it was a natural evolution. we announced two years ago, at this show, in 2017, that we were going to do this the fact we did it and our competitors have decided they are upset by it. i think they are wounded by our success last month >> when there's a big upgrade there's this marketing race to say who is first there's a question around what ha happen around smart phone demand in the roll out of 5g it's got a broad swath of capabilities that's different from previous upgrades is there a less likelihood we'll see a demand for handsets. >> the 4g was the epicenter of the 4g revolution was the device

itself when you think about how it comes together, each of these generations, the network, the device and then the applications have to come together. sometimes you get them timed perfect and sometimes one is ahead of the other the consumer benefit will arorie when all three come together at the same time. we think of it has a realtime network. it's also that we have been getting calls from customers in advance that say i'm going to do a new architecture or a new design on something, like you'll see on the floor it's going to radically we shap the size of goggles for virtual reality. it's going to change how you would architect an autonomous car. these things will cometogether much more quickly than they did during the early days of the iphone and the evolution of the 3g and 4g network. >> do you end up subsidizing

phones again or something else to help aid that 5g roll out >> that's a tbd. when you build a long term relationship with ua customer ad the relationship is expanding, it gives you a degree to say we're going to help you with this economics of this or that it's a tbd i'm not trying to shy away from the question there's a possibility you could get back to subsidies of some sort today, what customers appreciate with us, is that have the ability to get hbo or music so they get some added benefit with their traditional network. >> speaking of hbo, it's a big change for your parent company to integrate warner media. how can you better leverage that sister company of yours to lock in subscribers >> there's lots of brand answers but there's simple ones. the simple ones are every one of

our retail stores, everybody who comes into the store they want to make sure that when you walk out you can watch content. that able to say in our stores, their familiar with the launch of hbo show and its timing and help customers use it, that's a really big benefit for our sister companies and vice versa. >> you also oversee directv. what do you expect to see in terms of cord cutting this year especially as at&t launches its new over the top scretreaming service? >> it's not a surprise the decline curve we're on with linear video i think it will stay on trend. i think people are generally taking stock of the fact that how would i put together my

video entertaining i think the days of people buying packages that are more than they want or need are gone. i think the days where people think i'm going to be stapled to a couch at a certain time is narrower amount of content they want to see live the third big trend which is really important one is i want it where ever i'm going. i want it on my phone, my tablet these three trends are in fits and starts and moving. we have to be really in tune with our customers to say what do you want and how do we get it to you that's how we're thinking about it >> between content, devices, enterprise roll outs, looking to see what will accelerate 5g. thanks back to you. >> great coverage as always. dow and the s&p rebounding close eson highs squawk alley back in less than three minutes.

with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today.

welcome back we have much more coverage of ces as the day unfolds don't miss with dr. lisa sue later this afternoon on the exchange we start at 1:00 p.m

it is down 22% over the past three months though. it will be key to get more commentary from major chip maker. >> at a one month high it's up about 2.5% despite the warnings we'll see. let's get to the judge in the half i'm scott wapner stocks are on the longest winning streak since november. we'll tell you what has to happen right now it's 12::00 noon this is the halftime report. stock streak the bulls make a stand as the dollar falls and oil picks up. we're waiting for earnings and progress trade talk. is the market ready to make a new run? another big call on financials as the banks get set to report. the halftime report with scott wapner b