monday good stuff for the week. guys >> somebody on twitter says special shout-out to bill wayne of archegos for making the alert. if they have been talking about this for months, discovery stock price cut in half during that time so maybe they can ask what happened to the shares over that period of time. >> david was a billionaire make sure you join us tomorrow "squawk on the street" is next good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber it is an historic day in the media business as discovery and at&t's warner media agree to merge, with a new goliath in stream, and we'll talk to zaslav and stankey at 10:00 a.m. eastern time and a busy week of retail earnings updates of housing data. there's no disagreement on where the focus is today >> you know, it's a stunning deal i have to tell you

and listen, not to go too deeply into it but something i have been working on, i knew something was going on sometime ago, and you may remember when viacom sold stock on the big run-up because of archegos, why didn't discovery, right? when that peaked my interest at the time, and it clearly was because they had mmpi, a merely nonpublic information, and what it was, they were talking all b-this and all along that process trying to understand what may be happening and i never anticipated it would be at&t deciding to part with all of warner media. there had been plenty of expectation that at some point perhaps very soon, they would choose and try to sell turner which comprises cnn, tbs and cartoon network but to go all in, jim, if you're stankey and basically reverse much of what your predecessor, reynolds stevenson did in terms of direct tv, which of course they also have done a transaction for, remember, they're going to own a good deal of it, but it's being managed by another company, and

it's being offloaded and the debt is going with it, or some of it. and then to do this transaction, less than three years after completing the deal to acquire warner, time-warner, fighting through a regulatory disaster for them, in the courts, it took them two years to get it done, only to turn around and say we're out, now 71% of the combined company will be owned by at&t shareholders, remember, it's a reverse trust, tax-free to at&t shareholders, it transforms at&t of course, back to a pure wireless company, and it does make warner, discovery, a giant in the media business around the world. >> does that give the at&t shareholder the equivalent of the good dividend, because if you're targeting the dividend payout ratio of 40 or 43%, of anticipated cash flow of 20 billion, well, that's a dividend cut, from 15 billion to 8 billion. >> it's going to be a very different company. now, remember, they're offloading $43 billion in debt,

that's kind of net of debt, right? >> and so towers. >> the new company, warner/discovery, basically is much more indebted it levers itself up. over time. and they say very quickly by the time, zaslav says as soon as 2023, they'll be down to 3.5 times net debt to ebitda. >> that's great, but if you cut the dividend, and credit moffett for some of this, look, weeks ago i heard it was a great dividend play and the assets work well together here, have you ever kicked a cross-town bus >> yes, i have. >> who is that right now >> i don't know. >> i think stevenson is. i mean you could say greyhound but no one takes that anymore. the bus. and i got to tell you, i feel personally, having, thank heavens not recommended this stock other than to say look, it could be good, a dividend cut. >> it may be a frustration with the fact that at&t stock prices

have done very little for a long period of time and wireless businesses have been doing quite well. >> right. >> and now the wireless company, you give your shareholders an opportunity to participate in better growth with a combined company, being run by david zaslav who you believe is going to be able to execute under direct to consumer by plan, in a perhaps better way than you were going to be able to, or certainly in a way that it is going to actually reward that growth, as opposed to with at&t, where maybe you just weren't getting what you deserved in the stock market that at least is the thinking of john stankey. >> but didn't stankey come on air and say the way to make this a good deal is to get the stock price up, okay that is how the deal would grow. >> the way to get the dividend yield down, is to get the stock price up and people question the dividend >> >> they're reducing their debt substantially. >> right. >> they're creating a pure play wireless company. >> right. >> to be able to compete more

effectively with t-mobile. >> they have to. >> and verzen. >> no one thought the auctions would cost this much. >> they spent 30 - >> and who is the great american behind all of this. >> jeff. >> exactly. >> he sold at the top. >> clug debt-- including debt, they sold, obviously it was announced in 2016 but didn't close until '18. other than the mayor of easttown, what are they really getting? >> that's a dark show, man >> oh, come on, she's fabulous david, i want to understand this and carl, he watched stankey, and i think the take-away was you are going to have good growth, good entertainment assets which make it so that at&t is distinguished, as a great entertainment company, and that huge dividend but they're undoing the entertainment, the dividend will be cut, and because it's anticipated cash flow, and where is the synergy all along >> that's a great question

>> i don't know, vertical integration was always a question mark, carl, for this company, as in at&t. >> it was. >> and i'm thinking back to stevenson talking to code, about the synergies between having a telecom, having intelligence with data, and trying to overlay that with the creativity of media, but it's been difficult david, you got so much to talk to zaslav and stankey about. a couple of things is this announcement in the press conference that they'll start by investing 20 billion in content, which immediately puts them in the netflix ballpark and above, and this line from stankey, can asked about how long they have been thinking about dumping it, since 2020, and you remember zaslav came on this past quarter and talked about what some argued was an underwhelming number of subs on discovery plus it is an incredible poker pace. >> completely. and you know, again, not to -- didn't break it, but knowing

something was going on here and very interesting to watch. that and i don't know how things may have changed to your point. i think that the idea that turner was not an asset that at&t was wedded to was certainly one that the marketplace was aware of to some extent but the idea that they would actually completely turn and decide to dispose of the asset entirely was one that was unexpected. and by the way, there had always been a conversation, in in fact that would come, it would be without come cast and the power of putting them together, regulatory-wise, complicated with two studios and not as much of an anti-trust risk as two years ago and obviously nbc -- but it's going to -- >> it's not something you cut. it's something you get i had thought that the idea that

hbo combined with at&t would make you switch to at&t? huh-uh that was kind of the plan. >> it was. >> jim, you're right >> of course did i get had >> did they get had? >> you don't think there was a lot of doubt about this deal from the early days? >> you and i snickered about it. >> of course there was and we always wondered, and by the way we always wondered about the direct deal as well. >> we wondered. >> we kept thinking it, this is a declining asset. even when they bought, it you knew it was a potentially declining asset. great for mike, by the way >> i loved mike. great for pepsico. and it realigns the media landscape to a certain extent and you have to wonder, we will keep an eye on shares of viacom today and see how that performs because that had been thought of once at least as a merger partner for discovery as they try to all bulk up and the $20 billion number increasingly, that includes everything, what they're

spending on sports, with tnt and other things and netflix is spending 18 billion just on direct to consumer so it's not quite apples to apples >> 4.5% yield for at&t >> you have really focused on that dividend, haven't you >> that's why people have owned at&t. >> you are going to need a change in the -- >> i think discovery is great but it's not what people wanted. 6.7% >> the new discovery will be, take a listen. >> as john and i spend the next couple of years filming these companies, i see this as the number one media company in the world, and the number one telecom communications company in the world that's what our mission is, that's what we think can happen out of this. >> pretty big word, huh, carl? what do you think? >> yeah, i mean i guess are we talking about the end of an era in which large telecom wanted to

play in this space, david? i guess that's the question we've been dealing with for, what, five, six years now, and i wonder if this puts a period on it >> i think it very well may. yes, you know, at this point, it never was completely clear, now, by the way, don't forget, our parent company comcast is in the cable business, it's also in the wireless business, to some extent, but it's not an important component. and broadband, wireless, and then of course, owns nbcu-u, so you wonder if you're going to see further separation some way, to carl's points of those kinds of assets because there is a frustration i think on the part of some comcast holders and always complicated to talk bur parent company but we're doing -- >> why is it frustration, with a homerun? >> there is a belief that a pure broadband play will get a higher multiple a la charter. >> where is the growth coming from at&t? where will it come from? >> it will come from wireless.

that's it. >> but they can't -- >> and broadband >> and broadband >> okay. all right. it's okay. last quarter justified that. it was a pretty good quarter. >> yes. >> but the speed with which, the directional speed is rather remarkable in that i'm going to go back to the dividend the idea was you buy the stock, the stock goes up, so the dividend isn't that high, and carl, that whole thesis which i propounded many times on "mad money," because it's what i heard from john stankey, i now feel like that perhaps that my thinking about it was ill-advised because i agreed with stankey david, i agreed with stankey i thought it was a good idea hbo. all of these things. you know, talked it up am i as dumb as a bag of hammers for talking it up, because i agreed >> not necessarily there were people who believed >> you think it's just sometimes you just get had

>> i'm going to have both gentlemen joining me. >> that will be interesting. >> i am looking forward to the conversation >> and of course, i can remember when, as i told joe kernen earlier, and he can remember when david zaslav signed my contract every six months by the way i got extended that's as far as you could get fired. >> once the new york post said i was at his party and i wasn't. >> you wanted to. >> i wanted to go so badly but my wife didn't want to go. i was there in spirit. >> carl, i want to come back again to the economic value of owning stocks because everyone else will talk about awful these other things, i think the shareholders of discover ji just found themselves, she they have a terrific combination and they can close what they want to, and that's terrific. you have a chance to close and have school. >> global scale. >> i love scale. hbo went international. >> my man john malone who will only have one vote, one share now. >> really? >> and the new house, it's all ethan, we'll be on the board.

>> what else do you want for hbo? >> carl is watching hbo so carl knows. when are you watching hbo? >> i'm a little behind the problem now is there's too much now, right? there's just too much. >> right >> and that's why stankey got rid of it. brilliant. >> nize,-- nice, david, too much and not enough time. you know what they say. >> i'm disney plus a lot isn't that weird >> i can't explain it. >> me and my daughters >> you like ufc when you were kids. >> just kidding. >> disney plus >> do you listen to the conference call. >> and john ledger all because of john ledger >> all right, carl >> 10:15, zaslav and tankey, we will get to a lot more as we kick off a busy week don't go away

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to do when somebody walks in without a mask assume that they're abiding by the rules? >> you know, we are asking people to be honest with themselves if they're vaccinated and they are not wearing a mask, they're safe if they are not vaccinated and they are not wearing a mask, they are not safe. and what we're asking businesses to do, probably the most important thing that businesses can do right now, is to work to

ensure that it's easy for their own employees to get vaccinated. >> that's the cdc director whe walensky defending the guidelines on "meet the press. and some saying it is confusing and then on "squawk," we won't pay a price for, this and maybe a week or two early and prevalence is collapsing and that's a good thing. >> and gottlieb has been right all along and people will do this anyway and you might as well get ahead of it and what about the impending doom forecast of dr. wa lenski. >> she might have doomed her credibility early on and you and i have voiced frustration back and forth with the cdc, for what is now a year and a half, and unfortunately, it's undermined i think to a certain extent confidence people have in the agency overall and it will take a while to rebuild that and the guy we listen to

who has been the best is gottlieb. >> right >> and by june, nobody is going to be wearing a mask. >> some people would regard the cdc's work as completely incompetent. now, i'm not going to put myself in that camp i just think they're - >> they have a lot of very rigorous people who work their butts off to get things right. >> i remember when in "the walking dead" they all wanted to get to the cdc, how did that pan out. about equal the way this pans out. >> right did you not embrace though, the new requirements, or lack thereof, isn't that something that will continue to push us towards to what almost is appearing to be right now full reopening. >> every one of these organizations is finally getting into an idea is indoors without ventilation is how you get it and that's why i'm so furious. the w.h.o. just admitted that it's how it's transmitted. it's transmitted by viral load and it's been that way all the time >> not surfaces. >> no. >> i mean we can wipe down, carl, i like clorox, i think

it's an interesting stock but it did not stop the pandemic. >> no. and now it's one of the worst s&p stocks of 2021, i think it's maybe 15 or so from the bottom on the 500, and jim, today, we have cases down in 50 state, the white house says, it looks like that is probably, the case, and jp morgan is opening their offices across the country, beginning today, and 24 hour subway service, a lot of restaurants going to 100%, jim, in states like colorado. >> oh, no, it's real and i think that there are people who are still worried about the variants, and whether the people, david, who don't take the vaccine could be carriers of variants, which we may not be able to defend ourselves against, without boosters >> we may not. although we don't know >> right >> we don't know >> well, how about - >> anybody who has been fully vaccinated and seems to have gotten the virus doesn't show

symptoms, right? that's pretty common. >> very rare. >> and exceedingly rare. >> do you think it's the voluntary aspect of the masks, is a good thing? >> she says you should wear it >> i actually come back to vaccines and the question as to whether you can force your employees to be vaccinated and that whole debate. >> it's america. you can't do that. >> and that's, you know, that's a key question for corporate america. >> bringing people back and everybody wanting to be comfortable knowing you're fully vaccinated. >> no one has said - >> universities are doing. all over the country. >> absolutely. you're right. >> carl, the universities are doing it but the corporations, not corporations. >> although they do ask, they're asking staff, have you been and essentially the honor system, we're going to watch how that evolves over time. as a reminder again, for the first time, we're no longer doing temperature checks in inglewood. there's a look at zaslav and stankey, talking at 10:15

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nervive contains alpha lipoic acid to relieve occasional nerve aches, weakness and discomfort. try nervivenerve relief. let's gets to a mad dash as we countdown to an opening bell, a little less than seven minutes from now amazon >> david, this is one of the great pieces that i have read. this is a guy named brian nowak from morgan stanley, is day one of gaap p.e. approaching amazon? you're a big gaap guy. you have always liked gaap >> yes g-a-a-p. >> yes >> and are you ready 5,000 to 6,000 share price

yes, he thinks that this is very cheap. he's using pay rate, and pay rate, it makes no sense, and at least shoe get to 4 5,500 with 2 earnings. >> and those earnings are generally accepted accounting principles >> i always thought that amazon was kind of cheap and it is kind of an art not a science. and amazon valuation is at times more art than science. either he's a reader of what i have to say, or a watcher, or he's equally as brilliant as i am [ laughter ] >> like how i predicted that at&t's dividend would be so big. >> oh, my god, you're just not happy about that. >> when you get had -- >> you feel like you get had. >> sometimes you just get had. >> it's like, well, deserves has nothing to do with it. >> deserve better. >> meanwhile you still like

amazon. >> kinder, gentler. >> i wish it was discovery right now. >> it is going to be up a bit. >> discovery. >> first of all, it's down because of your buddy at archegos >> my buddy. >> your buddy. >> my buddy? >> everybody, i would like to get that interview but at least i got that one zaslav and stankey >> stankey is a good guy in the end, he had to do it because you can't compete with t-mobile an unbelievable merger i bet the germans are contributing money to them >> yes >> the germans still own it. >> i know they do. >> a lot more for you, including an opening bell, five minutes from now stay with us

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welcome back to "squawk on the street." take a look at elon musk's tweets from over the weekend, clarifying some speculation, jim, that he had instructed tesla to sell some bitcoin, he had tweeted in response to another tweet, the word indeed, about how frustrated he must be

about the bitcoin community. just a reminder how much the market cap overall is being swayed by really one word tweets from one man >> yes, this has become kind of, a little bit comical, given the fact that there is 20 million, on kind of a heartbeat, and i think that a lot of people hang on musk's every word, and he is brilliant, but i felt from the beginning when he was on "snl" with dogecoin, carl, that people have to understand that this thing, this is a dice roll, i mean this is like backing secretariat, it looks like a good horse, talking about bitcoin. >> i'm aware i know it looks like a good horse i mean i'm just saying there are people who know, it has scarcity and that's very positive but at the same time, it could be moved by a tweet, that's not the u.s. dollar, which is often maligned by people who like bitcoin like, you know, maybe yellen

could send the dollar down a little bit, like, a little bit. >> maybe a little. >> but here's a tweet, that almost took 10% off. >> carl, this is not a currency. who the hell knows what it is. >> yeah, we'll talk more about the degree to which tesla is beginning to track the price of bitcoin, and coin base as well, jim, but for the time being there's the opening bell, with the big board, it's the metropolitan transportation authority, celebrating as we said earlier, the return of 24/7 subway service in new york city, for the first time in more than a year at the nasdaq, jim, it is the times square alliance, as we are hopeful that between the subway, jpmorgan opening offices, i think blackrock is coming along on june 6th and midtown at least, jim, starts to get more activity. >> and i'm anxious to see where the housing cools off and the auto, because i think, we always think it is go be to hybrid,

high hybrid, but at a certain point, it's not hybrid, and work is not being reinvented >> no, it isn't. but i do, while i believe in certainly the conversations that we've had on air, and off, with many people who run large organizations, indicate that they expect people to come back to work. they also continue to say, but we'll be a hybrid. you know, it won't necessarily be every day, jim, but it will be three days, out in, maybe you pick your, now maybe you pick your three, and we pick them for you but not five out of five. >> is corporate america now sweet and nice >> they want to keep their employees. >> if someone comes in five day, and you got another person that comes in three day, let me tell you something, i'm giving a promotion to the five day and i'm sidelining the three day, because the three day obviously is not committed to work >> it is also where you are, and what your role is, where you are in your business. >> a younger person trying to climb whatever rung it is, and having more face time is what

you want to do and it is unclear whether your manager will be there every day. >> let's say the client wants 24/7 people in the office so i can meet them, what are they going to say no, i'm at the hamptons, i'm not coming in? >> right >> i'm in montauk, sorry. >> they'll be there. >> right >> the client drives everything. and if i were a client of one of these firms, i would say, enough with the zoom, i want face to face negotiations, i want the lawyers there, too, and i don't care about your -- >> the lawyers are not going to be there no way. >> are they in nantucket. >> they're wherever they want to be >> cardinal law firm, you will come in a few days a week, you're young people -- i talk to a lot of them, believe me. they know. they are not coming in, young people, they are not coming in anymore. >> you got your buddy. >> i have more than one buddy. >> your best buddy. >> harvard law. >> the guy running for mayer >> he will be in connecticut

no way he is coming in every day. no way >> well, let's get him on the phone right now and ask him. bruce, are you coming in every day or not >> we can send an email. and i think what it is important to recognize is young people, is come in, they are afraid, like i used to put my jacket on my chair, when i went out to have a cup, before i get back, i always made sure i was -- >> carl, it's an important issue. i know we kid around about it, but it is going to be very interesting to see who comes back and how many and how often. >> yeah, i do think there is something about the legal profession that is a little unique, given the billable hour model, jim, that they don't care if they see you at all, as long as you bill. but certainly financial services are, yeah, financial services are a different animal david, i'm just looking at the list of winners at the open, i mean it's media, from discovery to at&t to viacom to fox >> yes, and it's interesting, because you know, i can certainly give you a lot of

different reasons why discovery should potentially be up, and of course, let's not forget discovery got cut up, and we talked about it every day during that period in the archegos run-up and nowhere near the incredible highs it saw for a period of time there what is interesting is discovery decided not to sell stock unlike viacom which took advantage of that opportunity and sold $2.7 billion worth of both straight equity and i think convert in there as well. discovery didn't why? because they knew something that the market didn't know which is hey, we're talking to at&t about a transformative transaction. and now we know that what that was, and the stock is reacting positively to the prospects of this combined company, and we won't see it for over a year, but which they hope will certainly be the case, let's call it, say mid '22, they expect to get the deal completed. but you know, when i look at viacom, or i look at fox, you do wonder, jim, well, all right, what do they do, is it enough? is paramount plus enough, for viacom >> can they, you know, fox is

just news and sports that really is what fox is at this point and the question there has also been, is there another play, it's not clear how many moves are left on this consolidation we've been talking about in the media industry, as you get all of these direct to consumer platforms, and they compete for viewers, and subscribers, and they need capital to put it into content, to do that. i just don't know where it will end now. what happens to -- well, are they supplying a lot of stuff to everybody, all of the platforms, to viacom, which seems to be all in on paramount plus and then even the smaller guys that are out there, it's going to be interesting, and then our own parent nbc-u, which is a big company but is it still seen as a really good -- >> doesn't discover go from something that may be in the bundle to something that has to be in the bundle

cnn? sports >> discover ji, all of the networks combined. the most watched. >> if you're talking about the cable bundle, the question is it's coming down, we know it's only going one way >> so therefore, the parent company has to do something. >> yes, even though they have this great european asset, they don't talk about it enough, because it's so good. >> which one is that >> sports. >> you're talking about discovery? >> no, comcast. >> oh, comcast, yes. >> people love it. >> did you see that? >> well, it's early. arsenal. buying arsenal >> and nobody really made a bid. >> but they don't want to sell >> okay. but it's committed >> and how do you know they don't want to sell i didn't think at&t wanted to sell. >> it's true but right, selling so to speak, by obviously spinning off the company into a new company of which at&t shareholders will - >> it is only up five bucks.

do people feel like they need to do an equity offering. >> i'm saying discovery was knocked down enough by i'm not your buddy archegos. isn't discovery cheap? >> depends how you want to value it i mean i think they're talking about 11 times current let me look here, because i was having a conversation with that. >> and 10 or 11. on current multiples right now 9.5 times 23 which is the first full year that the combination will actually exist >> right >> you tell me if that's cheap >> maybe maybe, given what they're talking about. >> with all of the losers, a lot of losers there. >> at&t shares are having a nice move despite your concern about the dividend >> i guess they got enough money to be able to grow maybe. >> and compete >> or maybe it's wrong >> i don't know. >> amazon. >> i'd rather be in nucor. up almost 100% carl, i would rather be in a steel company. >> yup nucor is the best performing s&p

stock of the year. >> it's incredible >> since april >> i have them on, every quarter, and they put this company together, expecting a boom, and they're the only ones who seem to be ready for it. they're ready for everything and i know that it's not amazon, it's not discover, david, but i know that maybe you don't think there's a lot to be made there, but they spend a fortune to be ready and i think they should be saluted since everyone else seems to be caught with their hands down >> well, do you want to own freeport here, too >> i think they're run too much, the fact that i'm starting to see a lot of gold companies starting to sell copper and i think copper will cool off because we got china numbers last night that weren't that hot. i don't see all of the ev coming out. lordstown, what happened there they decided to delay their release? stock up

>> well, do you buy the stock on delays of reports? >> $7.39, jim. lordstown. i mean come on >> the price of a -- >> down 70% the last three months. >> the nasdaq is down, carl. microsoft is down. we haven't even talked about the microsoft situation. i mean gates - >> we know the reason he left the board, jim, was that these questions about a relationship with a staffer, and stories in the journal and a more expansive story in "the new york times" last night, about his behavior over several years, regarding multiple staffers, both at microsoft and the foundation, and we'll keep our eye on that in terms of some of the reopening headlines this morning, jim, i noticed ual wit

capacity announcements, adding flights in the month of july, more increased service to europe, getting more news on cruises, either cutting service, out of israel, because of the tensions there, but also planning for some reopenings in europe this summer. >> look, i think that it's imperative that these companies get moving, and one of the things i wanted the cdc to do is open up and be your choice if you want to go out i think that these companies are hanging by a thread in the cruise lines, because why? because the cdc won't even talk to them. i mean come on if you want to take a cruise, and you're vaccinated, the cruise, vaccinated, what's the problem? i thought vaccination is the answer what are they trying to do with the contribution companiy -- cruise companies >> you keep asking that question, jim, and i don't know, and it is clearly a rhetorical question. >> and with viacom, it went up to 90 and i will give you this rhetorical question. >> is it archegos?

>> i think that the cruise companies are uniquely punished, because, look, you can fly on a plane to australia, it takes a lot of time. and you don't know whether everybody is vaccinated with you. >> yeah. >> right >> did you see, guys, this interesting developments in the sale of marathon petroleum, the 711. and two democrats and two republicans, and basically couldn't agree if they wanted it to happen or not and the clock went out and the clock went out and we are doing what we wanted to do which is we're selling it so now 7-11 owns that and the ftc comes out and saying you should never have done that, a deal, with marathon taking a good amount of proceeds and buying back stock and on friday, they said, we have reason to believe this transaction is illegal on section 7 of the

clayton act and the federal trade commission and raises concerns with hundreds of gasoline and diesel fuel markets across the country and then for its part, marathon say, well, what do you mean? i mean, you know, we worked on this with you for months, we'll continue to do so, but the relative conditions to close the transaction were satisfied and you never got back to us so we closed it. >> a bunch of mistakes were made, but not this one. >> no. >> there is a lot of diversity when you pull up to a gas station, it tends to be a different one each time. i don't understand this. capricious from an agency is not unusual right now. >> with the ftc. >> and they can't agree on it because they don't have five, they have four. >> some of these agencies. >> obviously, guys, we're off the initial lows, s&p is down about 7 points

let's get to bob pisani this morning. hey, bob. >> choppy the last six days. we are essentially flat for the month. the problem is the reopening story is not pushing stocks forward, and tech is weak, and has been weak for the last couple of weeks, take a look at the sectors, and utilities, that's a defensive lead right there, and banks and tech right there lagging with some of the consumer discretionary names and thematic tech, it is the problem, and the mega cap tech and the clean energy stock, cathie wood and the ark innovation fund, cloud computing, 3d printing, cyber security, all of these, 30, 35, 40% off their 52-week highs which we keep pointing out happened in february, when the rates started moving up. that's when the they that theic t thematic groups started getting hit. and as for the reopening, it is getting harder to push the market forward on good news. carl was talking about united.

boosting capacity in july. nothing. no moves at all in the airline stocks these stocks have been essentially sidelines since march. they moved up on the reopening story earlier in the year but since then it has been choppy and hard to move forward even with good news and i kind of want to hear what walmart has to say they are reporting tomorrow. a great lead on the stimulus prac and how the spending is going on the stimulus checks, what kind of impact the employment uptick might be having, higher commodity and fuel prices and what kind of pricing power they have and this is a great read on what we keep talking about, they did well, their revenues are up about 6%, and they don't normally provide guidance in the first quarter, so maybe they won't say anything on guidance, i hope they will, though, but buy and large, a pretty good space though and on the internals on market, people keep worriesing about it and the 50-day moving average, nine of the 11 sectors are above the 50-day moving average.

my old buddy same pointing that out over the weekend and tech and consumer discretionary, the growth sec tors of the market are weak, we know that and amazon and tems and starbucks, and even ford, they all topped out a couple of months ago, so it has been tough moving, with that growth part of the market right here now as for where we are on the markets, they haven't changed since friday i said friday flat is the new up and it wasn't really a joke. we have to leive with the inflation story and there is no short term answer, and we won't know for months if the fed is right on this narrative and the fed is the largest supplier of liquidity and a lot of people believe theyare the primary reason that the market is up 500% since the bottom of 2009 but it's tough right now i think to make a new high without some kind of inflation determination and we don't have it and that's why we have the markets moving sideways and there's a little

bit of pressure on the thematic tech stocks. david, back to you. >> but i hear we will start a drinking game for every time transitory is said on the air. all right, bob, thank you. still to come, at&t agreeing to merge media assets with discovery. that will be in the next hour with both ceos. and first the bond report. yields are mixed ahead of homeowner sentiment data, due out at the top of the hour we'll be right back. the pursuit is on. the pursuit of outperformance at pgim. with deep expertise to outthink across multiple asset classes, actively managing investments in the world's public and private markets. outscale, with the resources to serve 1,500 clients

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spotify founder and ceo daniel ek calling reports he has not made a bid for u.k. soccer club arsenal inaccurate and in a statement he said over the weekend, an offer was made to josh and the bankers that included fan ownership, representation at the board and a golden share for the supporters and they imply they

don't need the money and he goes on to say he respects their decision but remains interested and available, jim, should that situation ever change. going to be interesting to see if it does. >> i thought it was interesting, they put his net worth at 9 billion. so he certainly has enough to do it but as david said, isn't it jus the guy has, david, i'm taking your view here if an owner doesn't want to sell, what is he to bid against himself 3 billion? >> i don't understand the intricacies of these leagues of fans, obviously playing an important role here. perhaps they can bring some pressure to bear, since they certainly seem to want to have the team change hands, jim it's not a public company that you have a board that you can try to house to make a proxy fight or make a hostile offer for. >> meanwhile it's a nasty day, random selling, all over the place. >> like what >> okay.

well, i'll say starbucks down a dollar boeing down 3. let's see, i got a bunch of them here penn national down two i think they're doing well, penn nat. lulu down. c coinbase down 17, that's not so hot. david, all the semis are down, it's a really nasty day, david. >> yes >> we are coming off the best internals of the year on friday, jim. >> yeah, i mean, look, i think that the vix is spiking. i think the vix is telling the tale here. i think people are way too confident about friday we do have the retail numbers this week, carl, but they've got them good. these stocks are good. maybe they're too good, and last week, a lot of the airbnb's of the world, i thought they were okay, they're getting shelled. a lot of shelling going on. >> there's a big lock up expiration today at airbnb

but you're right on retail, we're going to get a lot of information in 24 hours. we'll have home depot, walmart, and macy's to kick around. in about an hour, actually, less than that, david zaslav and john stankey. we'll talk to david about the deal we're ba ia me ckn mont hey, dad! hey, son! no dad, it's a video call. you got to move the phone in front of you like..like it's a mirror, dad. you know? alright, okay. how's that? is that how you hold a mirror? [ding] power e*trade gives you an award-winning mobile app with powerful, easy-to-use tools and interactive charts to give you an edge, 24/7 support when you need it the most and $0 commissions for online u.s. listed stocks. don't get mad. get e*trade and start trading today. - grammarly business turned my marketing team into rock stars. (diana strums guitar) maya swears by grammarly business because it keeps her work on brand and error-free. fast and easy.

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trading. >> carl, how things have turned. just a few weeks ago, we were worried about shortages all over in the semiworld machines to make more semis is down again today they reported on thursday. these would indicate that semis have peaked, and i don't think so, but maybe can tell a better story. >> how about tonight, what are you going to tackle, there's so much to choose from? >> i'm going to do generac at the cusp of trying to get power stored through battery, as well as of course making it if you have an outage, and a machine. hydropharma is one more company involved with the growing of cannabis, which used to be called pot, and their business is spectacular a lot of people are buying these

stocks it's what they want. they don't buy the pot stocks, which are awful. >> yeah. >> it's been a difficult run for those who saw a lot of runway policy wise, jim, especially here in the states as for the chop that you were talking about, we had a couple of nice days to close last week. you mentioned the action today i mean, you've got two camps, one argues that we're in peak growth, peak positioning the other says the vix is reset. we've got q1 earnings kind of out of the way and the path at least tomemorial day looks kin of clear. >> i think the path to memorial is clear, and i'm surprised the market is down there was a lot of complacency, the two days, three days before memorial day are fantastic days to buy stocks. don't give up the ship but understand things got a little too complacent the dividend cut, it could be substantial. i'm not sure. >> we'll get to that we'll get to that, carl.

>> you definitely will, david, because you're talking to john stankey, and david zaslav of discovery and at&t in just a few moments. don't go away.

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good monday morning, welcome to another hour of "squawk on the street," i'm carl quintanilla with morgan brennan and david faber. the choppy action for the month of may continues, back blow 4160, a busy week for housing data, and media m and a. david is going to talk to the ceos of at&t and discovery their megamedia deal in the meantime, nahb is out a few moments ago. let's get to diana olick. >> hey, carl, builder sentiment was unchanged at 83 in may, according to the national association of home builders index. anything above 50 is positive. this report came with a warning. construction costs now up 12% from a year ago. not just pushing home prices higher, but chief economist said some builders are slowing sales to manage their own supply chains which means growing affordability challenges for a market in critical need of inventory. buyers should expect rising

prices throughout this year. current sales conditions, unchanged at 88. buyer traffic fell one point to 73, and sales expectations in the next six months rose one point to 81. regionally on a three-month average, builder sentiment rose in the south, unchanged in the midwest, and fell in the northeast. morgan. we are 30 minutes into the trading session, here are the three big movers we're watching this morning, starting with discovery, those shares rallying after announcing a $43 billion david will have those details, including the interview of the morning, with the ceos of both at&t and discovery that is coming up. plus, crypto craziness continues. tesla under pressure as ceo elon musk clarifies the company has not sold its bitcoin position. those shares are down about 2%, and speaking of bitcoin, the weekend volatility pressuring c coinbase, among other equity

proxies. that is trading at a new low since going public last month, well below it's 250 reference point, and down about 30% from the highest hit earlier last month, carl. >> morgan, we're getting breaking news out of the supreme court, agreeing to hear some cases in the fall. our eamon javers has it all for us good morning >> we're watching decisions in realt realtime the decisions so far, the first is a big social issue on abortion, the supreme court has agreed to take up a mississippi case on limiting abortion rights they're going to decide that over the coming year probably, so this could be a long running situation where the supreme court is weighing in, but it is viewed by court observers as an opportunity for the supreme court to possibly take a relook at roe v. wade, decided back in 1973 so a new and more conservative court will have the opportunity to revisit that decision if it so chooses

that is a substaignificant one watch for. business headlines out of the supreme court, one on uber, the supreme court saying here it's rejecting uber's bed to avoid a driver pay loss. the supreme court is turning away a bid to avoid a lawsuit over whether drivers for uber black are employees and not independent contractors, so that's an important one in the employment space in the if he can sector, and j&j, a verdict against the pharmaceutical company. the supreme court is rejecting the appeal by johnson & johnson there. a couple of headlines to watch for, and we'll monitor new decisions as they come down from the supreme court over the next couple of minutes. carl, back to you. >> i'll take it, eamon, thank you. let's get to the media deal, right around 7:00 a.m. or so eastern time at&t is going to spinoff its warner media business into a new

company that will merge with discovery. at&t shareholders will own 71% of this new media, it is what we call reverse trust, it is tax free to at&t shareholders, so that's important, and perhaps even more importantly, at&t will receive $43 billion in a combination of cash and debt securities and the like, which will allow it to dramatically reduce its leverage, and remember, ever since it did both the direct tv deal, and then the time warner deal, there had been concern about the mounting lever raj, the debt at at&t. although the company has n navigated fairly well and maintained its dividend despite questions about that dividend for some time. by the way, on that note, we should mention that now, the new at&t, and again, this is going to be more than a year from now when this deal closes, is targeting a dividend payout ratio of what they're saying is

40 to 43% of anticipated free cash flow of 20 billion. substantially lower than the current dividend despite that, at&t stock, as you see, is performing quite well, in fact, better than discovery warner discovery will become one of the world's larger media companies, of course direct to consumer will be its key platform as has been the case now with so many of our major media companies, and they will put together hbo max, and discovery plus discovery plus itself only having launched a few months ago, and hbo max perhaps keeping them separate for some time, but obviously the creation of content for both, and the use of the warner studio for doing that is certainly something that david zaslav is pointing to, for what are some pretty ambitious goals. take a listen to him from a press call this morning in terms of what he sees. oh, we don't have that right now, but you can see the combined brands here, morgan that's a fairly impressive group of brands. of course they're talking about

as much as $14 billion in ebita. they do expect to generate $3 billion a year in synergies they'll reinvest that. that's cost, you can capitalize that, say that's worth 30 billion. the question of course is, wow, at&t deciding less than three years after the transaction of time warner to move it out. >> not only completing but fighting tooth and nail with the justice department under the trump administration to get that deal done. it's pretty notable. you talked about this in the last hour, you put that on top of the fact that it's spinning off the directv assets, going back to pure play, a focus on 5g, i am curious, david, for this creates a media empire that can better take on netflix and disney, have a more global reach. what does that leave in play for other companies that feel like they too now need to compete with a third, better, bigger player. >> that's an interesting question i think it's interesting that

viacom shares are up, people think there's nor consolidation to come. you have direct to consumer platforms out there. which of them are going to thrive we know netflix will, clearly disney plus will be one of the dominant names and now it appears discovery plus plus, hbo max is going to be one can paramount plus, man, the pluses kill you, paramount plus be there as well and peacock, the offering from our parent company, nbc universal, so these are key questions and how you fuel it all, and whether this new ecosystem of direct to consumer will ever equal in profitability, of course, the cable ecosystem that continues to decline subscribers. >> the timing is interesting too, given the fact that we're seeing the up front ad sales and pitches happening this week as well i'm curious, john malone, when you hear about tax free structure, he works closely with discovery, do you think he's involved in this deal some way. >> of course he is without a doubt, john and the

new house family, both of which had significant ownership, and john had significant voting shares in discovery. they're all going one to one no super voting shares john will be on the board of discovery plus warner media company, but it is interesting to chart his involvement with at&t through the years because of course i can go back to when he sold tci to the old at&t, see michael armstrong and suffered as a result of having done that. >> we're going to be getting into more of this with your big interview in just a few moments. in the meantime, we're turning to the markets, kicking off the trading week, the nasdaq coming off its fourth straight trading week m mike santoli, break this down for us, it's not like it's our first pull back to start 2021. is this orderly, how do you see it. >> this is basically the fourth one, in the weeks of chop, they

maybe have been frustrating but probably done a little bit of work on easing back on extended conditions that are there. the s&p where it is right now, at levels it first reached a month and a couple of days ago what was different now versus then is it came in on a huge hot streak, up 8% in three weeks going into mid april to around the same levels. technically, kind of overstretched, sentiment was very very over bullish, and you had a lot of things that fed into this idea that probably needed some kind of a pull back. that all has cooled off. if you look at the sentiment readings, technical conditions, that's eased back from those extremes that we saw back then growth and value also have come somewhat more into balance what i mean by that is the nasdaq 100, big cap growth stocks gave up their premium that they gave up to the overall market it's not to say they're going to be on equal footing going forward, there's less in the way of massive valuation, divergence is out there maybe we saw a little bit of short-term peak in the inflation

story. you saw commodities going vertical for weeks, and they all came off hard lumber, copper, as treasury yields stayed the same. this is a process. not to say this is over and it's mission accomplished but i think that you can sort of see it looking somewhat like the prior pullbacks from earlier this year we'll see if it has to go any deeper, david. >> mike santoli, well, after the break, you probably heard it, but we'll tell you one more time, the ceos of at&t and miy,herectll auay cong up next don't go anywhere. (vo) this is more than just a building. it's an ai-powered investment firm with billion-dollar views. a cutting-edge data-security enterprise. yes, with a slide. a perfect location for the world's first one-hour delivery. an inspiration for the next workout cult.

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it's certainly the news of the day. at&t will be merging its warner unit with discovery. joining me is david zaslav, and john stankey, the ceo of at&t. gentlemen, it is great to have you this morning, and i certainly appreciate it. john, i'm going to start with you and the soon to be most powerful man in the media, stand by, i want to start with a couple of questions of you, john you know, i'm going to use the word bold. i think you have been amazingly bold in ten months or so in the job or maybe a year in the job at this point. it doesn't always mean being bold is being rightm you know, it's less than three years since you closed the warner transaction, it cost your shareholders $107 billion when you include debt in that deal. so why reverse course now? >> david, look, you know, things

have changed a bit since we did the transaction, and despite the fact that, you know, we are doing this relatively quickly, shareholders have still done reasonably well with this decision i think when you look at, you know, the cash flows that we generated during that period of time, look at asset sales we've made, and you know, frankly, i have an incredible degree of confidence that david's going to do a wonderful job running this business, and as soon as we put this equity out there, we're going to see the natural rerating that we intend to see in fact, i think you're seeing that in the stock this morning where, you know, our shareholders are enjoying the run up and the discovery stock right now, given the fact that they're going to own 70% of this new equity so i feel by and large, frankly, that while we're reversing course so to speak or adjusting our approach right now, it hasn't been without the hard work of a lot of people who have built a really interesting franchise that i think is why david sees a compelling reason

to put these together. and why now? it's because we are able to breakthrough and get a domestic, direct-to-consumer business off the ground with a great subscriber base. we have had a fantastic year the team has done a wonderful job in making that happen, and the reality is we now have in front of us this great opportunity to scale this globally, and create a tremendous amount of value, and in order to do that we need the equity to line up with the right shareholder base that wants to take that ride, and is willing to put that kind of multiple up. if i step back and think about where we initially started this which is to drive value into our connectivity services at at&t, as i have shared with you before, we have seen really good progress on things like churn and customer acquisition, but the benefit of that is outscaled right now by this global direct-to-consumer opportunity, and i owe it to the shareholders of at&t to let this dog hunt, and let it scale on the way it

should >> okay. >> you know, david, yeah, go ahead. >> look, i think the very simple mission here is not just that we're better together in the media side, but that we're probably the best media company in the world with the greatest ip, the most iconic ip, batman, superman, wonder woman, sex in the city, entourage, "game of thrones," and this idea of a full on global ip company and the ability to take 71% of the at&t shareholder base, and together really assure that warner together with discovery will be a really strong global force, but also that the vision for john and i was the number one telecommunications company in the world and the number one media company in the world

and that's the mission that we're both on, and i think we both now have the tools to accomplish it. >> yeah, well, let me follow up on that, though, david, because of course all of those things you said may very well be true, but we have also talked about the declining cable universe i don't know if it's going to 60 million homes or 50 million homes or below that, but you're running a company whose assets in terms of cable networks are in decline in some way you compete against the likes of netflix, spending $18 billion on direct-to-consumer content, and you're going to have $55 billion in debt. things can go the wrong way, too, david, what gives you the confidence that they won't >> first, by 2023, we'll be generating over $14 billion in ebit, and over $8 billion in cash this company is going to be a free cash flow machine we've acquired scripps, euro sport, we're a big player in europe and frida air

we have a good sense of the synergy we can get we see over $3 billion in cost synergy alone, and we think there's real revenue synergy here, so the metrics of this business are compelling, and if you look at the traditional busi business, it solidifies us, we're a leader in a huge piece of the bundle. we're the top leader in news we have news, sports and nonfiction, we'll be able to super serve advertisers. i think we'll help the cable operators drive the bundle itself which i think would be helpful to them. >> right but most importantly, right now we're spending this business that. >> that's for everything you're

doing, the cable universe. >> disney is a great company we have a portfolio of content, we think it could be 2, 3, 400 million homes. >> you think you can get to 400 million direct-to-consumer homes. >> there's billions of people we could reach in the market. today we're almost 100 million to start the other thing that we have that some of those companies don't have is john built the best and enhance dsd and has ben investing in the best tv production company in the world. if not number one, number two motion picture studio in the world. it's great ip, and you know, the courage that john showed, the reason that we can do this deal today, and i went and looked at doing a deal with hbo five or six years ago, and most of the content that was on hbo, and it wasn't a bad strategy.

but it was sold in every country to frida air channels or cable channels, and that economics was used in each year for a return to shareholders. john had the vision to say, and you see it in hbo two or three years ago was making 2.4 billion. today it's not making anything but it's dramatically more valuable because when we come together, all the ip is there. "game of thrones" is there sex in the city is there when i looked at that business five years ago about doing something together, all that content was sold, and so john had the vision and the conviction to get that content back and build an amazing tech stack which is huge synergy with us on, and over the last three and a half years, he has been at work on that when you put us together now, and he hands it to us. off we go. i mean, off we go. >> i want to get to that, john n partic particular, i want to get to why

it's david that you have the most confidence in it's certainly possible to imagine there might have been other partners for warner media once you made the choice to spin it off why is it this deal as opposed to perhaps another one, and why is it zaslav as opposed to some other executive that you have the confidence in to deliver for your own shareholders? >> because he's really good, for one. i think i'll start right there, and he has a tremendous track record in terms of what he has been able to do at discovery, and i think we have a shared point of view of where this business is going. and as a result of that, that continuity is really important when you're right in the middle of a heavy investment cycle and looking to execute and david, you know, i'm not going to go into every permutation or every consideration, but you can assume that if you do something like this as significant as it is that all options are waived, whether it's a combination or are there other approaches to capitalizing a business or exposing value to give yourself the latitude and the flexibility

to attract cap ital in the righ way. i will say the board, myself, the executive team has been incredibly diligent looking at that, and i think it tells you this is the right one after looking at tons of options it's the right one because of the complimentary nature of the content, with very limited overlap, in the content work we do, which i think is great for the employees, it's great for the customer based on the breadth we're going to have because everybody keeps moving forward. it was the right construct in terms of generating some synergies and scale that david talked about it was a great way for us to do a big cut at the capital structure within at&t to get it right, so the communications company can, in fact, grow, and we can invest appropriately, and, you know, my job is to make sure this came out on balance, right, for the at&t shareholder and aggregate, and i think we did that here, and i'm really pleased about that. >> let me take that a step further, then, what is going to

allow at&t to do that you were not going to be able to do under the current ownership of warner? >> so what we clearly have been able to do is, number one, there's been some overhang on our equity that's been driven, i think, by the balance sheet dynamic, and we close this, and we're going to accelerate our deleveraging of the business, and i believe that acceleration of the deleveraging of the business, given the strong results that we're turning in in the communications company will actually reward shareholders with probably a multiple tick on that as a result of that improvement. second of all, as you have seen, we kind of have a package deal around here around how we're not only giving the shareholders an interest in a fast growing and very attractive and powerful media company, but we're also going back continuing to maintain a very very hardy and healthy dividend in the top 95% of dividend payouts, but we free up some cash flow that allows us to uptick our investment in what we're doing around fiber and the

wir wireless network on some very attractive terms in the high digit teens that allow us to go and start to take that lower dividend, and higher yielding growth in the business. >> is that how people should view it. you're targeting a ratio on anticipated free cash flow of 20 billion. that's a lot less than the dividend right now to your point, the capital structure is going to be quite different. how should shareholders view it. it does appear certainly you're cutting the dividend. >> what we're doing, david, is we're taking our cash and putting it toward the highest return and it's not to be unexpected that when we shift out as much as the cash flow as we do with the media company transaction, what we have done with the directv transaction, that we would resize the dividend as a result of that, but more importantly, using that cash flow to something we know we can generate really attractive returns far in excess of the 5%

yield that maybe the dividend returns is the right thing to do for shareholders, and we want this business to grow organically, and that's my goal and objective. david, i want to turn to you as well for, you know, what your expectations are for this new collasus that you're going to be running. it's going to take a year to get approvals, and i want to ask about that as well. are you concerned a talent train, followed up with thousands of layoffs the synergy number i assume will include some job losses. how are you going to plan to keep people that you need to, and obviously a creative business >> yeah, well, look, we're a creative company with us, it starts with getting the best people in front of the screen and behind the screen, and there's really wonderful people at warner a lot of them are complementary to us. we're not in the scripted business they have the biggest and most successful tv scripted business. they have warner brothers

studios, which historically is the place that's most friendly to talented and so what my job is, you know, and our track record, if you look back at scripts, more than half of the people that are reporting to me, and in our company right now are great leaders that would develop at scripps we want the best and the brightest. we're going to create great performance economics, and they're also going to know that this company has a chance to really be a force. and we're going to invest -- >> what does that mean, be a force, what do you mean when you say that >> we start with the most compelling ip in the world we also have content in every language in the world. we have a leader in sports we have all the tools to nourish people all over the world, and we're going to invest substantially more in content. we're going to get synergy, breaking the company in half effectively. the content is to the right. that's the future of this company. invest in the creative, and i think we're going to get that

message out. john is continuing to invest in his business, we're continuing to invest in ours, but we want the best and the brightest from warner to be with us, and i think they're going to buy into this vision. we have a chance to really be a global force those stories could be seen everywhere in the world, in every language, on every device. and what great creative leader or story teller doesn't want that >> understood. silos, i wonder it feels like we're starting to silo everything because all the producers of content are producing for their direct to consumer business. warner produces, i think, still plenty of stuff for other platforms. will that continue or is most of what comes out of warner now going to be only seen on your direct to consumer >> well, i think that john created an environment that allowed him to get jj abrams and some of the best creative people in the world, and what he did was to say you're not going to be a captive unit. so the start was we have to have the very best producers,

writers, talent working with us. and they want a chance to have their content appear in other places, and so right now it's working extremely well where we look, and john and i have talked about what's the right mix, how much should be on our platform globally, how much should be produced for other competing platforms, but it will be driven by maintaining the best creative talent in the world, telling the best stories because that's how we're going to be successful. >> john, you're no stranger to regulatory concerns. do you have any here it's a big deal. it's certainly going to get some scrutiny, though it wouldn't appear on the face of it to have anti-competitive aspects. >> i'm sure it's going to get scrutiny it of course has to go through reviews so therefore it gets scrutiny i don't have concerns. you asked a question earlier around why this transaction, clearly one of the reasons is we think it's a real clean approval process. and it's important to have deal

certainty, which we think we have engineered with this contract, and part of deal certainty is to have a nice, clean, regulatory process, and we think we've got a real good shot at making that happen and that way we can move through it quickly, and let david and the new team get on with doing the good things they need to do in the market. >> speaking of the market, david, how are you going to market hbo max and discovery, do you know yet are they going to be put together in one offering or do they stay separate >> you know, we have plenty of time to figure it out. iger and chapik have done a bundle they have been very successful with it. right now, john and jason are doing a super product, and that's doing really well we're experimenting with different ways of doing discovery plus throughout europe and here in the u.s. we have a very low entry price, and so we'll just have to figure it out. the super exciting thing is just the content ecosystem that we have, when you put it all

together, the motion pictures, the largest library in the world, you put it together with all of the content and characters that we have. >> right and the challenge is just how do we do it do we do it with two products, three products, do we do a bundle, put it all in one, how did we price it? >> aren't you kind of recreating the cable bundle, in a way, isn't that what's going on with all of these platforms >> i'll say this, between news, sports and the great entertainment and nonfiction that we have, we have an ability to create a tremendous amount of excitement and nourishment from any viewer i think that's going to be the basis of our success. >> john, as i probably remind viewers to their annoyance, because i have been doing this a long time, i remember at&t selling to create the broad band business at comcast, and i remember your predecessors

buying directv and time warner how should we view these things? are you done, are you going to be a pure play wireless company so to speak for the rest of your tee tenure at the very least. >> do you know what my tenure is, and then maybe i can answer that question? >> this deal might have something to do with that. >> probably. that's why i asked the question. look, david, i think what i can tell you is this, we need to be the best connectivity, broadband company that's in the united states, and that's my goal and objective. we've got the management team focused on that issue, and i believe to be successful in markets today, you have to have a really exceptional product, and we have a journey in our company to make our products really exceptional, and make our customer experience really exceptional. when i feel like we have accomplished or are on our way to achieve that objective, we can always talk about maybe what's next, but right now, our

focus is on making sure we're the best broad band company in america. >> all right are you disappointed at all? your stock is doing fairly well but the discovery stock is actually back to flat on the session? >> i'm happy with the shareholder does well, and i think we have several innings to play out on this over time, and we'll see it, you know, there's going to be a lot of relocation of shareholders given what we're doing around capital structure, and it will take a little bit of time to play out, but i'm absolutely confident we're going to see good things for both equities when this is all said and done, and yeah, i'm a little sad. there's some individuals i feel pretty close to in the company that david's going to inherit that have done remarkably good work, and have been loyal, and worked incredibly hard to do what this business has done to put it in this position, and to not have an opportunity to work with them day in and day out is a little melancholy for me to be honest with you. >> i understand that and finally to the soon to be most powerful man in media, your

powers aren't getting that stock price up right now, david. >> hey, my goal is to work with all the assets that john is contributing into in new company, and let's see where we are in a few years the goal is to be the -- a media company that reaches everyone, everywhere in the world. we'vegot a great running start here, and it's a super exciting moment for us at discovery, for our whole board, and we'll see where the stock price is in the next couple of years if we do a good job, we're going to create a lot of shareholder value. >> do we have a name yet >> we'll be announcing the name in the next few weeks. >> gentlemen, appreciate your time this morning. john stankey, thank you, david zaslav. >> thank you, david, good seeing you. >> you too >> carl, curious to get your thoughts in terms of what you heard there. interesting getting both sides and stankey, who's very straightforward oftentimes with

us, sort of just saying, listen, you know, we truly think we're going to be a better company jj jet, he seemed to indicate the share prices are not going to respond the way they hoped it had to some of the success they have already had and have had with hbo max. >> yep, i mean, it was an enlightening interview, even beyond what they said earlier this morning it was interesting that the ic brand was dc comics, whether that was intentional or not, you could imagine the war they would love to pose to disney marvel if they can get some of the d.c. brands elevated under the new synergy. >> yeah, you know, that is going to be interesting to watch, morgan, as will the performance of the stock price discovery this morning was looking up substantially, and it's going to take time for shareholder bases to actually

coalesce and for people to understand the rational behind the deal and the targets they're putting out there are quite aggressive, $14 billion, and reducing leverage by 2023 to 3 1/2 turns. >> super hero standoff, to your point, though, with the stock chart, i mean, it was pretty dramatic to see that move and that slide lower, i mean, still in the green, but just a big move off of those highs that we saw earlier in the morning i mean, i think if there were two headlines, it's creating the best company, media company in the world in terms of this discovery warner mash up, and then in terms of this idea, i know you asked him point-blank, is at&t now going to be pure play and telco, and 5g, best broadband company, and it will be interesting, longer term, deal making, the portfolio, reimagining, which he didn't totally answer. >> they seem to have, carl,

quite a bit, they still have to fig out and they have time to do it in terms of hbo max, and how they offer them, and a name, which i guess we're going to find out fairly soon that they're not going to wait too long on. >> i loved earlier today, steve case re-tweeted the cnbc headline about the deal with the hash tag deja vu, and it reminds you that time warner has been at the center of historic turns in media both on the buying and the selling side. >> oh, man has it ever of course the aol deal was, yeah, sent shivers, everybody was rethinking everything they had to do. it did bring about some consolidation, made a decision to sell the vendi, john murray messier buying there we'll see if it has the same impact unclear that it will, but you're right, time warner has made the rounds many times, once again, coming to a public company near you. >> we look for a lot more detail

as david says in the days to come as we go to break, keep your eye on bitcoin today, in the red again, back below 44 k remember, not too long ago it was the $64,000 question you've got coin base at anll a time low below the reference price. we're back in two minutes. cisco. the bridge to possible. keeping your oysters business growing has you swamped. you need to hire. i need indeed indeed you do. the moment you sponsor a job on indeed you get a shortlist of quality candidates from a resume data base claim your seventy-five-dollar credit when you post your first job at indeed.com/promo esg is responsible investing. who's responsible for building esg into your investments? at pgim, the pursuit is on for outperformance. as active investors, to outdeliver with customized strategies,

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check out shares of harley-davidson, jumping 4 1/2%. the u.s. and eu start talks that could end steel tariffs imposed under the trump administration announcing it's temporarily suspending the tranche of tariffs on u.s. goods set to go into effect coming up in june. amid those talks, goods that include motorcycles now, you will not see an increased tariff there. hence, harley jumping on this news the company calling the truce a first step in the right direction saying it will continue defending its position in europe. you'll recall, it was that first set of tariffs that caused

harley to push some production overseas, which caused a lot of controversy a couple of years ago as well. meantime, as part of asian american and pacific islander heritage month, we have to spotlight business leaders and our own anchors and reporters. here's cnbc contributor, kathie lee. >> i started on the trading floor in '99 it was filled with people who didn't really look like me i was asian, i was a woman, i was 18 there was virtually no women, and even fewer ashen women that were executives or managers so when i was given the chance to forge my own role in the fast growing company, i couldn't wait for the bank to change i realized i had to take that opportunity.

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market shop continues today as big tech remains a mixed picture this morning after the nasdaq saw its worst week since f february last week, despite some of the late week recovery, dropping over 2% last week joining us this morning, elevation partners, roger macnam, talking about what's ahead for big tech good to see jyou. >> carl, it's good to see you always. >> the cdc guidelines on masks are going to have some impacts on how we deal with technology in general >> carl, don't you think so? it seems to me that the big news today is not so much inflation or what the fed is going to do next but the economy is clearly undergoing a big change. i mean, we had a pandemic that had enormous impact on people's employment, on their ability to spend. so we started to transfer

economic activity from the private sector to the government, which redirected into the pockets of people who had been affected by the pandemic that was unbelievably good for amazon, facebook, google, and the like now we're in a situation where uh-oh, there's some inflation showing up and we are faced with the challenge of dealing with the structural flaws in our economy that were exposed by the pandemic, the fact that we couldn't make cotton swabs or ppe when we needed them, and it feels like biden's strategy is to move on to infrastructure and deal with those problems as the next step, which has further implications for inflation, has further implications for investors on allocating the economy. to me, what's going on, carl, is for tech investors, we're looking at a possible transition where, you know, the share of

the pie going to tech is going to be lower for a while. and how that turns out remains to be seen but i think we shouldn't lose sight of the fact that if assets and spending go into infrastructure, that's going to unleash a whole pile of other investment opportunities, including, you know, green tech and things that are associated with, you know, environmental stuff. >> i can see how say, for example, the share of ecommerce on retail gets a little bit of a shave, roger on the other hand, people would argue the labor shortage is going to make small business turn to kiosks and software, and that corporates are going to reinvent their i.t. budget as they have some marginal number of workers maybe working from home more often, and we have actually seen some pc sales forecasts inched up because of that >> i think all of that is true, carl, what is unclear to me is which parts are sustainable and therefore going to allow us to

enjoy a ride, and to me, the bottom of this whole thing is the government spent 40 years with an ever diminishing role in our economy, and now its role is much bigger again, and i don't think any of us knows exactly what that's going to mean. what i do know is that relatively speaking, tech was the biggest beneficiary of the old model and how big a beneficiary is the new one remains to be seen my point is only that it's uncertain, not that it's bad. >> roger, it's morgan, we're having this conversation about reversion to the mean essentially, we could talk a little bit about inflation, and what longer term potentially higher interest rates are continuing to climb interest rates. i know that's a debate right now. could mean for these names as well the other piece of the puzzle, though, potentially is a higher capital gains tax rate how do you see that factoring in, and what does that mean for some of these, at least until recently, highest flying tech names. >> let's be clear, obviously if

interest rates go up, there's very few industries with more surplus cash than big tech they're likely in some ways to be a beneficiary of that higher capital gains rates are an issue for the market. exactly where that turns out, a proposal is a huge change, but it still has to pass, and we'll see where that turns out, but in my mind, the thing that we're supposed to be doing right now is just recognizing that a transition is going on, and there will be huge opportunities coming out of it, but they may be different than the ones that we had going in, and that shouldn't scare anybody. i think that's just life. >> as an investor, where are you putting your money to work right now, roger >> it's a funny thing you ask. i have been very focused on a specific venture opportunity that i'm working on that is in intellectual property, and it's the kind of business that's not really related to what's going on in the broader economy. and so, you know, i'm trying to stay away from the things that are incredibly volatile. i still own apple shares, and i

still own some amazon, but realistically, at the moment, i just feel like we're going through this transition, and i don't yet know where it's going to land and so i'm being more cautious about new investments, hanging on to the things that i like from before, but, you know, in terms of new stuff, i'm looking for things that are going to be successful, irrespective of what happens in the company. >> finally, roger, just on crypto, i mean, we're watching bitcoin here, now down 33% from the highs. we're getting into the neighborhood of what we have long called historical corrections. in bitcoin, at least, and i'm wondering is that going to be -- is that going to shake out some weak hands, or not >> carl, i think the really important question is whether the discussion about the energy consumption associated with bitcoin explicitly becomes the dominant narrative, and does that start to create pressure

for higher degrees of regulation and i do not know how that's going to turn out, but i will note in the last couple of weeks, we have seen some voices raising that issue that historically did not raise it. and so i've been a, you know, i've been one of those people ae like a religion. that if enough people believe it it's real. and yet if you do burst bubble, then there's nothing to support it because it's not a currency so much as an extraordinary trading vehicle that made a lot of people a fortune. >> yeah. i think bofa calls it the tinkerbell effect. enough believe, it's true. see if that lasts. >> yeah. >> roger, get to more next time. good to see you. pleasure roger mcnamee joining us. coming up on "techcheck," don't miss bitcoin bull conway on all the crypto volatility begins top of the hour.

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welcome back to "squawk on the street." time for our etf spotlight

materials sector up in cyclicals and the ondoing debate seeing supply chain shortages, spikes materialize despite a rough month for the s&p currently down half percent for may so far materials are higher up 6% for the xlb month to date so far led by top holdings including lindy and up 15% just over the last two weeks with copper continuing its climb. we'll take a quick break, though, with all the major averages start the week in the red. stay with us. ♪ ♪ (upbeat music) ♪ ♪ ♪ ♪

♪ ♪ ♪ ♪ everyone wakes up every morning to a world that must keep turning. the world can't stop, so neither can we. because the things we make, help make the world go round. they make it cleaner, healthier, and more connected.

it's what we build that keeps things moving forward. so with every turn, we'll keep building a world that works. (♪ ♪) whether it's a technology first, (♪ ♪) a fashion first, (♪ ♪) a science first,

(♪ ♪) or a first for us all (♪ ♪) whatever you hope to achieve for your business, cloud first helps you get to value...first (♪ ♪) let there be change accenture we own the full ecosystem, and you know, netflix is a great company. disney is a great company, but we have a portfolio of content diverse and broadly appeals and think could be 200 million, 300 million homes -- >> up to 400 million direct to consumer homes >> there's billion of people out there we could reach in the

market today almost 100 million to start. >> pretty ambitious words there from david zaslav. the man running the combination of discovery and warner media. no name yet but will come up with one, morgan, very soon. i was kidding him talking about the most powerful man in media certainly amongst them, because this will be a giant right now discovery shares, not responding positively. s discovery ks we call them. one class, voters go away in terms of rights they have once they do the deal. >> hey, could very well be the most powerful man in media if he gets to 400 million homes. quite a number and speaks to the global nature of the deal talked about earlier in the hour. the other key thing. you're focused on this what happens to the dividend add at&t >> yeah. i think we asked john stankey, at&t ceo it's clear dividend will be cut essentially

from where had is now in terms of yield maybe a 5% potential but not as much cash flow and devote roughly 40% to 43% of free cash flow to the dividend seeing free cash flow right at the $20 billion. do the math. he wants to free up cash to invest in the business so they can grow faster. so it is sort of reclassifying at&t a bit in terms what that company will look like and obviously many shareholders will sewn 71% of this nuco, ip, they like to say. >> the deal speaks to the fact you've had other players in the telco sector like t-mobile, for example, able to strike partnerships rather than don vertical deals for billions of dollars and a similar if not more positive out come at least

from the stock output. >> no doubt. and greatly enhanced by the deal never did to gept acquired phi at&t, 5 million spectrum and a bunch of cash. one of the reasons they're doubling down on wireless and trying to compete with a new capital structure. >> merger monday to kick off the week we'll talk mob about it in days and weeks to come. that does it for "squawk on the street." "techcheck" starts now good monday morning. welcome to "techcheck. i'm deirdre bosa with jon fortt and carl quintanilla today a mega media merger that reshapes the streaming landscape, and in an about-face for at&t strategy. the latest on discovery's deal for warner