Transcripts For CNBC Squawk Alley 20160229

Squawk alley, Kayla Tausche is in london. Joining us this morning, our super panel, former daily male ceo, John Steinberg and indy go go co founder. First, you want to wait for apples top lawyer in its case against the Government Joins us live later on this hour. Dont miss it. First up, the oracle of omaha, Warren Buffett joining squawk earlier this morning, had a lot to say about a lot of stocks, namely ibm. Take a listen. I dont think so, but it could be. I mean, we weve owned stocks we lost money in. And sometimes when stocks go down, were wrong and we sell them. And sometimes we think were right and we buy more. And sometimes it turns out we are. A stock going down is a good thing, unless the company itself is losing value. And sometimes thats the case and sometimes it isnt. I dont think its the case with ibm. But i could be wrong. All right. So weve talked about this a couple times this morning, guys. But john, ill start with you. Is he looking past some of the shorterterm concerns for this company, because he is so longterm focused . Im not sure hes wrong and i know thats weird to say, given how much ibm takes, including on this program, their services modeled turned out to be a bad longterm bet as they have run into cloud. A number of issues, software, their core, their profit center, is losing momentum. But its not as if this is completely unfixable. Its not clear to me whether they are going to be able to fix it. But if they are, then, yes, the stock could rebound and surprise everybody. If ibm goes up it will be because Warren Buffett is lucky, not because he understands the company. When he talks about watson, its pretty clear he doesnt actually know what watson is. He says, oh, watson is learning with geico. I mean, it was a bit like listening to my mother explain watson and ibm, right . So i dont think he understands technology. This is not sees candy or cocacola. The stock is going to decline in terms of top line sales. Totally unclear whether it growth back in 18. I agree this is not a sweet spot for buffett in terms of being a tech company not like coke or gillette. There is an opportunity here. Seems like there might be a bottom for the first time in five years, theyre projecting their revenue will be flattening out as opposed to declining. They have already lost over 20 of their value from their stock for the last few years. And watson and the other initiatives are showing a little bit of growth. Keep in mind, those are small initiatives, but if they can start growing and instead of defending the proprietary information, build on the fact they have partnerships with j j building and doing these acquisitions, opening up their protocols. By 2020, youre going to see huge growth rates in medical analytics as opposed to core business, a 2 to 3 grower, but theyre declining. So i see potential for 18, 24 months, theyre going to be a big argument this watson area should be spun off. Should this be separated things which would be challenging because then you have the cash cow, which is actually feeding the investment area. What happens then . But to your point, john. I mean, whether its ibm and the cloud or coke and noncarbonated drinks or amx and stripe, or all these other old line businesses, we keep coming back to this theme on buffett. Is he understandable the new trend. Thats the point. He understands these old line businesses like everybody is going to eat a burger, drink a cocacola. Thats not like this. If you look at this company, right now, its trading at just under ten times revenue. Ten times earnings. Cisco, 11. 5. Oracle, 14 times. Microsoft 18. 5 times. These are all companies that are basically down to flat, to slightly up top line growth. So they are decent comps. If ibm had Something Interesting going on, if watson actually made sense to anybody, there is an argument for multiple expansion. I dont think i see that. Ive never heard anyone tell me what watson actually does for their company. Yeah, watson is out of business. They keep trying to market it, but it hasnt shown up and ibm has way too many people. Massive cuts, probably necessary at that company. If its going to get right in front of the cloud era. Havent seen that yet. And when you hear buffett talk about mcdonalds, he says the question is over five years, are they making a people want to eat. These companies are not like that. You need a continual thread of innovation that drives growth and ibm he thinks works its way out. Well said. Next up, some new money on the way for spotify. That kayla is in london and has that story. Hey, kayla. Hey, carl. As we reported for you a couple weeks ago, spotify had had planned and is still planning to sell 500 Million Euros and dollars in convertible bonds on either side of the atlantic. The company is also now in negotiations with private equity firm for an entirely 500 million euro for 550 million investment. The exact terms of the deal unclear. Im told they are similar to the convertible, which is still being raised. That deal pays interest around 3 to 4 and offers a 17. 5 discount to the ipo price if the ipo happens this year. The discount goes up, the longer that spotify takes to go public. Most interesting about the convertible, it keeps the valuation the same, which is about 8 billion premoney. And because it converts at ipo, its equity value will be determined then. Unlike pure equity the companies raise, which is quite annoying. It has to be recalculated every single time money is raised, it goes up, it goes down. And that can be frustrating for companies as we have seen. Bankers have told me, we will likely see a lot more of these types of deals for highprofile household name unicorns. Of course we know tpg has investments in air b b and uber. This is good for a lot of investors and thats why we could see more dales deals like this. They get a high coupon and discount to the ipo price and Companies Get cash when they need it and dont have to reset their valuation, carl, which so Many Companies have had to do. I love your take on this one, knowing what we know about spotify and the way they have been healthily funded with a lot of money. Yeah, mine, clearly they need more money since theyre giving a 17. 5 discount on the ipo price. The fact theyre able to get this money is a good sign, especially since the vc markets have tightened up since q4. I am concerned about the overall market, considering that the Public Markets when companies have gone public has been really tough for some of these recent Tech Companies. And then also the tightening evaluations. I mean, if i was spotify, i would grab on to money. It seems the shift is going more towards the investors as opposed to Companies Getting the deals they want. That brings us to Microsoft Founder Co funder, bill gates, who did weigh in on valuations in it an interview with the ft. He says there is some sorting out taking place it should never be a case of closing your eyes and saying, oh, its a tech company, throw money at it. That strategy worked for two years. Now you actually have to open your eyes and look at the company. This should not be difficult to grasp, john. No. And i think now for me to Say Something nice with Warren Buffett. He put in his letter 2 growth in the u. S. Is not so bad. That effectively gets you to 34 growth in gdp over the course of a generation. What were seeing now is a lot of people looked at 2 annual growth and said we will pay anything for growth at any cost, which led to very inflated valuations in the private market. Now i think we are seeing kind of a normalizing or sanity check where people say, these highgrowth businesses that inevitably we pay up for and miss our expectations or dont have the profitability to them, were less excited. And this kind of spotify desperation convertible note round, which you do when youre a Small Company and dont know what your value is because the Public Market doesnt want the company now. This looks like a good sign were getting a soft landing in this tech cycle to me. When you look at what we went through a few weeks ago, with linkedin, weve had a number of other small cap techs down big. Youre getting more of this talk down. This isnt like a bubble bursting where people are panicking and Office Furniture is out on the street in Silicon Valley at penses on the dollar. A number of companies have come way down, but it hasnt cratered the entire tech market. And explains why sentiment is good. In some cases getting better. Yeah. I mean, like you say, its a soft landing. I would say spotify should take the money and run. We dont exactly where this is going to continue to shake out. Definitely in Silicon Valley and around the world, i think the vc Laurie Segall are really tightening up in terms of valuations. The only valuation around maybe is still somewhat normal is the a round, the first institutional money, a little leverage. But when these late rounds and early angel rounds have been super lofty, and i think were going to see more of these down rounds. There was an organization that was talked about a couple weeks ago about the down rounds. I think that number will continue to go up through q2 in terms of the number of down rounds. And i like johns use of the term soft landing and the chart we had there that showed the unicorns recently gone public trading down 25 to 50 . Thats effectively what were seeing in the private markets. These were unbelievably multibillion dollar companies, so on and so forth. Thats by no means the cataclysm we saw. The other point i would make on what slava was saying, the a and b rounds, no issues right now. Im still seeing highquality companies that are multiapproximately dollar companies, 20 Million Companies that have fundamental businesses getting funded. Its the class of companies effectively Public Companies that should have already been Public Companies that were just seeing trade down. Kayla, the last word on this one. Are we all whistling past the graveyard here . No, not necessarily. I think that there is a softening in valuations you cant deny. And there is a sense that investors are starting to do more homework. Theyre starting to be stricter about the companies theyre investing in. But i think whats interesting about this spotify deal specifically is that the company is incentivized to go public in the next year. When uber did its convertible debt round a couple years ago, it has terms that dont get worse until 2019. So if you were to look at that, you would say that uber has several years to go public, but spotify is a company, obviously thinks that being public is in its future, and in the near future, it just needs the cash to get there. And i wonder how Many Companies will need that cash to cross the finish line and what it means for Public Market investors once they get there. Yeah, absolutely. Kayla, thanks. Finally today, hash tag oscars. Still trending on twitter. Chris rock probably the highlight for most people watching last night. Take a listen. Im here at the academy awards. Otherwise known as the white peoples choice awards. You realize, if they nominated hosts, i wouldnt even get this job so yall be watching Neil Patrick Harris right now. Early ratings not looking great. Nielsons estimates hit about a sevenyear low. Down double digits from the last time rock hosted the show. Yeah. Thoughts, john . I enjoyed moments. It was not great tv. But i think it was a really important cultural moment. He cracked a joke about black peoples grandmotherses swinging from trees as being a reason there wasnt this same protest years ago. When have we seen that during this kind of a telecast . That said, i thought the jokes about asians fell flat. It showed to me that american comments still have comics still have not figured out how to do smart cultural commentary about asianamericans. I was disappointed. Yeah, and just on the whole twitter trending thing. Twitter is usually you win at events or twitter wins at events like this. And last night i was following most of the conversation. But it does seem like with the comments Mark Zuckerberg made about Facebook Live video being the most focus, they want to take even this away from twitter now, owning these live events. I think the next time we have one of these events, it will be interesting to see how aggressively facebook goes after. And carl, to your point, a lot of people were watching, not on television, the live facebook feed from the black carpet, red carpet, watching from the periscope. Were going to make the carpet black the day after. Nice. Slava, to johns point about facebook, stealing the mantle of realtime, right . Trying to take periscopes candy to some degree now. Is that going to work . Video is definitely where things are going, and live video the next step. Facebook has shown a really great opportunity to take video, competing that with youtube and getting all that content. At some point they were pushing video first but now going back to content. I do think that the live video is an opportunity for facebook. And, you know, i think that the oscars is a discretion where there wasnt a huge movie. Usually relies on a huge movie to drive the participation. Between that and also the buy fur occasion i guess thats why oscars had a tough nielson ratings. Not always about the coast. Thanks for joining us today. We do want to check on the markets right now. The major averages are just slightly positive. The dow up about. 14 . The s p also up slightly. Nasdaq doing a little better. Russell up better than all three of those interestingly about a half percent. This comes amid a decent day for the price of oil. Crude up about 2 , carl. All right. When we come back, behind apples strategy in its fight against the federal government. Their top lawyer is going to join us in a first on cnbc interview. Speaking of apple, buffett also weighing in on the companys privacy fight. What he had to say. And tech stocks having a rough start to 16, and janice thinks its a good buying opportunity and will give us some names in just a moment. Dont go away. Out on the town or in for the night, at t helps keep everyone connected. Right now at at t, buy one get one free on our most popular smartphones. No matter how you hang out, share every minute of it. Buy one get one free on our most popular smartphones. And right now, get up to 650 in credits per line to help you switch to at t. This morning on cnbc, Warren Buffett weighed in on apples fight against the government. He was asked what he would do if put in a similar situation to apple. Heres his response. Theres something major, something that the attorney general or the head of the fbi would be willing to sign and go to a judge on and say, we need this information and we need it now, i would be willing to trust that official to behave in a proper manner. Carl, Warren Buffett, of course, just a titan in the world of business. When he talks about this, it drives home even more to me the fact that apple is still kind of behind the 8ball on this story, trying to explain how software is different than handing over the keys to your house or car. Trying to explain why the precedent is something that theyre concerned about. I wonder if tim cook can get ahead of this at this point. Well, for a company that has historically been stingy with media, right, and access, theyre rolling it out. Because i feel like there arent too many choices. Its a complex nuanced argument to make, as cara swisher has said in the past. And that is going to require explanation over and over again in some cases. Indeed. Well be talking about it a lot. A great interview, apples lawyer in its case against the government will join us in a first on cnbc interview later on this hour. And up next, some life in the tech sector, still down more than 5 to start the year. One top investor still bullish on tech for the rest of 2016 tells us why when we come right back. There have been recent signs of life, but 2016 has proven to be rough for the tech sector. Heavy weights alphabet and apple down 7 for the year. Our next guest whose top portfolio include both Companies Says hes bullish for the rest of 2016 in tech. Joining us now, rad slingerland, portfolio member of janice. Thanks for being with us. Thanks for having me. So i want to ask you, your optimism, where is it rooted . Because yes, were in this cloud transition, but at the same time, we have seen some software as a service names, sales force included. Really hit hard thus far this year. Do you expect consolidation to sort of benefit these companies . Do you think Something Else is going to happen to really trigger an upswing in those stocks . Well, its a great question. My optimism is really rooted in the valuation pullback. So coming into the end of last year and the beginning of this year, many stocks had good fundamentals, but were trading at very high valuations that were sort of prepricing in the growth for the next couple years. We have seen a very dramatic pullback, though, anywhere from, you know, 15 to 20 in the low end up to 40 or more for some of the smaller software as a service and Cloud Software companies. When you match up the fundamentals with this great valuation opportunity, thats what makes me so optimistic. I havent really seen valuations line up with fundamentals like this since the 2008 2009 housingled recession and before that, going back to the dotcom bursting. Were talking about a once in every five, six, sevenyear opportunity here. Huh. Well, given what you just said, and looking at the top holdings of alphabet, apple, facebook, microsoft adobe, which is the most compelling buy . Well, i think were seeing a lot of interesting opportunities in the software as a service and cloud space. So you mentioned adobe, which is certainly a benefit there. Google and facebook tend to be more on the Consumer Internet and the shift in ad dollars moving from television to online. Moving down the list, we see great opportunities in Companies Like salesforce. Com, service now, workday, ultimate software, a provider of payroll based solutions and many more opportunities today. Brad, i would love to get your thoughts on the ipo market. There are some companies, despite the lack of ipos, a lot of Companies Looking at the ipo as their eventual exit. We have seen how much valuations have come down and im wondering if you think Companies Going public from here on out, are they going to be so conservative with their valuation it makes it a good buy or do you think the market will continue to punish those types of stocks . Well, were hoping to see a lot more ipos come, and were encouraging entrepreneurs at the private companies that we meet with regularly as part of our research to approach the Public Market sooner rather than later. I think theres been some bad advice simply thats been given out in Silicon Valley, mostly by venture capitalists which has scared companies from the markets. The reality is the liquidity in the Public Markets is much better than the private markets. We have seen that liquidity decline, particularly for latestage opportunities in the private markets, and if youre still private, and you need capital, to fund your growth, you may face an extension threat when youre private. In the Public Markets, you might face some dilution when you need to raise capital, but you will have that liquidity there for the employees. So were hoping to see the ipo market open back up. We think right now were seeing a lot of fear from growth investors. Which is why some of these stocks have pulled back so much, including recent ipos. But i think if we look at the longterm and we look at the opportunity, we should see some ipos come soon. Brad, along those lines, you mentioned workday, which i think is fascinating. A few weeks ago, it dipped under 50 bucks. Today its trading just over 60. The c can eo is going to be on with jim cramer on mad money tonight. Whats going on with a stock like that which is so volatile you think its a good buy despite the fact its all over the place. Its hard to know why investors are reacting the way they are to workday. Yeah. You know, its a company thats been around for ten years or more. They are focused on the cloudbased erp software, competing against oracle and s. A. P. Its a much better mouse trap, the business is very sticky. When they want a customer, it tends to be for a very long time, a decade or more. It makes sense to spin now to do that. A lot of ajaysencees they can go into are branching out into financials. And other opportunities down the road. So we think its a great opportunity, because of that volatility the stocks come in, well more than 50 off its highs a couple years ago. Meanwhile, the Company Continues to grow 30 to 40 or more per year. So the valuation has come in from, you know by almost 70 . Even if the stocks come in by less than that. All right. Some optimism on a monday morning. Brad singerland from janice capital, thank you so much. Thank you. When we come back, a first on cnbc interview you do not want to miss. Apples lawyer in its case against the government will join us in just a minute. Dow is up 43. Hello, everyone. Im sue herrera, and here is your cnbc news update it at this hour. Countries backing the syrian Peace Process meeting in geneva. The french demanding information about attacks in breach of a ceasefire that went into effect saturday. The saudis claim that ceasefire was broken 15 times by the syrian government. An american student detained in north korea was presented to the media. Its the first time he has been seen since his arrest on january 22nd. North korea claimed the university of virginia student had perpetrated a hostile act against it. He has apologized for the alleged crime. Meantime, workers continue to dismantle structures in the make shift migrant camp. The french are dell monthlyishimonthlyis monthlyishing the camp last week. A religious festival in Southern India went very much awry when an elephant went on a rampage, smashing vehicles in its path, overturned that particular vehicle. The elephant was taking part in a holy ritual when it broke loose and started fleeing motorbikes, rickshaws, cars. It took several hours to get the animal under control. No one was injured, which is surprising, given the people who are sitting on that elephant at this particular time. They are very lucky indeed. That is the cnbc news update this hour. Lets get back to squawk alley. Carl, down to you. Thank you very much, sue herrera. Lets get to simon hobbs in europes first trading session of the week. Yep, absolutely. Its a relatively quiet session, this is the last of the month. The big news out of europe, the eurozone, a february print of minus. 2. Thats because oil and energy, its falling. The price component down 8 year on year. The major concern is when you strip out energy, youve got a core rate, energy, alcohol, tobacco. Youve got a core rate thats actually moving in a negative direction. Its gone from 20. 7 . So its 30 basis points lower. That is a concern for the ecb, feeds into this whole focus of the markets as to what the ecb will do march 10th. Another reason why they continue to move into the bond market. Yields move lower. This is where we are. Were now at 10. 7 basis points. You remember the alltime low we have back in april with 7. 9 on a closing basis. So were going back down to there. Obviously, the people are so concerned about what the ecb might be do. In this instance, not boosting the equity market. Lets look where we traded through february on the stock 600. And youll see here the s p has cut its losses. Youre still losing momentum on the equity market in europe. A lot of that has to do with whether theyre going to go further into negative rates and what the effect of that would be on the banks. Into this, you also have potentially importantly the guy that used to run the bank of england in the u. K. , which is not part of the eurozone notably, suggesting, predicting that the eurozone will collapse. In the new book that he has out. He has been a longtime skeptic. We kind of knew that. Now hes saying the debt levels are so big and the lack of transfers to the rich and poor within the eurozone means its days are numbered. Hell be doing a book round which will generate some froth and feeding into ecb news conferences. One story i wanted to make you aware of, amazon has done a deal with the Third Largest Supermarket Chain in the uk to boost offerings online. Its done a deal with morrisons up 5. 6 . Supermarkets in the u. K. Are horribly competitive, as we have covered before. Others, this is an online player, tesco, one of the bigger Supermarket Chains in negative territory. Morrisons will supply fresh goods to amazon. Guys, back to you. Simon hobbs. The ongoing battle between apple and the fbi will heat up again tomorrow as the House Judiciary Committee is set to hold a hearing on encrypted devices. In a first on cnbc interviews, were joined by apples attorney ted boutros, and josh. Josh, take it away. Ted, thank you for joining us this morning. Thank you for having me. Its good to be with you. So ted, the governments argument here is, listen, were simply asking apple for help with a single phone in a single case. Is that accurate, ted . That is not accurate. They say just this one time, just this phone. But first, you have prosecutors state and local prosecutors lining up. Sy vance, the District Attorney in new york says he has 175 phones. He absolutely believes apple should be required to assist and create software and create a back door that would allow new york to access those phones. You also have the fact that the federal government is going has got ten other matters pending against apple alone. So its just wrong to say that. And ill add one more point. The director of the fbi, james comey, has said this is one of the hardest issues hes ever faced in government. And its a broad policy question. Its not one legal case. Its just not appropriate to deal with this through an action in court. This is a political and policy question that congress is going to have to face. And ted, at the heart of this case is the all ritz act, this centuries old law that has been used to compel companies to assist the government. But you argue that the governments interpretation of the all ritz overreaches and goes too far. Can you walk us through that position, ted . I can, josh. Its a very important point. The all ritz act was first enacted in 1789. So the no one was thinking about using it to compel a company like apple to write software in order to allow the government to hack into a device like the iphone. So its really an outmoded statute. But its only meant to allow courts to basically fill in the gaps of the authority they already have. Its not meant to allow the courts at the governments request to recognize a whole new power. And the government in this case has said, weve done this before. Weve used the statute before in this way. Its just not true. Normally, the all ritz act has been used to allow courts to compel production and supply of information that already exists to the government. Here the government is asking the court to compel apple to write new software that would has never existed that apple thinks is dangerous to have exist, because it would then be subject to hackers, criminals, terrorists and theft by them and misuse by them, which threatens the security of hundreds of millions of people around the globe. And so to use this statute for those purposes would be improper, would violate the separation of powers. It would have the court resolving this policy question about encryption that is raging across the country. Thats something for congress, not for the courts to do using the all ritz act. Ted, its jon fortt here in new york. Dig into this argument, if you will, about it being dangerous to have this software exist. Because a lot of people have said, well, just create the software, keep it in cupertino, let apple be the only ones with access to it. Is apple concerned that the people who create the software, its still in their minds, and they could recreate it somewhere else if compelled to . Are they concerned their own systems could be hacked or might already be infiltrated, say, by Foreign Governments . What why is this so dangerous . Well, our engineer laid out in his affidavit and the court filing we made last week, software and code is persistent. Its not going to go away, even if apple were to destroy it after the fbi had access to this iphone. And the other thing is that other governments, state, local, Foreign Governments, are going to come back and say, do it again. And so its not going to disappear. You cant make this software go away. And as you all know, data is under assault. Criminals, terrorists, hackers, are trying to break into everyones data. The federal government cant keep control of its own data. So there are all sorts of risks. Its tim cook has noted this would be like creating a master key that could then be either recreated or pulled off the shelf and used over and over again. And every time that happens, its going to create a risk, a security risk. And so the government is trying to portray this as National Security and Law Enforcement against other interests, but they overlook the security interests of citizens, their data. So we do think this is a very significant risk. And that were better off protecting data and not creating this tool, which we think would be dangerous to everyone. Ted, you mentioned the Foreign Government element of all of this. How much of the legal calculus at the company is aimed at preventing a snowballing effect once this moves to the u. K. Once this moves to china and other parts of the world . It really is an important point. Again, the government says just do it this one time. Just this one phone. But you know that the governments around the world will say, if you can do it in the u. S. , where the protections of privacy and individual rights are really at their zenith, we have the strongest protections anywhere in the world of Civil Liberties. And if apple were willing to do this in this one this particular case, every other country is going to say, well then you have to do it for us. You have to create or let us use that software that youve created to access the data of citizens in our country. So that is a very serious concern. And, again, i think its inaccurate for the director comey and others to say this is a onetime shot. They know that prosecutors are lining up here in the united states, and around the world. So its a very serious concern, carl. And ted, we have seen a lot of Big Tech Companies now supporting apple, right . So microsoft, facebook, google. Why is that kind of support from big tech important in this case, and do you expect other Tech Companies to rally to your side, as well . Its very important. I think, one, it goes to this point that isnt just one episo episode. That its not just this one event. This request by the government, the order that theyre seeking, has widespread global repercussions for Tech Companies and other companies around the world. So its very important. I think it demonstrates that fact. Were very pleased that were going to have a strong showing from an array of companies, Civil Liberties groups, others this week who will file briefs in court, supporting apples position and saying you cant go down this road. We have competing interests here. The interest in protecting the security of the data of millions of citizens is an extremely important interest, and i think that it will be important for the court to hear those voices, to hear from other companies can, civil libertarians, media organizations, and others saying this is a fundamental principle. Its part of our democracy, its part of our system. We have to protect that interest, those interests, security, privacy of citizens, even in a difficult situation like this. And to the extent there are going to be changes and that the law is going to be changed to give courts the sweeping power, thats something that Congress Needs to consider, and theres going to be a hearing tomorrow, as you noted at the outset. And i want to touch on that point, ted. Are you suggesting that these issues here are just so big, so complex and critical, that it shouldnt be handled by judges that congress does, in your opinion, need to have a more active role . Absolutely. And related to the all ritz act point you asked me about, josh, the separation of powers doctrine, which is really important here, says that courts are to decide cases and under the law, and under the powers that Congress Gives them. Courts are not supposed to basically create new law. What the government is asking the court to do is to essentially amend the existing statutes, to give the government more authority to persuade courts to require that the companies basically do new software, write new software, to decrypt their own allow the government to decrypt their products. That would be a significant change in the law, and thats Something Congress needs to look at. We think that congress, when it does look at it, will say that authority shouldnt be granted. But thats something that Congress Needs to look at, and deal with it through the legislative process, not the judicial process. In that judicial process, though, ted, you know, a bill date to circle is march 22nd. When youll be back in court in riverside, california. What should we expect that day . Its going to be a very important day. Well be before the magistrate judge, and both sides will have the opportunity to lay out their arguments, and talk about the evidence and talk about the law here, and we obviously will argue that the law does not extend this far. There is the fact that the courts are not allowed to order individuals to speak. This is a form of compelled speech, writing code is a form of speech. And here the arguments will be laid out by the government as to why they think they need to access this information and why they think the government has the power to do this. And were going to argue that the court simply does not have that authority, and that it would be dangerous to go down this road. Ted im sorry, go ahead, john. Do you expect this to go to the Supreme Court . Does it need to reach that level because of the lack of precedent in so many of these areas that were talking about here, the fact that software has become such a prominent feature in american life, and these issues of Data Security have taken on global import . These are big issues. And the Supreme Court has looked at issues similar to this. And has recognized in a recent case that the government cited, actually, that its inaccurate to just think of these as phones. These devices. The iphone. Because it has every detail of a persons life. Its who you are is on the phone. And the Supreme Court has shown a great sensitivity to protecting the privacy rights of citizens. And that cuts across the ideological spectrum, too. So i think these issues could well under up in the Supreme Court. From our perspective, were in the ninth Circuit Court of appeals, which has very strong Case Authority that supports our position, both in terms of the reach of the all ritz act or the lack of reach. And its very protective of Civil Liberties. So we feel that the courts are going to be log looking at these issues, and were creating a record in this case that will put us in good position if the case moves forward and the government keeps pressing these issues. Ted, a lot of people still ask, you know, technology always evolves. Why cant Law Enforcements ability to leverage it also evolve . In other words, you cant have wiretaps until the telephone came along. Why cant we have the kind of code the government wants now that, in fact, encryption has become so pervasive . Well, that is really the issue, i think, that the congress will need to address. And youre right, that as technology develops, Congress Amends statutes, enacts statutes to adjust to these issues that arise through evolving technology. Thats true. But i want to make one point clear. Apple has cooperated and supports Law Enforcement efforts under the current law. In this case, in the San Bernardino case, the company worked very hard to respond to the governments request under the law. So theres no question that Companies Like apple have an obligation to help Law Enforcement when its required under the law. But here this is really extraordinary. The government wants the authority to require the company to create a degraded version of its own product. That is something it shouldnt be permitted. But those are the kind of issues in terms of the intersection of technology, Civil Liberties, Law Enforcement, that needs to be looked at by lawmakers. Its just not an issue for a court to decide in one particular case, which could have significant ramifications for all citizens everywhere. And final question, ted. I want to give you the chance to address this argument. Ive heard some argue that, listen, ultimately, what the government is asking for is a lot like when the Government Asks for emails or for phone records from a company like at t. Is that a fair comparison, ted . That really goes to the heart of the problem with the governments argument. Its not a fair comparison. Apple produced information like that to the government in this very matter. And so what the leap forward thats being taken here is the government is asking the court to order the company to write new software that would allow the government then to create basically a different iphone so it can hack into the iphone. That is its light years away from the kind of authority that normally is exercised by courts and the kind of requests the government makes. So thats why its completely unfair to suggest, well, this happens all of the time. Its never happened before. It is an extraordinary request. And it would have an impact on the security and privacy of every person who has an iphone or other device. And so thats why we think this is such an important issue, and Everyone Needs to know the full story. Well, ted, thank you so much for your time this morning, sir. We do appreciate it. Thanks so much for having me. Thanks to you, as well. Back to you guys in new york. Thank you, josh. And on to a different sort of legal issue. The next step in the lawsuit against red stone by his girlfriend, starting moments ago. Our Julia Boorstin is at the courthouse. Julia. Thats right. A hearing is going on right now in this case against redstone. Redstones lawyers have asked for a judge to dismiss the case, and a tentative ruling on this to dismiss was handed out to reporters before it began. It stated the court denies the motion to dismiss without prejudice and to strike supplemental declarations. It says the courtin tends to now schedule a prompt trial after conferring with counsel as to what further discovery may be taken to prepare for trial. This was a tentative ruling. Were going to be monitoring to see if anything more happens in this hearing going on right now. But if this court if this case goes ahead in court as it now sounds like it may very well go forward, then we would expect phillipe doman, ceo and also redstone to be deposed. So certainly, a very interesting case to watch. We have been seeing both sides, Manuela Herzer and ex girl friend, filing various things back and forth since the case was first introduced last fall. Over to you. Quite a case. Thank you, julia. Coming up, governor Chris Christie shocking many after throwing his support behind donald trump. Thats upsetting many christie supporters, including hps meg whitman. What she said, when we come back. Coming up, shark tank vest for kevin oleary joins us. And is Corporate America afraid of donald trump . And what should investors think . Plus, mooring is back as high divdeny players are out. And Warren Buffett sticks with the banks. Should you follow his lead . John, well see you in five minutes. Sounds good. Looking forward to it. Our next guest has said the first year at his company was bigger than fit bit, go pro and drop cams. And app powered security camera. Its required several rounds of funding and partnered with verizon and state farm. Adam sager is co founder and ceo ofcanary. Good to see you again. Thanks for having me again. So a lot of these companies youre mentioning, particularly fit bit and go pro are under a lot of pressure these days, not living up to the growth expectations. Is there a particular reason why you think your company is different, going to have a different trajectory . We are a softwarefirst company. So most of our team are software engineers. We build a subscription model that connects people to your home. And what the hardware is, its important for us. We have former apple, motorola engineers building the hardware for us on our team. Thats absolutely critical to get into homes around the world. The software experience, user experience, is first and foremost what our company is about. Is it youre highly leveraged to new household creation . What are some of the macro wins you have to serve . You know, a lot of it is lifestyle. So were seeing when people get married, when they move into a new home or new apartment and think about security for first time, its a real personal need. Its like thatsos hierarchy of need. People are always thinking about security and that drives them to look for a solution. In the past, Solutions Like adt which hasnt been effective for most people. Do you need to get beyond the camera that sits inside the house . Nowler doorbell cameras, et cetera, to really make this software message and Service Message work to get beyond that device soon . The old way of thinking about security, lets put sensors everywhere around the home, the doors, the windows, et cetera. And really, what were about is information. So you want to know who is in your home, that is supposed to be in your home. Are the bad guys out of your home. And if someone is there, how do you know about it and what do you do about it. So that transfer of information to you and from yourself to the world. So the police or neighbor or spouse. Thats what we build. And its the most critical part of security. Security is something that everybody cares about. We have been talking about it. Yes. A lot. Yeah. Adam sager, co founder and ceo ofcanary, thanks. When we come back, harsh worst for donald trump and meg whitman. Was engineered. To help sense danger before you do. Because when you live to innovate, you innovate to live. The allnew audi q7. A higher form of intelligence has arrived. Which allergyeees. Bees . Eese. Trees . Eese. Xerox helps hospitals use Electronic Health records so doctors provide more personalized care. Cheese . Cheese patient care can work better. With xerox. Thats it. How was your commute . Good. Yours . Good. Xerox real time analytics make transit systems run more smoothly. And morning chitchat. Less interesting. Transportation can work better. With xerox. Theand to help you accelerate,. Weve created a new company. One totally focused on whats next for your business. The True Partnership where people,technology and ideas push everyone forward. Accelerating innovation. Accelerating transformation. Accelerating next. Hewlett packard enterprise. Trolling for a gig with cant blame you. Its a drone you control with your brain, which controls your thumbs, which control this joystick. No, im actually over at the ge booth. Were creating the operating system for industry. Its called predix. Its gonna change the way the world works. Ok, im telling my brain to tell the drone to get you a copy of my resume. Umm, maybe keep your hands on the controller. Look out ohhhhhhhhhh. You know what, im just gonna email it to you. Yeah thats probably safer. Ok, cool. Ahead of tomorrows super tuesday primaries, Hp Enterprise Ceo Meg Whitman blasting Chris Christie for endorsing donald trump. She had been a National Finance co chair of christies president ial campaign. She writes, Chris Christies campaign of donald trump is an astonishing display of political opportunism. Donald trump is unfit to be president. He is a dishonest demagog who plays to our worst fears. Trump would take america on a dangerous journey. A conversation thats going to continue as we head into a big day tomorrow, politically speaking. Yes, indeed. Meg whitman also ran a selffunded campaign for california governor, some people might remember. Different message for donald trump, though. Well talk to her later in the week. In the meantime, lets get back to headquarters. Scott wapner and the half. Carl, thanks so much. Welcome to the halftime show with super tuesday less than 24 hours away. Todays top trade is what a trumpclinton race for the white house would mean to your money. With us for the hour today, joe terranova, Pete Najarian and shark tanks kevin oleary. Tomorrows results could all but seal the deal for the donald and his democratic counterpart. Which is best for the markets . That debate begins now. Kevin oleary. First of all, im agnostic to party. Im going to make a statement that i have believed since the beginning of this whole campaign started for both parties. The old crusty brands arent going to work. Bush brand, gone. Clinn