Transcripts For CNBC Squawk On The Street 20140513

Back ecb measures like negative rates. Euro has fallen this morning on that news. Our road map with the record highs. Investors retaining their appetite for riskier names. Now what . At t and directv reports of deal talks now active and could be done in the next two weeks. And as we said, davids exclusive with ibms Ginni Rometty, a rare conversation about the companys future. First up, more market history for the bulls. The dow with a record closing high for a second consecutive session posting its first alltime intraday high in a month and the s p achieving a record high close of its own. Internet and biotech names helped the nasdaq jump 1. 8 in yesterdays session. Dow, jim, with a win today, thats five straight. We havent done that all year long. No. This is amazing because this bubble talk has presumed that what would happen is the nasdaq, the internet plays, highly valued momentum plays would bring down the dow. This pool of capital keeps going around. The analysts are making a stand on the cloud and internet. You saw the bounce yesterday. So many ipos in the chute. They dont have to come out and make a defense here. Theyre out of the fox holes making their move. You have the dow up and nasdaq up. Kind of a sweet spot for the market, but it is, like you said, its gone up a long time now. David, weve talked about this rotation for weeks now. Odd that yesterday you had winners at the top of the list like a sales force, but also not far behind, a name like alcoa. Yeah. You know, i there seems to be a great deal of debate at this point still, i think about whether or not the rotation out of all those high multiple names has truly ended and were going to get back to sort of thinking about growth in a real way and Hedge Fund Guys starting to creep back in after taking down a lot of ex po sure. I dont know the answer to that. Its something people need to keep an eye on. Jims been talking about it for a long time so im curious, is this a real sign or is it a fake . I think that they can all bounce. I mean i think that there havent been a lot of equity offerings of late. Some of these stocks got overdone. The fireeye bounce. Two guys saying salesforce. Com where it started, the last week of february, is going to have a better than expected quarter. We see a lot of people coming out and saying the Internet Security names are good. They can make a stand, david, and no one can get in the way of the stand for a couple days. I think these do bounce. Take a name like rack space thats going to open up what, 16, 17 . Manage internet cloud. A piece yesterday in the wall street journal a guy who tends to be too negative saying its going to miss. That was a terrific setup. Who does in is . Elizabeth arden. Consumer package good company that is a horrendous quarter. I was negative on mad money. They sent me like 5,000 products, told me everything was going to be good. That was wrong. You could have a situation where wall street says i have to cover my shorts on the service now. Use that as an example. Cover my shorts on the work days. Let those rally based on sales force which is the Umbrella Company making all these companies seem like, you know, look, theyre all going higher and watch the stand. I mean do you have to go by fireeye. Jim cramer, jim, you must love fireeye now you hate it. I hated it from 80. Give me a break. I missed 26 to 28. How perfect. Youre price sensitive. Pitch a perfect game, no hitter, i walked two guys, wow. There is general talk that rotations like these mean the bull market is old, right . What do you make of that notion . Great rotation is the whole way up and, you know, ive never felt that a bull market ages. I mean im not saying its fine wine here. Its not a great cabernet. You know, its a cabernet and then kind of a sav yon blank and then zinfandel. I dont care for them. And then rotate back to a cab, maybe a good one like a camus select. A mallback. A lot led by m a, directv in the premarket this morning. Published reports say at t is in talks to buy the satellite tv provider for about 50 billion, or 95 a share and that a deal could be completed within a few weeks. Man, a lot of talk about the telecom. Whats your read on this so far . Carl, of course a couple weeks ago we got the reports from the journal there had been conversations earlier this year. I was able to confirm that. At this point, though, hard to follow up on what the reporting is out from a number of news organizations in terms of confirming they are a couple weeks away when you see these stories you can say somebody is certainly talking and telling them this. Dont know where the sourcing is exactly. The logic is something we and many investors in at t have been certainly focused on over the last couple of weeks since these first reports arose. And, you know, i would say that while people fully understand why at t might want to do this, it is not without at least some level of doubt as to whether it is the right strategic move for the company. You get 30 million customers, add to what is uverse, their video offering, perhaps allow uverse to use a lot of its bandwidth for broadband in certain areas, although not much of the country. You have more of a retail presence with direct. If you want latin america, you get a lot of it. Its never been clear that thats what at t is really focused on. Question, of course, of cash or stock here if they use stock, well remember theyre paying that dividend. One of the key reasons they may want to do a directv deal is because the Free Cash Flow will help with their payout ratio, something that has been a concern for investors and at t as to whether they can maintain that dividend. At the same time given the after tax cost to debt one might wanter why they might not use more cash instead of stock. You have to pay more dividends on it. Another key is the regulatory window. Comcast and time warner table, comcast our parent company, are going to be going through the regulatory process. If you want to get in front of the regulators might be a time to do it with this deal as opposed to waiting until that has been approved. Well see. It was not that long ago we were talking and they were giving signals about europe at at t being an area they were focused on. Its unclear exactly why they pulled back and perhaps it had something to do with the nsa and snowden. Ive heard there was a backlash from a lot of those european regulators about allowing any consolidation by a major u. S. Carrier, jim. But well see. And then finally we still got dish out there. If youre charlieringen youre watching your potential partners going away. You could do a deal with directv where you might actually end up with control or sell to at t and those both go away at least take once of those options he likes to talk about on his fingers when he talks how he could do a lot of different things. David, back to the point you made about latin america. I mean, the big problem with directv is theyre too big in latin america i think and these countries really make it hard. Theyre not banana republics but putting the screws to directv. Why would at t do that . Secondly is mike white really done . I mean mike white is fabulous. Came from pepsico, doing a great job, is he finished . No. He may be. Or may be a sign they think listen this is not a Growth Business at this point, jim. You know that. And you dont have that second path for broadband. Thats kind of an issue, isnt it . Yeah. Apple along go ahead. Sorry. Along with the board and mr. White, when you get an inquiry coming in you hire your bankers and do a good deal of thinking about whether this would be right time to return significant value to shareholders and may be taking stocks so theyll get opportunity to participate in the merged entity although at t is still mostly about wireless even with this deal. You know, well see. If they announce it i will be curious to see how the stocks react. With it out there hasnt been that hard on at tses stock at this point but it is interesting to watch the Strategic Decisions or considerations that they are currently undergoing. Directv has been up 12 for the month. 69 in january. I mean people have to understand theres so much money being created in the stock market. Theres a shortage of supply of the high quality companies. The bankers are ready to pump out lousy stuff and think well all say fine and rubber stamp it, im not going to from my end. There is without a doubt Wealth Creation in front of our eyes. The stock market a great place to be. Part of the Small Business optimism. Thats a great point. Small Business People are saying hey, you know what, lots of money being made. I want a part. Question is by the way, there is no stronger sign of confidence, guys, than m a. You know that is a real sign. Weve wait years, years now, with a lot of false starts for a period like this. I do think jim, were starting to really see it and the conversations im having with bankers and lawyers who ri lie on this are extraordinarily turned on a dime too. Sang quinn. Right. Why doesnt cocacola buy the rest of keurig to make a point Hedge Fund Guys who come on and tell you a stock is going to go, stock up 100 points from the last time a hedge fund. Im not going to mention hedge fund names. The guy has been picking on me. Like pope john xxiii said when he came here better answer in justice with mercy as they told den nare russ. Ive always felt mercy toward none with charity thats backwards. Speaking of money, a question if ibm can make 20 by 2015. Talk about what youll say today to Ginni Rometty. Thats the road map that theyve had out there for quite some time. Tomorrow is their annual analyst day meeting. We are lucky enough to be here at the Digital Experience Lab in midtown manhattan. One of a number of labs, in fact, theyre increasing the presence of those that ibm has where they bring their customers in and work with them in a lot of different things. A sign of the Growth Opportunities the company sees. But the key question is, can you grow, given we havent seen that in terms of even the bottom line and the top line, and how are you going to do it . Great opportunity for us. And for our viewers to meet Ginni Rometty who, frankly, you know, leading one of the Largest Companies in the world, is not a wellknown presence at this point having been ceo for roughly two years or somewhere around that, so im looking forward to it. Lots to talk about. Im expecting sort of a broad ranging conversation but the focus being on what she calls a transformation of ibm, a company that is no stranger to transformation and each time it has worked, of course, for this company. Its a big interview. We all love cloud. Theyre going to be cloudy. We didnt like cloud for a couple weeks. The timing is fabulous, david. The more she mentions cloud the higher the stock goes. Yeah. As you know their cloud presence is significant, perhaps theyre trying to do more now to actually put a spotlight on that, whether its cloud or data or even watson which they are now starting to commercialize. Watson. We know it as having beaten the jeopardy champions but its becoming a product they are using for clients. David, hes very sensitive areas but concerns. What would when you you didnt get it to go get a go against watson. David says he can take them. Always looking for rematches. Or are you more like mr. T . Not going to be a rematch. Watson knows i can take him, i think. I think i can say that safely. Yeah. I mean watson, frankly yeah. Watson has hes in tune to his reputation. We cant wait, david. Ibm leading todays ceo parade on the show. Also got opentable ceo matthew roberts. A good guy. The website facing competition from the likes of yelp and later this hour whitewave foods up 30 . Exclusive with the ceo gregg engles on whats working for the Company Behind horizon organic and silk. The dow going for five straight, the first such streak of the year. More squawk on the street from post nine in just a moment. Avo waves dont care what age you are. Take them on the way you always have. Live healthy and take one a day mens 50 . A complete multivitamin with 7 antioxidants to support cell health. Age . Who cares. Pfizer is hinting it could increase its 106 billion offer for astrazeneca if the rival agrees to talk about the bid. Astrazeneca says pfizers recent offer represents an opportunistic attempt to buy the company that doesnt reflect the value of its drug pipeline. Meantime pfizers ceo ian read appearing before the British Parliament trying to win support amid lawmaker concerns about job losses. Take a listen. Lets be very, very firm on this issue. We dont make decisions lightly about changing assets or closing assets or asking people to leave the company. We understand the impact both on the company and the people leaving. What we do is try to create a company that can be successful and succeed and get products to patients. Trying to sell it to lawmakers that jobs are okay, trying to sell it to your target that you might sweeten it if you engage with us. Kraft sold the cadbury idea and that didnt end well. Isnt this once again a pure sign they dont care. They want that tax domi soil. They dont mind not laying people off immediately . I suppose. I wonder if that accent helps him over there. It may. Interesting. You know, weve talked about this a great deal. And taxes, listen, mr. Read made no secret taxes are a key part of consideration of why theyre doing this deal and reconsidered doing it after a brief conversation earlier this year and then some reporting of that and they came back to it and said why not take a shot. Time is of the essence here for pfizer. You and i are in agreement we dont believe congress will do anything to curb these inversions but i would reference our colleague Andrew Ross Sorkins column in the times, senator levin is one of the few looking at it. Could you do a shortterm remedy to get longterm tax reform at least has to be a concern for pfizer. They dont want it to go hostile and stretch out. They want to get astrazeneca to agree the sooner the better to try to get this thing done because to your point it is very much focused on making the inversion happen and they dont want to watch that window close. Look, you go back to the point, congress, and when i speak with people in congress and speak with people in treasury, they just say listen, were seeing this. I said well i know youre seeing it. How about doing something . Oh, were seeing it. I dont think people at home recognize that, you know, we sit here and we talk about this all the time, it just kind of dawning on them this is happening. David, its not like they see this as a crucial issue. The republicans want to lower the taxes to the rich. The democrats want comprehensive reform. No one really cares. No. We need comprehensive Corporate Tax reform, it would seem, and this is a sign of that certainly. And a challenge to it. Mine in a way you can see ian read saying youre not going to do anything about it were leaving. By the way, andrew references this, i referenced it yesterday, again, talking to the banking community, the incoming inquiries from fortune 500 companies or fortune 100 companies, maybe fortune 50, are significant and so this is not going to be the last of them. At some point people will wake up. Weve been sitting here over a year talking about these inversions as they took place time after time in the form suitcle industry but but its moved beyond that, Applied Materials or companies of that nature, the expectation you could keep seeing it because there is that concern it will be eventually shut down and you will have a competitive advantage conferred upon a Certain Group of companies while others have to compete with them, thats not going to make it easier. Were dealing with were in a mid term year. Right. Nothing will happen before the fall. No. And, you know, congress doesnt operate in some sort of political vacuum, they have their own calendar and cycles to worry about. Right. Look, the worlds changed. I mean europe is a great place to invest. Many multiple year highs there. Rates are low. Its not like youre buying something thats a clunker. Theres like david is right. Theres 50 Big Companies in europe, theres 50 Big Companies here. You should expect the fact that the mergers have to occur because wow, im raising smms, blahblahblah, by the moment they do the deal. It matters. Every food and drug company should be doing it or id be ashamed of them. When we come back its not just about sorry. Guys, go ahead, carl. See you in a bit. I was going to take us to break. Cramers mad dash as we countdown to the opening bell. Davids interview with ibm ceo Ginni Rometty amid the challenges facing big blue how she plans to transform the company and the s p 3. 5 points from 1900. More squawk on the street from the nyse straight ahead. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. Does it end after youve expanded your business . . After your companys gone public . And the capitals been invested . Or when your companys bought another . Is it over after youve given back . You never stop achieving. Thats why, at barclays, our ambition is to always realize yours. Just about seven minutes before the bell on this tuesday. Lets get cramers mad dash ahead of the market open. Retail sales come in 0. 1. Thats a miss. And the skeptics say you cant blame winter weather. Show me the money situation. Heres what i think will happen. Retail sales agate not so good. Nordstroms which reports may 15th you should buy ahead of it. I sat down with nordstroms spending a fortune on online. I think its going to be an okay quarter. Its not going to hurt on the top line. [ inaudible ] says buy coles not just because i gave my daughter a gift card to kohls for fathers day. Again isi does fine work on apparel. They are saying vf corp doing well. Vf north based. Theyre everywhere. Im going with the analyst view retail sales are going to be good when we hear from the companies this week. Not bad. I like the group. I would like to get behind every one including walmart and maybe even target if there had not been such management in turmoil which told me maybe target is losing, not winning. Only seven companies now give you monthlies doesnt make it easier. That was a Big Hedge Fund guessing game. Hedge funds with short certain stocks hoping for a bad comp number. Jc penney reports this week. Melissa lee last night had some guy blasting sears. Saying no reason for being. S like an exo tensional conflict but theyre losing sales to other people too. Jc penney and sears had a chance to pick sales up. Looks like they didnt. After the jobs number decent for the last month today new evidence Credit Availability to Small Business pushed high. A good number that shows Small Business is spending. Thats terrific. A lot of Payroll Processing companies will benefit from that too. Its not a bad situation. Not a bad setup. Interest rates down today. You know what got to be careful. That had been a sign that you should sell stocks. Yeah. I dont know. We got a head of steam coming into this session. Well get the opening bell a few moments away and as we said davids exclusive with the ceo of big blue, Ginni Rometty when squawk on the street returns. So ally bank really has no hidden fees on savings accounts . Thats right, no hidden fees. Its just that im worried about, you know, hidden things. Ok, whys that . Well uhhh. Surprise um. Well, its true. At ally there are no hidden fees. Not one. Thats nice. No hidden fees, no worries. Ally bank. Your money needs an ally. I got more advice than i knew what to do with. What i needed was information i could trust on how to take care of me and my baby. 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You know what, the earnings are in a vacuum right now. We have cisco, some retailers, but not a lot of numbers and not a lot of numbers the bulls play, not the bears. Right. We keep our eye on m a. We mentioned at t and directv. Hillshire pinnacle deal doesnt get love out of jpmorgan. They cut hillshire to neutral saying they may have overstated the strength of pinnacles categories. People were hoping hillshire would be for sale. Oscar had good thoigs say today. Hillshire didnt make a strong ca case. I think pinnacle is a good company. Cam gourd has taken out a lot of costs already. They didnt do a good job stating it. It gets hit. Got to come in and say were going to cut out this and do that and this. They were placid. Not what i wanted. Interesting. Well see, the ceo on squawk this morning. The opening bell and the s p at the top of your screen. Down here at the big board, south koreas ambassador to the u. S. Doing the honors and at the nasdaq, nuvisive focused on spine surgery. Yeah. You sound like youre familiar . I think that cohort has not been that great. Got to be careful. The vix is low. I tend not to look at the vix other than extremes. Got to go everywhere in this market. Spiegel online. What . Der speigel talking about how its frankly that the europeans dont want sanctions, deep down. Against russia. Against russia and i think as long as russia stays low key and off the front pages, you can do this. But if russia comes back and we see something, its been a mistake to think russia is over. Absolutely. Especially now, they will have these separatists essentially sovereign states they want to make. New russia. Yeah. As its called. You have to keep it europe does not want something to happen. I think were pushing something to happen. Bigger sanctions will make it so people start worrying about europe european economy. When the vix this low and had that boiling, i had rangold on last night, stock is down but saying, listen its not like the turmoil is going away. I think thats true. Keurig top of the list this morning as coke reaches a deal to up its stake to 16 . Theyre too much, man. Cocacola. Its like i mean i wonder if cocacola says wow a lot of people short now. Lets take it to them. I used my keurig this morning and think cold or hot beverage . Hot. I like the 8 00 coffee and i was using it saying, wow, i remember when people come on and say this thing is going to zero and well if it was going to zero why did cocacola put real money behind it not just because the ceo is from coke and a smart guy. Soda in trouble . Soda stream . Im tired of them floating. Mentioned this earlier on my game plan this week in mad money. Tired of them not shooting down the pepsico and pepsico saying its not going to happen. Soda stream is one of the products, mine blew up and stained my wall, its my fault, always your fault, right . I think to put soda stream in the same category as keurig is a mistake. Keurig is a dominant force and soda i think is a loser category. As an sku. As a loser category. Yeah. I think diet soda will remain to be the great untold story of just an unraveling if front of your eyes. Masco as we know, all housing names have been under pressure. Jeffreys ups it to a buy. Last quarter management. Good luck. Last quarter was bad. They have a lot of europe and if europe turns theyre fine. I have not liked that stock. I think they keep letting you down. Yeah. Down 10 this year. Now look so many better fish to fry. If you like masco buy home depot. Facebook. An executive says theyre considering opening a sales notifies china and i believe i saw that. Ups the stock. Facebook needs to go higher. Customers that are blocked that could be opened. Its not google. They need facebook higher. Again f you look at all the drop box, box, air b and b these venture capitals are saying will you please pound the table on these stocks. How will we get our deals done . We need liquidity. Whirlpool down almost 3 . The biggest loser on the s p right now. Downgrade there. A copy of a downgrade. Yesterday they reaffirmed. Whirlpool has been a sucker short bet. Was the quarter a blowout . No. Did it need to be blowout . You know, when home sales arent that strong, people short this one and they short sherwin williams. Talk about another bad short. Yes. We are going to talk to the head of whitewave in a little bit. Whole foods under pressure today. Down a percent. High growth. No go. I think starbucks could make a run here. Really . Yeah. These are all stocks these all the commonalty of starbucks and whole foods selling 28, 27 times earnings but i think starbucks has a lot of irons in the fire. Oprah chai will not be a nothing here. Theyre doing unbelievable stuff with mobile. When i had ron shake on from panera on mad money he was saying point blank we need this stuff. So i think starbucks is okay of the higher multiple stocks. Whole foods not. We can ask gregg engles, well ask gregg from whitewave. Hell tell you the category is proliferating so quickly you dont need to go to whole foods for the products you once ask at one time. Directv by the way, as we mentioned, the at t directv reported talks, thats up 2 as people try to make some sense of what the pricing structure is. Interesting. The times says it will be between 92 and 49. Stock up 4 in the aftermarket. Seems its a done deal. Too many people talking about it. Its a done deal. Yeah. Theyre just dotting their is and crossing their ts. If you threw darts at cable and you threw darts at satellite youve made a fortune and uknow what, theres nothing matter with these. These are earned value assets. Since the dows last record high in april, the best components have been travelerses and mcdonalds and today ubs raises its target on mcdonalds i think 120 now. Yeah. I like this upgrade because frankly the stock has been creeping up compared chipotle versus mcdonalds last night. Mcdonalds has that great dividend people like that versus Interest Rates, Interest Rates down today. Have one good month and this thing is at 110 and you and are both silentiary rooting for mcdonalds i think because we like the ceo. Yes. We know the company. I know we know what theyre capable of and do one thing right at this scale and doesnt take much. No. And i still like to go to mcdonalds for my coffee and if i really feel thin i will treat myself to an egg white egg mcmuffin. I wish mcdonalds luck and travelers fishman he turned around pricing. People wrote him off. Writing off the ceo of travelers is about maybe the most stupid thing you can do. He may be the smartest ceo in the dow 30. Really . Yes. And theres a lot of good ceos in the dow. I love inga. Hes terrific. Jim mcnureny from boeing. Those guys are fabulous. Dont count out fishman. I have to use travelers for my the restaurant i own. You know, theyre the only guy that really rights Small Business. If you think Small Business is coming back you buy travelers. Theyre fabulous. To price breaks either. Holy cow my insurance is expensive. 1898, jim, do you think we blow through 1900 . Maybe not today, but this week . I think we certainly have a head of steam and dont have a lot of earnings to take us down. If cisco reports a horrendous number, some say they are going to do, and a big guide down, that could caught tech etty fuss to come down. If russia, tensions escalate, i think if the russia if it does not if it does something you will see this market blip down. Everyone is looking at salesforce. Com. That was the one that let us down. Two guys recommend the stock and the stock is up. Interesting. Yes. And this is jack power not helping sales force right now no dominic chu on the floor with us. Jack bower is helping the rest of the market right now at least right now you can see were kissing up against that 1900 level in the s p 500. The dow and s p both did set new records today, so its nothing to really scoff at right now. You can understandably see how the markets are in a Holding Pattern with stocks at record highs. If you take a look at some of the other sectors or parts of the market in focus for investors its the small cap stocks. Jim, you guys, carl, everybody has been watching this as well because the divergence we saw in small cap stocks versus the s p 500, maybe didnt bode well for the overall market but we sit at record high for the large cap stocks like the dow and s p. Whether the russell continues to work back up towards those levels, row mains to be seen. Also interesting enough f you look at the sectors that are standouts in 2014, two of them, utilities we talk about all the time, the safety trade, the bond proxy play, thats still up in terms of the overall scheme of sector plays. Its up about 10 . Thats about double the next best performing sector which is energy. Other side retail sales, in todays trade, we saw those retail sales numbers, Consumer Discretionary stocks, retail stocks, single worst performing sector in the s p 500 in 2014. And as you take a look at what else is happening in the market you want to keep an eye on whether or not we are going to see some kind of a base whatsoever build in some of these momentum names. Rack space, you guys have been talking about it as well. One of the Cloud Computing infrastructure type plays. Thats up big after earnings yesterday. Whether or not you see some kind of a stability brought to momentum stocks thats going to be the repeat. Whether or not theres a next leg higher is going to be contingent from a lot of these trader standpoints on whether we see stability to other momentum type stocks. Back to you. Good have you down here. Dominic chu at the exchange. Bond pits. Rick santelli at the cme group in chicago. Good morning, rick. Good morning, carl. And today is a very and ill underscore very important day for any of you out there trying to divine what makes Interest Rates move, where theyre headed, and why they are where they are. Okay. We get a clean slate today, okay. In the moment, it isnt about geopolitics, it isnt about the fed and their ownership or the treasury where all the games going on because at 8 30 eastern, we got a glimpse of what was perceived to be a week report for april on retail sales. There was march but thats not what i want to concentrate on the positive revisions. Look what happens, intraday two, five, intraday ten. Twoday of 30s. See what happened. Interest rates moved down. It shows us that when it comes to those points where important data is released we get a glimpse of the emperor with no close. What seems to be moving the market and week economy is a drive weak economy is the driving force keeping rates down. No russia or ukraine headlines. In the heat of the moment between 8 30 eastern and 8 33 you see how the markets move. Isnt only about domestic markets and how they price and Interest Rates may be telling us the economy improving, the pace and sustainability that fixed income markets might be paying attention to. Look what happens when you look at the booms overseas. Keep showing the tenyear charts of the difference between our yield and boon yields because it continues to hover close to tenyear highs and that is also going to impact the investor appetite for u. S. Treasuries. Which may be just a bit too cheap on a relative value trade. Now lets look at the dollar yen. Still correlating . Yes. Dollar moved down. Kind of the derisk retail sales, but really, treasuries led. We need to be cognizant of that. Last chart, euro versus the dollar. Mario draghi take a bow. I dont know how long they can get away with using the microphone but if their goal is to bring the euro down its hovering at the lowest levels since the 4th of april against the greenback. Back to you. Thank you so much, Rick Santelli. Before tomorrows Analyst Meeting at ibm, the ceo guinea rometty is r Ginni Rometty is talking to cnbc. Theres a lot to talk about. Up next giving the term organic growth a whole new definition, exclusive with whitewave ceo gregg engles, coming up next when squawk on the street comes back. In a world thats changing faster than ever, we believe outshining the competition tomorrow quires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. As the company thats all about printing. But did you know we also support hospitals using Electronic Health records for more than 30 million patients . Or that our Software Helps over 20 million smartphone users remotely configure email every month . Or how about processing nearly 5 billion in electronic toll payments a year . In fact, todays xerox is working in surprising ways to help companies simplify the way work gets done and life gets lived. With xerox, youre ready for real business. Sfx sounds of marching band and crowd cheering and life gets lived. Sfx sounds of marching band and crowd cheering so, im walking down the street, sfx sounds of marching band and crowd cheering just you know walking, x sounds of marching band and crowd cheering and i found myself honoring americas troops. De ich is actually ite fitting because ico has been servingng band and crowd cheering and i found myself e military for over 75 years. Aawh no, look, i know this is about the troops and not about me. Right, but i dont look like that. Who can i write a letter to about this . Geico. Fifteen minutes could save you fifteen percent or more on car insurance. Very exciting we will talk about a stock that is one of my favorites, whitewave. Shares of whitewave are up about 30 year to date. This is a food stock. The maker of organic foods you bought them, such as silk soy milk, reported a standout First Quarter, beat wall street estimates by far. Joining us for a cnbc exclusive interview is gregg engles, whitewave food ceo. You have got more opportunities than any other food company i know. Youve got a china joint venture, doubledigit gains in plant based food. You have this earthbound, 600 million acquisition, horizon snacks, which are the ones that will lead whitewave to be the Fastest Growing food company this year . The most powerful thing going on in our Business Today is our plant based foods business, our silk franchise and al po franchise in europe. I dont know if you know about our business in europe grew 24 . In the Conference Call people said its not sustainable but your cfo said it is. Its being driven by almond. Almond has been a powerful mover in the u. S. Business. Its now twothirds of the plant based category. Were just Getting Started in almond in europe. It is exploding. Were really excited about our european business. But plant base is huge. China, give us the problems of china versus what plant based can do. China is a company that has a huge emerging middle class, starting to eat a more western, calorie dense, nutritious diet. Theyve tried to push and are pushing an expansion of their dairy business, but its very expensive in china. Chinese are buying alfalfa in the Imperial Valley of california, putting it on ships and shipping it to china to feed to dairy cows. The chinese have a culture of plant based alternatives to dairy. Soy, emerging into these nut beverages, we think its just a huge opportunity and we have a great partner to take us to market. We should point out, we just hit 1900 on the s p. All right. I like it. I actually like that. You do . Most of our viewers are not short sellers. Right. You know, weve had quarters come in from whole foods and others, sprouts, that make investors wonder if the core urban demographic is tapped out in this category . Why is that not true . I think what youre seeing in the category actually is the movement of the category from being a specialty category to being mainstream and when that movement happens, the whole foods of the world, specialty retailers are sharing that is category with other people who want to participate in it. If you look at whats happened to the Brand Companies and the manufacturers, theyre benefiting from this broadening of the category into a mainstream movement. And i think you see a little bit of that dichotomy, but the overall categories i think you have to look at whats happening to the velocities and brands and thats a positive story. The part of the supermarket thats growing, is literally the only part, many are in decline is your categories, right . Our categories are very buoyant on the upside. The organic category grew 7 , we grew 8, the plant based beverage category grew 7 , or the coffee creamer category grew 7 , we grew 9. The plant based beverage category grew 20 , we grew 13 because were mixing from soy to almond. Extraordinarily healthy. Our package salads category up high teens in this latest quarter. Very strong. My refrigerator i didnt know was there, you stole the company, i think you did a great job buying it. Other acquisitions still to be done and are you competing against hain . Bumping against them on the acquisition trail . Not explicitly. Look, theres there is a limited universe of things to buy out there. Hain and whitewave are logical buyers for a lot of them. Im sure well see one another. But the great news is, theres a lot of die na missile in this space, lot of stuff happening. I think there will be things to buy that will be interesting to both of our companies and we both got great opportunities. This horizon brand, trusted brand, how is i know youre rolling out snacks not as fast as i thought you would, but looks like its taking . Its doing very well. Were on track with what our expectations were. Our intent, it is a trusted brand. It has a core demographic of consumers and where you see we built is where that core lives. So we want to establish a really strong core with our key consumers and our key demographic, key retailers and well move it into broader distribution. Also the longer term story of millennia millennials. The way Young Millennials are spending on traditional branded goods are not good for those companies. Are you on the positive edge of that story. I think we are on the positive edge of that story. People are being more thoughtful about what they eat. Theyre being more choiceful about what they eat. Theyre looking harder at ingredient statements. They want to eat in a way that feels more authentic and natural to them. And were fortunate that our businesses are and our brands are well positioned in that regard and organic, nongmo, fresher, those are all trends i think that play into that general theme. I promised not to steal this from prouds. Youre the depantry company. The way i look at it. Whitewave, stock is going higher. Thanks for having us. Well get stop trading with jim. Minutes away from davids exclusive with Ginni Rometty and the s p 0. 2 below 1900. Back in just a minute. Cars are driven by people. Theyre why we innovate. Theyre who we protect. Theyre why we make life less complicated. Its about people. We are volvo of sweden. With all the opinions about stocks out there, how do you know which ones to follow . The equity summary score consolidates the ratings of up to 10 independent Research Providers into a single score thats weighted based on how accurate theyve been in the past. Im Howard Spielberg of fidelity investments. The equity summary score is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Could mean less waiting for things like security backups and file downloads youd take that test, right . Well, what are you waiting for . You could literally be done with the test by now. Now you could have done it twice. This is awkward. Check your speed. See how fast your internet can be. Switch now and add voice and tv for 34. 90. Comcast business built for business. It took 170 days but the s p has traveled from 1800 to 1900 just crossing above that level a few moments ago and currently at 1899 and a third. Well keep our eye on that. Hitting 1900 for the very first time. Lets get cramer and stop trading. Im glad were pointing it out. It is different from the ethos. One for you keep on your radar screen. Concho resources. They priced 6. 5 million shares in the hole, 129, the stock is ramping, at 131. What is concho . Its a Permian Basin play. Anything in the permian is red hot. They have a pipe thats going to open up very soon, going to bring the oil to the gulf, going to get the full price of west texas concho. How strong is this move . Baker hughes downgraded by bernstein, glancing blow, not going down. Baker hughes has a lot of permian, lot of price cutting in the eagle ford, doesnt matter. Think the concho deal shows you the permian remains the single greatest growth story in America Today of all industry im including plant based foods. One that supports secondaries even though others around the market havent done well. Almost every secondary has fallen flat with the exception of zillow, hats off to spencer there. Concho is a sign that the permian is so underrated, this is going to be the greatest job creator of our lifetime i believe. Thats not hiyperbolhyperbole. A job creator of another one. Dont have a lot of jobs being created. Young men go to not odessa in europe where i hope we never to put our soldiers but odessa in texas. Jobs story, a housing story. Try buying a house in austin right now. You cant. Governor perry, had he was thanking me, says thank you for talking about the permian. I said no, its kind of your thing. I talk about it. We keep our eye on concho. Whats on mad tonight. Trinet helps Companies Save a lot of money. The only 2014 ipo im recommending. By the way its a its a private equity deal, okay, and i think that people should recognize that this company is one of the few that was valued well because the private equity guys did not try to rip you off. Does general atlantic, thats what they do. Do the new highs make you feel any less fearful about the momentum names that youve been wary on. I felt they had the bubble, deflated. Let them come up. Look i cover my short i dont need to go long. Theyre all tracing out. These are technically oriented. W pattern, which is bullish short term. So many other options that i can be in right now. Do i have to go in nine times sales when i have nine times earnings stock, no. American air selling six times earnings why do i have to be in shutter stock selling 60 times earnings or why do i have to be in service which i like but its good cash flow positive but this market likes earnings per share, dividends and buybacks. Covered a lot of ground this past hour. Jim cramer see you tonight. Dont forget fabers exclusive with ibm ceo Ginni Rometty on the other side of the break. Dont go away. When folks think about what they get from alaska, they think salmon and energy. But the energy bp produces up here creates Something Else as well jobs all over america. Engineering and innovation jobs. Advanced Safety Systems technology. Shipping and manufacturing. Across the United States, bp supports more than a quarter million jobs. When we set up operation in one part of the country, people in other parts go to work. Thats not a coincidence. Its one more part of our commitment to america. My golden years will not just be gold plated. I had 3 different 401 k s. E trade offers rollover options and a Retirement Planning calculator. Now i know when im going to retire. Not if. All stations come over to mithis is for real this time. Step seven point two one two. Verify and lock. Command is locked. Five seconds. Three, two, one. Standing by for capture. The most Innovative Software on the planet. Dragon is captured. Is connecting todays leading companies to places beyond it. Siemens. Answers. Welcome back to squawk on the street. Seconds away from march business inventories. Of course any big moves here could affect revisions to q1 gdp. Inventories up exactly as expected, up 0. 4. And last month, february, originally released up 0. 4, stands up 0. 5. My guess is this isnt going to have a huge impact on any q1 revisions but this mornings retail sales upgrade for march probably will have some upgrades despite the fact that the warm weather for april seemed to have kept shoppers away interest the stores. Carl, back to you. All right. Rick, thank you very much. Rick santelli. Ibm holding its Analyst Meeting in new york city and faber joins us now from one of ibms Digital Experience Labs with the chair and ceo Ginni Rometty. Take it away. Thanks very much. Were happy to be here in midtown manhattan at the Digital Experience Lab with Ginni Rometty the chairman and ceo first time and were very happy obviously to be here and have you. Thank you. Thank you, david. Glad to be here. First off, well, were here, obviously, in a Digital Experience Lab where you bring your customers, your clients and help them sort of figure out ideas and what they can do in terms of a lot of different things. I know were going to spend a lot of time talking about these new initiatives and this is not that but Growth Initiatives at this company during the course of this interview but when it comes to growth, there is certainly a question as to whether so many of the different things, data, cloud, mobile, watson, whether they are incremental or whether they are truly going to change the profile of this company. Which is it . Yeah. They are truly going to change the profile of this company. And if you think about it, actually theyre going to change the profile of this industry. As i like to think of it, the industry is reordering and its actually not any one of those, david. Its the convergence of these. So if you take cloud, if you take data, you take i would actually broaden it beyond mobile to something called engagement. Those are shifts that take in this convergence. It will reorder the industry and we will lead that. Lead it from the enterprise perspective and thats very different than saying just the consumer space. And thats where we have been very diligently focused on investing and lots of results to show for it. When you say leading it from the enterprise perspective, what does that mean . When you talk about results to show for it, tell our audience, tell your Investor Base and employees what youre talking about . When i say were going to lead in those three shifts, take data this morning. Ive said it was the worl as natural resource, it will be for the next century, and what i mean by that, big data, analytics, data is nothing unless you refine it. Kind of the analogy with a natural resource. I have to tell you, you know i spend tons of time with clients. Every ceo i talk to will tell you data will be the basis of their competitive advantage. Not the data alone. The analytics around it. One of our big strategies and we have he been working on it for years, around changing industries and professions with data and weve invested 30 billion in this area over time. Weve got over 30 acquisitions plus in this area. As i look at the results to show for it, just last year, we ended 2013 our Big Data Analytics business, its 16 billion right. If it was a Standalone Company its huge. 16 billion having grown 9 . This is all around a portfolio for data an lytics as well as maybe well talk about it, you know, watson, the really embodiment to future in this area. Thats one of the ideas for the enterprise. Right. 16 billion off about 100 billion revenue basis. Yeah. Not insignificant. No. Growing. The concern amongst investors is there are parts of the business that arent growing. Yeah. And that these important initiatives for you will take quite a long time and its still not quite certain that youre going to be able to achieve the growth rates there to offset what youre seeing in the rest of your wise okay. So first, i think its important to think about what we do is, i manage the company and we manage this company to move to high value. Over time. This is how you get to be 103 years old. Its not the first transition well make and wont be the last one we will make. So i think of areas thats important to think of the word mix and where were growing its important to grow in the right areas. So around data, 16 billion, up 9 , around cloud, in fact we ended last year at almost 4. 5 billion. High growth. Up 69 , over 50 in the First Quarter. In this whole area of engagement, social, mobile, security, enterprise clients this is going to hang in the balance, security security. So important to have growth in those areas. The other part of the portfolio, i call it our core franchises. Now, they stay forever young. I mean what our job is is to constantly innovate those. While they may not be they may actually be declining or slow growth, but what they do is increase, they absolutely increase in value over time. And thats important both for clients, its high value to clients, and its high value to our investors. I mean i talk to our investors all the time and often ill say, yes, how much of our revenue do you think is au annuity or reoccurring, right . People dont realize it. Its over 50 of our revenue, 60 of our profits. Thats a manifestation of having a high value business that continues to change. The absence of Revenue Growth at the company, do you believe that is cyclical or secular . Interesting point. There are parts of the business weve been challenged, parts are cyclical, parts are secular. As an example, something i call cyclical is something called our main frame piece of hardware. Its important for everyone to know, for ibm, less than 15 of the company is hardware actually. Many people still identify the company with that, im sure many people 85 is high value services, high value software. Right. In fact, way into the 21st software. We have moved this company. When i talk about things like the main frame like that, you take a look at that and that has been reinvented many different times. When i say cyclical challenge you asked me about it, very predictable cycle that has. Reinvented many times, runs all new work loads, 60 of the main frames out there run lin nux. Where we are right now is that its cycled before its next launch of a new product. I call that cyclical. By the way, i consider some of the Growth Markets around the world to be cyclical in challenge right now. That was a concern im sure these are things youre going to address tomorrow at the Analyst Meeting and get a lot of those questions and listening and reading the transcript of your First Quarter analyst call, the cfo handles that, questions about why is china slow, because other companies arent necessarily seeing that same kind of slowdown there or some of these other Growth Markets you refer to dont seem to be growingp. Is that a concern . Two things. I should say the Growth Markets my view for the long run they are the right investment. You have differences and some of our Growth Markets, middle east and africa, latin america, strong growth. China i would put in two words, reform and its really the intersection with our hardware business. Some of the challenges we talked about in hardware of which some are cyclical and some are secular, but if you look at china, two things. China doesnt resemble our profile there. Doesnt look like the rest of ibm. As i said less than 15 . Chinas majority hardware. Which is not atypical for a market thats really developing and as you put in big infrastructure to run banks, telco, thats what a focus is. But on the other hand, as you know, as they roll out some of their new reforms, were very concentrated in those big state owned enterprises. Our job move out into other industries as well. Software sales. An important part of this company. 29. 1 billion. But again, to this question of growth, which is a key one certainly for so many people, i believe the Software Business grew 1. 4 in 2013. Slower than Worldwide Software sales, slower than some of your Key Competitors as well. Do you believe that is cyclical or is that something that we can expect to only be a slow Growth Business . Oh, no, no. Look, you have to when you look at our Software Business like all of these big businesses, they contain two pieces of them. They have a piece that is very high growth into these Growth Initiatives, and then the part where we do Mission Critical work for clients. These core franchises which are reinvented, they are wonderful source of value, the clients profit, profit for us, to reinvest in the business and in software, you take a look, high double digit growth in some of these key growth areas between security, what were doing with cloud, and many of we often call it code word, its called branded middle ware. It was 5 growth as an example last quarter. That shows you that is, in fact, everything but operating systems. So very high growth, things like our software as a service, so its a blend. The Mission Critical and the new. Thats what happens in all of our businesses. Thats how this idea of continuous transformation thats how this company is going to reinvent, always reinvented itself, done it the past two decades and how well do it again. When you talk about reinvention, youve been running the company now since january of 2012. Yeah. Ibm has successfully reinvented itself any number of times, even 100 years ago when watson senior took over. Yes. Our founder, yeah. Its an enormous orggation. 430,000, 440,000 employees. What gives you the confidence you can actually do what you need to do in terms of to use your word reinvent . I have unwavering confidence. It is to me very clear and part of it is a very Clear Strategy and i have got a world of confidence in the people in this company. At its heart its an Innovation Company not a profit company, its an Innovation Company. They have reinvented before. Weve moved the talent, moved the investment and they reinvented again. So i am very clear about that. Absolute complete confidence. And you see it. Theres evidence. Like i said we were talking about the cloud growth, we talked about the an lytics all around mobile Social Security all those are there, plus the reinvention of the core franchises and at the same time weve placed longterm bets, africa and watson for the long term. I want to talk about both of those. Were going to take a break in a minute. On africa . Africa . Yeah. Political instability and africa go together. Why do you believe thats a prudent investment for ibm . Oh, boy. This is a great show in and of itself on africa. Africa is not one place. Its 54 countries. First mistake people make on africa. Weve been there since the 30s. I believe this is the next decade this decade approaching us is going to be the time youre going to see africa as the next frontier for us. Why do you believe that . Look at some of the fundamentals. Youve got believe it or not, over 400 companies over a billion dollars in size. You have a work force in the next 15 years will exceed chinas. If you take it middle class, bigger than indias already. Africa will be a place in countries two steps forward, one step back, but you do see government changes without political instability. So it is you see various different degrees, youll always still have issue but boy, i am bullish on the long term and today, we now sit in almost 24 not almost, we sit in 24 countries, started in four, went to eight up to 24 countries. We are across africa today. And high growth. High growth. High growth. In that region. Middle east and africa, high growth. Lot morse to talk about. Stay right there. Ginni rometty our guest and chairman and ceo of ibm. Well take a break and continue our conversation. Welcome back to squawk on the street. Im david faber here at midtown manhattan. The Digital Experience Lab, one of many ibm has around the world and joined again by the chairman and ceo of the company, i dont need to say nice to see you. Glad youre here. Lets continue to have our conversation. I would love to get to an investor focus on ibm. Because thats much of what our audience focuses on. Capital allocation. Yeah. For example, since i believe its 2000, the company has generated or used 170 billion in cash. Your Free Cash Flow generation is significant. But 108 billion of that was on net Share Repurchases, thats net, not including what you issue for compensation and the like. 59 billion on cap ex. Im sure youve heard this criticism, which is, this Company Manufacturers its earnings per share growth largely by significant buybacks of stock not through actual growth. I think its important this is an important topic to talk about. Our earnings per share to me reflect the strength of the Business Model we have. And i think the one number thats even more important is, in that same decade, we spent 133 billion on r and d, acquisitions and capital together. When we look at what to do and, in fact, ithink thats what my job is, Capital Allocation to the high value areas, im able to do r and d. My predecessors, myself, everybody has maintain, were at your heart an Innovation Company, you dont cut it back. Through good and bad times r and d, capital acquisitions, 133 billion and then we do dividends and Share Repurchase. And i tell you our investors they i mean, of course, any individual might have a debate of which dividend Share Repurchase but as we return value to them, those are important mechanisms and weve got a lot of longterm shareholders and thats what they look for us to do. Continue to move, manage it right for the long term, keep moving it to higher value, bought thats really what it is were doing with that investment and able as you said a second ago, i mean i look at even you look at last year net income, operating net income, 18 billion, Free Cash Flow of 15 billion, were able to do that, able to do the investments for today, the long run, the future and able to return values to shareholders. Last year 13. 9 billion in stock repurchases. To those who say why not invest more, do a bigger acquisition, spend more on r and d to make sure the Free Cash Flow generation youre relying on to continue to fuel that repurchase is there . If we needed more we would invest more in other areas. I feel very good that weve allocated capital to where it returns, right. So big acquisitions that dont return, big acquisitions that fail, thats not a good thing to do. And so i feel you dont do big acquisitions, you do smaller acquisitions. Several billions. It adds up. Ibm does not do the big acquisition, why is that . By design, actually. We have done in the last decade, 150 acquisitions. We are very much a an acquirer but clear about do them in strategic areas, intellectual property goes into our Global Distribution system so its efficient and we do them around a core of a strategy. I think youll find Many Companies fail when they try to acquire outside their core, take them into an entirely different space. Thats not what we do. We pick the spaces were going to be in, we invest in them and you feel in things around them with acquisitions and thats what we did as an example with cloud. When you and i were talking earlier about cloud, i feel very good about what weve done in one of the acquisitions we made there, one of the big ones last year something called soft layer, thats right. And, you know, that is to me a very wise. They were built bottom up, public cloud for the enterprise. Enterprises have different requirements. Security, privacy, be able to audit, placement of data, i mean the biggest things Big Companies care about on cloud, big in any serious enterprise cares about where the data is, and then you have to be able to connect the new data out in the cloud with data you have. So we made an investment there back to your question on capital. Big investment to buy soft layer and its been a success married with the investment we made in cloud. Lets talk about cloud because there is a perception out there, think of people think of, for example, amazon web services. Somewhat of a commodity business. Their constantly lowering price. How is ibm differentiated from that kind of a business that does not deliver it would seem the margin that youre talking about your Cloud Business being weve got again, very clear view of what cloud for the enterprise is and, in fact, i think as you and i are speaking were afownesing a big cloud another big cloud engagement with a Company Called ny source. Big energy provider. 600 million. Its a cloud that is their private cloud and our public cloud soft layer working together and theyre regulated yet we understand how to operate in that environment. Cloud for us and the difference between everyone out there, not knowing look if we were a Standalone Company it would be a big company at over 4. 4 billion last year, infrastructure as a service, platform as a service, software as a service, process as a service and theres value at every one of those. And good margin at every one of those. When those are all at steady stake. Back to the idea overall of sort of Capital Allocation and where you are, you know, at this point. Theres a youre going to continue to buyback a lot of stock it would seem, 8. 2 billion in the First Quarter of this year. That may have been front end loaded. We can expect that to be the case and the road map, the 2015 road map, you know, i guess some wonder, why are you sticking with those longterm targets . Why the need to do that in such a Dynamic World . Its important. I mean i think of that because of what it is, that road map, it is Capital Allocation plan and our investors appreciate the transparency, they appreciate we manage it for the long term and a part we didnt talk about, im equally diligent about our divestitures. Just in my time as ceo, ill have divested 6 billion. So if it was a maniacale focus on just Revenue Growth you wouldnt do that. This is about making the right portfolio changes. Remember, i do all those things and then we talk about our dividend and Share Repurchase. So you do the right r and d, right acquisitions, make the right portfolio changes, i could vest tours. Divestitures. Over the last decade by the time we finish up with the divestiture of our Industry Standard server business to lenovo, over the last decade well have divested over 18 billion. And you made a lot of acquisitions as well. Thats right. But thats all to the future for higher value. What is then what is more important . Revenue growth or margin growth . Its growth in the right places and then margin margin improvement always i define myself by my clients, what margin improvement is about, taking the portfolio to higher value over time. Its not about margin to take the same thing and just take profit out of it. This is because were constantly reinventing it and that is really an important part of our core franchises and when say toy people, while they may be slower in some cases declining growth, dont be confused. That doesnt mean theyre not doing both Mission Critical and increasingly valuable work as within those. They get changed for this new world. So thats why growth in the right places, margin improvement moved to high value, in the current core franchises. Are you done sort of with the portfolio after the divestiture is completed of the lowend server business to lenovo . Still waiting for Regulatory Approvals but not far off, is the portfolio where you want it to be . I would say i would always answer never because its continuous transformation. If i have learned anything in my decades with this company, its constantly changing this company for the future. Thats what im here for. Finally in the last minute we have, we can talk a little watson. Yeah. We were talking earlier i dont think i could take wasson in jeopardy. I did win in jeopardy so you know. You are commercializing that. Yes. Youre opening up a lab here in new york in the nottoodistant future employing a couple thousand people. Another billion dollars, yep. Why . Because weve made some Big Investments this year. Another billion in cloud data centers, billion in platform in cloud, billion in watson. Watson is the foundation for the next era because all this big data you need systems that learn that you dont have to program. And there is no doubt in my mind, watson will transform industries. We will contribute to transforming the what does that mean . We will change the way health care is done the way you do diagnosis and treatment of cancer, one of the big things we have been working on. Here in the city memorial kettering, md anderson, Cleveland Clinic, i mean just to name a few in the Health Care Area but we are really, really making progress and this is rolling out. So watson again, its going to help diagnose, pick the treatments. Think of it as an ability in natural language for any problem, form a hypothesis and test it and look for all the evidence in the world to prove it right or wrong. And thats in effect. Take that idea and apply it to lots of industries that will change industry and health care is one of the toughest ones weve picked on first to start with. I always say we are contributing to many great professionals in the world trying to do this and we are make something great progress. Not too far from here, the new York Genome Center we also just did a partnership with them, watson, genetic, to cure brain cancer. So much more to come. The right longterm bet. Finally tomorrow you will be in front of investors and analysts. I wonder weve talked about your different constituencies, youve mentioned clients, some would say, ibm seems to be focused more on pleasing their shareholders. Where do you put it . Oh, no. Look, the ability to please your shareholders comes because of what you do for clients. Above and beyond, not only are we an Innovation Company were in service of our clients. The only reason we exist, make no mistake, is our clients. As a result of that and moving them to higher value over time, we are able to satisfy our shareholders. And so two very, very important constituents, both of which i spend a lot of time with. Well, we appreciate your spending time with us today. Thank you. Thanks. Ginni rometty, chairman and ceo of ibm. That was a great interview. David faber with ibm. Ahead on the show, the ceo of opentable will join us live for another exclusive interview. Yelp announcing its launching its own online service, is opentable worried . Find out. Were back after this. Yelp,. Welcome back to squawk on the street. Its been a tough session so far for elizabeth arden. The Cosmetics Company losing 84 cents a share in its Third Quarter below analyst forecasts for a breakeven quarter. Sales also fell short of estimates in and the company is exploring strategic alternatives, the stock down 17 at 29. 52. Carl . That is a tough action for a company that may or may not be for sale down the road via the south korean congom rate lg. I guess the brittney spears brand perfumes arent selling. A lot of celebrity perfumes havent done well. We keep dancing around 1900 which is going to be a battleground at least in the near term. Lot of that dow component setting some new highs like a travelers and a mcdonalds but housing is interesting. You look at pulte among the Top Performing s p components, so some of the areas that have been really ignored by the market are getting a little bit of love this morning. The one everyone is trying to figure out is the retail sales report for the month of april. 0. 1 growth. A lot less than economists were looking for. Yet, higher revisions for march. You wonder how that really adds up for gdp in the next quarter and whether the optimism, the 4 we keep hearing from Steve Liesman and from some of the estimates on wall street can continue. Yet the stock market is that steady, steady relentless rise. What did i tell you about tuesdays . What did you tell us about tuesdays . I told you. What gave it away . The string of seven tuesdays in a row, is that what gave it away . It seems to be a trend. Tuesday best day of the week for equities. Friday, i think is the weakest. We have not mentioned saying they might back negative rates on Bank Deposits we sets a new tone in europe. It does. Its more of the verbal intervention for the European Central bank they might launch qe at some point in the first. When i last looked at europe the earnings werent on fire. You look at air bus and a stronger underpinning of worldwide markets. Lets get some are we getting inventories at 10 30 . A tease. Well coming up on the show, yelp certainly biting back at its competition launching a free reservation service. Are the competitors worried . The ceo of Opentable Joins us live with his take on that and much more when squawk on the street returns. Cars are driven by people. Theyre why we innovate. Theyre who we protect. Theyre why we make life less complicated. Its about people. We are volvo of sweden. Beautiful day in baltimore where most people probably know that geico could save them money on car insurance, right . You see the thing is geico, well, could help them save on boat insurance too. Hey okay. Im ready to come in now. Hello . Im trying my best. Seriously, im. Im serious. Request to come ashore. Geico. Saving people money on more than just car insurance. [ tires screech ] chewleys finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. Get the most extensive charting wherever you are with the mobile trader app from td ameritrade. Wherever you are with the mobile trader app trwith secure wifie for your business. It also comes with public wifi for your customers. Not so with internet from the phone company. I would email the phone company to inquire as to why they have shortchanged these customers. But that would require wifi. Switch to comcast Business Internet and get two Wifi Networks included. Comcast business built for business. About an hour into trading some of the stories were talking about, 7 33 on the west coast. Keurig Green Mountain one of the biggest gainers on the s p, up 10 . Cocacola raising its stake in the company from 10 to 16 . Different story for whirlpool, biggest s p loser down 3. 5. Government data showing a decline in Appliance Store sales for april. Dow components a 3m, travelers hitting new alltime highs. Opentable has long been the leader in online reservations but yelp launching a shot at its competition, launching its free reservation service. Opentable not sitting still either. The company says its now successfully piloted its mobile Payment System in San Francisco that will enable you to pay your bill by phone while sitting at the table and will roll that out to customers in 20 key city markets. Pay with opentable is core to its strategy of offering diners and Restaurant Owners a richer experience to fend off that competition and here in a cnbc exclusive is matt roberts the ceo of opentable. Welcome back to the program . Good to be back on, simon. Youve finally cracked it then, this Payment System that you are piloting in San Francisco . Yeah. Its going great. The diners love it and the restaurants love it too. Its a better way to settle the check at the end of the meal. So the and weve discussed this, this has been a Long Time Coming before the rollout. One of the Major Concerns is whether the server realized that actually people had paid their bill. You seem to have got over that by continually transmitting to the restaurant that this person may pay by their phone when they walk into the restaurant, when the server first logs in. Talk me through the changes youve made . Sure. Its about overcommunicating to the team thats delivering Great Service in the restaurant. And so by doing so, they feel very comfortable with this solution. And as a result, the diner feels great too. So its all about making sure that atmosphere is set for the product and the experience to be successful. Now i know everybody is itching to talk about the competition but before we do that lets lay the table on what youre offering now to customers. Youve got this next generation i. T. Architecture youre offering i dont know what it is 32,000 restaurants you have worldwide. Talk me through what that does for the restaurant owner, what the analytics are and the difference it can make to the business . Yeah. Thank you. Its a guest center which is our new next generation cloud based solution. What it does both its a much more elegantly designed solution but it also delivers insights to the restaurant. It actually helps them to understand things like, for example, information about guests that have never even been in the restaurant before. So they can know their preferences, they can know whether or not theyre glutenfree, for example, or if they prefer booths and deliver that amazing hospitality for Restaurant Guests that have never been at their property before. Or as i understand it to say look, your sales seem a bit soft on a wednesday, do you want a promotion . Thats right. So it can, based on capacity, it can really trigger and help restaurants drive more demand and fill seats. What about this idea that yelp is now going to let users be able to make restaurant reservations on its website . That is exactly why people go to opentable. Do you feel threatened . No. You know we have yelp as a partner, we have over 600 different part fers and in agate to remind you they are 5 to 10 of our Business Today. The brand that weve established in the position that weve established as the leader is really because we deliver results for our restaurant customers. And we are the best experience and offer the broadest selection of the best availability at the best restaurants globally. I guess it sounds like youre not worried. Youve built the scale you feel you can remain competitive when other services and sites like yelp or groupon or whoever i allows you to make the restaurant reservation. Why do you have to come to opentable . Its the best solution. Offers the best availability at the market level. No matter which market youre in. Weve done a lot of work over 15 years. Were not worried. Well always have competition and continue to have competition. Come on, matt. Come on. I mean yelp is offering as i understand it, offering free to restaurants. The Restaurant Owners that are basically your clients. Free to the restaurants if they claim their yelp page. You are charging 1300 for the hardware, 200 a month to be a member a dollar for each reservation. Do you think the structure of what you charge the restaurants will change . We also have a free solution for restaurants from a subscription perspective. Weve had that for five years. They only pay when we deliver and we deliver. So the reality is, the restaurants continue to see amazing return on investment from us if you look at our attrition rate over time its remarkably low because we add tremendous value for a restaurant customers. Time and time again. Let me ask you finally about the stock price. Youve been one of the momentum plays, hit badly, youre 19, 20 down from where you were at the beginning of november. Youre worth about 1. 5 billion. Youre kind of squarely now in the takeout zone potentially. People talk all the time about yelp because of the richness of the local data it has. You also have a rich arguably a rich local Data Platform you could, you know, somebody else would be interested in. What is your strategy on negotiating with people to maximize shareholder value in the event that youre taken over . Well, we dont comment on any speculations around m a. We are focused on creating an amazing business. Youve pointed out some of the attributes of that business. Were mostly focused on this transition from a Transaction Company to an experience company some of the things you talked about at the top of the segment. Matt, good to see you again. Great to see you too. Are we going to be able to pay by phone in new york, do you think, in the second half of the year . Is it coming here . I would say new york is a safe bet to be one of the 20 markets we would be rolling out by the end of the year. Interesting. Matthew roberts, thank you for joining us. The ceo of opentable. Well, speaking of restaurant, cnbc is about to get into the food business. So to speak. Launching a new reality series this summer to help find americas next Generation Food super stars. Famed restaurateur and tv personality Joe Bastianich and celebrity chef tim love will vie against each other to discover and invest their own money in food ideas that could make them millions. Have a look. I love the consistency of this. I love the flavor, the acidity. Full on palate of salt. The flavor is awesome. I would eat the bowl. This is the best of the day. I love the greens in it, the crab in it, the seafood brininess. One hand the food what we experienced and ate, on the other hand the three guys and between those two realities Investment Decision will be made. And restaurateur Joe Bastianich joins us now post nine, part owner of house b and B Hospitality Group along with chef mario batali is behind restaurants including the rapidly expanding brand. Thank you for having me. We love food shows but this is a business show. Its funny, more of a business show kind of in the world of food restaurants and wine. But we really were looking for entrepreneurs, invest ing our money, the deals are real. Its hard driving business. People find the business of restaurants interesting and we delve into that. What makes a great restaurant, how do you invest, why do you make money, why do you use opentable, like all the questions that we talk about. Its notoriously a tough business, hard to make it and survive in the restaurant business. I think its appealing to a lot of people because they think they can do it. Something very sexy about it. Everything everyone thinks theyre a good host or cook and think that translates into making money in restaurants which is not always the case. Were casting all over the country people who are have great ideas and really vetting out who the people are who can really make money and investing in those people. When you think what makes or breaks a restaurant, is it the concept menu, the real estate, the market . I think its the ability to create margin. I think because thats what sustains a restaurant. I think thats what people get lost. Restaurants like every open bars and sell alcohol. Thats not true. Even that thats a misnomer as well. Selling food and wine and liquor together is a great combination. Theres margin in everything. You can make as much money in food as you can in booze too. I think that its counterintuitive to some people. They feel hospitality means dont make money, something you have to be less profitable if youre going to be hospitable. Margin sustains the restaurant, allows you to reinvest in the customer, create new customers and its a selffulfilling prophecy. You have to have margins. Lack of margin you get shut down. Can i draw you into the conversation about opentable and reservations. I have my opinions. What are they . Where do you stand . Im the one writing the check. Of course opentable created Human Behavior so people go to their app for opentable to find a reservation. At the end of the day were writing big checks to opentable, big, big checks bauer theyre driving a you like the yelp idea. Can you reinvigorate your website so people come to your website first. Not only if you come to my website we give you good content, find out more about the brand we can facilitate your restaurant as well. Opentable does a great thing, created a human act of Human Behavior about reservations. That is a powerful thing. They have to be careful, yes, yelp getting into the game, theres several other players out there, i think that theyre expensive for what they are. They provide a Great Service. 2 a reservation, start adding it up youre writing 5 and six digit checks at the end of the month. Sara mentioned italy. When you a phenomena like that do you regret not swinging harder earlier on, ex panneding faster . I think there are 28 throughout the world right now. We will be opening up in the Freedom Tower next year. San paolo brazil, mexico city, los angeles. And london ultimately. The expansion is happening about as fast as we can. Generally very big. 40 to 80,000 square feet, 400 to 800 employees. So crowded. It takes its a corporate culture, takes time to grow the people and create excellent food and hospitality. Nutella bar in manhattan. Now new york has chicago has nothing on new york because we have our own nutella bar. I waited in that line in chicago. Good to see you. Congrats. Hope you tune in july for the new show. Going to be exciting. Joe bastianich. Cnbcs brand new restaurant reality series premiers as joe said in july. Stay tuned for more information on that. When we come back the ceo of pfizer making his case for that astrazeneca takeover in front of the uk parliament. Hear what he had to say about the future of the deal. When we come back. Mine was earned in korea in 1953. Afghanistan, in 2009. Orbiting the moon in 1971. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. E financial noise financial noise financial noise financial noise the numbers are impressive. Over 400,000 new private sector jobs. Making new york state number two in the nation in new private sector job creation. With 10 Regional Development strategies to fit your business needs. And now its even better because theyve introduced startup new york. With the state creating dozens of taxfree zones where businesses pay no taxes for ten years. Become the next business to discover the new new york. [ male announcer ] see if your business qualifies. Welcome back to squawk on the street. Im Mary Thompson out in new york. We are here at the Morgan Stanley facilities where the companys annual meeting concluded about a half hour ago. Speaking to shareholders earlier the companys Ceo James Gorman called 2013 a year of significant progress for Morgan Stanley but said more work needs to be done on the companys return on equity or roe, a measure of profitability. Morgan stanleys roe has continually lagged some of its rivals, most notably goldman sachs. Gorman said the company is focused on this. Now, speaking to reporters after the meeting, gorman was asked about the companys deal to sell part of its commodities business to russias rossnef and asked if the escalating tensions with russia would derail that deal. He said the companies are still working toward completing it and also said that he didnt have any comment on potential criminal charges against Credit Suisse and whether or not that would be disruptive to other financial firms. Lastly he said the companys fixed Trading Volume remains low. It was a stand outfor the company in the prior quarter. All of the directors were reelected, company backed proposals were approved, shareholder backed proposal was defeated. Quiet meeting. It shows maybe were getting farther away from the financial crisis. Not one shareholder asked a question. Back to you. Thats interesting. Thanks so much, mary. Mary thompson. Meantime pfizers ceo ian read getting grilled at a hearing in the uk over the companys proposed takeover of astrazeneca. Our meg has some of the highlights there. Hey, carl. How are you doing . Listening to this grilling of the pfizer ceo ian read this morning, the uk package was very concerned about pfizers commitment to science and jobs in the uk. Pressing him very hard to answer some questions without equivocating and he did end up saying that the combined r and d spend potential of pfizer astrazeneca combined company would be lower than it is now. Not giving specific numbers there, but he also said that pfizer takes issues of consolidation very seriously. Lets be very, very firm on this issue. We dont make decisions lightly about changing assets or closing assets or asking people to leave the company. We understand the impact both on the company and the people leaving. What we do is try to create a company that can be successful and succeed and get products to patients. Now astrazenecas ceo also spoke today, stressing to the panel that his concern is disruption to astrazenecas work developing drugs, that a merger like this would bring. He said in an interview today with cnbc in london he wants more details on how a combined company would look. We have a fiduciary duty and responsibility to our shareholders, and we will, of course, consider any offer that is made to us, that reflects the value that we believe exists here, reflect the value of the company. But also gives us a better understanding of how we would implement this new company, how we would be able to protect the projects that are so critical to the future of this company. And, of course, the question now coming out of the Panel Hearing today is does pfizer up its bid and provide a third offer higher than the 106 billion its already put on the table . Simon in. Yeah, worth mentioning, of course, the pfizer is scottish. Thank you very much for that. Up next on the program, robots that are able to fire their own weapons and communicate with facial expressions. This could be the future of the military. Well be right back. All stations come over to mission a for a final go. This is for real this time. Step seven point two one two. Verify and lock. Command is locked. Five seconds. Three, two, one. Standing by for capture. The most Innovative Software on the planet. Dragon is captured. Is connecting todays leading companies to places beyond it. Siemens. Answers. That corporate trial by fire when every slacker gets his due. And yet, theres someone around the office who hasnt had a Performance Review in a while. Someone whose poor performance is slowing down the entire organization. Im looking at you phone company dsl. Check your speed. See how fast your internet can be. Switch now and add voice and tv for 34. 90. Comcast business built for business. Ever wonder what our nations military will look like in 25 years . Well, just picture less manpower and more robots. Jane wells is live in orlando at the association for unmanned Vehicle Systems show with more on that story. Jane . Reporter hey, sarah. Well, it would be more of these. These are harmonic drive gear reducers. They reduce backlash and increase torque. This is for unmanned aircraft. These are for robot. Even though this is the show for unmanned aircraft, over the next 25 years, what about on the ground, the military and first responders, will buy more robots . And, yet, some will be armed and to an extent think for themselves. In 25 years, in defense, it will be less is more. Fewer men. More robots. I think youll see many of the highrisk missions done by autonomous platforms. Reporter irobot is most famous for the rumba vacuum. This whole arm is a robot in and of itself. You can unbolt this, put it on the back of a truck or something, and would you have a robotic arm. Reporter in the future, expect robots to handle more missions, firefighting, perimeter security. The technology they have is better than the google core. Reporter this is the first look. Its surrounded by cameras. Theyre getting smaller and durable. This weighs five pounds. And you can throw it. Even if it lands on its top, you can turn it right back over and itll go back to work. The army recently held a test for prototype robots shooting weapons. Currently, robots need constant supervision. Some day, they may not. I would like to see the relationship between a soldier and a robot be much like a hunter and his bird dog where theres a learning relationship between the two members of the team and that the robot will respond to a soldiers hand and arm signals and his behaviors in the way that hunting dogs do with their masters today. So that you augment the soldier and the soldiers not having to control the robot. He is enabled and supported by the robot. And so, some facialtype eck preciouses expressions or emotion sal expressions from the robot are helpful for understanding and communication between the human sand the machine. By the same token, you dont want something the public is afraid of. That is will come with trust and reliability. Reporter not everybody is on board. Google, which owns boston dynamics, a major competitor for defense robots, now google saying it will not accept military funding for the competitions and will instead selffund. Back on fast money with the latest on drones. By the way, a word they dont like here. Cant stop thinking of kyle white getting the medal of honor for the ambush in 07, taking troops out of the harms way is a big part of the story. Reporter absolutely. Still ahead, the ceo of etsy will joins. Are they plaining an ipo soon . Were moving our company to new york state. The numbers are impressive. Over 400,000 new private sector jobs. Making new york state number two in the nation in new private sector job creation. With 10 Regional Development strategies to fit your business needs. And now its even better because theyve introduced startup new york. With the state creating dozens of taxfree zones where businesses pay no taxes for ten years. Become the next business to discover the new new york. [ male announcer ] see if your business qualifies. Sfx car unlock beep. Become the next business to discover the new new york. Vo davids heart attack didnt come with a warning. Today his doctor has him on a bayer aspirin regimen to help reduce the risk of another one. If youve had a heart attack be sure to talk to your doctor before you begin an aspirin regimen. When folks think about wthey think salmon and energy. But the energy bp produces up here creates Something Else as well jobs all over america. Engineering and innovation jobs. Advanced Safety Systems technology. Shipping and manufacturing. Across the United States, bp supports more than a quarter million jobs. When we set up operation in one part of the country, people in other parts go to work. Thats not a coincidence. Its one more part of our commitment to america. Good tuesday morning. 11 00 a. M. On the east coast, 8 00 a. M. Out west. Heres what were watching for you. Ibm ceo just set down with us for a cnbc exclusive, her first interview since taking over the tech giant. Youll want to hear what she had to say about growth and the surprising foreign market shes bullish on. Plus, if you dont like what you see about yourself on google, you can finally do something about it, at least if you live in europe. Well go behind a controversial new ruling that google says is, quote, tantamount to censorship. Fire tv, apple tv, roku, google, were reviewing them all. The report card coming up. Today, Online Marketplace etsy announcing it will create 300 new jobs and open a brandnew headquarters right here in new york city. The ceo will tell us what expansion means for the startup a little later on this hour. Joining us this morning, henry, editor and ceo of Business Insider along with our own jon fortt talking all things tech. Good morning. Good morning. We want to look at the markets. What a farrow range weve been in. As you know, s p 1,900, destined to be the story of the morning. We did get there. But just barely. And this will be about ground for the afternoon as to whether or not the bulls can carry us through to higher levels. But it took 170 days to go from 1,800 to 1,900 and the question is, whats next . Theres some speculation yesterday that risk was back on as some of the momentum names moved to the upside. Russell 2000 was up better than 2 , its biggest move in over two months. Today, thats flatlining. It looks like there was short cutting. Right. Well watch the dow, as well. Speaking of which, ibm, the tech giant, hoping its annual Shareholder Meeting in new york city tomorrow. Ahead of that, the new ceo set down with our own david faber for her firstever television interview. David is live at one of the Digital Experience Labs in new york city with the highlights. Good morning again, david. Reporter good morning, carl. Thats right. Of course, we are, as you said, at the Digital Experience Lab in mistown, and we did speak to jenny, since she took over in january 2012. She spent the first year really focused on clients but is now perhaps starting to communicate more broadly with the shareholder and Investor Base as well as, of course, customers and employees. Dont forget when you have over 430,000 employees, communication can be important there. In terms of what shes doing at ibm, a company that had actually 8 less operating income, pretax, last year than the year prior, and has not had Revenue Growth, well, shes claiming to transform the company, focusing on higher margins and potentially higherGrowth Businesses as they focus on their core constituency, the enterprise. If you take cloud, if you take data ive actually broadened it beyond mobile to something called engagement, those are shifts that taken in total, this convergence, it will reorder the industry, and we will lead that. Well lead it from enterprise perspective, and thats very different than saying consumer space. Thats where we had been very diligently focused on investing and lots of results to show for it. Reporter and thats what youre going to be probably hearing more about tomorrow at the companys investor or analysts day in terms of cloud and the investments theyve made there. And data, which is now a 16 billion business. Of course, software continues to be a very important business for the company, as well. And there, the growth rate is perhaps not as much as some would certainly hope for. One interesting well, many interesting things came out of the interview, of course, but perhaps one somewhat of a surprise was that ibm, which is clearly a Global Company in fact, perhaps one of the best multinationals in many ways, is focused very heavily on the continent of africa. Youve got, believe it or not, over 400 companies, over 1 billion in size. Youve got a workforce that in the next 15 years will exceed chinas. If you take it middle class, bigger than indias already. And to your point, i mean, africa will be a place in countries, one step forward, two steps back, but you see government changes without political instability. So you see a various you know, in different degrees, youll always still have issues, but boy, im bullish on the long term. Of course, the larger question is how do you transform this company in terms of focusing on the areas you know key to your growth, at the same time keeping the Investor Base happy, making the right investments. Of course, theyve spent a great deal of money, as many investors will tell you, on buying back stocks. So maintaining an eps growth rate, even though the top line has not been growing. 13. 9 billion last year, 8. 2 billion in the First Quarter of this year, although that was frontend loaded. Those are some of the things shes dealing with, of course, now into her, what, almost two and a half years, into her tenure. Back to you, carl. David, great stuff today. David faber at midtown manhattan. And back here, henry, you cover tech, as you know, and its one of the those lower. What do you make of what she told david . Theres no quick fixes here. Over 50yearold company. Been transforming for a long time. This is a huge shift in enterprise i. T. To the cloud. You cant wave a magic wand, suddenly transform it into a drop box. Theyre doing exactly the right thing. They are buying the new stuff. Transitioning out of low margin businesses. You can grow earnings per share while shrinking the company, if you use your cash right, you sell off pieces that arent working. And keep buying back. That stock, john, which some estimates, i think, they said it would be a third of the growth rate over the past few years. Yeah, im not so sure yet shes doing the right thing. I think the fundamental question is has ibm software and Services Model run out of steam in a similar way that the hardware model of Revenue Growth and cash flow ran out for steam kind of the last generation . They did the right then in kind of dumping off the p. C. Business to will he nova back then. Do they need to do something more drastic than dumping off server hardware . Do they need to acquire something . She talks about, and rightly so, big data and analytics being an important area. But cloud, too, the margins just arent there in all of cloud. So i wonder how a company ibms size moves to the cloud in a growing way that actually maintains the margins, that investors have come to expect . Is that even possible . Well, i thats the key. Is it even possible . Especially given the prices in the market. You cant go out and buy companies for tens of billions of dollars. People arent going to like that either. I know one part of interview where she said growth will come is watson. Im interested, david, when you think about how much watson has struggled to get off the ground, she had hoped it would be a 10 billion revenue business. It only had about 100 million as of october. Im wondering if you and investors think maybe thats something that wont bear any fruit for some time . Well, the way ibm sees it, and certainly you heard a bit of it from ginni, as well, rometti, is that it will be that kind of a significant business, that its growth is just beginning, the investment they made as much as 1 bhl, kayla. She referenced one particular use for watson and the Artificial Intelligence system that it is, which is trying to help deal with and cure brain cancer. Fairly important. How is that possible . Well, in nakt, you know, if you can scan the dna and figure out the different drugs that may be of use, watson actually can boil that down to perhaps the two out of the 80 that might really work and be effective. So they are just starting, they would say, to really commercialize a watson after, of course, we know its success and jeopard jeopardy. Its one of a number of growth platforms they hope to transform the company. Weve seen these things in the past. Ibm has been successful in doing this under different leadership. Of course, they had a neardeath experience before lou came in, and now we will see, trying to keep the shareholders happy, by using a good deal of the Free Cash Flow to buy back stock and maintain a growth rate when you dont have it at the top line. In watson, i think we see the danger in marketing a technology before you figured out how to sell it. We see google doing this all the time, like with google glass. So watson is kind of their google glass. Everybody remembers jeopardy. That was years ago. Here we are years later, and ibm cant figure out how to sell it. A little bit of back to basics for them. I would consider david faber an expert in knowing whos good at jeopardy. As he mentioned, to ginni, yes, im actually that impressed. Next up, according to the european union, google is responsible for limnks to old websites. The case is based on a complaint by a man in spain who argued a note on his repossessed home damaged his reputation. Were still trying to figure out what the implications are with this. Well, i think this is actually a reasonable idea for the e. U. To pursue. Though it seems crazy to us in this digital age that anything should be forgotten, i mean, who hasnt wished that, you know, that teenage relatives photo that they posted on facebook could disappear . It used to be that things kind of aged out, and there are privacy implications Going Forward that people are increasingly concerned about, about Companies Like google keeping this information forever. This is probably a signal to all kinds of Tech Companies to architect in some kind of forgetting feature, whether or not they have to turn it on is a different question. But kind of like security, maybe you want to build that now. Because if this becomes a push later on, youre not going to be able to pull it back. After yesterdays mute twitter function, now were moving in the direction of be quiet, go away. Be forgotten. What does that mean, henry . Its a small issue for the company as a whole. You have to keep it in perspective. It could create a lot of logistical and administrative headaches. The question is whether google should be responsible for just pointing at stuff thats already out there, or whether the site thats hosting it should be responsible. It does beg the question of whether there should be an appropriate timeframe. You think about a credit score, Bad Information stays on your credit score for seven years. Should there be a time after which this information all those embarrassing things disappear . Right. In bankruptcy and credit scores, we have this kind of sense that after a while, you should be off the hook for things. I think you see this movement in apps like snapchat, like secret, like whisper, people are kind of going back to this idea of ephemerality, and the e. U. Has created problems for Tech Companies, who thought they had logic on their side microsoft so companies have to be careful about not wanting companies to remember everything about us forever. A great point. Finally, a potential shakeup in the tv business. A deal close to 50 billion. It could be completed in the next few weeks and comes not long after comcast proposed 45 billion deal for time warner cable. Shares of directv seeing a nice gain on news of a potential d l deal. At t is trading to the downside. Thereve been so many reports on it, henry. People assume its done, and theyre just working through the pricing structure. Well, stepping back, again, whats going on here is just fascinating. You have the tech tonic plates that are crashing together with the internet, satellite, cable, the telecom operators, wireless operators, were headed toward a world where we can see it, 20, 30 years down the road, where its just i. P. You have one data feed and everything comes in on that. But getting from here to there is going to be quite exciting. At t does not have a national tv footprint, so you could make the argument theyre trying to get that. Andrew ross sorkin said it might be a defensive move to get regulators to throw out the time Warner Comcast deal. If theyre faced with two mega mergers, could they a denial of service attack. I like it. I think part of whats happening here is you see cable players, including comcast and charter, they want to move into the wireless data space. They want access to that bucket of money that people are paying. And at t, which owns a piece a big piece of the wireless data market, wants to move into content at the same time, because theres the die that all the stuff will end up on one bill. What i think were waiting for is tvs iphone moment. If the plates will shift in that area with the tv content providers, content providers, there has to be some move in the settop box that upends it. Weve seen interesting things that the content providers are doing in settop boxes. I dont think were quite at the iphone moment yet, but maybe and it brings to mind how can regulators possibly keep up . We have these these papers from the fcc on paid prioritization and whether or not theyd want to consider this deal and and who controls what, and what is a utility, and what isnt, oh, youre an old company, a different set of regulators. Just all colliding, tremendously disruptive. What i think probably renders this entire argument moot is innovation. If somebody comes up with the box that everybodys got to have that delivers an experience that people are willing to pay a premium for, well, it will kind of drag all the regulators and the consumers and the Big Companies along. Thats what the iphone did after all. And we havent had it. The great news for the consumers is its happening. None of the folks have complete control. All of the dams are leaking. Consumers are getting what they want, its just a question of how we get it where its really available. Faster, though. Always faster. Jon, thanks. Henry, thanks. Thank you. When we come back, one is seven foot, one a fourtime nba champion, a former cop, and rap artist. The other, son of a homebuilder, the one and only Shaquille Oneal talks about our own bob pisani in a moment. First, Rick Santelli, what are you watching today . Two numbers. Anybody know what they are . Ill tell you and see if you can guess. Minus 120. And minus 74. And these numbers should mean something to you, especially if you worry about the direction of Interest Rates. Come back in about five minutes. Find out what those numbers are. E question can you keep your lifestyle in retirement . I dont want to think about the alternative. I dont even know how to answer that. I mean, no one knows how long their money is going to last. I try not to worry, but you worry. What happens when your paychecks stop . Because everyone has retirement questions. Ameriprise created the exclusive confident retirement approach. To get the real answers you need. Start building your confident retirement today. Cozy or cool . Meow or woof . Exactly the way you want it. Until boom, its bedtime your mattress is a battleground of thwarted desire. Enter the sleep number bed, designed to let couples sleep together in individualized comfort. Hes the softy. His sleep number setting is 35. Youre the rock, at 60. And snoring . Sleep numbers even got an adjustment for that. You can only find sleep number at a sleep number store. and right now all beds are on sale. Yep, all beds, starting at just 649. 99. Know better sleep with sleep number. 1,898 right now on the s p. The health care is on the move. Sheila has more on that. Hey there, carl. A good day for Health Care Stocks led by mckesson. It posted betterthanexpected Fourth Quarter earnings and sales helped by stronger results of Drug Distribution and also Technology Solutions operations division. Take a look at allergan. The stock is also in the green. Valeant saying it will improve its 47 billion takeover offer, and this is just a day after allergan rejected the deal. So, kayla, that backandforth will continue. All right, thank you so much, sheila. Today is the annual charity day where celebrities make trades and the benefits go to charities. Bob, youre joined by a special guest who last time he was on cnbc sparked a big rally in the markets. Well send it over to you. He did. Were hopeful it might happen again today. Thanks very much. Everybodys giving their commissions to charity today, here at btig, a way of giving back to the community. Over 60 celebrities from all walks of life actors, models, sports celebrities including this guy, Shaquille Oneal, fourtime nba winner and representing a charity, i didnt know this, youre telling me your mother has a charity. Yeah, she has what charity called odessa qualities of life fund, providing scholarships for young ladies who want to be nurses. My grandmother was a nurse before she wassed away in 1996. What does the money do for the charity, in the area it works in . It helps provide funding for scholarships so the young females can go to school. Since 1996, weve sent over 100 young ladies to a school for fouryear scholarships, so that could be fulltime nurses. Thats a wonderful opportunity. I have to ask about the brand Shaquille Oneal. Youre one of the first sports celebrities to make a business out of that brand. You have a mens line of clothing at macys. You made some very wise decis n decisions. During the break, he was one of the earliest investors of google. How do you build that brand name, and what advice for younger sports celebrities . First rule, i tell them, you know, be true to yourself. To me, image is reality. You see a lot of guys try to create their image and they can never really stand up. The shaq brand is all about humor. Im a humorist, a funny guy, im a likable guy. Being an early investor in google was you know, i wish i could sit up here, the expert, i was at the right place, at the right time, a guy was having a conversation with me about this Company Called google, what he thought it would be in the future. Im considered a geek. I consider myself a geek. Do you still own that google stock . Yes, i do. Its worth a lot. Glad you held onto it, arent you . Yes, yes. Let me move on. I have to ask you about the big issue of the moment, and Donald Sterlings apology, last night, i presume you saw it. What did you think of it . Did you think it was a sincere apology . We saw it. Its funny how you apologize and then go on another rant. You know, the guys 81 years old. Hes probably stuck in his ways. This is nothing new. You know, theres document, theres proof hes had this kind of problem before. You know, i dont think a lot of people believe his apology was sincere. Well, he made an apology, and then turned around and criticized a friend of yours, magic johnson. What did you think of the criticism . I thought it was unfair. I thought it was unnecessary. I thought it didnt have to do with anything thats going on. You know, america, the whole world, heard what he said, so we know we really know his true side. I hope that the other nba owners realize what we realize, that theres no room for this in the game of basketball. Well, how big of a problem is this for the nba . Are players happy with the response from the nba . Nobody will be fully happy until the guy sells the team. If hes still the owner of the team, you know, and hearing his wife wants half of the team, and theyre going to fight, no one will be happy until he sells the team. Do you think his wife should be required to devest her ownership . Yes, the whole family, get rid of the business. For them, its a good business. They bought it for 12, its worth 700, 800. They certainly wont lose any money. Let me ask you about the playoffs. In the middle of it. We have a lot of interesting teams going on. Whos your pick . Going with in the finals, coming out of the west, san antonio spurs, coming out of the east, miami heat. An incredible jump shot. Mark cuban will be here. Dallas mavericks, of course, a different team. But san antonio a different team. Yes. Well be here all afternoon. C. C. Sabathia, eli manning will be here, we have 50, 60 celebrities donating their time and their money to btig charity day. Shaquille oneal, thanks. Nice to see you again. Gracious throughout the years. Fourtime nba champion, Shaquille Oneal. Guys, back to you. Great stuff, bob. Great charity that btig does. When we come back, are you in the market for a settop box . If so, which one should you spend your money on . Dont worry, the one and only Walt Mossberg will review them all. Plus, etsy announcing plans for a major expansion in new york, along with 300 new jobs over the next five years. Does this mean the Online Marketplace is on its way to going public . Well ask the ceo a little later on this hour. Predicting the future is a pretty difficult thing to do. But, manufacturing in the United States means advanced technology. We learned that Technology Allows us to be craft oriented. No ones losing their job. Theres no beer robot that has suddenly chased them out. The technology is actually creating new jobs. Siemens designed and built the right tools and resources to get the job done. You wouldnt have it she any other way. Our toes. 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If you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about experiencing cialis for daily use and a free 30tablet trial. Welcome back to squawk on the street. Were watching shares of microsoft. That stock is trading higher after the Company Announced it will now offer xbox one without kinnect. And it will offer owners access to entertainment apps whether or not the subscribers have the gold membership. Microsoft shares are trading up about 1. 5 on the news. Netflix is also higher, up by actually, now,. 8 . Carl . Sheila, thank you very much. Lets get to the cme group and check in with Rick Santelli and get the ssantelli exchange hey, rick. Hi, carl. This is a fascinating time to be a follower of markets, of course, especially Interest Rates. And consider this morning retail sales we had some positive revisions of march, which happens, to be, of course, First Quarter. We had a very weak april. Whether it was better in april than it was in march, i guess we can now say good weather kept people from shopping. That was kind of the humor on the Trading Floor. But theres truth to that. Obviously, weather really has been an issue. Now, is it an issue for those trying to find the brightest Silver Linings in the economy and theres nothing wrong with that . But it really is about keeping it real. Theres another area. Today, ive heard several people, not only on our channel but also in the written press and on the blogs, talk about stocks high, Interest Rates low. Hey, its a wonderful world. But, okay, stocks high. Interest rates low. Its great. If its real if its real okay, lets look at something. If we look at a 10year yield, the u. K. Paper, its hovering now around 2. 68 yield. Around 2. 61 in the u. S. 10. So you have the u. K. We have the u. S. And then, of course, lets think of where the french 10years trading. Trading around 1. 87. Thats the o. A. T. , french 10 year, and the lowest yield on major sovereigns . Were looking at a 1. 41 yield on the bund. So lets think about this a minute. I asked for it, the big numbers this morning, 1. 20. 1. 20, and lets show the chart. Its the difference. You can have minus plus, depending on which one you put first. Its the difference between bund yield and 10year yields. 74, minus 74, the difference between u. S. Yields and french yields. And if we look at bunds excuse me, u. S. Gilts, its hovering around 80 basis points in favor of the u. K. So when i say low rates are good, if theyre real. Heres pretty much what im saying. If you talk all of the paper in europe, especially southern europe, but to some extent the french paper, maybe the italian paper, and you put it in an talk, do you think that the current rates the current prices versus yield on the fixed income instrument would be where they are today . I dont think they would. And ecb is giving 100 collateral to the securities. And we know theyre trying to find ways to u. S. Style quantitative easing. And i think if you think about that, the issue is if it really isnt there, they really shouldnt have the benefits. And this is my second argument about why rates in the u. S. Are going to remain on the low side. First one is weaker data than it should be after five and a half years postrecession, but the latters, the relative value of trades on the charts, and back to you, kayla. Kayla and carl. Thats a nice synergy, rick. Well go from european rates to european markets and bring in simon. The european markets lower than they were, and the same rate wall street has fallen back down, and the european markets have come up to the sixyear highs but back down. A lot of stalk in the wall street journal talking about the bundes bank, going to buyout packages of bank loans. Its kind of where we knew we were, but its a reinforcement of the idea that the most powerful central bank is behind draghi. Interesting it has added to the pressure on the euro. Look where weve traded over the last week. This is for one week after draghi held the news conference, down 1. 6 . Thats a big move on the major currency pair. As far as the stock markets in europe with concerned, the earnings, call europe, industrialized europe, has pleased a lot of people. Airbus up 6 . Germanys largest steel maker up over 4 . In the u. K. , tailor, house building, has been suggesting they will exceed their estima s estimates, meet or exceed estimates, by the end of next year. You can see some of the housemakers in the u. K. Are higher. A lot of headlines clearly coming from london where pfizer ceo, ian reed, has been defending the potential acquisition of astrazeneca. Interestingly, he didnt promise that he wouldnt cut jobs in the u. K. , and at the same time said that he had options. One of those options clearly by inference is he could go hostile on the bid. We are expecting a higher offer for astrazeneca, it would appear, in the coming days. One more ceo under pressure, perhaps of a more severe nature, is brady dugan, coo of Credit Suisse, and theyre trying to deal with the fines here in the United States for allegedly allowing americans to evade the irs for so long. Rueters is reporting the fines could be 2 billion, that the new york is demands 1 billion. In zurich, the politicians there are suggesting that brady dugan should resign. They say you take his salary of 11 million, if youre justifying the high salary with the responsibility you can carry, you cannot duck that responsibility in emergency, or so says the president of the s. P. Let me just leave you with one more thing, guys. Tomorrow is the quarterly Inflation Report from the bank of england. You may find tomorrow the b. O. E. Stars talking about when rates rise, which could change our conversation more broadly on central banks. Back to you. A conversation thats been expected for quite sometime, but it will be interesting to see that finally happen. Simon, thanks. When we come back, so many internet tvs, how do you even choose one, with amazons fire tv, google chromecast, apple tv, and more . Weve got the master to break down which box is right for you. Walt mossberg, reviewing them all. I bought a car, over and tells you, and youre like. A good deal or not. Looking at truecar. Com. Theres no buyers remorse. Save time, save money, and never overpay. Visit truecar. Com the battle of the settop box, the space is starting to get crowded. So which is the best fit for you . Walt mossberg is for re code, and he has reviewed some of the products. He joins us now. Good to see you again. Hey, carl. You start out by saying video from the cloud is big, and its here to stay, thats for sure, right . That is for sure. And i think everybody in media, you know, cnbc, all of the other networks are well aware of that and are, you know, doing online things. But, you know, there are just millions and millions of people who spend a significant part of their time in front of their tv not watching the tv that comes through the normal cable, but watching tv stream from the internet. Right. So lets go through these one by one. Apple tv, people are familiar with usually. 99 bucks. You say its best if you are already deep in that apple e ecosystem. Well, thats right. Apple, i should say, there are over 30 services that are not Apple Services on there. You can watch netflix, youtube, huluplus, hbo go, lots of others on there. But the heart of the then is built around itunes and icloud. And so, its best for people that are deep into the apple ecosystem. So, walt, clean slate, if youre coming to this and you dont have a strong allegiance to apple or amazon or googles ecosystem, maybe you play a little in each, which one is the best . Well, i think probably if you dont have a lot of things you bought from one of those guys or your own photos or videos stored on them, then roku makes the most sense, because they dont have a content ecosystem, but they do have over a thousand channels. A lot of them are marginal or niche, but they have a wide price range and a lot of channels. Walt, theres a big difference between apple tv at 99 bucks and chrome cast at 35. Its hard to argue with a 35 price tag, but where chrome cast is concerned, are you basically getting what youre paying for there . Well, i dont i think chrome cast is a pretty decent product, kayla. But it has, at last i checked, which was yesterday, they have 17 services that work with them, which is much fewer than apple, although you can stream a page from the chrome browser on your laptop, so that gives you a lot of variety. They have a different philosophy. They dont have a remote. They dont have services built into it. Their whole idea is that you take the mobile device and it has to be android or apple, and you can what they call cast the program onto the tv. Now, apple has a somewhat similar feature in apple tv, but apple also has builtin content and a dead indicadicated remote. My feeling about chrome cast, and at the moment it may grow to gargantuan proportions, like a lot of things at google, but right now you have somewhat limited apps that work with it. And you have to have your phone or your tablet or your laptop with you to launch the device, because there is no remote. Walt, i was just making the argument that tv hasnt yet had its iphone moment, and the closest thing to a musthave that we have in this space is netflix. They can throw their weight around a bit. But do you expect to see any kind of an iphone moment from apple or anyone that sort of shifts this whole conversation on Net Neutrality and related things that are getting bandied about these days . Youre talking about services, carl, or hardware, or both . This is jon. Im really more talking oh, hi, jon. Maybe in the settop box space. We havent had that moment where theres a categorydefining product that comes out and changes the way everybody thinks about television, what theyre willing to pay for these for these services. Are we going to get that in the next three to five years . Yes. I definitely do. And i think you do, too. I think that it has to probably be some combination of the hardware and the cloud service. And it may come from somebody like apple or google buying netflix or a similar service. It may come from further transformation of youtube. I mean, people forget how huge youtube is. And a lot of people dont realize that youtube no longer is primarily about cats on skateboards. It has actual shows on it. It may it may come from this rumored apple project. I expect apple in the nearer term to do some improvements on the Current Apple tv. But we all know that before he died, steve jobs was working on with his teams on a broader television thing. You know, the rumors were it became difficult to work with the Media Companies to get the terms they wanted. But they probably havent given up on that. And i do. I think youre right. We havent had the iphone moment, but i think we will. Yeah, who knows, Developers Conference right around the corner, maybe well get clues in the next couple of weeks. Walt, always good to see you. Great to see you. And also, Nbc News Group is a minority owner in re code. And etsy is undergoing a major expansion here in new york city, announcing it will hire 300 new employees and open a brandnew hq out in brooklyn. So Online Market space is expanding. Could an ipo soon follow . Well ask the ceo of etsy when squawk on the street comes back. Stay tuned. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. As the company thats all about printing. But did you know we also support hospitals using Electronic Health records for more than 30 million patients . Or that our Software Helps over 20 million smartphone users remotely configure email every month . 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A short word thats a tall order. Up your game. Up the ante. And if you stumble, you get back up. Up isnt easy, and we ought to know. Were in the business of up. Everyday delta flies a quarter of Million People while investing billions improving everything from booking to baggage claim. Were raising the bar on flying and tomorrow we will up it yet again. Coming up on the halftime report, another alltime high for the s p. Is there any hope for a rebound in the momentum names . Were on bubble watch. Silicon valley. The fear of missing the next big thing putting tech investors in danger . And twotime super bowl mvp eli manning is on wall street Trading Floor today. Well talk to him live, find out why. All coming up at the top of the hour on the halftime report. Kayla, see you in 15. Thank you so much, melissa. Our next guest has been on our show before. Hes back today to announce that etsy has signed a 10year lease in brooklyn, creating 300 new jobs on the heels of an acquisition startup of grand street and etsy wholesale. What is next for the online retailer . Chad dickerson is the ceo of etsy, of course, an Online Marketplace for designers and collectors, selling the creative goods. Thank you for joining us. Yes, thank you for having me. Big news. Over the course of the next ten years, youll be doubling your new york workforce and moving into this new space. We will. Thats a decent growth outlook. Yeah, well be growing about 650 employees over the next ten years, all here in new york. Weve not only committed in new york state, but also committed to brooklyn again. Just two blocks from your current headquarters. Just two blocks. You like the neighborhood. You wanted to stay there. What sort of benefit do you see from staying in new york city for the long haul . I think new york is a really great place a really great place to build a tech company. Its a creative place. Theres a lot of kind of media and fashion, and in that way, the Creative Culture really makes etsy, given that etsy is a creative marketplace, the Perfect Place in brooklyn, the Perfect Place to build etsy. Etsy had 1. 3 billion in sales last year. Yes. Thats a Staggering Number for a retailer thats been around just about seven years nine years. Starting in 2005. I stand corrected. Yes. An amazing number when you consider the artisan base that normally shops on etsy and the fact you dont have any stores. But that could be changing with the wholesale launch . We have a million sellers around the world, so it has grown quite a bit. We have just started announced the wholesale program that launches fully in august, comes out of beta in august, currently in beta. In that program, were allowing etsy sellers and helping etsy sellers to sell to local retail. So our offline strategy is to help our sellers put their merchandise into stores not for etsy to open its own stores. Ive always had the sense that the demographics of the etsy user might be different from your typical ecommerce site, maybe a little bit more female, maybe a little bit more skewed toward middle america, the way that pinterest is. I know at a certain point you were the most popular source of content on pinterest. Right. What can you say about who that user is and how theyve evolved . The etsy, we consider them members, the etsy member is largely female. We consider that a big advantage, because women control Household Income around the world. A asetsy has grown, its all ethnic groups, and its become like the world, not a small niche. We ask you about going public, and youre well positioned to go public. Your reaction to that . I agree with fred. We are well positioned. We really believe etsy is a 100year company. We want to build a company that lasts 100 years. Were in no rush to go public. Weve been profitable since 2009, which is fairly unique. Were well positioned but in no rush. What sort of infrastructure would you need to actually take that leap, though . Weve seen a lot of companies in your stage of growth, higherend i. R. Director, maybe replaces the cfo, maybe make sure they have certain metrics or certain positions in place. Im wondering if youre taking any of those steps . We have a very strong cfo. There are a lot of steps you have to take in terms of filing. We havent done any of those yet, because were not in a big rush. In the very near term, a disappointing number on retail sales, you think the macrodata is undercounting or overcounting consumer strength . Well, when i look at it in terms of etsy, i think that etsy is an Online Business in retail, on etsy its strong. The weak retail numbers reflect people are going more online and thats really good for etsy. And really good for our sellers and the communities they work in. Tell me about whats driving growth these days, particularly among social networks. When you look at twitter, facebook, and ill throw a pinterest in there, because youre popular, where do you get the most value and most bang for your buck . Whats driving growth for etsy is the things you can buy on etsy you cant buy anywhere else, you cant find anywhere else. The retail world we live in, we talked about retail sales a moment ago, you know, people in general are getting tired of the kind of bigbox sceneness. So they come to etsy because they can find things they cant get anywhere else. In terms of social media driving traffic to you, which channel is the most valuable to you . Oh, i see. Facebook is really strong for us. Obviously, its not social, but Google Search is really strong. Pinterest is really strong. You know, etsy members are really social groups. When they make things, they share them. When they buy things, they share them with each other. So we do benefit from all the social platforms. Fairly soviet union, on, bou be popping up. Yes, at a neighborhood near you. Chad dickerson, thank you. On this show, weve talked a lot about a potential tech bubble in Silicon Valley. What do some of the top vcs in california make of the bubble talk . Well bring you their answers when we come back. All stations come over to mission a for a final go. This is for real this time. Step seven point two one two. Verify and lock. Command is locked. Five seconds. Three, two, one. Standing by for capture. The most Innovative Software on the planet. Dragon is captured. Is connecting todays leading companies to places beyond it. Siemens. Answers. Trwith secure wifie for your business. It also comes with public wifi for your customers. Not so with internet from the phone company. I would email the phone company to inquire as to why they have shortchanged these customers. But that would require wifi. Switch to comcast Business Internet and get two Wifi Networks included. Comcast business built for business. Welcome back to squawk on the street. Retail sales, Small Business, confidence report, inventories, consumer credit. Lets give you the cnbc wrap it up, where we put the relevant data into the hopper and figure out whats happened to the outlook for growth in the first and second quarters. What happened was on the second quarter, the current one were in, a very slight change. Up 0 glory, up. 06 with a range of 3 to 4. 2 . The q1 tracking down. 2. Mostly on the inventories and a little bit of the retail there. To minus. 4 with a range of positive 0. 1 to minus. 7. It took a little away from the First Quarter, and on balance, on a 1. 6 , 1. 7 average growth for the first half. Bmo saying a disappointing way to kick off the second quarter, but still early days, consumers are still spending. Houses shop till they dropped in march. It looks like they dropped shopping from the list of things to do in april. Here are the details. Electronics falling sharply. Furniture going along with maybe not such great home sales. Miscellaneous stores, including the internet, minus 2. 3. Clothing accessories, gas stations, vehicles were the ones that did well. We also got positive data from Small Business. Up to 95, the best number weve had since october 2007. So Small Business coming back, in a lot of different ways. At lof the components of the index were up strong. Finally good news on the consumer. Consumer credit delinquencies falling to the lowest level since 2008. Mortgage delinquencies down. New Mortgage Origination fell sharply, but foreclosures and paydowns fell to the lowest decline since, get this, 2003. So better consumer finances. Not necessarily better consumer spending, guys. Yeah, something for everyone today, steve. Thanks a lot. Sure. Steve liesman at hq. Is there a tech bubble in Silicon Valley . Our own josh lipton went straight to the source talking to some of the vcs and entrepreneurs, to see where they stand. Josh is live in San Francisco. Hey, josh. Reporter hey, carl. Yeah, certainly venture capitalists on the hunt for the next big money maker and its here at venture scape where theyre talking about the latest investments. Its a twoday conference in San Francisco where top vcs come together for panels, discussions, and, of course, lots of networking. One big topic this year, carl, is there a tech bubble in Silicon Valley . Certainly valuations are rocketing higher. Airbnb and dropbox at 10 billion. Spacex at nearly 5 billion. Pinterest and uber at 4 billion. Despite the lofty valuations, the ones im talking to say they dont see a bubble. The startups today they say are real businesses with real revenues. Back in 99, most companies were going public after about four years. Today, thats been elongated to about nine years. And so, you see this in their revenue and levelled maturity. Annual average revenue for a Company Going public in 99 was 12 million. Today, its about 106 million, what the numbers were from 2013. Reporter venture capitalists are finding plenty of places to commit capital. They invested nearly 10 billion in the First Quarter. That was the highest quarterly total in about 13 years. By sector, the Software Industry received the highest level of funding, rising nearly 40 to 4 billion. Even those vcs im talking to who say they dont necessarily see a bubble, do say there are pockets in Silicon Valley overpriced. Well have that story for you later in the day. All right, thanks so much for that, josh. An important debate. And it looks like an interesting event out there in San Francisco. Josh lipton. When we come back, in the market for an xbox one . Well, it just got a little bit cheaper. Well explain when we come back. I make a lot of purchases for my business. 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It says it will offer them access to apps like netflix whether or not they have a gold membership. Jon, some people wonder why this wasnt done earlier. Nadella continuing to offer more at a premium basis. Well see the move. The stock not getting much of a bounce. Well keep an eye on it. 1,897, well continue to watch the levels on the s p. Melissa lee will take us through the next hour. Hey, m. Yeah, well talk about whether the momentum names have a chance here, because they do seem to be fizzling at midday. Guys, thank you for that. Heres todays playbook. Bubble trouble. How the race to buy the next big thing is brewing a bubble in Silicon Valley. Drone wars. Jane wells joins us with a sneak peek at the battlefield of the future, and were trading it. Giants quarterback eli manning making trades on wall street today. Were talking football and raising money for a great cause. But the twotime super bowl champion. Lets meet the lineup. Another alltime high for the dow and s p, but is there hope for a rebound in those momentum names . Pete, some c