Transcripts For CNBC Squawk On The Street 20140523

Last time i looked around 2. 5. There it is. 2. 53. Flat looinds. Think theres something happening there and it doesnt happen. It is amazing. A look at europe which has been less than amazing although you can see, mixed picture over on the european continent. Road map starts with yeah, hewlettpackards earnings report. More job cuts coming an exclusive interview with hps meg whitman, on her continued efforts to turn this Massive Company around. Its been a rough week in retail coming to a close now. Another retailer, though, lowers its outlook but the gap surprised to the upside. The secret . Athletic wear, old navy, and the stronger april. Show me the money. Russian president Vladimir Putins working the crowd and moving the market ahead of elections in ukraine this weekend. Hewlettpackard is where well start. Announced plans to eliminate an additional 11 to 16,000 jobs. That is on top of 34,000 positions hp said it would cut or has cut 31,000. This is a Restructuring Plan announced in 2012. The company also did report a slight decline in revenues that were very, very small amount wee below what analysts were looking for in the revenue number for the profit number it was in line. Were going to talk shortly with the ceo of hewlettpackard meg whitman live and as always, exclusive. Youve done some work this morning and going to join me in the interview as well. Of course. Thank you. Give me a take here. The stock did trade down a bit. The earnings came out early. Weve seen this happen a number of times. Somebody hits a button somewhere and a part of a release is released and apparently some of the news organizations may have botched the crawl the web for these Earnings Releases and find the link. The market did react a bit negatively. The market reacts before thinking. This is a turnaround. Multifaceted turnaround. Lots of acquisitions made. Peel back the onion, keep seeing things that dont go right. Tepid environment for technology, Enterprise Spending and what meg whitman has done is fix the Balance Sheet then get the earnings per share to stop going down. Only then can you begin to take the offense. These turns around goes defense to offense and shes now at that inflection point. I like the quarter. Interesting. I like the quarter. You know, its a good point you make and one ive mentioned a number of times, Free Cash Flow. 2. 3 billion this quarter. They have gone from obviously a net debt position to net cash position and its now i think its almost 3 billion. Ive got so many different numbers. You can control your destiny it and people have to recognize, sure, we can knit pick, toner wasnt that good. You have razor blade model on printers. You go through the companies i deal with, other than a few companies that have Something Real pizazz, the enterprise isnt that good for anybody. The corporate. So lets not look at this in a vacuum and say this meg whitman is a failed turnaround. Its anything but. On scheduled turnaround where all you have to think about i hate to use this, but there was a lot of dead wood at hewlettpackard. Lets get to it. Meg whitman has been listening in standing by. There she is at hewlettpackards headquarters in palo alto, california. As always, very much appreciate your being with us this morning. Good morning. Happy to be here. It was year ago during one of our interviews, a year ago to the day where we were talking about this turnaround, you and i yet again, and you said when i asked about this year, we do believe growth is possible in 2014, probably not in every business, but we hope overall well see growth in 2014. After yesterdays report, meg, that is hope realistic . So, at our security Analyst Meeting in october of last year, i said it was unlikely that hp was going to grow in 2014, that there would be pockets of growth and there were this quarter like pcs and networking and security, verityka, some of our security enterprise services, but i would say the good news is that the rate of decline has slowed dramatically. This was really the Third Quarter of flat revenue which you might say well gee, thats not all that exciting. Its way better than where we were a year and a half ago where we ha had quarters down 7 , down 6, down 9. My in my view the turnaround is right on track. Right on track meaning as you say, pockets of growth this year and then real growth in 2015 . Well, we certainly hope so. We have not given revenue guidance for 2015, but remember, were managing a portfolio of businesses. Weve got some businesses declining, some businesses are holding their own and some that are growing quite rapidly. If we can continue to grow the fastgrowing businesses and stem the decline in the big legacy businesses, then maybe it will turn out the way we hope. We havent given revenue guidance for 2015. Understood. There were a lot of questions on the Conference Call yesterday, meg, about the increase in work force reduction. A lot went to this question of growth in 2015. For example, tony, a number of questions like this, saying are you cutting these jobs and, obviously, the incremental savings youll get as a result, is it a sign youre not as confident you can grow earnings per share in 2015 without work force rebalancing . I know you answered the question, but i want to ask it again because there is that key about 2015 and what these job cuts really mean for you . Yeah. So no, i remain confident in the future of hewlettpackard. But as the longer that i have been here, we see opportunities to get more efficient and more effective. This was company that was a product of many acquisitions, go all the way back, compact, eds, nearly 17 software acquisitions. And these acquisitions never got integrated quite the way they should have and there are still big pockets of inefficiency. What it will help us do, david, it will help us serve our customers better. Our customers still tell us were a little difficult to do business with, we dont make decisions as quickly as we should, we need speed, agility, need to be nimble in a changing marketplace. While no one likes to reduce the work force, this will be good for our customers and good for hewlettpackard. It will make us a stronger company. And obviously, you know, we will be able to create capacity to invest in the growth engines of this company whether cloud or security or big data or mobility or our next generation of servers or next generation of networking. We have a lot of opportunities to make incremental investments in r d. Youve seen r d increase significantly this quarter. Were going to be pouring money into r d. Right. You know, meg, another big picture question some of the critics would offer yes, your getting smaller, some would say shrinking to grow but still an enormous work force, still an enormous company, and theres a belief somehow you cant innovate as quickly as many of your smaller competitors. How do you dispute those who simply believe no matter how small you make the company youre still always going to be too big . Were a big company and compete against other very Big Companies and compete against little startups and what Big Companies have to do is we have to make scale work for to our advanta advantage. Go to market work to our advantage, supply chain and make sure where we are focused we are innovating. And i would argue actually that our printing business is one of those areas where we are excellent innovators and were now transferring that to our server, storage, our networking, converged infrastructure business, our sass business. So weve got to innovate but weve got to use scale to our advantage otherwise Big Companies will always fall to Small Companies and listen i think theres a real role for our customer relationships, Service Capability all the things we do well as an organization. Right. You mentioned printers and this quarter there was some concern, particularly in terms of toner sales, overall revenues were down 4 , margins were up, it was profitable, and grew in terms of profits, but to this point on innovation, explain to me how it is that the toner sales, for example, are not doing as well as some thought, supply sales perhaps not quite up to speed, and yet youre talking about this unit actually accelerating. Yeah. So remember, it is a razor and razor blades business and so you recall when we made met, hp had been out of the laser jet market. We had been out almost seven years. We introduced a lineup of multifunction printers. Those are taking whole that will improve the stall base and toner will rebound but 15 16 toner will do better than it has for sure. Jim cramer here. Good to see you as always. Hey. Lets stick with printers for a second. You have a terrific 3d printer operation in israel. A lot of startups you mentioned coming in taking different areas. Why dont you crush them . Crush everybody in that business . Well, were focused on business 3d printing, not consumer 3d printing. Well announce a 3d Printing Technology at the end of this year and we think theres a real opportunity here. This is an acorn that were planting that will become an oak tree in the future. This is a business we need to be in. Its very consistent with our heritage. But were doing that in a lot of businesses. You know, innovation, you have to plant those acorns before they become oak trees and you have to have patience in terms of development cycles. You have to continuously and consistently invest in r d. Okay. Meg, you mentioned again this startups. There was a moment when you answered tonys question, you said look, come on, we have five Major Business units, 150,000 stores. 66 66 countries. I still dont hear anybody talking about how if you can maybe fine tune that, maybe get out of business, and be in mobile, social, cloud, connectivity, i know that those are a more fis issues but when you dealt with salesforce. Com at dream force i thought the emphasis would be on at least one of those. I did not get mobile, social, cloud, connect it tifts when i went through your connectivity when i went through your presentation yesterday. I started out my presentation talking about the innovation that went to the marketplace and led with helian which is our cloud offering distinctive in the market, enables to run work loads in public, private cloud with one click work load portability across those different ens built on open staff and this is a differentiated offering. It is exactly what enterprises need. Were solving a real pain for them and the response has been terrific. Nfv, another innovation, the Telecommunications Industry about to go through one of the biggest shifts theyve ever gone through and were well positioned. So i actually led off yesterday with the innovations in the enterprise that i think will distinguish hp. Enterprise Services Revenue was down 7 , meg, over the prior year. You cite delayed key account revenue, runoff from fiscal year 13 continued. Operating profit margin flat. Not a lot of focus on the Conference Call but i would like to ask about it, an important part of this company to be certain it is not growing, but you seem to be positive that it can. Why is that . Well, we had an unusual event last year and a bit of the year before where big accounts ran off in a very unusual kind of way. That doesnt typically happen. And so that runoff will be largely through at the through at the end of 14 and then we actually have the ability now to turn to a proactive selling motion. Weve got an entirely new sales team, new sales leader and saw over 200 new logos in what i would call the new style of i. T. , strategic enterprise services, smaller contracts that are meaningful to our customers. We have to improve the profit margin in that business. It was flat year over year. Good news it was up sequentially from 1 to 2. 5 . What weve said weve got to get to a to 9 operating margin there and theres work to be done. In these turnarounds there are businesses performed very well, businesses where more work is needed. Enterprise services is one of those businesses. When it comes to storage youre disappointed. That was a word i believe used by your cfo in her prepared remarks in the Conference Call. Whats disappointing . I know that world is changing quickly but what gives you the confidence that you can execute properly to take advantage of the opportunity . Yeah. The storage results were disappointing. They were down 6 year over year. Although we believe well grow a point of share in the market. I think we performed slightly better. This is largely a market problem as i understand it and only three things going on. First more efficiency that is being gained in the Storage Market through compression and then provisioning. Then there is the highend market is moving to the midterm market. You can get a fabulous storage product that used to cost you much more that is now very, very Cost Effective and then i think a lot of customers were taking a pause. Gee, whats going on with flash. What about these lower prices in storage. What should we do as organizations. And my belief is this will accelerate in the second half its what a lot of the suppliers are saying. I think our competitors believe that. We have to see that market come back. Our objective we always want to outperform the market which we did but weve got to the good news we are perfectly positioned with 3 par to the extent people start buying again 3 par is perfectly positioned for what people want in the next generation of storage. That middle tier that delivers high tier in a sense. Finally meg, personal systems group, never very profitable but sales were up and as you told us last quarter, a while ago, when there were a lot of doubter ere commercial pcs are not dead, still hanging in there. Do you continue to see stabilization and or potential growth when it examines to the commercial comes to the commercial side . Our pc business grew 7 , commercial faster than that. Operating margins were up and focused on profitable growth. I think thats partly because of the migration from xp to windows, from a delayed refresh program. A lot of businesses held off to see what was going to happen here. We see some we think well have a couple more good quarters here but the market we do think the market is in a slow decline and we outperform the market pretty dramatically this quarter. So listen, its funny, isnt it . Remember when we first started when i came to hp, we said pcs are dead, printers are dead. I guess neither turned out to be the case. No. Maybe a slow death. With some good moments. Meg, finally, a number of people seem to be making a lot of the cash flow, above the investors that follow the companys expectation of 3. 2 billion. Theres chatter i picked up on the call, maybe you should do a deal, maybe a larger deal than you thought about. This man to my right was talking about it. Is that something you would consider . A larger acquisition again to try to transform a company as you continue to try to turn it around . Well, let me say this, and repeat what ive said before, any acquisitions we make will be returns based. They are likely to be small to mediumsize acquisitions. In the areas of cloud, big data, security, maybe some of our core businesses if we see a particular Market Segment where we want to play and we dont have the product. So well be very disciplined about this. We will make sure it is those acquisitions are aligned to our strategy and i have to say i think theyre in the small to medium sized range. And finally, meg, once you hit 50,000 or roughly in terms of job cuts are you done . Well that will be the end of the Restructuring Program we started in 2012. What ive said after the first Restructuring Program we have to build productivity into the dna of hewlettpackard and so we always, every year have to be more efficient. I will say we live in a new world order. We have competitors who are the most respected biggest companies, companies in the other parts of the globe and the startups you recognize. We have to be efficient in how we do things so were easy to do business and our customers choose us because they like our products and like how we service their needs. So but we will build that efficiency into our daytoday operations. There wont be another big restructuring for sure. As always appreciate your time. Thank you. Great. Nice to see you. Good to see you. Meg whitman, ceo of hewlettpackard joining us as she does every quarter which we always like to point out. Good and bad. Shes there. Thats whats important. Different than some other ceos. Theres people who dodge us. She held herself very well on the big issues. Turning around, one thing that didnt come through in the Conference Call, were hard to do business with and were going to change that. Sma something remember steve jobs talked about how intel was hard to do business with and started sam sung. Its a little damming but can be changed. With all those acquisitions she pointed out and a large work force. No surprise when you talk to hewlettpackard employees there are potential continued cuts. Must be tough to go up against the new firms in california, all the Great Companies and youre cutting while theyre expanding. Its very difficult to get the right people. All right. Coming up weve got russian president Vladimir Putin speaking out on numerous issues ahead of this weekends elections in ukraine. Hear what putin told cnbc. Its going to be another look at futures as we end the week ahead of the long weekend. More squawk on the street live from post nine when we come back. You, my friend are a master of diversification. Who would have thought three cheese lasagna would go with chocolate cake and ceviche . The same guy who thought that small caps and bond funds would go with a merging markets. Its a masterpiece. Thanks. Clearly you are type e. You made it phil. Welcome home. Now whats our strategy with the fondue . Diversifying your portfolio . E trade gives you the tools and resources to get it right. Are you type e . Predibut, manufacturings a prettin the United States do. 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. This morning we are remembering our good friend and my longtime colleague mark haynes who passed away three years ago tomorrow. Mark the founding anchor of squawk box and coanchor of squawk on the street. We remember him for his knowledge looking out for the small investors best interest and his steady hand during the dotcom bubble, 9 11 rand the financial crisis. Mark called the stock market bottom of 2009 we call the haynes bottom. Our thoughts with marks wife cindy, his son matthew and daughter meredith and as you saw we were also both mets fans. Right. Still waiting for that championship as i know mark is wherever he is. Yes. And you have the meg whitman interview and what are you thinking about when you interview meg whitman . No free pass. Mark haynes would sit here and he did not care about making friends. No. Never. Never knew when he was going to suddenly turn and it was going to get really interesting. And thats a great tradition because its when you book these guests people should know at home that theres always someone who says boy, i hope you got to get that guy on again. Its not one shot. Mark was one shot if he felt the person was dishonest, dissembling, are trying to pump a story to the public to get the stock bought he didnt think was right. Squawk on the street will be right back. Dog what, what . Mattress discounters what, what . Mattress discounters Memorial Day Sale ends monday . But mattress discounters has the Largest Selection of memory Foam Mattresses under one roof. Comforpedic, icomfort, optimum, and wow, four years interestfree financing on the entire tempurpedic cloud collection, even a queen size sealy gel memory Foam Mattress for just 497. Better hurry the Memorial Day Sale ends monday. Mattress discounters [ 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. Youre watching cnbc squawk on the street live from the Financial Capital of the world. Where the opening bell is set to ring in less than three minutes. Were going to do the mad dash now, and its going to be an interesting one. Were going to do stocks that are not yet public stocks. And yet they will capture americas fantasy like no other. And have implications for a lot of different things. Start off with alibaba which will be public most likely late this summer. Right. Bernstein has been writing on this company for some time and keeps moving its valuation of alibaba up. Until this morning, when they actually cut it. They said not 250, but 230 billion. Now this is carlos, hes very good. Why is he very good . Because he understands the core of the business and why it should be valued the way it is. I just thought in light of jd. Com which is not nearly as good as alibaba. Doesnt have its margins. Immediately does say listen, the 230, has to do with tax rate, with very small things, but the idea here, david, is if this is 230 billion what does it do to yahoo and yahoo is undervalued if hes right. And, of course, the key will be the tax efficiency at which theyre able to dispose perhaps the stake theyre going to be selling the ipo although it seems unclear they will do that. Even more so what will be left which will be at least 12 if not more of alibaba. If thats the case then yahoo will get about 9 billion after taxes which im supposing they should buy yelp, grub hub and opentable and the yahoo restaurant would be your onestop app. Talking about apps maybe they should buy ubber. Would only cost 12 billion. Another one in mad dash here. We were talking behind the scenes the valuations of a lot of these companies, in the private market have been shrinking because the Public Market just went they took all the air out of it. These stocks down 25, 30 . Software as a service, watching those multiples thats your words contract has a huge impact on venture companies. Yes. Because when theyre raising their next round theyre taking Public Market multiples as their valuation and it comes down. But ubber is not. No. Thats whats important. They were upset they were lumped into this 10 billion quo Sheriffs Department with airbnb. A lot of companies were talking about box, drop box, 10 billion. They come up with 12 billion. They are brazen in the world. They told you they were going to be, remember. He told me it was after worldwide domination and i think he may do it. Hes got everything that we want, david. Hes cool. Hes young. Hes rich. Ive had it. Could have been all those things although tough to beat. You cant go back in time. Those of us who use ub ubber terrific product. Also going to be borrowing money too. I was talking to a banker, yesterday, 50 million, just open up a bit in terms of on the Capital Market snide can he invert . I dont know. I dont know. You heard the opening bell here on the s p 500. Youre looking at it the realtime exchange at hq. Heritage Insurance Holdings a provider or is a provider of residential insurance in florida celebrating its initial Public Offering today. At the nasdaq, finjan holdings, owner of Patent Technology to protect users from online threats. Oh, boy. And boy there are a lot of those. We saw fireeye upgraded today. Barclays. Fireeye is controversial. I know jim cramer on twitter a couple things i say periodically, fireeye is the best product. But the stock got too high. It then went down because people felt there was a big lockup expiring that people from the acquisition would sell. They havent. Next thing you know youve got a stock that had been more than cut in half thats coming back. Just remember that the companys product doesnt necessarily always have to do with the stock price. Right. I mean that if there was ever a story about multiple compression, fireeye would be it. Yes. And then also a lot of stock for sale as you said. Also they did a no. They sold a lot of stock. But the company i want people at home appro po of mark haines three year passing, were trying to do Something Different here. Were trying to analyze both the company and the stock. Thats a lot harder. On the Conference Call with hewlettpackard you had all these analysts, good analysts saying meg help us we have to make our model. You and i are not about the molds. Tryi model. I marvel at the analyst so many questions on these calls trying to get their numbers right and i think it was rightzis. And tony. Wait a second, how can you tell us about the cuts and the cost savings and not give us a number. And meg said what do you want from me . The next day on the reports, they were the most glowing. I thought they were rebelling. No. Theres also a back channel where niece guys were pieced. By the way on the subject we did speak to meg whitman not more than 10, 15 minutes ago. Heres what she had to say about the long turnaround of the company shes been running for over 2 1 2 years. At our security Analyst Meeting in october of last year i said it was unlikely that hp was going to grow in 2014. I would say the good news is that the rate of decline has slowed dramatically. This is the Third Quarter of flat revenue you may say its not that exciting, its better than where we were where we had a few quarters down 7 , down 6, down 9. My view the turnaround is about right on track. Talking about turnarounds this is a stock price itself has turned around after being down 2. 5 yesterday. During the trading day because of that glitch where they released earnings early and after market as well. Not once in the Conference Call, you asked why do i like the story . Did she ever once mention that Enterprise Spending was down and therefore hewlettpackard is going to be the customers are hurting. Ive heard all that stuff from a lot of companies. It wasnt from her. She didnt give a single alibi. She was disappointed where it paid to be disappointed and did not blame the customer. That was a nice change of pace from a lot of technology companies. Change of pace in the stock over 3 . Should be. Lets move on to retail we havent hits this morning, gap, gamestop. Gap, the stock is down 15 cents. They were fairly positive on the call, the transcript of which i see is right there. My problem with that is that i like this guy very much, this glen murphy, and you dont usually get an analyst, a ceo that starts the first line, everybody here was actually pretty disappointed in our earnings results. So he grabs the bull by the horns and say heres what we have to do better. A road map guy. Saying certain things, get better, old navy turning around, gap hasnt turned around yet. Talk for china. But in the end its not that exciting. Hes saying listen, have faith in us were going to get better. What we need to hear is the kind of thing were hearing from a fresh market. This is tfm. They said basically you know what, were not blowing up. Were not as bad as you think. Were going to slow down our growth because we want to be more focused. Thats a direct shot at whole foods where a lot of people said they ought to slow down the growth and figure out how to be more focused. I dont know who has the right approach but the stock is up because they didnt blow up. Heritage insurance which says it is a pilar of strength and character, by the way, just so you know strength and character . I want my carrier to have strength and character. Both of them. Pilar of strength and character. The cow bell. Lets talk about gamestop up over 6 . All right. After a theyre benefiting from playstation, from xbox 1, although somebody who has an xbox where are the games give me more of them. Where are the developers . I want more. More cow bells and games. The undercurrent of the gamestop call, paul raines, ive had him on a couple times from mad money, he said listen dont write us off. Of course many people have because the short position is 27 here. But what i thought was great about the gamestop call he said you know what were doing pretty darn well even when supposed to be doing not well at all. Theres a lot of loyalty to this story. Do you remember when walmart said they were going to start getting into the used game businessp well whatever walmart did has not worked. The used game business is strong. A read thats positive on this, you may not like this take away, pay attention. I want to hear it. Read positive on this, xbox, a read positive on hewlettpackard is the microsoft software. May i suggest for a suggested dont do it. Dont do it. I was trying really going to go there. I was thinking about it . Really. I was thinking about it. I heard jay leno and israel. If he can pull that off im going off with a line about microsoft being better than expected. You kind of said it. I throw it out there. Okay. I think microsoft could be a better than expected quarter ahead because of what im hearing the undercurrent here, xbox, enterprise software, windows, i like these things that i hear. Dont you laugh at me. Dont you snicker about that. A pregnant pause. Did i say sears i could have said sears is great. I could have gone off that limb. Didnt you hear him at the annual meeting. Apple had its tough years 05 through 07, sears is just going through that. Look the stock by the way were being facetious. The stock down 3 . Reported numbers yesterday, but it does seem as though theres a follow, reanalysis. Stock was up and gary came out and made jokes about a club you dont want to join. Gary actually hey, gary, ive known gary since 1984, you were a little too tough. Because the pension is peaking and thats been a huge contributor, the fact is that the ebitda, there was a lot of explanations, still in a lot of good malls, they are getting out of the worst stores. They have no they are shrinking and theyre not growing. Theyre not shrinking to grow. Theyre selling off things. People say listen, its like engine one is off of a four engine plane. Engine two, fine. Engine three, when engoin four goes off. There are problems here. At the same time you understood why it went up yesterday. People say they have enough cash to last through this. They dont have a very big chunk of debt coming due for a while. So i mean Eddie Lampert is keeping the ball in the air. I think that when down looking at maturity schedules its not saying a lot. Trying to say listen venders dont give up on us. One of the things that happened on the call, theyre calling him eddie, like kind of recognize hey. Call you jimmy. When try to infer coleak alty. People are allowed to. That person being my mom who passed away almost 30 years ago. Lets leave jimmy in the dust. I think Eddie Lampert does not necessarily have a strategy to grow but he has a strategy to stay in business. The analysts want to bury it and you cant. He has smart owners. He does. Between him, berkowitz and tish you have a lot of stock locked up which is another reason why people shorting this thing do it at their own peril. Canada theyre going to sell and still theyve got a lot of things they can sell, automotive. Whole rap against it they keep selling the jewels. What are they left . Ive wanted lampert to close the bad stores and hes doing that. Look, i shop everywhere. You do. You dont shop there. No. I have my standard ps. Were going to keep an eye on stocks moving. Over to Mary Thompson on the floor who also has more on whats moving this morning. Mary . Good morning, david. Modest gaps for the market, broadbased gains. Weakness in banking stocks, Oil Companies and drug stocks actually just turned flat. They were a little weaker. The dow up 24 points and the s p 500 is within striking distance of an alltime closing high. Just about three points below those levels. Of course today were keeping watch on the retailers in the wake of all those results and also dow component hewlettpackard. Were also watching the emerging markets. Etf touching a sevenmonth high as investors taking a risk on approach in the last week with the markets on track for their first weekly gain in three. Theyre a little bit they have turned higher, they were weaker at the open. Take a look at the groups that have been leading the markets higher on what is expected to be a strong week or the sector. Health care tech, Consumer Discretionary financials and energy lets get back to those retailers. Of course you heard jim and david talking about them earlier among the companies with good companies, the fresh market good Sales Numbers thats giving a lift to its shares. Gamestop, strong numbers on the sales and earnings front. Foot locker also coming out with strong earnings and sales. The retailer of Athletic Apparel up just about 1. 5 and xwap coming in with earnings a penny ahead of expectations. Air row postal a disappointment. Hurt by weak mall traffic, promotions and bad weather in the quarter. We want to mention visa and mastercard, two credit card processors say they plan to stay in russia despite some pretty significant financial i dont want to say sanctions but financial regulations that will be imposed on the companies if they stay in russia to create systems and they plan to do so. Those were imposed after western imposed sanctions against russia. Both of those stocks responding to that. Lets take a look at the two Companies Going public at the new york stock exchange. You heard heritage financial. It opened actually 11 11155, b the range talked about 14 to 16. Were waiting on Parsley Energy priced 18. 50 above the range of 15 and 18 a share. Dow up 32. Back to you. Thanks very much. Were watching hewlettpackard, only about 0 cen70 cents from 5k high. They should release their earnings earlier all the time. This is a story where upon closer review, its kind of like a call in the field, upon closer review it is really clear that the cash is building, the r d is being spent. Shes doing everything that you want from a turnaround. Meg whitman speaking of. And why should the stock have been down. I didnt get why. Because toner sales werent that good . No revenue growth. With when you start a turnaround you have got to get that Balance Sheet great. Now it is. If they want to do an acquisition which she said they dont they can do it. Theyre going to buy back stock. Still going to cut expenses. 50 of Free Cash Flow for buybacks and dividends. Theyre not salesforce. Com, theyre not workday. Theyre not trying to do that. Oracle is a step ahead. Mary mentioned aeropostale, too soon to buy . Its too early to buy aeropostale. Those who want to buy aeropostale take a look at Williams Sonoma which has figured out how to appeal to that demographic and thats what you should be buying. Aeropostale is a company that people talk about all the time. Its not worth talking about. Its just sorry. You dont shop there and i shop there like its total me too. You go to pottery kids and teen, thats what theyre buying. Wall murals and that fancy west elm. Kids no s nknow where to shop. Lets stop talking about aeropostale. Thats merry go round. Remember mgre. They disappeared. Well stop talking about that. Head to the bond pits where well join Rick Santelli from the cme group in chicago. Thanks, david. If we look at tenyear note yield intraday chart we are definitely drifting a bit lower down several basis points on the day. We settle at 2. 55 yesterday. Twoday chart really shows you the 2. 52 area. Basically today and yesterdays low yield is significant. Open chart month to date. The things that need to jump out at you are simple. On a closing basis since we had the sub250 close a week ago thursday the closing range for tens tight, 2. 51 to 2. 55, still falls short of the it technically significant february 3rd low closing yield of the year until a week ago thursday at 2. 57. Add three for slippage, want to keep an eye on the 2. 57 to 2. 60 zone. On june 5th is Mario Draghis big day. And on that big day, he is going to decide the next chapter of the down move weve seen on the euro versus the dollar. Look at a single day and you can see it was toying with testing at 136 handle getting very close. Open the chart up, these are the lowest areas should we close here since february 12. Three plus low on the euro versus the dollar. Much of the decision process of what happens on june 5th will be aimed at further weakening of the euro to boost european exports. David, back to you. Thank you, Rick Santelli. Russian president Vladimir Putin saying show me the money. But thats not all. Hear what he told cnbc in an interview ahead of this weekends ukraine yan elections. Later on squawk alley at 11 00 eastern getting you off the couch and into the theater. Meet the ceo of a company you might consider to be a priceline for movie tickets. Well be right back. Tdd 18003452550 trading inspires your life. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. 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People in ukraine want to see emerge from this projected crisis and we will have respect for the choice that the ukrainian people will make. We will watch very closely what will happen. One of the more interesting comments, jim, where he actually admitted that sanctions are having a bite. Yeah. Taking a bit of a toll. Look, say anything good about him immediately people just obviously hes viewed as a villain in this country. Look, i mean, he was basically saying a lot of stuff that that is from the old days of kissinger. Saying this is the way the new world is. Your president may think he knows what hes doing but were going back to a world where we are able to not deal with you. Right. Dealing with the chinese again. We talked yesterday about the 30year. Right. Contract if you will. Where theyre going to be selling natural gas to the chi sneeze. Charl krauthammer wrote i thought a fantastic piece. Get it in the new york post. Saying listen our president may misunderstand to have china allied with russia at this moment, two countries that can do whatever they want because they dont play by the norms, be careful. Theyre not rules players. Neither one when it comes to intellectual property or when it comes to pollution. These countries are rogue and theyre powerful and theyre with each other and did it have to be that way . Not clear. I wish it werent. Yeah. Up next were going to have stop trading with jim. Squawk on the street is coming right back. Youve reached the age where youve learned a thing or two. This is the age of knowing what youre made of. So why let erectile dysfunction get in your way . Talk to your doctor about viagra. 20 million men already have. Ask your doctor if your heart is healthy enough for sex. Do not take viagra if you take nitrates for chest pain. It may cause an unsafe drop in blood pressure. Side effects include headache, flushing, upset stomach, and abnormal vision. 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Plus, get 36 months interestfree financing, two free pillows, and free sameday delivery. Are you next . Announcer but dont wait. Sleep trains ticket to tempurpedic is ending soon. Your ticket to a better nights sleep 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. All right. Time for cramer and stop trading. What do we got . Sometimes what happens in this world of the crazy world of the stock market is a company that consistently delivers consistently delivers and people yawn. Foot locker, okay. I mean foot locker never really went down. Its been delivering so well. They deliver a plus 7, 6 comp number. Take this stock higher. Thats fantastic. This is one of the best operators in retail. People dont pay it enough attention. The old bullworth. It was woolworth and then got split and veneny tour and foot locker. Good read for everybody in the sneaker business. Bernstein, very controversial call. Chipotle, algorithm, everything, from here, chipotle heres what you need to know. I happen to be in the Mexican Restaurant business. There is no company i know that can put through price increases for a guacamole for the for everything thats gone up in this gawk apocalypse is what i allude to. Bernstein says there have been price increases from the decline of the march peak. Its time to buy chipotle. They can raise price and therefore will be able to get the Gross Margins up. What would this company have to do to have you not like it . Chipotle . Yeah. Have bad tooed and not grow earnings and bad comp stores and a place you would never think of going. Series of things. I only dont go to sears. Thats it. I even go put a chipotle in a sears you would go. Absolutely. Put a starbucks and chipotle ill have a burrito and get a triple cappuccino and right back to shopping. What to we got coming up on mad money. Isis, stock down but they have nis novel way to this novel way to solve problems. Its up again today. Viasat. In a war with go go and maybe at t. This is to have really good want to watch netflix on a plane. Yes. I do. Thats so do my kids. Want to watch buffer. You watch go go. Go go is going to land on your head. Theyre going to send a plane and land on your head. Viasat allows you to watch netflix and lot want to watch orange is the new black which i would recommend to you. Would you . Orange is the new black fabulous show. Still have to work on house of cards. I never got to. Breaking bad. Were on season five but we took a breather between four and five. Where are you on 24. Never mind. Game of thrones im up to date. Silicon valley i kind of like. Thats because you dont shop. I dont have time to watch all those. There you go. Have a great weekend. You too. Hope your boy plays. Hes not going to play. Oh. Baseball tournament where your kid doesnt play because hes injured. All right. Anyway, nobody really cares about that. What they do care about breaking news on new home sales and market reaction. Thats coming up after the break. Also ahead the ceo of gamestop that stock as we told you getting a lift on earnings and the retailer sales outlook. Keep it here on squawk on the street. What can your fidelity greenline do for you . Just take a closer look. It works how you want to work. With a Fidelity Investment professional. Or managing your investments on your own. Helping you find new ways to plan for retirement. And save on taxes where you can. So you can invest in the life that you want today. Tap into the full power of your fidelity greenline. Call or come in today for a free oneonone review. Call or come in today for a free oneonone review. 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Theyre why we make life less complicated. Its about people. We are volvo of sweden. Welcome back to squawk on the street. Breaking news. April new home sales, definitely better than expected, 433,000. Were looking for about 420 to 425. The 384 of last month originally released was 14. 5 drop. Gets upgraded to 40 which makes last month a minus 7 job and 407 to 433 is up 6 . Keep in mind to put this in perspective if you were to add a million to the current number that would bring you to the high watermark of the series reached in the summer of 2005. David faber, back to you. Thank you very much. Rick santelli. It was yesterday at about 3 30 hewlettpackard mistakenly released at least most of its earnings report, 88 cents a share was in line with estimates, the revenue number a bit light and some of the businesses not performing as well as investors hoped. The stock started down this morning it is up almost 6 now, a big run at hewlettpackard as it approaches, in fact, its 52week high. This after our interview with the ceo of the company meg whitman in the midst of a multiyear turnaround as we always do every quarter with her continue to discuss both positive and negative. One thing that wasnt in the Earnings Release when it first mistakenly hit are cjob cuts. That was page two. We did find out about that at roughly 4 00. 34,000 job cuts had already been slated but hewlettpackard is talking about another 11 to 16,000 additional cuts. Could take the number to as many as 50,000 under a 2012 Restructuring Plan which was running for three years and hence continues to run. A lot of questions about why the additional job cuts. Heres what meg whitman had to say. So while no one likes to reduce the work force, this will be good for our customers and will be good for hewlettpackard. It will make us a stronger company. And obviously, you know, we will be able to create capacity to invest in the growth engines of this company. Were talking about as much as a billion dollars in cost savings but not all of that going directly to the bottom line as you heard meg whitman mention. A number of the savings will be reinvested in the business to grow which is not something at this point that meg is talking about for 2014 in terms of top line growth. Although they did seem to focus on profitability. As for businesses that might contribute to growth, many have asked about 3d printing and where hewlettpackard is on that. Heres what she had to say. Well, were focused on business 3d printing, not consumer 3d printing. Well announce a 3d Printing Technology at the end of this year and we think theres a real opportunity here. This is an acorn that were planting that will become an oak tree in the future. This is a business we need to be in. Its very consistent with our heritage. But were doing that in a lot of businesses. You know, innovation, you have to plant those acorns before they become oak trees. Innovation has always been a key question for a Company Still of the size of hewlettpackard despite what is a shrinking work force, sara. Which she really put a positive spin on that, didnt she . That shrinking this is a good thing, going to be leaner and meaner and more nimble and i thought it was interesting she admitted some customers still not thrilled with the service there and as long as they can consolidate too many layers of bureaucracy, to go through to make a decision and get something done quickly which in this world especially ever more becomes a value part of the value plroposition. A concern the strongest unit is one of the lowest margin which is pc sales you would expect to do well anyway given windows xp was no longer being supported and businesses had to buy on the quarter. Thats right. The revenue number did benefit from the commercial pcness particular to the pcs to the shift you mentioned. While revenue wise it comprises the top line, it does not comprise a lot of bottom line. Well she certainly portrayed some confidence because the stock as you said is having a positive reaction. Stock on a huge tear frankly, up almost 6 . Reaction earnings. Great stuff. Were watching retailers. Theres the stock, as you can see the turnaround up nicely. The retailers front and center today. As you can see taking a hit, especially some of the teen retail names. Looking at shares of gap, theyre down this morning, following results that beat by a penny. Shares of air row po stale lower by 18 . That slide started in afterhours. American eagle also in the red. Lets bring in adrian tenet Senior Vice President and specialty apparel analyst with Janney Montgomery scott to talk about gap. But retail is all relative and compared to aeropostale, gap is not doing too horribly. Gap had a little bit of a difficult quarter. We know all the weather issues. There was excess inventory coming into the year which theyll clean up. But weve got to tell you, gap really is doing well with old navy. So although the gap division is struggling the Old Navy Division is starting to pick up momentum. I thought that was interesting in terms of samestore sales, negative for gap, negative for Banana Republic and positive for old navy. Why is this a bright spot . Is it about the consumer and low income . I think its about the value proposition. So old navy has been doing phenomenally with this new advertising campaign. They are focusing on key items an bringing the family back in. Typically when you get the momentum of that core customer they tend to keep shopping at the same place for some period of time. They have the momentum right now. What about aeropostale. Clearly there is an issue about how much cash they have in the bank with the berm theyve got. On the sidelines sycamore which could come through with a lifeline and extended stake. At what point should investors buy in your view . S. I dont think they should buy aeropostale at all. Heres the thing, sycamore can give them a lifeline but the fact of the matter is of the three as, abercrombie, American Eagle and air row po stale aeropostale is the most measured and as the price points come down the margin and pricing is pressured at aeropostale. Hemorrhaging cash, too pane stores and too much inventory and negative comp. I would stay away from aeropostale altogether. Do you think it could go out of business in your professional view . It takes a long time for these retailers as you know, right, they have revolvers, lifelines thrown at them. I would tell you this, in the next five to ten years, air row postal will be a shadow of its former self and somebody in the space probably will go under but it will take a long time and be very messy. The Common Thread between these names all having trouble are that their teen retailers. What happened to teen retail . Why arent they cool anymore. So so the teen over the course of the past few years, basically teen unemployment has remained north of 20 , hasnt come down, down a little bit, as high as over 25 , you are starting to see, you know, just other avenues for them to spend money. And this whole notion of cheap fast fashion continues to compress that price point. Its a difficult environment to be in. I wanted to ask about international expansion. I know that was a key theme in the gap report as well. Theyve got more than 80 stores in china opening their First Old Navy in china. Do you expect the gap brand, so american, and old navy to some extent as well to be a hit there . They opened in japan. Old navy in japan. They are in china. The chinese and asians want American Brands and they are absolutely a hit over there. What about this style of gap . It certainly has had momentum over the last few years going back to basics making the basics cooled again. Any sense theyre losing that . That theyre losing that actually they the fashion, the trend, the cool factor. They have done quite well over the past couple years. They have new creative director at the gap division whose products started coming in in the first quarter. It was the timing with the weather was a little challenging. Well start to see that kind of global creative footprint even more so in the fall season. So thats the one thing is, you know, when you start to make these changes, you never really know what the uptake will be with consumers. Well keep watching that. Sounds like you like gap. Not so much aeropostale. Thanks for joining us on what has been a busy week for the retailers. Thank you very much. Up next on squawk on the street, Vladimir Putin slamming western powers during a q a with cnbcs jeff cutmore this morning. Live to russia to get more details on that. Plus, pulitzerprize winning columnist jim stewart joins us to weigh in on putin, the Global Economy and the markets. Well be right back. 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But this special financing offer ends memorial day at sleep train. Sleep train your ticket to a better nights sleep welcome back to squawk on the street. Shares of housing stocks gaining on a better than expected number in terms of new home sales. The april report showed an annual rate of 433,000 units. Thats above forecasts for 418,000 with marchs number revised higher as well. Check out names like leonard, dr horton and pulte group, all of them rising again on new home sales after a nice run yesterday. Simon on existing home sales. Back over to you. Thank you very much. Meantime the russian president Vladimir Putin was live on cnbc earlier today saying he will respect the result of sundays president ial election in the ukraine but slamming western powers for their sanctions against his administration. For more insight on what we witnessed live on tv this morning lets bring in jim stewart, columnist for the New York Times and a Pulitzer Prize winner. Good morning. Good morning to you. It was an extraordinary piece of television in many ways. Absolutely. First of all i have to say, the idea that putin has gone on cnbc i think is actually quite encouraging. It shows he wants to re s ts to sophisticated business and financial audience. He was care about the markets and how these actor in the financial world are reacting to what hes doing. What do you think the strategy is here . I think it started to become clear. Seemed crazy at first but i dont think it is so crazy. Did a bold thing with creimea ad now hes backing away. For russia they want all the ben fises of controlling the ter forebut not the obligations. Extragts the economic benefits but dont want to take over the Social Security and welfare of these populations. This Economic Union or whatever hes talking about is kind of getting there. Hes shown the west is not going to come to the aid of the ukraine and theyre not going to have any choice but to go along with this. In a way hes kind of pulling off what he wanted. Interesting you started out talking about business, corporations, the impact on the economy. We did learn visa and mastercard will continue to operate in russia. Rethinking the entire Payment System despite the fact theyre going to incur losses on the higher security deposits that moscow is imposing on them. Should we be concerned about that . Well, i think it depends. I mean from an investor point of view this is good. Were seeing a normalization of this. I think its interesting that on cnbc putin says that hes he hates the idea, hes slamming the west for doing sanctions. The west doesnt want sanctions either. Isnt that abundantically clear it doesnt want its gas cut. Its more i think the threat of future sanctions that has hurt the russian economy and it has been hurt. I mean its got inflation issues, its got Interest Rate issues, growth rate issues and putin has to be aware of that. To bring it back to the markets, is sunday an event risk for the markets . The election in the ukraine. Can we sail on regardless through the memorial weekend . Theres always risk. I mean youve got some crazy people with guns over there. So anything can happen. But i do feel the odds now are its going to be orderly. Russia will respect it. There will be a legitimate political government and thats all good for the market ps i wouldnt go to sleep. Speaking of the risk if you look at the vix which is sort of the fear gauge on wall street, were seeing lowest levels in a year. The volume has been so sleepy this year, were going into memorial day weekend but earlier wait and see, isnt it, on so many fronts. Where is this complacency coming from. A lot is from the geopolitical sphere, a sort of a calm settling in nothing horrible has blown up. In comparison to what it looked like a few weeks ago thats better. These numbers are coming in. The weather is still kind of an issue for the first quarter. Thats behind us. You know, comments from the fed and other places are sounding pretty good. Stay with us. I want to cross back. In fact, out to st. Petersburg where our very own steve sedgwick, part of the team there, that carried this live event, able to join us with a little bit more detail and a little bit more color on what was a fascinating piece of television. Over to you. It was extraordinary. You and i have worked with jeff most of last 10, 15 years. We know what hes capable of. Its an extraordinary piece of television between jeff and Vladimir Putin. Im slightly less optimistic on some points than your panel there. Putin was making the point, yanukovych is still the legitimate president and he wants to see constitutional changes. What he means by constitutional changes in ukraine is the fact that he wants to see more influence for bold power in the east and southeast of that country and that would mean kiev unable to exert control over what could well be a buffer zone within his own country. I think that was a subtle point about constitutional change rather than the election. Jeff was hammering away at him on a host of issues and whether he would work with the government once we had a new president and legitimate. Listen to the first exchange. Do you accept the legitimacy of the election that is going to take place on sunday in ukraine . Translator oh, come on, really. Hes a difficult man to deal with. Where did you get the guy. Of course the audience is a home audience and just like previous species weve seen to the doom of others it was a rap russ audience. A lot of subtle subtext as well. The fact that jeff got out of him we will cooperate with the new head of state was i think a progression and yes something to hold on to. But there are huge problems ahead for ukraine which are going to keep it weak despite, of course, imf and new money going into the country. Not least the fact that they get their energy, they get their gas from russia as well and theyve been given a loan, given discounts and the russians still want their money. Listen in. Give us our money back. You know, that would create very Good Environment for further discussions. So look lot of issues still. I think there was a few olive branches saying we still want to be a partner with the eu. We are reliable partner. But some subtle not threats nosily, but just implications from the fact that russia is saying it will be a swing producer to the east and the west and, of course, russia only has a finite amount of energy. It cant necessarily provide the same amount of energy to europe in the next decade if, indeed, it is getting 400 billion worth of gas to the chinese over 30year period as well. Also accusing the west once again of aggravating the crisis, of backing a coup detat from the legitimate president yanukovych. Jeff was at his best but mixed. Were looking at the positives. Markets looking at positives. But still big problems aheaedea politically and economically for ukraine. The relationship between mr. Putin and mr. Obama. I think that looks broken at the moment. Back to you. Worth pointing out. Steve, safe journey home to lond london. Steve sedgwick. Before we let you go lets mention the column you have out this weekend, the rise financially of the american artist Norman Rockwell or at least on the sale of the paintings and prices theyre getting. Its my memorial day theme column. There are these interesting similarities between the stock and art market. In this case it can pay to be a contrarian. Normen rockwell was probably most reviled by the critics of any major american artist of the 20th century and all of a sudden his paintings are selling for tens of millions of dollars. A painting that sold in 1995 sold for over 9 million. Almost 14 annual rate of return. Isnt that a reflection of the insanity of the art market which many would argue is the next rich Hedge Fund Guy who realizes he has so much money doesnt know what to do with it. Its not so insane. Like the Value Investors who look for underpriced stocks. Norman rockwell was always a great painter but because he didnt fit the fashion of the times he didnt sell. Not creating any Free Cash Flow. Kind of like gold. Not going to earn a return. People are comparing him to andy warhol. Walk into a room and theres a rockwell on the wall you know what it is. You also know it costs many millions of dollars. There is this prestige factor . And price guggenheim did a retrospective, george lucas owns them and spielberg. The stars align. Bring the glitter into it, you can create a valuable artist. If you have the means to get these to line up. Im not saying go out and buy an artist that nobody likes thinking its going to soar in pricep. Thats a risky proposition. Fascinating american story how an underdog like this can be the darling of the art world. Do one of the great jim stewart books in the art market then get back to me. That would be a good read if you spent time on you. Have a great weekend. Enjoy the holiday. Jim stewart from the times. Up next a pharma stock nearly doubling in value. Could have huge implications for the industry. More on that when we return. Tomorrow. Quick look at the weather. Nice day, beautiful tomorrow. Tomorrow is full of promise. We can come back tomorrrow. And we promise to keep it that way. 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During the mercedesbenz certified preowned sales event now through june 2nd, youll get complimentary prepaid maintenance and may qualify for a twomonth payment credit. Only at your authorized mercedesbenz dealer. Shares of one Pharma Company are absolutely soaring because of one single drug and the move says as much about the companys Business Model as it does about the treatment itself. Meg terrel back at hq on this company ptc we dont talk about. Much Smaller Company before today. Shares up more than 50 on recommendation of their approval on a drug in europe. This drug is designed to treat muscular dystrophy with no really good Treatment Options about 35,000 patient in the u. S. And eu with this disease. And you know, it can really be a horrible one. Affects boys, can put them in a wheelchair by the age of 12, fatal by 30. A need for Treatment Options here. This is whats called an orphan drug Business Model and its a very hot area in the pharmaceutical industry treating diseases with few patients who need Treatment Options. You can get a lot more patent protection on those drugs so they can be exclusive for a longer period of time and companies charge 200, 300,000 per patient for these drugs. Analyst says this could be a billion color drug. Its important in the context of the disease, there are a couple other Companies Working here so rep to therapeutics, ser rep ta had news, and they got a patent forn their drug. Per sen sa had bad news on a phase three tile. Their stock lost a lot of its value. They are still working the disease but seeing the good news from Ptc Therapeutics back to you. Meg back at hq. Straight ahead on the show gamestop getting a boost today thanks to strong xbox 1 and playstation 4 sales. But its the National Rollout of three new Technology Retail chains the best way to capitalize on it. 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Could mean less waiting for things like security backups [ apple crunches ] 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. Relief for hard pressed investors in gamestop. Xbox 1 driving hardware sales up 81 at the largest retailer of video games. Sales of used products rising for the first time in three years. Here for a cnbc exclusive is paul raines the ceo of gamestop. Paul, welcome back to the program. Thank you, simon. Its great to be with you again. Looks like the console cycle is working for you this time. It is, simon. Its incredible the consumers have adopted this new generation. Hardware up 81 . New Generation Software up close to 50 . Gamestop is driving most of the growth in this generation. You know, paul, inevitably the questioning comes down to will digital download unseat your bricks and mortar strategy. It was evident last night on the Conference Call. The bears like Pacific Crest will say look at their new Software Sales down 20 pp. How can you be suggesting in the coming quarter overall sales will rise 12 to 19. That doesnt add you. Sure, simon. We love to talk about why Digital Gaming is good for game stop. Thats sort of old thinking about music and movies. Gaming is different. Our digital receipts grew 9. 5 . Our businesses have robust growth. Were growing at a rate that is slightly faster than our top four publisher. Were participating in the Digital Sales as well. As far as this next quarter, you know, we see that as titles emerge in the back half there will be very strong option of new titles with next gen software and old gen declines thats where youve seen the gap in the first part of the year. Paul, the landscape is changing rapidly. I mean forget what might be happening with apple tv. We dont know. If you look, for example, at google which may be buying twitch for 1 billion, were 43 million gamers watching each other every month, the center of gravity could shift could it not towards google and somewhere else. No question. Thats why our company if you follow us you know weve driven a high rate of internal change. Were well positioned in console and Digital Gaming but by no means our only business. Weve doubled our revenues last quarter and were an apple dealer as well. We have knowledge of where gaming could be headed and something new happening in the technology space. We have a community 36 million around the world are rewards members and were trying to serve them with whatever kind of gaming they need. We like our position on that, simon. When i think of gamestop i think of a mall store or at least a physical store. How do you change the perception in consumers minds you are the go to place for Digital Gaming sp. Im not sure that we want to change your great procession of our great stores. We still have 6200 stores or so in 15 countries, but our power up rewards program has allowed us to introduce our good gaming customer to new Digital Properties like our congregate mobile site, pc download Business Inside our Gamestop Stores and console game business. Consumers are hybrid consumers. They like to do both. Weve been able to introduce people but we see the store as the place where the Community Gathers and we introduce you to new kinds of gaming. Paul, let me come on to the big idea, this aggressive rollout you have now, 300 to 400 new technology stores around the country. We saw it there a few moments ago, the brands from gamestop, simply mac from mobile, spring mobile, and cricket which is a prepaid phone operator, prepaid phone retailer. Why are you advancing in these areas when you see the likes of best buy or radio shack pulling back . Well, certainly weve competed with many of those players in the past and been very successful. On the first point i would say our customers are looking for a higher level of service and buy, sell, trade model. Candidly we are an exclusive partner and thats different from these other competitors. We are an exclusive an apple dealer at simply mac and our partners like our Higher Service levels and offerings. At at t were an exclusive partner. We have access to better offerings, new Services Like digital life and uverse and anything else that may come along and we provide in exchange a high level of service. The reason we Enter Technology brands because we saw that we had ajay sensies around our Gaming Business such as real estate, buy, sell, trade, great human talent, power up rewards and Balance Sheet and found we can be successful in being a family of specialty retailers that make your Technology Products affordable and simple. Whos bigger competition right now, walmart or amazon . You know, candidly weve gained share against both of those companies in the last if five years. So we are the smallest player in the video game space with the largest market share. I think were maybe one of the only ones like that. I would say theyre all important. We also have significant digital competitors. Were in a pc download business. We compete with players in the game space that congregate. In europe we compete. So gamestop is a place we can never rest and have to drive a lot of change. We have massive competitors. Before we let you go, i watch i spent hours going through the investor day presentation you had last month. Yes. Throughout that you teased your audience about the arrival, imminent arrival of more wearable products and said with simply mac your team spends a lot of time with apple in cupertino. Do you expect apple to launch a Virtual Reality helmet or headset for 3d gaming . Boy, simon, i cant go there on discussion of product that havent been launched. I will say weve been in conversations with the folks at facebook about oculus rift and that headset and we sell a lot of wearables like fit bit and jawbone at simply mac and spring mobile. I think the point we make is the world will have more and more connected devices and were going to be in the middle of selling new ones and letting you trade your old ones we can refurbish and resell. If you look at the landscape of the businesses and Consumer Electronics should apple be in gaming in some form . I think apple is one of the premier Technology Brands in the history of the planet and i think whatever product they cant wa want to get into will be successful and we will be pleased to provide a service in distributing their products and any other ones that come along. Paul raines joining us, ceo of gamestop. Want to take a moment and check out the markets. The s p 500 trading above its record close set back in may of last year and within striking distance of its alltime intraday high. We have a bullish vibe here with the dow transports trading at a record high with the Dow Jones Industrial average up 53 points as we speak heading for the first week of gains for u. S. Stocks in three. With that market setup over to dominic chu for a quick market flash on southwest airlines, dom. So sara, like you said, the s p 500 is just 0. 2 about a 5th of a percent from an alltime high. Love is in the air. The company is trading at alltime highs to levels dating back to its ipo in june in 1971. See there shares up almost 2 on the day. A nice run for those airlines specifically, vare, southwest. Back over to you. Trading at an alltime high. Thanks. Still ahead the rumored google gadget that could turn a hallway in your house into a Virtual Reality game space. More on that when squawk on the street comes back. [ male announcer ] Tora Bora Fallujah argonne khe sanh midway dak to normandy medina ridge the chosin reservoir these are places history will never forget but more important are the faces we will always remember. But more important are the facan you start tomorrow . Mber. Yes sir. Alright. Lets share the news tomorrow. Today we failrly busy. Tomorrow were booked solid. We close on the house tomorrow. I want one of these opened up. Because tomorow we go live. Its a day full of promise. And often, that day arrives by train. Big day today . Even bigger one tomorrow. When csx trains move forward, so does the rest of the economy. Csx. How tomorrow moves. 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First of all, for cnbc to have putin on this morning. Everybody was glued on to it. Made a about boatload of news. Your impression . Weve talked about putin and his stance. Pretty much as and hes invoking, his stance on ukraine, everybody forgets history, i dont forget history sos easily, james baker and others made a commitment to gorbachev days. Rudy of germany there would be no movement east of the german unification of nato. We could argue who lies, whos judging, misjudging. But on a simple Foreign Policy level his arguments with nato are grounded in facts. Well to some extent. Right. Everybody has a different interpretation of those facts. But the two plus four talks they were called, amazing nobody has gone to jim baker here, about as missing in action as our good friend gerhard schroeder. There are more arguments here than meets the eye and putin is invoking that. Switch to the financial angle. Whats the ruble versus the dollar. Five month highs. 3410 against the dollar. 3390 the 100 day moving average. So that tells you the sanctions or whatever was going on has had no bite whatsoever. Markets are important these days and i tell you what, weve talked about, could argue whos right, whos wrong but in the end i dont think putin is going to march through europe. This is about energy, boundaries and nato. We were talking theres sort of a cuban missile crisis type of analogy isnt it . Everybody thinks the u. S. Back the soviets down during the missile crisis. There was another opposite site at the rate our installations came out of turkey people argue thats what khrushchev was concerned about. Also a quid pro quo, we have to find it. Lets switch gears a bit. June 5th, the ecb meeting, this is huge and some of the returns coming in on the elections in europe like the netherlands. To summarize we should have an idea of who these parliamentary officials are by monday. How do you think it plays out on june 5th . Weve seen really pull badly in the netherlands. If france and italy especially go farther to the fringe parties. What about sarkozys letter is. That was an act of desperation. If they poll stronger than we thought, you can look for some aggressive action from the ecb. There will be pressure from the french. French want what . 10 devaluation. Theyre on record of saying that. When you dont control your Monetary Policy they have to hope for something hoping to get political leverage to drive the euro lower. At this point its not an Interest Rate game. Its about the Foreign Exchange side. This is the issue ive had with france. We can talk about the eurozone as an economic power house but in the end the french keep reverting to the manipulations not that we dont do the same thing. It really is going to be a beggar thai neighbor argument in europe wouldnt you say. Everyone trying to depreciate the currency and the g7 allowed the japanese to do that. We go back to october of 2012 after the g7 meeting when they gave a wink to the japanese you to do that. Same in europe. Especially with deflation in the southern peripherals its a very dangerous thing. So were out of time. Hope you have a safe and happy memorial day. We may have issues but we live in the greatest country on the planet. Back to you, sara. Thanks very much, Rick Santelli. Up next on the program why memorial day is going to cost you a lot more. Jane wells up at the crack of dawn at the grill. Shes been there all morning. Jane . Love that apron. Never too early to start grilling, simon and, in fact, were looking at the meat while im checking my fewertures. Thats how we grill. How long before high beef price comes down . Well have that after the break. Who do you work for . Your boss . Yourself . Your parents . Your family . At baird, what matters most to you. Matters most to us. As an Employee Owned firm, our Financial Advisors have the freedom and resources to realize a plan to fit your familys unique needs. Well listen. Well talk. Well plan. Baird. [ 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. My mom works at ge. Carstheyre why we innovate. Theyre who we protect. Theyre why we make life less complicated. Its about people. We are volvo of sweden. 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. Barbecues across the country will be fired up this memorial day weekend but its going to cost more this year. Jane wells has the grill going this morning. In case i dont get to say this to you later on if that is your home you have great lawn. Oh, thank you. It is not my house. It is producer jeff daniels house. You could perform surgery on that lawn or on this patio. It is pristine. It is a beautiful place. I will let him know. It you have a beef with beef prices, get used to it. Sky high prices are expected to be with us for the foreseeable future until demand tapers off which isnt happening yet. This time of year the restaurants start to compete with consumers for barbecue grilling meat. Why is beef high . Drought starting record feed prices, farmers cut back their herds now the feed is low and beef prices are high, cattle ranchers will build their herds back up. Dick rode whos been in the meat business says dont expect any relief soon. Chicken can be raised in five weeks. A sou will have two to three liters a year. Always two. Sometimes three. Theyll have 10 to 12 piglets. So consequently they can turn the shortage of pork around the about six months. Cattle takes two years. Now the usda reports meat in freezers down 17 from a year ago. How big is chicken . Chicken and cold storage is down 15 to lowest level in supplies since 1995 when production was half what it is now. Wings are down 27 . Jpmorgan says this suggests, quote, a floor in prices. A floor. Until production increases and or demand slips. They see this as a positive for Sanderson Farms which buys feed, now at low prices, and sells meat now at high prices, also kind of positive for tyson, slightly enough for hillshire. Guys, back to you. All right. Jane wells, let you get back to your grilling. Love the apron. Thank you. Fabulous. Jane wells, looking fabulous on the eve of memorial day. Cooking up beef. Now from steaks to soy protein, meat prices seem a little too high for you for summer barbecue, you might want to consider the meaty texture of a plant based burger. Demand for Meat Alternatives is growing and gardein is one of the meatless product makers taking the trend to the masses. Yves potvin is the founder of gardein and the man said to have created the first veggie dog more than 25 years ago. Thats quite a claim to fame. Good to have you. Tell us about the popularity of veggie veggie dogs and other meatless meat. Well, you know, with gardine has been on a rapid growth, as you can imagine. Anytime for recall, hysteria for e. Coli, or the price of a meat goes up, theres a consumer that is always on the threshold, looking to say, im ready to make a switch. And most of the consumer are flexatarian, looking to diversify the meat intake, so memorial day weekend is the perfect day to try. Given what jane was telling us, supplies are low, prices are up. Is this a cheaper alternative . Really, how much cheaper . Well, actually, plantbased protein is very stable in price. Our product has not increasing price in five years, and just because we use a variety of protein. We use soybean flour, wheat flour, aquino flour, so we diversify the source of protein, therefore we can offer an even price on a regular basis. Whats the nutritional value of what youre doing . How does it how does it stack up . Is it just people are chasing something that might look or taste like meat, or is it actually delivering the nutrients . Actually, our product delivers 28 grams of protein, is low in fat, no trans fat, no cholesterol. At 75 less fat than traditional hamburger. So it not only tastes good and i think thats the key, important thing, is the product like gardine deliver on taste and texture, and thats where people are switching. So it still contains fat. When you say its 75 less fat, theres still fat in plantbased protein substitutes. Yeah, there is fat. Were not fat free. But its good fat for you. Theres no its not trans fat. Theres no trans fat in our products. But instead of having 20 gram of fat, you might have 5 gram of fat in our product. Clearly, americans are becoming more healthconscious, but they are still meat eaters to the core. I was looking at recent gallup polls, for instance. Vegetarian numbers, 5 , vegan 2 of americans. Do you really see this becoming mainstream . 38 of the American Population have meatless item once a week. And that has doubled since the last five years. So people are not turning from carnivore to vegetarian or vegan. People are turning more to be flexatarian. Anyone Health Conscious is looking at the label now and saying, lets see if i can introduce plantbased protein in my diet. I guess the real question, what it comes down to, hows the taste . Can you tell the difference . I like it. Im into it. I dont like meat. I think it would be a turnoff to heat plantbased meat. Yes, absolutely, but you have to try it. Anybody who try our product, 50 of our population buys the product again. And so, thats quite a statistic when you calculate that chocolate is 32 . So you have to try it, and i think, you know, weve just won an award from better homes garden as best new frozen item. And won an award from the National Restaurant association. Our company is winning awards every year for greattasting product. So you have to try it. Can you tell the difference between the fake meat and the real stuff . Hes a french chef. Of course, he can. Do you think that yes. Yes. But, you know, i quite often compare our industry to the car industry. I consider our product like more the hybrid or the electrical car. So, yes, you can see a difference. But, you know, its a very slight difference, and its actually tastes very good. Has a great texture. So. All right. Sounds good. It certainly is an alternative for some americans dealing with the higher prices. Thank you for joining us. Thank you, a great pleasure to be here. Lets send it over to jon fortt with a look at whats coming up on squawk alley. 140 characters or less, jon. Okay. Hps threat from the cloud. What might apple really want from a beats deal . And the priceline model for movies. Thats 110 characters. Well see you coming up on squawk alley. Financial noise financial noise financial noise sfx sounds of marching band and crowd cheering 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. You are gonna need a wingman. And with my cash back, you are money. Forget him. My Airline Miles will take your game worldwide. What im really looking for is i got two words for you rewards. Theres got to be better cards than this. [ male announcer ] theres a better way with creditcards. Com. Compare hundreds of cards from all the major banks to find the one thats right for you. Its simple. Search, compare, and apply at creditcards. Com. First rounds on me. Thats keeping you from the healthcare you deserve. At humana, we believe if healthcare changes, if it becomes simpler. If frustration and paperwork decrease. If grandparents get to live at home instead of in a home. The gap begins to close. So lets simplify things. Lets close the gap between people and care. Welcome back to squawk on the street. Check out whats happening with aruba networks. Shares are taking a hit after reporting earnings that matched analysts estimates with sales that beat, but Gross Profit Margins were a big question mark. Analyst at jpmorgan said the reported margins with below its estimates. They reiterate a sell rating on the stock. Analysts at northland encourage a buy on this weakness, they have an outperform rating and 27 price target. Back over to you guys. All right, dom, thank you. I want to point out here, the russell everybody has been watching the small caps, underperforming the Broader Market on this day where were seeing gains across the s p, nasdaq, and dow, we are seeing the russell smallcap index actually outperforming, up about. 5 . Now, if you add it all up, the pain is still there. Its down more than 7 from the record high back in march. But a lot of people are talking about now perhaps the worst is over for these smaller stocks. Stan greenhouse put out a note last night. The Broader Market, in the meantime up, and heading for the first weekly gain in three weeks. Were also near record highs. Record territory on the s p 500. Of course, top two gainers on the s p 500, hp up 6 . Gamestop up 4 . The ceos of both of the companies, of course, respected ceos, have been on the program this morning. In a many sense, sarah eisen, jock done. Got it covered. Time for the memorial weekend. Lets go out there. Well grill some meatless meat. In the meantime, lets send it over to kelly evans and squawk alley. Thank you, sarah. Thank you, simon. Guys, have a great weekend. Good morning. Its 8 00 a. M. At hewlett pack headquarters in palo alto, california, headquarters. In for carl today and squawk alley is live. And welcome to squawk alley on this friday morning before memorial day weekend. A long weekend, but already a busy morning here. Joining me, jon fortt, kayla tausche, or should i say, im joining you really . Its good to be here. We are excited to have you. Yeah. A lot of fun here, and thankfully, you can be a part of it, too. We have to start with hewlettpackard right away. Shares up 6 . They started down this morning, but in rally mode. Heres the chart. Hewlettpackard trading at 33 and change, up almost 6 . The company said it would eliminate between 11,000 and 16,000 jobs as part of its Restructuring Plan. Hewlettpackard posting earnings yesterday, and heres Ceo Meg Whitman talking about the cuts in an exclusive interview this morning. So while no one likes to reduce the workforce, this will be good for our customers, and it will be good for hewlettpackard. It will make us a stronger company. And obviously, you know, we will be able to create capacity to invest in the growth engines of this company. Jon, why are the shares rallying . Is it something meg said . Well, i think, maybe. But its also a testament to how undervalued hp has been over the past couple of years. Keep in mind, even at these levels, its at about a