Transcripts For CNBC Squawk On The Street 20141006

Employment report. The bailout trail back in court. Bernanke, paulson, geithner expected to take the stand this week. A live report from washington. And bitcoin loses a fifth of its value over the weekend. Well explain why and what it can mean now for future of a controversial crypto currency. First up, shares of hewlettpackard jumping in the premarket. Confirming the company will split itself into two publicly traded companies. Services businesses take the name hewlettpackard enterprise. Davids going to have a live interview with hps chairman and Ceo Meg Whitman in moments from now. Well find out when this all began and why they couldnt have done this a few years ago. A lot more detail. You know, carl, for broader takeaways here, it is interesting focus on of course following announcement from ebay last week, and you know connection between these two companies, john donohoe taken over from meg whitman as ceo at ebay. And also in the interview i did with him last week, citing so many of the same reasons that meg whitman cited to me when we were able to speak late last night about this perspective split, namely agility, increasing speed of the marketplace in terms of responding to needs of customers. One has to wonder with ebay, with hp, a much more significant split, creating two fortune 50 companies, whether going to see other companies perhaps consider it as well. This whole idea of creating more agility, creating more focus, so many things that you hear will that translate into other companies that also feel now is the time . Activism, i think that it plays a role on both sides here. Ebay we had an activist, carl icahn, beaten the first time but might have been another activist, perhaps at ebay. Here the activist was chairman of board until not long ago until he had to resign due to health reasons. The shadow of activism is casting a long oning activism is casting a long shadow, i should say, over boards who have perhaps are feeling more pressure to act, more quickly than they might otherwise. Does it drive growth . Thats the big question. Ibm shedding its business. Does that increase focus drive growth or a way to ramp up more m a for each of them . For instance, people looking to emc. I dont i dont know. I mean i guess we will see whether in fact growth comes from these decisions. Lets get to it joining me if an exclus interview, hewlettpackards chairman and ceo, meg whitman. Always good to have you. I know its been a few long nights for you. Meg, weve talked many times, in fact, every quarter, sense you took over as ceo, happily, we have spoken. Yeah. You have talked about one hp often and you have talked about the power of the combined forces at hewlettpackard. And now, of course, talking about the combined power of having separated them. And so im left to wonder, as others are, admission in some way your turnaround has not succeeded . Actually, quite the opposite. Today is only possible because the turnaround has succeeded. Think about what we have accomplished over the last three years, a rebuilt balance sheet, an innovation pipeline that is significantly improved over three years ago. I would argue best in class in the industry now. Inspired workforce, new leadership team, renewed confidence of partners, customers, shareholders as well. But we have to gather ourselves as one hp. But now were in the position to take advantage of whats going on in the marketplace and position these two companies for growth. They go after quite different Market Segments and we now have the opportunity to align rewards and results, to respond to customer needs faster with these two big companies. Were excited about this. I think its going to be better, offering for customers and partners, Career Opportunities for employees, and we believe it will create real shareholder value. No stranger, of course, to those who followed the company closely, as a possibility. Yet you chose not to do it when you took observe, to do it the year after, the year after that. Why now . First we had a lot of work to do to get hp in fighting shape. A tremendous amount of repair work, gathering ourselves to be able to compete in the new world order. And now, the time is right as we think about what is the next phase of this turnaround . Were in year three of a fiveyear turnaround. Your call that fy15 was an accelerant year, we think the best tactic to continue the turnaround journey and position hp in into great new companies that are real scale and have a chance to make a difference on a go forward basis. Before a few months ago we were not in the right position to do this. This is a very big undertaking for a company of any size and scale. We now have the leadership to go to market, the innovation engine, the balance sheet, and the confidence of our various constituencies that allows us do this. So, it is the right time now. And it wasnt when i first got here. I dont even think it was a couple of years ago. Well, you know its funny, it may not have been as little as six weeks ago, you and i were sitting on this very set, talking about your most recent reported earnings. And i asked you, you know, what about the idea amongst your board, perhaps, that if the turnaround doesnt work, will you consider splitting the company . Here was your answer. Our objectives to execute the turnaround strategy that we laid out three years ago and were working very hard on that. But as ive said to you before we obviously have to prove that thesis. But we believe providing end to end solution for customers is a very important Value Proposition. So, again, weve got to prove thesis but feel good where we are in the turnaround. So, meg, did you no longer prove the thesis that providing an end to end solution for customers is a very important Value Proposition . Listen, we think this is the best alternative for our customers and shareholders. The market has changed dramatically in terms of speed, and were in a position now where we can pursue the turnaround to hewlettpackard, by the way the brand remains on both companies in one form or another, and were in a better position to get focus companies who can respond more quickly. Think about this for a second. The competitors for printing and personal systems business are almost entirely different than the competitors that we face in our enterprise group, our Enterprise Services business, and our software business. So more focus, more agility, tying rewards to results. We think is going to make a big difference and propel us on the next level of the journey on our turnaround. Were so pleased with where we are today because, as i said, if we had not done the hard work, if we hadnt executed the turnaround as one hp, we wouldnt be in a position to take advantage of the next opportunity. You know, meg, id like to explore this idea of the speed of the marketplace because it is something i heard from john donna hand, the man who replaced you as ceo at ebay, last week in articulating the reasons to split paypal and the marketplace business at your old company. What does that mean when you and he both refer to the speed of the marketplace increasing . Give our viewers some sense to what youre talking about in the real world. Yeah. So every 10 to 15 years in our industry there are big, enormous tectonic plate changes where things speed up, profit pools are in play, new competitors emerge. You can go all the way back from the mainframe to the Client Server environment, Client Server to web 1. Oh i had a front seat at revolution i saw the speed happen. From web 1. 0 to web services, and mobility, were on the cusp of another enormous change. Everything about how compute is being bought, paid for, sold, applications are written from, you know, a licensed model to a sass model, how employees and customers interact with technology. And you can just see the pace of change. And theres technology that is enabling that change that wasnt available four, five years ago. Whether that is cloud or the ability to take huge data sets and gain insight. So we have to take advantage of those changes. And if youre not careful, youll be disrupted and youve got to stay on your toes and be able to respond much more rapidly when the industry is in a more normal state. And thats, by the way, great thing being in technology. But youve got to be set up to go grab those opportunities and make sure youre on your front foot. Right. To be fair, though, you may say these two companies will be more agile, but theyre enormous, talking about enormous employee bases and 57 billion in revenues on one side, 58 billion on the other. Are they still too big to be able to response to the Market Opportunity . No, theyre not too big. The good news is they still have scale, distribution scale, purchasing scale, go to market scale, but they are now more focused, first, hp, hewlettpackard enterprise will be completely now focused on the enterprise space. Really on the strategy around new technology for enterprise, while the printing and personal systems business will be some consumer business as well as the enterprise business, but in the device and printing area which has different characteristics. By the way, both companies have incredible innovation road maps and he i think theyll be able to pursue road maps better than we are currently configured. And you have to remember, continuity of leadership is an important thing here. Ill still be the ceo of hewlettpackard enterprise, and i will be the nonexecutive chairman of the board of hp ink. Ill make sure where there are insert gis that we can take advantage of, whether supply chain other things well take advantage of that, but where the companies are better served to go 100 miles an hour against respective markets theyll be able to do that as well. Meg, youve talked about fiscal year 15 as being year after acceleration in the plan you put in place three plus years ago, a fiveyear plan. In your Earnings Call this morning, and associated materials, youve indicated its going to be a flat revenue year in fiscal 15 versus fiscal 14, Constant Currency headwinds but flat. Was that a reason that youre not photog see that acceleration that you are now pulling a lever of the splitup . No, it wasnt. Yeah, we said that 2015 wed flat in Constant Currency without Enterprise Services the company would grow. The Revenue Growth was not at issue here. Really it was, whats the best way to set businesses up to compete for the long term . How do they become more focused competitors with a customer focus that is unique to the markets in which they serve . So, we actually have a positive outlook for 2015, and we, you know, think these companies can grow and beyond 2015, into 2016, 2017. So the revenue flat revenue 2015 was not part of the equation. It was not. So it wasnt as though no. Were not going to hit the original goals i set out years ago, therefore weve got to do Something Else . No, no. This we undertake a Strategic Review of the Company Every year with the board of directors and we had seen the market change, we had seen how much stronger we are, how much stronger the company is, how our go to market capabilities have improved, innovation engine and felt like this was the right time to take advantage of setting up, too, as you said, Scale Companies but more focussed and more nimble. Meg, separately, but along with todays announcement, you updated us on your restructuring efforts, which began in 2012. Under that plan originally 36,000 targeted layoffs, you moved to 45 to 50. Now today youre at 55, another 5,000 potential layoffs at hewlettpackard. Is there going to be more from here . I would think particularly when you have you leading one company and another leader of the other company focusing on those employment ranks, is there even more layoffs to come beyond this additional 5,000 for hp . Well, pleat give you the context of the reshaping of the workforce at hp. As you recall, what weve done over the last three years is we have invested in i. T. Systems, redesigned processes, we have changed our goto market, we have focused our r d while we have at same time r d spending increased. We are seeing results of the i. T. Investments in that business process reengineering and even more opportunity for efficiency. And efficiency is another watch word for companies today. We live in a very competitive market. We have to have the leanest, most Effective Organization that we can have. So when we see opportunities, we obviously need to take advantage of them. And it makes us stronger and a more competitive company. So, we, i think for 2015 in terms of this restructuring we are done. When you split companies apart, often there is again realignment of the workforce, but well see how it goes. Well know or. Were going to take each business now and say, knowing what we know now, whats the cost vuk tstructure, how to go market, how to leverage the supply complain between the two, and making sure that we set these two companies up to win. Its one of those great opportunities that you have to really say, whats the right cost structure, right focus for these two companies as they go off to win in their own markets. Well, sounds to me, from that answer that conceivably there are going to be more job cuts to come for the companies. We have to organization the companies to win in the market. Were more efficient than we were three years ago, as you can see, but we have to set companies up to win, that is our mission. You were asked on the call about dissynergies. So the question is, what about any dissynergies now as a result of agreements between two sides of the businesses . And, as you say, goto market power of bringing a fuller portfolio of products to your customers . Do you lose any business . So heres the thesis on d dissynergies, recall back in 2011, we were spinning off potentially, it wasnt even a definitive, the company was potentially spinning off pcs, and the biggest dissynergy was the brand because printing was staying with remaining company and pcs going off on its own, there needed to be a new brand for pcs. Its costly to build a new brand. This time we are separating our printing and personal systems business, which is where all of our consumer facing businesses are, they will be hp ink with the blue logo, so they will not have to build a new brand. On the enterprise side, hewlettpackard enterprise. We take advantage of the hewlettpackard brand there. So the good news is, thats one big dissynergy we wont see. Supply chain was another d dissynergy, not as big as the brand, but well mitigate that potential by having a supply chain agreement between these two new companies. Revenue dissynergies, there may be some because we did get some benefit from going with a full portfolio, but we think thats really manageable. I. T. Has to be split, that will be a onetime cost. But this will give both companies the chance to have a clean sheet i. T. Organization that is uniquely suited for their business. So, there will be some d dissynergies, but lie tell you the teams are committed to working off the dissynergies as past as humanly possible. Its a different situation than it was august 2011. Meg, youre going with the hewlettpackard enterprises company, as its ceo. A, why did you choose hewlettpackard enterprises and, b, why not go with a name perhaps thats different on that side . I get hp inc, keep the branding but a different set of customers . Why did you choose that side to go with ceo and are you going to stick with the name . Yeah we love that name. Hewlettpackard enterprises and hp inc both have the strength of the Iconic Company that everybody recognizes worldwide, Everybody Loves hp, our customers from the beginning have said we want hewlettpackard to win. So i think that was the right decision. And i decided to, with the support of the board, go to hewlettpackard enterprises because i have a passion for the enterprise. I have a passion for the new things that are happening in cloud, the data, security, mobility, and converged infrastructure. We also had a fantastic executive who has deep domain expertise in the personal systems business and printing business over the last couple of years, deon weissler. Where are my skills best suited . Where is the breadth of the talent and the board and the Management Team felt like this was the right answer. And, again, yes, i am going with hewlettpackard enterprises but also, as you know, being i will be nonexecutive chairman of hp inc, ill make sure that that cups off to a good start as well. Finally, you have been in the job over three years, as ive said. Youve talked to me oftentimes on air about the complexity of the organization. You know, is this a conclusion, then, based on your decision to split the company and the boards that hp was simply too big and complex to effectively manage . Well i wouldnt say it that way exactly. What i would say is these two entities are better suited to compete in very rapidly changing markets with two quite different customer bases, even within the enterprise, and and we will be two simpler companies by reducing scale. But i think the major thing is we are strong now because of our turnaround efforts, were in a position to undertake this, and by the way, its an enormous undertaking in a way that i know we wont miss a beat with customers and that we will make sure that we do this in a really planned and thoughtful way. And i think weve set up two companies that can win in the future in their markets and thats very exciting. Meg whitman, as always, very much appreciate your willingness to come on and talk. Meg whitman, chairman and ceo, least for now, and for probably another year or so of hewlettpackard. Meg, thank you. Thanks a lot, david. Gra great to see you. Carl . All right. Fascinating interview. A lot of people commenting, no matter what you think of her strategic or tactical views, yeartodate of 25 , two years up 258 . You cant argue with what shes done with the share price. No. I mean, to the extent that she discusses putting hewlettpackard on the right foot to then pursue this split, youd have to argues that has been reflected in the stock market. A company that had a great deal of debt and little cash flow, for example, and now generating a lot of Free Cash Flow. I can give you the numbers. Numbers are significant, Free Cash Flow yield, attractive, many would say. That goes to the Financial Health of the company and the firm footing shes been able to put it on. You painted it at the beginning the lead indicator for what is happening in tech. Others were doing this, ibm, notably way before. Talks about rapid tectonic speed of change in technology, cloud or licensing, and that was not apparent in august 2011, thats not strictly true, is it . Theyre late to the game on this, david. That was a question for ondonohoe as well, when it came to paypal and, come on, havent you see the future . Its not as though things have change that dramatically over the last year. Certainly you could have seen. Its a fair point, simon. If you believe that they truly felt like they needed to get these businesses in a position of strength to be able to do this, then perhaps you understand regardless of what changes they were see why they close now. The stocks down 25 over the last 5 years and from the highs. When we come back, which rebel leaders and innovators expected to change the face of business over the next 25 years . The cnbc next list of trailblazers. Take one more look at premarket as dow comes off its best day in seven months. More squawk on the street in a minute. Greenline do for you . Ity 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. Lets bring in art cashin over the ubs to talk about the action today but some of action last week. Good morning to you. Good morning. The dow had its best day in seven months but the worst weekly loss since august. How much work is there still to do for the bulls . I think theyve got two challenges, s p resistance around the 1980 area, 1978, 82, and above that 1985 to 88. They get through those, they can say theyve reclaimed the high ground for sure. And move on from there. So from a technical basis, you know, its getting back to what is resistance had been form of support that was broken in well take a break and come back to art after that. Very busy week, of course, on that. Tag sooner or later, Everyone Needs a helping hand, or a helping paw so mattress discounters good deed dogs is raising money to help train Assistance Dogs for wounded veterans. Veteran i live independently because of what all it provides for me. And its huge theres a lot of wounded, ill, and injured out there just like myself, who just maybe need a little bit of help. Tag you can lend a helping paw too. Give at mattressdiscountersdogs. Com or any mattress discounters. Mattress discounters good deed dogs helping dogs help people. Welcome back. Here with art cashin at post nine, a few minutes before the opening bell. Discussing last week, as for this week, Earnings Seasons going to start to kick into first gear. A lot of fed speak. A lot of fed speak. Ten speakers, by my count, fed minutes. Dealing here with an earnings story for the markets or a macro story . Youll shift into earnings, people will look to see not only Third Quarter results but the outlook for the fourth quarter. Here on the floor, there is some lingering concern, not in the markets, about a geopolitical event, and for example, if isis were to move into baghdad, i mean, we still have a very large Embassy Staff there, over 1300 people, that could send real shocks through the market. We dont think youre on fully steady footing quite yet. Fridays rally, really helped cut what was a bad week. Still second weekly decline, but that jobs report, but was it a game changer as far as u. S. And global fears, the fact that money continues to pour in here as our economy outperforms . It certainly encouraged people to believe that the u. S. Is still the strongest in the whole neighborhood. But again, there were distortions in there, out of 248,000, 230 were people over 55. [ bell ringing ] thank you very much. Good to see you. Art cashin of ubs. Theres the opening bell. Here at big board, Dollar General celebrating its 7 path anniversary and over at the nasdaq, new jersey delegation made up of four u. S. Congressmen. Keep your eyes on movers. David, hp a big one. As you mentioned, will result in two companies with 50 billion in revenue, huge. Yeah. 48 and 59, i think 48 and 49 in the fortune 50. Untested ceo will be running one, know meg whitman the nonexecutive chair of h hp inc. , the pc and printing business. Stock up 5 . We didnt talk about it in our interview but also contending that the peer multiples on ear side higher than what hp gets credit for and in separating them out and giving them purer play, if you will, they will garner higher multiples to their earnings in the stock market, hence higher price. That, of course, oftentimes a reason for doing splits, although meg whitman did not cite that specifically as a reason behind this. Talk about care fusion, one of the top gainer, the top gainer, in fact on the s p 500 at open a big deal going in medical equipment players today. Becton paying 58 a share in cash for care fusion, both involved in pumps and cath they ares and ininfusions. The acquire and acquiree are gaining at the open there is belief theyre moving into fresh areas to help hospitals better deal with insurers on the one side and drugs on the other and therefore have resources to better manage both and therefore the future could be brighter for both. You see care fusion, up 24 at the open remember the offer is 58 in cash. 6 premium to fridays share price in more importantly to your point, simon, becton stock up over 7 . One of the things weve seen consistently in the market is that oftentimes shares of the acquiring company go up. You cant understate how important that is psychologically to the team doing the deal and sending i signal to other teams that might consider doing a deal, my stock price is going up, ill be rewarded, and that does build momentum for a busy fourth quarter, at least judging from people i speak to in the industry. They expect it will be, but well see. Certainly for ipos, a lot of ipos for the fourth quarter. Eight alone this week, including dave and busters which we think will price on thursday. A lot of you grades and downgrades. Downgrades barclays cuts colgate to equal weight. Peers playing catch up, thats down 2 . Mcdonalds, cut to equal weight as well. Target moves from 102 to 96, talking about weakening fundamentals, market share loss in the United States, even as they do that, they take burger king to overweight, keeping price target at 38. The food business the burger king upgrade, cite the deal with tim hortons, like the synergies of that, analysts are coming around to than they like that. Tim horton is growing and exposure internationally, especially canada, a high point. Mcdonalds continuing losing share and thats the analysts read. Theyve found it hard to find a meaningful catalyst for a turnaround in mcdonalds sales which the community has been waiting for. This consistent rumor of an activist in mcdonalds, but i havent been nothing confirmed. I havent been able to unearth if there is one, who it might be, if there is something going on. Certainly something the market keeps in mind, ive heard that quite a bit. Dont forget years ago bill ackman was in there, failed largely to get mcdonalds do what did they do . Change the menu in. Wanted to take owned and operated stores and create a reit, if memory serves. He was involved at the time which he got involved in a couple of other situations, notoriously, jcpenney, which did not work out for either one. Hanging in there so far this year. Raised 3 billion in permanent capital, holy grail. Perhaps push for management shakeups. Thompson failed to turn around declining samestore sales growth. A big ship to turn around did he get dealt a tough hand . Who, ackman . No, thompson. Thompson, its like following babe routsa babe ruth, skinner had a nice run. Keep your eye on hog, rbc ups to outperform, one of the best gainers this morning, reports called keep calm and harley on. He new full suite of products. Thats photog result in share gains. Think the valuation is reasonable. Take a look at oil today, too. 88. 74 on west texas, brings to mind ubs upping conoco to a neutral. They cut their price target to 78, saying valuation is closer to peers. But west texas closed, settled 90 for the First Time Since 2013 on friday. Talk about, if youre a skeptic on the u. S. Economy, one thing you have to consider is benefits of having energy this cheap in the country. Its interesting to watch the Energy Companies roll out earnings, revenues unpressure with the low oil gases. Theyve managed to keep prices up here. Energy companies are among the top ormperformers on eps despit the lower oil prices. We havent mentioned german manufacturing. Im curious to get your take. Weve talked about multinationals when jim is with us in the morning, saying stay way from them. The economys slowing. Europe may be in recession. How much do we read into the numbers . I dont have the figures but we do have a manufacturing report for germany, manufacturing key for europes largest economy. Factory orders amiss. But the month before was very good. So if you even it out, yes, it may not be as bad as it look. Whats interesting, though, to the point you make, about the broader move that youve had on the dollar here as we go through earnings season. Youve got three key policymakers of the fed amongst the ten that are going to speak this week. What they say about the dollar, of course, and the negative impact on the economy and therefore the likelihood that rates could stay lower for longer may be very important. That may be a key theme, that and wage growth, as they move the goal posts so they dont have to raise rates. Last three months, during the earnings period, dollar up 8. 5 versus the ear euro 7. 5 over the japanese yen. Will that hit earnings in the Third Quarter . There is a lag time. Trog hear what they have to say about guidance. Forward looking statement. Any ceo will hedge their bets and say subject to move on the dollar, including mcdonalds . Bob pisani, see whats move on the floor. A modestly positive day. Most major indices to the upside. Whats go on in brazil because the Election Results there were a bit of a surprise, not only is bill marusoff. In a runoff, but mr. Neves. The candidate for the people who are in favor of moving the stock market to the upside. Petrobras, biggest stock, up 13 . Mr. Neves promises to be more investor friendly and loosen the grip the government haze on petrobras phone company up. Ebreaer up. Ewz, you can buy brazil in the form of exchangetraded fund. Theres a three month. Its plunged in the month of september, as pooling fairly well. This surprise has got people talking and rare you see the brazilian market up 7 in a single day. Well keep an eye on that. Iron orr chatter over the weekend. They want to ramp up iron ore production by 30 . This i intuitive but makes sense in the world of the mining industry. The idea now is increasing production, you can reduce costs overall. How do you do that . Use more driverless cars, fire a lot of people, lower costs overall. So costs are around 80 a ton, down 25 this year. A lot of lower cost producers are ones that survive, like a rio tinto. Others are in trouble. If you drive costs down by increasing production, youre fine. Theyre talking about driving costs down towards 30 a ton from 80. That would be remashable. Maybe towards 20. So this reducing costs ramping up production, does make sense if you are one of the last survivors that are out there. You can see, building up fractionally. Earnings season, you were mentioning that, key thing here is well hear good things from companies which big u. S. Based operations, but its little rougher outside the u. S. Remember, 50 of revenues for the s p 500 occur outside the United States. I think well have cautious words for companies that have heavy expose sure over in europe. Theres the vanguard vgk, etf for europe, thats trending down. Youll hear that as well. Another issue out there, and thats china, softer as well. The world bank was talking about lower gdp production than expected for this year as well as next year in china. Plenty of companies between europe and china that have significant exposure in the s p 500. Thats a bit of a achilles heel well be hearing this year. Put up yum, yum brands reporting tomorrow. Great example. 53 of yums revenues are out in china. Only 23 of yums revenues are inside the United States. I think thats going to be a major issue from them, remember, yum struggled since they had problems with poultry supplier back in december of 2012. Probably see samestore sales down 10 or more, estimates vary all over the place. Talking about numbers in china. Thats fgoing to tomorrow, thats a key. It wasnt just yum, even mcdonalds reporting issues going on in china. Keep an eye on that. The dows up 82 points. Back to you. Thanks very much, bob pisani. If youre joining us, our lead story this morning hewlettpackard, which at 6 30 this morning, press release announcing its plan to split into two companies. Now the split will take some time as these often do. A great deal of work that needs to be done to create two companies prior to it being split off in a taxfree manner to shareholders. Once it is done, a year from now, hp inc. Will comprise the companys personal systems, pc business, and printing. Revenues roughly 57 billion with operating profit soon to be or based on historical numbers of 5. 4 billion. The other side, hewlettpackard enterprise, led by meg whitman, current chairman and ceo of the combined company, revenue there of 58. 4 billion, operating profit 6 billion. It is expected to be the faster growing of the two companies, perhaps well have a different capital structure with a different shareholder base. But at the begin, theyre going to have the same shareholder base, given you get shares of both if youre a current hewlettpackard shareholder. Meg whitman has been ceo now for over three years. A roughly fiveyear turnaround plan shes discussed and described many times in her many interviews with us on cnbc. The decision to split the companies a sign that the turnaround plan has failed. Today is only possible because the turnaround has succeeded. Think about what we have accomplished over the last three years. A rebuilt balance sheet, an innovation pipeline that is significantly improved over three years ago. I would argue best in class in the industry now. En spired workforce, a new leadership team, renewed confidence of our partners, customers, frankly shareholders as well but we have to gather os as one hp. But now were in position to take advantage of whats go on in the marketplace and position these two companies for growth. And citing in many ways the arguments that were cited last week by john donohoe, the man who runs ebay, faster marketplace, need to be become more agile and focused for both companies to respond to the speed at which things are changing in terms of what the customers on both sides actually want. A couple of things that have gotten loss in the mxix a bit. Additional 5,000 layoffs. 55,000 total head count reduction and as she pointed out in the interview, perhaps more to come you pointed out, she failed to deny possibly more. Fair to say, there will be more to come once you have the Leadership Teams looking at workforces. And looking at flat revenues fiscal year 15 over fiscal year 14. Some would hope that would be the acceleration year where you saw Revenue Growth. She cited continued runoffs in accounts in the enterprise business. So that may be contributing to it. We would naturally assume hpq the acquirer in the market. Once they split up, are they the a acquisition target . Is emc bigger. No, not revenue wise. Market cap, maybe. Because it owns, you know, so much of it is tied up in the in its ownership. Its 58 billion market cap of the names escaping me emc. Im sorry. No, thats all right. Ive got so many Different Things. Own 80 of the company that elliott wants to sell. You know the name. Bertha obviously higher there, Health Care Companies rocketing. A lot of the Health Care Companies rocketing. Talking about meg whitman making that move at hp, meg whitman and the board. Could Marissa Mayer come under more pressure at yahoo along with the board to do similar things, splitting up . A couple of reports over the candidate weekend talking about not just what are they going to do with alibaba profits but the structure of the company itself and a split is one of the things that people inside and outside the company are reportedly talking about. But you are talking about Big Health Care moves today. A company that has gotten some emergency approval for an ebola treatment, of course, ebola in the news with a couple of people here in the u. S. Being treated for that, and certainly the situation continuing to be huge in africa. Tekmira cut on a valuation, the stock has rocketed this year on the fact that some of its drug has been used for treatments. Other big movers include Intuitive Surgical on upgrade from goldman. We also have mylan labs, generic hiv drug. Tesla, looking forward to announcements on its cars. Micron giving back, despite positive review in barrons. Macao turned out to have a good golden week, not wiwithstanding problems in hong kong. That is helping wynn resorts. Simon, back to everybody. Thank you to all viewers, if you wonder whether people are watching, they are. Vmware, thank you on twitter, email, thank you in ways youve contacted me, talking about what emc owns. Potential m a, i asked whitman when i spoke to her last night, we didnt get to it today, she expects if there are opportunities both companies will take them or overall hp will take them now. You cant wait on those things. So you cant rule out whether it will be transformative is another matter. All right. When we come back, hank paulson, tim geithner, ben bernanke, bracing for a different type of testimony, taking the stan in the aig bailout trial. A live report from washington coming up. Charlie, the demand on this network, it is increasing by the second. Its crazy, huh . And people are relying on it more than ever. We cover more than 99 of all americans. I know, i cant imagine living without it. Its a place where people can come share knowledge and ideas. Its beautiful. Thats deep charlie. My selfie just hit a hundred likes. gasps a hundred at t is building you a better network. Chocolate, soybeans, thisand apricots. Made with what kind of chef comes up with this . A chef working with ibm watson, on the cloud. Ingredients are just data. Watson turns big data into new ideas. And not just for food. Watson is working with doctors and bankers to help transform their industries. Today theres a new way to work. And its made with ibm. Ameriprise asked people a simple question in retirement, will you have enough money to live life on your terms . I sure hope so. With healthcare costs, who knows. Umm. Everyone has retirement questions. So ameriprise created the exclusive confident retirement approach. Now you and your ameripise advisor. Can get the real answers you need. Start building your confident retirement today. Bailout trial in a lawsuit Hank Greenberg is alleging that the government cheated his shareholders in the companys 2008 rescue. Ben bernanke, hank paulson, tim geithner all expected to take the stand this week. Our own Mary Thompson is in washington with more. These guys are going to be grilled by david boyce, if youve seen david boyce in action in a courtroom, this is going to be spectacular. Reporter its really going to be an interesting week, simon, just as you said. About 15 or 20 minutes ago, court was in session, opening with judge Thomas Wheeler turning to mr. Boyce and saying, i see you have a new witness today, with a smile. There was laughter in the courtroom. Referring to hank paulson, who will be on the stand today. Boyce opening his line of questioning, taking paulson out to before the financial crisis where paulson new of a pending crisis in the housing market. You can see by his line of questioning how hes going into what the governments response was during the financial crisis, how hes going to focus in on some of the actions taken when paulson was treasury secretary, specifically loans that were made to other companies who were suffering during the financial crisis. The reason being, one of the alleges is the government did not treat aig fairly because it charged it higher Interest Rates on those loans. Now, paulson declined to speak to reporters when he arrived here at federal claims court, a little bit 9 00 a. M. Today. He is expected to be on the stand most if not all of today. His successor at treasury, tim geithner who ran the Federal Reserve during the crisis will follow him on the stand today or tomorrow and former Federal Reserve chairman, ben bernanke, will take the stand wednesday and thursday. Greenberg, who ran aig for 40 years before resigning in 2005, alleges the government violated aigs fifth amendment rights with that bailout. Last weeks Opening Statements hi lawyer acquitted the high Interest Rate loans of the governments taking of 92 stake in the company to extortion. The governments attorney replied that aig shaif sharehol were ungrateful because the company would have failed had there not been a bailout. The first glimpse of the line of questioning taking with mr. Paulson. As i said, court got under way 9 30 and ill be back with updates throughout the day. Thank you so much. When we come back, gas prices at fouryear lows. How low can prices at the pump go . Well talk about that, one reason the rails are at record highs today. Dows up almost 75 points. Well be right back. You know. Theres a more enjoyable way to get your fiber. Try phillips fiber good gummies. Theyre delicious and an excellent source of fiber to help support regularity. Mmmm. These are good the tasty side of fiber. From phillips its monday. A brand new start. Your chance to rise and shine. With centurylink as your trusted technology partner, you can do just that. With our visionary cloud infrastructure, Global Broadband network and Custom Communications solutions, your business is more reliable secure agile. And with responsive, dedicated support, we help you shine every day of the week. Centurylink your link to whats next. This is charlie. His long day of doing it himself starts with back pain. And a choice. Take 4 advil in a day or just 2 aleve for all day relief. Honey, you did it baby laughs for over 60,000 extra curricular activities help provide a sense of identity and a path to success. Joining the soccer team. Getting help with math. Going to prom. I want to learn to swim. Its hard to feel normal, when you cant do the normal things. To help, sleep train is collecting donations for the extra activities that, for most kids, are a normal part of growing up. Not everyone can be a foster parent. But anyone can help a foster child. Espn and tnt on a new nineyear television contract. Julia boorstin live with details. Reporter thats right. Nineyear deals with both turner and espn, now these deals, more than doubled the amount that the nba was being paid by its media partners, sources tell me that now this will bring the nbas total annual take from these deals to 2. 5 billion a year. Now the key thing here with the deals they greatly enhance the amount of Digital Content that the nba will be providing. So for espn, that means nba and espn will work on over the top digital service, details not worked out. But we can expect a lot more Digital Direct to consumer offering there. In terms of turner, which owns the bleacher report, that website is getting a lot more content from the nba as well. This, carl, speaks to increasing value of live sports in an era when so much else can be recorded and watched later. Its all about the value of live suppo sports, as we saw nfl rates increate. A lot of the contracts are getting extended farther and farther out im thinking back to Nbc Universal deal with the olympics which goes, i think, 30 years, Something Like that, to 2030, something . It is a longterm deal. I mean, you know the feeling, of course, is that almost everything is dvr able except live sports. Team val use going up themselves. Theyre going to do over the top solution which goes against the orthodox si that we take for granted. A sports programming and over the top solution, you make it more viable. Well get the hp plan to split into two. What will it mean for the stock . Keep it here. You know what my business philosophy is, reynolds . No. Not exactly. To attain success, one must project success. Thats why we use fedex one rate. Their flat rate shipping. Exactly. It makes us look topnotch but we know its affordable. [ garage door opening ] [ sighs ] honey, havent i asked you to please use the we dont have a reception entrance. [ male announcer ] ship a pak via Fedex Express saver® for as low as 7. 50. [ male announcer ] ship a pak via Fedex Express saver® you know your dunlike natural teeth. Try new fixodent plus true feel. The smooth formula helps keep dentures in place. Its free of flavors and colorants. For a closer feeling to natural teeth. Fixodent. And forget it. In a 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. Squawk on the street. Road map begins with hp, splitting into two companies. Hear what Ceo Meg Whitman had to say about the split during our exclusive interview. Markets on a roller coaster the past couple of weeks. Well hear from tom lee, what he has to say. And exclusive interview with Liberty Interactive ceo, greg maffei. Talking to him a little bit as well. He did something thats virtually indecipherable to understand, except when you bring the ceo to explain. But thats liberty. Lets move on to our top story, hewlettpackards decision, the board decision, of course, Senior Leadership decision to split into two. Hp inc. , comprising personal systems, pcs, and printing, roughly 57 billion revenue company, and hewlettpackard enterprise, to be run by the current ceo of the combined company, meg whitman. But b pat russo nonexecutive chairman of that board. Whitman nonexecutive chairman of hp inc. Run by weissler, i believe im pronouncing his name properly but i may not be. We did speak to miss whitman earlier on the program, of course. We have talked to her often over the last three plus years shes been running hewlettpackard and asked her about any plans potentially split the company. She has responded that one hp was the strategy, they were following, the benefits that accrued to the company were significant from keeping it together and of course then we asked her this morning, why the change . We think this is the best alternative for our customers and our shareholders. The market has changed dramatically in terms of speed and were in a position now where we can pursue the turnaround of hewlettpackard by the way the brand renames on both companies in one form or another and were in a better position to get focused companies who can respond more quickly. Think about this for a second. The competitors for printing and personal systems business are almost entirely different than the competitors that we face in our enterprise group, our Enterprise Services business, our software business. So more focus, more agility, tying rewards to results, we think, is going to make a big difference, and propel us on this next level of the journey on turnaround. Investors are responding positively to this decision, of course, conceivably, if you have two separate companies and they are capable of performing at level just described by miss whitman, you will get higher multiples and the peer groups for both companies, as she said, competitors are very different for both businesses, do trade at higher multiple than currently given to the combined hewlettpackard, hence the belief that separating them out will create value. We will see. It will be at least a year or lets call it roughly a year before the split actually takes place, giving you construct Capital Structures for both companies and do a lot of Different Things in terms of agreements and all sorts of other things that are required. One thing that well l. Happen, though, does appear to be more layoffs on top of additional 5,000 that were just added to the Restructuring Plan that was originally announced by the company back 2012. I asked whitman whether there will be more job cuts. We live in a very competitive market, we have to have the leanest, most Effective Organization that we can have. So when we see opportunities, we obviously need to take advantage of them. It makes us stronger, and it makes us a more competitive company. So, we, i think for 2015, in terms of this restructuring, we are done. Now when you split companies apart, typically, weve looked at other ones that have been done, often there is, again, a realiment of the workforce but well see how it goes. We need to take each business and say, knowing what we knee whats the cost structure, hoe to go to market, how to leverage the supply chain between two and making sure we set these two companies up to win. She didnt answer the question directly, but do you have any doubt that there wont be more layoffs . Once the two companies are aligned synergized. Yes. Do they cut salaries running Smaller Companies . No, i dont believe so. Still very large companies. The next question is, now that you have this theme, david, its trendy to split, ebay, hp within one week. Who is next . The big Old School Tech should get smaller and nimbler to froe. I have to think about names. Theres more, i have a feeling. When i first started in the business, it was three is a trend. Were almost there. One more a real trend. I expect well be talking about the trend soon. A guessing game. Broader markets. It look like u. S. Stocks are extending the rally on monday morning. Tom lee is here, founder and head of research, former u. S. Equity strategist with jpmorgan. You have a target for the s p 500, 2100 by the end of the year, are you not shaken by what weve seen first week of october . Rocky, two straight weeks of decline for u. S. Equities . It was a rocky couple of weeks. We saw a deep correction, small caps but its healthy for markets to correct that way and as we noted friday, i think the setup for rest of the year for the next three month is quite constructive. We believe 2100 is possible. Your favorite sector is technology and health care. I know you dont talk about individual stock but was hewlettpackard splitting in two, ebay splitting in two do you like these moves . They seem to be shareholderfriendly in the near term. You want to see more of this activity . Yeah. I think this is highlighting a theme where we when investors look at valuation opportunities in technology, this is a way for multiples to rerate because you can look at pure play businesses, you have management focused on optimizing returns on the assets of those specific businesses. So i mean, its very good news, again, technology, i think, has many years to run because its a sector that the multiple is much lower than its been historically while returns on equity much high somewhere this will improve returns on businesses. Earnings kicking off in full. Watching yum brand tomorrow with overseas exposure, pepsi has a big exposure to russia, thats on thursday. Q3 earning per share growth 5 , whats your call . I think companies will surprise us to the upside. A handful of companies have exposure to strong dollar hurting bottom and top line. But historically, the dollar moves have had a lot less effect on earnings than you thip pmis turning up are more important. Underlying demand is improving in the u. S. Profit growth surprise to the upside. On the subject of dividends and the chase for return, its not actually the Technology Area that is growing most rapidly at the moment. Its cyclicals and industrials increasing dividends almost twice the rate of technology. What do you think about that area of the mark at the moment, given the move on the dollar, given the great strength of the u. S. Economy compared to everyone else . Historically, you know, when you have strong dollar you want to look at dollar centric industry. So i think small cap is going to lift off from that, consumer cyclicals and domestic industrials. But one of the things that will probably happen over the next few years the fed kind of moves towards normalization, that the market does shift away from a dividend preference. I think when we look at opportunities, its about Free Cash Flow yield, higher ones, and where can the p e rerate . Some of the parts types valuations make a lot of sense in tech because of the type of businesses and strengths each of the individual ones might actually have. Tom, when you have small caps start to roll over, everyone a lot of the common notion is thats a sign of the Broader Market is going to roll over as well. But russell is a canary. Explainy thats not true when it underperforms for a long period of time. Its true. Disturbing to people to see the small caps underperform this year. Over the past six months, its been 1,000 basis points or more than 10 versus s p. And its true that that market tops happened. How far, the nine times the russells underperformed the s p, since its inception which is 79, only two of them associated with wabear markets. Small caps underperform because of rotation, weve had movements across markets that have rattled people and it explains why small caps underperformed but its an extremely bullish signal. When you see small caps do this badly and you look at, say, history, what does it mean . 80 of the time the s ps higher, talking annualized return of 12 or better. Bullish, from tom lee. Good to see you. Thanks for having me. Fun strat. Former u. S. Equity strategist at jpmorgan. Tom lee. When we come back, the american journalist who contracted ebola in west africa arriving in nebraska. You might see more ebola screening at u. S. Airports. A live report outside the cdc when squawk on the street continues. Its a fresh approach on education superintendent of public instruction Tom Torlaksons blueprint for great schools. Torlaksons blueprint outlines how investing in our schools will reduce class sizes, bring back music and art, and provide a wellrounded education. And torlaksons plan calls for more parental involvement. Spending decisions about our education dollars should be made by parents and teachers, not by politicians. Tell Tom Torlakson to keep fighting for a plan that invests in our public schools. Fighting for a plan that welcome back to squawk on the street. Intuitive surgical, higher after upgraded to buy from neutral at goldman sachs. The companys single site needle driver cleared by the food and drug administration, that leads to scarless surgeries through a single incision. Stock trading up over 4 . Back to you. For more on hps confirmed split, we want to bring a Senior Research analyst, joins us from new york. Good to see you again. Good morning, carl. Are you surprised at all by this . A little bit. I mean obviously it was leaked into the press last night. But you know, hp had been marching along recently well and meg whitman, the ceo, said repeatedly we are Better Together than apart. So this is this is something thats been speculated by the Investment Community but the timing and, you know, the seeming change in tone from hp was a surprise. Is it a tactical strategic move out of strength or weakness . The company certainly saying its out of strength. You know, i think thats debatable. The company has hp has been rumored to have almost bought rack space, hosting company recently, there was obviously well documented reports about the Company Nearly merging with emc. And now you know this decision to split the company in two. So collectively, the data points suggest that hp has been looking to make a big move, and you know, its and this arguably may have been one of the one of the options further down on the lisp and so, i think its difficult to say that this is n unequivocally from a point of strength. You know, tony, if you listen to what they say, they will tell you enterprise, part of the business that meg whitman will be ceo of, enterprise is the future, dealing with businesses and services and software, thats where we want to be. But actually its the principal business, which does reasonably well, i wonder if its an admissi admission enterprise has not been set free to do what its supposed to do on the cutting edge of technology that is driving this in particular. Yes, youre right in the observation, simon. Over the last 12 months the pc and printing business has grown 4 and the remainder of the Enterprise Company has grown at minus two. Recently its been pc and printing that have really been the growth parts of hp. I think in terms of liberating the enterprise business, theres certainly some belief in that, and i think that historically separations or spinouts created management incentives and afforded more degrees of freedom. Now that said, one of the limitations that the Enterprise Company at hp will face is, it will not benefit from roughly the 4 billion a year in operating profits that printing generates. So, on one hand there may be more degrees of freedom. The other hand less cash flow to go out and do acquisitions without having printing under the same roof. Tony, in my conversation wealth meg whitman this morning, and interestingly in the conversation i had last week with john donohoe, who runs ebay, they both came back to the same theme, which is creating agility for companies in an increasingly rapidfire marketplace, if you will. Im curious, amongst the companies that you follow, is that true . I think to a certain degree. But im not so sure that the Tech Industry has ever really been a state changing industry its always been incredibly dynamic. Many people point to cloud and big data as being true revolutions. But arguably the Client Server era was a true revolution, arguably virtualization and all of that it brought in terms of data, architectures were revolutionary. Its really unclear if its notably different now than it was in the past. I do think that, you know, companies are putting forth and espousing this as a rational. But the proof points arent exactly there, in my opinion. If its true, e pay and hp turn out to be correct in that view of rapidfire changing technology landscape, how does a company like microsoft or cisco, these big, sprawling operations, sort of justify their structure . How do they look at whats happening today . Right. I think the case with ebay and paypals differently a little bit different. Its the more classic spinout where you had this company that is arguably shackled by a slower growing company, paypal, shackled by ebay, and liberating it would allow it do more partnerships, grow faster, et cetera. I think with hp the thing thats puzzling in the separation is the businesses, in terms of growth profiles are not dramatically different. And so the notion of a traditional spinout, when you do it, where theres different sets of investors that you want to market to, different cash characteristics, different growth characteristics, i dont think that really holds quite to the same degree in the case of hp. For the other players in terms of what it might mean, i think if you look across all industries, you often see patterns of consolidation, and then patterns of breakup, certainly we saw that in the financial industry, the drug industry. When you see Major Players starting to move towards, you know, splitting up and focus is better, you know, invariably, others in the industry follow. So, it it will be interesting to see if some of these larger behemoths, ibm included in there, look to try and find ways to release value. Clearly a stock markets reception to both ebays move and hps move initially, at least, have been positive. Where does it leave you in term of advising wlants to do here . Is this going to create value . You know i struggle with the strategic rational. One thing that was not really talked about in hps presentation is that there are synergies, particularly in purchasing and in distribution for this company. Three years ago hp actually said they thought there were 1 billion a year in annual d dissynergies if it were to spin out the pc business. I do think that is, you know, potentially a hidden liability in this deal. Now, that said i think the marketplace generally is receptive to vehicles that will allow more degrees of freedom, create incentives for Management Teams to be more aggressive and more bold, and so i do think and hp stock is very, very inexpensive, the single least Inexpensive Technology stock in the entire s p. I think what is generally viewed as a positive move, splitting and spinning off, is being modestly well received by the marketplace. And thats to be expected. Thats too bad, we were going to ask him about one other name as well, toni covers apple and the company that supplies sapphire to apple, its filing for chapter 1 bankruptcy reorganization, recall apple did not use sapphire in the iphone 6. Other than that, well find out more why that led them to chapter 11 maybe later this morning. Its using it in the apple watch, correct . Did t. Has supplied them in the past. Fifth american to contract ebola in west africa arrived in the country today as the first patient to be diagnosed on american soil continues to fight for his life in a dallas history. Live outside the cdc in atlanta with the latest. Meg, over to you. Reporter good morning, simon. A little more than a week after the first u. S. Patient was diagnosed with ebola, Thomas Eric Duncan remains only diagnosis here on u. S. Soil, in critical condition, treated in dallas. His condition deteriorated over the weekend. 48 of his contacts are being monitored, 10 of whom are close contracts. Ashoka mukpo diagnosed with ebola in liberia has been flown back to the u. S. For treatment arrived in nebraska to receive treatment at same hospital that treated dr. Rick saker, mother american infected in west africa. The cdc is considering strengthening screening at u. S. Airports for people coming in from the three affected countries there. Cdc director tom friedan spoke with us about that this morning. Wish we could say, we can do things that make the risk in the u. S. Zero, but as long as the outbreak is spreading in africa, its not going to be zero. We can reduce it here, look at all steps that might do that, but we have to stop it at its source. Were seeing signs of progress in africa. Reporter now the patient being treated in dallas, tom mass eric duncan, has not received experimental drugs though many worked on in the earliest stages. Dr. Friedan emphasized that vaccines are an important part of the equation. Im encouraged two experimental vaccines that are going through phase i trial, to see the dose and safety concerns. We need to get those into the field for efficacy trials to see if they work in africa, as quickly as possible. Reporter now glaxosmithkline working. As for the situation in the u. S. , friedan emphasized that no patients here new york contacts here, im sorry, have shown any symptoms. Back to you. Thanks very much. Tekmira, sort of leading experimental treatment, down sharply in todays action. Up next, gas prices in the United States falling to less than three bucks in some area of the country. Crude oil continuing to slide. Just how low can it go . vo rush hour around here starts at 6 30 a. M. On the nose. But for me, it starts with the opening bell. And the rush i get, lasts way more than an hour. announcer at scottrade, we share your passion for trading. Thats why weve built powerful technology to alert you to your next opportunity. Because at scottrade, our passion is to power yours. Revolutionary by every standard. And that became our passion. To always build something better, airplanes that fly cleaner and farther on less fuel. That redefine comfort and connect the world like never before. After all, you cant turn dreams into airplanes unless your passion for innovation is nonstop. You just have to win 70 forof your points at net. And keep unforced errors under 10 . On the ibm cloud, the us open analyzes 41 million data points from 8 years of competition to uncover key insights. Data can help show you how to win, no matter what business youre in. Today theres a new way to work. And its made with ibm. Sliding crude oil prices giving consumers relief at the pump. Crude prices down 16 since their june highs. And the consumer gasoline prices dropping to a nationwide average now of 3. 28 a gallon, the lo t lowest since february. Can the trend continue . Joining us, Founding Partner at again capital. Welcome. Good morning. Do you think we can hit 3 a gallon on gas . On the National Average, absolutely. Its in the works. We have 10 to 15 cents a gallon working its way through the system right now over the course of the next week or so, it could be that could pick up further. How low are we going to go here, do you think . Its a perfect storm in terms of Surging Crude Oil output and supply and weakening demand in europe and china thats combined to a onetwo punch. We go as low as 2. 85 at least on the National Average before things settle out. Wow. The heart of it, for many people internationally, of course, is this decision, the surprise decision last week for the saudis to basically start a price war with everyone else in order to keep volume of sales up. Is that a major structural change . Is opec crumbling before our very eyes . Opec is under pressure, simon. The bigger news last week the cartel was surveyed to be pumping 31 million barrel a day, which is huge, it was up 800,000 barrel daze from the previous month because of rebounds in libya and iraq. That was the bigger news. The saudi discount, though, that they gave to asian buyers was important because the saudis arent pulling back yet. Production went up as well in the face of the Falling Oil Prices and theres more of that to come disharmony in the cartel which is great for u. S. Consumers to hear because a lot of resentment about the saudi position, how they were able to pump out full blast over the last couple of years while other companies had production problems and couldnt benefit from high prices. We hear about the u. S. Energy revolution, how thats reshaping supply and demand equation, putting pressure on prices. Can you quantify that for us . The fact that the u. S. Is now a major oil player, that our refiners are pumping at the highest levels in ten years, where would the price of oil, brent or wti, be without that . Extraordinarily higher. In terms of the dynamic going on now, the amount of increasing u. S. Crude oil exports, exporting Alaska North Slope crude oil out to asia now for the first time in a decade, and theyre moving oil out of the u. S. Gulf coast, minimally processing it, getting around some rule, oil prices upwards 120 to 150 a barrel in my estimate achatio acgiven the trouble in the middle east. Isis is on the move. A concern that would be magnify if it wouldnt for the oil were getting. As the price of oil declines, what projects get canceled . Where is oil the most expensive to produce . Where will supplies be cut first . And thats going to be the worry, simon. I think you know, certainly more traditional drilling in the u. S. Offshore, for example, will be impacted. And the worries going to start be for canadian and our fracking industry could get harmed. The saudis play hardball for market share and are willing to suffer a lower price for a time hang on, john. The assumption had been that maybe the saudis were trying to do the white house a favor to drag the price of down to hurt the likes of russia. Youre saying Something Different that it could be to get shale projects canceled here in the United States . A Collateral Damage effect. Back in 1978, the u. S. Domestic industry got ruined. And really didnt come back until the shale revolution came to be. So, i do think that the saudis are taking a hard look at whats go on and saying, we can suffer a lower oil price. They do need a 90 a barrel price for their budget but cost of productions down around single digits. They can tough it out for a while. Thats what we have to worry, harming our domestic miraculous recovery here. John killdorf. More of the cnbc next list wl who will be changing the face of business. Waldorf has a new owner. Details when we come back. Whenwork with equity experts who work with regional experts thats when expertise happens. Mfs. Because there is no expertise without collaboration. Ghave a nice flight r bag right here. Traveling can feel like one big mystery. Youre never quite sure what is coming your way. But when youve got an entire company who knows that the most ontime flights are nothing if we cant get your things there too. Its no wonder more People Choose delta than any other airline. E financial noise financial noise financial noise financial noise all day today, cnbc unveiling its next list, leaders and innovators expected to change the face of business over the next 25 years. To bring us more of the next list, name some names, andrew ross sorkin. Thank you. For week weve been working with our expert Advisory Board to compile the list of leaders for the future. Results are diverse, global group, innovators from fashion to finance, countries from the u. S. To turkey. Lets take a look now at the movers on the listen. Expanding into china, being global is another aspiration that we have that were working on. Really being the trusted family brand for millennials all over the world. You have to continually try new formats. Were obsessive. Our focus is making people think of it passing on to their friends and sharing it. Liberating china, but using my way to improve china. The ceo has power or is quirky because they listen to the community. I actually carry no. Got to love penn there. For more coverage, head over to cnbc. Com next. Guys who would be your alltime, like, quick vote to be on the list like this, do you think . I was surprised to see jessica alba, myself. Really. Shes the most clicked on name online right now at cnbc dolly len. Jessica alba. Doesnt surprise me there i liked your interview with the gentleman from inc, the easiest call, elan mucon musk. Hes had three companies. I imagine in the next 25 hell have a fourth, if not a fifth. Well see what he does. Mark zuckerberg. These some of on the first 25. Bedid Something Different. We if you were along the first 25 list, which was looking back at last 25 years, probably by the way easier list to put together, theres hindsight and 20 20 vision. If youre on that list, youre exo exofficio. We want everybody to comment and let you know what you think of the picks and if theres other pick. I like that Doug Mcmillon is on here, Technology Hot shots, young companies, startups. New ceo of walmart. Away from tech, too. Im thinking we have dan lobe in terms of finance. Is he the next carl icahn . Well find out. Technology, we think of technology as it, where innovation lies. But people like Jonathan Gray at blackstone, he may become the next steve schwartzman. Well have to watch and figure this out in 25 years from now. Its all on our website. Thanks for bringing us highlights. The next list of cnbc 25. Let me show you a live shot of the waldorf hotel, the waldorf astoria, here in new york. Hilton worldwide announced its sold the property which takes up one block of manhattan a Chinese Insurance Company for nearly 2 billion. Remember, this is where the president stays when he comes to town because it still has a disused subway station in the basement, therefore two exits. Talking about selling it for a long time. I last asked the ceo of hilton about his plans for the waldorf when i interviewed him in june. The waldorf is a complex asset, both in terms of what we could do with it from a use point of view but also structurally what make sense for the waldorf and were just not there yet. Clearly, what were looking to do with real estate is maximize the value. Sure. We think were in a very nice part of the cycle for growth and operations work he have a bunch of value enhancement opportunities including the waldorf. They have a contract, robert frank, to run the hotel for the next 100 years, did i see . Yeah. Wow. You talk about maximizing value, thats exactly what they did here. Conrad hilton once called it the greatest of them all, now the waldorf is the most expensive of them all. Hilton worldwide selling the wall door for 1. 95 billion, the highest price paid for a hotel in the u. S. And perhaps the world. Waldorf has over 1400 room, 1. 4 million per room key. Hilton will operate the waldorf under the name for 100 years, still the waldorf, and hilton is keeping the waldorf brand which has 27 hotels around the world. For comparison, the most expensive stay alone in the hotel in the u. S. The Peabody Hotel in orlando sold for 717 million. This, far more than twice than the Cosmopolitan Hotel and casino, blackstone bought for 1. 7 billion but thats a casino. What are they getting here . Of course a trophy property, a full block of real estate in the heart of manhattan and as you mentioned they get the hotel where the president stays. Foreign buyers here had been flooding the new york market. Looking for safe investments to generate income, hotels fit that bill. Some people comparing this to when the japanese buying empire state building, big Trophy Properties in new york. Everybody says this time is different but smells like getting tour to high 1. 95 billion for one single hotel. Yes, i think the analysis from suntrust about 32 times earnings, which does seem quite rich. Whats interesting here, you would know the assetlike model popular, hyatt selling of a hotel in washington this week. Whats interesting about hilton is theyre not returning cash to shareholders. What they have said is, for tax reasons, well spend money on other properties here in the United States. I think under the rules, robert, they have about six months to do that once the deal closes at the end of the year. The rush will be on for them to spend that money, which is different from what the other hotels have done. Fun to watch. Also interesting to see how they renovate the waldorf. They announced, and he highlighted this in his interview, renovate the waldorf and thats a hotel that could use a trim up there and nice to see what they do. The other waldorfs are brand new and look much better. Its all about retail space, i believe. Didnt paris and nikki live there in. Did they . Thank you. Thank you, guys. Another spinoff, Liberty Interactives board approving its split into two groups. Greg maffei live when squawk on the street comes right back. When change is in the air you see things in a whole new way. Its in this spirit that ing u. S. Is becoming a new kind of company. One that helps you think differently about whats ahead, and whats possible when you get things organized. Ing u. S. Is now voya. Changing the way you think of retirement. Im spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast . Go to ziprecruiter. 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Liberty interactive announced the board splitting into two tracking stock, one for qvc, one part of the commerce, initiateded a year ago. Joined by greg maffei, ceo on the phone. Greg, somewhat complex transaction, at least for those who perhaps are not as familiar with these businesses. My best take here is, i mean you are freeing up or creating pure play qvc, which conceivably will down the road create a higher value for that. Is that a fair conclusion . I think youre right, david we have a more focused qvc with opportunity for investors to look directly at its result and also has our 38 stake in hsn, its the leading player in video commerce, and investors are responding well to that this morning. Does it clear the way for qvc and hsn to get together completely . I dont think that is the result or that is our goal. Our goal is to give investors more clarity and more choice around our assets. Well see what the future holds, but as i said, were very happy holder of 38 of hsn and we have been for a while. Liberty ventures received digital properties. Theyre being valued at what i believe 1. 5 billion, also contributing 1 billion in cash. Seems to be a high value, based on i think 80 million ebitda,. 8 of revenues. How do you justify the multiple youre putting on those properties that are being transferred from one entity to another . Before we get to that the leadins had it described inaccurately. We have two tracking stocks, one is called lenza, one called liberty ventures, creating a pure qvc, and liberty ventures is going to receive assets and 1 billion of cash. Now, to get to understand the values i think, first, ebitda numbers probably, if you look at most the forecasts for 2014 and into 15, youre ebitda numbers are very light. Okay. Im using trailing. What do you feel comfortable with saying multiple is for people who want to follow. We feel comfortable the multiple is well in line with industry numbers and we had a Financial Adviser come and look at fair value for both sides of the house. Were very rigorous in trying to ensure that liberty inactive and liberty ventures treated well and the board had to approve it on that basis. Right. Liberty interactive down sharply, linta is up quite nicely. Im getting 67 million shares of venture stock, if im a linta holder arent i just going to sell that . Isnt that going to create selling pressure . Exactly right. First, the total group is up today if you take market value. But youre right, theres some blowback between the shares that are being issued to the linta holders like. 14 share of venture given to each holder and some holders might be exabouted to sell. But were not looking at this for oneday trade. Liberty ventures had a great run over the last year, year and a half based on growth in expedia and based on the growth in trip and some degree based on our splitting off of trip, trip shares into liberty trip holdings. Some holders of ventures might have hoped that we were going to fini finish liquidation getting expedia out or the like. This, in the short term, creates selling pressure not only because of Liberty Interactive holders who may not have wanted the stock in the short term but disappointment in venture holders looking for a quick pop. We think this is a great way to add value in long term. You may have seen the trade working with pro flowers into ftd. I think other Digital Commerce assets have exciting opportunities. Secondly, we built a bigger war chest at ventures. We think, in our experience has shown, having a larger pile of cash, having more flexibility to do broader, bigger, more interesting deals where theres le competition in big deals is a great opportunity and we think theres more of those ahead. Bullish on ventures. 2. 7 billion in cash by year end. A couple other things weve talked about in the past. Obviously sirius continues to be a question for many shareholders here. Will you revisit the buy in transaction you set aside i believe early this year . We have to plans to do that today, obviously. We are seeing the liberty stake being increased by the Share Repurchase of sirs you as were naturally gaining on our ownership position and remain excited about sirius where its headed. Another onetime part of the stable of properties stars i believe youre still chairman i think. Recent speculation about the potential sale of that company, is it correct . Is starz for sale . Obviously we cant comment on all those sort of rumors. Starz is very well positioned on its own and yet as we said in the past, both john mullen and i, one could imagine there are partners who would be helpful to the business. Greg, as always, appreciate your taking us through these various transactions. Look forward to seeing you in person at some point in the not too distant future. That would be great. Thank you. Thanks, greg. Up next on squawk on the street, paulson and bernanke set to take the stand. Hank greenbergs legal battle against the government. All the details on that trial after the break. 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. Its monday. A brand new start. Your chance to rise and shine. With centurylink as your trusted technology partner, you can do just that. With our visionary cloud infrastructure, Global Broadband network and Custom Communications solutions, your business is more reliable secure agile. And with responsive, dedicated support, we help you shine every day of the week. Centurylink your link to whats next. Do want to check on the price of bitcoin. The currency everyone was watching it after in the last few sessions it managed to lose nearly a fifth of its value. As you can see its rebounding a little bit but people took note as the price of bitcoin did fall below 300 and i know all of you on the desk are going to give me a little grief about this, but i want to say that this comes at an interesting time because increasingly retailers are accepting bitcoin. Weve seen some big ones like dell, like some of the online retailers, all say theyre going to accept bitcoin and some say thats putting pressure on the price because as they accept bitcoin, more are paying with it, those retailers are converting it into dollars to add up to their profits. Go ahead, simon. I know you have something. I just who cares. I mean i dont understand why we focus on bitcoin rather than the square or the platform. I dont understand what youre trading becomes so important. Its how you trade it, surely, whether thats paypal, whether thats square. Thats the future. Not whether you have to define it in a currency. Thats a good point why a lot of bitcoin believers and people who say that this is the future of payments or infrastructure say its about the technology, not necessarily the price. It cant be the future if it has those price swings. People just havent its not mass adopted yet. People dont understand it. Give it time. Everyone is talking about it. Patience. Lets send it over to jon fortt with me on bitcoin. Whats coming up some. I am, sara. A great show coming up. Were going to talk hp, revisit the great interview that david faber did with meg whitman about the upcoming split. Kara swisher will join us to weigh in and weve got Technology Investor Roger Mcnamee whos never short of insight on topics like these coming up. Theres a difference when you trade with fidelity. One you wont find anywhere else. Onesecond trade execution. Guaranteed. Did you see it . In one second, he made a trade, we looked for the best price, and the trade went through. Do the other guys guarantee that . Didnt think so. Open an account and find more of the expertise you need to be a better investor. Your customers, our financing. Your aspirations, our analytics. Your goals, our technology. Introducing synchrony financial, bringing new meaning to the word partnership. Banking. Loyalty. Analytics. Synchrony financial. Enagage with us. Revolutionary by every standard. And that became our passion. To always build something better, airplanes that fly cleaner and farther on less fuel. That redefine comfort and connect the world like never before. After all, you cant turn dreams into airplanes unless your passion for innovation is nonstop. Good morning. It is 8 00 a. M. At hp headquarters in palo alto, california, 11 00 anon wall street. Squawk alley is live. Good morning and welcome to squawk alley. Joining us Roger Mcnamee cofounder of elevation partners, great to have you back. John steinberg ceo of the daily mail north america, Kayla Tausche is back. Welcome back. John fortt as well. The big story, hp announcing it will split into two companies and cut 5,000 jobs. Shares of hp rallying on the news this morning. Hp will split into two publicly traded entities. The pc and printer business using hp inc and services with hewlettpackard enterprise. David faber talked to meg whitman in an exclusive interview this morning. Heres what she said. Another enormous change. Everything about how compute is being bought, paid for, sold, how applications are written, from, you know, a licensed model to a sas model. How employees and customers interact with technology. And you can just see the pace of change. And theres technology that is enabling that change tha