Transcripts For CNBC Squawk On The Street 20161021

You can see kind of a mixed bag. Didnt give me italy or spain, normally i get italy or spain when im on the desk here. Theres germany, france and the ftse of course which is the only one in the green. Tenyear note yield, there it is. 1. 738 is where we stand. Crude of course had the nice move and helped some of those oil related Energy Related companies of late. Lets call it down a little bit as you see but still above 50. Our road map this morning starts with microsoft shares. They are set to hit an alltime high after strong earnings on a quarter that was boosted by what they are doing in the cloud. Were going to dig into a report with jim. Shares of tobacco maker reynolds soaring on news that British American tobacco offering to buy what it doesnt already own in the company for about 47 billion. Ive got a lot of details on this one. Youll want to stay tuned. Well share them with you. And shares of mcdonalds moving higher. Well break down the quarter and talk about what it means for some of its competitors as well. Lets get to microsoft. It is up as we said in the premarket this after posting better than expected Quarterly Results helped by gains in its cloud business. Ceo sacha nadela on last nights earning recall. Our annual run rate now exceeds 13 billion and we remain on track to achieve our goal of 20 billion in fiscal year 18. Once enterprise customers choose one of our Cloud Services, they continue to adopt more services. So the cloud is not just helping them because its growing so quickly, jim, but its also then having customers who are then moving to other services. Amazon for the first time has got a real credible threat here. Thats how good they are. Amazons 31 , i believe, what we call the cloud. Where you basically web services. Web services. As your revenues once again grew triple digits, 121 in constant currency, the margins here are good. Satya is killing it. When i saw him literally a year ago, he came to me with an 18 billion run rate that he thought he could do cloud. And im like, i said to him, dont give numbers that you cant deliver on. Now hes on target to do 20. This guy is such a heavyweight. Its really incredible how quickly he turned this company around. I would not want to compete against this guy. By the way, selfeffacing. But this is a monster good call. Sometimes all it takes is making one good decision. And if it was that decision, lets get in, this is where everything is going, all computing is moving into the cloud, its not going to be on the premises any longer. And this is a service. And they did. And they moved there and moved there strongly to potentially compete with Amazon Web Services as the giant. For real. Remember it was oracle, trying to get to ibm, people didnt like ibms gross margin numbers, but i have to tell you, david, even at one point they have to mention they have this device division. Remember Steve Ballmer on previously making a big bet on devices, he gives you throwaway number devices, there was one point i wouldnt have let him got away with it. He can get away with anything. This is a remarkable, remarkable turn. And the stock is still undervalued even up this much. Ive got to tell you Companies Like hp, hewlettpackard, that was a huge win for him. You mentioned mr. Ballmer, your former classmate of course many years ago. He was a guest on squawk box earlier. Of course the former ceo of microsoft. And he was replaced by mr. Nadella, heres what he had to say about him. We grew our revenue and we grew our profit. We made the transition from a pc company to an enterprise company. And now satyas got the company doing the right stuff. Hes going down this cloud path. Down the cloud path, jim. And theres a lot more path to be walked, it would seem. Yeah, this is one where they are on fire. And ive i just think that people dont understand that this was a we would be talking about the consumer business like two years ago. And we would say its kind of they actually did okay. Not bad. Down prenine print in terms of pc sales they actually stayed yes, they did. Remember, this has this renewable subscription stream that is fantastic. But this guy, you know, were talking about early 2014 that this man came in. This is remarkable. 2014. This is 2016, you hear people say i need more time, need more time. For now on we should be measuring against satya time. This is satya time. Nice guy, too. This is a very fought over area, weve got one leader, weve got another here significant. Who are going to be the big players in terms of offering these Cloud Services . If i dont say oracle, theyre going to yell at me. Okay. Because of the net suite deal i feel they are more challenged. The deal is in question. Well see whether it happens. What about ibm . Okay, so im back and forth with ibm. I think ibm is, look, every time i say ibm is trying to do bet ner cloud, someone finds a new problem. You know whats happened is people are measuring waiting for all revenue growth. Right. But i think theyve done impressive things. Weve got to make the difference the difference between the computing power, which is here it is. Right. And the all the software that rides on top of it that the likes of an oracle or crm or workday or so many other companies. Salesforce platform is used by all companies. Every time you Say Something and dont mention oracle get them out of your head. Dont worry about it. I know, mark hurd is a tough dude. This is in my head and oracles in my head. Its scary, but hes not behind you right now. Thats what you think. Its like pokemon go, right there. But i just think ibm has Strategic Imperatives have very Gross Margins but ibm is out of favor, oracle is out of favor because people feel they needed the net suite for for the small and mid size, okay, because that showed them maybe they cant get the high end. Which is going to microsoft. People like dealing with microsoft instead of dealing with amazon. Why is that . You know, maybe amazon is basically not as loved as we think. You know, theyre just not, theyre just not as loved. David, theyre considered more of an evil empire. Remember when microsoft was the evil empire . Remember when you had mr. Klein going after there and Steve Ballmer going, Justice Department though they play for free. Those are the most dangerous opponents in the world. I do think ibm, microsoft much more impressive. Salesforce i can understand one point they wanted to buy salesforce. They dont need salesforce. Right. And i dont know if salesforce needs twitter. I got to tell you oh, lord. Theres a lot of bad blood all of a sudden out there. Yes, there is. We should get to that in a bit. Weve got another 53 minutes of our show just you and me to talk. I love that because we havent even talked about how the biggest mistake i ever made was quitting smoking because thats where all the moneys being made. Lets get to that this morning. Of course people woke up to the fact British American tobacco which already owns 42. 2 of Reynolds American has made proposal to buy the rest, that 57. 8 that it doesnt already own, offering a 20 premium over reynolds Closing Price on the 20th of october, and a deal that values it at 56. 50 a share, were learning about this immediately. In fact at the same time more or less reynolds is because they own they have 13 ds, remember they would have to update their filings. Remember tesla, solarcity, they had to do the same thing. Right. Theyve got to just let everybody know as opposed to trying to negotiate this privately. So here we sit with b. A. T. Having made this proposal, reynolds now of course is reviewing it. They dont own a majority, but they do own a significant stake, as we said. Lets go through some of the values, jim. Altrias jumped three bucks this morning. Right. Youve got to explain this to me. That one im not im saying do people think no, no, theres only one buyer here. Okay. Reynolds is not in a position where they can go out and sell to somebody else. All right. Walk me through this. They cant. But what they can do is put up a strong defense. Now, in their defense b. A. T. s going to say the following. And theyve started to already. And i can communicate some of it this morning. Our offer already is 16. 3 times the last months ebitda that reynolds has put up. Is that an offer they cant refuse . Well, theyll say it is, but its not at 20 . Theyll say, listen, when reynolds bought lorillard it only paid 13 times ebitda. Theres going to be about 14 million of cost synergies, were giving you a decent amount of stock here. Why now is the question. Its never been a question of when, its been a question of excuse me, right, its never been a question of whether they would do this, just a question of when they would do it. All right. Why now . Obviously Interest Rates are very low, a lot of cash they would need for this deal. Hence being able to borrow. B. A. T. s been doing fairly well. I was going to ask you what the pound is. So many of their sales are international, and theyve been beneficiaries of the lower pound given its made their predict more competitive in overseas markets. And the two companies have sort of aligned. Reynolds just recently had an earnings miss, stock went down. So p e multiples are more closely aligned right now. So those were a number of reasons why now. Although theyve been planning this for weeks. Its not as though they were waiting for reynolds to miss earnings. They werent. They were planning on doing this for quite some time. But well see where they go from here. I think this is a key point that needs to be made, and what you may hear, the 20 premium some will say is what you would pay to squeeze out if you were a majority owner. Its sort of what they would refer to as a minority squeeze out premium. The question will be does reynolds go for what they may argue is a control premium, which should be higher than 20 . Is this like that netsuite . Oracle thats really larry el ison, give me something to understand. S. A. B. Miller . I got to think about it. Its a good question. Hard for me to understand. Well, what you need to understand is reynolds is going to do the best they can for its investor base. Its grown dividend and had growth until recently. Its got a ceo transition underway, but generally speaking i think its a fairly well regarded company, correct . Absolutely. And the lorillard deal is done in terms of synergies theyve been expecting from it. From their perspective how hard do they fight . B. A. T. Saying we want friendly, collaborative. Well see. Reynolds my understanding again this is a key thing in the details, that until they take full control buy all the shares, they cant control the committees on the board. Right now those are led by independent directors. Theyre going to set up an independent committee of directors, 5 of 14 directors, seven who are not affiliated and get a vote unaffiliated shareholders. My guess is reynolds is going to argue for obviously higher bid. The question is how high the a. T. Is willing to go. I see the stock reflecting perhaps that could happen. Okay. Weak euro, bayer going after monsanto, weak euro, b. A. T. , weak pound, why is it not the other way . Why are we not seeing u. S. Companies buying over there . What is that about . Thats a great question. And i dont know. Were on this. Im working on that one, too. I dont understand why the stronger dollar hasnt emboldened u. S. Companies to do the reverse. In some cases youre talking far Larger Companies buying smaller companies, bayer is larger than monsanto. Maybe its protectionism. Maybe theyre afraid. Stay on that too. Anheuser, bud, inbev. It should move fairly quickly but still going to take awhile. Reynolds is just getting themselves set up here to sort of deal with this. But keep in mind minority squeeze out premium versus control premium, my guess is thats where reynolds comes down in terms of its argument. But well see. Cbs has to do the best for its shareholders sd. Thats right. Kind of similar but not completely because they have a Controlling Shareholder in that case. This case theyre not a Controlling Shareholder. How about time warner getting a bid never mind. Lets tease that. Thats coming up next. Let him have the tease. We have a lot more squawk on the street coming back after this. Well, we wake up this morning to the possibility at least of ground breaking, really earth shattering consolidation in the Media Industry in the midst of course of a landscape that is truly changing, jim. And im referencing of course these reports yesterday from bloomberg that at t and time warner have had some talks. Now, theyve been about a range of things, but they have included the idea of at t buying time warner. Let me add my own reporting here to the extent that i can. And i can because i did have some chance to talk to some people. This is not this is a possibility. Youre not dismissing this out of hand . Im not dismissing this out of hand. Are you kidding me . I dont want people to seem theyre talks in a deal, thats not the case. There have been conversations, i know at least one key meeting. While they discussed a range of alternatives, its my understanding about would time warner at t really try to buy time warner or not. Now, is that likely . I think its easy to say no, but is it possible . My understanding is absolutely. Wow. And when you get a report like this and other people reporting on it of course and investors start getting involved and you start to see a change to a certain extent, not a lot, in the Shareholder Base and you just get people talking, sometimes you can build momentum. Jim, this is an extraordinary moment in terms of the media business. Weve talked about it so often. Ive said so many times about the unbundling taking place slowly at first and then suddenly. Im starting to think were getting closer to the suddenly part where people truly are thinking of tv as the internet. How much of this is defensive . I was on the verizon call yesterday. I think, actually, i think aol yahoo is going to be important. That was not a good call. Verizon did not do well. I think sprint and tmo. Fascinating they are truly having to compete. Younger versus older, frankly. But at t with directv was brilliant even though nfl ratings are down. Im wondering if theyre saying, listen, were getting out of the Greyhound Bus business. Its interesting to bring together of course in a significant way content and distribution. Now our Parent Company is in that business with the ownership of Nbc Universal and that. But we are in the midst of the seismic change thats going on. We talk about it so often. It is happening. Yeah, but david if you move even in all your houses youve got to start thinking about do you really need your cable. You dont, jim. No, i know. And more and more especially as we head into next year with all of the bundles that are going to be available over the top, meaning through your broadband, there are going to be real possibilities for you to figure out a way to cut your bill and get what you want. A 3 a month verizon bill, small skinny bundle at one of my places. So this is forcing everybody to think about things. But big time heisman to fox. Yes. Why stevenson and att, what is that about . Lets not go too far down the road you just went down the road. Youre on the entrance ramp. Yeah, im on the entrance ramp, and they are too. And if they get own the highway, theyre going to go 75 miles an hour, theyre not going to start at 20. Is stephenson different he used to be a plain vanilla guy. Does he got some pizazz . I dont know. Suddenly youve got people thinking about content in a big way. The question is will you see any come to have the forefront. Raising a good point. Time warner successfully fended off fox very much so. Yeah. Its not clear that they are ready. But if you bring them an offer that is really significant and delivers enormous amount of value to shareholders, hes got to consider it. Hes got to. Then that offer was a real good price, no he didnt believe it. He had a lot of room ahead of him at that point. But that was a couple years ago. Again, is this likely . No. But is it a possibility . I think you have to consider yes particularly in light of all the changes taking place. Its not idle chatter. Thats great reporting too. Shoot, i better have something jim, we have to start thinking about a lot of this stuff in a bigger way. Remember that report from goldman earlier this week about apple and creating ecosystem on the prime side, so to speak, to actually get moving on the hardware. But trying to get apples business. Does apple have to go out and do something . And apple wont. I think apple wont. No, they wont. How about google . Would they consider it . They have so much money they could consider it. They can consider it. What about facebook . Youtube is coming on so strong. Facebook doesnt need to do anything. Doesnt need to do anything. No, were giving them their content. Twitter twitter not saying anything. Salesforce really just crushed them. Twitter just really they crushed them. They did. What they did to them. That wasnt fair. Wasnt nice. 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Switch to directv and lock in your price for 2 years, offer starting at 50 month. We have about six minutes before we wrap up this week well begin trading this morning. You said key to this market, mad dash, what do we got . Mcdonalds had been going down from 130 steadily to 111 because people were continually underestimating a ceo who im telling you is bringing about remarkable cultural change. Im talking about easterbrook, people looking for 1. 5 comp, he delivers 3. 5. International fabulous. Most important all Day Breakfast continues to be a hit. This is what this man has done and why its so hard for people to get their arms around. He has reenergized the franchisers, the people who really determine the place. So what happens is they start putting more money in the place, they start cleaning things up better. They add other shifts. They get excited themselves, and that adds to its what i call, david, a fly wheel. So all this talk about millennials dont eat hamburgers doesnt matter . It doesnt. Its a treat. He and i talk about that. Its a treat. The egg mcmuffin doing incredibly well, piping hot coffee, innovations youre going to see over the next 18 months are extraordinary. This guy Technological Innovations . Its going to make it so you can order not necessarily in the drivethru. Oh, okay. A little too slow. Hes one of the most responsive ceos in america. The people i know who are franchisees, they think this guy is the real deal. And people have to understand thats who determines the sales. Thats the key. And its so funny because when you speak to him he speaks very atherially. They got mojo, my word, and this one goes higher. You always do the head and shoulders kind of thing because youre tactically oriented, youre not at all, but this is good. Theres something happening here. What it is aint exactly clear. We got an opening bell right over there. My name is Cynthia Haynes and i am a senior Public Safety specialist for pg e. My job is to help educate our First Responders on how to deal with natural gas and electric emergencies. Everyday when we go to work we want everyone to work safely and come home safely. I live right here in auburn, i absolutely love this community. Once i moved here i didnt want to live anywhere else. I love that people in this community are willing to come together to make a difference for other peoples lives. Together, were building a better california. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell will ring in about 30 some odd seconds. We got a busy morning, jim. Yeah, a lot of Large Companies here. We havent gotten to ge, hon honeywell, but anything else you want to keep an eye on apart from earnings . The schlumberger call right now, theyre calling really still saying the bottom but the bill looks good. Halliburton was incredibly bullish. Schlumberger is less promotional, but the oil Service Group is back. Its bigger than ever, david. This is a turn just like seeing in the airlines being led by halliburton in the oil service and being led by of all things union continental. The Union Pacific call is every bit as bad as stock. Wow. Theres a lot were going to follow up. Here it is the opening bell at the new york stock exchange. Youre seeing realtime exchange back at hq. We should end up with more red on that board given where we look in terms of futures. Heres the big board Madison Square garden and New York Knicks opening 70th week. Saw marcus camby, was a knicks but what was he a denver nugget for a long time . He was a good player for a long time, not unfortunately long enough for us. Drainage pipes celebrating recent ipo. Can we get to ge . Yeah. The numbers werent good, jim. At least i know your take on them is not a positive. Im not going to disagree. Look, the orders were down six. Now, thats organic orders, lets be very clear. Youve got some compares in the rest of the industry that are slightly better than that. Remember, they went big in oil and gas, david. They tried to x it out a little bit, you cant. Locomotives not that good, aerospace not that good, Service Revenues not that good, that does matter a great deal. Backlog grew, which is important. But in the order grew 6 . Unfortunately it is a mirror of the industrial world. And youre not going to get any excitement here. Right. I mean, theyve lowered their fiscal year 16 industrial organic Sales Guidance from what was 2 to 4 to now 0 to 2 , eps Guidance Range now narrowed 148 to 152 a share. Right. But its the revenues, david. 29. 3 up 4 , consensus was 29. 6. You know we need to see robust revenues in these companies. Thats what people want from an industrial. By the way the Union Pacific Conference Call talked about needing fewer locomotives. Thats not an unimportant business for ge. No. Aerospace by the way, theres a huge shift going on against wide body for narrow body, which is roiling the industry by the way, but the main thing to focus on ge while theyre increasing the buyback, doing a lot of things right for shareholders, they did go into oil and gas, david, at the wrong time. Yes. And thats now very clear. A poor time to have bought there. Of course they got out of Financial Services, and that has been applauded. Theyre no longer a significantly important financial institution. That has been applauded. Theyve got a large shareholder in trion on that stock. They did sell stock, youre right. I wasnt crazy about it. My travel trust owns it. Minus six orders was stunning. Sge digital, yes, big order with saudi arabia. Im trying to present a mixed picture as opposed to all negative. Its not ibm in terms of what happened. I didnt think ibm was that bad either. Its mixed like ibm. Oh, whatever, im putting it out there. Not a great quarter. Yeah. I mean, Illinois Tool Works what about staying in this industry . What about honeywell . Remember, honeywell kind of there were two honey wells, there was the honeywell from that presentation and then there was the dave cote coming on mad money and this was the equivalent of mad money last week. Again, when you look at these i think United Technologies could be better than some of these guys, but aerospace is a changing breed right now. Climate control is a very good business. Ges not climate control. Honeywell is, United Technologies, thats a real good Growth Business because thats about cutting emissions. Okay. So i like that business more. And i like the oil and gas business less. Oil and gas business is just not so hot. Even above 50 now . Well, look, halliburton recovering u. S. Shale. You do need to see a real agreement in november. I dont know if you can do that. Natural gas doing better by the way because of export possibilities. Really interesting that natural gas export to sha near having an impact on our supply of natural gas because we cant get them in the right places. Thats the williams deal. Thats the pipeline. Fascinating moment for industrials but not a great moment ppg, dover, honeywell better, but look at illinois tool again down. That was the premium one. Danaher, they got more to life sciences. They are smart. Just in general they built an enormous company that typically is not discussed very often. They are really good at what they do. Really, really good. But anyway, look, ges ho hum and you cant be hohum. Well, you got to be like microsoft which was of course a lot better than hohum and now sitting at 60. 27 a share, jim. Can i take a second . I know this isnt a big company, but this is major, novel antidepression drug, it works, theres a lot of upgrades. Its an significantly reduce without importantly no weight gain. David, its going to 70. 30 gain. Its going to 70 because no weight gain. Weight gain is why people stop taking these drugs. Thats a monumental thing. Richard pops, congratulations, no one thought he could do it and he did it, big. Big. Stock goes higher. Right. Time warner up a buck. People taking it seriously. Yeah, i mean, its up. Time warners up, as you say 1. 6 . Att down a bit. The response i think you sort of hoped for given well see. Can i get your sense about the unbelievable conference you were at . I know you spoke to more than just goldman. Its funny because the Conference Goldman had was for entrepreneurs. Right. I met people from a lot of different businesses. And when you come out of these things, and im sure youve had the same experience, you feel very positive about the potential for our country. Right. Just so many people doing so many different things. Whether its Virtual Reality or whether its Cyber Security. Machine learning. Cyber security you raise a great point. Machine learning. Did you see prove point this morning . No, i didnt. Prove point is up six bucks. Pfpt. Yeah. All the Cyber Security stocks have reported just okay numbers. Prove point protects your email. Well, talk about we know some people that could use that. John podesta, are you listening . Colin powell, are you listening . Come on, guys. Just unbelievable. But these guys are in the sweet spot. And when you think about the internet of things and whats coming and the fact so many things are going to be connected, security continues to be a key concern. Youve got to know your network is secure. Absolutely. I had Sky Works Solutions on last night pivoting a little bit going to get to what i want to ask you about, pivoting from cell phones, apple is very strong. The guys from lam research, you need theirs to make format, but i keep coming back to what chatter do i hear . Qualcomm, nxpi. All right. Ill do a little favor report on that. Im very interested. All right. Lets talk about nxpi, jim. I got a little bit for you which should help in terms of as the market anticipates this deal. We talk so often about the internet of things, we talk so often about qualcomm, all that overseas cash, this deal has been in progress for some time, it looks like they are nearing the conclusion. There were some reports yesterday, what i can tell you is they do have an agreement at least at this point are you kidding me . On 110 a share. Thats the number that qualcomm is going to be paying for nxp. And you can see the stock 104 in many ways discounting an expectation of lets call it maybe a bit more than that. From 120. They were asking 120, appears they will be willing to take 110. It was a handshake deal at 110. Theres a lot of things to work through here. Apparently the contracts at nxpi in particular, jim, are very complex. And so they need to be going over all of those to make sure that whatever may be in particular contracts is adhered to. But they are on track it would seem to have a deal announcement as soon as lets call it next week. Kind of keep that broadly speaking later next week. In perspective, 110 may seem not as great, but this stock was at 80 a few weeks ago. And they are they pivoted really well away from just communication cell phone into the auto. And as you keep saying, david, the driverless you need more semiconductors than you would ever believe and its nxpi that has the lead. I want to make sure people understand theyve agreed on a 110 as the price, but the deal is not done. Okay. No one knew that, thats called news. The additional specifics are still being worked on. The fact qualcomm is going up will make people feel nxpi didnt get enough money. Qualcomm went up when the story was first broke. Chance to not just be a cell phone company. This is an enormous deal. Its closer to 40 with debt and Everything Else, its well above. This is 40 billion deal before debt. Look at qualcomm soaring. Soaring. They will be able to use their cash overseas, which is an important component of this. Willing to include stock as well. Why didnt they hold out for 120, david . This Machine Learning world were starting with except amazon. Yeah, theres so much coming here. Everythings going to have a chip inside. Eventually were going to be chips too. Internet of things, you kept hearing iot, Machine Learning. A. I. , all a. I. , a. I. Artificial intelligence. You begin to think, wow, im from a different generation. Im from spreadsheet, im from paper and these guys are beyond us. Our kids are going to be at a point at their life cycle where theyre going to be talking about do i upload my consciousness to the cloud before i go. How about the fact the cell phones wiping out millions of jobs but people claim its also creating a lot of jobs. But the cell phone is so linked, its such a bigger ecosystem than it was. But i am concerned about i thought that nxpi would get more. I did. Well, they asked 120, as i reported a week or two ago. 110s not bad. Not bad versus being at 80, being greedy here. Absolutely its fine. A lot of these guys its interesting, david, when i was talking to lam yesterday, you know that that deal was blocked the klatencor and lam. All three. Yes. They might have expected that too when they announced it. But said long line of customers have been unable to get over antitrust enforcement. No. Well have cases starting here for the hmos in november, anthem and cigna. And then followed by aetn aetna humana. Paypal did blow the number away and the bears whove been all over that stock have capitulated this morning. Have they . Yeah. They capitulated. All they did someone deliver one more good quarter but finally the bears said we cant just stay negative on this stock anymore. All right. Not too much up, but microsoft certainly is. Twitters up a little bit too, jim. Twitter . Yeah, 16. 97. Really . Did they decide that people who were trolls were no longer on . How many accounts do the trolls have . Of the 300 million accounts, how many accounts are trolls with multiple names . Great question. Yeah, i know, isnt it . Yeah. And its an important one by the way. They got trolled by crm, didnt they . Well, maybe well, thats one side. All right. See that, silence. Courtney reagans on the floor shes got more on whats moving this morning. Good morning to you, david. We do actually have a lot of movers in either direction when it comes to earnings, but if you take a look at earnings direction decidedly lower dow down by about 96 here in the first few moments of trade, s p lower, nasdaq also lower despite strength from microsoft. And worth noting the dollar hitting sevenmonth highs today against a basket of currencies. And looking at the euro, euro hitting lowest level since march 10th at 108. 68. And a lot of dow components are on the move today, not all in the same direction. Youve talked about microsoft, but its worth pointing out were hitting the first alltime high since 1999. You rarely see moves in microsoft up 5 here in the opening minutes of trade after its eps soared past consensus, revenue beating some strong growth in its cloud business. Ge also beating on its earnings. Revenue short narrowing that fullyear guidance and increasing the buyback by 4 billion, not enough to satisfy investors this morning. You can see shares of General Electric down more than 2 . Mcdonalds higher by 2. 5 . Again, a dow component after beating on earnings. Some pretty decent same store sales growth. Folks are liking that all Day Breakfast and new Chicken Nuggets. If we take a look at global markets, actually pretty good week for both europe and asia, global stocks set to have their first weekly gain in four weeks. But both europe and asia mixed this morning. Again, some currency at play here. And we know that the ecb is deciding not to move into tapering and keeping its socalled easy Monetary Policy in place. A lot of deal chatter going on this morning. I know you all have been running through, but its worth aggregating it because we dont often see this on a friday. You see this often more towards the beginning of the week, tobacco, Reynolds American getting reported buyout offer from British American tobacco for the percentage of the company it does not already own. Sources of course telling our very own david faber that both time warner and at t have engaged in talks for some kind of arrangement going forward. And then in high end retail there is some chatter that coach and burberry may be looking for a deal, but then theres also other reports saying thats not happening. We bring it to you because stocks are moving on this. And coach often gets involved in some of these kind of talks. I think the markets remain skeptical until we hear something more solid but worth pointing out because stocks are on the move. Its a rough morning for shoemaker skechers. Shares down sharply more than 16 . The shoemaker issues some pretty disappointing guidance. It missed on earnings. And what i think is interesting to point out because we may see this follow through in other retailers is skechers says it saw weak u. S. Wholesale sale. So that means of course the sales its placing with retailers to sell its shoes and also some changes abroad. So im going to watch that when it comes to other manufacturers that are selling to the likes of wholesalers Like Department stores. David, back over to you. Thank you very much, courtney. Courtney reagan. Lets get a closer look now at the oil markets and were joined by Jackie Deangelis at the nymex to do just that. Good morning to you, david. Oil prices on this friday are bouncing around between positive and negative. Negative at the moment but staying over 50 a barrel. Even with the move we saw yesterday more than 2 selloff this fact that were staying over 50 is convincing people that is a nice level of support. And we could potentially go higher by here maybe upper 50s even by the year end. But a lot of caveats and variables until we get there. Now, the technical analysts are looking at the charts they see a head and shoulders pattern forming, theyre even saying we could get to 60 or above in the next six months or so and that flies in the face of what we typically see seasonally this time of year. Remember last february we got very close to 26 a barrel, but maybe, just maybe, the tide is turning in this rebalance that has been forecasted could be happening. Still investors should brace for some volatility, im told from the analysts, especially with the shortterm support in resistance levels. The dollar also should be watched very closely ahead of the election. And also in anticipation of that december rate hike. Back to you, david. Thanks, jacqkijackie. When we return, youll want to hear what former microsoft ceo Steve Ballmer told cnbc about facebook and mark zuckerberg. Squawk on the street is back right after this. Dw brought i. T. Orchestration to a global outerwear manufacturer, allowing them to handle the recent popularity boom in fanny packs. Its pretty fly. Unless being 90s is your thing. Well, cdw and hpe services gave them the flexibility they needed to scale up their scale up their cloud resources, making sure supply meets demand. Poser [ classic ringtone ] whats crackalackin . Hey, did you remember to set the vcr . Increased flexibiilty by hpe services. I. T. Orchestration by cdw. Anything worth pursuing hard work and a plan. At baird, we approach your Wealth Management strategy the same way to create a Financial Plan built to last from generation to generation. Well listen. Well talk. Well plan. Baird. This is the rx. Elevated. Rx hybrid and rx f sport. Get up to 5,000 customer cash on select 2016 models. See your lexus dealer. Gilman go get it, marcus. Go get it. Coach gilman used his cash rewards credit card from bank of america to earn 1 cash back everywhere, every time. At places like the batting cages. [ crowd cheers ] 2 back at Grocery Stores and now at wholesale clubs. And 3 back on gas. Which helped him give his players something extra. The cash rewards credit card from bank of america. More cash back for the things you buy most. The cash rewards credit card from bank of america. Sprint . Im hearing good things about the network. All the networks are great now. Were talking within a 1 difference in reliability of each other. And, sprint saves you 50 on most Current National carrier rates. Save money on your phone bill, invest it in your small business. Wouldnt you love more customers . I would definitely love some new customers. Sprint will help you add customers and cut your costs. Switch your business to sprint and save 50 on most current verizon, at t and tmobile rates. Dont let a 1 difference cost you twice as much. Whoooo for people with hearing loss, visit sprintrelay. Com. Yeah. Well, we gotta hand it thto fedex. Glasses. Theyve helped make our ecommerce so easy, and now were getting all kinds of new customers. I know. Can you believe were getting orders from canada, ireland. Th ones going to new zealand. New zealand . Psst. Ah, false alarm. Hey you guys are gonna scare away the deer idiots. Providing Global Access for small business. Fedex. Some day i want a soundtrack of all our songs. Why not . The best music. Full service has been restored to a number of popular websites following a denial of service attack, the attack was against domain name company dime dns, sites such as amazon, twitter, spotify suffered widespread intermittent outages. No word on where the attack originated, why it happened, but apparently everythings back up now, jim. Does show you though the world that were entering. Listen, russians are hacking everybodys accounts in terms of at least if youre a democrat. And dont forget about cyber ransom we never hear about. And the release as a result of Colin Powells being hacked. 14 companies this is the world were part of. Hub spot but pegasus was the one that would fit in the most, 17 had already been acquired over already so the note was out of date from may but that was extraordinary document. Extraordinary. Yeah. Shares of facebook by the way check them out right now. Theyre near an alltime high. The Market Cap Company by the way about 370 billion plus. Former microsoft ceo Steve Ballmer was on squawk box discussing an offer he made some time back to mark zuckerberg. Remember, you have to have a willing seller. I mean, i made a pitch to zuckerberg when the thing was small, you know, he said no because entrepreneurs how much did you offer . I think 24 billion when the company was itsybitsy. He said no, i respect that. That would have been a good buy. But he wasnt a seller. Ballmer and i were very near each other in our facebook in the harvard class of 77 facebook, both of us now you would not recognize because we both had giant heads of hair. Time does go by. Yes, it does. Time, time warner. Yes, but you both still have very big brains, so thats good. Thank you. Youre welcome. Dont forget Steve Ballmer had that microsoft phone at my 35th annual yes, that nokia deal. Yeah. Satya nadella came in and did so many things including done, get rid of that. He asked me when i saw him are you a gamer, guys a renaissance man. Nadella . Yeah. People dont realize that. All right. You ready for stop trading . Sure. Get yourself ready. Get yourself ready. Get off twitter. I was seeing if it worked. Our fabulous producer here, shannon, just was putting my friend up, Kristen Flagstad on, i saw them in the whole cycle, david, the whole vog ner kirs ten overshadowed, always was. All right. There you go. Little history of opera for you. Weve got squawk on the street coming back of course with stop trading from jim. Man, im glad aflac pays cash. Aflac isnt Major Medical enough . No whos gonna help cover the holes in their plans . Aflac like rising copays and deductibles. Aflac or help pay the mortgage . Or child care . Aflaaac and everyday expenses . Aflac learn about one day pay at aflac. Com boat blurlbrlblrlbr our customer is a our 21yearold female. Heavily into basketball. Wait. Data just changed. Now shes into disc sports. Ah, no shes not. Since when . Since now. Shes into tai chi. She found disc sports too stressful. Hold on. Let me ask you this. Whats she gonna like six months from now . Who do we have on aerial karate . Steve. Steve. Steve. And alexis. Uh, no. Just steve. Just steve. Just steve. Live business, powered by sap. When you run live, you run simple. Omg. You are so funny. In the time it took me to type that, if i were driving 55 miles an hour, id have driven the length of a football field blindly. Not funny at all. Dont text and drive. The more you know. Not funny at all. Dont text and drive. Keeping the power lines clear,my job to protect Public Safety, while also protecting the environment. The Natural World is a beautiful thing, the work that we do helps us protect it. Public education is definitely a big part of our job, to teach our customers about the best type of trees to plant around the power lines. We want to keep the power on for our customers. We want to keep our community safe. This is our community, this is where we live. We need to make sure that we have a beautiful place for our children to live. Together, were building a better california. Time for stop trading with jim. Where are we headed . My favorite ipo of this year is twilio, they make the infrastructure for a lot of Different Companies for like this is what you must watch. Acacia wasnt able to hold 100 when they did it, if this can hold 40 and go higher, then the market is looking a little better. What am i supposed to make of the fact how this things performed so incredibly well after the ipo but then just the last month david, remember they offered very little then they got the big pop as the institutions come on and they average up in order to get a full position and stock goes higher at full position. And now hitting the market with more stock and seeing if it can handle it. That said the company is excellent and you may think its overvalued. I think its got the best growth path of any of the ipos weve seen in 2016. Okay. What a show. Congratulations on reporting on b. A. T. , time warner and nxpi. Thank you for all of your great reporting too. Lets sit here and congratulate each other for the last 30 seconds. Like to point it out because the value added comes from reporting. Everybody can get everything from the web. Thats not going to stop the people of twitter saying were both idiots. Compliment. How about whats on mad tonight . Ive got my game plan. Im also doing some beer forecasting. And im comparing the industrials because some industrials are not all industrials are created equal, some more equal than others, thank you, george orrwell. Thank you, george. Eagles, vikings sunday. Two and a half. The vikings have a heck of a defense. Vikings have the best d, but never know, oblong ball. Good piece sunday about the Philadelphia Eagles and what they do and howie is doing a great job there. And as they say every friday from what i said to them in the huddle, take no prisons. Tnp. Have a great weekend. I will be in touch with you at all times. You bet. Im online. I know you are. Dont worry. Serving tonight. Got it. Coming up, more reaction for a big day for blue chips, of course microsoft having a very good session. As you see mcdonalds as well. Keep it right here. Okay, so your banks app. Now what . How will you keep up with the new demands of todays Digital Economy . The fact is some believe they wont need a Traditional Bank down the road, so at cognizant, were helping banking and Financial Services Companies Think digital, be untraditional, and reimagine what the bank of the future can be. Our clients can now leverage customer intelligence to predict their financial needs and provide more contextualized products and services. Were creating new platforms across channels so customers can effortlessly invest, borrow, lend, transactwhereverwhenever they choose. And were digitizing the way banks run, driving efficiencies and delivering new value for their customers in return. Digital works for banking and Financial Services. Lets talk about how digital works for your business. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley mary buys a little lamb. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of at t, and security that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Good morning and welcome back to squawk on the street. Im sarah eisen along with david faber and mike santoli live at post nine of the new york stock exchange. Carl is off today. Lets take a look at the markets where we stand right now. The dows off about 90 points. Only gainers in the dow right now microsoft, mcdonldss and american express. S p 500 off 0. 4 , industrials and energy getting hit particularly hard. And the nasdaq doing the best of the bunch thanks in part to microsoft and paypal trading around the flat line, not helping matters. Wti crude is off by 0. 5 , david. All right, our road map does start with microsoft hitting a record high this after reporting better than expected earnings and also showing real strength in cloud business. Mcdonalds shares are also riding high after Comp Store Sales beat on earnings, global comps up 3. 5 . And theres a tobacco deal in the works, British American tobacco making an offer to buy what it doesnt already own of Reynolds American. It would create the Worlds Largest Tobacco Company. Were going to give you all the details in this hour. But first, lets check in on shares of microsoft. Top story after the Company Reported a big beat. Our jon fortt joins us onset with more as we watch this stock, jon, move past the 1999 boom time high. Yeah. And a lot of this i mean, the performance is great. This is driven by the cloud, the growth rate particularly in commercial, office 365 commercial is better than a lot of analysts expected. The margins are looking good because a lot of these cloud pairs that have achieved megascale, amazon, microsoft, theyre not spending as much on building out these data centers. But whats happening here is multiple expansion at a level that a lot of people could not foresee. People believe in microsoft again. Not just investors, but also microsofts peers in technology. Take a look at forward p e. I think as of this move microsofts forward p e is now above 20. I mean, when was that going to happen, right . Nobody thought apple is at 14, intel and cisco at 13, ibm and Hp Enterprise around 11 or 12 to give you a sense, googles at 24. Thats the sort of class that microsoft is rising into expectation wise. Of course the linkedin deal is supposed to close in this quarter. Weve got to really deliver and execute on that. Now theyve got vm ware teaming up with amazon in the cloud on the enterprise. Thats going to be tough because vm ware has those enterprise chops that amazon lacked in the past when it comes to doing bigger deals in the cloud with them teaming up with amazon, its going to be tough for Satya Nadella and redman to go up against them. But no question theyve done it thus far. And as you point out, jon, the stakes get higher in terms of how the stock performs because now its back to being viewed as a growth story. About a 17 forward multiple a year ago up to 20, now you have all the analysts saying, well, if you take out 100 billion in Cash Holdings you have to kind of make the story a little better. But i would also point out that the stock price is at an alltime high, market cap is nowhere near it. They bought back so much stock, peak market cap in 199 was 620 billion or so, now were about 470. In retrospect lucky or smart was actually a pretty good strategy for use of cash. Yes, it was indeed. Of course we had Steve Ballmer on squawk box earlier, former ceo of microsoft. A guy who i think didnt get enough credit for what he did some positive things getting microsoft in position. Listen to what he had to say about Satya Nadellas leadership thus far. We grew our revenue and we grew our profit. We made the transition from a pc company to an enterprise company. And now satyas got the company doing the right stuff. Hes going down this cloud path. And satya was going down this cloud path all along. He was running that division. But it was at that stage where investors really didnt believe in the cloud. They didnt really understand to the same extent this isnt just like another division of the company and we need to just value it on how much cash its throwing off. So it was hidden underneath a bunch of other stuff. Nokia probably not the best idea, but they made a lastditch effort in devices. You know, skype is a nice bolt on but didnt light the world on fire as some might have hoped. But once you strip some of those things away and once the cloud grows up, you got to remember ballmer did help them get to this position, now theyre really flowering. Whats the competitive match to watch here . Is it amazon and aws versus microsoft . Is it salesforce versus microsoft . Which one will you be watching . I think its amazon versus microsoft primarily. Then youve got a bunch of other enterprise players as you guys, david, were talking about. Earlier, your oracles, ibms, trying to make the case for why they should be included in the big leagues. Now youre starting to see these deals taking place between amazon and microsoft trying to scoop up other players in the software realm. Microsoft got adobe with its harkting cloud onboard as i was saying amazon bringing mv in to bolster sales and try to get a greater share of those enterprise workloads that are moving to the cloud but want to stay on premise too. Microsofts advantage had been, hey, weve got Windows Server for those who want to stay with an on premise component and make it easier for you to move to azur because its the same architecture. Now with vm ware amazon can start to make a similar argument. Michael, quickly on the stock itself, you made a point earlier via email that alltime high does not equate to alltime high in market value. Yeah, so basically they bought back throughout the mid 2000s really a tremendous amount of stock. People are saying what are they doing. The p e was so low on microsoft at that time that it actually looks like also in combination with dividends looks like a pretty good use of cash in retrospect. So what does the investor care about . Do they really care about do i own a piece of the biggest Market Cap Company . They care about whats my actual total return from dividends and appreciation. So its worked. Stock price going to get the big headlines anyway. Its nowhere near 600 billion it once was in 99 or Something Like that. All right, jon, thank you. See you next hour. Another big earnings mcdonalds beat profit and analyst estimates. Reporting 3. 5 jump, u. S. Comp store sales rising, both better than expected. Join us to discuss is analyst at guggenheim securities. Also on the phone, bob derington, analyst at telsey advisory group. I think you both like the stock, matt. What was the problem . Were expectations too low going into the quarter . Is that why shares have been under pressure and getting a nice boost today . Yeah, well, i think first strength on top line came more from the foreign markets. We have a little bit of caution what the u. S. Will be. They had some heavy year ago promotions theyre about to lap. Theres a lot of unknown how fast theyre going to be able to grow their profits while they sell Company Owned stores to franchisees. Thats where they beat. The ebitda grew much faster than what we had anticipated from their core business, not just from selling stores. So i think it was a high quality quarter that came in only a couple of pennies above where the street was expecting. Yeah, bob, how should we read that global improvement . They cited uk, japan as particular bright spots. Is it the Macro Economy and those sort of economies is getting better, or is it something mcdonalds is doing specifically right to win and boost sales . I think its a combination of factors. If you look at the year ago trends they were, you know, excuse me, fairly strong then. But i think the real surprise looking at the high Growth Market foundational market were dramatically better than expected. I suspect that japan probably benefitted a little bit from the pokemon tiein there, and in china that was somewhat of a drag in the high growth segment, but still nonetheless much better than expected within that segment. Matt, in terms of the stock, it obviously had a really steep runup into the spring and then again a couple months later. It sort of got caught up in this whole rush towards supposedly safe stocks, good dividend payers and things like that. Did that kind of reset the upper limit for what the valuations going to be . Because were still knocking around well below those highs near 130 a share. Well, they are transitioning their company to more franchise model. They historically trade at higher multiple. Our argument is that multiple expansion should incur because they will be getting to historically high margins and higher cash flow free cash flow, so that usually goes from a 12 times enterprise value to maybe a 14 times in line with more of their 90plus franchise peers like Dunkin Donuts and dominos they can approach closer to those. Also i suggest that the stock came under pressure mostly because people were so concerned about the athome food deflation and what that would do to low end consumer. They benefitted on their margins mostly because of the lower cogs out there. So profitability is being flowing through and theyre not seeing the pressure of people migrating as much as we might have been concerned going to even the kitchen. Bob, we were just talking about microsoft and the transition that has happened there under Satya Nadella. We should give Steve Easterbrook credit, shouldnt we . Hes really come in and brought back not only the allDay Breakfast but changed some of the ingredients, gone to antibiotic free Chicken Nuggets. How much has he really changed the culture and improved the relationship with franchisees . You know, i think thats a very, very important point, sarah. Because i think ultimately we view Steve Easterbrook as a change agent. And its his ability and his teams ability to better communicate with the franchisees. Youve got to get them on board and keep them on board. And hes going to have to continue to work with them and his team to get them to pull the boat in the right direction. You know, as big as this Franchise Network is, he needs them working with him. Now, the one thing i would suggest we need to keep an eye on is theres been considerable turnover within the executive ranch of this company over the last month or so, so that may change some of the chemistry and some of the effectiveness. And thats going to have to be something that we keep an eye on. Yeah, i mean, matt, that could be something to watch. Were also still watching this burger trend. Mcdonalds has gotten a lot of bad press lately, it is still the burger king with the big mac, but those going for better for you burgers, where does mcdonalds stand with trying to tackle that challenge with a fine line between pricing and speed and Everything Else trying to worry about bringing younger customers in . Thats a great point. I think you want to have the credibility on improving your food or going the right direction, i dont think they could ever match a call it a shake shack or habit, but they want to improve their perception of quality. Theyve called out their Chicken Nuggets as far as improving those and ingredients in those. But you touched on it, its price and convenience. People are going to mcdonalds for those two major reasons. You just need to have acceptable food thats on trend. So i think they will continue to improve their food product, but i dont expect them to go after or compete. Theyve tried that in the past and its not a big enough opportunity to disrupt their entire promotional schedule or brand image to go after the steakhouse type burgers. All right. Well leave it there. Gentlemen, thank you. Good discussion on mcdonalds, matt and bob with shares up about 2. 5 . Bucking the overall trend in the dow. Thank you. Another mover to talk about here, British American tobacco making an offer to acquire the rest of Reynolds American that it doesnt already own. The 47 billion deal represents a 20 premium to yesterdays close hence the 16. 5 . The deal would create the Worlds Largest Tobacco Company. I guess the Worlds Largest publicly traded Tobacco Company is more apt because you still have china tobacco. In terms of consumer brands, b. A. T. Owns dun hill and lucky strike, behind camel, weve talked to david, cameron a bunch of times on this program during earnings after she managed to combine lorillard with american, that 26 billion deal which is why she came back, she actually used to lead a subsidiary of b. A. T. Herself. So theres a lot of theres already a very strong working relationship. The question is, do they go for this price or do they try to get a higher one, right . Thats the key question, sarah, right. They own 42. 2 . Theyre making the offer for the remainder of what they dont own, but they dont control the company. They arent a Controlling Shareholder as such. They dont have control, for example, of the board of directors or the directors who sit on the independent committees. And a key will be here where does the value end up. You can see there of course the actual makeup of the offer itself in terms of cash and stock, a 20 premium over the stock price from yesterday. Theyre talking about 400 million in cost synergies that will be accretive to earnings in the first year that represents 16. 3 times the last 12 months of ebitda at the company and as such is a multiple that is 300 basis points above what reynolds paid for lorillard. But there are others who will say, you know what, that 20 premium for a company that is well regarded as you pointed out thats increasing its dividend and has done so even though didnt have a great Earnings Report last time, is more reminiscent of what you would pay for a squeeze out, namely for if you had majority control and were simply trying to clean up and buy what you didnt own. It is not a control premium. My guess is that is where the key debate will come down when the directors of reynolds, seven independent directors that theyre going to choose, review the deal. And when shareholders ultimately if it gets to them, vote on it, those unaffiliated. That being the remainder not the 42. 2 . They wont have a vote of course at b. A. T. So well see. But theres a lot of compelling reasons for it. Its not an unexpected in terms of it happening. The timing though was something that was always a question. Well, the shares had sold off sharply after quarterly earnings. Although theyve been working on this for some time. B. A. T. In the time has seen stock go up in part because weakness in the pound has helped its business because so much of what it sells is overseas. And you and jim were trying to figure out sort of why its working the other way around. Why isnt the u. S. Using the strong dollar u. S. Companies buying overseas. Tobacco may be an interesting case here because the u. S. Market is extremely lucrative. Consider this, the u. S. Is close to 25 of the global cigarette profit pool even though its only 6 of global volumes. So americans pay high prices for cigarettes. And thats why these Companies Including Reynolds American have been doing very well. Its not because more people are smoking, its because the prices. The margins are very, very high. And they continue to raise price. Susan cameron is a tough cookie. Theres a transition going on in terms of ceo. Yeah, announce a new ceo coming in january. Most likely shes going to fight. Well see. Well be following for some time, sarah. All right. When we return, Athena Health shares down more than 6 after it reported earnings now down more than 7 . Well talk to the ceo jonathan bush, plus one of Donald Trumps key energy advisors, Oil Billionaire harold hamm will be joining us on the polls and Trumps Energy plan. Much more ahead on squawk on the street with the dow down triple digits. Stay with us. Massachusetts based Athena Health topped Third Quarter profit forecast, but the company did cut its full year guidance and shares are down about 7 plus, almost 8 . Joining us now first on cnbc Athena Health chairman and ceo jonathan bush. Always nice to have you, mr. Bush. You surprised the stocks down almost 8 . I am not a stock watcher. At one point i made a comment about my stock price a couple years ago on your show. And felt rashes for months afterwards. I am sure that between you and all the guys you have youll figure out the right price. But im excited about is our prospects as a business, which are better than ever as the kind of Obamacare Mandate energy kind of wanes out of washington and we can get back to the core business of letting doctors be doctors by doing their crap work for them and helping them grow their business by hoelping them be an online resource for health care as well as just, you know, doctor behind a sliding glass wall. Understood. And youre doing a good job of that, although your forward looking guidance seem to be a bit below what people were anticipating. Is there a slowdown in those doctors willing to take you on to do as you said, their crap things . Yes. Theres a shift right now. For the last seven years thereve been a series of major federal programs, 36 billion in the hightech act, of course the aca uncommonly known as obamacare, and then another series of things people call macra, which i wont explain to you. Those programs were forcing doctors and programs to buy systems. So everybody had to race to be the tallest midget to win that battle. We were in guaranteed compliance with all those systems and punched way above our weight class all those years. Those programs are now waning. No matter who wins the president ial election, it will be a president with historic mandate to change anything. So we are expecting the basis of purchasing to be more return to real sources of cash. Can you cut my cost, can you grow my market share, can you connect me to the rest of the health care continuum. Were the best in the world at that and we expect to win big at that compared to all of our competition is really preinternet Software Companies that cant do any of those things. Hang on, jonathan. Hasnt obamacare been very beneficial to your business, all of these mandates for more recordkeeping from doctors and from hospitals . And the fact now some major insurers are pulling out or raising premiums by double digits. And it is under some political pressure here, isnt that a headwind for you . So, yeah, i mean obamacare movement, this sort of washington going to make everyone better for the last seven years has created kind of a sugar high in our space where everybodys got to do this program. And it did help us in what i would consider to be a somewhat unhealthy way. Go back and look at the tapes on your show, you know, ive been sort of railing against it even as weve been growing a lot of share with it. Our real competitive advantage is we are a cloudbased business service, the only one in health care. We can do a lot more broad based work on eliminating the administrative work in medicine and connecting doctors care to patients and to the rest of the continuum. And now that most of our energy isnt going to complying with new programs, we are expecting to do a lot more of that. But youre absolutely right, we got a big sugar high along with everyone else from these big frankly silly programs and excited about getting back to our core knitting. Jonathan, you mentioned neither candidate would become a president with a mandate necessarily to do much. But there is a lot of scrutiny on kind of the entire food chain of health care, of course drug prices but also services. Especially with the epipen controversy there was a lot of talk of how far things are priced, how things are billed, what kind of services are loaded into a bill with the assumption its going to be reimbursed in a certain way, what role do you and your services have in trying to rationalize any of that . Absolutely. So youre seeing what did not change is that prices of Health Care Continue to march upward, upward, upward and that providers who can offer some break in that are going to win, and those who cant are going to lose. 10 of ambulatory visits, 10 of Doctor Office visits happened on athena net last year, every tenth one. Those were the ones online where you got a welcome text before your visit where you didnt get handed the clipboard, where you got a followup with your lab results and an opportunity to make the next appointment online. Those are the ones that next year will be able to be available as an online visit as well as an inperson visit. These are the places where we can really help doctors and hospitals differentiate that the Old World Technology players that have been propped up by the last seven years cannot play in. So were very obviously the markets going to have to adjust to these new basis of competition, thats great. I look forward to it. I dont mind their skiddishness with us, but im psyched for what were going to be able to do in this environment. I know youre looking at the election, jonathan. Im curious what your thoughts are what election . Was there an election . Wondering what your thoughts are. Surely you have them because you have them about everything on donald trump and his character, especially considering the recent revelations about him and unfortunately about your brother, billy bush. What can you tell us . Well, obviously im sure youve been as mystified as me by the rise of donald trump. A lot of thanks, a lot of credit to nbc corporation for pumping him up with the apprentice and all of his shows. Im sorry hes there. Im sorry that the candidates we have are the ones we do. I think the malaise is obvious. And of course poor billy, who of us has not had a moment to stand up to awful behavior and missed the moment . The awful comment or the butt grab or the little thing. In mexico today theyre handing out whistles to women to try to give them the courage to speak up when theyre grabbed on public transportation. All of us are confronted every day with an opportunity to stand up to some tribal crap from our past and we miss them. Billy missed that one, but ive seen him stand up a hundred other times. Im very sure hes a atalented guy will bounce back big, but of course, darn. Do you think he was a scapegoat here . Melania said in a recent interview that he egged mr. Trump on. Well, i certainly think any outrage from your folks at nbc has got to be crocodile outrage given that they built the donald, the apprentice is an nbc property, the universe pageants billy sent to be the host of these things. You know, of course we all do what we need to do, blame not the bird of prey for eating the lamb for that is what he does. I dont blame nbc, but please dont be silly, nbc. Weve all been a part of this. Talk about an example of inability to stand up to a little scoundrel. All of us have had this. Even nbc. Jonathan, finally, just to bring it full circle here back to your company. Assuming Hillary Clinton oh, great. Becomes the next president as the polls seem to indicate is more likely than not, of course there are people who disagree. We know that. Yeah. What are your expectations for what will happen to the aca under a Clinton Administration . Well, i think the point i made earlier stands, which is these are two very low mandate candidates, they both have the highest unfave ratings in my life are you not expecting anything . Yeah, exactly. Its conceivable the senate will also go democrat. I actually think im not expecting anything. I dont think that a Democrat Senate will or a Democrat White House will attempt another great leap forward kind of a big movement, i just dont think theyll have the mandate. Theres a lot of changes that have gone into effect during the last seven years. Some of them could be made to do good. I think managing the regulatory environment, the regime thats been put in place better is a lot better idea. And the only credible thing you could try with the level of mandate thats there compared with starting some great new idea of a Regulatory Regime. So im expecting a very steady Regulatory Regime where people try to optimize around the edges. And thats when the free market can really kick into gear. I cant wait. Right. And as a bush i know h. W. Is going to potentially vote for hillary. How about you . Well, ive settled on the fact that if you cant stand the nut on the left and you cant stand the nut on the right, go for the johnson. And im sticking with johnson weld here in massachusetts where well make no difference anyway and happily voting there in hopes we frac apart this tired broken Democratic Party into two more reasonable groups and frac apart the Republican Party in the same way. Id like to get a party a place that i can believe in again. I grew up believing deeply in my uncle georges Republican Party, really feeling like it was good for people. And when i listen to bill weld talk, i feel the same way. Even if he loses, i want to be for something that im just thrilled with. And i think most of us feel that way. Were all doing a lot of deals with the devil that we sort of want to bathe with a wire brush the next day over and we dont have to do that. Were a great country. We can come up with great people that have great ideas that enable our human freedom and agency rather than suppress it in some judge or socialistic way, either one. Im going to remember that, johnson. Thank you, mr. Bush. Couldnt help it. Jonathan bush, Athena Health. Scouldnt help it. Usually ceos steer away from that. When we come back, just one day after their heated debate Hillary Clinton and donald trump sharing another stage and even a meal. Well tell you where and why and what we learned straight ahead. The dow is down 108. Bend me shape me, any way you want me as long as you love me, its alright. Shape the best sleep of your life. Sleep number beds with Sleepiq Technology adjust any way you want it. The bed that moves you. Only at a sleep number store. Update now for you on the ongoing deal talks between qualcomm and nxpi. I can tell you the two sides have agreed, a handshake agreement at least according to people close to the situation on price, that price 110 a share. The composition of which is all cash. So qualcomm and nxpi have agreed that qualcomm will pay 110 all in cash to acquire nxpi in a deal worth roughly 40 billion at that price. There are still other things that they are dealing with. Apparently the deal itself including a number overcomplex items involving contracts nxpi has with customers that need to be gone over, but it does appear to be drawing close. This after talks have taken place for a number of weeks between these two companies to complete a transaction that size wise would be one of the largest weve seen in the chip sector and of course would have to do with the growing importance of the internet of things, Machine Learning and the role chips are playing in so many different things. Not just computers. You can see nxpi shares have moved down a bit. Market hoping price would be perhaps above that, asking 120. Qualcomm shares strong ever since this first surfaced continue with that strength this morning. Mike. Yeah, and a cash deal. Old tech Companies Like qualcomm thats what they have, cash and access to cash. Enormous amount of cash overseas and overseas company enables them to use it. All right. Coming to a head. Thanks, david. As we head to break, oil down yesterday Holding Steady today above their 50 a barrel mark. Well speak to Oil Billionaire harold hamm. His take on trump, energy and much more is next. Stay tuned. Youre watching squawk on the street. Good morning everybody. Im sue herera. Here is your cnbc news update at this hour. Large clouds of black smoke billowing from a strategically important iraqi town northeast of mosul. Founded by air strikes and border fire from peshmerga positions as part of the iraqi offensive to recapture mosul. Hundreds of activists in the philippines burned a mock u. S. Flag and demanded president to punish police officers. The protesters marched to the president ial palace to condemn the Violent Police action. More than 100 firefighters battled late into the night to extinguish a massive house fire in los angeles. At least one person was hurt, four people are unaccounted for. No word on how that fire started. And hong kong issuing a typhoon warning this morning, but that didnt stop dozens of surfers from taking action. The thrill seekers ran into the sea to take advantage of the unusually large waves. The typhoon is expected to hit about 62 miles off the coast a little bit later today. Thats the news update this hour. Sarah, back down to you. Flirting with danger. Sue, thank you. Only 18 days until the election with Hillary Clinton leading donald trump by at least six Percentage Points in the latest nbc poll. So will the republican candidate be able to catch up . Joining us now is noted trump supporter and Energy Policy advisor harold hamm, founder and ceo of continental resources. Good morning to yoru, harold. Thanks for joining us. Good morning to you. I just cited the nbc poll, real clear politics average also has her up by about six points. How do you feel about your candidates chances now after the third and final debate and with the polls where they are . Well, i thought he did very well in the final debate. You know, i think the polls weve seen this all the way along this election how wrong the polls are. You know, on the other side weve got rasmussen showing donald trump up. So the polls have not told the entire story here. Theres a lot to be said about whats going on with this Trump Movement across the country today. I think its a washington disconnect, if you will. Weve seen people crowded in this country with all the Syrian Refugees American People want to stop. I think an analogy close to this is brexit. What happened in europe. And i think the American People can step out and say we want this shut down, we want to know whos here, whos coming across our borders. So immigration is a huge part of this. And its time, you know, that washington listened to what the American People are trying to say and trying to tell them. Yeah, we talked a lot about that yesterday with nigel farage of the brexit movement. While we have you, lets talk about the energy policies. Because weve got very different ones from Hillary Clinton and donald trump. Its funny, we did hear a little about it during the second debate, but of course everybody remembered ken and his red sweater a lot more than his question which actually was on Energy Policy. So what can you tell us as the biggest distinguishing feature of Donald Trumps energy plan . Well, the american renaissance have given america a huge shot in the arm. Here again Hillary Clinton wants to follow right on with president obama and basically discount whats been given with this american renaissance. We can now, we have not reached American Energy independence, but we can. Weve said we could by 2020. So its probably been delayed a couple years by whats gone on the last two years with, you know, this low point, low prices. But we can reach energy independence. Now, we cant under her plan. I called it silly. And it certainly is. I mean, were going to put 500 million solar panels on everybodys house. Guess who makes those . China makes those. All those jobs are going to go overseas, and were going to totally discount whats been given to us. So, harold, if Trumps Energy plan is so good for business, why are so few Public Companies ceos supporting him, and especially in the Energy Industry . The wall street journal looked at it back in september and found most of the money from big oil, and they looked at exxon employees and others, was going to Hillary Clinton. Well, that report wasnt correct. I mean a lot of them are just coming out. My donation, the contribution just came out today. So a lot of its in the later months here. But, you know, donald trump has had good support from this industry. And certainly receiving a very good support today. So its there and theres no doubt about that. Mr. Hamm, where is the sense that under the Obama Administration the Energy Industry has been ham strung . Hasnt u. S. Oil production approximately doubled over that time with this administration . It was not anything to do with president obama. In fact, the tsunami of regulations that hes piled on have been designed basically to stop our industry in its tracks. Thats whats gone on. You know, hes not been very bashful about saying that. You know, hes not for oil and Gas Development and production in the u. S. The wealth that it creates, you know, for this country. So that tsunami, i call it tsunami because more regulations that hes piled on and all the agencies that hes over you know, just this last year more than george bush all through his term. So its a tsunami of regulations thats been brought about. And trump talks about harold, trump talks a lot about reversing them. What is he talking about . A lot of people think its unrealistic, executive orders to undo some of the major regulations from the epa . You know, president obamas acting like a dictator. Hes used executive orders for everything under the sun. Im asking how trump would reverse those regulations. Wouldnt he have to use executive orders to do that . He certainly could. Theyve been executive orders. Theyve been stacked on by president obama without going through congress. Certainly donald trump can reverse every one of those. And he can do that on day one. And he intends to do just exactly that. Finally, there are reports that you are in consideration to be Donald Trumps Energy Secretary if he does win the presidency. Have you had talks with mr. Trump about that prospect . No, i have not. You know, this was started by reute reuters, who hadnt particularly liked me anyway. That came out by them. They started that speculation. Its strictly speculation. I have a fulltime job here at continental. Im gainfully employed every single day. I work very hard at my job. Thank you. All right. And we know that you are advising mr. Trump either way on his policies. Thank you for joining us to talk about some of them today. Harold hamm is the ceo of continental resources. Yeah. Thank you very much. As we head to break lets take a look at shares of paypal. The stock hitting alltime high since its been liberated from ebay. Subscriber growth with new agreement with chinese giant alibaba. We have exclusive with paypal cfo john rainey. More on that ahead on squawk on the street. Stay with us. [ male announcer ] eligible for medicare . Thats a good thing, but it doesnt cover everything. Only about 80 of your part b medical expenses. The rest is up to you. So consider an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. 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Take a look where we stand right now about an hour into the trading day. You can see broadly negative on the s p and the dow, but the nasdaq inching up a bit. Certainly helped by the performance of microsoft. General electric though posted results that the street doesnt really like even though better than expected Third Quarter operating profit of 32 cents a share, revenue was shy of estimates, ge also narrowed full year earnings outlook, increased its stock buyback by 4 billion but lowered fiscal year 16 industrial organic Sales Guidance from what had been a range of 2 to 4 to now 0 to 2 . Its tough out there, michael, when it comes to oil and gas, when it comes to even locomotives and a number of their businesses. And were hearing about from its competitors about the aerospace cycle isnt that friendly at the moment either. Ges stock has been telling you this for a little while now its been underperforming. If you look at equal weight of basket of industrial stocks, it has been suffering. In fact, every time its kind of threatened that 30 level for the last couple of years its been kind of poised for some kind of a reversal. Seems like the markets just saying, look, no real clarity on any pickup into next year. Its also the tale of multiple economies. They call it a volatile environment with just some parts doing better than others. Mcdonalds for instance seeing global strength in its report, and the analysts telling us that was a little bit of improving economies there. At the same time manufacturing, manufacturers that are still dealing with a strong dollar which is marching back up again still have their headaches. I mean, leading indicators look at global pmi indexes and all that stuff, its starting to turn highhigher, but certainly to the point its in these big conglomerates. Look at ge support mechanism about 3. 2 , 3. 3 right now. Yeah, you know, above 3 with a safe dividend is usually a reason for people to step in, maybe thats why its sort of mitigated here at least in the mid to high 20s. Yeah, not great reviews on the quarter there from ge. All right. Lets send it over to jon fortt. Hes got a look at whats coming up on squawk alley at the top of the hour. Microsoft is on cloud nine, the question now does it deserve a multiple inching closer to googles . Also, weve got the chairman of telemundo to talk about the growing influence of the hispanic vote and the economy, and we sat down with Barry Dillard talk about the future of tv. He weighed in on a potential at at t time warner deal. All that and more coming up. Y so figure out this complex trade so i brought in my comfort pony, warren, to help me deal. Isnt that right warren . Well, you could get support from thinkorswims inapp chat. It lets you chat and share your screen directly with a live person right from the app, so you dont need a comfort pony. 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Thats why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. Translation . Goodbye 60 40, hello 50 30 20. The costs of Higher Education will be on many voters minds when they head to the polls next month. Hillary clinton promises to make Public College tuition free far lot of americans. Donald trump pinching an incomebased student Debt Repayment plan post graduation. Our next guest says its the graduate earnings potential which has colleges taking notice, also a Key Statistics in overall rankings for the klemms. Joining us jim stewart. This is becoming more and more important as the way people judge where to go to school. Yeah. Frankly, i think its about time. For jeers, generations weve had these kind of vague ideas of whats the most prestigious or best school. Finally now we have real data. Its coming from the payscale. Com. Theyve got millions of data points now. The government has put out the college scorecard. These are raw numbers about what you could expect to earn. It adjust for is everybody an epg nearing major or math and science majors. Now other people are incorporating this data into more sophisticated rankings. Wall street journal did their first ever this fall. They use it. The economist has put out rankings. Georgetowns center for work and education has done a very sophisticated analysis. So you can now really begin to see with real data what the financial expectations would be if you go to a splparticular scl and there are surprising results. Such as . The one thats shocked me the most and also shows you can get very divergent results from these but take yale, very high prestige school, and the wall street journal survey of outcomes it ranked number one, but in the economist survey, which takes a very interesting methodology, it was towards the bottom. It was like 1,200 or something in the rankings. The reason is the economist looks at what you would expect to earn with your basic criteria like your s. A. T. Scores, high school grades. And obviously if you have high scores and grades it doesnt matter where you go to school. Youll do pretty well. They estimate how well would you do with those criteria. Then they looked at what what graduates did. And they found that a yale graduate earned 10,000 a year less than you would have expected given those criteria. Hmm. Just up the road so not the best places to go to earn or telling us what sort of kid goes to that school and what kind of life they want to have after. If they go to become a professor, theyre not going to necessarily earn a ton of money. True. Pay scale did another rating which included the factor of how satisfied people are with their jobs midcareer. That produced a totally different result. So it took earnings and Job Satisfaction. The liberal arts colleges, which typically dont do so well on these studies, because they do produce a lot of musicians and poets and english professors journalists. And journalists. Im a liberal ed graduate, i admit. Suddenly they shot up in the rankings once you put life and Job Satisfaction in there. The Number One School on that list was clarent, mckenna, and a group of these schools did well. I would think if youve got a lot of Software Engineers at a particular school at this point its going to rank quite high. The pay school Number One School this year which was in the rankings for the first time is soonyi maritime college. Ive never heard of it. Beneath the throgs neck bridge. In the bronx. Yeah. They were number one, over harvey mudd, over m. I. T. Incredible. But it cuts through ridiculous prestige notion and puts the spotlight on some schools whose graduates are doing really well where the schools are obviously adding value that nobody knows about. I was looking up places like Bentley University in massachusetts. I went to law school in boston. I never heard of it. They do fantastically well in these surveys. Malloy college on long island, never heard of it. Adolphus broadus in west virginia, never heardit. But theyre doing something right. The next ratio that should be looked at is tuition ratio to the earnings. How much are you getting for your investment . Thats correct. None of these surveys yet are really doing a sophisticated return on investment Carbon Monoxide of analysis. One of the tricky things about that is the Sticker Price at these schools is not what most people pay. It varies so much based on your family resources. So actually some of the most expensive schools tshs net tuition is fairly low because they give out lots of aid. Thats still a tricky calculation. Youre speaking solely, though, from an economic motivation here as opposed to wanting to actually learn. And the value of education more broadly as an english major. I was a history major. History major. Look, i totally agree. I mean, it is in a way very crass to take the immeasurable value of a College Education and reduce it to a dollar signed, and thats what critics have been saying. On the other hand, the data is now there, something that parents and students care about. To pretend it isnt there, which is what u. S. News is still doing, is not the way to go. It is out there. Everybody should recognize it. It is a factor. It should never be the only factor. But why not include it in the mix of things that because frankly they are going to do it. I think the danger is as you point out, if it becomes the only basis, then we have suffered. Managed to get through a whole segment without talking about the election. Bet youre happy about that. I am. Jim stewart, thank you. That does it for us on squawk on the street. Squawk alley is up next. 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