Shares in the telecoms arena, as the giant heads for the worst day in nin months after it slashes its 2017 outlook amid declining sales we will speak to borje ekholm in 15 minutes time. Swiss pharma giant novartis beats expectations in the Second Quarter, amid improvements in its eye care unit alcon, as the ceo tells this channel that th collapse of republicans latest healthcare bill will not affect his business im not so sure it provides certain certainty. What it provides is there will continue to be debate what will benefit patients in the u. S. Is if theres some level of coverage whether its voluntary or mandatory, but to allow the access to medicines through insurance plans that reduce the copays shares of lufthansa struggling despite the German Airliner lifting its profit target for 2017 after a busy summer for bookings netflix blows away expectations for subscriber growth, with investors scrambling to bid up the streaming services stock, sending it higher by more than 10 in after hours european equities giving up a bit of ground in the first hour or so of trading. Trading pretty much on the lows of the session 0. 5 lets look at individual sectors. Yesterday basic resources strong here in europe i. T. Stocks one of the best performing sectors in the u. S. , 21 higher this year telecoms moving the opposite direction. Today we have the major indices down the ftse not getting the boost it got yesterday from basic resources. Dax was one of the worst performers in yesterdays session. Is it the strength of the euro which is hurting the german exporters . I think possibly thats one of the questions being asked given how sensitive we appear to be to Interest Rate moves and currency moves to the underlying level of individual stocks lets look at those sectors. Lets see which ones are moving. This is interesting. This is chris griggs, british land story ill talk more about that one later on safe to say is it more about buybacks than underlying performance of the company if it is, why is the company that has cash to spare not spending it on land, not building more skyscrapers, why are they giving back money to shareholders ill give you answers on that basic resources down 1. 5 . Technology down 1. 3 you think netflix pretty good. But we have our own problems on this side of the atlantic. Thats ericsson. Ericsson trading at the bottom of the stoxx 600 it posted a bigger than expected loss in the Second Quarter the telecom equipmentmaker which has its own activist problems as well reporting an operating loss of 1. 2 billion Swedish Krona compared with a profit of 2. 8 billion a year earlier ericsson said it expected the mobile Infrastructure Market to decline by a high single digit percentage this year up from the previous estimate but added planned cost cutting will be accelerated. Huge numbers of problems potentially inside the company and in the broader environment the ceo, borje ekholm will join us in ten minutes time shares of lufthansa trading lower. Everybody is scratching their head this is the chart i wanted to you look at. Threemonth move 36 higher off the top of my head this one peaked at about 21 euros, which is greater than the fiveyear peak so its trading lower despite the company raising fullyear guidance german carrier revised up the forecast in preliminary numbers, but analysts warned, seeing a stronger number in costs i think its the shares and where they have come from. The shares have rose 60 yeartodate ill giveyou a bit of valuatio work on this one ryanair trades at 31. 76. This one only trading on 6. 6 times. You can see why some analysts like this one. Trades at a discount to aig, which is the ones that owns iberia and british airways, that trades at over 7 times. And zalando reported stronger Second Period growth are they a retailer or tech company . While profitability improved after a membership scheme. Second Quarter Sales increased between 19 and 21 compared with a 23 rise in the first quarter. Herein lies the problem. Roll that back herein lies the problem. If you trade at 52 times forward, 52 times forward, thats exactly double, i can tell you, what inditex trades. Trades at 27 times forward this one trades at double. Is it better to be a tech company that does retailer or a retail their does tech better to be zalando shares because they have that 19 to 21 increase, compared with 23 last time around, are they running out of momentum if so, can you justify 52 times forward . Just a question. Novartis has lifted the outlook for Alcon Eye Care division after Surgical Equipment sales bucked the trend of consecutive declines this after a smaller than expected 2 drop, in core net income the ceo joe jiminez said novartis was on the cusp of a growth phase we expect a new drug to be approved in october of this year the fda action date is october we will commercialize that well file the second indication before the end of this year, which means we will be selling in 18 2018, most likely two indications. The second one being significantly bettigger than the first. I said novartis is about to enter its next growth phase, cart 19 is part of it once we get out of the patent expiration of gleevec at the end of this year, we should begin a growth phase in 2018, 2019, and 2020, cart 19 will be part of that how does the sandoz business fit into that . Its a truchunky part of revenu but looks tobling in the u. S. Around retail generics declining sales. It is true there is a lot of price pressure in the u. S. In the generics industry. Those are basically the more of the commodity generic side of the business our plans for sandoz is all in bio similars in term of how we grow that business, sales and margin the bio similars business, these are generic versions of boilogi. We were able to get our generic version in oncology and our generic version of imbril in immunology those will have an impact in the second half of 2017. We believe the outlook for sandoz is positive in the longterm. The latest republican healthcare overhaul bill is dead after two more republican senators said they wont support it that has led to the Senate Majority leader, mitch mcconnell, conceding the votes are not there to repeal and replace obamacare. President trump tweeted republicans should repeal obamacare any way and worry about a bill to replace it at a later date interesting. So heres my question you saw from the top of the show this is whats going on with the dollar, whats going on with the dow. And ill show you this i think its interesting you have thedollar trading at tenmonth lows and the conventional logic is, i think, its very much about the lady to the right of that. The fed chair, janet yellen, whether she will be able to raise rates or not people have questioned the lack of inflation despite the narrati narrative, and the Unemployment Rate and says the phillips curve looks broken at the moment the chart to the right, its about this gentleman, love the smile. Its about him certainly he believes thats why the market is up 18. 5 over the period since the election in november as well so, my question is the same one. Richard do we have a problem here in market valuations . Ie, the 4x are looking at the dollar and the equity market is looking at mr. Trump and if so, if the trump rally was about mr. Trump reinvigorating the financial economy, and the dollar is about the lack of ability to raise rates, do we have a disparity problem here im wondering now if the dollar move is also about the fact that we have a logjam on capitol hill i think theres been a big Asset Allocation trade going on. I never bought into the trump trade. I think people were mistaken to say all of this were because of mr. Trump. You know, i think people mistook the fact that the u. S. Data was getting strong before we went in there. It was the strongest data surprises. When trump was elected, it was the strongest data in five years and in the eurozone, we were all focusing on hillary versus trump. We priced that in. People built irrational expectations on the back of that and weve taken that out people wanted to be long u. S. Fixed income and long u. S. Equities i think the dow was along for the ride in some regards, people were bidding up european equities nobody wanted to touch european with a tenfoot poll after quarter after quarter, people realized the euro was not falling. Okay. Just on your point about the euro, karen tsao have argued about this in your view, is the european side of the story becoming more dominated than the american side of the story absolutely. You can start to price good news into the euro but only so much draghi and the ecb will be cautious over what they want you to price in. Theres a difference between the exuberance getting priced in the euro now versus what we saw in the beginning of the year. In the beginning of the year, the ecb muddled the message. They started pricing in hikes for 2017, that was silly now theyre pricing in for the second half of 2017. Maybe theyre good enough and the ecb is tightening. Thats appropriate theres another 10, 15 basis points higher for bunds. The market has begun to price in chance that there wont be a rate hike later. I think 42 now think there will be one it was much higher than previously is this regardless, in spite of what the president can and cant do as well you say it was convenient to say it was a trump trade rather than looking at fundamentals just be clear here, are you saying theres nothing to do with the president on why we had that rally i think if the Republican Administration could have gotten significant tax reform, fiscal stimulus into the pipeline that would have added upside risks to the fed and tightening from what we have seen the end of this year through 2018. The fact thats gone takes away the upside risks it leaves it appropriate for the fed to be hiking two to three times each year. I looked at the sub sectors for the latest cpi out of the United States. Mrs. Yellen clearly believes that there are some transitory factors that could come out of data and keep rate hikes one of them was a big decline in mobile phone costs another one was lodging costs. The former was about 13 lower year on year and the other was 6. 8 if you strip out lodging and i strip out mobile phone services costs, the inflation rate is dramatically higher. About a half percent higher. So, is the market getting very complacent about the low cpi in the United States . Thats actually going to get a shock does that create a ripple for the equity markets theres no question the pain point for the markets is everyone is caught off guard, we get to the end of this year, inflation is looking better. Theres a lot of oneoff factors that are in there that will be passing out of the data. The flip side is the wage numbers when you dig into the details do suggest that things are a little bit softer on that side than maybe the headline appears. The headline has already been decelerating that can leave the fed in a bit of a pause there is a difference there. Youve done me a favor. You said you would chat uk inflation with me. When we break those figures 15 minutes time thank you very much for hanging around for that. We have a brilliant interview coming up, electric slide down the stoxx 600 for ericsson shares after posting a wider loss than expected in the Second Quarter well have the ericsson ceo, borje ekholm join ftus aer this break. Ericsson has posted a larger than expected loss in the Second Quarter. They reported an operating loss of 1. 2 billion Swedish Krona, compared with a profit a year prior. Im delighted to welcome borje ekholm the ceo of ericsson thank you very much for joining us outline for viewers where you see the biggest problems for your industry and ericsson specifically at the moment thank you its great to be with you. Yes. We had an unsatisfactory quarter. Our sales were down 13 if we adjust for currencies. We see that it is a tighter market for telecom and for our market in general its a tighter market condition. We see that relatively concentrated in europe and latin america as well as the middle east and africa. Thats where weve seen tighter markets. And weve said that we believe the market will decrease a bit more than we anticipated before. Looking at Gross Margins for the Second Quarter, its a precipitous decline. We know prices always go down. Do you not have enough in the pipeline in terms of new product with greater margin to offset that what we see is a couple of things impacting gross margin. We see here that part of it is that our legacy portfolio, primarily in i. T. And cloud are falling faster than we can compensate with growth of new product. Thats one reason. So what were doing here is accelerating the growth in our new products getting them to the market faster and growing them faster we are also seeing Second Quarter impacted by Lower Software sales which is that our customers are more cautious with capacity investments in terms of where you go next and looking at reorganization of the business, do you find yourself under enormous pressure how is your pressure with chris degardel and the rest of the sevian representatives i think its important to take a step back first, which is to look at what are we trying to do here. And our strategy, which we presented a few months back aims at reestablishing profitability on2018 we said we will double the margin from 2017 and 2018. That strategy is focused on being a product and Technology Led company. That Strategy Incorporated tough market it was actually there in order to combat a difficult market the market we see is not the surprise what we see and what weve done during the Second Quarter is start to quantify our Cost Reduction opportunities and efficiencies that is part of our strategy what we see is that we will take out at least 10 billion krona by mid next year in order to be on the path towards doubling the operating margin that is a strategy which all our major shareholders have supported and so has sevian. So theres no dispute in the boardroom or with the views of what sevian want to happen and your views for the company, sir . No what were trying to do now is accelerate the implementation and execution of our cost efficiency measures we need do that. Of koucourse it is a tighter mae out there. We need to take out costs out faster thats what were trying to do at the same time we need to invest in r d in order to be competitive longterm. Thats the Strategic Direction we have. And thats the self help. Thats what you can do yourself given the environment as well. I was also interested in the line in your report that you see an increased risk of further market and customer project adjustments with a negative impact on operating income is it just getting much tougher environment . Its not about whats going on at ericsson, its the broader environment actually quite opaque despite the hopes and were seeing a Global Economic recover recovery youre partly right it is a tighter and tougher environment out there. Thats one thing but the what we are also trying to do here is kind of frame this size of adjustments we need to make in order to execute on a more focused strategy these are not we cant say they will happen, but this is framing the risk in those contracts. Its typical customer renegotiations that need to be done those things we are conducting and they will happen over the next 12 months were trying to do our best to minimize the risk, but we want to be transparent and tell what we see just something you piqued my interest with. I spoke to ceva breka yesterday, he was trying out for regulators to understand the 21st Century Telecom setup and to give them perhaps more cohesion and more of a green light to go out and invest and spend do you think theres a regulatory problem or commissionbased problem in europe which is preventing investment in infrastructure and the next level of mobile telephony . I mean, we should be a bit self critical about the whole industry its really the vendors or it includes the vendors as well i would say 2g and 3g were led out of europe. What you see now in the lt world, it has been overtaken by north america. And its still unclear what will happen to 5g we should start to think as a continent how should we think about 5g how should europe position ourself to be a leader in 5g here its important to start to talk about this from a regulatory perspective as well as call it spectrum ail location, how will they be alloca allocated. Here we need to do more. Thank you very much for that. Its a key line as well. We need to think about this as a continent. Borje ekholm the ceo of ericsson talking to us about the industry and his numbers. Looking at sterling. The pound is trading at multimonth highs. What will we get on the inflation figures ter afthe break . Well break the numbers and get instant analysis from Richard Kelly coming up. Welcome to street signs. Im Steve Sedgwick these are your headlines poor reception for ericsson. Shares in the telecoms giant head for the worst day in nine months after it slashes its 2017 outlook amid declining sales ceo borje ekholm tells cnbc hes unhappy with the results we had an unsatisfactory quarter. Our sales were down 13 if we adjust for currencies. We see it is a tighter market for telecom and for the rand markets. Swiss pharma giant novartis beats expectations in the Second Quarter, amid improvements in its eye care unit alcon, as the ceo tells cnbc the collapse of republicans latest healthcare bill will not affect his business im not sure it provides certainty, it provide theres will continue to be debate what will help patients in the u. S. Is if theres some sort of coverage, voluntary or mandatory, but to allow access to medicines through insurance plans that reduce the copays shares of lufthansa drift lower despite the German Airline lifting its profit target for 2017 after a busy summer for bookings netflix blows away expectations for subscriber growth, with investors scrambling to bid up the streaming services stock, sending it more than 10 higher. Uk cpi, 0. 0 monthonmonth, up 2. 6 yearonyear poll looking for 2. 9 . Ons data lower than expected interesting how the pound gave up some of its gains before the data not saying anything, just making a point. June core cpi ex energy, food, what else is there in life 0. 0 months on month london second slowest growth in all uk regions london house prices huge compared with the rest of the country. Lets have a look at what the pound is doing again, gave up some gains before the data 130. 32 is where it is currently trading at the moment. Richard kelly head of Td Securities is still with us. What do you think . It is shocking to have a decl e decline. Fuel prices were coming off, but Energy Prices looked like they were passed on to the economy. This might be pulling things forward. I think it helps the bank of england in its dichotomy i didnt think the bank of england would hike this does help for the moment. I like people, they talk about the antidote as well as the stats in this environment it doesnt feel like a rate hike environment in the uk. I know inflation is building up. But people, to me, seem like theyre stretched quite a lot. You have the j. A. M. Story, just about managing, you have inflation at 2. 9, now 2. 6. People dont feel we should be in a rite hike environment it feels like the economy is precipitous with the back drop of brexit. Its an environment where people are struggling with high prices they dont have the ability to get the wage growth on the back end of it. Wage prices shouldnt be getting passed along i think some members are right to talk slightly hawkishly to get things anchored, but its not a good thing if we needed to hike rates how do you feel about the broader uk economy were stuttering on the growth rate stuttering on wage growth. We have a chancellor who says 1 is fine for Public Sector works, though that wrangles with other cabinet ministers. How does the broader economy feel to you . It feels weak it had been extremely resilient post the brexit vote one thing about the uk, we kept up with 0 been t. 5 wage growthw were at 0. 2, 0. 3, we will sustain that theres not the consumer strength that was there. In hindsight people were pulling things forward before price increases were going through, before some of these problems were settling in now theyre settling in. Youre in shape for a bit of a longer stretch of this softer economy. What does that mean for underlying Asset Classes what does it mean for the pound . I will give tom a shout out there. He said keep asking the question so i will he says somebody laid into cable big time from 130. 20 about 15 minutes before the numbers. They have no idea why they did i dont know if someone has got the date taerl a early. Interesting price action gone from 131. 20 to 130. 28 i can only ask the question. It looks very interesting to me. Thank you, tom i will carry on asking the question your point about currency. Its definitely the pricing you didnt have to make the point about that just in terms of where were going. In terms of sterling, its still a general sell the problem against the dollar is obviously these swings of trump sentiment, swings in the dollar, if youre talking about euro, euro sterling higher is a clean trade given the differences going on between the two economies. Are people getting burned on that trade there was talk about 110, 115 on the cable cross, they have not necessarily come through is that about positioning . Once the shorts have got their shorts on, its like who is the marginal seller . Those people talking 110 or parity, that side is not going to happen. The issue is when you have this high inflation, this threat of a bank of england hike, that talk is doing what they hoped it would do it puts rate premium in there, scares away people from getting too short away the currency from the dollar and we get stock. People were trying to pour in. Its not working it leads to bouts of being squeezed higher. Overall sterling wants to be weaker how does one trade brexit you have the currency inverse impact for the ftse. Weve seen that aggressively in how the ftse went from 57 handle on the 27th of june last year to a 75 handle within the last couple of months how do you trade the uk assets or International Assets based in the uk on the back of brexit the best way to do it is just trading it less and going somewhere else where they have a cleaner trade. Thats the easiest thing to do if you have to be involved in the uk, you still have small shorts in the currency a lot of those allocation trades within stocks may be over on that side of things. The sectoral boost to exports. That may be out of there you fade the talk of tightening thats going through the bank of ek la england but go longer. Its been a pleasure to speak with you today thank you very much. Richard kelly help of global strategy at Td Securities. Richard likes the euro i think thats fair to say ftse dont know what to make of it 7,407. Bad data, pound down ftse up. Lets look at the u. S. Futures the dow jones down 28 points nasdaq has had a fantastic run what have i got on the nasdaq . Seven up for the nasdaq. Russell 2000 trading at alltime highs. Gold had five or six days positives. I was going to do these flashes about libya. I cover some opec in my spare time interesting flash from the libyan noc chief, the national oil company. Hopes to present a unified libyan position in sant petersburg that will show we can act together in the national interests. Libya along with nigeria are the only two countries within opec that dont have a cap on prediction they production the problem is that has undermined the broader strategy of opec to take 1. 8 Million Barrels a day off. Thats why you have that spike thats what were looking at there. Libya is going to st. Petersburg to the jmmc, the joint ministerial monitoring committee, the russians, saudis might pop up as well and a few others who will meet to see whether the current strategy is working. Theyre meeting on the 23rd and 24th of july they will see whether the libyans and the nigerians can be persuaded to take a cap. Mr. Novak said last week theyll be invited to propose something to us. Maybe a cap for libya and nigeria on the cards that could add momentum to the oil prices u. S. Government says trade def s deficit will be the priority when it renegotiates nafta trump has branded the north Atlantic Free trade agreement a disaster and called for a new round of talks earlier this year he called for them earlier this year were in the second half, arent we President Trump has kicked off his made in america week to promote the u. S. Manufacturing industry he posed in front of iconic u. S. Products on display. Is that iconic product, a spacemans outfit on the right the vase in the middle this was at the white house, promising to make legal and regulatory moves to help americanmade goods. Hallie jackson has more. Reporter at the white house, President Trumps focusing on what got him there, jobs and manufacturing. Showcasing products made in all 50 states. Made in the usa were going to start doing that again. Were going to put that brand on our product. Reporter but on made in america week, critics counter the president never put his money where his mouth is when running his own Business Products that they sell are imported from abroad it would be nice to see a lead by example there. Reporter the white house argues President Trumps trying to roll back stifling regulations, part of a manufacturing message that plays well here, just outside detroit. When i hear made in america, i hear made in michigan, i hear made in macomb county. Reporter its counties like macomb that are places where President Trump really surged compared to republicans 2012 performance or places he flipped altogether turning them from blue to red. These are the counties that fueled his win, and right now half the people who live there like how hes doing. His 50 Approval Rating in those counties is ten points better than his performance nationally. So far hes done what he said hes going to do reporter but theres a twist to this story. The president s support is slipping from where he was in November Dave pelter is now cooling on his candidate. Id probably give him a b. And that might be going a little maybe a little too far but reporter common critiques include too much action on twitter and not enough on healthcare, with russia a wild card chad sowesky has covered politics in this county for three decades. Some people are saying when are we going to see this change . When are we going to get what we voted for . Reporter six months in, a question of patience for this president. Hallie jackson, nbc news, warren, michigan. Citi group is set to pick frankfurt as its eu hub. It will make the german city the trading base in preparation for brexit citi will announce the plans this week but declined to comment on the reports london is beginning to wobble from brexit it is too early to know how the uks exit from the eu will play out about that weaker growth in the housing market, slowing job creation were the first signs of the impact of brexit if it means London Properties get cheaper, im up for that david davis and Michel Barnier have kicked off the first round of brexit negotiations davis returned to london and left talks in the hands of Civil Servants Officials Say the brexit secretary will be back in brussels on thursday to join barnier in endorsing a first set of partial agreements. Wow, we got some agreements. Amazing. The british teams lack of notes in the meeting compared to the e ushg si u side pile of papers also sparked jokes as saying the eu was unprepared there were documents in the briefcases british land is buying back up to 300 Million Pounds of shares a buyback was a clear value opportunities as shares are trading at a substantial discount to the firms asset value. I can tell you what happened, shares trading about 600 pounds, just above it. N. A. V. Is 9 pound 15 i have a question for chris grig, he clearly believes the shares are undervalued are we still happy with the n. A. V. At 9 point 15 questioning. Just asking. N. A. V. , 9 pound 15 stock trading over six quid. Someone is wrong. Shares in netflix explode after blockbuster results. Ill raise a few questions after this break your brain is an amazing thing. But as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. I enjoy the fresher things in life. Fresh towels. Fresh soaps. And of course, tripadvisors freshest, lowest prices. So if youre anything like me. Youll want to check tripadvisor. We now instantly compare prices from over 200 booking sites. To find you the lowest price. On the hotel you want. Go on, try something fresh. Tripadvisor. The latest reviews. The lowest prices. The Chinese Government vowed to bolster Financial Regulation in the wake of a mini crash of mainland small cap stocks. The selloff was caused in part warning befoabout wait for i gray rhino risks the coin was termed to describe obvious dangers that have been ignored. I have not heard of them before. Have you herard of gray rhinos i had not until this report the big, scary gray rhino. Investors came back from the lunch break saying maybe they were not so scary. The mainland equities did not recover the steep losses yesterday in what some called black monday, we have seen a rebound in the final hours of trade. These are the closing prints its crucial to point out the selloff was largely concentrated in small cap stocks. Especially for high growth Tech Startups located in the shenzhen this index declined more than 5 thats because investors stated those firms are the most exposed to deleveraging concerns when we talk about the mention of gray rhinos as they were talked about in the peoples daily article that started these fears. They are talking about debt, real estate concerns, and financial risks. They are calling on the government to bring out more regulations to control these risks, thats what were seeing today. Even just few hours ago, Chinas Central Bank came out saying it will strengthen Macro Management and Counter Cyclical adjustments and strengthen financial coordination across agencies this hints at what many could say could lead to a super regulator across the Financial System we are hearing the recurring theme, that being regulation some intestdevestors worry in at tackle the gray rhinos you could see an overcorrection coming from the government. Its essential for beijing to strike this delicate balance between tackling the potential risks, the great rhinos that are considered obvious but sometimes ignored risks, and maintaining financial stability. There you have it. A bit of a rebound on the mainland equities today. Continue to look for reaction into tomorrows session. You did a great job over in singapore, fantastic there you go making the transition from london to singapore. The pound fell just before the data true 130 was the handle, now trading 130 120. Inflation data is still high above the 2 market, but its come down from 2. 9 to 2. 6 . There was a concern we would get a three handle on it what does that mean for Interest Rates or the broader uk economy . Big questions out there. Inflation has abated energy costs coming off a bit in the last set of data toshiba shares surged after Green Light Capital revealed it bought a stake in the struggling electronics giant. For more, makiko utsuda joins us toshiba shares finished up over 19 an Green Light Capital announced it had bought a significant stake in toshiba during the Second Quarter its unknown how much the fund has invested, but the price was at 234 yen per share, and the fund says toshiba shares could be worth 70 more. Toshiba suffered a massive write down from its ailing Nuclear Power business and is seeking to sell its prized memory chip unit to get the fund foors tus for a turnaround talks have made little progress. At a hearing on friday, the court postponed a decision on whether to grant an injunction to block the sale. The news was expected to trigger a plunge in stocks today which is the first trading day this week, but the news from green light helped to turn the tide. Its not the first time toshiba stocks have been helped by a hedge fund earlier this year, a 10 stake was bought in toshiba at a price of 800 million totals in march and april and the move was seen to buoyed to sheeba shares the following months even so, toshiba faces many challenges, one of the most critical is whether it can remain listed. And it postponed its Earnings Report due to refusing to get a stamp of approval if it cannot get the amroefl pproval by auguh a delisting is not out of the questions. Netflix shares soared more than 10 in afterhours trading after the tv movie and streaming service smashed subscribers. They added way more customers than expected during the quarter with a significant portion coming from nonu. S. Markets overseas subscribers bigger than home subscribers netflix expects foreign growth to result in its first fullyear profit for overseas markets in 2017 what about the problem with this company . These valuations they are big. They are big they are amazonlike valuations. The price is 36 times forward. The 2020 estimates for consensus earnings 98 times forward pe. Price to book, 18. 1. So youre buying future growth you are buying it at a great premium. The stock has come a long way. Watching less. This is interesting. 13 decline last quarter i know subscribers are great you like this. 179 minutes per month in the last quarter is what people watched. July 2016 people watching 268 minutes this can come from new subscribers, not quite up to speed, orange is the new black, house of cards, and cash burn. Look at this one 6 608 million in the Second Quarter up 44 on the first quarter. Dare i say it, the actual profit figure was small net income 15 cents per share. That missed. Everyone ignored that, but it missed what about this company and the Growth Potential and barriers to entry . Lets speak to paolo pescatore, Vice President of multi player media at ccs insights. On the surface brilliant looks amazing subscriber numbers. Is it at a cost . Good morning. Yes. I think fundabilitily its ay i fundamentally its all about the content they are burning through a lot of cash. Thats a huge concern for any business focused in the area of video and tv you need to differentiate, the only way to differentiate is through content. You do that through licensed content or original content. Netflix is placing huge bets that its investment in the original content will pay dividends not only in one particular market globally it goes to show in this quarter which traditionally is a poor and challenging quarter, not only for netflix but for other provide providers, they exceeded expectations in terms of acquisition costs. It doesnt matter if its itv, sky, any of the big players, including comcast which owns this channel, are Customer Acquisition costs still going up is that an area where we should be worried for all companies, whether traditional media player oshs new g playerers or new guys on the block . Customer acquisition costs are something all providers need to be aware of but netflix is smart relying heavily on local telco partnerships as a way of increasing presence in the markets. When they first made the for ray in foray into europe, we saw vodafone, vt and working now closely with those telcos. Thats one area where you can manage costs and rely on your partners to raise the profile of the company. All right paolo, great getting your insights on this company thats it for street signs today. Im Steve Sedgwick up next is Worldwide Exchange. Well be back on european programming with squawk box europe tomorrow morning. Republicans pull the plug on the healthcare bill. Were live in washington with the fallout. Global markets immediately reacting to the news the u. S. Dollar dropping to multimonth lows. Trading day se. And netflix takes the crown, well tell you whats behind that big move coming up. Its tuesday, july 18, 2017, Worldwide Exchange is coming up right now