Good Tuesday Morning welcome to squawk alley. I am Carl Quintanilla with Morgan Brennan at post nine of the new york stock exchange. Jon fortt joins us from investor day for qualcomm, first one since 2016 a lot from jon throughout the hour, including a sit down with the ceo exclusively in a few moments. We start with tech on a tear, on pace for the best year in a decade, shrugging off mixed earnings concerns. Sectors off another record close. The dow is selling off, down 120. Buyers beware. Some say were set for overbought conditions when it comes to tech. We talk more about this and the market at large. The chairman of Global Internet banking, good to have you back. Thanks for having me. How do you put the run weve seen, especially in things like semis into context whats driving it . It is amazing, nasdaq up 28 , driven by bigger cap companies, apple up over 60 , microsoft up over 40 , facebook up over 40 to add to the point, semis has been a sub sector, up 58 , driving growth other sectors up 40 give or take, so it has been strong across the board, internet trailing 11 or so try to put it in context, what did we learn in recent quarter earnings as well as what we learned through the year, q3 earnings, you saw dichotomy. A couple of names were beat up, changes in business model, problems theyre having like a far fetch or grub hub. Also some some you didnt see coming ironically, names most beaten up have done the best snapchat up over 150 so far this year. We learned a lot of different things, particularly what investors are focusing on. Theyre focusing on a couple things one, core Unit Economics are you making money in what you do if so, what is the roi number two, how visible is revenue looking forward, how reliable is the forecast we have and number three, path to profitability, the returns we are having with the money. One of the things were learning through the quarter and the year if youre not checking boxes, we have seen some companies punished that werent able to answer those types of questions. Retrenching to the giants is it that simple . You have smaller guys that ripped, roku has done tremendous you had Nice Movement there. I think the interesting part is when you break apart a little more interesting about the tech ipos, what happened there, and what were seeing tech ipos as you know this year to date are up 9 or so. However, for retail investor, after day one of trading, down about 20 . That 9 , when you think about it, how do you break it apart. For companies with more recurring revenues, sass type Nature Companies were up 40 or so the ones arent of that nature are down about 20 even the conviction point too. For stocks that pop more than 40 , theyre up 30 versus ones that didnt pop much are down 10 . Interesting the poles that layer it back. When you contrast how have Growth Stocks done versus tech ipo, Growth Stocks have only grown 2 you had a 7 increment to alpha for investors to chase. You talk about checking boxes, and ipos in terms of performance, has it rippled back to the private market . Great question. I think the intuitive guess is disconnect between private market valuations and Public Market valuations. You look at the data from 2019, 75 of them today even with pull backs, enterprise value is greater than the last private round. When you think about that, it makes sense to a degree. Private rounds were more than a year ago, some cases two years ago. Theres a time value of money there. I think one of the lessons we are learning is private investors are taking a longer term horizon when they make investments versus what we see on the public side bob, if you thought you were clever a year or more ago and sold off facebook, amazon, maybe google on antitrust concerns, regulatory concerns, right now youre not feeling so smart. Whats the market telling us about that worst Case Scenario around the stocks. Is it time to put that behind us or is this just exuberance it is a great question because google is up 25 this year facebook is up over 40 . I think what youre seeing is the reason why so many active investors are trailing their benchmarks, looking for the incremental alpha, hoping to find it in the tech portfolios i think youre right, jon, some cases investors maybe outsmartd themselves versus what was baked in for expectations. We had huge policy risk we thought. We thought the semi cycle wasnt going anywhere because of cars what happened to the two narratives yeah. I think on the political risk, it is still there. I think what investors are realizing is it takes longer time to play out probably not something thats going to happen. Great to make grandiose stations and say were going to break up this company and that company. In reality, it is very difficult to do, and even if it were to happen, would take quite some time today, banwood comes out, says take tech to market weight. We think the trade war could escalate into a tech war after the 2020 election. Yeah. Trade war aside, we are cautiously optimistic on tech going into 2020. Theres a backlog of ipos in the first half when you think of the ipo market next year, important to realize i think the market shuts down around july, give or take, because of the election in november too much uncertainty, particularly depending who the candidates are at that time. Theres a lot of risk around the election look for the front half of 2020 to be more back loaded with ipos and last thing i point out, the point i made a minute ago, active investors are trailing benchmarks, looking for incremental alphas you can get some of that first of the year that was my question for you. You talk about big runs across industries within tech is there value to be had in the sector more broadly . Thats a great, great question i will point to august you look at the tech ipos from january 1 to august, theyre up about 50 , give or take, right now to today, only 9 as i mentioned earlier. Big pull back in growth. You saw the same thing not only in tech ipos but Growth Stocks a big pull back. Whats interesting about that, still high Growth Stocks growing more than 30 are still up 60 year over year theyve done well, just not as well as preaugust. You look at smile direct, down about 50 since the ipo, started beginning of september if you see, a lot of stocks trail with it. Now investors are sitting here looking at it, saying reasonable multiples for software companies, multiple for Internet Companies as well. That will bode well for 2020. You bring up grub hub and google algorithms, slack, microsoft today. Whats the incentive to chase a new name when the entrenched names are powerful youll see with the newer names, it is not a lot of loss generation youll see either Profitable Companies come out, airbnb would come to mind, or other companies with a path to profitability underpinning all that is the strong Unit Economics. You need to be able to demonstrate that thats one of the areas ridesharing guys had trouble explaining. Time to look at other sectors, industrials comes to mind, look at them as the other software place it is interesting you think about software, you think about tech in general, it is more pervasive across all industry you can see how tech is having impact on all of the other verticals. You talk to the management teams and the board, we think of tech as a vertical, may not exist in ten years, right used to be pervasive across all industry if youre not using ai to inform your internal and external decisions, it will hamper you in the long run bob, thats great way to start the hour. Thank you. Meantime, can qualcomm keep growing . Thats the question the investors are asking at the first analyst day in three years with qualcomm 5g strategy in focus. Jon fortt is there live with more, ahead of his exclusive interview with Steve Mollenkopf. Jon . Yes, morgan february 2016, the last time they held an analyst day here today in new york, first time in a while, executives make their case it has been nearly four grueling years, investors are asking the question the company is dying to answer can qualcomm keep growing. Analyst meeting here today, the companys first since 2016, Ceo Steve Mollenkopf will outline the strategy for the 5g era. It comes at a pivotal time in the past three weeks, the stock has risen above 80 a share, signaling that maybe, just maybe qualcomm has turned a corner on the campus in san diego where i visited earlier this month, long time employees are eager for the narrative to change. Soon they hope it wont be about lawsuits from governments, withheld payments from big consumers, takeover attempt. I am very proud to say that it is partially the engineer cultures ability, engineers ability to focus on the next generation, on 5g, for example, thats really carried us through some of these existential challenges anticipation of 5g has blanketed qualcomms campus. The company set up a network beaming a test signal from rooftops a manufacturing facility is putting out parts for 5g technologies they hope give qualcomm an edge over huawei, ericson and nokia. The capacity of 5g and capability of 5g is so large, theyre thinking in terms of, a, what are the Business Models that need to evolve to make sure this technology can be embraced, and what is their role in that. Despite promise of the technology, wide adoption wont guarantee the Profit Growth investors want to see from qualcomm some use cases, making factories more flexible will take a couple more years to implement. Others like this broadband require excessive spending. 5g will disrupt some Large Industries that provide opportunity for us why do they provide opportunity . It is mainly because we are one of the only companies that has the product portfolio. What we are looking for today is meat on the bone about the 5g strategy, exactly when some of the benchmarks for the roll out will hit, how much revenue, how much more qualcomm thinks it can get from 5g. They talk about having more components, more ip in every phone. When will investors really feel that then the regulatory picture. Theyre saying a lot of that is behind them, but weve got more action in the courts coming up beginning of 2020. Well figure out how Steve Mollenkopf sees that. The regulatory picture and spectrum picture a Satellite Service business is down 70 in the past week because it is part of the consortium trying to sell spectrum for 5g use and fcc says no, you have to do it public, the stock is being hammered on this now we talk about all of the different pieces of 5g, jon. I wonder whether we are talking enough about that actual piece of it. Yes, spectrum is interesting. Spectrum is a local issue. It is different country by , qualcomm is a global play they talk a lot about china, the opportunity there, the work theyre doing there in areas like streaming and mobile gaming theyre talking a lot about automotive here today, entertainment inside the car the opportunity for them there as theyre able to design chips that are smaller than competitors. Dont take up as much heat because of the more efficient design they argue. Yes, that matters. The u. S. Is a big market, also a big world that qualcomm is trying to continue to dominate dont miss johns exclusive sit down, only about 15 minutes st wh ayitus dow down 116 welcome back to squawk alley. Disney opens the vault and gets hacked hours after the initial rollout, thousands of disney plus users reported their accounts were hacked, information put for sale on the dark web. Joining us, joanna stern, cnbc contributor and tech columnist and porter bib, founder, managing director of media tech partners, first publisher of Rolling Stone magazine both at post nine. Welcome. Good to be here. Joanna, we talked about it, were anticipating it, what happened here . How big an issue is this for consumers . Something had to go wrong for the disney plus launch not everyone in the world could sign up with no problems but the latest is theyre still investigating this theres no evidence theres been a huge breach. It seems like at least some of the security researchers that are looking into this that this is a classic case of password misuse again, theyre still looking into this. Chances are or theres a likely possibility people were using the same passwords, same User Accounts or user ids on this platform they used on others in the past, those have been breached on the dark web, there are lots of places, you can find user names, passwords they were plugging them in, getting into accounts. Porter, we talk about content is king. You need the technology and platform to work at the end of the day, right no, but the hacking, it was a few thousand against 10 million new subscribers day one. Basically, it was caused because bantech is the streaming service they bought that never had more than a Million People on it at one time so they were overwhelmed and it was pretty easy to hack. The hacks mainly happened in the uk and norway where disney had a prelaunch test with no promotion, doors were wide open. This happened to everybody who opens up a streaming service when theyre not prepared for the flood of subscribers growing pains like we saw netflix go through years ago. Absolutely. The Biggest Issue is not the hacking, it is password exchanges. Netflix, if you remember a few years ago, came up with significant losses because everybody was trading passwords. Disney plus audiences, teenagers, preteens giving it around to their gang right and left, disney will have to figure out how to deal with that. Netflix, hulu, disney plus dont offer two factor authentication that you have set up on twitter, facebook, emails, get a second code texted to you. Might be a reason. They know about password exchange you log into my netflix, im going to get the password, i have to text how to get in there are ways to ramp up security reuters has a piece up that says one week in, it is becoming clear the two can coexist, netflix and disney plus. Do you agree absolutely. Theyre going to be at least five in 2020 with peacock and all of the others that are coming on stream theyre going to start to bundle as well. The field is getting crowded. The greatest opportunity helping consumers navigate the possibilities, how to go to one place . I was here a couple weeks ago saying that the biggest loser in the streaming wars could be the consumer it is on us as consumers to navigate this crazy territory. You mentioned all of the new services again, my number one rule is do not pay if youre not going to watch. Do you think we would be having the conversation if it wasnt for streaming the Movie Theater business is collapsing, on life support right now. Justice department was quite right saying circumstances of the last 50 years have certainly changed. The bad news is that theyre going to make block booking illegal. Major suppliers of film, still three or four major studios will be able to put blockbusters and other films and wipe out art films, niche films, foreign films, and little standalone single theaters, not chains, will be the losers, so are the consumers, if you like going to a movie, seeing a different, not a comic book this is Martin Scorseses worst nightmare. How do you get to the Movie Theater . Who do you think of the streaming giants would be most likely to want to own physical distribution, a chain, part of a chain . Amazon no, netflix, they want the oscar qualifications, and to do that you have to be distributed at least three weeks in the Movie Theater. Movie theaters are not playing netflixs game they put the irish man in theater on broadway, it is a sellout, huge success. I wouldnt be surprised if netflix doesnt start buying Movie Theaters another place to sell us. Right maybe apple converts stores to theaters. Genius is now service. Coming back to the passwords and hacking, the big thing that disney has all of the content and including more sophisticated marketing, what they have to understand is that theyre in a new game direct to consumer is not something disney has ever done theyre going to have to vastly improve the Search Options on disney plus. Netflix solved all of the consumer management problems disney has a long way to go before it is working perfectly. And they have to solve how much tv my son has been watching oh, my gosh, you and me both. I think it may be on us, i am blaming him. He is two, i blame him and i blame bob iger. You mentioned apple were going to move to that. Hosting a surprise event december 2nd to honor the favorite apps and games of 2019. Apple is not expected to release any new products at the event, but joanna, i dont think theyve done this before it was always a release in the past. If you look back at the past years, every time around this time of year they do the top apps list, top apps, top games, the different qualifications of apps, make a big web page, quietly say we love these apps, download them on your devices. This year theyre rolling out red carpet for the developers, probably bringing executives i think it is an interesting time for them to do this, with app store scrutiny around regulation i dont think it is much more than that though i dont think well see new hardware, i dont expect major announcements about app store. Maybe a little about momentum, apps, number of down loads. I dont agree i dont think tim cook will miss the opportunity with attention he will create to pump new blood into apple tv plus because it is on life support right now, not doing well what do you mean, because of the morning show reviews werent good enough . None of the content what he is doing december 2nd is say look at the new content we are bringing in movies, were bringing in music, going to do all kinds of things that nobody has heard of with apple tv plus. And he has to do something to jump start it because reviews and audiences and subscribers are not there. If youre wrong, well, you are going to be wrong, im going to be right. And if you are right, i will pay for your apple tv plus subscription for the