good friday morning. welcome to "squawk alley." i'm kaylee towshe. rick santelli joins us as well. carl quintanilla has the morning off. executive editor kara swisher. good morning to you too. >> how you doing? i'm in d.c., actually. >> all right. let's get to our top story today. i think we'll work on kara's audio there. shares of microsoft at all-time highs this morning for the first time since 1999, the company beating the street on the top and bottom lines and showing significant growth if the cloud. former microsoft ceo steve ballmer joining our friend op "squawk box" talking about the stellar quarter and a potential acquisition of twitter. >> i have never, ever, ever wanted to buy twitter myself. i mean, come on. i've got a good life right now. i don't need to do that. >> of course, mike, they asked the question because he is a large twitter shareholder, not just an outside tech observer. interestingly on microsoft this morning, people are joking that it only took 17 years to get yours. if you were holding it since 1999, you're doing pretty well. >> doing pretty well. people are saying they initiated a dividend over that time, total return, you've been ahead of the game at least a little bit. i thought ballmer's comments said we put things on the right track before i left and this is the logical place we got to as a company after that. >> it's true. ballmer gets the blame, at least so for a lot of missteps, for missing mobile, for maybe not being aggressive enough in social, for losing to google. but microsoft did under ballmer transition from being more of a consumer play to more of an enterprise play, buildup window server to a lot of things that were absolutely essential. sateen worked under him to build up the cloud to what it is now. a mixed legacy, certainly not all bad. >> kara, are you there? >> yes. >> your take on the quarter and ballmer's comments this morning? >> it was interesting about the twitter. the twitter issue because he is a big shareholder and there were those rumors. you know, i think microsoft is doing great under they've taken this company and changed it. steve had a very good run for a while and then missed a lot of turns, very critical turns around mobile, you know, moved into advertising, they tried to get in the consume area. i think sacha has focussed the company on cloud computing. he's not a flashy ceo but he's doing things effectively do exactly what microsoft is good at. >> at cloud, who is doing well? is this an industry there can be multiple winners? >> amazon had the field to itself for a long time. google is trying to get into the space too so it will be a competitive area now. google was very late and i think they were busy doing other things just like microsoft was doing. these are things right in their wheelhouse, both of these companies. so it should be interesting going forward. a.m.son will see a lot more competition but amazon was way ahead of the pack on this and others are catching up. >> mike, some people sold microsoft shares after the linkedin deal got founsed because they said it's expensive, will take time to adjust, they'll get distracted. not the case. >> and it came after a tough quarter so that was a direction microsoft felt compelled to go. definitely confusing but i think the cloud momentum is coloring the entire story at the moment and people aren't talking that much about linkedin as a key input. >> i think linkedin is important because you have these megascale cloud players now trying to place bets that extend their advantage. you see microsoft teaming up with linkedin. that's going to be difficult to make work, but if it does it enhances, you know, the benefits they have in share point and outlook, a lot of the things they're trying to do communication-wise within the enterprise. you also see amazon doing this deal with vmware which potentially gets them into microsoft's wheelhouse. amazon has not had those enterprise chops in the past. kayla, you raised a question about whose ebs penxpense this to large extent the hardware players you used to have to go through if you wanted to build up a data center. now that microsoft and amazon and oracle and others are doing that themselves, you don't have to deal with those folks. >> let's turn the conversation now to another megamedia deal that may be in the works. dow jones now reporting that at&t is in advanced talks to acquire time warner. the deal could be announced as early as this weekend. our own david faber confirming that the two companies have held talks. take a look at the crowd gathering around the time warner post. the stock had been halted for volatility earlier this morning on the back of that dow jones news. kara, does this deal make sense to you for at&t? first directv and now this? >> yeah. they're still digesting directv. that's interesting. it still hasn't completely been complete the way they probably should be focusing. but, you know, at&t has been mentioned in a lot of these purchases of yahoo! and all the other stuff. it's similar to me to a comcast/nbc kind of deal and, you know, at&t has needed to get into the digital content space or they felt they've needed to so it makes sense there. other people are wondering if they will help time warner, if not, but i think there might be some other buyers that might enter the picture. you can imagine news corp. coming back in and looking at it. that seems to be to me a fit that makes more sense. but a lot of these pipe companies like at&t and comcast and verizon, obviously, are getting into the content business or feel they need to going forward so they have digital -- unique digital content offerings. >> if you're 21st century fox, john, what's going through your mind? >> well, i don't know, but i did talk to peter chernin at barry diller yesterday and raised this because headlines were coming out. they had different reactions. chernin was like yeah it could make sense, diller said no, not really. teaming up with at&t doesn't help you to figure things out. you basically do that if you ear giving up. who nose what these guys' motives are for taking the positions they do? without question, content is hard and not every distribution player is going to be good at shepherding that kind of a business. >> one thing you're thinking about if you ear 21st century fox is time warner is much bigger than you are. 21st century fox is less than $50 billion right now, time warner is above $60 billion with this advance. it got away. >> when you think about the approach made last year, jeff bu kis was on the defensive, said there was more value in the company then to be taken over. was he right? >> i think they may not have wanted to get acquired by news corp. that was one issue. the cultural issues there. you want to hold out for the best price, but no question hi business is under siege and pressure. peter's got to be part of this whole thing. he has a relationship with at&t. so they're probably consulting with him quite a bit because of the expertise in this. i'd be shocked if he wasn't deeply involved in this. there are only so many choices you can buy and if you're pipe company like at&t you have to look beyond your current business. like john said, content is hard and it's under pressure and it's a question of whether they can do anything more with it, if it's additive or not at all and they're just buying it and it's a big, splashy headline. i don't know. >> mike, cbs and viacom both shooting higher on this news, up sharply about 2% apiece. they have their own issues to sort out. >> their own issues, considered to be an inside job. and yet there continues to be lots of talk and has been for a long time that cbs and time warner make a lot of logical sense to put together. they're partners in the w cnet work, i believe, and just in general you have the broadcast network plus the cable player, showtime and hbo, whether that works or not. i'm not saying what that's why the stocks are up, but it sort of touches off all this activity. even discovery and amc are seeing stocks go up because nobody seeing how they'll go. >> buyer be bought. >> seems to be that time of year. >> kara, what about a potential cbs/time warner tie snup. >> i that idea. that makes a lot more sense than these eres. i think the difficulty these phone companies or cable companies have are very apparent is whether they add to the situation. a cbs and a time warner to me, you're exactly right, fit together beautifully. both in the same business -- >> yeah. >> one of the reasons that time warner didn't want to sell to fox that they gave was it has the family control, dual share class situation, which, of course, cbs has as well. >> cbs market cap right now $26 billion so, that would be a time warner takeover of cbs. interesting, though. quite a land grab going on in this space, kara. we'll have a lot to discuss going forward. kara swisher, our thanks to you. we want to check on the markets this morning. wear little off the lows. the dow jones industrial average down 80, in that range far while, ge weighing on s&p in particular. let's check out shares of reynolds american, shares of the tobacco maker soaring on news that british american tobacco is offering to buy the remaining stake in the company they do not own yet for $47 billion. number-one winner the s&p 500 today. reynolds america. ge posting better than expected third quarter operating profit of 32 cents a share, revenue shy of consensus, and ge narrowed its full-year earnings guide and increased stock buyback by $4 billion. >> when we come back, immigration and focus as we're just 18 days away from the general election. cesar conde joins us next. and we'll continue breaking down the microsoft earnings. the stock trading at an all-time high it hasn't seen in nearly two decades. and cnbc exclusive with paypal's ceo john rainy. more "squawk alley" next. ♪ there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be. immigration, racial profiling, and opportunity for all have become hot-button issues on the campaign trail. with more than 55 million hispanics living in u.s., roughly 17% of the population, hispanic voters are poised to have an unprecedented influence on this election and, indeed, on the economy's ongoing recovery. joining us now at post 9 with some insight, caesar conde is chairman of nbcuniversal international group and nbcuniversal telemundo enterprises. welcome. >> thanks for having me this morning. >> great to have you here. as so offen the case with issues in this election cycle and the hispanic community, it often becomes about immigration and, you know, criminality and things like that that don't represent 17% of the u.s. population. how is this playing and what do you think will be the ongoing effects of some of the rhetoric that we've stirred up in this campaign cycle? >> look, i think it's safe to say we've never seen an election like this. there's a tremendous amount of interest by the latino community in this election. to give you a little context, as you pointed out, the u.s. latino community today is over 57 million people here in the united states, 17% of the population. and besides the raw numbers, i think what's really interesting is not only are the numbers growing exponentially and the demographic, the influence in the united states is growing exponentially, influence on a virt of fronts -- cultural, social, xhishgs and of course political. you know, on the cultural front, great examples like today in the united states salsa outsells ketchup, which is incredible. on the political front, yes, there's a lot of interest, but every 30 seconds in the united states a la tino turns 18, an eligible voter. this demographic has exploded in the last 15, 20 years. today the u.s. hispanic population has $1.5 trillion in consumer spending power. if we, the lahtino community, were our own stand alone market, we would be the 14th or 15th largest consumer market in the world. so tremendous opportunity right here in our backyard for any company and any industry. >> has the economic and cultural awareness of the growth in this group kept up with its actual growth? it seems like to me, maybe i'm wrong, around 15 years ago, a lot of people discovered this market. but i don't know that the nuance of how latino millennials, you know, their preferences, their tastes might be different from, you know, what their parents' were. if that's sunk in for a lot of the marketers and companies trying to capture the attention of this group. >> i think that there is clearly still a gap in the understanding or the opportunity that this presents for marketers, companies, any industry of this growth opportunity right here in the united states. and we are certainly focused on ensuring that people understand that opportunity. kayla? >> i was going to ask about the election itself and how heavy a hand you would envision telemundo playing, because your competitor, univision, the chief at the top of that company has donated $10 million to hillary clinton and has actively played a role in trying to get her elected. do you think it's appropriate to go that far as a media network? >> our philosophy at telemundo enterprises is very straightforward -- we believe we need to cover all sides of the issue, all candidates to ensure our community is properly educate sod they can make an informed decision when they go to the polls in this cycle. in this cycle, yes, we have a presidential cycle but we have very important federal election, state and local elections. the latino community will have incredible impact on all of those. today to give you some context we all have about 13 million to 14 million latinos that will place their votes in this election cycle and their impact will be outsized because they have such high percents of the population. in key swing states, florida, colorado, nevada, arizona, they'll decide that election and latinos are a large percentage of those populations. >> finally, original content has been a big push from telemundo. what do you think when you see netflix doing narcos and trying to export that into other markets, your competitor picking it up? is that interesting? is that succeeding for them? sit ip influencing you at all? >> we're seeing a tremendous amount of interest in this demographic not just in the united states but throughout the world. for us, this is wonderful news. telemundo has had a tremendous growth trajectory over the last year, particularly the last few months. we became the number one spanish language network in the prits yooits in prime time and that is focused on developing original content that's made by latinos for latinos right here in the u.s. with story lines that resonate with that. what we love about seeing other companies, it's raising the bar, raising the options for our consumers. in this particular case, we've had competitors from netflix and our original content has been able to double or triple that type of content. but the fact that high quality premium come tent is coming to this is great for our industry and great for marketers trying to reach them. >> great to have you and that unique perspective on an increasingly important demographic in the u.s. caesar conde, telemundo enterprises. still to come, the big winner of the morning, microsoft. the company surging on growth in the cloud up almost 5% at the moment. we'll hear what former ceo steve ballmer has to say about that. and on a programming note, be sure to tune in to "power lunch" today with facebook co-founder dustin moscow vits. audi pilotless vehicles have conquered highways, mountains, and racetracks. and now much of that same advanced technology is found in the audi a4. with one notable difference... ♪ the highly advanced audi a4, with available traffic jam assist. ♪ we're drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. morgan stanley. microsoft's ceo satya nadella has been pushing a focus on cloud and computing rather than pcs. >> commercial cloud annual run rate exceeds $13 billion and we remain on track to achieve our goal of $20 billion in 2018. whenever our customer chooses one of our cloud services they continue to adopt more services. >> joining us battery ventures general partner and a cloud investor and keith weiss, microsoft analyst at morgan stanley. thanks for being here. put in perspective the opportunity for microsoft with regard to the cloud base. it's now the new focus. they're quoting -- nadella is quoting the annual run rate of revenue. where can that get to and is that the driver for whole company? >> cloud is a once in a generation technology transformation that's happening. you look at $300 billion of cloud spent and that's $3 billion of on-premise spend migrating to the cloud. if you look at their $13 billion revenue run rate, which by the way at 58% revenue growth year over year, very impressive. i think there's a lot more to go from here. >> how much of that $300 billion is cloud so far? where are we in that process? >> my estimate is roughly between 10% and 15% is the penetration rate ofloud computing. and the other thing that's important to note is it's not a one for one transformation. $1 of on premise can easily equal $2 or $3 of cloud computing. >> keith, if you could give us your take away on the quarter not just the cloud business but the way everything seemed to work together, office 365, a lot of things seemed like it came together for this number. it was a strong stock and is getting a boost now. where does this leave you in terms of protecting into 2017? >> thank you for having me. definitely a strong quarter for microsoft hitting on all cylinders. it's multiple parts of the cloud business, office 365 growing the base and expanding, getting higher revenue for user. it's ads are growing nicely on top of the stable base of their own premise business. it's the cloud gross margins improving seven percentage points on a quarter by quarter basis that us and other investors more positive on microsoft going forward. when you start to layer in stuff like linkedin, we think this story will continue that momentum and we'll continue to see positive earnings revisions as we go throughout their fy-17. >> former ceo steve ballmer certainly sounded positive on cnbc earlier talking about microsoft earnings. take a listen. >> we grew our revenue and grew our profit, we made the transition from a pc company to an enterprise company, and now satya's got the company doing the right stuff. he's going down this cloud path. >> going down the cloud path, microsoft finally has a pretty nice multiple up above 20 on a forward p/e basis, but from here it looks tricky. the linkedin integration is going to be a challenge if they'll get some of the benefits they talked about. vmware and amazon teaming up could give amazon some of that credibility in the enterprise that they perhaps have been lacking. what does microsoft need to do at this point to keep this kind of momentum going or have we seen some of the best games? >> look, i think the -- what i look for is the inflection point. it's career to me microsoft is at a major inflection point the last few quarters. two reasons. one, coverage is up a quarter of a basis point. when you go through a cloud transformation, what usually happens, revenue drops first. four quarters ago revenue declined but now it's growing again and i would argue accelerating. to me that means they're beyond the hard part of this transformation and the best years are ahead of them. >> keith, as part of the company's transformation, deal making hasn't gone away. it's continued to play a big role in the structure of the company. i'm wondering if you think microsoft's deal making reputation is changing under satya nadella. you know, ballmer this morning talked about the ekwan tif deal being his biggest mistake. how would you describe microsoft's deal making and do you think it's checking all the boxes? >> i think most of the deals we've seen are falling in one or two buckets, either technology tuck-ins, seeing a lot of purchasing and artificial intelligence getting the forward technologies onto the platform and able to drive innovation within microsoft. to on the other side of the fence is guys like linkedin, making a big acquisition of data and the social network that you could leverage through a lot of existing channels within microsoft. we're actually pretty positive on the linkedin acquisition. we see a lot of room for revenue synergies. we've put out a report targeting over $5 billion in revenue synergies we see accrue by fy-19. smoik better focused on how they're making need acquisitions to adjacencies to their product line as well as linkedin and the forward looking technology driven innovations on a forward basis. >> the market likes it for now, the stock trading just about at that december 1999 nominal high. we'll see if it can get over there to say. keith and neerjas, thank you. paypal shares surging on growth and a merger deal with alibaba. john rainey will be here. an cre, used by this bank, to protect this customer, who lives here and flies to hong kong, to visit this company that makes smart phones, used by this vice president, this little kid, oops, and this obstetrician, who works across the street from this man, who creates software. they all have insurance crafted personally for them. not just coverage, craftsmanship. not just insured. chubb insured. i'm sue herera. defense secretary ash carter meeting with turkish leaders in ankara today, stressing the need for turkey to respect iraq's sovereignty. turkey has been locked in a dispute with baghdad over who should participate in the campaign to retake mosul from isis. militants armed with assault rifles and explosives attacked targets in and around kirkuk. the assault was quickly claimed by isis and likely aimed at diverting attention from the battle to retake mosul. a magnitude 6.6 earthquake hit western japan today. some buildings were damaged as more than 60,000 households lost electricity. railway services were suspended in some of the regions and some were without gas and water. nasa says a russian spacecraft carrying an american astronaut and two cosmonauts has docked with the international space station. they've joined three other crew members who have manned the station since july and are due to return to earth later this month. that he ice the news update. back downtown to "squawk alley." kayla? >> thanks so much, sue. markets closing in the uk and europe a couple minutes ago. sima has that for us. >> a surprisingly quiet session one day after that ecb policy meeting. let's talk about stocks on the move, british american tobacco falling in london trade offering to acquire the rest of reynolds american for around $47 billion price, though still seems to be a source of contention for the two players. a combination of these companies would make the world's largest tobacco company. shares of british american down 3%. banks also in focus. shares of italy's monte paschi up 13% ahead of a presentation by its ceo marco morelli expected to outline how he plans to recapitalize the bank on monday. keep an eye on this stock. we've been discussing the growth we're seeing in cloud with microsoft reporting results. s.a.p. raising its 2016 guidance as it makes cloud software a bigger prioritization, shares up 3% on the day. then the auto space, daimler profits helped by a strong demand for luxury sedans in china, but the stock is falling amid concerns about a slowing truck market. same goes for volvo, which is forecasting a decline in truck demand on both sides of the atlantic. more problems for ericsson and competition in asia, the swedish firm has lost a quarter of its market value this month alone, definitely on the move frp. from stocks to bonds, keep a close eye on bonds in portugal today. in less than an hour, dbrs is expected to update investors on portugal's credit rating if portugal is downgraded, it will no longer be eligible for the ecb's qe program, which would have large negative consequences on portugal's financial stability. we'll get you that announcement when it comes out. back to you. >> thank you. a quick check on at&t and time warner. at&t lower by 3%, time warner up about 9%, as dow jones reporting they are in advanced talks. david faber reporting they have indeed held talks. we spoke to barry diller at the establishment conference in san francisco yesterday, and here's what he said on media toll takers and a possible time warner/at&t tie-up. >> they could try. right now they're kind of paying people. but look, the reason there were toll takers is because there was scarcity. that was the reason. first there was scarcity of radio spectrum. then there was scarcity of television spectrum. then there was scarcity of cable. there was only a little co-ax cable, only get 70 channels through at analog, right? they said you want to get on our thing? not only are we going to charge you about half the value of your company, but we'll pay you whatever we want. >> now it comes down to scarcity offal snent. >> so when you no longer have -- that's this thing, this miracle of the internet -- when you do not have any absolute barriers, you can do what you want. and, yes, facebook has a huge audience but you have an idea, and you can get it across to people, done. >> now this content is really great. scarcity of talent. is that what you're saying?? >> of course. you have a good idea, you get to do it without asking anyone. that's fantastic. >> almost two years since the untimely death of aria, which you were backing. >> and the reason we wanted to do it was to get that central away from these. the supreme court said no. >> pull one out for aereo but the way you're describing it maybe you don't need it. >> i always thought it was an interim technology. all it was designed to do was to break up this -- these closed satellite and cable systems taking all programming and warehousing it. that was short term, meaning eventually the dam falls so, yeah. >> at&t perhaps looking to merge with time warner. is that a good idea? >> what do i know? >> you know a lot. is that a decision you would make? you get to make decisions. >> no. >> okay. >> i wouldn't. if i were at&t -- >> or time warner -- >> if i'm time warner i have a whole other -- my challenges are to great that to figure out the course for old kind of ode media companies that are not really in the dejal world or think digitally, when all this created instruction is going to happen because that big close circle is going to get busted, those are huge challenges. >> so they ought to focus on figuring that out rather than getting up under at&t? >> getting -- if you can't figure something out, you get bought. >> we'll se if they can't figure it out. >> i like very much time warner, its management. i think they're really good. and there's every reason they will figure it out. i don't think at&t helps them. they've got -- at&t has a lot of wireless customers. are there ways they could? probably. but companies usually screw those things up. >> all sorts of reasons why barry diller might give that take, david. you know the man well and you've been reporting on the possible tie-up of these two companies. your thoughts. >> things have moved quickly since my earlier report, john. this morning we reported on the talks between the two companies after having seen bloomberg report yesterday on a variety of things they might be considering. our reporting saying they would focus on a deal in which at&t would buy time warner. then a story moving the stocks saying the talks have been advanced. i can tell you that reporting appears to be accurate, the talks have more advanced than i thought based on conversations i had with people. . it appears the talks have been takes place for or at least the preparation far potential deal has been taking place for months. so it is possible you could see something in the near term in terms of time warner selling out to at&t. the market indicating if you discount it, the regulatory review, how long would bit? 15 months, 18 months? a price well above $is 00 at this point. unclear where that would be. fox had offered $85. that's well in the rear-view mirror. some people speculating it could be at high as $110 a share, representing a fairly low amount of dilution for at&t, perhaps as little as 3%. that eke speculation of those following this closely at this point. the ramifications of a poen theial deal, it is not in any way a done deal, but certainly they are moving very quickly it would seem here, are enormous. they are enormous for media companies, any of those who were thinking they may be in a less advantageous position as the world changes from being of course the cable bund toll the unbundled world we've talk sod often about over the top. there is a question now as to whether you're apple or google or even amazon you've ever considered whether you need more media properties, you're going to have to move pretty quickly to think about it or be faced with a potential large breakup fee if this deal does come to pass. >> you didn't mention 21st century fox potentially -- >> i don't see how they can compete with at&t. >> at&t was largely out of the running then. what changed in the last two years? >> time warner back then was talking about its plan and delivering on its earnings. fox and time warner are similar in size. there was the question of what would happen to fox's stock price, the dilution of it being a family controlled company. time warner wanted to deliver on a lot of the goals they talked about and wanted a higher price than fox was willing or able to get to. fox is simply not something you can talk about as legitimately in the running at this point. whereas we know apple, google, or amazon, if they choose to try and participate, this is the last property. the others are family controlled. fox's family controlled. viacom and cbs. >> disney is too big to buy. >> thank you. disney is too large. if you're leslie moonves, thinking about a viacom tie-up, thinking you might have a shot at time warner where you want to make this happen, you're probably saying if this deal happens i just want to get my deal done. you need to be bigger it would seem at this point. so that's where you're seeing a lot of stocks in need ya run this morning with time warner. >> at&t has been trading at ten-year highs, off just about 4% on this report. is there anything to take away from that, maybe that at&t shareholders would be okay with it? it's not like the stock has tanked on the idea that it would make -- >> not like what sales force did on the twitter. >>, no it isn't. important point and they're getting a market check on their stock price right now and probably feeling okay about it. i'm concerned about their stock price recently, and we now know why we've heard that, checking on it. wouldn't be that diluted even up to a price of $110, obviously in a position to pay for it. it would have to include a good amount of stock pap long with cash, the dividend. in fact, the free cash flow c c characteristics of a deal would enhance the dividend. that's a key for at&t shareholders. >> a lot of debt. $150 billion combined or something? >> a lot of debt. no doubt about that. we're just starting to work through the potential -- it does bring you back. i've covered this industry for so long. time warner once had a cable company called -- >> exactly. >> naj they stayed together and known what was coming in the world. our own company of course is a combination of distribution and content, and now it would seem that at&t wants to move firmly in that road. if you're verizon and you've been taking nibbles with aol, potentially with yahoo!, do you really think long and hard about taking the big move. there are a lot of bankers and a lot of executives right now thinking long and hard, knowing that there may not be a lot of time for them to respond if they want to think about trying to get it. >> how crazy is this, verizon and at&t buying up all this stuff. who would have thunk it? >> comcast would have, probably. >> there was a time 20 years ago where this was going on the to a certain extent, then it all came apart. >> yeah. >> here we are again. >> you know, this world we're entering in terms of the unbundling, the internet, a vastly different construct. >> and at&t straddles a lot of it. thanks a lot. stay on top of it. when we come back, paypal ceo john rainey. important than your health. or the freedom to choose what doctor you want to see. so if you have medicare parts a and b, consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, these let you choose any doctor who accepts medicare patients. you're not stuck in a network, because there aren't any. plus, these plans help cover some of the part b medical expenses medicare doesn't pay. so why wait? call now to request your free decision guide and find the aarp medicare supplement plan that works for you. like all medicare supplement plans, you'll be able to stay with the doctor or specialist you trust, or look for someone new - as long as they accept medicare patients. but unlike other plans, these are the only ones of their kind endorsed by aarp. rates are competitive. so call today. and learn more about choosing the doctor's you'd like to see. go long. coming up on "the halftime report," one of the most closely watched energy traders around on which way he thinks oil and nat gas are about to move, mark fish we are us. and new england patriots owner bob kraft on nfl's ratings, the patriots, league business, so much more, and all eight halftime traders are here as we celebrate our fifth anniversary. their picks from today's big-name movers as well. we're talking mcdonald's, microsoft, ge, we'll get their top stock plays for rest of the year as well. starts at the top of the hour. kay lashgs see you in about ten minutes. >> we'll be there. thanks, scott. paypal reporting third-quarter earnings, seeing revenue growth as active user accounts grow as well. it's on pace for its best day since latewhere it gained just over 8%. close to being up 9% right now. john rainey is the cfo of paypal and a member of the cnbc global crot cfo council and joins us this morning. good morning. >> good morning. great to be on the show. >> i want to talk first about the partnership with alibaba. it's not company's first foray into the chinese market but it is the biggest. how much scale does this give paypal and how much business will it drive to your platform? >> it's very important deal for paypal. we are a global company. more than half of our customers are outside of the united states. and china is one of our largest and best markets. and this is an extension of the agreement that we already had with alibaba whole seller where now we can allow our 192 million customers across the road to shop with chinese merchants and we're excited to continue to see this -- be successful and grow. >> you know, a partnership in theory sounds like it's always a good thing, but investors were worried about the partnerships with visa and mastercard for the reason being that it steers them away from using a bank account and using more expensive cards. do you have a good handle on how much more expensive those will be for paypal? >> well, these are fantastic deals for paypal. fundamentally they allow our customers to have more choice in how they choose to fund their transactions. and this is exactly why we came out and increased our revenue guidance from 15% previously to now going 16% to 17% over the next several years. we certainly would expect some increase in transaction expense, but we've also seen with consumer experiences that when you give them more choice and you remove that friction from all of which go to pay pal's benefit. >> john, just if you could sort out for us the state of play across so many different fronts. i think a lot of people look at the payment space and feel like there's a ton of uno veginnovate going on. you have the baipgs like visa and master card, and then you have more intermediaries, steps along the way. where do you fit into all of that, and really kind of do you have a sustainable spot in where this is all going? >> well, we absolutely think that we do. we are a leader in thin tech. thin tech is about reimaging the movement and management of money and financial services for our customers. there's certainly a lot of commission competition, but for good reason. the e-commerce market today is roughly 10% of a $25 trillion global retail market, and we see that growing at double digit rates. yet, pay pal continues to grow in excess of that. competition is nothing new for us or this industry. we've shown in the face of competition for each quarter successively we've been able to grow in the 25% to 30% range, and it's by focussing on what where he do best, which is digital payments. >> john, when you hear things like we heard this week where ammex said it's planning on marketing blitz in the fourth quarter around small business saturday and that it's going to be ramping up substantially its marking and promotional spin, that's just one competitor. how much are you going to have to spend on marketing venmo and your own platforms to make sure you stay at the front of consumers' awareness? >> well. >> we're certainly going to invest in our product and continue to grow, but i think ilg important, kayla, to distinguish what pay pal is doing that's different thn a lot of the other players in this business, and a lot has been made about digital wall leets. we think of pay pal as more of a form change to swiping a card to p thatting a phone. we're trying to enhance the value proposition for our customers, and that includes both merchants that see higher von conversion as well as our customers that have amenities like buyer and seller protection and free return shipping. >> well, it is working for the stock today. almost as its best day as a public company ever. john, congrats on a good quarter, and hopefully we'll see you soon. >> thank you, kayla. appreciate it. >> as we head to break, we're kepg an eye on the major averages. dow currently down 45. s&p down two. nasdaq thanks to microsoft hanging in the green. we'll have more on microsoft. more "squawk alley" up next. >> the dow down about 41. within the dow we have mcdonald's up on a decent earnings and comps record. 2.7%. honey well getting -- ge down 1.6%. also weighing them down. that was based on narrow and somewhat disappointing order guidan guidance. right back with "squawk alley." ♪ ♪ the highly advanced audi a4. ♪ i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i got a medicare supplement insurance plan. 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[ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be. >> its current market cap for facebook is $374 billion. it's a far cry from its pre-ipo days when steve ballmer was angle for a deal with mark zucker burg. >> you have to have a willing seller. you know, i made a pitch to zuckerberg when the thing was small, but, you know, he said no because -- >> how much -- >> i think $24 billion when the company was itsy bitsy and, you know, i -- he said no. i respect that. >> $24 billion. of course, it's not like they would have gotten facebook up-to-date. facebook of today is facebook of today because mark zuckerberg is running it and making the decision. steve ballmer would not have made the same decisions as mark zuckerberg. >> he wasn't the only person trying to acquire it. that time and many times before yahoo couldn't wrap its head around $1 billion for the company. >> how many, what, 21, 22-year-olds would say no -- he did for microsoft and snapchat did to him. refuse a tremendous amount of money hoping to build something bigger. >> they call that karma. there's one deal -- you didn't really mention british american tobacco and reynolds. nxp qualcomm. this space has been on a tear consolidation. >> pc's have slowed down. we'll see if this doesn't. that's it for squawk alley. send it over to scott and the halftime. ♪ >> the dow and the s&p are lower. nasdaq slightly higher. all eat of our traders are here to talk us in just a bit. patriots owner robert craft. steve, there are so many microsoft all-time high, mcdonald's is doing well. we'll talk ge. what stands out to you today in this market? >> what stands out to me is the consolidation that's going on. we've seen it, but it has been a slowdown. today we've got