Transcripts For CNBC Squawk Alley 20170505

Once again, good morning and welcome to squawk alley. Joining me at post nine, sara eisen, mike santoli, carl keent nia has tkne quintanilla has the morning off. A big interview for us from omaha, bullish comments on apple from Warren Buffett. Becky quick is live there, berkshires temporary headquarters for the weekend in omaha, nebraska, with details, especially on ibm. Thank you very much. We talked to Warren Buffett about ibm, apple, a lot of different issues but lets start with ibm. Warren buffett says the case for ibm doesnt make quite as much sense to him as it used to. He told us last night that he went ahead and sold about onethird of the position he held in big blue over the first and second quarters. Thats pretty shocking because Berkshire Hathaway was the largest shareholder and shares of ibm that controlled about 9 of the shares outstanding. Buffett told us they went from 81 million shares down by 25 million. They still hold more than 50 million shares, which means there is still a major shareholder. The news is coming out next week, his hand would have been forced with an s. E. C. Filing of 13f filing that was going to be coming out. He told us about it now because he didnt think he could go through the Shareholder Meeting and not be forth right with telling people what was going on. You see where the stock got above 180, thats when he started selling shares. He says at this point he has stopped selling shares, the stock is back below 160, got there after the earnings came out and disappointed investors last week. So he stopped selling at that point. Says he wouldnt be selling additional shares at these levels and says that in fact shares continue to go down, he might actually buy more shares. But take a listen to what he said about why he sold those shares. It has been a period when it im sure that it has been tougher than they thought and tougher than i thought. I was wrong, i dont blame i get paid to make my own decisions, just like an apple or something of that sort. And sometimes theyre right and sometimes theyre wrong. I think ibm is a big strong company. But they got big strong competitors too. They did talk a lot about the big strong competitors, he did talk about some of those competitors, the one he mentioned more than any was amazon, pointing out that jeff bezos has really been able to do with the amazon web services, the cloud division, what none of its competitors saw coming. Bezos has been phenomenal in two different industries, with Online Shopping and secondly with the cloud services. Hes been incredibly impressed by that. And talked about how none of the competition really saw that coming. He said bezos himself says that said he had expected to get about two years lead time, by moving into cloud services. He got seven years head lead time and that has made all the difference for amazon. Now, another stock that buffett is a huge shareholder in is apple, the other Technology Stock we talk about being a berkshire holding, one he moved very aggressively into and Berkshire Hathaway owns more than 19 billion worth of apple shares. And he talked about those earnings as well because obviously those earnings came out earlier this week, a bit of a disappointment to the street, Warren Buffett said he was not sf disappointed by it. He talked about how the iphone sales were weaker than an tis paced because there are so many people waiting to upgrade to the iphone 8. Holding off on purchases until that iphone 8 comes later this year. That explanation made sense to him. Listen in. If you knew a new car was coming out, tomorrow, a new model of something or other, and you had to pay the same roughly the same, i dont know, but close to the same for last year model, youre probably going to wait. So i think i think it is an incredible consumer product. An incredible consumer product, but one that Warren Buffett himself still does not own. So, jon, maybe blame him for why the sales were weak. He says hes very happy with his flip phone and will keep it that way. Wow. Even the best have blind spots, we learn that, and he is a ledge end. Thank you, becky, as always. Great stuff from Warren Buffett. Lets bring in nick and josh. Guys, buffetts comments on apple come as citi is putting out a note listing the top potential targets. Netflix topping the list. I want to talk about buffett first. Is tech his kryptonite . It was contrary to his bet on ibm years ago anyway. Apple and aprmazon have done amazing. If he bought into those five, ten years ago, he would have done a lot better. Nick . Yeah, i mean, i think it probably is. I have a tremendous amount of respect for Warren Buffett, i think hes an incredibly smart guy, but he has a flip phone. How can you understand how consumers are going to interact with technology when you dont use them. Maybe his bets are wrong sometimes with technology and, you know, for me, i do agree amazon is a big and Scary Company that is going to be a competitor to a lot of the people that hes invested in. And, josh, one of the things that strikes me about this area in technology is how much parity there is between big giants. I dont remember the last time we have seen a time like this, is it easier or harder to pick winners as an investor during a time when you got so many big potential acquirers and competitors . I think the real thing with technology you have to be investing in is expecting the rate of change and investing in the companies that can be able to catch the new trend and the new trend, you know, amazon was able to catch this trend of software moving into the cloud and become the foundation for that that nobody thought they would do as a bookseller. Now seeing the trend of ai come up and every company is building the best Machine Learning and being able to predict the company that can hit the next trend like apple did with mobile. Thats a different business type of bet than one that is runs a great infrastructure business or engrained in the fabric of america, a lot of other berkshire holdings. Buffett reminding us that the wars right now are in the cloud, and while amazon was one of the first movers and probably the leader, nick there are other competitors. Who else is a prospect to be watching in the cloud here . Is google a contender . Well, i think anyone it is google, could be facebook, could be any big company. You know what josh is saying is correct. If you think about it, snapchat is a 4 1 2yearold company, started in a dorm room at stanford and now a 20 plus billion Dollar Company with hundreds of millions of users. That happened at an incredibly rapid pace and will happen with cloud computing, with artificial intelligence. So you dont know. It is interesting, amazon right now, they sell books, in the cloud, theyll get into the driverless car market and compete with uber and google and apple and the other dhapz dont companies that dont do these things today but will do them tomorrow. Building on the idea of defining what is tech has become harder. We heard in the sound bite, Warren Buffett referring to the iphone. You have amazon, and netflix. Are they categorized as tech stocks in the s p 500, so you have all the different kind of dynamics wrapped into what we call technology, how does that change things from an investors perspective, at whatever stage the company is at . I think that you have to be expecting this pace of technological advances to keep going as nick pointed out. Things like selfdriving cars are coming and whether thats three years or ten years, and so everything is now built around software, this is the ability you can write the programs that actually we see things on our screens, do things around us, faster than ever before. Not just thee atoms you move around, but bits. It makes investing in any business or any space, figuring out what are the technological advances, users accessing new products over their phone, whether they dont want to go to a store because they want to just make a couple of purchases through their voice and say bring me a new shirt and one shows up, these are the advances were expecting and you have to invest in the companies on the head of the trend, not the ones that get stuck behind when consumers move on faster than those companies can keep up. I want to poll you guys on that netflix question, real quick, josh. Should apple buy netflix, yes, no . I think apple is a Great Company that sells these consumer products, it doesnt it has the itunes and app store, but doesnt quite have a Consumer Service we use in the same way. It would be incredible for them to own something that is more of a subscription like that. Nick, what do you think . I think that facebook should buy netflix. I think that, you know, facebook is looking for longer views on videos on their platform, they have almost 2 billion users, an astounding amount of people, quarter of the planet. What better way to get longer views than to actually start posting live content and videos that are two plus hours long. I think that facebook is going to get in that space, why not buy a company to do it. It is a fun game that we go back to. It is very relevant. The cash pile overseas that apple has, that buffett said, will probably come back to the u. S. If they get a repatriation kind of deal from congress. Some of the other names that are floated out there, tesla, we know it has ambitions in cars. And, even disney, hearing more about this, the analysts like to swoon over that potential deal. I think the real question is, you know, when all this cash comes back to the united states, what are the Technology Trends that apple will want to be part of in the next ten or 20 years. Seems like car and transport and energy is really interesting and would fit with the consumer products. Moving on, uber reportedly facing a criminal probe over its use of what it calls gray ball software. Helped drivers to avoid local regulators by giving those regulators a false view of where cars actually were, according to the wall street journal. Uber said back in march it would stop using that software after a New York Times report exposed the practice. Guys, does this matter as far as the amount of heat that is already on uber . Nick, you have covered a lot of these companies that have been under the microscope, incrementally does this probe make a difference . Well, does the probe make a difference . Maybe, maybe not, depends how it nets out. But i think all of the things that have happened over the last x number of months with uber will make a difference. It has been one problem after another after another after another. If this was a Public Company, travis kalynic would not be running the company and if he was, the stock would be on a downward trajectory. There are bigger problems with uber too. We talked about driverless cars. If they cant figure out the driverless car model, uber will not exist. If i was thinking about investing in that company, i would be worried today. Josh i was going to say, you know, if nick is correct that if it were a Public Company that he would no longer be the ceo, would that be a good thing or bad thing in this instance . Is there an advantage being private to basically say, maybe we can ride this out with the current leader . You know, i think when a company is growing and uber has grown to 20 billion in gross bookings over the past six or seven years, just a phenomenal business and proof there is a need for transportation that just wasnt being fulfilled at all. And it took a lot of scrappy work to upset the apple cart or the taxi cartels and to get into the cities where it wasnt sure it was a trusted thing, even though customers needed it. I think the company has to change and mature. Travis is a ceo is somebody who can make that transition and being private allows you to make that transition. But i do think the verdict is out on whether they can mature and be a company that now harnesses the impact it is having versus a scrappy one that has to prove it is even useful at all. The other market impact, hard to quantify what this means for a private company, but we can look at the Competitive Landscape and there are hungry competitors out there like lyft and dd in china. How much are they benefitting from this . They have been out trying to raise capital. Theyre benefiting theyre doing everything they can to benefit from this. There was a interesting, you talk about the New York Times mike isaac had written a story about greyball and a followup story yesterday and i was reading it on my phone and in the middle of it was an ad for lyft. Their taking full advantage of this. It is working to their benefit. There has been several delete uber campaigns from people on twitter and from what i can tell, from what i heard, lyft is growing as a result of that. Yeah, would not be surprised of that. Nick, before i let you go, want to talk about your new book, american kingpin the epic hunt for the criminal mastermind behind the silk road, fascinating subject, a guy who essentially set up a digital Drug Distribution network, i want you to riff on this idea for a moment, is american kingpin really about Silicon Valley and this libertarian idea in technology that tech is always good, Government Intervention is bad, and kind of tech inventors arent responsible for what the people do with their product . Yeah, it is absolutely it is interesting when i started reporting the book, i knew the story was this kid who started this website where you buy and sell drugs on the internet and led to Different Things going wrong including attempted murders and so on. What i found as i started to get access to the diaries of the guy who ran it and the chat logs, he ran his company in the same way a lot of tech founders run their companies in Silicon Valley. He cited the same ann rand quotes and, you know, the same inspirational steve jobs quotes and that was it. It was, you know, travis has decided he wanted to disrupt the tax industry, and ross founded silk road decided to do drugs. You could switch the founders around and they would still say the same exact things about the things that the companies that they were running. Little bit scary. But you guys and others out there keeping a watch on all of it. Nick and josh, thank you for joining us. Thank you. Thank you. And when we come back, 211,000 jobs created in april. More than double the amount added in the prior month. Hear what former cea chair ed lazear has to say. Silicon valley and more when squawk alley is back after this. At fidelity, trades are now just 4. 95. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. And at 4. 95, you can trade with a clear advantage. Oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. On a perfect car, then smash it into a tree. Your Insurance Company raises your rates. Maybe you shouldve done more research on them. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch and you could save 509 on auto insurance. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. The big news of the morning, the economy adding 211,000 jobs in april. Just heard from new labor September Alexander acosta, releasing a statement moments ago saying, quote, all indicators of labor market slack showed improvement in april, adding that we still have challenges ahead. For more on the april report, were joined by rbc Capital Marks chief economist jim porcelli and david kelly. Welcome to you both. Strong january. Strong february. Weak march. And now strong april. Can President Trump claim credit . No, i dont think that were quite there. A lot of what youre seeing today has been put in place sort of months previous. But, look, i think at the end of the day, we like this report. And i think one of the things that most folks have to come to grips with is if youre trying to build a case for sort of, you know, resource outilization, ths report checks off all the right boxes. The u 6, now 8. 6 . Decade low. Yeah. I mean youre within an arms length the previous cycle low. The fed will like this report in terms of us moving in the right direction, but i would hasten to add i heard this from a number of people already today. Not consistent with an economy that is accelerating. From our perspective, you know, were not calling for an acceleration, were looking for more of the same, pretty nice backdrop, 2. 5 backdrop and this report is consistent with that. Investors like this report too. The s p is up about a tenth of a percent. Im surprised were not seeing a bigger reaction. This was a better number, a better Unemployment Rate, and a lot of the internals also pointed to stronger economy and stronger labor market. What is with the reaction . Well, the problem is it is a tighter labor market. The good news it is a good report f you wa report. This economy is perfectly healthy, and there is no need for further fiscal or monetary stimulus. This report makes a june rate hike more likely, but also undercuts the idea we need big personal tax cuts to try to sort of pump up demand here. Because this is the Second Lowest Unemployment Rate in the last 17 years. We have really dont need more demand stimulus here, so, you know, from a market perspective, dont get big tax cuts, that might be something of a negative for the equity market and fed is more determined to tighten, thats a negative for the bond market. Market reactions should be muted, it says the government shouldnt be trying to help the economy out from here. Tom, i mean, the bond market has been reluctant to fully price in what the fed has stated as its consensus in terms of how many times it might tighten. Do you think that will change . Will the bond market start to l about this conversation. Market is pricing in 1 1 2 hikes next year. At a minimum, if you think that there is not going to be any real deceleration in economic activity, which i dont know many people that do at this point, it would the market is already offsides, even just on the 1 1 2ers, three or four next year. The number argues against the idea that we need big tax cuts. Might we slip into this sort of good news is bad news mode that we were in with the fed not too long ago if this continues. We could because there are a lot of fiscal conservatives in the u. S. Congress who will look at the deficit numbers which are high and look at the state of the economy and say do we really want to add to the deficit . When you think about, for example, the Health Care Bill that headed over to the senate yesterday, there will be a huge debate about preexisting conditions. The cost of covering preexisting conditions is going to be enormous. That money will come from somewhere. So can you afford to do tax cuts in this bill and still cover preexisting conditions. Where are you seeing signs of worry about deficits . The bond vigilantes have been asleep now for years. I think it is deficits arent going to govern the bond market for the moment while Central Banks are buying so many of the bonds. But eventually when the Central Banks stops buying the bonds, long rates will move up. But it is i dont trust the bond market to tell me where the economy is going or the deficit. The deficit numbers are there. And theyre getting worse. And at some stage it will be a problem for america. If the economy is this healthy, we really shouldnt be cutting taxes in general. Im in favor of a Corporate Tax cut, not a big general tax cut to spur demand in a economy which clearly doesnt need it and cant handle it. A contrarian view. Well leave it there. Thank you very much for joining us. David kelly, on a jobs day, tom porcelli, nice to see you as well. Check out zendesk getting hit hard down, down more than 5 after earnings. And well speak to the ceo coming up on squawk alley. Hes hiding a card its time for you and your boys to get out of town. laughing left foot. Right foot. Left foot. Stop. Twitch your eyes so they think youre crazy. If you walk the walk you talk the talk. Its what you do. If you want to save fifteen percent or more on Car Insurance you switch to geico. Hide the eyes. Its what you do. Show em real slow. After months of campaigning and that very close first round voting, a final vote is taking place this weekend, in the french election. Michelle cruise carusocabrera. So sarah, for months we heard the one great Political Risk out there for the market was this coming sundays election, david tepper said he was watching this because of the risk. However, as you highlighted, this morning, and for the last several days, the markets are very complacent. They act as if macron will be the next president of france. As a result of that complacency, there is a lot of expectation among his supporters that he, it is absolutely a done deal. The markets are relieved because he has a far less radical program. He wants to stay in the euro, wants to try to do something reforms to make the French Economy more competitive. Over at marie le pens headquarters, it is a different story. If she were to win, there is predictions that there would be market chaos on monday. Well, you know, this rhetoric has been the same about the brexit. It is true that the uk is not in the eurozone. But still the market hasnt plunged there. I think if we do that, we will get a lot of strength and confidence. We want to break this negative circle. We want to bring confidence back. For that, we need to have freedom. So that was one of her policy advisers responding to a question about whether or not her antieuro position, pro frexit position hurt her in the polls. We hear 50 of her supporters dont actually want to leave the euro. So that may have been one of the issues that hurt her in this election. Macrons team put out a tweet saying, we are uncomfortable with the done deal media narrative for the french election. No votes are yet cast. We are optimistic but not naive. Theyre very worried about people staying home and not voting because they think their candidate has won. Guys, back to you. So, michelle, are we going to get exit polls . When do we start finding out what happened on sunday . So, probably 2 00 on sunday afternoon is when were going to get the first projections if the numbers are very wide apardon you can expect to see french media just like they did in the first round project a winner and see the numbers come in throughout the evening. The evening here, Late Afternoon on sunday east coast time in the united states. Currencies will be open. Michelle, thank you. Michelle carusocabrera in paris. Thats a good setup for seema mody standing by with the european close. Stocks ending the week on a positive note as we wrap up the final trading session before sundays french president ial runoff. Check out the runup in french stocks, up 7 since first round of voting took place two weeks ago as investors are increasingly betting on a macron victory. You have the german and french ten year yield spread continuing to narrow. Once again, betting on macron win. Moving on to earnings, winners include britains pierson up after announcing plans to cut costs further. The educational publisher aiming for additional annual savings of 300 Million Pounds by the end of 2019. Pierson also saying it has begun its Strategic Review of its u. S. School Publishing Business which has been struggling in wake of digital competition. The stock is down more than 8 over the past 12 months. You also have European Oil Majors in focus today, rebounding as crude prices bounce off fivemonth lows. Back over to you. Seema, thank you very much. Strong day in europe, not yet translating on this side, well see how it goes in the afternoon. Still to come, how alphabet is doubling down on original content. Signing pretty high profile stars in the process. But, first, rick santelli, what are you watching this morning . Well, it has been a big week. We had a fed meeting, we had a big jobs report. Were going to discuss all this with the man, ed lazear after the break. At fidelity, trades are now just 4. 95. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. Good morning, everybody. Im sue herera. Here is your cnbc news update at this hour. North korea accusing the u. S. And south korean spy agencies of an unsuccessful assassination attempt on leader kim jongun, involving biochemical weapons. In a statement on state media, north korea said it will ferret out and mercilessly destroy the terrorists and the cia and in south korea. No immediate comment from either country. Palestinian protesters clashing with israeli troops in the west bank in a show of support for prisoners in jail who are on a hunger strike. They say about 1500 prisoners have been on strike for 19 days. The first large chinese made passenger jet has taken off on its maiden test flight. The plane is touted as a rival to airbus and boeing. It has been beset, however, by delays blamed on manufacturing problems. And harry potter has a date on broadway. The producers of harry potter and the cursed child, the hit london show part of the potter franchise, say it will open in new york city on april 22nd of 2018 at the lyric theater. Tickets slated to go on sale this fall. Thats the news update this hour. Back downtown to squawk alley. Sarah . Sue, thank you. We have news now from the vice chairman of the Federal Reserve, Stanley Fisher has been speaking. Lets get to Steve Liesman with the headlines. Steve . Here at the Hoover Institution annual monetary conference, stan fisher saying we dont need no rules, a day after the committee passed a sweeping Regulatory Reform rule saying that the Federal Reserve should pick a rule for making Monetary Policy. Fisher saying the fed should consult rules but not apply them mechanical mechanically. Committees can be better than rules. And the fed can have good reasons for deviating from a rule and also points out almost all countries decide Monetary Policy by committee, not a rule, and i want to redo this quote here, emphasis on a single rule implies that the truth has been found. He said it has not. Mike . All right, well, didnt break any news there, didnt say the truth has been found, steve, but thats interesting stuff all the same. Appreciate it. Right out to the cme group in chicago. Rick santelli has the santelli exchange. Well, thank you, mike. I would like to welcome our first friday of the month guest ed lazear, thank you for taking the time. Nice to be with you. I know we have our list of things to talk about. But after that last spot by steve, im sorry, we have to talk about it. Stan fisher, vice chair, we dont need any rules, are you serious . I mean, we dont have rules, bank of japan doesnt have rules, ecb doesnt have rules, bank of england doesnt have rules, how are investors supposed to invest, how are they supposed to invest consistently, efficiently and predictably if it just by committee. Nothing works well by committee. Thats why were the greatest country on the planet. Your thoughts . Well, every central bank implicitly looks at rules, whether they say that they follow any particular rule or not, theyre all looking at rules. For example, janet yellen spoke about this out here at stanford about a month, two months ago, and talked about a variety of rules that they look at. Now, the issue is whether they wait any one particular rule over others and as you know, im sitting next door to where stan is speaking. And the other guy in there is john taylor also close to mr. Taylor, yes, mr. Taylor might have a thought or two on this. Well, and john is moderating that session. So after were done, ill probably sneak over there and hear what theyre saying. But i think what stan is saying essentially is that the taylor rule is one of many rules and it is while it has shown to be impeerically relevant, i think his point is were not willing to be wedded to that particular rule. Thats really what the controversy is about. I dont think that these guys really do things in a vacuum, theyre always looking at data and have to benchmark that data against something. To the extent that they say theyre not looking at rules, i think thats not quite true. Well, listen, youre interesting to talk on this topic, but im not convinced. What did you think of todays jobs report . Well, obviously it was a good report. There are a couple of things i point out that i dont think people have mentioned at least i havent heard them mentioned. I always like to look at the average hours worked and thats ticked up one tenth of an hour, a huge thing in terms of the equivalent of jobs, about 400,000 jobs, so thats a good sign. It is also consistent with Something Else that you talked about earlier this morning, rick, i was watching the show, you know, when the job data first came out. And you mentioned u 6, u 6 dropped. 3 of a percentage point. Yes, sir. Right. And two thirds of that is accounted for not by a reduction in discouraged workers, but rather by people not having to work part time for economic reasons. So thats also consistent with demand in the labor market going up on the hour side. The one other last thing i mentioned is, you know, the other number i like is the employment rate. I think the employment rate cuts through all this stuff, much better than the Unemployment Rate, and it is now up to 60. 2 , nowhere near the previous peak at 2007 prior recession level, but not going to get there because of demographics. I would estimate were now only about 1 percentage point below where we need to be. Were moving steadily in that direction. All of that stuff is good news. Real quickly, we passed the first phase of the repeal and replace, but im not wanting to one to talk about that. Talking about the Tax Implications for tax reform. Omb for 2015 said that individuals through their taxes paid about 47 , okay. Corporations about 11 . Were concentrating on all of the horsepower going to get from dropping the corporate rate. Do you think most americans realize they pay, what, four times more into the coffers than corporations do and doesnt matter to think about that dynamic, your final thoughts . Yeah, well, it is actually bigger than that. It is personal income tax plus payroll tax as well. If you put those together payroll tax is another 33 , yes. Right. So thats where the action is. Thats right. Now, in terms of growth, though, in terms of what we can do to stimulate the economy, capital is really the story. So while capital is not big in terms of the number of dollars that it is bringing in, you know, still not trivial, 400 billion a year, but the action in terms of stimulating the economy is on the growth side. I must say, i was listening to the previous guest, i strongly disagree that the economy is humming. Look, we had 1. 6 growth last year. Last quarter was. 7 , productivity is growing at less than 1 . And wages arent growing. We still have a long way to go. I would like to see us get investment going at a much higher rate than it has been, i think that would do a lot of good for the economy. Ed lazear, always a pleasure. Thank you for taking the time today, sir. Back to sarah and the gang on squawk alley. Thank you. And up next, youtubes latest bet to capture the attention of cord cutters and premium advertisers. Coming monday, exclusive interview with michael dell, thats at 11 00 a. M. Here on cnbc. Squawk alley is back after this. Coming up on the halftime report, ibm shares shrinking. How far will this Iconic Company drop. And if apple decides to take some of the massive cash stash, who will be the target . Well talk about that. And kevin oleary doubling down to defend his call geth the regional banks despite the fact theyre up for three straight weeks. Is mr. Wonderful wrong . Well talk about that too. Sarah, see you in a bit. 15 minutes. Youtube announcing 7 new ad supported exclusive shows that will be available for free on the platform later this year. The alphabet owned website signing kevin hart, Ellen Degeneres as producer for the new content, separate from the Premium Service youtube red and a plight to attract the growing group of cord cutters. Interesting play for big names. Theyre going to air for free. What does this tell you about what alphabet has in mind . I mean, i think it tells me that User Generated Content is dead. Not literally dead. Sure still out there, on snapchat, whatever. But the idea used to be this stuff is cheap, get a lot of people on, it is a free for all. It is costly. Facebook is having to hire 3,000 moderators because of User Generated Content. To get the premium advertising where the market is, you need premium content. Thats what theyre doing here. Interesting to me, theyre not targeting, like, tweens this stuff, kevin hart, Ellen Degeneres, theyre going after people who are already making money. Trying to formalize and professionalize the viral clip market in a way, i would imagine, if you look at rhett and link, thats one that would come out of User Generated Content, Ellen Degeneres, and to your point, jon, companies lusted after User Generated Content. And now youre seeing slicing and dicing regular content made by a large Media Organization can fly on this. Remember the youtube millionaires, the viral video sensation. What happened to the hourly rate for those cats who can play piano . Devalued, i guess. Weep for the cats. No wage growth there either, i guess. When we come back, shares of zendesk under pressure after reporting results. Well speak with the ceos when squawk alley returns. Lets go, shes a dog. [ whimpers ] find pingpong. Okay, lets go. Find your awesome with the xfinity x1 voice remote. Thats amazing okay hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Customer Service Software Company Zendesk reporting First Quarter earnings. Done decently well, although down today. The ceo joins us now. Welcome. Thank you. I got to ask you, so the stock is down, but a lot of analysts still seem b to be behind it. Youve had strong growth. 30 percent over time. Whats this hiccup about . Is sales force and getting it ramped up as you continue to pursue growth . No, i think you know, i dont know exactly why the market reacts why it does, but i think people will look back at this point and see this was a solid quarter. Just in line with our expectation and we have reaffirmed our strong guidance for the year and also reaffirmed objective, being a billion Dollar Revenue Company by 2020. Great investor, they believe in that statement and they believe in our ability to execute on that. And will reaffirm their commitment to the stock. Once again, the ceo of zendesk. We seem to be in the period of the cloud where best of breed is the story st. A lot of Innovative Companies like yours are gaining share. At what point if ever do you believe we move more into that consolidation phase wrrks some of the bigger names, the amazon, microsofts, start to buy out some of your competitors and leverage their big sales forces to try to take over . I think we already seeing a lot of consolidation. That is kind of, that is what happens in the technology industry. Through generations, through decades, but at the same time, technology has really changed today. Like implementing intersurprien software is not like it used to be. Incredibly seamless. So, and we have this whole internet, the great new apis and great new ways for applications to work together. So, the technology has changed and its different for cios today to buy Technology Enterprise software and best of breed can scale much better than it used to. And give businesses a trajectory for growth, so, technology has changeded, were seeing the of i. T. And its heading for the enterprise right now. Does that imply for everything youre saying, youre saying there really isnt as much of an advantage to being more comprehensive Enterprise Software vendors, so herbally, the customer can play al a la carte and pick and choose in narrow product areas . Well, i think if you look at it from the perspective of the customer, from the perspective of the company, companies today, they have a lot more choice. They dont have to go to one vendor and get this big platform where they have to make everything work on and slows down the enterprise over time. They have the opportunity to play their cards basically and play different applications that can give them agility and the trajectory for growth. That is what businesses want. That is what our customers want. So i think its a great time to be b a business, to be a customer of Enterprise Software. Weve got a strong jobs report out today. Im wonder, i know youre fast growth any way, but are you feeling a difference in Business Optimism as far as the pace . Well, were a global business. We have half a business outside the u. S. We have 100,000 paid customer accounts today. Its a big milestone for us. We continue to see a lot of optimism and continue to see high growth everywhere. Even in economies that doesnt show so much growth, were still seeing a lot of growth for new generation of business software, so we are bullish on the Growth Opportunity ahead of us. Stronger earnings, rough morning, but thats just one day. Ceo of zendesk, thanks for joining us. Looking at i day here of fractional moves on the major averages. Well hit the markets squawk alley returns. Times up, insufficient were on prenatal care. Es. And administrative paperwork. Your days of drowning people are numbered. Same goes for you, budget overruns. And rising costs, wipe that smile off your face. Were coming for you, too. For those who wont rest until the world is healthier, neither will we. Optum. How well gets done. We, the entertainmentloving people, want all our rooms to be tv rooms. Because those are the best rooms. Because they have tvs in them. And, when were not in those rooms, we want our shows to go with us. Anywhere . You got that right, kid show thing. Get a directv allincluded package for 4 rooms. Only 25 a month, price guaranteed for 2 years. Available for at t unlimited plus customers. Whats really fascinating is that amazon, which ive never seen a guy succeed in two businesses almost simultaneously that are really quite divergent in terms of customers and the operations. Youre talking about amazons shopping business and cloud business. Jeff i think is the most remark bable business person of our anyone. Ive said that before. To succeed in two different big businesses in a huge way is really, i cant think of another example like it. That was of course Warren Buffett sharing some praise for amazon founder, jeff bezos in that exclusive interview with becky quick. Monday morning, theyre going to talk about all of it. Of course, buffett not an investor in amazon or technology name, but that was where the most news was made pairing that stake in ibm. You want it to follow icahn, not buffett when it came to technology. What struck me about his comment, it was just the way he talks about his own ceos of people who run his businesses. He loves to lavish praise on those guys for how they think longterm and the rest of it. Seems as if hes putting bezos in his category. Interesting. You have an interview on monday . Michael dell, dell world kicks off lt hes got news on the cloud. He is going b to be trying to shake some things up in shares that with us exclusively on cnbc as he gets ready to kick off that conference in las vegas. Its been five years since icahn almost took out and he managed to get back. Being private im guessing. Also had time at the white house lately. Four year, it has been. Have a great weekend, guys. Mike, thanks for joining us. Now, lets hand it over to the half. Back at headquarters. Top trade this hour, big black and blue. Ibm shares falling on news Warren Buffett has sold a third of his stake in the company. What does it mean if you own the stock . With us for the hour today, jim, john, steve weiss here as well, so the erin brown. Also with us today from minneapolis is pete. Lets begin with shares of ibm under big time pressure today. Pete, you own this stock. Im going to you first. When buffett