Transcripts For CNBC Squawk Box 20140113

A plane land at the wrong missouri plane last night. The flight to chicago midway was scheduled to land at the nearby Branson Airport with a longer runway. Nobody was hurt. Thats the good news. It is not clear whether the plane landed at the airport by accident or whether there was an actual emergency. And picking up on what becky was talking about in news around target, Neiman Marcus is saying thieves stole some of its customers payment card information and made unauthorized charges over the holiday season. No estimate yet on how many customers may be affected. Reuters reporting that target and Neiman Marcus may not be the only u. S. Retailers breached during the Holiday Shopping season. Three other wellknown retailers were hit with smaller breaches than the one that hit target using similar techniques. Walmart tells cnbc it did not suffer any Security Breaches over the holiday, so we can cross that one off the list for that. Meantime, back to becky with a lot more news on target. Thank you. Target first announced that massive Security Breach on december 19th. The details have come out slowly with the first disclosure zoo citing 40 million Customers Using debit cards or credit cards in the stores. Later it came out that pip numbers were compromised and now up to 70 million additional customers had their personal information stole enas well. What does market know . I asked the chairman and ceo gregg steinhofel. We are in the middle of a criminal investigation and can only share so much, but as time goes on, well get to the bottom of this. We are not going to rest until we realize what happened and how that happened. Clearly, were accountable. And were responsible. But were going to come out at the end of this a Better Company and were going to make significant changes. I mean, thats what you do when you go through a period lithis. You have to learn from this and were committed to do this. What can you share . Was it an outside vendor . What happened . We dont know the full extent of what transpired, but what we do know was there was malware installed on the point of sale registers. We have established that and removed the malware so we can provide a safe and secure shopping environment. This investigation is ongoing. And its going to take some time before we really understand the full extent of whats happened. What do you think did it . I have no idea who did it. I think what i hope that we find out in time and we are working closely with Law Enforcement to try to determine who did it, when did they do it and how did they do it. Do you think it was cyber terrorism . Is that fair to say . I dont really want to speculate. The one thing ive learned throughout this crisis is share what you know, be honest and dont speculate on what you dont know. And i just dont know that. Obviously, as youre going through and doing this, its going to take some time. You were trying to tell people what you knew when you knew it, that information has changed over time. At first it was the 40 million debit and credit card accounts. Then we found out the pin numbers could be accessible in some situations. And then we just found out that youre looking at 70 million shoppers whose personal information, whether email or phone numbers, home addresses, some of that was compromised. How confident are you that this is everything that was compromised at this point . Were very confident that our safe, our environment is safe and secure. And we have no evidence that theres any other guest information that was removed from our environment. As you said, weve tried to be transparent and timely in our communication, so initially in the forensic investigation, we were informed that pin data was not at risk. We proceeded upon those investigati investigations until they told us otherwise, so we immediately disclosed that. As we have learned more, we have been truthful and timely in all that communication. Thats the heart of target. Thats part of our value system. And we take that very, very seriously. So weve wanted to be as truthful as we possibly can and share what we can recognizing its an ongoing criminal investigation. I can completely appreciate that, but i can also say as a target shopper who was here during that time period and used my own credit and debit card, it just makes me wonder, is there any more information that could be stolen . Or is this all the it just makes me wonder, is there something you will find out this week or the next week after . I can tell you, becky, you are our number one priority. Clearly, we are accountable for this. We are responsible for this. And i cant tell you how sorry we are that this happened to you or any one of our guests. And were going to have to learn from this. And we cant speculate on what we dont know, but we believe in our heart, we know in our heart of hearts our environment is safe and secure. And everything that weve learned as it relates to guest data we have disclosed, and we dont believe that there is any other evidence that speaks contrary to that. If im someone who did shop here, and i am during that time period, ive been monitoring my account, looking for anything along the lines, i just wonder, what percentage of people actually have had their information and what percentage of that 40 million and the 70 million, do you add the two numbers together . The 40 and 70 or is there overlap . There is overlap, but i can assure you from the guest standedness point, it is not acceptab acceptable. We are trying to be proactive, so zero liability for the guest, free credit monitoring services, its notification by email where we have the notification, its working with Law Enforcement and other social service agencies. Weve already taken down 15 or 13 phishing sites, so we are actively involved in trying to educate the consumer and taking down fraudulent activity. And were providing tips along the way, monitor your account. If you have concerns, change your pin number. Is ask for a card to be reissued. If theres concern, theres some things that you can do as a consumer. I can monitor my account, but how can i know that someone hasnt done one of these phishing sites and set up an alternate identity and used a credit card take up out in my name that i wont find out down the road . We dont know, but we are trying to educate the guest and be super transparent in making sure that our guests, there are no liabilities for anything related to this fraudulent activity. Whether it is happening now or down the road. We think credit monitoring helps, we think tips and taking out phishing sites, all that in combination and just the awareness of the consumer is going to help a lot. Whats to say, youre offering credit monitoring for a year, whats to say that 14 months from now im safe . What if the information is the same and hasnt changed, what is to say someone doesnt rip me off the road a year from now . If you look at the tips, if you have concerns whatsoever, change your pin or request a new card. And that really restarts the clock again. And we will send you a new card, if you want to expedite it, well do anything we can possibly do to alleviate future concerns. Do you feel like youre coming out the other end or theres still a lot of work to be done . We are in the middle of this criminal investigation, its going to continue to take some time until we really understand what happened, how it happened, and all that. So were committed to make sure that we get to the bottom of this. Target has come under fire for waiting four days to tell the consumer about the breach, but steinhofel says that was moving at lightning speed from their perspective. Well tell you what the company did during the four days. And it got interesting with Neiman Marcus breached and three other smaller retailers. It was a month now before we heard anything. The breach occurred at the same time but you didnt hear about it for weeks. The speculation on Neiman Marcus is it is around a Million People. Well talk to analysts later about what the analysis is internally, but when do you go public or not go public. Is a Million People on a relative basis so small that you dont need to know. I dont know. Unless youre one of the Million People. It is an interesting question that will take a while to see how the consumer reacts to this. On friday they shade shoppers were coming back into the stores, but that was before the latest announcement before the 7 million additional other people. Did you get the sense of what he thought he had done wrong . He said were making changes, but clearly may must have been making changes because they didnt do something the first time. They cant talk about a lot of things, but one of the things they want to change is just the Encryption Technology you use overall. Europe has a different standard, they use a chip. Has he talked about that . He is pushing for moving u. S. Standards to that, too. Target tried it a while ago and didnt use. There was an Adoption Across the board. The Credit Card Companies dont want to do it. None of the banks want to do it. It is much more expensive, and historically the banks didnt care because they didnt have these type of problems. They go over this in business school. All these guys, it seems to me they all go back to tylenol and jim burke. And heres so they talk to you and then they talk to you. Yeah, its in there. This is the wall street journal. This is the new york times. They talk to you and give you a long interview. Then at the same time that youre doing it, all this stuff hits in all the papers. Its a coordinated effort, it is. Did they do it right . Did they do steinhofel, he is steinhofel furniture, the same guy. I guess hes from wisconsin. I can tell. Hes almost from fargo. He seems very with his accent. Green bay, thats too bad. It didnt fair too well for the pack, but steinhofel furniture, thats a weird name to be in retail. It must be the same family and is the same family. But hes been at target since the late 70s. So hes a homer there. But when they come out, did they do as well as j j or did they wait too long . Honestly, it will take time. It will be written up in Harvard Business school and revealed. It will be they will take time to figure out what they did right and a lot of that depends on whether shoppers come back. What i dont understand is why you feel any less safe or any more safe at target than you would at amazon or macys or any of these places. I think the disclosure over the weekend that other retailers were hit, three retailers with outlets in malls, i think that probably changes the situation a little. Unless you think that these people had lousy technology, which is possible. But on a relative basis i imagine this possible every day. Until you walk around the store, i was just wondering, were you shopping . Could you just hold on for a second . Because target is such a great store. I really wanted some makeup that i ran out of, and i had to stop myself from going to buy it. I know you because you walk along and youre just like could you just you do know me. Could you hold on for one second . I could do it at target, too. I had to run and catch a flight afterwards, but i was doing exactly what you said. But they have all kinds of video games, they have everything that did you know apple is their fourth larger supplier . I hasnt realized because they sell so many ipods and iphones. Theres more interesting stuff that we talked to him about. Well bring you that later. Well talk about godman now quickly. Well talk about target more, but i know you think that im full of beans. Me . Yeah. Stocks were down for the first seven trading days. Thats the seven. Right because it was on a wednesday, they went it counts, but when you start on a thursday, youre going to do seven, because the first two were sort of youre still hungover. Its more important how january goes. Than how the first week of january goes. We had a big runup. What did Goldman Sachs say . They say the opposite. Stocks could be do for a pullback. This is tough. Politicos Morning Money sites the weekly kick start report. Goldman says the s p 500s evaluation is lofty now by almost any measure. It believe the s p trades close to fair value. Thats different than lofty in that the forward path will depend on Profit Growth rather than pe expansion. Goldman they think we havent heard this already . Every guy that has come on has said this. The bank further the further p e expansion will be difficult to achieve as rates head higher. We may have seen some good levels as far as multiples, but then again, we know that as the bull market gets long in the tooth, usually you go to extremes. So well see whether 17 or whatever it is is lofty as they say. Well check on the markets this morning. Well see what were in for. Its monday, people dont like mondays. For the sun, i finally saw it in the solar system yesterday. Did you see it . Yeah. It is interesting how fogs over lakes, is that cool looking . When was that, sunday and last week when we came in. On friday when we came in it was like that, too. I asked both of my kids, why do we live . Do we have a good reason why we live up here . Neither one came up with a good reason to living in new jersey. Works here. I dont know why you live in new jersey. No, on the east coast. I like jersey better than where you live. Im pleased with where i live. A cab driver it is a jungle, it is scary where you live. It is not it is a wonderful place. The greatest city in the world. Crossing the street, none of the cab drivers get in trouble for driving like maniacs. That can happen anywhere. Really . You think thats going to that doesnt happen where we live, believe me. Anyway, i meant weatherwise, east coast. I dont mean new york. You dont need to take a shot at new jersey, just because i happen to mention it. I can make a shot about the bridge, but well leave it alone. It was a joke. The bridge is still going on, isnt it . The bridge is not over. For me now, i know some things happened during it, but what it started out as was kind of you wouldnt know that it would be it was a prank. It started out as something where you didnt know someone wasnt going to get emergency care, you didnt know someone was going to be looking for a 3yearold. The coverup is always worse than the crime. Chris christie seemed awfully sincere when he was talking. The actual case itself, when i look at the i. R. S. Or benghazi or the fast and furious, its like, youre kidding . You think this is on the same level, and i know, for you it is much worse than benghazi, but for me its not. I dont know if it is worse, but all these things are bad across the board. You want government to be as perfect as it should be. To rise to the level of what it can do to people. If it could, it would be a great thing. Coming up, well talk about whether the Retail Industry can make the Technology Switch to protect consumers. This is the story we were talking about with becky earlier. And more reaction to her exclusive interview with the target ceo. Well have that from sachs ceo and the president of the National Retail federation. And then in the next half hour, macys still marching higher while other retailers are faltering. Well have Ceo Terry Lundgren on. And speaking of retail, watch shares of lululemon today. They are lowering guidance for revenue and profit views falling below street consensus. Squawk box is back in a moment. and my customers are really liking your flat rate shipping. Fedex one rate. Really makes my life easier. Maybe a promotion is in order. Good news. I got a new title. And a raise . Management couldnt make that happen. [ male announcer ] introducing fedex one rate. Simple, flat rate shipping with the reliability of fedex. [ male announcer ] introducing fedex one rate. That its given me time toabout reflect on some of lifeseen biggest questions. Like, if you could save hundreds on Car Insurance by making one simple call, why wouldnt you make that call . See, the only thing i can think of is that you cant get any. Bars. Ah, thats better. Its a beautiful view. I wonder if i can see mt. Rushmore from here. Geico. Fifteen minutes could save you fifteen percent or more on Car Insurance. Welcome back to squawk box. Gregg steinhofel talked to becky quick about the data breach. We are talking about the Chip Technology thats pervasive and is global around the world. We think it is time for america to make that commitment to get to that standard. Theres been some discussion about end of 2015, we think its important that we get there as a nation. And we want not only to participant in that conversation, but we want to lead in that conversation, too. We think it is really important that we have safe and secure environment. And that Chip Technology is the right technology. And we should adopt that. Steinhofels topics will be head at the convention in new york today. Joining us from there, the former saks chairman and board of the nrf, and matt shea, the ceo of nrf. Lots of acronyms or sort of acronyms. Good morning to you. Good morning. Good morning. You heard that interview, and im curious how quickly you think the Retail Industry is going to try to take up changing the way the credit card industry has worked, in part because thus far the banks have not wanted to pay the transition nor have the retailers. Well, i think that the target breach is a catalyst that can get all of us moving. Its a very high priority for the nrf. We had our Board Meeting yesterday. It was one of the primary topics of discussion. We are ready to move quickly and put resources behind it because i think greggs comments are right, we need to move to new technology. It will require cooperation with the banks and retailers. Neiman marcus in how long they waited to tell the public, close to at least a month it appears, what is the right answer . Did Neiman Marcus do the right thing or the wrong thing . Im not sure theres an exact answer for every situation. I think the key is working with Law Enforcement to make sure youre doing everything you can to address the issue as soon as you learn about it. Some of the reasons that people dont and arent able to disclose it immediately is because they are working with the secret service and the department of justice, other Law Enforcement, and until they are ready to go, if they release the information too early, they will tip off the hackers and may not find out who did this or how they did it. But ultimately we all have a responsibility and want to play our role, and were going to spend hundreds of millions if not billions of dollars on new point of sail equipment. But we need to move to chip and pin technology. Were using essentially an atrack tape from the 1960s with the magnetic stream. It is time to move to a magnetic chip embedded in a card and a pin reader, something at least in the 21st century. What we have now is obsolete. What were talking about adopting, if we dont do it soon, it will be obsolete soon, too. Steve, if you were at saks and this happened, how quickly would you tell the public . And do you get credit for telling the public even if you dont know the entire story . Because thats what happened here at target. Well, i think one of the things, you want to move as quickly as you can, but you want to make sure you have all the facts. And you also want to make sure that youre as matt said responsible to the Law Enforcement authority. So there is a balance there. I think target did move quickly. Four days was, i think, extremely rapid response. And i think that they have been very forthright with ads in this mornings papers to educate the public. This is a very difficult situation. And obviously it has Business Impact as well. But i think greggs comments are very appropriate. They are moving as quickly as they can. They are doing the right things. And they are right that we need to move on to new technology because the hackers are out there. Were going to do all we can to protect them. How do you feel, steve, about both the neiman revelation over the weekend, which came up apparently over the holidays, so we are talking about a monthplus. According to reuters, three other brand name retailers that we dont even know about yet. I dont know the neiman facts. I think that clearly karen and her team are doing what they think are the right way to be approaching this thing. I dont think anybody is trying to hide the facts from the consumers. I think, again, everybody is working with Law Enforcement authorities and trying to do whats right. Lets talk about the customer. Go ahead, greg. Well, i was going to say, yeah, no, this isnt just about one or two companies or about a single industry, this is a threat we all face every single day. The General Accounting Office put out a report, just published last week, in 2012 there were 22,000 instances of cyber breach and data breach of the federal government alone. So for the department of defense getting hacked, the financial institutions, people are working on this every single day. Thats one of the reasons we have 500 boots here, we have 2,000 exhibit booths, we have 30,000 people here. Innovation is a big part of what were talking about. We are talking about big data, analytics, mobile payments, the next generation of technology. Retailers are doing this every single day, but were not the only stakeholders here. So we need financial institutions, the cad issuers, we have an interest in protecting the consumer. Thats the number one interest and it should be for the other stake holders as well. Well talk about the consumer. In this case target has seen a slowdown in business after revealing this news. Do you think this is going to become such a common occurrence that the consumer is not going to care . Or do you think that this is actually going to have a meaningful impact on a lot of different retailers . Oh, i think that the consumer cares. Theres no question in my mind that they are worried about it, and part of what target is doing is educating the consumer about phishing and emails coming to them. So clearly the consumer is worried about this. I dont think they will become oblivious to the whole thing. Role of the government in protecting the retailer, a lot of most companies are sort of left to their own devices until they actually have a problem. There have been some industries and some businesses that have said, actually, you know what . The police, if you will, the government should be helping us protect ourselves. Where do you stand on that issue . Well, you know, i think we recognize that were all being challenged every single day and the federal government has a role to play here. And in some of these cases the secret service and treasury and justice are involved. So retailers are victims of this, too. If consumers are the victims primarily, but retailers are victimized every single day, as are other businesses. So we have to continue to Work Together and work constantly having that conversation to ensure that were doing everything we can to protect retailers as well as protect the consumers. I do think over time theres going to be a need for common standards and theres a role that the legislature can play here as well. Okay. Matt, steve, thank you, appreciate it. Good luck with the conference. Thank you. Thank you. Coming up, is the Security Breach something that keeps other Retail Executives up at night . Well talk about that and more with macys chairman and Ceo Terry Lundgren in the next half hour. First, an exclusive unveil at the auto show. Bmws north american ceo takes the wraps off a new vehicle. And heading to break, a look at last weeks winners and losers. [ male announcer ] this is the story of the dusty basement at 1406 35th street the old dining table at 25th and hoffman. And the little room above the strip mall off roble avenue. This magic moment it is the story of where every great idea begins. And of those who believed they had the power to do more. Dell is honored to be part of some of the worlds great stories. That began much the same way ours did. In a little dorm room 2713. This magic moment good morning. Welcome back to squawk box here on cnbc. Im joe kernen along with becky quick and Andrew Ross Sorkin. Targets ceo tells cnbc that the retailer is accountable for the data breach that now affects some 100 million customers. I would like to have 100 million customers if i were a company. Out of 300 Million People . In an interview with becky yesterday, steinhofel said what transpired is not completely known yet but malware was installed on the point of sail registers. Target is working with Law Enforcement to determine when it was done and who did it. Well have more from the Retail Executive in about 15 minutes. Honeywell is cooperating with the Justice Department probe into the overseas production of equipment it provided for a u. S. Fighter jet. And this involves electronics that honeywell manufactured for the new f35 fighter plane. And the average price for a gallon of gasoline rising to its highest level since midoctober. The lumberg survey says that the gallon of regular unleaded is 3. 35, thats up 8 or 9 cents from the 3. 26 we saw three weeks earlier. The north American International auto show is kicking into high gear this morning in detroit. The biggest auto execs in the world strutting their stuff with phil lebeau joining us from detroit with a special guest and a squawk exclusive ahead of the unveil. Reporter i know you love unveils and today we are joined by the north american ceo for bmw. Lets not waste anybodys time here. Lets show them the new two series. Tell me about this car, which is gorgeous, by the way. Thats what bmw is about. Set back cab and it sets drive me. This is why bmw is here, its what were about. Its the ultimate driving machine. Someone out for having fun with a car should buy this. Reporter thats important because a lot of people look at the luxury market right now and forget there is still a core audience that want to have fun, the speed and performance. But they also want fuel economy. This comes in one package. Absolutely the right car. Reporter goes on sale first quart her . Yep. Reporter whats your expectations in terms of demand out there . Where are the buyers coming from . Moving in from other bmw models, bringing them from your feet or the competitors . We think it is satisfying the true bmw customer at heart. So its actually both, and in the end, just looking at the car, it looks very decisive for a person to buy a car. This just speaks for itself. Let me ask you about what you have come off with, a phenomenal year, first time topping sales of 300,000 here in the United States. You departmeidnt win the crown number one luxury brand, so how important is that when you talk to other executives in the industry, because they say thats the most important thing, winning the crown . We have done it two times in a row. You cant win all races, but we have had the best year ever. So we really are happy about 2013. Reporter as you move into 14, youre expanding production in South Carolina. We are. Reporter in the spartanburg plant, any problems bringing in talent for the jobs youll be adding down there . Not at all. We still have very motivated people there that are just, you know, they have a family spirit there. And they attract new colleagues. We dont have a challenge there. Reporter and the skill labor pool is still Strong Enough down there in South Carolina . We are working with that. We are educating people while we are recruiting. It works very well for us. Reporter final question. Youre heading into this huge year expanding production down there, youre going to have spartanburg up close to 400,000 in capacity . This may be a longterm target, yes. Reporter 400,000, will that make it the number one bmw plant in terms of worldwide . Maybe, yes. Reporter hes not going to commit to it, but this is the northern american ceo of bmw joining us at the north American International auto show. Dont forget, we have a squawk news maker interview at 8 00. Dont miss this. Mary barra, the new ceo of General Motors, incoming ceo, shell be joining us for her only live interview this morning here at the Detroit Auto Show. You do not want to miss this interview. I know you guys will be part of it as well. Were looking forward to that coming up at 8 00. Guys, back to you. Thank you, gentlemen. Cool little car. Appreciate it. Definitely looking forward to that interview. Stick around. When we come back, we do have a big weekend for nfl. The broncos, the patriots, the 49ers and the seahawks moving on. But the big story off the field, what the league is doing with that thursday night game. They could be going up for bid. Well talk about that right after this. And macys has been riding high through the holidays. Ceo Terry Lundgren will tell us about the companys performance and the concerns about the data breaches at the retailers we have been talking about. Squawk box will be right back. Mine was earned orbiting the moon in 1971. Afghanistan, in 2009. On the u. S. S. Saratoga in 1982. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. About the most tracktested is ever. But the truth is. We dont have to. The experts have spoken. Now its your move. Now its your move. voseeker of the sublime. Ro. You can separate runway ridiculousness. From fashion that flies off the shelves. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. And only national is ranked highest in car rental Customer Satisfaction by j. D. Power. natalie ooooh, i like your style. vo so do we, business pro. So do we. Go national. Go like a pro. Welcome back to squawk box. Looking at u. S. Equity futures that the hour, seeing how the market is setting itself up. We have red arrows, this is day eight now where we are down for the jeer . Dow will open down 23 points this morning. The nfl is talking to tell Vision Networks about selling a package of thursday night games as soon as next season. The nfl Network Plans to retain some games, but with games drawing monster ratings, any additional games are hugely appealing to the networks. And there are not a whole lot of things you have to watch live, but Football Games is one of them. This is where the digital thing comes into play. They may try to sell the package to a google, netflix or somebody to play in that new world. The amazing thing is that if you had talked to people, you go through all these games and anybody can win on any given and sunday, but look at the four teams left, those are the four best teams that you felt would make it. Its awesome. Next week is you have payton versus tom brady again. And then you got russell wilson, seattle looks so tough, but then the crazy capnik, that guy, its really good. Were you up watching everything last night . I saw everything. And i saw the first half hour of what i think is the finest awards ceremony. Oh, my goodness. Bar none. Because it is nbc, right . This is my idea, those two ladies are funny. And it reminds me of saturday night live. I think all award ceremonies that the hosts should be from saturday night live. And that the whole ceremony should be like saturday night live. Have it real and give out the real awards, but just know how just absolutely ridiculous all of it is right from the start. And how seriously all these people take themselves, make it saturday night live awesome so that it you know what i mean . Whats that . Please get us out of here. Thats my idea. It was awesome. Coming up, the parade is still going for macys. The stock continues to outpace the competition. Up next, well talk to macys Ceo Terry Lundgren about the next act for his company. Well find out if the risk of a Security Breach keeps him up at night. Squawk box will be right back. [ telephone rings ] [ shirley ] edward jones. [ male announcer ] with nearly 7 million investors. Oh hey, neill, how are you . [ male announcer ]. Youd expect us to have a highly skilled call center. Kevin, neill holleys on line one. Ok, great. [ male announcer ] and we do. Its how edward jones makes sense of investing. [ male announcer ] and we do. If yand youre talking toevere rheuyour rheumatologistike me, about trying or adding a biologic. This is humira, adalimumab. This is humira working to help relieve my pain. This is humira helping me through the twists and turns. This is humira helping to protect my joints from further damage. Doctors have been prescribing humira for over ten years. Humira works by targeting and helping to block a specific source of inflammation that contributes to ra symptoms. For many adults, humira is proven to help relieve pain and stop further joint damage. Humira can lower your ability to fight infections, including tuberculosis. Serious, sometimes fatal events, such as infections, lymphoma, or other types of cancer, have happened. Blood, liver and nervous system problems, serious allergic reactions, and new or worsening Heart Failure have occurred. Before starting humira , your doctor should test you for tb. Ask your doctor if you live in or have been to a region where certain fungal infections are common. Tell your doctor if you have had tb, hepatitis b, are prone to infections, or have symptoms such as fever, fatigue, cough, or sores. You should not start humira if you have any kind of infection. Ask your doctor if humira can work for you. This is humira at work. Well, it is a very challenging time for target, i can tell you that. Its a real punch in the gut, but throughout the crisis, weve had a singular focus by doing the right thing by the guest. We are a company that has been here for 51 years, and we have focused on the guest and made the guest our priority for that entire time. So we knew that, we know that our guests trust in us and it is shaken, but they love our stores, they love our brand. Well work really hard to become even a better retailer over time. That was target, they needed a reaction shot at the very end of that, because becky, you were listening intently that was a lot of stuff between last night and today. That was target ceo gregg steinhofel. Joining us now is the ceo of macys, Terry Lundgren, im sure this is front and center all the time with you. Yeah, indeed. We have nothing to make us believe that this is an issue for us at this moment, but this is a subject that has been going on for some time. And as was said in earlier interviews which i listened to, this is a much broader issue than one or two companies. So everybody is on alert. And far be it from you to have this happen, but when it happens to somebody else, you can bone up a little bit. Have you actually increased any type of monitoring or precautionary steps based on what you saw happen with target . And i guess with Neiman Marcus as well . I think we were already there. We take this subject very, very seriously. And im involved with other organizations, so i get a chance to listen to other companies, other industries talk about this subject. And so long before it became headlines at target, you know, our own company was very focused on this subject. Thats not to say that thats the answer, but its indeed helpful that weve been focused on this subject for a long time now. Watching what youve done with macys, too, its kind of a pain that thats almost like playing defense. And youre playing offense. So well at macys with whats happened the last couple of years, and the latest initiatives that you have announced, but you have to play defense, dont you . You need to field both sides of the game, i guess, or else youre going to be in trouble. Yeah. You know, listen, you always want to be on offense whenever you can. And i think our recent announcements are an example of that. Were doing well, we are 4. 3 on same store sales for the November December period. We feel really good about that. But thats not a time to rest. Thats not a time to sit back and say everythings fine here. Thats a time for us to think about whats next for us . How do we move forward . How do we find continuing operation in the business . Thats what the most recent announcements are about. And were pushing forward to the next big momentum mover for the company. Terry, for the last decade, most retailers and the Bank Industry specifically has not been supportive of moving to the emv chip on the credit card, in part because of the high cost and because frankly the banks werent taking on a lot of cost in terms of making up for any fraud that actually did happen. Would you be supportive of this changeover . How much do you think it would cost macys if they did it . I dont know the answer yet. But having said that, i mean, we should look very closely, all of us, we meaning the retailers, the banking industry, the credit card industry should be working very closely together to figure out what is the right technology to protect consumers . That should be the focus. How do we make sure that the consumer is taken care of . The consumer is protected and then work around the solutions from there. But starts always in our company with putting the customer at the center of all of our decisions. This to me is one of those examples. Its always sad to close stores. What do you tell people, communities, when thats going to happen . How do you decide who to close . Conversely youre adding probably more than youre closing. How do you know when youre not adding a place youre going to close down the road . We have over 800 stores. We close five storrs out of that portfolio. At the same time, we announce were opening eight new storrs between macys and bloomingdales. This is just the rationalization that you go through every single year. What happens, joe, weve had a store sitting in a Shopping Center for 30 years and all of a sudden another Shopping Center opens up two miles away. And in some case its a zero sum gain. The business is transferred from one to the other. Its not something you can avoid. Theres going to be that continuous evolution of new Centers Going and some of the deteriorating centers falling away. That will, unfortunately, be part of what happens in the Retail Business for the next several years. A few employees are being laid off as well. I saw that i mean, how would i know, where would i be able to tell in the scores who got laid off . My luck it would be mens underwear. How do you pick where the service might be lessened . Well, a great first of all, a great deal of these jobs you would never interact with as a consumer, joe. Many of these are management jobs which is unfortunate no matter what the job is. Listen, ive said to my guys, people are feeling pretty good about the fact that the stock, you know, advanced significantly on our announcements and people are feeling good about that. You know, i feel good about that. I dont feel good ever if i have to, you know, eliminate one job in my company. Never going to celebrate when thats happening at the same time. And im very sincere about that. We talk about that internally in our company. But the reality is, the 2,500 jobs that we are eliminating is protecting the 175,000 jobs that we have in our company. In order for us to continue to grow, we have to move the emphasis to where we are growing. There are stores that are growing, there are business categories that are growing. And there are markets that are growing. Of course, the whole omni channel change and shift has been dramatic in our company. I think were the tenth Largest Internet Company in america after netflix. We have so many going on in that part of the world. I cant not fund those ideas and Fulfillment Centers i have to create. Are you a believer that the economy has turned a corner and to the extent that weve just been talking about layoffs, what do you think of the job picture broadly . Well, first of all, i think that the economy is not obvious that the economy is moving aggressively forward. Thats clear. Its not obvious. But im looking at the fundamentals that are in place are better at this point in time than they were a year ago. Were all going against a this year, last year comparison. My belief is that there should be fewer head winds in 2014 than there were in 2013 and certainly in our own case, i think weve got a formula thats working thats focused on localization of product, focused on the omni Channel Consumer and focused on the magic selling component of our business. We have a strategy that works. Pore the macys economy, anyway, i think we feel pretty good about it in 2014. I never thought of macys as jcpenney. Its not that simple, terry, the difference between the two companies. Macys is you know, i dont think of it as Neiman Marcus or saks. I think of it as macys. It seems if someone else had been running it it might not be where it is right now. How do you whats the difference . Where did jcpenney go wrong . I dont want you to help your competitor obviously. What was the real crux of matter on how macys has flourished as jcpenney has had such trouble . I would point to, you know, three things. One is, youve heard me say this before. Im dead serious about it. We simply have the best and most talented team in the Retail Industry. Its not one person. It is a fantastic team of people. I think at every position i have an allstar performer. Thats one. Two is we have a strategy. Weve been focused on this strategy. We call it the mom strategy, its my macys, localized product. Its an organizational structure that gets it done. Its the shopper, how they shop and where they shop. Well be responsive to those needs. We have a strategy thats very, very clear. Then i would say last and very, very importantly, we start with the customer. You know, we know who our customer is. Whos shopping with us. Were focused on that customer. We put the customer at the center of those decisions. We think about what do we need to do to be responsive to what this customer is looking for. I think those are the three things that have made macys inc. The performer that its been. On bloomingdales, i say the same thing. Weve had the same vision. It comes down to ordering the right stuff. You dont sell something ugly where you dont sell a thing or have to take 80 off to move it out of the stores. You must have people who do that. Youre a sharp dresser yourself. You have good people. We have talented people. Yes. You know, but then by definition youve hired the talent. It comes back to you anyway. I know what youre saying there. You pick the right ones as well. Im still trying to sell andrew a coat by the way. He keeps talking about coats. I cant get him into the store. Macys is ill siene you an email after the show. Macys is great. I was alluding to that earlier. Its a little too middle market for our friend here. Well try him. Well take him to bloomingdales. Thats fine. When we come back, getting to bottom of the target breach. Chairman and ceo Gregg Steinhafel talks for the first time about the Public Relations nightmare thats impacted potentially 110 million customers. Our guest host is Glenn Hutchens of Silver Lake Partners. Hes bringing friends along, too, including at t chairman randall stevenson. We have a big two hours ahead. Stick around. Hey, the new guy is loaded with protein really . 25 grams of protein. What do we have . All four of us, together . 24. Hes low fat too, and has five grams of sugars. Ill believe it when i [ both ] oooooh. Whats shakin . Oops. [ female announcer ] as you get older, protein is an important part of staying active and strong. Ensure high protein. 50 of your daily value of protein. Low fat and five grams of sugars. See . Hes a good egg. [ major nutrition ] ensure high protein. Ensure. Nutrition in charge kicking off squawk box with an exclusive interview. Targets chairman and ceo, Gregg Steinhafel. He speaks for the first time about the data breach. We are going to get down to the bottom of this. We are not going to rest until we understand what happened and how that happened. More of this exclusive interview, next. Investing wisdom from a private equity giant, Glenn Hutchins of Silver Lake Partners is todays guest host and hes bringing friends, including at ts ceo randall stevenson. Conquer the morning, conquer the day, squawk box begins right now. Oh its 7 00 time for the party and i know what i want to see good morning and welcome back to squawk box, Andrew Ross Sorkin along with joe kernen and becky quick. Breaking news right now. We have a 16 billion deal to announce, crossing the tape as we speak. Beam being sold to suntory. This just crossed the wires moments ago. Had the ceo the beam guy. We had the beam ceo. Justin timberlake. It was about justin timberlake. Suntory, osaka is mentioned here. It will create the worlds Third Largest premium spirits player with a portfolio of leading brands across different categories. Its 20 times ebitda for the last 12 months and 25 premium in its cash. 83. 58 in cash. Beam was the largest u. S. Based Spirits Company before this. This has brands jim beam, souza. Knob creek. Canadian club. Im looking at suntory. Theyre bottling pepsi or other beverages like that in addition to the liquor business. I dont know any sunt 0. Suntory products. Sales of 17. 6 billion. Flagship, single malt whiskey is yamazaki. Im looking at the brands. A lot of them are international brands. International brands. Not ones necessarily sold big here. I wonder what this says about origena. I recognize that. I wonder what this says about abe, making acquisitions of this size in cash no less. Given the japanese markets run up as much as it has, you might have seen a transaction like this in stock but clearly, people feeling good. Suntory. Malibu rum, kailua suntory. They brought these liquors to japan. They also have jim beam listed. They must have been the importer for those things. Pinnacle vodka. No. Pinnacle is beam has everything, tequila. Makers mark was always my parents love that. I cant tell the difference between bourbon. I cant tell the difference between any brands. A bad one is tough for me. Lets talk more about target. The company has come under fire for the number of days is initially took to expose the massive breach to its payment system. The question is, what did the company know and when . Gregg steinhafel details the companys time line and how it worked with the bank to notify and protect consumers. I found out on sunday, sunday was really day one. It was in the morning. Sunday, what was the date . December 15th. That was the day we confirmed that we had an issue. Our number one priority was do the right thing for the guest. So it was about making our environment safe and secure. We worked very hard on that. And by 6 00 that night, our environment was safe and secure. We eliminated the malware and the access point. We were confident coming into monday, guests could come to target and shop with confidence and no risk. Day two was really about initiating the investigation work. And the forensic work. We initiated that. That moved in and that has been ongoing. Day three was about preparation. We want toed make sure our stores and call centers could be as prepared as possible and day four was notification. Throughout that fourday process to some people it probably felt longer than that, we worked around the clock to try and do the right thing, to be transparent, truthful and then share what we knew as quickly as we could. Some people will say it was a blogger who put out something on day three, december 1 th that pushed you to make the announcement on december 19th. Is that true . Part of that timetable all along was for us to make that announcement on day four. We were working around the clock to try and get the right to prepare our stores and prepare our contact centers. We want guests that come in, once they hear that news, we want to be able to answer their questions and we want our call centers to be able to function appropriately. We were fully prepared to make that announcement on day four. You talk about what this means from the shoppers perspective. And you recently put out numbers that suggested that after this news first came out, shoppers dropped off, they werent coming into the stores frequently. They werent coming in in the same amount of traffic numbers and they werent spending as much money. Clearly, customers were confused, frustrated. They didnt understand. What we really wanted to ensure them that targets environment was safe and secure. There was an immediate dip but over time weve seen our business rebound back to almost normal prebreach levels. How big was the impact, lets say, in the first couple of days . It was a pretty big impact. We disclosed through an 8k last friday some of the impact around the breach. On friday, again, you did put out more information. Did that impact shopping trends on friday, saturday or even today . I know its early. We dont look at it as a daybyday basis. What have the banks and credit Cards Company said in normally my Credit Card Company would be responsible for picking up fraudulent charges that would show up. That happened to me right before this as well. What has wells fargo had to say, visa and mastercard . Were in the middle of this investigation. We havent gotten to the end of the timetable. Theres a process that plays out. The issuing banks work with networkers and processors. Ultimately were accountable for this. We are responsible. We will incur the losses associated with that. Theyll be packaged and aggregated and brought to us. How big do you think those chargers should be . What should investors expect down the road . The liability will play out over time. We know that from prior breaches. So we dont have a timetable. We really dont have an amount. The banks dealt with this in very different ways. My bank, pnc has said dont worry about it, watch your account. You had Jp Morgan Chase which was putting limits on how much people could spend. Has that been frustrating with you and what has your interaction been with Jp Morgan Chase and others . Every bank has taken a different approach. We thought about that. We sat down, we came down on the side of the guest. We said lets not make a decision for our guests. Lets give our guest choices. And i think different banks have different things. If youre concerned, change your pin, if you want a new card, if you want it expedited, do that. We came down on the side of let the guest decide whats best for them. The guests are like this is no big deal. Im not affected. In other cases, theres banks that are reissuing. Most of the industry came down on choice like we did. And jp morgan and a few others took a different approach. Did you get frustrated by jp morgan and this whole issue . It made consumers mad that were caught in the middle of the Holiday Shopping season, they were traveling and issues came up and they couldnt use their cards. Backlash comes to target. Were accountable and responsible for that. Its not up to us to decide what policies are correct for any financial institution. Theres a lot of confusion out there with consumers, i this i, when you hear numbers like 40 million and 70 million and maybe you add those up and get to 110 million, how many people have seen fraudulent activity on their accounts to this point . I know about five people personally. I cant speak to what the other cards have seen. We have seen almost no fraud len the activity on our target red cart. I come back to the priority is on the guest. Every guest, whether a red card holder or nonred card holder will have zero liability and the free credit monitoring. We want to make sure its Crystal Clear, regardless of where you shop or what card you have almost zero on the red card . Ive read reports that suggested that the number of these credit and debit accounts that are out there on the black market websites increased by 10 to 20 times right after this announcement. We have three credit card products in our red card, a debit card an a proprietary credit card. Weve seen zero activity. Not a Single Person. Not a Single Person that we are aware of. We have low level activity on the legacy target visa card. Thats the only place wife seen anything to this point. But, again, this is ongoing. Well continue to monitor i know at least five people who had incidents that came up and theyre tieing this back to target. Is that incorrect. One was an american express. Im addressing the red card portfolio. I cant address any of the potential fraud len the activity that happened in any other accounts. We dont get access to that information. That makes it sound like theres nothing that has led to fraudulent activity from this. Is that what youre suggesting . Im not suggesting that at all. There is clearly some fraudulent activity. I think the important thing is, regardless of what the fraud len the activity is, that may change over time, there is zero liability for the guest. Zero i mean, we are responsible. Were accountable for all of it and we want to make that Crystal Clear to everybody that shopped in our store. An important point we should make, while customers will have zero liability for fraudulent charges, target isnt necessarily on the hook for all of those charges. Different banks credit cards have different liability coverage. Target and the banks will negotiate over who has responsibility. This investigation is ongoing. Joe . Coming up, tech investing, the economy, fiscal and Monetary Policy in the interaction which has gotten much more front and center. We need to do more, more research and get a think tank involved. We have the guy to do it, Glenn Hutchins, cofounder of Silver Lake Partners. He has so much money. Hes bringing friends all day long. And mary barra will join us live from the Detroit Auto Show as well. Squawk box is coming right back. Our life. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. Tdd 18003452550 and seasoned market experts to help sharpen your instincts. Tdd 18003452550 so you can take charge tdd 18003452550 of your trading. Whatswithout the thinking capitathat makes it real . . Whats a vision without the expertise to execute it. And the financing to make it grow . Whatever your goal, it can change more than your business. It can change the future. Thats why, at barclays, our ambition is to always realize yours. Thats a nice shot. The scaffolding is all the way down. Did you see how far it is now . They thought of leaving it up permanently. That looked unbelievable. The earthquake is what threw it off. A little crack in it. Rubenstein raised money for it. He gave a bunch of money and raised money for it. David rubenstein is on tomorrow. Well talk to him about the progress. Hes another guy with so much money. Anyw anyway, welcome back to squawk box. Beam is being acquired by suntory. They got the money. Its cash. Its cash. Abe printed so much over there. I think i mentioned the earlier price, it wasnt the Closing Price. It was what it moved to. 73. The Closing Price was 63. Wendys, shares getting a boost on upbeat guidance. Up 4 . Wendys got a brand new facility out where i live. It was closed for a while which we had no place to get fries. You program in what you want. No caffeine, diet there, flavoring, it comes out, whatever you order, out of the same nozzle. State of the art. Fast food is not your no, no. Im joking. Glenn hutchins is the cofounder of Silver Lake Partners. Also on the board of the new york Federal Reserve, correct, si sir . Yes, sir. Recently started a new program at brookings which we want to talk a lot about in tells of what Monetary Policy looks like in the future. Since weve been talking about target and retail all morning and specifically technology, we consider you a technologist. Thank you. When you see the target news, over the weekend we had a potential breach at Neiman Marcus that happened during the holidays, is this something weve going to live with . Is this going to get solved in the next year or two . I think it will be a chronic problem. Where you have some amount of the world in which we live in, the technology is interconnected and rapidly changing, highly motivated people, governments or individuals that have the skills to crack all that. I think its something well have to live with. On the commercial side, youll have to get better every year, every day, vigilant and learn how to combat it but dont expect it to go away. One of the big issues is who should be responsible for all of this, protecting us . Meaning how much of it should be the corporations and businesses having all the fire walls and how much should be the government working with the companies . Bankers will explain off the record, theyre spending billions of dollars to keep people safe. Theyre battling nation states. Thats a good point. Theres a bit of an asymmetric problem here. They call quasi government actors out there, people who work by the government by day and themselves at night or are licensed the way the ancient privateers used to be. They go and find things and bring them back to government. I think there are two things the government can do. Im not an expert on this. One is make sure the technology is developing developed in a collaborative way. The second is a policing function. Once Something Like this happens, have the capabilities to do the forensics, to understand how it happened and get the bad guys. Those are two kinds of roles. We live if a market economy. Large part businesses have to be the first line of defense for their own businesses. Yes. Lets talk about the Hutchins Center on fiscal and Monetary Policy. Mouthful. You just started this at brookings. You hired david wessel, one of my favorite columnist to run it. Hes my second favorite after you. Thank you for that. Hook you up to a polygraph if you keep saying stuff like that. Youre spending 10 million on this project. What is this about . Its by my observation, your observation, weve talked about this, since the financial crisis markets have been influenced by financial policy. We talked about t. A. R. P. , qe, fiscal cliff, sequester, now to taper or not to taper. I thought there was a need really to sort of have a dispassionate, high quality, completely nonpartisan, highly sophisticated commentator at the center of that for analytics and commentary. Theres no think tank in the world that does good Monetary Policy analysis. Most of that happens inside central banks, is constrained by the institutional interest of central banks. To have a good we will have immediately the worldclass goto place for thinking about Monetary Policy. If you think about one more second about that, the interaction between monetary and fiscal policy is critical. Because the two, though theyre made in different places, their interaction is important. Theres really only one place in our world, the United States, where good fiscal policy analysis is done. It has a set of political constraints as well. Where is the data from . The data is available. Its having the ability and capability to analyze it. The data matters. The jobs number on friday, some people think is real and some people say is a complete outlier. What do you do as a think tank having to rely on that data. You put some of the best economists in the world in a nonpartisan way to look at those issues. Already at brookings we have the leading u. S. Tax policy analytical unit called the tax policy center. Thats already in place. All those capabilities, to launch it, we can talk more about it, to launch it on thursday afternoon well have ben bernanke at brookings. Broadcast live. You couldnt get anyone else . Broadcast live on cnbc. We heard you were busy, joe. Becky was our first choice. We go back and forth for years. But when you said when i asked you what party you are . You said im the capitalist party. Its a sad commentary where weve gotten to the point where we do need to look at fiscal and Monetary Policy. They can be forces for good but they can also be forces that can be sort of the that can hold back the system. It would be nice to know exactly what were doing and how some of its positive and how some of its negative so we can do the right thing for everybody, to grow as quickly as we possibly can. I often times say if someone asked me to design a set of policies that were best designed to discourage Economic Growth in the United States, i could not have done a better job than the u. S. Congress did. Also at the time when businesses needed to plan for the future to have undisciplined spending. High quality, completely nonpartisan way, have somebody to talk about that. You picked guys from brookings because you know what the perception is. You even leaned some of it right. Its not bipartisan. Its nonpartisan. Its the best ideas and the best thinking. Like me. Well talk about some of those best idea as the program progresses. Phil lebeau landed the interview of mary barra at 8 00 a. M. Eastern from the Detroit Auto Show. Time now for todays aflac trivia question. 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Ask your doctor about cialis for daily use and a 30tablet free trial. Now the answer to todays aflac trivia question. By what percentage did pope francis boost tourism at the vatican in 2013 . The answer, 180 . Aflac. Up next, a new focus in washington, david wessel made his name at the wall street journal. Now he will be running the Hutchins Center on fiscal and Monetary Policy at the Brookings Institution. Well talk about fixing the debt, right after this. Welcome, great to see you, david. Later, at t chairman and Ceo Randall Stephenson will be joining us on set with his mobile strategy. More squawk right after this. In my world, wall isnt a street. Return on investment isnt the only return im looking forward to. And my parachute definitely isnt golden. [ male announcer ] for some, every dollar is earned with sweat, sacrifice, courage, which is why usaa is honored to help our members with everything from investing for retirement to saving for college. Our commitment to current and former military members and their families is without equal. Start investing with as little as 50. Welcome back to squawk box, everyone. Our top story, targets ceo telling us that the retailer is accountable for the data breach that now affects as many as 110 million customers. He says that the full extent of what transpired is not yet known. He did say that malware was installed on the companys point of sale registers. Tarring set working with Law Enforcement officials to try and determine who did it and when it was done. Well have more from the Retail Executive in about 15 minutes. Some of our other headlines within General Motors is close to paying a dividend for the First Time Since 2008. Thats according to the automakers cfo. He declined to give details on the timing. He spoke on the sidelines of this weeks Detroit Auto Show. Lululemon is one of our early stocks to watch this morning. Theyre cutting their earnings and Sales Outlook for the Current Quarter. It says traffic and sales trends have decelerated mean iingfully since january. And beam is being bought by Suntory Holdings. And washington just got a new player in the think tank area with the recent announcement of the Hutchins Center on fiscal and Monetary Policy at the Brookings Institution. Joining us now is david wessel, the founding director of that center and a wall street journal contributing correspondent. Our guest host is Glenn Hutchins. Hes vice chairman at the Brookings Institution and is funding the new center. Will there be fewer journal pieces for us to read. Fewer journal peetzs in print, probably a lot onlien. Thats what the future is. Thats what the future is anyway. What attracted you to this project. Ive been at the wall street journal for 30 years. It seemed to me it was time to try Something Else. Glenn and i ran into each other in a bar, hotel in washington. He told me what he was doing and asked me if i had any ideas of who might be the director. The next day i sent him a note and volunteered. He was boning up on his conservative credentials. Youre a wall street journal guy. The editorial page less than as glenn said earlier, weve seen in the last five or six years the enormous impact fiscal policy, taxes and spending, Monetary Policy, what the fed does has on ordinary peoples lives. If theres anything that cries out for scrutiny and critical evaluation, its these policies. Brookings is a great place to do it. Thanks to glenn we have the resources. Given the influence in our everyday life of the fed in the last five years, maybe that was because of the crisis obviously, but we mentioned it here. That for a while, it looked as though the fed felt that every you know, minute ticking of the economy was derived from their actions, which i think is a bad thing. Hopefully youll be able to shine light on that at the institute. These guys with the mandate, why add four or five more mandates on there . Actually, we gave them a third mandate. Theyre responsible for financial stability. Think about that. I think it has a lot to do with fiscal and Monetary Policy. Unlike the European Central bank, the Federal Reserve said if congress is going to do the wrong thing well try and do more for the economy. I think they were pushed into this by the counterproductive fiscal policy. There are people that think that the fed erred on being way too activist and the fiscal policy were doing the right thing by adding more stimulus. Its hard to make the case that the sequester was the right thing. Tightening the federal governments belt. He might be the right guy for you at brookings. Some economists were pointing out that weve had a lowlevel recovery, describing the secular stagnation. Weve been growing 1. 8 per year. The different parties characterize the cause of that. My point is if youre sitting in the shoes of someone making policy, youre looking at the kind of fiscal policy. I want to get david to talk about fiscal policy. You have the tools to alleviate that. You might think there could be longrun decisiistortions from that. I have to act today. I think you could argue about what was done, the extent it was done. But the vast majority of people, had they been in the shoes of the decisionmaker would have done the same thing. It doesnt mean we dont have longterm fiscal problems. Right. Its frustrating to be in washington and think whats the big economic argument . Should we extend unemployment for three months and pay for it or not . That doesnt seem to be prudent policy. Neither does raising minimum wage on 2. 5 of workers that are between the age of 16 and 22 anyway. That brings up another issue. We have a widening gap between winners and losers. There is more inequality. The question is what should, if anything, should the government do about it . Gun hubbard, he had an oped talking about what he thinks they ought to do instead of raising the minimum wage, expand the earned income tax credit. Right. The fact that those issues are coming to the front and center is another opportunity for think tank people to say, look, these are your choices. These are the pros and cons of this option and that option. And dont listen so much to the talking points or the advocates. Here are real data and analysis. Theres a good argument, people argue that qe, one of the affects has been Securities Prices more than housing prices. Peoples whose wealth is in the stock market have done better than if their wealth is in in their homes. So theres still, the unevenness of this recovery, driven large part because there hasnt been enough rising tide, less than 2 to lift all the boats, means some of these issues have come to the forum, we need to Pay Attention to them. Right. We need big answers. We dont need 2 increase in insufficient, youre absolutely right. I have a jobs question thats a technology question. Tom freedman wrote a column, called the second machine age that Andrew Mcphee wrote. The book argues what weve been talking about the past week or two, which is that were moving to a second age of technology. The first age of technology improved everybodys life but required human beings, more jobs to make them work. Were coming to a Second Period in which technology is so advanced that ultimately we can outinnovate the job creation machine. Whats your take . I think that i think its an enormous problem. And the question is how do we use technology to leverage human beings and provide jobs for lots of people . I think what were seeing now is that the technology is getting so good, that its starting to displace some people who were skilled. And so its a real challenge to this society. How do we get the benefits of Technology Without ending up with people who dont have work . One in six men between 25 and 54 today is not working. And some of that has to do with Technology Changing faster than people. You look in europe, its probably three out of six. Looking at it in a vacuum is that your standard for a good economy, were doing better than europe. Its not. Were talking about it in a vacuum rather than in terms of technology. All along, theyre doing whatever the Industrial Revolution a lot of people were saying this is going to put people out of business. It hasnt happened. There will be Something Else that comes along. Sometimes it is different. One thing we dont know about is the pace of technological innovation has quickened. Its difficult for individuals to change. Its improved all of our lives to a much greater extent i understand that. There are two other features. One is theres a longer term multidecade equal liberation as others enter the marketplace. That equalization is coming down, not up. Its coming up for them. Thats beginning to reach limits. Were talking about how china is having trouble keeping its export engine going because costs are increasing there. I think the second thing is on this inequality issue, because of the technology, if youref successful locally, you can be successful globally. That accentuates the winners and losers effect. David wessel, thank you for coming in. Thank you. Randall will be sticking around. We have more of beckys exclusive interview when we come back. R insurance. Yeah. Everybody knows that. Did you know there is an oldest trick in the book . What . Trick number one. Lookest over there. Ha ha. Madeest thou look. So endeth the trick. Hey. Yes. Geico. Fifteen minutes could save you. Well, you know. Amazon started in a garage. Hewlett packard, and disney both started in garages. Mattel started in a garage. The ramones started in a garage. My point . 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Power. natalie ooooh, i like your style. vo so do we, business pro. So do we. Go national. Go like a pro. Over the pizza place on Chestnut Street the modest first floor bedroom in tallinn, estonia and the southbound bus barreling down i95. This magic moment it is the story of where every great idea begins. And of those who believed they had the power to do more. Dell is honored to be part of some of the worlds great stories. That began much the same way ours did. In a little dorm room 2713. This magic moment welcome back. Making headlines, shares of express coming under pressure, the Specialty Retail chain cutting its Fourth Quarter outlook. More from dick lebeau. The Chevy Silverado has been named truck of the year and car of the year is the chevy corvette stingray. The red card has been a big loyalty driver for target. How does the data breach impact that growing business . The red card product is something that our guests love. We have grown that penetration. Its a key strategy. Our guests get 5 off every shopping visit they come. Its simple, powerful, easy to understand. They love it. They also love shopping in our store. Initially it shook their confidence a little bit and we did see a dip. Its rebounded back and its almost back to the same level that it was preincident. I think its understandable they were frustrated and concerned initially. Its a powerful product and weve worked hard to communicate with red card holders. Were sending out notifications, telling them theyre not liable and telling them about the free monitoring. Theyve said i get it, as weve added reassurances. Steinhafel says not a single red card user has experienced fraud to date. That doesnt tell the story about other cards that have been used there. Its a close thing being watched by wall street. It drives loyalty, that in turn makes them more competitive for walmart. Its been a big driver for the business. You want to buy stock in right now . What. Who makes the chips for the credit cards . The physical thats the company you should be buying right this minute. That i think is about to anyway, there it is. Coming up next, a Trading Outlook for 2014 from the man who runs nasdaq, ceo bob greifeld. We talk about the land escape and more when when return. In the next hour of squawk box we kick off the hour with tech investor Glenn Hutchins of Silver Lake Partners. Plus, we head to the Detroit Auto Show for a first on cnbc interview with the incoming ceo of General Motors. And then at ts Ceo Randall Stephenson joins us for a rare instudio appearance. To top it off, more of beckys exclusive interview with the ceo of target. A big hour with big names. Conquer the morning, conquer the day. Squawk box on cnbc. Welcome back to squawk box. The first initial Public Offering of the year taking place at the nasdaq last week. For more on the driving force behind the tech sector we are joined by bob greifeld. Our guest host Glenn Hutchins sits on the board of nasdaq. Are you still an investor . My Family Foundation is still an investor but silver lake sold its stocks. At a good profit. At a good profit. Lets talk about the market for a little bit. How much of this is being driven by the economy and what kind of bump do you think the jobs act is i is giving this . So many ipos had a jobs act component to them in terms of disclosures. We had 90 of the ipos that came to market follow under the confidential filing of the jobs act. I think more important than that was when you talk to the Biotech Companies, we had 36 Biotech Companies become public in nasdaq. It was an explosion, some of the good things that happened with intercept last week, they filed confidentially. They were able to test their road show and knew if they were going to be accepted. The jobs act has had a positive impact in particular on biotech. How interests are you that some of these companies, particularly in biotech, are coming out too soon. Two or three years later from now, well look back at the generation of new companies and said, there were a lot of duds in there. When you look at biotech, theres going to be winners and losers. I think important to recognize investors go into that space recognizing that. Right . Were about full disclosure, understanding the risk. Not every company can be intercept. I would say its important to recognize the Public Markets which are often criticized forever being short term, have the ability to think long term when the investment thesis from the beginning is specified, this is a longterm risky proposition. The good news is a lot more companies having the opportunity to go public. The bad news, there are critics that say the jobs act makes it more difficult for investors to truly understand whats going on at some of these institutions. The investors will end up with the same information. The window for them to digest this information is shorter. No investor should invest if they dont have adequate times to understand the s1s and the company. One of the impediments on taking a Company Public is the time to takes to do that. If you can actually file something privately, have it ready to go, that is significantly improves the access to companies. You eliminate the market risk between the time you decide to go public and when you can. Its a huge benefit. Very large. Theres plenty of time for those prospectuses to be digested. They dont need to look at a draft of a prospect us three or four months before it goes public. Youre a private equity guy. Your firm has remained private unlike others. You own a lot of companies you take private and you make a case, i assume to the ceos, like michael dell, you need to be private. Is it better to be private or public . Yet youre on the board of a Public Company. Public securities is just a tool. Its a tall to finance your company. You can finance your Company Private or publicly. Just a tool. And different courses are right for different horses, Different Companies at different times in their life cycle. Are we in a tech bubble . When you look at the numbers, it would suggest not. Look at the market last year went up 30 . 22 of that was multiple expansion. You say, okay, that gives signs of a bubble. You look at the longterm p e. In around around the tenyear average for the p e multiple companies. We feel good that the market was somewhat underpriced. Now it seems to be fairly priced. We look at 2014, i think the conclusion youd have to come to is youre probably not going to have the broad market appreciation you had in 13 but clearly there will be opportunities where there are good stocks within the market. Was the nasdaq 5,000 in the late 90s a double . When you look at the earnings if this we need a different name for what this is. We need a different name for what that was. Think about what is the overall nasdaq earnings per share versus what it was when it was at 5,000 . It must be a difference. Right now were running with a p e of 19 times. Back then it was what . There was no p e because you didnt have a lot of e. Right. Our tenyear ratio is within 19. Clearly going into 13, the p e ratio is depressed as compared to long term. Its tripled since then. I brought data comparing this market to the market of i think its up there. We might be able to get it up there on the screen. If you compare the increase in values, forward p es, backward p es, prices, et cetera, between now and the 2000 time period theres no comparison. Weve never seen five again. On the other hand, you know, i have numbers here, 60 of companies that went public were not profitable. Thats versus 80 in 2000. The venturebacked ipos, there were 76 of them, the largest number since 2000. Theres your chart. Thats the chart right there. We can see it up here. This shows, this compares the five years following the financial crisis in blue to the five years that in green that ended up in the ipo bubble from 2000. The current numbers in blue, the bubble year is green. Its a huge amount of difference between the two. We cant analogize between the two, i think. The nyse had more technology listings. People point back and say thats because of what happened with facebook. Has the nasdaq been able to turn that around . Do you think thats what happened . We disagree with that assertion. We count 27 Technology Companies to their 25. More importantly is to look at the success weve had in many sectors. In the last three years, all market share in industrials went from 20 to 40 . Were quite proud of that. Biotechnology, we went 100 of the Biotech Companies that went to market look at sprouts, fairway, pot belly, we dominated that sector and we also dominated health care outside of biotech. Were proud of the fact that we have broadened our appeal across the number of issues across many different sectors. We appreciate that. Were in a fight but we did have 27. How do you measure the success of the ipo . Twitter looks like a successful ipo, yet you could argue depending on which side of the aisle youre on that they left a lot of money on the table. On the flip side, facebook and now their stock has come back, they didnt leave a lot of money on the table except there were people that were frustrated and angry about it. Just in your comments, you can tell the time frame matters. Clearly facebook is higher now than it was at the ipo. What should a company do, try and get the most they can initially or price it reasonably . Listen to their bankers and make their own decision. Why would you listen to bankers . Buy it, sell it, merge, demerge. Listen to their bankers and make their own decisions after that. As an investor when ive taken companies public, ive always tried to bring them public at a fair value. For two reasons. One is because if youre going to do it repeatedly, you want the mark tote know when you sell things to them, they get value for it. The second, you typically sell a low amount of the secondary shares. 90 you dont sell gets valued at that new price. Except you have less cash. For some of the businesses the cash doesnt matter. The ipo is the first step in a long process. Being public is an endless surge of quarters. You cant focus on one quarter or two quarters. Spoken like a ceo, endless series of quarters. Thank you for being here. A lot more to talk about. We hope to see you soon. When we come back, well have more of my exclusive interview with targets ceo Gregg Steinhafel, including what the company is doing to try to correct the breach that affected millions of consumers. 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Open an account today and get a 150 amazon. Com gift card when you call 18882800154 now. Optionsxpress by charles schwab. Start your engines. We are trying to Law Enforcement to determine how they did it, when did they do it. A cnbc exclusive interview with targets ceo. We have at ts ceo in studio. From the future of mobile to expanding the spectrum, we cover it all. Plus, we talk tech with two major investors in the sector, guest host Glenn Hutchins is here. The final hour of squawk box begins right now theres too much traffic i cant catch no so im try my best welcome back to squawk box, im joe kernen along with Andrew Ross Sorkin and becky quick. Im here with Glenn Hutchins, Silver Lake Partners cofounder. Youre doing things with brookings, harvard, youre a philanthropist. Youre all over the place. Silver lake is the great accomplishment of my business life. 1999. Very proud of the firm. Number one youre totally overeducated. Are you still paying off some of the school bills. No. I managed to get those paid off. Now i have bills for my children im paying. Youre a lawyer, an mba. I think education is important. Im concerned about Student Loans building up. After all that you had no job when you got out of school. Professors were worried about me. I wanted to ab entrepreneur. Theyre not laughing anymore. I tell you that much. It worked out very well. Thank you. Today is the first media day at the Detroit Auto Show. One of the most soughtafter people there is mary barra, gm incoming ceo. Car and truck of the year, you were down there, first time in three years an automaker has swept those awards. Its exciting. Im proud of the team. Im proud of all the three gm products that were part of the finalists but for the chevrolet silverado, its a great truck. And the corvette, it won the most awards ever, at least last year. For the silverado, its a great bounce back that youll be recalling 370,000. Well put the customer at the center of everything we do. We found an issue. It happens in a very cold temperature. Well do the right thing for the customer and take care of the situation. This speaks to what you wrote in a memo as the global product chief saying, no more crappy cars. People looked at that and said its blunt language but welcome language. Is this what youre talking about . Absolutely. When we talk and start a new Vehicle Program were going in to win the segment. We want to make sure we understand the customer. We are getting the right performance, quality and knockout styling. Are you Getting Better at doing that, do you think . I think if you look at the awards we just received that tells the story. You look at the chevy impala, cars getting recognition and leading in their segments. A lot of attention will be focused on you as you become the next ceo of General Motors, the first woman to run a major automaker. Give us perspective in terms of how much this means not only to you and your familiar but for the Auto Industry and female executives in the Auto Industry. I am honored and humbled to lead the team. The many women of General Motors work so hard. I believe we have the most talented team in the field. Were aligned. We know what we want to do. Its about great cars and trucks, building strong brands and delivering quality and value. I would say from a female perspective, you know, if i can encourage young women or young men as theyre looking at fields they want to go into to pursue a career in math and science, thats great. We need more people with technical degrees. Leading the Worlds Largest automaker, you see not only the u. S. Economy but the global economy. Lets talk about both of these. The u. S. Economy heading into 2014, whats your perspective and what do you expect . I think weve, since we came out of the 0809 time frame, weve seen steady growth. Hopefully well continue to see that. Were looking to continue to build and, again, with great products. Were looking to take advantage of that as well. In the last year and this year together we have 32 new launches coming out. Again, it will be about the product and how we get those into the marketplace. I know andrew has a question for you. Go ahead. Congratulations on the appointment. I want to talk about the landscape of new vehicles aand new types of vehicles. When you think of tesla, do you think electric cars win the day . Do you think its another technology . We recently launched the cadillac elr. We have the spark ev. Very important products. I think electrification will continue to grow as we go forward. Its a lot about the technology as we continue to make breakthroughs in technology, i think youll see that advance. I think a very important segment of the auto market globally. The suv and the big vehicles, even some of the pickup trucks, theyre a big part of the picture again, big part of the profitability of General Motors. Weve had stable gasoline prices for years. We have the fracing revolution but if you look out at the future, 10, 15, 20 years, there are families that have three kids that need these cars but then again it looks like the automakers didnt learn the first time around you cant tie your fortunes so closely with these big vehicles. Whats your view on that . Again, every single vehicle we put into the marketplace were looking to make sure its as fuel efficient as possible and we understand the segment. The v8 engines are the most fuel efficient of any on the marketplace in the trucks coming out. We get every single amount of efficiency out of the engine and other fuel sources. When you look at this year, youre going to be your production level here in the United States is beginning to be the highest that its been this a number of years. I dont know if its the highest of all time in terms of number of vehicles built here. Are you finding enough Skilled Labor out there right now in terms of what youre looking for at the different facilities around the United States . Absolutely. We have been able to put 10 billion back into the u. S. Economy as we go forward and i would say we have great work forces around the world. Thats a very Important Message and the jobs that we can put back into the economy are very important. One last question. A lot of people have asked me to ask you, whats the car that you drive the most . I know you have access to all the gm vehicles. Which one do you drive more than others . Well, you know, im really enjoying the cadillac cts. Its a great vehicle. And ive also been driving the escalade with some of the weather because it handles extremely well. Every one has an important part in our portfolio. I try to spend time in all of them. Mary barra, the new ceo of General Motors starting on friday, joining us here at the International North American Auto show. Thank you for bringing us that interview. Congratulations again to mary. Coming up, we talk about connecting with at t. Ceo Randall Stephenson is going to join us to talk about business friends and fierce competition for wireless customers. Squawk box returns right after this. Up next, targets ceo on its massive credit card hacking scandal that has affected 70 million customers. Every guest, whether youre a red card holder or nonred card holder will have zero liability. And later, the ceo of forest labs on whats in the profit pipeline for the drugmaker. Squawk box is coming right back. So i c an reach ally bank 24 7, but there are no branches . 24 7. Im sorry, im just really reluctant to try new things. Really . Whats wrong with trying new things . Look mommys new vacuum cat screech you feel that in your muscles . I do. Drink water. Its a long story. Well, not having branches lets us give you great rates and service. Id like that. A new way to bank. A better way to save. Ally bank. Your money needs an ally. Welcome back, everybody. More than three weeks after target initially disclosed the breach at its u. S. Stores, a tremendous amount of confusion remains. I asked the ceo what tarring set doing to correct it and what he thinks is the possible solution to security threats like this one. I think theres a lot of confusion in this. Thats understandable. Were trying to be as clear as we possibly can. This is what happened, this is what didnt happen. Here are some tips. If you have any concerns what ever sob change your pin, get a new card. What are the misconceptions. There were misconceptions as it relates to p. I. N. Data, when did we hear about it, when did we not hear about it. Everybody interprets the story a little bit different. Weve tried to be transparent and clear in terms of what we know did happen and what we know didnt happen. Neiman marcus came out and said they were hacked into as well, theyve had a data breach. Yes. We heard another story that suggests at least three other smaller retailers were hit at the same time. There are some Security Experts who think it might all be related. Do you think its related . I dont know that its related but i think theres a better way. In the United States were using mag stripe technology. Thats old technology. Theres a better way called emv technology. Is that the chip . Its Chip Technology and its a well established standard throughout the world. We think its time for america to make that commitment. Target used to use that technology in the past. What happened . We had that technology over ten years ago. And we were ahead of our time. We were trying to set the trend to say, this is where the Industry Needs to go. And we were out front of the industry and the industry didnt follow. I think the industry is ready now. I think were ready to have a different conversation and i think base the on the sensitivity of what happened at target and other retail institution, i think that i think were at a different time. I think the fact that this is such a well established standard globally, i think were ready to move. Why didnt it get adopted before . Is it more expensive . What was the problem with it . Because its picked up in europe. It is the way europe does it. It is the european standard. This is one of those where it takes a village. Everybody has to participate. All retail, all networks, all financial institutions, everybody has to participate in making this the national standard. And we tried to take a leadership position and there wasnt enough of the village that came along at that time. Where was the holdup, the banks . Im not exactly sure. I dont recall specifically what the holdup was. I think the where we are today, i think that conversation will be far different. I think everybody will be far more receptive. Theyre seeing the vulnerability of the system. They see the technology thats being used today is Analogue Technology and were operating in a Digital World and other countries have moved ahead of us. America should be the leader in this kind of technology. We shouldnt be following everybody else. We should be at or with the global technology. I have to admit, this has my friends and i all thinking about the safety and security of the system overall. Is your money safe in the bank . Are you safe making transacti transactions, using your card anywhere . My guess is youve been having those conversations inside the boardroom, inside your offices with injure staff. What do you think about the state of our security right now. I can tell you that we are highly confident that targets environment is safe and secure. Not just target. Im talking beyond that. Im talking about america overall. I think your concerns about moving to the chip probably show you do have concerns about where we stand. I think what weve seen is vulnerability in our system. And i think if we are proactive and really engage and move it forward, we can accomplish this, we can accomplish anything. Were a nation of prosperity and we can solve any problem if we put our minds to it. Im optimistic that well move forward in this Chip Technology. By 2015 this will be the standard in the u. S. I saw angry blogging comments when this first happened, people interviewed, man on the street type of stuff talking about it. Have you had oneonone facetime situations with customers where youre trying to explain to them what happened, where youre on the phone with them . How much interaction have you had with the shoppers. No one screens my email. So i have read every single email that has come to me. As you described its run the gamut of emotions from, im with you, target, im with you, i trust you, i know this is a criminal act against your company, your team, your guest. And ive had the other side of that equation, too, where there has been some very poorly chosen words to describe target and myself. And i read every one of them. And i understand, theyre upset, frustrated. They have every right to be. We have to do Everything Possible to make it right by every guest and earn that trust back. One thing target is doing is offering free credit monitoring to all customers who shopped in their stores during the breach period. Go online to creditmonitoring. Target. Com and register for that program. Coming up, forest labs striking a 3 billion deal last week to improve its drug portfolio. We speak to the companys ceo next. Then, Randall Stephenson, the head guy at at t, a rare instudio appearance from mr. Stephenson. Squawk box will be back right after this break. Ing floor in real time. The shell brought him great fame. But then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their Trading Platform. [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a. Shell. Get live squawks right in your Trading Platform with think or swim from td ameritrade. Over the pizza place on Chestnut Street the modest first floor bedroom in tallinn, estonia and the southbound bus barreling down i95. This magic moment it is the story of where every great idea begins. And of those who believed they had the power to do more. Dell is honored to be part of some of the worlds great stories. That began much the same way ours did. In a little dorm room 2713. This magic moment forest labs still taking the pharma world by storm. The stock up more than 80 over the past 52 weeks despite patent loss concerns for its two top selling drugs. Joining us now exclusively from the Jp Morgan Health care conference in San Francisco is brent saunders, president and ceo of forest labs. Mr. Saunders, its great to see you. Yes, nice to talk to you as well. You have an acquisition that will certainly help with the product line. One of the things to consider is one of your bestselling drugs, ive been following your company for so long with lexipro and celexa but the alzheimers medication, theres a way of dealing with the patent expiration by combining it with aricep or doing a limited release. Do you worry that the technology will bring something along that puts out of business . I hope innovation continues to improve in this field. I think in the short term amenda will be just fine. Theres not a lot of latestage pipeline thats been successful. We believe we have a long, durable franchise. You made an acquisition from tpg. Tell us about it and what it will do for you. What kind of products youre bringing on board. I guess you want to develop these products. They have a lot of potential but at this point, theyre sort of on the ground level, right . Right. As you know, you mentioned earlier, when lexipro went generic two years ago, it was put in five therapeutic areas, including gi. We have an anchor there. My view is we need to create line buster calls. We have a bunch of gi products as well as bringing us into the Cystic Fibrosis space. Its a good strategic fit, good fit. Have you heard from carl lately . Were you the result of some of his activism, brent . Well, i do speak with carl regularly and he has fully bought into the strategy i started executing. And he pushes us, lets just put it that way. Which is a good thing. Which is a good thing. Where, when you look at whos going to do something in alzheimers, were not talking about forest right now, who do you think is on the right track in terms of something that actually works . Its unclear, its very expensive but its unclear if dealing with the plaques is efficacious at all. Exactly. Thats the exact issue. Theres not a good understanding of the right way to go. I think there are some promising early programs but they take a long time and are very expensive. There is a lot of people looking at it. I think the program i recently looked at that looked interesting and one i know well, because i was at scheringplough a while back is mercks program kaled base. They have work to do still. Brent, we appreciate your time. How much revenue are you bringing in with eptalis . How much is it replacing alexipor and amenda . It is bringing in 700 million. We believe we can grow that. A lot of cost synergies but revenue synergies in this deal. Great. We appreciate youing us today. And we see carl, too. Carl is everywhere. Were talking about our viewers think were talking about carl quintanilla. Were not. Were talking about carl icahn in this interview. He has about three hours before hell even stir. He only went to stir a couple hours ago. Might be up but hes going back. Hes nocturnal,s y as you kn. If youre lucky he can tweet about you. He can. Hes a good tweeter now. When we come back, at t Ceo Randall Stephenson joins us in studio. We talk about smartphones and the fierce competition for customers right after this. Plus, well wrap up our exclusive interview with target ceo Gregg Steinhafel. Well find out how he found out about the target breach and how it affected him personally. That story and much more, just ahead. To get a list of equity options. Evaluate them with our p l calculator. And execute faster with our more intuitive trade ticket. Im greg stevens, and i helped create fidelitys options platform. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. And truecar users. Save time and money. So when youre. Ready to buy a car, make sure you. Never overpay. Visit truecar. Com today. Welcome back to squawk box. Lets take a look at some stocks to watch. Lululemon taking a big hit this morning, the maker of the athletic gear and clothing. They lowered their Current Quarter guidance. The company says the quarter began on track with its outlook but adding theres been a meaningful deceleration in traffic and sales since the beginning of the month. Also, restaurant chain wendys with a more upbeat story, giving First Quarter guidance, thanks to better than expected sales. And beam being bought by Suntory Holdings for 14 billion, 83. 50 per share, a 25 premium over beams Closing Price on friday. We should say thats all cash. And soda stream announcing preliminary Earnings Results falling below street estimates. We just got one of these things. The holiday selling season was challenging and that its disappointed in its performance. Our next newsmaker of the morning, Randall Stephenson, chairman and ceo of at t. Great to see you, randall. Good to see you. Great to see you in studio. Well talk now about all the definitive trends in mobile and communication that i know we can count on as long as a banana is ripe, basically. Im looking at your notes here. Where are we now, six month is there anything you can count on for longer than six months in this business . This industry, what its done over the last five years is stunning. You look back at how fast things have progressed going from iteriter literally six years ago no smartphones, no app store or apps in earle. We are of the opinion you consider whats happening and Cloud Technology is beginning to mature, we think the next five years will move at a faster pace than the last five years. Is that with good news or bad news . Good news because consumers are buying but bad news because its hard to keep up as a company. Its good news. Companies will be doing things they never thought possible. If you look back the last five years, what its done is transform our industry radically. We think the next five years is going to transform every industry. Arent you hesitant to make predictions to us right now . Three weeks from now, it might be a totally different answer. I wouldnt make predictions on what device is going to be exciting. Or a specific service. Directionally there are trends i think are fairly predictable. Any i could understand . Yes. We have a philosophy that we want to mobilize everything. Because what we have seen over the years is you take any application, any function, if you make that function or application mobile, utility of it explodes. And the easiest example is music. What happened when the 8track cassette tape came along . You mobilized music. They dont remember that. When you say more innovation, more innovation connecting people and devices. I read a peace about ces. The people said the phone, the phone has been innovated. Its a slab, its glass. There might be more technology on it but it will not be that different over the next five years. Is it the phone or other things youll connect to . Its the functionality of the phone. Think of it this way, the phone has become and is more and more going to become like the Remote Control of your life. Okay . Go back to ces. What was the big aha at ces . The great device everybody was talking about is the automobile. The automobile is connected. It is being connected to the internet. All right . So weve been very, very aggressive over the last couple of years chasing this because we believe the phone will be the driver of the car experience. It will be the driver of the home automation experience. Right. Weve been aggressively working with General Motors. I saw the new ceo through a huge partner of ours to connect the automobile. Just think of the functionality thats in your phone, whether it be weather, maps, music. That same functionality is resident in the automobile. But theyre not integrated. Hes saying its about the software, not about the hardware. Exactly right. When does the Telephone Company become the bank when it comes to ecommerce . There has always been the question of who will own the ecommerce function of the device. When you leave home theres three things you will not leave home without, your keys, wallet and smartphone. The smartphone will become the means by which you access your home, your business locations, et cetera. We are convinced the smartphone will be the medium by which you conduct commerce day in and day out. Do you collect a fee or does apple collect the fee or does chase collect the fee . Thats kind of the big issue thats up in the air right now. You have ebay with paypal. Theyre doing a lot in this area, google, apple, we at verizon and tmobile have created an environment thats open. We want the phone to have the capability to do commerce. Its wide open. If you want a chase card in there, you put it in. American express, put it in. Create it in an open environment so it is the medium by which you are doing commerce. At t was the largest capital investor in the country, spending more capital than anything else. Over each of the last five years, thats been the case. Think about that for a minute. Thats about building up the network to pass ig tate all this. A lot of this is facilitated by 4g and 5g. Talk about what youve done at a Network Level to make all this happen. If you go back to 2006, the year before the iphone launched, weve put either in organic investment into the networks, expanding the network with spectrum acquisitions. You put all that together, weve invested over 150 billion since this all began. This is, i this i, joe made the comment earlier. This is a capital intensive industry. And what weve had to do obviously is create this mobile internet capacity which means sell sites. New antennas, the technological obsolescence curves are impressive. In 2006 we were deploying 3g technology, multibillion dollar investment. 2013 was all about deploying 4g, obsoleting 3g, going to 4g. They are running four and fiveyear obsolescence cycles. Thats facilitating huge innovation. Dare i say we are a subsidiary of comcast. Do you see a day where you are able to provide overtheair video that competes with cable . I made the comment that our kind of our philosophy in life at at t is mobilize everything. And the iphone mobilized the internet. Thats really what it did. We built networks such we can mobilize the internet. We think the next functionality that gets mobilized at scale in a big way Cost Effectively is video. In fact, we have embarked on a initiative, you think about 3g, 4g, our next major Capital Investment is deploying video capability into our networks. Its all about delivering video. Does that ever displace comcast or our own uverse Video Service . Probably not. We think a lot of content will be streamed over the top, im talking live sports programming, things you dont traditionally think of today in a Cost Effective way. Can i talk to you about, youre the guy, the man for the business meeting at the roundtable. Growth solves everything, we know that. We talked about that. Thats bipartisan. I looked at those four things, theres no reason why we cant do all four of those things. I would agree. The fiscal stability, even if its only for two years, at least its something. What was the next one you look forward to . We can do tax reform, obama himself said we can do tax reform. Thats par mouamount. I just read an article, standing in the way of the trade agreements are the republicdemo his own party. We think not only are they the most important, those four initiatives in areas that would drive Economic Growth, we think theyre ripe. They are. Fiscal stability, the ryan murray plan, i dont think it was a cureall. No. What it did was clear the table. We dont have to worry about the next fiscal crisis. You said it, tax reform, that one is ripe. There is youre hard pressed to find somebody in washington who would argue that the u. S. Tax rates and corporations and all businesses are not too high. Visavis other countries around the global. When you have fluid Capital Markets and capital flows to the highest return, if were uncompetitive if the president is not arguing youve gone as far as you can go. The one person that might have said no, hes even saying yes. Hes supportive. Yes, its been a big priority as we can tell. How about immigration. That should be done. Immigration is one of these, its got to be fixed. The system is broken. We need this talent in the u. S. Were all starving for this tall en, people come here, they get educated at the best institutions in the world and the idea that we not only create a way for them to get here, were booting a lot of them out. I worry about trade. Trade might be the one thang that is the most troubled, the most problematic at this point. We have to get the president i think its a fast track authority. Why isnt entitlements reform on that list . I use the word ripe. Stuff we can do. I got it. Stuff we can do. When you think of fiscal stability i got it. The courts of Bowles Simpson is ripe. Especially now that weve made progress on the deficit, people are not talking about it anymore. Which is a bad thing. Theyre not sustainable the way they presently are. I dont think theyre ripe. I can count on you. He can help you with a couple of the things. Thats what well be working on. The Health Care Costs are moderating in ways we didnt expect. That problem is selfcorrecting, which is useful. Social security has pretty understandable talk to me at the end of 2014. Theres a couple of things happening this year that may go back to 6 . Health care. Yes. Right. Randall, good to see you in studio. See you in the office in a week. Very good. I saw oklahoma had a big win the other day. Did you hear about that . I did see that. Im talking basketball. Hes talking about football. Youre not watching hoops yet, its too early. Gives us hope that maybe the s. E. C. Isnt the only place in the world. Your buddy, stoops, awesome. Up next, the target ceo and how the Security Breach affected him personally. Also, tip leap laphilippe l coming up. Stacys mom has got it goin on stacys mom has got it goin on stacys mom has got it goin on [ male announcer ] the beautifully practical and practically beautiful cadillac srx. Lease this 2014 cadillac srx for around 319 a month with premuim Care Maintenance included. voseeker of the sublime. Ro. You can separate runway ridiculousness. From fashion that flies off the shelves. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. And only national is ranked highest in car rental Customer Satisfaction by j. D. Power. natalie ooooh, i like your style. vo so do we, business pro. So do we. Go national. Go like a pro. Theres nothing like being your own boss and my customers are really liking your flat rate shipping. Fedex one rate. Really makes my life easier. Maybe a promotion is in order. Good news. I got a new title. And a raise . Management couldnt make that happen. [ male announcer ] introducing fedex one rate. Simple, flat rate shipping with the reliability of fedex. You stand behind what you say. Theres a saying around here, around here you dont make excuses. You make commitments. And when you cant live up to them, you own up, and make it right. Some people think the kind of accountability that thrives on so many streets in this country has gone missing in the places where its needed most. But i know youll still find it when you know where to look. Welcome back to squawk box. A Southwest Airlines plane landed at the wrong missouri airport last night. The flight from chicago midway was scheduled to land at nearby Branson Airport. Thats a much larger facility with a longer runway. But where this plane land, no one was hurt but apparently it stopped before going off some horrific cliff or something. Its not clear whether the plane landed at the airport by accident or whether there was some type of emergency. The ntsb is going to investigate. What a good stalling tactic. Pretend i cant read, which is not that far from the truth. I appreciate it. Gregg steinhafel has spent his career at target, starting at the retailer in 1979 as a trainee in merchandising. He became ceo in may of 2008. Here is his personal account of how he found out about the target breach. I was at home, it was a sunday morning. I was having coffee with my wife. I remember it, i remember it distinctly. Because i got a call and upon that notification, i mean, my heart sunk. Its hard for me to describe the feeling that came over me. I mean, i was devastated. How could this happen to target . And it was really a moving moment for me, because were all about the guest. Were all about the trust and the relationship. This is what weve built the franchise on. And to have Something Like this happen was really was really it was really moving to me and still is. Im still shaken by it. But i will tell you, it increased my resolve to say, we are going to put the guest first and continue to make the guest the number one priority and this particular incident is going to be my number one priority. And it has been since that time. And i will also tell you that im really proud of the way that the target team has responded. Since that confirmation weve been all in. This team has work eed 7 by 24, christmas day, you name it, everybodys been all in throughout the organization. While were not proud that it happened and were deeply sorry that it happened and accountable for it, im super proud of the way the team has responded. You know, we spoke with bill george on friday. He was our guest host, a former target board member. He pointed out this is a retailers worst nightmare, this is the worst thing that can possibly happen. Gregg steinhafel talked about that, too. A lot of people are watching this to see how they deal with it. A lot of retailers are concerned, worried it could happen to them, too. Glenn, what do you think . I think its a chronic feature of most companies in general. Every time i see a ceo of a big company, i say have you had a breach . Every one of them says yes. Its a part of doing business. If everyone has said yes, where do you think the disclosure should be . We talked about Neiman Marcus. Its taken them a month to tell the public about it. You dont know if the fbi or someone else has told them dont say something. The fbi and secret service are both investigating target and Neiman Marcus. You shouldnt disclose unless its material, you have to know what youre disclosing. The last thing you want is incomplete or misleading disclosure. It does take time to understand it all before you should be disclosing. Thanks. All right. Coming up, our next guest runs one of the worlds hottest techfocused hedge funds. Philippe laffont will identify some of the best investment ideas for 2014. Well do that when squawk box returns. So ally bank really has no hidden fees on savings accounts . Thats right, no hidden fees. Its just that im worried about, you know, hidden things. Ok, whys that . Well uhhh. Surprise um. Well, its true. At ally there are no hidden fees. Not one. Thats nice. No hidden fees, no worries. Ally bank. Your money needs an ally. Welcome back to squawk box. Head of one of the hottest tech funds joins us, philippe laffont, found or of you have 9 billion in your fun . Wow. We should say, our guest host, all morning has been Glenn Hutchens from silver lakes partners. You got back from ces, youre a big tech investor. Was there anything that stuck out as being excite ing in the tech world . Yes. Some years are more exciting than otherans this year it didnt feel like there was one absolute flagship product. Im sort of wondering more like what apples going to do now, and they havent done anything for a couple of years and i hope this is the year that they will. Do you have money in apple . Yes. You do . Yes. Where did you start . It seems like last year i kept buying high and selling low. I know youre supposed to do the opposite, its been sort of a tough stock for last couple of years. But we have a large position around these prices. I would say what do you think is the breakthrough in 2014 . The big phone. The big phone . Just bigger screen. The bigger screen. I think randall said a little while ago, one you switch to a big screen, you use the phone more, theres more video. Its easier to type, bigger keyboard. I can type on my little iphone. I know you have an extra keyboard youre thinking of adding to the phone. I think the big phone makes a big difference. Eye how about the home . Apple in the home . Apple in the home, too. Youll get the apple tv. I buy phone i buy a movie on tv it shows up on my phone, ipad. Its simple to use. I just find it strange that this is one of great stocks selling at one of the cheapest multiples in the market, and somethings going to change. Where do you stand on microsoft . Well get a ceo, well not in the next couple of weeks, it sounds like. Strange, it seems like no one wants to be the ceo when theres two exceos on the board. Its a tough one. This is a story if someones allowed to do basic stuff, the stock could double. Its so much costcutting opportunity, so much restructuring opportunities. But is the new ceo allowed to do what he wants . You think thats the problem . They wont have autonomy, they wont be allowed to make changes they need to make . I think so. When you see innovation of apple and google and youre microsoft, you dont want to cut this, youre thinking im going to get back to be like apple or google. They need restructuring, i think the r d budge it is five times the size of apple and they dont seem to be coming up with anything new. Where are you broadly on turnarounds. A number of tech turnarounds. Blackberrys one, can they turn around . Would you invest in any of these . Over the 13 years ive invested on the turnarounds, im 0 for 7. Which ones were you 0 for 7 on . I you bought them erased them from my mind. Its very difficult. I think technology, either youre a growth investor and youre a dreamer, or youre a value guy and youre very sort of like focused on the balance sheet. And youre one of two investors, hard to be both. The other thing im saying, its hard to be turnaround as a passive investor. Turnaround is more game for private equity and control invest, so you can drive outcomes. Would you look at a blackberry and say, maybe theres a shot here . Im not going to talk about any existing Public Company nice try but weve done a bunch of turn ts arounds in the past. Skype was a turnaround, increved in mci. You have to have control in business and a plan. Where are you on the facebooks of the world and twitters of the world now . These are tough companies because theyre so great, but the valuation is, at times, you scratch your head. I go back to google, in 2003, everybody said, youre crazy to invest in google as a Public Company, the stock went public at 90, this year theyll be at 60. The key with facebook and twitter to figure out five or ten years out, is it two or three times earnings or not . Im very optimistic about facebook and instagram, in particular, on the private side we invest in snapchat, thats also i wanted to get there. Mobile related. Twitter, boy, that stock went up so much so quickly. So i was leading to the big one, which youve been talking about for weeks on the show, snapchat, 3 billion, they turned that down. Why did this make sense to you . You didnt invest in 3 billion valuation. We invested at much lower valuation than that. Almost less than half of that. This is a chance with snapchat, i dont know if youve used it say im a football fan not soccer football fan. Go to the saints and theres a little video about what they do in the locker room and preshow. Its nonprepared and i think thats Something Big in the future. More than 1. 5 billion big. Thank you for coming in. Thank you. Football. We know what you mean. Were not thinking if you say football, were not thinking soccer. Were not we do but you dont need to well talk about intercept. Did you see intercept . Well talk about that at some point. Up 100 bucks down 150, ill tell you why. What . Ill tell you now, ill tell everybody else when we come back. Well talk about what that when we come back. 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Parents who received the experimental liver drug, there was some buildup of the bad cholesterol. Worsening of the bad cholesterol in the study. A huge gain. Thanks Glenn Hutchins for being here today. A big fan of your show. Its a pleasure to be here. Were a fan of you. One word for 2014, what do you think . I think steadily improving economic conditions. Okay. And growing stock market. We will see you in davos. That does it for us today. Make sure you keep it locked on cnbc all day. Its time for squawk on the street. Mustang sally good monday morning. Hope you had a great weekend. Welcome to squawk on the street. Im carl quintanilla. David faber and jim cramer. Earnings from the big banks headed our way, Detroit Auto Show, m a action, target ceo speaking to cnbc. Tenyear down to 2. 85 ahead of inflation data and regional surveys later. Europe hanging on to green