Transcripts For CNBC Squawk On The Street 20131024

Yesterday late in the day we got another famous tweet from mr. Icahn saying he had written a new letter to apple. Weve heard some of the contents of that letter, which apparently is about to be made public, if it hasnt been already. Theres the tweet were referring to. The specifics that havent been shared completely as of yet or perhaps are just in the process of being shared is that mr. Icahn wants to tender immediately, buy apple for 150 billion worth of its shares. Its choking up jim over here. Right now he wants to tender an offer . At the current price is what hes asking for in the letter. He also says in the letter that he would not tender his own shares into that immediate tender offer, again of 150 billion. So roughly about a third of the market cap of the company at its current price. And he also said he would not tender. And he has raised the stakes on the earnings to 4. 7 million shares. It has been roughly 4 million shares. Were talking about a 2. 5 billion position for mr. Icahn who just took an 800 million profit on some of his netflix shares. Flabbergasted. I dont think you would expect this. This is kind of a nonstarter if you get this if youre apple. I dont know what the response is going to be, if any. I cant imagine they would entertain it. Lets say the quarters bad . Lets say the quarters good. What is the worst . I think you keep the pressure on the board. Apparently in the letter hes perfectly friendly in terms of praising management and how the companys run, but you want to keep the pressure on the board to continue to think about and do something with excess cash, which keeps building up and will build up. Of course, well find out how much from the Current Quarter that will be reported on monday. But youre right, you know, there are a lot of people not a lot but wonder whether well get guidance for the Fourth Quarter that wont be that great. Who knows which way the stocks will go. Interesting he would use 525 as a number when you conceivably its at market, why would you tender . I agree. This is a very exciting time for apple. Theyve got the new operating system,new phones, just did the ipad. Im sure people at apple are saying you youve got to be kidding me. Do you know people at the New York Times are saying we have to do this, theres like a window where you focus on the product. And suddenly hes an activist . Even at 2. 5 billion, thats far less than a 1 position. You wait till wednesday. Why would you do it today . By the way, questions we can ask carl when he os cnbc today at noon with scott wapner. Do you think thats why he did it today . I want some ratings for wapner. Carl in another three days well find out whether youre going to get 525, 425 or 625. Exactly. In the meantime, i love him. 3m posted betterthanexpected numbers and ford beat the street, 45 cents a share on an operating basis, also boosting its fullyear guidance, improved outlook in europe and latin america. Jim, 2 billion in cash generation is up from 1. 4. The only caveat, they are cutting some north american production. Its still going to be higher year over year but trimming about 15,000. They dont want to see the lots get too full. No. I think what really matters, the reason why went from 18 in 2011 down to half of that is because of europe. And they lowered the loss forecast for europe. Theyre still losing money. They also raised south america. So i hear you on the north america but ive been focused laserlike on fords core performance in europe and that seems to be coming to an end. On 3m, can i promote him . He is so noncommercial people probably dont know who runs 3m. The guy is just a joy, okay . And so are the numbers. The organic growth is terrific, the sales recap, he does some great presentations. They are just great numbers all over the world. Wow. This stock when it reported people said wait a second, he narrowed the range. Not that interesting. If they would even look at the presentation before they started trading it, they would see this was a great job by a great ceo, unaffected by the morace in washington. Its always been my father sold 3m products for years. Really . Yeah, yeah. He sold the board games and sold sashine ribbons, the bows. Always had a great relationship with 3m, its a Great International company. They did boost the forecast, looking for 675, streets at 670, local currency organic 35 versus the current 25. It looks like the numbers are depressed and you do have to add back the currency. Plus if the dollar gets weak. Only dupont really focused on it. But pension costs are coming down because of the Interest Rates going higher. A bit higher. Not much higher. Well, lately because of the were getting some bad numbers out of employment. Thats always worth the pmi in europe is good, pmi in china is good. Were awful because of our government. Yes, we are. Were awful because of our government. Its certainly not the people. The governments not as good as the people. By the way, were getting word that everyone is trying to log on to carls web site and nobody can. 525. Did he contract that to the same people he may need to have an address in the rose garden. Thats going to be a story all day, who can log on to the web site first. And what did apple do wrong except for having so much cash and issuing great products. Shame on them. I want a company that is a Financial Engineering company, i dont want a company thats a real engineering company. All true. Capital allocation is a part of running your company properly. If youre not allocating capital properly why not by netflix . That would have solved the social problems. That would have solved the problems for anybody, if they bought it right. Of course the only person who did buy is right is carl. Its just hard to fathom doing this between the ipad launch and the quarter. Youre not arguing that apples not overcapitalized. You just question his timing. If the Company Reports a quarter and they dont give you good guidance and the stock goes to 460 then 525 looks good. Then dont you wait and see . Something ticked him off. Youre right, though. Monday is the day that really will matter with that. Well see what the Fourth Quarter guidance is and how they divest it globally. Is it selling as strong as many people think . Apparently theres one quote here, if im hearing this right, a lot of people have died fighting tyranny. The least i can do is vote against it. Carl icahn. Really . I think that was a quote from a while ago. He likes, you know, in his offices hes got some very beautiful paintings, the battle scenes and things like that. Give me a higher stock price for apple . I can go there. I guess carl gave that line at a texaco annual meeting. Oh yes. Carls just he makes it fun. He does. He really does. Doesnt he make it fun . Especially when theres not much else going on. Thank you, carl. Meanwhile, we want to get to Bertha Coombs, who joins us from capitol hill the. Reporter good morning, carl. The title of this hearing is implementation failures congress didnt know. Today they are all finger pointing, deflecting blame, cgi, the key architect in terms of the hardware says the problem isnt them, the problem is software. Quality software services, a unit of United Health says its not their software, which is used to help identify people and to help get them registered. Part of the problem, they said, was a late decision to require registration first. No doubt theyre pointing the finger at health and Human Services department. Secretary Kathleen Sebelius wont be testifying until next week but certainly it does appear there are going to be a lot of fingers pointed at what her underlings were directing these contractors to do. Sirko, one of the contractors doing paper applications said so far theyve had about 16,000 of them feed through, a bunch of them have errors and its taking a lot of time to process them. Thats been an issue for the insurers. Some of them that reported this week said the errors are Getting Better in the few applications that are coming through, but they were at the white house yesterday clearly talking about some of these problems and it doesnt seem coincidental that following that meeting the white house and the Health Department said they were going to let slide the deadline for when people actually had to buy a policy. Now they only have to enroll for a policy six weeks later at march 31st. Lots of fireworks expected this morning. Well have an update coming up. Back to you. No one better to cover it, bertha. Thank you for that. When you speak with ceos in technology, theyve turned on obama in this thing. This thing is really big in the technology market, the problems with the web site. Because the companies are Great Customer relations management, great software. And the Canadian Company honestly, people are scratching their head saying how could he have let this happen and how is sebelius still doing her job . I dont know. Im not a political guy. I say hey, hows pcs . Let me tell you about sebelius. Theyre furious. Shes going to have her moment in the sun in a few days, thats for sure. When we come back, well break down some of the Airline Earnings for you, see how some of the carriers are earning. Also ahead, Boston Red Sox tom werner smiling about Boston Red Sox victory in the world series. Take one more look at futures here this morning. Well walk through claims, china, pmi, some of the european pmis, too. Up 49. Were back in a minute. Look at the night and it dont seem so lonely some new members of the team will be introduced. The chairman emeritus will distribute his usual wisdom. And you . Well, youre the chief life officer. You just need the right professional to help you take charge. All right. Of course much of the country focused on the inability to get on the Health Care Exchange web site to try to sign up. A lot of people also frustrated by carl icahns web site, trying to get that letter. We told you earlier the key to the letter that he sent yesterday to apple is that he wants the company to undertake an immediate tender offer for 150 billion worth of its stock, 525 a share. Icahn saying he wont tender into that and hes increased his ownership to 4. 7 million shares. Thats about 2. 467 billion dollars. Thats how much money it is. All of this doesnt seem to be likely to happen at all, but take a look at a cartoon that we have been able to at least download from the web site. As you see, theres a lot of people fighting tyranny. The least i can do is vote against it. Remember that was an early battle. I remember that, 1988. In fact, i remember calling carl, he called me back, i was a young reporter. It was late, he called me back, i was like ah, ah, ah i said why do you want to buy texaco. He said what do you mean why do i want to buy texaco . A great twa run. Theyre getting rid of this picture, the staggered board. I think hes having the time of his life. Taking time away from selling the product and deal with this. Even though again hes got well less than 1 of the company. I question well, lets see the quarter. It might be a nice play if the stock goes to 450 to say in my back pocket i got 525. Two Airlines Heading in opposite directions. United continental falling after it did miss the street despite higher quarter profits and cost cuts and southwest higher net profit for increased airfares. We had a decent year. We started out the year very strong. We saw some impacts in the spring and early summer from the tax increases and sequestration, but we had a really good summer. We had a great Third Quarter, alltime Third Quarter record, 231 Million Dollars and consumers were out there buying and flying. My favorite metric for kelly, fuel cost down 5. 1 in the quarter. Revenue per available seat mile up 5. 1 and united is lagging their rivals, their revenue up only 2. Delta had a fantastic quarter, an upgrade today for usairways. If you listen to what boeing is saying, maybe 50 of your cost is fuel. One of the reasons boeing has great numbers, this company is a renaissance. Theres not much competition at all. Its really hard to get new planes. An industry that never, ever earned its cost to capital. Not once. The sum total of the whole history is a loss, right . Absolutely. Are others, even wireless, amazingly enough. A big case coming up. Department of justice saying its antiamerican to have two together i took the antitrust course. Did you go to law school. I play one on tv. I passed the bar exam, which i always thought was incredible. New york. Thats a tough one. You could sit on the Supreme Court then. All rise, justice cramer. Why not . I can ask 20 questions as well as anybody. Why not. Can you imagine asking 20 questions in front of cramer . I think they would finally have to bring in cameras. If i am on the court, i want kangaroo court. The prosecution is always right. They dont pick those names out of the phone book. When we come back, how do you get back into the green after yesterdays fallback . Cramers mad dash is next. The president will speak at 10 35, this time on an immigration bill he wants congress to sign. A lot more still to come. Squawk on the street will be right back. [ male announcer ] when we built the cadillac ats from the ground up to be the worlds best sport sedan. People noticed. The cadillac ats 2013 north american car of the year. 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If you are what you say you are, a superstar, then have no fear, the cameras here seven minutes till the opening bell. Mad dash time. Well talk deals. Market leader, these companies that make these deals and their stock goes up, ive always said to you when will the bankers like really start pushing because look at this. Look at this theyre pushing. Its not helping but theyre pushing. This is the kind of run and they reported numbers as well. Yes. In germany. You can make this world wide scale, walgreen alliance. Mckesson saves the Health Care Companies money. And of course bankers are out there constantly talking about how often the acquirer stock goes up. They are, they are. But its not helping because you come back to the basic issues of ceo confidence, which is thats washington. Theyre buying a german company. Now, yesterday you were delightfully asking me when i was up at teavana about the Great American growth retailers, tractor supply, its very big, 9 billion company, reporting a blowout number, adding stores, really terrific. This is one of those stories, people doesnt realize, 1938, theres 1,200 stores, its a real company. And following up on yesterday, lumber liquidators, they hit the high number. This is a 3 billion retailer and, you know, theres one mention about that federal investigation. No analyst talks about it. Why do i focus on these companies . 17 come many store growth, adding stores left to right, got a new concept. Its all love, david. Its all about love. Until its not anymore. Exactly. Its great until its bad. And when do you ring the bell . You dont know. You dont know. And aura tractor supply. When you think of kohls, penn penneys obviously penneys troubled. They want oxygenated growth. This 3 billion company has caught the love affair of growth funds everywhere. We got a lot of earnings, as you heard about, a lot of stocks to watch. More squawk on the street at the opening bell after this. Fo, but at xerox weve embraced a new role. Working behind the scenes to provide companies with services. Like helping hr departments manage benefits and pensions for over 11 million employees. Reducing document costs by up to 30 . And processing 421 billion dollars in accounts payables each year. Helping thousands of companies simplify how work gets done. Hows that for an encore . With xerox, youre ready for real business. Hows that for an encore . At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. Became big business overnight . Like, really big. Then expanded . Or their new product tanked . Or not . What if they embrace new technology instead . Imagine a companys future with the future of trading. Company profile. A Research Tool on thinkorswim. From td ameritrade. It was a pleasure meeting you for dinner at the end of september, the carl icahn letter, we have copies here at the desk. We could not be more supportive of you, the culture and the innovative spirit it engenders. Hes not going to go after management but he presses the board. He says 525, lets get it started, i know its a big number but its appropriate and relative to the size and strength of your company in terms of how much cash flow you generate and servicing amount of debt, you have 170 billion in the bank. Well see if it resonates at all. They obviously had a good dinner. Tim cook is its great to be able to meet him and talk to him about what hes doing as manager of the company. But youre right, Capital Allocation is very important. [ opening bell ringing ] the big board down here this morning, we have inspiredmd, a medical device company, celebrating its listing at the nyse and citycon on the nasdaq. You just like saying that because kleinfeld. Have you noticed alcoa sneaking up . Alcoas up 1 since when it recorded. You laughed kleinfeld. That stock is going to be up nicely. Historically when stocks are kicked out of the dow, the next 13 months are generally very kind. And klaus has done an amazing job. This is an industry where they give the stuff you know, you recycle aluminum. Its difficult to come up with new uses. I think alcoas on a new comeback. Underarmor is going to get some attention. They did raise outlook, conservative on the guidance. International continues to be a big push for a company thats basically north america focused. I want to hear the call. I think i never want to be so glib as to say just go buy it here, but this is a great growth company. And the Company Keeps coming up with new products. Its nike under armour. I think its probably down too much but i dont want to be glib. Theyre citing inpomport dut but that will need clairification. Its a technology company. You know why he came up with these great products . Worlds sweatiest man. Yeah, i get that. His mom would be so proud. Dont give up on it, i think its an innovative company. They do see the stocks reaching the low end of their full target on earnings. Hersheys, 104. I think the estimate was 108. Raises their longterm aps target. A story today about rising cocoa prices and what that may do to prices of chocolates over the Holiday Seasons. Chocolates sold in convenience stores. When gas prices go down, their prices go up. Yesterday we had Consumer Product companies doing well. This market changes directions in a nano second. International paper on mad money tonight, that stock has been straight down and now finally its finding footing. People want to buy cyclicals today. Theyre oversold. Deutsche bank to a buy, raises the target to 30. This stock has been up, i like that company very much. Obviously i would love it if they could get amr that, stock would double. Its already starting to go up without that but that is what a combination that would be. What a combination. I should mention shares of at t are down. Im going to get to the quarter in a bit in the faber report. Take a look at at t, its earnings and why the stock is suffering a bit. Verizon got hit on that deal with vodafone. Its been up ever since. A lot of people like the numbers, maybe we talked to at t, maybe thats the problems, the numbers not that robust. Get into it. Wait for it. That was a little tease. I did it with teavana yesterday. That was tea it was. A location on the Upper East Side 84th and madison. I wonder if there was a line. Semantic, the worst performer on the s p. Altera was really bad, ceo of palo alto network. The Cyber Security business, the bad guys are fast. Theres a lot of price cutting but you have to take a longterm industry pattern. Theres a lot of cyber crime and everyone is trying to come up with solutions. Intel bought mcafee. Mcafee. Angela merkel might want something for the nsa. This s important story developing when you think about the totality of whats going on in this country. Our allies are not happy with us, the chinese are not happy with us. Why not the health care peop people . Government works in mysterious ways. There is some dayafter cat damage. Jpmorgan cuts to neutral, Raymond James cuts to market perform. They make the best machines. Keep coming back to that. Stock was up huge in the premarket, you wait for the guidance for Conference Call and they guided negatively. Dont trade when the headlines come out, akamai, because its that conference right before the q a when they lower the boom and you dont know what the boom is going to be and akamai was terrible. Its a shame. Its a good company. Deutsche goes from hold to buy, even as i think they take down ubs. A big piece in the times today about a letter to jamie dimon saying dont worry, it worked out for blankfein in the end. That was a really interesting piece. How lloyd has been able to really become the senior statesman of the group. The p. R. People at goldman also very helpful. Well, they brought in a new team. They seem to have done wonders. Yes, the beard. Its all the beard. You know how many times im tempted to get that beard because of the success that lloyds had with that. Go for it. You think so . Yeah. Wow. Hes developed a new karma. Hes very funny. Lets talk at t. Now we teased it a little bit. The company did report after the bell yesterday. Conference call followed that report. Stock is down a little less than 2 , had been down as much as 2 . Not a bad quarter for at t. To those who might choose to sell today, perhaps theyre focused on a couple of different things. One might be the fact that, yes, at t did add 363,000 postpaid subscribers, which was above expectations but a lot of that, in fact more than all of it, was tablets, 388,000 tablet net additions. So if you net that out not that you should except tablets are not typically as high in terms of average revenue, not as high in terms of quality. Those who sign up with at t for their tablet. If you were to take out the 388,000, theyre not growing at all and theyre losing on postpaid stuff. Now, again, they did grow because they added a lot of tablets. There may be some focus on that. As for margins, fine, in fact. In line if not above. U verse was quite strong there. Interesting to note theyve got 10 million total subscribers at uverse. Thats becoming a major, major part of the company, competing with the likes of our parent company, of course, comcast. Think about 22 million, directv or dish. These are real competitors at this point. They did i think it was 655,000 high Speed Internet subscriber ads and 265,000 video ads. That was the second highest quarter ever, best quarter in almost five years. Let me play devils advocate. Sounds like a good quarter to me. There were some very good things in this quarter. There were. There were great yields. Overall, 2 Revenue Growth and thats even a little squishy. Again, this idea they really didnt gain any postpaid subscribers, didnt tell us what they were going to do with the proceeds of the big tower sale. It is a slow and steady quarter. One thing that may help is Interest Rates move down. Interest rates move down, that 5 yield looks a lot better. Thats what i was thinking given the 10year, its a very wellrun company. Verizon just having a better time right now. The key thing when you look at all four companies, sprint, tmobile, verizon and at t is the coming competition. We thought we might see it in at ts numbers, really taking a lot of subscribers away or having an impact. Its not clear that that impact was that dramatic, although again i do refer you to the postpaid adds numbers. But whats coming when they really get it going over at sprint . Ledger willing to say anything to anybody about having to do with tmobile. I know hes doing it in a tshirt but thats going to be interesting competition. Dan, the ceo of sprint, was on mad money. When that company is loaded for bear and they finish the nextel, i think sprint will be able to come with a program to give you a great deal. You dont want a fight a guy like this. And he has the 300year plan. Boeing has a 20year plan. The like of uverse and the ability to offer a complete package is something tmo will be able to do, or sprint. There is one company that had a fiveyear plan, it went very off. I just want to congratulate them from get being back on track, aem. They did a great job today. Ive been very critical of them. They may be back on track and thats good because gold prices are not doing that well. People who own gold stocks, its always incredible. Its probably an interesting stock to buy, agnicoeagle. Weve seen some relief in the raw metal. People dont like the metals. With all of that, dow is up 44. Bob pisani is on the floor. Hi, bob. Hey. This is the biggest day of the quarter for earnings. Its a good time to review where were at. I looked at 9 missed on earnings. Thats an unusually large number. 14 missed on revenues. This is really the trend so far. 213 Companies Reporting, 42 of the s p, 66 beat on earnings. The historical average is 62 . More are beating on earnings than the historical norms but only 50 are beating on revenues, well below the historical norms. This is the trend going on two years essentially now, generally better on earnings but not as good on revenues. Bottom line here, were continuing the overall trend. Auto is holding up really well. Ford had another great number, raised their fouryear forecast. Autonation was fair, not great. Ration de i raytheon doing well, United Continental is a rare miss but thats an anomaly among the airlines. Southwest specifically talked about the lower fuel costs, gave a number to it, 5. 7 lower fuel costs year over year, lower prices per gallon, higher prices, stronger bookings. Thats the trend. They expect another yearoveryear decrease. They talked about it specifically in the Fourth Quarter. Hotels doing great. Starwood said theyre at a sixyear high today, raised their 2013 eps. North american occupancies are at an alltime high. They went out of their way to say revenue per available room increased by 6. 9 at their hotels. Ceo went out of his way to say hes bullish on longterm trend on rising well and increasing demand, even though they might see Slower Growth in china. We had problems with the semiconductors yesterday. It was an unusually large number giving weak revenue guidance but elsewhere the numbers were good. I looked at f5 network, file storage pace, they had a great report, theyre up today. The industrials so far and im including caterpillar, 3m is a good example. They beat on the top line but the narrowing of the guidance is helpful. Its an indication of what a middle incline of earnings were getting in big industrials overall. I would note the lower dollar is helping u. S. Multinationals overseas. Back to you. All right, bob. Thanks so much after that. When we come back, shattering more than just windows. Find how the who is saying now is the right time to break up microsoft, which reports tonight . And later in the fast money report, carl icahn and his letter to tim cook. Squawk on the street will be right back. [ male announcer ] staying warm and dry has never been our priority. Our priority is, was and always will be serving you, the american people. So we improved Priority Mail flat rate to give you a more reliable way to ship. Now with tracking up to eleven scans, specified delivery dates, and free insurance up to 50 all for the same low rate. [ woman ] we are the United States postal service. [ man ] we are the United States postal service. [ male announcer ] and our priority is you. Go to usps. Com® and try it today. Welcome back to squawk on the street. Im Sharon Epperson at the nynex. Platinum group metals are actually rising on better than expected u. S. Car sales data, that of course as many of these products are used in auto converters. Well continue to watch whats happening in the oil market as well because the rise that were seeing week after week in u. S. Crude Oil Inventory certainly putting pressure on oil prices and we are seeing them slightly lower in this session. But were paying most attention to natural gas because that is the data well get out today from the energy department. Were expected to see a rise in natural gas, levels of storage greater than what we normally see. Were looking at natural gas futures under pressure before the number comes out at 10 30 a. M. And, carl, you know ill bring it to you live. Absolutely. Thank you for that. Theyre talking 3. 15, the National Average by the end of the year. That would be the lowest since 2010. That would have an impact on the retail season, which citi says wont be very good today. This is terrific news. The yearoveryear we had sandy, there could be some surprises. Im not as negative about the consumer other than washington when i see gasoline because thats just money in your pocket. So maybe you go from dollar tree to walmart, or maybe you go from Dollar General to target. I dont want to be as negative. And oil i think goes to 93. Interesting. Citi by the way, today says it is a shorter calendar. Their favorite picks Dollar General, macys and walmart. I think they see some people may be graduating down the other way. Macys has been hanging in there. Jcpenney has been somebody theyve taken a lot of business, Dollar General expanding in california. Walmart can be here or there. I dont know how to value the stock price. Why not . Because i dont understand the merchandise right now. The Dollar Stores do better. Its almost as if im trying to figure out did people trade down from walmart . And thats unusual. But a lot of that might be the Dollar Stores. If you go to them, they no longer look the way they used to. They actually have a little pizzazz. Stuffs not on the floor lying around and when i go to dollar tree, i am like kind of very impressed at the niceness of the aisles, the terrific people, clean stores. Ive got two dollar trees i go to and they are super. Walmart is focused on that dollar store window, would they even consider doing an acquisition to get involved . They should buy dollar tree, its a Great Company. Ford zooming past the street with its Quarterly Earnings and positive outlook. Stay tuned for an interview with its cfo, robert shanks. But first coming up, investing in this market can be quite the fight. Thats why we have cramer with his six stocks in 60 seconds. Hell help you avoid the mess when squawk on the street returns. Tdd 18003452550 trading inspires your 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. Time for six in 60, six stocks in 60 seconds. Pretty good quarter out of starwood. They make fun of me because of kleinfeld. This is fritz. I love fritz deutsche goes buy to hold on panera. Yeah, its a very discouraging Conference Call, about not being able to put the food through fast enough. Citi on chesapeake. A lot of people talk about hidden value. I think there is more data. Meta data. This is software, a service for the Health Care Business for testing for drug companies. Its terrific. Tarik charif is the ceo their. And then finally look at this this is what were looking for in a company. This is a Great Company sant ander. What do you have on mad money . Were going to show how to make paper tonight on international paper. 6 00 and 11 00. Thank you lets get to simon. The burning question of the day, can apple stock rise 140 . And will he get his way with tim cook . And well have puchback on obama care and minimum wage from andrew puzder, and well be joined by the chairman of the Boston Red Sox, mr. Tom werner. That and more in the next 60 minutes. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. More than a new interior lighting system. It is more than a hot stone massage. And more than your favorite scent infused into the cabin. It is a completely new era of innovation. And the highest expression of mercedesbenz. Introducing the 2014 sclass. The best or nothing. Introducing the 2014 sclass. announcer scottrade knows our and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. Welcome back to squawk on the street. Our road map begins with apple. Carl icahn asking the tech giant to commence an immediate buyback offer to the tune of 150 billion in a letter to apple ceo tim cook. What should cook do now and what does it mean for the stock . Plus technical problems have been plaguing obama care web sites and lawmakers now want answers. Congress grilling the contractors responsible for the federal site this morning. Well take you there live. And the chairman of the red sox after a great game last night, tom werner will join us to talk about the future of media and the stocks big win in game one. At the top of the 9 00 hour, we told you what would be the key contents of carl icahns letter to apple. Those have been made public on the web site. He holds a 2. 2 billion share in the company. He says in the letter that if you were to borrow much of the money to actually accomplish that given so much of the cash is actually overseas and they wouldnt bring it back, if you borrow 150 billion at 3 Interest Rate, comment a tender at 525 per share, it would be a 33 increase in the value of the shares, which assumes no multiple expansion. He also says he would not tender into that offering for whatever reason, therefore actually accreting up his position in the company. He also says in the letter he wants to be very clear he could not be more supportive of you, meaning tim cook, the ceo, the existing management team, culture at apple and innovative spirit it engenders. Hes focusing his criticism solely on Capital Allocation and certainly urging the board to get more involved perhaps in that. Whether or not any of this happens of course, its probably unlikely, isnt it . Even the idea of 150 billion bond offering, for example, would equal the nine largest Investment Grade Bond Offerings ever done taken together. One would think that might not actually happen. Plus, why would you tender at 525 . Thats where the stock is right now. All that being said, lets get insight here from gene munster. How likely is it that apple would consider the plan that carl icahn is proposing . I think what this does is inch the ball forward for apple to be a little bit more aggressive with Capital Allocation, that theyre going to revisit on a yearly basis, which would be the next time you could see a bump up. Carl is probably shooting for the moon and hoping to fall somewhere short of that. I think thats more or less what hes doing. That makes sense in a lot of ways of course given this is not particularly realistic to ask for this. But that said, then, lets assume he continues to pressure. We know he will. He says hes going to be in here for a long time. What would you expect if they were to, in your opinion, revisit Capital Allocations. What would that look like . Youre looking at about 50 billion a year, even considering somewhere between 30 billion and 50 billion a year in cash, some of thats offshore. Ultimately, 60 billion buy back they could increase comfortably by 20 or 30 billion a year, keep doing it every year. In terms of what the existing plan is, that would kind of be a 40 , 50 increase of what theyve got already on the table here. They could do that on a yearly basis for the next few years. Gene, just a question here. If im the ceo, if im tim cook, i read through this letter, i say, okay, that sounds great. It also smacks of Financial Engineering to some extent. Why shouldnt i be taking all of that capital or borrowing massively to do capex or research innovation. Do you know what i mean . From a Strategic Point of view, does that amount anything more for apple than just playing around with the stock price . Theres no reason they need the cash balance of the 145 million. Thats absurd. You have to look at it through the lens of apple. Its unreali iistic to have tha cash flow. The reason they have that is where the companys been over the last 20 years. I think you have to paint yourself into a different kind of mindset when you think about these numbers. If apple has a perpetual fear of running out of money and thats why they keep this absurd amount of cash. Finally, we have one line getting tossed around a lot reads this way apples board of directors does not current litscurrently include a board member can a track record. Is that a veiled does he want to be on the board . How would apple respond to that . It feels like carl kind of likes the attention, i dont know what the right word is, kind of around it. Based on some of the details of the letter youre sharing, im sure hed love a chance to do that. I dont know if the board would i think its probably a better chance that they do the 150 billion repurchase than he gets a spot on the board. Yeah that, would be an interesting one. Look, if nothing its certainly something of a distraction at this point for tim cook. Well see what the numbers look like on monday. Thanks for you time, gene munster. And carl said it himself, he tweeted to the world well be talking more about the web site and apple with scott wapner at noon on cnbc. Dont miss that interview on halftime. Theres plenty to cover and thats coming up in just a couple of hours. In the meantime, glitches have been plaguing the federal obama care web site and now Congress Wants answers. Officials of the two main contractors hired to build the Health Care Exchange are testifying before congress this morning and Bertha Coombs is live in washington with more on that. Reporter good morning, simon. The q a portion is just getting under way. The four Key Contractors that are testifying this morning include cgi, responsible for the overall architecture of the federal exchange, qssi, a division of United Health is responsible for some of the software in terms of identifying and registering people, equifax and circo. Some of the decisions, according to the contractors, led to some of the problems we have seen. It appears one of the reasons for the high concurrent volume was a late decision requiring consumers to register for an account before they could browse for insurance products. This may have driven higher simultaneous use and of the Registration System that wouldnt have otherwise occurred if consumers could window shop anonymously. Now, according to committee members, qssi had indicated they had said to cms there would need to be some other changes in order for this to work well. Thats within one of the things want to question them about, one of the questions that the chairman had this morning was if it didnt look like it was going to work well, why did you all say it was okay to go live . If cms had the ultimate decision for live or a nogo decision, not cgi, we were not in a position. Were there to support our client. It is not our position to tell our client whether they should go live or not go live. Cms very much talked about this morning, though of course they are not testifying. Health and Human Services secretary Kathleen Sebelius will be up before the committee next week. What the gop is attempting to do is to say, first of all, the reason that it doesnt work properly is because you got to preregister, you got to go through a lot of data before you can browse the site and the second reason why you have that or why it was designed that way is because the white house wanted everybody to see the prices with the federal Tax Deduction on it. In other words, theyre trying to create a logical chain with win to blame obama for what is happening. That is what many on the committee believe is the chain of what happened there. There are those who say theres not necessarily a nefarious coverup going on but basically mismanagement in the way this was put together. Well see what comes out from todays testimony which side it goes to. Okay. Our next guest employs 70,000 people across the United States in restaurant chains. And he says obama care is hurting american consumers. Andy puzder joins us. Good to have you back. Good to be here. You wrote its unequivocal, abundant and consistent with common sense. How long do you expect it to last . Youre not having the real impact because they delayed the employer mannt mandate. During i dont want to overwhelm you with numbers, during that period of time there were 8 33,000 parttime jobs created and we lost 97,000 fulltime jobs which means net job creation was 736,000 jobs, 100 of which were parttime jobs. So it clearly had a very significant impact. Now thats been delayed because of the we know about companies trying to improve productivity being hesitant to take on longterm legacy costs. How much of that do you attribute to obama care specifically . What you need to do is look back over the period of time since the recession. When people talk about the recession causing an increase in parttime employment, people are dealing with lower revenues, youre going back to september of 2008. If you look at that entire period of time, of course youre going to see increased parttime employment as we try and recover, but that sixmonth period even stands out in that Overall Economic recession period. And the guy that ran the bureau of labor statistics for the Obama Administration from 2008 to 2012 said hed never seen anything like parttime hiring during that sixmonth period, that it was remarkable. Ben bernanke said he wasnt sure the official Unemployment Rate was reliable because of that parttime employment. And then youve got the unions out there writing letters to president obama saying youre destroying the 40hour work week. Im not making this up. This is in the b. O. S. Number. Andrew, just a quick question because you actually have talked in the oped that you wrote about the bipartisan 40 hours. This could be interesting. If a fulltime worker were defined not in terms of hours per week but hours per month, 174 hours per month, that would be one way perhaps to protect some of these positions . Absolutely. The reason we have a 40hour work week is because the government passed a law, the federal government passed a law that said if you work more than 40 hours, your employer has to pay you overtime. That made people that work over 40 hours less economically efficient than people that work 40 hours or less so we have a 40hour work week. Obama care changed that. It took that down to 30 hours and said if you work 30 hours or more, youre now less economically efficient than if you work under 30 hours. If were going to change the trend to employ people less than 30 hours, were going to have to chang that metric, those hours worked. The 174 hours a money or 40 hours a week would be a way to do that, get more money into peoples pockets so they have more money to Purchase Health insurance. I think this could work. Its a bipartisan bill. It not a republican bill. Andy, i hope everybody goes back and reads your piece in the journal, i think it was from october 10th. It good to see you again. Thank you, carl. Good luck tonight. Well need it. Lets get back to the market. Over the past weeks stocks and bonds have both been rallying, the yields on the 10year driven down decisively between 2. 5 . Are the reasons for the rally contradictory . If they are contradictory, which will be proven correct . Guy, like my take off with you. Why is the treasury market rallying as strongly as it is . I know its about tapering to a certain extent and the fact that the Federal Reserve may not cut back on its tapering. But at the same time, isnt the underlying reason for the rally in bonds because the Economic Outlook is now so much poorer . Well, very much so, simon. I think i like to describe it as macro myopia. In other words, we look at sort of one major factor at a time in the market, which has been increasingly occurring in the bond markets to the last several years to the ignorance of Everything Else thats going on. I think right now were squaring back on the Federal Reserve and the tapering debate as been overdone. Its talked about time and time again. Looks like its going to be buying bonds for longer and that simply moves toward higher prices and lower yields. What about the outlook that implies for the economy . Well, weve been to some degree economic pessimists over the last several years. That reflects the idea that theres no source of longterm inspiration. If you make the argument that Economic Activity is going to pick up in the first quarter, all one has to ask is why and that sort of defeats the whole argument about economic expectations. If what guy says is true, for how long can the stock market continue to rally to records if the underlying state of the economies are in question . Well, simon, our assumption is 5 6 Earnings Growth this year, next year and probably 2015. You know, the economy has been in a very modest growth, modest inflation environment for a while. Its not going to change. Thats the situation. I think bonds overshot when the need shot up and this rally back we cracked 250 here in terms of the yield. I man, that doesnt surprise me at all. Were in a low inflation, modestgrowth environment. But stocks, because valuations are still reasonable, still below the historical average, you know, i think that the gains are in for this year, 1650 to 1,700 is our yearend target for the s p 500. I feel comfortable thats where were going to go. I dont think were going to see much follow through this year. But by the end of 2014, i think youll see the market 1,900, somewhere in there. We have profitability on an 84year high. That cannot be sustainable over the long, can it . At some point you have to question that profitability. Well, i think so but i think right now, you know, margins are at record highs. And what really simon, what we really need, if you believe and the facts are that 50 of the revenues from the s p 500 come from overseas, if we just see a little bit of improvement out of europe, which i think were going to see a little bit of improvement out of the emerging world, a little bit of growth here, thats how you get to the 5 , 6 Earnings Growth thats a little below the historical average, you take valuations and you see the market move up another close to 10 from here over the next 15 months is not a stretch at all. Guy, thank you for the analysis. Scott wren and guy lebas. Coming up next, google trading near new alltime highs today, 1,032, up about a tenth of a percent this morning, the stock seemingly unstoppable despite that high level. Is there more to come or is it time to sell . And later the chairman of the Boston Red Sox, tv legisla lege werner. Hell join us live. Squawk on the street will be right back. [ laughter ] [ female announcer ] each one of us is our own boss. And no matter where you are in life, ask your financial professional how lincoln financial can help you take charge of your future. Welcome back. Google hitting a new alltime high, over 1,040 in early trading today. Heres a look back since its ipo in 2004. Thats a pretty Straight Line up with a blip for the financial crisis. The question is whether theres more room now for the stock to run from here or is it time to sell out of the shares . Ken with an outperform rating and jason at oppenheimer has a market perform. Guys, good morning. Good morning. Ken, first you. Outperform here. How much further do the shares have to go . I think they can continue to move. Theyve moved a little quicker than i was expecting but i havent changed at all in terms of the conviction. When youre looking at what google has to offer, the fact that they make most of their money through services gives them an advantage in hardware and software and ultimately it stands to make them somewhat disruptive there. And what do you see have they hit your price target yet . Were at 1,100 right now. But i would say, look, theres still up side from there. Google is doing a very good job putting a lot of platforms together, android, probe, youtube, search, everyones doing logged in searches at this point. I think for the potential for it to be a gate way at some point, its closing the loop between online and offline advertising. Interesting. Jason, what say you . Why is that not feasible . Part of it is we look at the fact that moves with the market. The question is how much more outperformance can you get from the market . When we look at the most recent quarter results, i think frankly you have just as big of a surprise on margins, which is completely not predictable as you did on the top line. Yes, they were successful shifting search revenue out of the webtype business into their own where they capture more of that revenue but longer term we think the challenge for the company is going to be multiplatform. Users do not want to be logged in when they search. As a result, its going to be much harder for google to connect from your desktop and mobile devices. Ken, a lot of people are still curious as to why they bought motorola and still there are substantial losses at motorola. The journal a couple of days ago floated an idea that maybe they bought motorola in order to kmod tiez as much as they could the market, to force prices down simply to get android out to more millions of people, particularly in emerging markets and that was the longterm aim. Would you give that idea any credence . I think google has a couple of approaches here. Through motorola, they are pursuing hardware, but i think also with chrome and their chrome tablet, theyre pursuing a sync tactic. Google would like to see, i think, hardware ultimately commodityize but i think that goes back to my earlier point that theyre in a good position because they maybe most of their money on services and to the extent they can fund their investment in infrastructure in software and hardware through that, they tend to be disruptive among many of the other players in the ecosystem. Ken and jason, thank you. One of the country as largest drug distributors, mckesson, is seeing big gains today. Well tell you whats supporting the move after the break. Here at fidelity, we give you the most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second trades. And at the center of it all is a surprisingly low price just 7. 95. In fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. Im monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Always go the extra mile. To treat my low testosterone, i did my research. My doctor and i went with axiron, the only underarm low t treatment. Axiron can restore t levels to normal in about 2 weeks in most men. Axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. Women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. Report these symptoms to your doctor. Tell your doctor about all medical conditions and medications. Serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. Ask your doctor about the only underarm low t treatment, axiron. Welcome back to squawk on the street. Check out drug distributor mckesson, which is on a tear. It agreed to buy a german competitor for 8. 3 billion, including debt, as it looks to grow internationally. The Company Posted quarter live results that beat streat expectations and, key here, lifted its outlook for the full year. Thank you, dom. Be on the lookout for lower gas prices. Crude oil has plummeted. What does it all mean for Consumer Spending heading into the Holiday Season . Could be a little bit of a help. Plenty more on that when squawk on the street continues. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. Welcome back. Im Sharon Epperson at the nymex, breaking news about natural gas supplies. For the week ending october 18th, supplies rose by 87 billion cubic feet. They were looking for an increase by 82 billion cubic feet. But traders say some of that may have already been priced in. They had a number on tuesday that was reflective of the week that was delayed due to the Government Shutdown. Were looking at Natural Gas Prices that had fallen to 3. 54 for the session low. Were off of those lows right now. Were continuing to watch where the weather patterns are taking us as well because as we get into the winter season, chilly, very chilly this morning here in new york. Well see if that gets factored in to the surprise as well. We are looking at a decline here in natural gas futures. Sharon, energy so interesting right now. Sharon epperson this morning, thank you very much. Well keep an eye on it. Now, from tv to sports, he does it all. Hes now the chairman of the Boston Red Sox. Legendary producer tom werner will join us live right after the break. Plus carl icahn said it himself. Hell be speaking to scott wapner live on halftime in about 90 minutes or so. You wont want to miss this one. Well be right back. I love having a free checked bag with my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. Good news for many. Gas prices are at their lowest level since january. Could 3 a gallon be here to stay . The chief gas analyst for gasbuddy. Com, Tom Kloza Jones us. If youre in the midwest, youre going to see prices drop sharply. Where do you think prices are going here . Were going lower. This is the second phase where weve seen crude Oil Prices Drop back. For of dollar in crude, you lose about 2 1 4 cents of gasoline. I think were probably going to stumble somewhere close to 3 or so. Well certainly drop below the lowest number since the arab spring back in january of 2011. Whether we go to 3, not so sure. But most people will see Something Like that. What if the president were to approve the Keystone Pipeline tomorrow . Not a big deal really. I mean, if he were to approve it tomorrow, it would take a long time to sort of get it online. Thats going to start the next big debate after keystone, which is will we sanction exports of u. S. Oil when the u. S. Oil boom runs up against sort of the problem of nowhere else to put the u. S. Oil. So thats going to be the big debate in 2014 and 15 and will be more contentious than keystone. I know you say the lowest prices at the pump not likely to provide a catalyst no, i think the u. S. Consumer is very grumpy. Theyre like sort of the old man returning a bowl of soup at the deli. Theyre not going to drive more, theyre not going to take more vacations. And when you consider it, generationally, we didnt spend 1 billion per day on gasoline until december 2007. Now its routine. Its a total boone, though, if you dont have to take so much wealth out of the country to pay the arabs for the oil youre consuming. Absolutely. What do these prices mean for the shale . These are very, very good numbers for producers as well. Dont be fooled. Up might hear producers cry wolf about, oh, its going to stunt the shale boom. This is a sweet spot right now and we have another 10 or 15 of sweet spot. Once you get below 80 for wti, then you start to impede the shale boom, perhaps and p but right now this is a nice sweet spot for north america. If were coming off of a commodity super cycle, if that has anything to do with it, or just because of innovation and Everything Else thats going o, what do you have think in 12 to 18 months is going to be for the price of gas and for oil . I think the new normal will be something probably between 85 and 95 for u. S. Crude. But offshore crude will be 100 to 115. So were going to be the privileged continent once again. I think well see gasoline prices in 2014 and 15 be like they were in 2010, which is under 3, above 3, higher prices on the coast. Surely the politicians are not going to stand in the way of that spread if the Oil Producers want to start exporting at a 20 premium. Theyre going to prove the export ban . I cant imagine the export ban will get any great sport in 2014. Now 2015, who knows. I really enjoyed that interview. Thank you. Pimcos bill gross tweeting a little while ago that carl icahn should leave apple alone and spend more time like bill gates and say if icahn is so smart, use it to help people and not yourself. Guaranteed well hear a response from carl icahn later today. Very interesting choice by bill to do that, pick a fight with carl. Carl has signed a pledge, hes going to give away at least 50 of his money, he said, though im not sure each has a plan for doing so. And hes got a lot of it. Over 20 billion now for mr. Icahn. I dont know. Twitter can be a dangerous thing, kelly. Its a very curious tweet. Carl icahn will be on cnbc at noon. Coming up next, red sox chairman and tv legislaend tom werner wie with us live. R start and end price. And let it do its thing. Wow, more fan mail. My uncle wanted to say thanks for idea hub. He loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. [ male announcer ] open an account and get a 150 amazon. Com gift card. Call 18882800149 now. Optionsxpress by charles schwab. [ male announcer ] united is rolling out global, satellitefed wifi to connect you even 35,000 feet over the ocean. Thats. Wifi friendly. The Boston Red Sox will try to take a commanding two games to nothing lead in the world series tonight after a dominating victory over the st. Louis cardinals in game one. The red sox have had quite the turn around. Just last year they had their first losing season in more than a decade. Joining us this morning, tom werner is the chairman of the Boston Red Sox. He joins us this morning from boston. Great to see you again. Good morning. Great to be here. Fenway park was rocking last night. No doubt. My favorite line in the papers today, the red sox, whether theyre clean shaven idiots or bearded wonders just dont lose when they get to this point of the season. Its been 27 years sense they lost a world series game. Is this going to be a sweep . Oh, no, i dont think so. I think the cardinals are an outstanding team. But we did get off to a good start. Jon lester pitched a brilliant game. I think this series is going to go very deep. The words worst to first get tossed around a lot but this was the real deal. What did you attribute it to . How did you do it . Well, i think, first of all, our fans in boston do expect october baseball. And we were as disappointed as our fans and our players about our performance at the end of 2011 and 2012. I think that the start of the turn around was the trade we made with the dodgers where we shed about 250 million in payroll last august. We invested that in a number of players that were new to the red sox this year. I think theyve all performed well. None of them actually were highpriced free agents, but they all were veterans, they all had something to prove and i think that while we surprised a lot of people, there was a lot of optimism in spring training that the turn around was beginning. Nobody knows more about making money in television than you do. What do you think the industry will look like in 20 years time . Do you think people will have cut the cord . How many thousands of jobs do you think will be lost in the industry . In television . Yes. Well, i think that the industry is as strong as ever. There are 250, 300 channels, people are getting the content they want, how they want it, whether its on their ipad or in their home. I think that the industry is going through a great rejuvenation right now and the content will continue to be king in 20 years. And do you think thats sustainable, though . Because that content, a lot of it is funded from the subscription to the cable companies. In those subscriptions are not going to be paid, a lot of the network will lose 50 of their income. People are watching as Much Television now as they did 10, 20 years ago. The number of hours people are watching in their homes or on their mobile devices is as high as its ever been. I find that people will search for content wherever it is. Tom, i want to ask you about this as well, speaking of content. We understand that youre in Development Potentially for a series on stars that would involve lebron james. Can you tell us about that one . Sure. Well, lebron james and his partner maverick carter and we and stars are doing a show that is about nominally its about an nba athlete and his group of friends and his family. But its going to be dealing with not just issues of wealth and fast times but the importance of family and the importance of race. I dont think we talk enough about race in this country and im excited about this series. Is that why, in fact, you wanted or had an interesting in developing it . How soon do you think people can expect to see that series . We actually just had a good script conference on it this morning. Were about to go into casting and the rest will be up to how well we can produce a good pilot. Tom, youve been at the producing game for a long time. Youve seen distribution change so many ways since you got started. How has netflix changed that game. As pitch meetings go now, where do they rank . Do developers and producers want to hit them first or last . Well, certainly netflix is an extraordinary new way of distributing product. And, again, the consumer, he may want to binge watch a show, all 13 hours in a weekend. And so the idea that the networks have of at 8 00 you have a hit program and then you feed it into a show at 8 30 and then at 9 00 another show, those days are gone. People are going to find the shows how they want it, when they want it. So netflix is just a great new way for content makers to get their product to the consumer. And if youre a cable provider, is bringing them on to your settop box an invitation for people to cut the cord or do you want to keep your enemies closer than your friends . The cable industry is going to be here for 10 and 20 years. One of the ways that i know that is that theyre investing more money in sports programming. And you can see the rise in rights fees that good content has. Look at the deal that the dodgers just made with Time Warner Cable in los angeles. Yeah. Well, anything to get live eyeballs, right . Thats right. Other than baseball by the way, what are you watching right now . Whats your favorite series on television at the moment . Im still watching homeland. I was riveted by the ending of the episode on sunday night money. Dont spoil it unbelievable. I saw patinken was on and said he actually wept come on i just finally got to six. Where is the beard . Doesnt you want club unity . Did they pressure to you do that . I think john henry, Larry Lucchino and i may grow a beard after the world series. Well let the players do it. Weve put beards on all the statues across the city and the ducks in the boston commons. So theres red beards everywhere in the city on the statues. Thats an invitation to get up to the common today, thats for nice to be here. Tom warner is the chairman of the Boston Red Sox. Now, president obama will be delivering remarks on Immigration Reform in washington shortly. Lets bring in the chief washington correspondent john harwood this morning with what to expect from the president. John . Reporter kelly, the president has actually started already, and what hes trying to do is fill the vacuum in washington after the debt crisis and Government Shutdown with some focus on immigration, which is an issue that hes been pushing, trying to get through the senate or he got through the senate, trying to get through the house now. And the president s trying to see if he can make headway. John boehner, the house speaker, said the other day that the house may act by the end of the year. So thats some small window of opening for the president to try to push things. But, of course, the mess surrounding the rollout of obama care and the Health Care Exchanges is also competing to fill that vacuum. And so, at the moment, hes gotten an uphill fight to return washingtons attention to the subject. John, does he think that he has a window of opportunity here . Jon huntsman rights in the Financial Times today that the gop must now be seen as a more Constructive Party to do deals on the budget, taxes, and immigration. Does he see that there is weakness in the gop of increasing willingness to go along with him on immigration . Reporter well, theres definitely weakness in the gop. We see that from the poll numbers. Im not sure there will be willingness to cooperate with him. Thats one of the tests going to be coming out of the Government Shutdown, republicans took a big hit in the polls. Does the fact a deal was averted to raise the debt limit . Does it make it more likely republicans will cooperate with him, or less, because their base is so angry and upset about what happened in the last showdown . I think most people are expecting the latter, which is why were not looking for a big budget deal, a grand bargain with the president. And i think the chances for Immigration Reform are not dead, but not a lot of optimism in washington now. All right, john, for the moment. Thank you. Live in d. C. , john harwood. Straight ahead, mcafee is sounding the alarm on bit coin. Well have more live after this break. Wow. Look at you. Ive always tried to give it my best shot. These days im living with a higher risk of stroke due to afib, a type of irregular heartbeat, not caused by a heart valve problem. At first, i took warfarin, but i wondered, could i up my game . My doctor told me about eliquis. And three Important Reasons to take eliquis instead. One, in a clinical trial, eliquis was proven to reduce the risk of stroke better than warfarin. Two, eliquis had less major bleeding than warfarin. And three. Unlike warfarin, theres no routine blood testing. [ male announcer ] dont stop taking eliquis unless your doctor tells you to, as stopping increases your risk of having a stroke. Eliquis can cause serious and in rare cases fatal bleeding. Dont take eliquis if you have an artificial heart valve or abnormal bleeding. While taking eliquis, you may bruise more easily and it may take longer than usual for any bleeding to stop. Seek immediate medical care for sudden signs of bleeding, like unusual bruising. Eliquis may increase your bleeding risk if you take certain medicines. Tell your doctor about all planned medical or dental procedures. Ive got three Important Reasons to up my game with eliquis. [ male announcer ] ask your doctor today if eliquis is right for you. Investors beware. A reents report by mcafee sounding off son bit coin and the use in cyber crimes. Rog simone is the chief operating officer for them, and is the author of the report. What is the basic problem you see here . Its unusual for somebody in your position to actually speak out to put their head above the power pit. You must be quite worried. Well, certainly people have told me, actually, maybe perhaps i should be slightly concerned. You know, weve seen Virtual Currencies be used by criminals from, you know, egol to liberty reserve. Liberty reserve itself cited as fostering 55 55 million illicit transactions in its time. So certainly people should be aware of Virtual Currencies. Im not quite getting it here. So a lot of criminals use the u. S. Dollar, but that wouldnt prevent me from carrying it in my pocket. Well, exactly. Lets be clear here. The u. S. Dollars or euros have also been used for crime, and are used for crime. What were beginning to see is a transition of products and services, for example, the sale of drugs on the internet, the sale of hacking tools on the internet, and theyre being funded and sourced through Virtual Currencies such as bitcoin, and previously through liberty reserve. Rog, this is so interesting, because then you wonder from a regulation point of view, does that imply that from should be policied aimed at cracking down on this usage . How could you im sure you cant just say, well, because the bitcoin, or one of the other kour currencies is used for illegal purposes, maybe well just make it illegal. Maybe they can, but thats too broad of a reaction here. Historically, some of the early Virtual Currencies have had so verification whatsoever. So in other words, you would have people signing up to Virtual Currencies and calling themselves Russian Hackers or youd have people signing up for Virtual Currencies saying, im going to use this transaction for the sale of cocaine. And these werent actually in any way, shape, or form red flags. So in a way, the criminals have gotten away with it. Yeah, i im still not quite getting the main point here, rog. I would have thought the main issue for most people with the Virtual Currency is who controls the supply and whether or not it then becomes a pyramid scheme. Thats not a concern for you . No, so certainly, you know, the basis of the report, one of the Major Concerns we had, was really the element of anonymity that afford the sellers of illicit materials and the buyers. This, in fact, what weve seen is weve seen a rise of cyber crime tools, for example, used for hacking, the sale of classa drugs, and even more frightening services. All right, thank you for the warn, rage. Thank you. Its been an interesting morning if youre just joining us for carl icahn, of course, having put a letter out, a public letter he told us yesterday in a tweet he was sending to apple, asking them to undertake an immediate 150 billion buyback at 525 a share, saying that to do so would bring 33 appreciation in the stock price. But also an interesting response in a tweet from bill gross. Of course, we know bill gross from pimco, very significant voice in the bond market, saying, icahn should leave apple alone and be more like bill gates. Use it for the use it not sure it the intelligence. Yeah, look, theres plenty of debate over whether theres any reason to believe this has any chance of happening, that being the significant buyback he is rur urging on the company, being a 2. 5 million of shares, less than 1 . But picking on icahn, you know, hes from queen, im from queens. I think david is on team carl, no doubt about that. Maybe from a west coast perspective, it may be an attack from the east coast financier. Although he doesnt go after management at all. Hes quite rude about who is on the board. He says you need somebody like me. Leave apple alone because of x, y, z, he just says leave them alone. Like bill gates. Just a strange usually, i thought maybe somebody had hacked his account. Does it make you what gross has done in the way of helping people. You open yourself up to the line of attacks. He gave a large charitable donation, i remember reading about, him and his wife. And, yeah, youll invite that kind of response. Twitter makes people do stranges things. Doesnt it . In the morning. If youre just joining us, heres what you missed earlier on. Announcer welcome to squawk on the street. Heres whats happened so far 10 correction would not shock me in this bull market, but i wouldnt let i wouldnt have investors try to, you know, trade that, because one doesnt know when thats going to happen, or when you get back. The jobless claims come out as 350, expected 340. Last week revised higher to 363. Mr. Icahn wants to tender immediately buy apple for 150 billion worth of its sha s shares. Its choking up jim over here. Yeah, right now, he wants a yeah, at 525, the current price, is what hes asking for in the letter. Can you imagine making an argument in front of justice cramer . That would be, you know, if we think bader, ginsburg. Maybe bring the cameras into the courtroom. I think so. And make it a show trial. I would want a kangaroo court. [ bell sounds ] whether or not any of this happens, of course, well, its probably unlikely, isnt it . Even the idea of 150 billion bond offering, for example, would equal the nine largest investmentgrade Bond Offerings ever done, taken together. The real impact from obama care hiring was from january 1st of this year through july 2nd. Thats the period of time during which employers were looking forward to obama care taking effect january 1st, 2014. And good morning. Were live here at post 9 at the New York Stock Exchange on this thursday. And lets start with a check on markets. Its a tale of good, better, and best. The s p 500, the nasdaq, the dow, which is up 76 points at the moment. Shares of Southwest Airlines are rallying today as the airlines Third Quarter earnings were inline with estimates, and they see a strong Holiday Season ahead. Dow chemical falling after missing on the top and bottom lines in its own results. In an interview in morning, the ceo said the company is seeing improved pricing and cash flow this quarter. Today, obama care front and center on capitol hill. Contractors in charge of the obama care website are facing the music this morning over all those problems associated with healthcare. Gov. Well go live to capitol hill to see what went wrong and if any solutions are on the way. How do i support you . Let me count the ways. Carl icahn extremely supportive of apples ceo tim cook in a letter today, but says the timing is still right for a significant stock buyback. The question is, will tim cook listen to carl icahn . Plus, a great day for ford. The stock surging after Third Quarter numbers beat estimates. Well go behind the numbers with the cfo, bob shanks, in a few moments, and is it time to break up microsoft . The chorus getting a little louder as microsoft gets to report earnings after the bell. If microsoft did break up, what would it look like . Well try to answer that question later this hour. Theres a hearing going on on capitol hill with regard to obama care. Bertha coombs is live with more on this. Any headlines so far . Reporter kelly, basically theyre not getting the answers. The frustration isnt partisan, were hearing from both sides of the aisles. The contractors saying, effecti effectively, were doing our part, cgi, the architecture, the contractor said, what we did, we did well. Theres other parts that arent working. Quality software system, which is the software area, more the registration part of it, saying our part worked well, its another contractor. And both of them saying, a lot of these issues have to do with cms, and their management. Committee member Morgan Griffith says hes getting the impression that basically obama officials let political pressures guide their decisions. I think they felt a lot of pressure, because they felt like they had to go forward on october 1, and i think mismanagement, and they probably missed some of the signals. The democrat didnt let the contractors off the hook. From Silicon Valley, listen, when amazon, ebay go up on christmas, they dont crash. They know its a big day. She wanted to know why they werent ready. Are you saying that you didnt test that the tests worked very well, both inside and out . Or that you turned it all over to cms . Anybody want to answer . [ laughter ] reporter there went on for a little while. We had independent contractors testing our system, as well. And what was the net result of that . What you just described. That the system was that our portion of the system, the cgi was responsible for, that our functionality worked. And it didnt. Yes. It didnt in the end result . When it became part of an integrated endtoend system. You knew it was going to be integrated. Reporter clearly frustration there that the answer they keep getting is we thought it was going to work, and we told cms, they told us what to do, and no one is taking accountability for the full project, not from the contractors point of view, guys. And when they were asked, when is this going to be fixed, the woman from cgi said, i cant begin to guess, because i dont want to raise expectations. Bertha, we are clearly in the weeds now. Interesting testimony there. We know youll cover it all day long for us on the hill. Bertha coombs, thanks. Getting over to dominic chu, getting a look at the flash. Medical device maker stryker is moving lower. It will pay 13. 2 million to settle civil charges alleging the company bribed cob doctors and government officials to win business in five different countries. The s. E. C. Said it tried to mask the 2 million in bribes in ireland, greece, booking them for travel costs and expenses. Theyre not admitting or denying any of the charge, carl. Back to apple and carl icahn. Icahn releasing the letter to tim cook. Heres a few quotes from the letter. Heres one. We consider apple to be the most compelling investment. And also this one. The criticism has nothing to do with the management, leadership, or operational strategy. The criticism relates to one thing only, the size and timeframe of apples buyback program. Its obvious it should be much bigger and immediate. Lets bring in john buckingham, cio Portfolio Manager with afam, first got in on apple at 7. Makes up 2 of sachlt fms holdings, 10 million worth. And also joining us, david ralph, Portfolio Manager, a morning fund. Apple is his largest position, owns about 900,000 shares. Guys, good morning. Especially when you think about where we are on the Interest Rate spectrum. When they did the 60 billion offering, they went out and borrowed 2. 4 for a big chunk of the debt and retiring stock that was had a dividend of 2. 8 at the time. I mean, thats alchemy, and now, are they going to agitate it that theyll do it . We have low Interest Rate, they should be buying back a lot of stock. John, you said thats financial alchemy, thats fantastic, i forget the why is financial alchemy look, we can talk about the fact this would overnight, as carl describes, mean a 33 increase in earnings per share, 33 increase in valuation. But again, its alchemy. Theres not necessarily something you know, why not have it be based on the success of a new product . Is this not a sign that apple strategically doesnt see another use for this money . Why not do it all . Why not continue to invest in r d . This Company Generates fantastic cash flow every quarter. They could certainly finance the debt on doing a big buyback. So, you know, i think its a brilliant idea. With Interest Rates so low, and this is part of the reason equities are so attractive, companies can borrow it for next to nothing and buy back stock and grow earnings. Ibms done it. A lot of companies have done it, and theres nothing wrong with it. No, you could argue thats why weve had the year weve had. David, whats your take, are you happy to have icahn involved or not . Yeah, i really am. I think tim cook needs to channel his innerhenry singleton of teledime fame. Its rare you get a chance to buy back stock at such a cheap price to be this accretive. And i think some of the skeptics who say, well, keep 100, 150 billion on the Balance Sheet to stay relevant for the next technology that may come down the road, if you happen to miss it, well, that assumes that you could deploy that much into a new, single technology, and those are typically negotiated transactions, and theres a long history that those arent shareholderfriendly type deals. Im in. Im definitely in icahns camp on this one. Interesting. Is there something to be said, though, david, tim cooks got a lot to worry about. He has a global company, trying to break into emerging markets, trying to make apple relevant around the world, keeping up with samsung, android. Having icahn on the phone, a distraction to management, or not . No, i dont think so. Again, tim cook, the whole team, has done a great job in delighting customers with their products. But there comes a time, from time to time, that you have to delight shareholders. And mr. Cook, i think thats part of his job, is to be a terrific steward of shareholders capital. Thats part of the job. He wanted the big chair. And i dont think its a distraction to have very vocal shareholders. Gentlemen, were going to see what icahn says in a little bit here when he joins us on our air. Our thanks to you, john and david, on probably the story of the day in business news, and that is apple. Of course, icahn tweeting to the world, well be talking more about the website and apple with scott wapner at noon on cnbc. Dont miss the interview on the half, beginning in about 50 minutes. Obviously, a lot to cover with icahn. Shares of ford reporting strong this morning, rallying. Where does ford go from here . Well talk to the cfo, bob shanks, when we come right back. Welcome back this morning, ford beating the street and raising forecasts for the year. The stock is trading above 18 earlier in the session for the First Time Since january 2011. Joining us now is our own phil lebeau with another first on cnbc interview. Hi, phil. I want to bring in bob shanks, the cfo of the ford motor company, joining us from dearborn, michigan. Bob, you guys beat the street. Youve raised your guidance for the fullyear earnings as well as profit margins, and yet, im looking at some of the reports from wall street, and Buckingham Research is out, and they pointblank say to people, sell shares now. This could be a reverse, and this is as good as it gets. What do you say to that . That particular firm has had us as sort of in their sights for some time. Theyre at the low range of the analyst, 26 cents versus the high end of the range is 42 cents. We came in at 45 cents. Well let the results speak for themselves. The company is growing, and we feel good about where were headed in the future. Bob, lets talk about europe. You came in with a loss of 228 million, well below what many on wall street were expecting. Most expected you to lose closer to 500 million. Are you to the point now you can say, not only do we think well break even bring the middle of this decade, but we could be turning a profit sooner than that . No, phil, i dont think we want to get ahead of ourselves. We think well be profitable by 2015. Not breakeven, but profitable. And we think as we look at next year, it will be improved versus this year, well talk in january how much better. We feel good about the track were on. The team is doing a wonderful job with the plan. We continue to improve quarter to quarter. Business is growing, and there, we feel like were on track to the guidance we gave for profit by 2015. Allii listened to the call t morning. There were several questions from china about whether or not he will say anything regarding the microsoft issue, and whether he is up for the ceo job at microsoft. How much of a distraction is for you and the rest of the management team, that this question continues to swirl out there . Well, we have a plan, and the plan is being driven by the entire organization. Obviously, allilan is our leade and doing a wonderful job for the company. Well continue to execute the plan. At some point, all of us leave, including me. So we feel very good about, you know, that in front of us, and that path that weve got to walk ahead of us. But has he given you any indication that anything is different than what he said publicly in terms of how long he plans to stay at ford . No, and no one is speculating about it internally, nor are we going to talk about speculation externally. Were just all doing our jobs, and the results show that as a team, were delivering good results for our investors. Bob, one last question. I want to ask you about whats happening in the u. S. You had a huge Third Quarter. Is the growth that youre seeing when it comes to the truck market, how much of that is being driven by the Housing Market . And is that starting to plateau a bit . A lot of it is driven by the Housing Market, because Housing Market correlates very closely to either growth or contractions in the fullsize pickup segment, so thats certainly a factor. Certainly, also, just a just a replenishment of demand that hasnt been taken care of over the last number of years, so thats a factor across the whole industry. So that plays a big role, as well. We think theres a lot more to play. The housing is growing. Energy boom is a factor. And the replacement demand is still out there. Bob shanks, cfo of the ford motor company, joining us from the Company Headquarters in dearborn, michigan. Kelly, we should point out shares of ford briefly traded 18 a share. Thats the highest since 2011. A bit of a pop for those shares. Kelly, back to you. Yeah, helping the broader market. Phil, thank you. The Company Still isnt profitable. And its not the only stock seeing amazing returns without actually yielding a profit. Dominic chu is following some of the others for us back at headquarters. Dom . Kelly, it got us thinking about the companies that produced great stock gains. I want to show you a couple of different ones. First one, the mystery stock, trading about 43 a share, but its up 150 just in the last 12 months, so this mystery stock, clue number one, is theyve lost 234 million over the course of the past year. Clue number two, if you dont know who they are, they are in the Consumer Electronics space. So you buy your tvs, dvd players, game consoles. Talking about none other than, yes, best buy. In the last 12 months, theyve generated a loss. And this mystery stock is about 16 a share, and its up 42 over the course of the last year. Now, clue number one, how much money did they lose . They lost about 245 million, and clue number two, if you dont know who they are, well, theyre in office supplies. Because that was easy. Were talking about staples. That company has lost, again, 245 million, but the stock is up 42 . Theres a whole host of these kinds of companies in the s p 500, so weve got a couple here. But stay tuned to cnbc, because throughout the course of the day, well be talking about others on power lunch, talking about this stock, 11. 50 a share. And they have lost a lot of money. So who are they . Theres a big hint here. Theyre in medical devices. Well have that. Stay tuned to power lunch. When we come back, throughout the course of the day, carl, well be bringing them to you. All right. I like the game show elements. Very nice. The dow is up about 78 points. Weve been talking about the hearings regarding obama care on the hill. 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Tdd 18003452550 and seasoned market experts to help sharpen your instincts. Tdd 18003452550 so you can take charge tdd 18003452550 of your trading. Are you saying that you didnt test, that the tests worked very well, both inside and out . Or that you turned it all over to cms . Anybody want to answer . [ laughter ] as we mentioned earlier, congress grilling the contractors responsible for the obama care website plagued by glitches and problems probably bigger than that. Congressman anna eschu is a member of the committee. Congresswoman, good morning. Thank you for your time. Good morning. Certainly. It was striking the response, the question you asked. How worried are you now about the problems and how deep they go when it comes to the obama care website . Well, representing Silicon Valley, i know that technological glitches can be repaired, but i think the purpose of the hearing today was to determine what went wrong, why it did, and, also, when the system for the federal healthcare. Gov, for people to sign up for Health Care Insurance coverage in our country is going to be a bugfree. And i wasnt impressed with the lack of answers from the contractors. But then again, i wasnt impressed with my republican colleagues, either. Because they shut down the whole government in opposition sure. To health care. Theres a lot of political crossdressing today. So what i the point i wanted to make at the hearing is when the contractors said that they had unexpected volumes, that simply doesnt fly with me. There are far larger systems in our country today that handle concurrent traffic that is far greater than what this system covers. And they run well. I mean, amazon and ebay dont shut down and crash four days before christmas when they have the highest volume of shoppers, and the proflowers doesnt crash on valentines day. So i wasnt satisfied with th r their with their answers. I think they really they let us down. Sure. And thats why some people are saying now, given how problematic this website is, wont it perhaps take help from Silicon Valley to get it up and running . I mean, from your point of view, now just being pragmatic, what do you think needs to be done here to fix it . Well, i think the work is going on. And that it will be. But i think we have to keep two things very separate. The technological glitches and what needs to be addressed. I also think federal procurement is a much larger issue. But we wont go into that today. And, also, that this is the opportunity of a lifetime for people in our country. Theyre signing up in the states. Were not having a problem in california. Why is it on the federal health care, health. Gov, weve experienced these problems. Right. Congresswoman, now people are saying there might be a delay of at least six weeks with regard to the individual mandate. Obviously, if the websites not only no, its not. No, its no, no, no, no, thats not correct. To get people no, thats not correct. Okay. Can you clarify whats happening . Yeah, the way the law was written, they have up until march. And people will be allowed that amount of time in order to sign up without any kind of penalty, because in the law if you do not sign up for health care for three months or more, there was a small penalty involved. But because this has happened, that will not apply. Theres a big difference between what i just described and what the republicans want. They want to get rid of the law. Lets make that clear, and im not part of that. Congresswoman, i hear you defending the technology, how that can be fixed. I think a lot of people understand that. I dont hear you defending claims that young people are not signing on, or that theres asymmetry in states in the number of insurers involved, its much easier in new york to do this than in west virginia. Those are more structural issues, arent they . Well, i dont agree with that description, because california is the largest state in the nation, and they are successful every day, not only in terms of the inquiries, but also signing people up. So i dont agree with your characterization of it. The problem we have technologically is with the federal exchange and health. Gov. Thats where the problem is, and thats what we were attempting to examine today. But people are going to shop. Theyre going to go online. Theyre going to read. People dont sign up for things right away. I never have. I dont sign up at something at the beginning of the enrollment period. Sure, but at some point, especially if youre forced, you have to make a choice, and we hope the system is functioning enough. We have to leave it there, congresswoman. All right, thank you. Thank you for joining us. Certainly. Its been a fascinating, it seems, hearing, carl, with regard to perhaps and i think theres more to come. More information to come, as shes saying. Thank you. Thank you. The dow has climbed up 87 points. The question is, is it time to break up microsoft . A lot of people have been asking that, including our next guest. If you broke it up, what would it look like . Here are some of the window, the windows operating system, applications, like word and office, mobile devices like the surface, and the xbox game system. Well have a lot more on the future of the company. They do report tonight after the bell when squawk on the street returns. Clients are always learning more to make their money do more. ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. With my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. The european markets are closing now. Welcome back. More and more focus on whether investors are moving into europe. Its a lot green, simon. Yeah weve resumed the upward track in europe. And as far as the markets are concerned, we continue to weve weve returned to the upward buys after we fell yesterday. Overseas, a lot of Big Companies are reporting in europe today. Here are some of the movers. This is the largest power tool operator for gardens in the world, a problem with its supply chain here in the United States. The Spanish Banks have also started reporting, the big one, of course, concerned about the underlying asset quality. Its the fifth largest bank in spain thats had the big move and pulling the other banks up. And mckesson, the medical distributor here in the United States, has done the deal with its german company, celesio, and its had a wonderful run over in frankfurt. Its about generic drugs and Global Distribution systems. I want to mention the underlying state of the euro zone economy is poor. We had some very bad pmi figures, both services and manufacturing, a composite pmi. Theyve started going in the other direction. Theyre beginning to decline. Okay, theyre above 50, which means you have expansion in those economies on the survey data. But theyre expanding much less rapidly. The real interesting thing, and at some point those that are investing in europe may have to wake up to that, not so good economic situation, the real interesting thing is the way in which the euro continues to make gains against the dollar. And that is partly because here in the United States, the Federal Reserve is still printing money, still forcing it into the economy. And actually, the ecb is reducing the size of its Balance Sheet, despite those economic problems. Guy, back to you. Yeah, raising a lot of eyebrows about the future of the continent. Thank you. Lets bring in bob pisani now, see whats moving on the big board. Up 79. Highs for the day, essentially. Earnings are the big issue. Dont lower your guidance. Thats the only visit give the company. If you do, look at xerox, had a great run this year, up 50 easily on the year. But when they came out, lowered the Fourth Quarter guidance, the stock is one of the big losers at the New York Stock Exchange. Oil companies are starting to report. They have a series of problems. Were seeing it now two days in a row. Its simple. Lower prices for the product, lower demand, and companies in the Services Area are unable to raise the prices. This is a big problem for the oilservice companies. Look, a problem with nabors reporting, and today cameron reported poor guidance overall, and then diamond offshore, the same situation, much lower revenue than expected. Again, hard to raise the prices, putting pressure on all of the companies in the group here. Gas prices may be dropping faster than oil prices. Thats a big problem if youre a refiner. So the Refining Companies have been under pressure, as well today, valero, marathon, all of the usual suspects. Homebuilders doing well. Im surprised. Because pulte beat, but the orders were below expectations. I would have expected the stock to be under pressure. Not so. M i up, up 15 . And hotels doing great. Starwood raised guidance. Occupancy rates, alltime highs in north america. Their revenue per available room up 6. 9 . Thats a great number. All of the hotels are moving up today. Okay. Almost at the Halfway Point for earnings. This is the biggest day of the whole earnings season. Heres the halfway scorecard. 66 of the Companies Reporting are beating expectations. The average historically is 62 . So good numbers on the beat. The revenue is, again, the problem, and for two years, this has been an issue. Only 50 are beating on the revenues. The average 61 . Carl, again, were getting the same situation here, and yet the Companies Still find ways to eek out little earnings gains. Rather remarkable, kelly. They certainly do. Bob, thank you, sir. Microsoft earnings are expected after the close, with the new search of ceo, the xbox 1, were wondering if theyre not better splitting the box division into a company of its own. Remember, cramer called for three divisions back in september. I think it should be broken. Its too big, too wiley, its time to break it up. Really . Lets bring in fred mcguire and brent bill with ubs. Guy, good morning. Good morning. Ed, first of all, how much discussion has there been about breaking microsoft up into more than one company, and is it a good idea from your point of view . Its been an ongoing debate for investors for quite a while, and with the new reporting segments, it provides more visibility into what a brokenup company could look like. I do think microsoft has a lot of great assets. You know, theyve lacked someone like Victor Emanuel of italy to kind of bring all of the di disparate companies together. In terms of the Technology Assets and how they could work together, theres a lot of opportunity thats been left on the table. Well, its interesting, because the first question that alan mulally got on the ford call was about whether he had heard speaking to microsoft to leave to take the position there. Is this something that could potentially be fixed, ed, by changing management at the top . Or is it just that these, as you say, these separate businesses are perhaps too unwieldy . Well, culture is pretty deeply imbedded, so leadership is always important to drive the direction of the business in the right way. You know, i think what we what from has not been is a real coordination among the different operating segments to really leverage the cross synergies across the different businesses. Now, they do have different types of markets, a lot of different end users, and it is quite unwieldy, but microsoft isnt the only company in history thats had a lot of different operating units. I think its just needed a skillful way to orchestrate all of these and deliver really consistent results. Brent, you know, we were looking at video of ballmer there, and some have made the point that to spin off an xbox does leave some of the units exposed to existential threats, but the knock on ballmer for a long time is he hasnt let the units fend for their supper. He hasnt let them compete for survival within the company. Is that fair . I think theyve been fight g fighting i still look at microsoft, you know, the xbox business is just really not relevant to investors. And the stock, 60 of the revenue is enterprise, and thats why youve seen activists and long onlies in the stock, because they see the value in the Enterprise Business. They really dont see the value in the xbox business. So, yes, i agree with jim, if you want to break off one piece of the business, break off the xbox business. But you go back to the recurring revenue story here, i think thats thats the real thats the real highlight but, brent, just real quick, because isnt enterprise precisely the weakest part of the i. T. Space right now . Why would you want to take a potentially highergrowing thing like the xbox away and leave people purely focused on that possibly struggling kind of line of business for the future . Because its lower recurring revenue, and the Enterprise Business is a highly recurring revenue that has higher margins. The xbox business, the entertainment business at best, will have 15 operating margins, at best. The core flagship businesses are spinning off 40 to 60 plus operating margins. What business would you want to be in . I would want to be in the Enterprise Business. So i just i see it a lot different. And i think investors this is why the stock is up as much as it is this year, because investors are seeing the proof that that Enterprise Business, theyre growing the backlog double digits. Thats a good business, highly recurring. So we think that business is in very good shape. So i love the xbox business, i have an xbox at home. Yeah. I just i dont think thats the story you hear at microsoft. Fascinating argument. Real quick, brent, whats your price target here . 37. All right. 37. Were at 34 now. Brent and ed this morning. Interesting thoughts. Appreciate it, guys. Thank you. Break out the wrecking ball. According to public documents, Facebook Ceo Mark Zuckerberg applied for permits to work on a massive remodelling project for his new home in San Francisco. What does this mean for the neighborhood . What does it mean were playing milely on the show . Julia boorstin is live in San Francisco with more on that. Hey, julia. Reporter well, carl, there goes the neighborhood. Mark zuckerberg is making some waves here in San Franciscos upscale noie neighborhood, and though he is great at product, but he doesnt seem savvy with real estate. He bought this house quietly for 10 million last year. They say it was closer to 3 million worth. And now spending another 4 million to 5 million to fix it up. The word is, zuckerberg trying to save money with taxes. Vander mark said hes downplaying the millions hes spending in the renovations that are in the works right now. He has submitted permits for about 1. 6 million worth of upgrade, repairs, remodelling. That isnt the real number, though. Everyone always goes in and submits numbers less than what the real spending is, because then you keep the tax rate down. Reporter vander mark tells us that zuckerbergs arrival is boosting real estate prices. He has been spotted in local restaurants and walking his dog, and if history is a guide, he could pay up for neighboring prices to ensure privacy. Thats what he did in palo alto. We spoke to a number of locals odd a neighborhood cafe, though they wouldnt talk on camera. Half of them told us they welcome the highest real estate prices. Others complained the neighborhood is changing and long time residents are being pushed out. Based on the fact that Facebook Stock has doubled in the past three months, zuckerberg could buy the whole neighborhood. In rush hour, it could take him an hour and a half to get from here to menlo park. But it seems like this house will be a second, since he does own the property in palo alto. All right. Julia, thank you very much for that. Lots of interesting stuff happening there. Most of you have had a hard time finding your parking lot in a finding your car in a large parking lot. But now, maybe some help with your smartphone. [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you open an account. [ paper rustles, outdoor sounds ] [ male announcer ] lauras heart attack didnt come with a warning. Today her doctor has her on a bayer aspirin regimen to help reduce the risk of another one. If youve had a heart attack, be sure to talk to your doctor before you begin an aspirin regimen. Coming up on the the half, carl icahn joins us at noon. Well talk to him about what he expects to get from apple. Well look inside his portfolio and find out what his next big moves might be. That and much more when we see you at the top of the hour. Carl, see you in a bit. Thats all you need to say. Thank you. Breakthrough time. Everybody knows the flash of panic that hits when the dash engine light goes on, or you dont remember where you park. A device intends to make parking your car a lot easier. Thejo joins us this morning. Good morning. You say the car is the most expensive computer you own as a consumer. We spend thousands on our cars every year, but we dont access any of the information its giving back to us, right . Absolutely. So the average American Family spends about 10,000 a year on their car, and the car is the most expensive computer you own, and its surprising that you dont have access to any of it. So this device retails for about a hundred bucks. Yeah. What does it give you . So automatic is an iphone application which pairs with this little guy, which connects to a standard port that every car sold since 1996 has. And once the computer of your car is connected to your smartphone, it can do a number of interest be thing. One, insight into how you actually drive and make suggestions about small changes in your style of driving that can, you know, help you save a third of the amount of money you spend on gas. And it can tell you where your car is parked at any time. And it can even detect a crash and call emergency services, and phone loved ones, or it can tell you what the checked engine light means, and if its not a big deal, one tap on the smartphone, can you clear it yourself. We think of automatic as a smartdriving assistance. And i think some people would pay 100 bucks for the app that allows you to locate your car in a parking lot. Yeah. I wonder what impact the Insurance Companies would have. It sounds like a dream in terms of metrics. I think progressive already offers Something Like this. Absolutely. Thats where i think its important that consumers have the ability to own their own data and not the Insurance Companies, and thats what automatic allows. And we are always beholden to our users. Thats why we exist as a business, so we try to make the experience of owning a car as good as possible and convenient as possible, and we, you know, build the Consumer Product. You got some big backers. Ann dreesen among them. Youre a little stingy with your figures, though, in terms of how much youve raised and whether youre profitable. What can you tell us about the state of the business . So recent survey found that there are investors in we have since raised money from other investors. We havent really talked about the amount of money weve raised and other metrics about the business. But we launched in march of this year, and we launched with the apple stores as of yet, and you can walk into a apple store, or go to the website and buy the product. Were focused on distribution and revenue, and thats going really well so far. Thejo, real quickly, assuming you use this yourself, whats the most surprising thing youve learned about your car . The most surprising thing ive learned is that, you know, staying in Cruise Control when youre on the highways saves you a lot of gas. And it literally has changed the way i drive my car. And this actually, the Impact Company came out of research we were conducting at u. C. Berkeley, and theres a lot of insight that people arent aware of when it comes to how they drive their car. Thejo, interesting. People are spending a lot on their cars, as ford testifies today. Well keep an eye on you guys. Thank you so much. Thank you. Thanks for having me. Thejo kote joining us from San Francisco. Earnings the big story this morning, with under armour preparing to be tackled by the earnings squud, breaking it down for us when we come back. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Welcome to the earnings squad, where we dissect the stories everyone is talking about. Im melissa lee, and joining me is dominic chu and herb greenberg. Starting off with raytheon, posting better than expected Third Quarter earnings, but the stock is down today. The stock is down. Its down with the overall market. Its the latest defense contractor to say that the budget cut, sequestration, Everything Else in washington, d. C. , is going to weigh on them. But what they are saying is theyre trying to sell more missiles to the middle east, to kuwait, to oman, to qatar. They want to go internationally to keep the profits, and thats a big deal. They make tomahawk and cruise missiles. Yeah, five of the large contractors have beat on estimate, locking, a lot of them have run up. I want to say on the shutdown, they only said it nine time, and minimized it, versus lockheed martin, which mentioned shutdown three times on the calls. Theyre all sort of downplaying it. Do they count if they say it when they refer to shutdown, or the only the word shutdown. All right. Herb, youve been following xerox, and you got so excited about this one when i mentioned im actually very pained. I think erse laburns, just brilliant, on a personal basis, and they keep trying to reinvent, keep disappointing, the stock is taking a huge hit. They say theyre focusing on issues of differentiation and profitable growth, finding operational improvements, too. Theyre still looking for something. They have good Free Cash Flow. Will me shake my worst ceo this year . I dont know if that will happen, but she may have earned a birth. Theres an accounting investigation into one of the units it acquired recently. Thats another overhang on the stock, although it has had a good run. I was going to say and since she took over in july 2009, the stock has really just its a little above it, but its done relatively well, other than these, you know, the peaks and valleys here. Footwear, athletic apparel. Under armour reporting higher than expected earnings, reporting strong sales growth in the foot division. Its a classic case of high valuations. If you comb through the numbers, one area of concern, poking any concerns at the report, is the inventory growth number. They cant get it straight 59 year on year. They have had inventory control issues at this Company Quarter after quarter after quarter, and the Free Cash Flow down. You know, people want to love it. Cramer is out there, tech company . Come on. Highly competitive space, though. Nike, those guys are big. Yeah, a new high on the back of the results. Thats it for the earnings squad. If you want to join us, tweet us. Meantime, next on squawk on the street, an answer to this question. Is elon musk the greater inventor alive . Stay tuned. Its a growing trend in business do more with less with less energy. Hp is helping ups do just that. Soon, the worlds most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. Multiply that across over a thousand locations, and theyll provide the same benefit to the environment as over 60,000 trees. Thats a trend we can all get behind. The atlantic putting elon musk on the cover of its Technology Issue this month. Asking whether musk is the greatest living inventor. We will have james fallous of the atlantic here tomorrow on squawk on the street. Looking at the shares today, moving higher, after a rollercoaster ride. There have been some call, some downgrades saying the valuation is getting a little out of control. But a fascinating story nonetheless. Im interested at the with the 10year right below 2. 5, kel, no coincidence, pulte is the biggest outperformer. And the banks laying off the refinancing divisions. Can they even handle another wave of demand if it were to come . Yeah, excellent question. And icahn is coming up next with wapner on the half. Lets get back to headquarters. Guy, tharchls so much. Indeed, welcome to the halftime report. The top story is the one people are talking about. Icahn and apple. A new letter, and an even bigger position, and a pledge to ceo tim cook. So what happens now . Carl icahn joins us live and exclusively right now. Carl, welcome back to the halftime show. Good to be on, scott. Said the letter was the talk of the street. I know a lot of people have seen it. To run through the bullet points, and the most important things, you upped your stake in apple by 22 to 4. 7 million shares. Thats from 3. 9 million