Transcripts For CNBC Squawk On The Street 20140220

The yield is up after the fed minutes suggest the hawks are a little bit restless and as for europe we continue to watch the death toll in ukraine. The eu does hold an emergency meeting today. It is facebooks largest ever acquisition by far, the social network whying messaging Service Whatsapp and Mark Zuckerberg said the deal came together in ten days and some of the details are beginning to fill in. Closing the deal over chocolatecovered strawberries but a lot of metrics being thrown around, david, 42 a user and questions of how quickly this company can grow. Yeah. Of course, the thought being at 450 million users perhaps they can get to a billion. It is considered a communications platform. It is not about advertising. It is about communications. It is a very Popular Platform in europe. The user interface is said to be very slick. Given that most of the 55 employees that work at this company are engineers. But, carl, you know, there are many people who might want to ven tture its 1999 all over again. Ive heard it this morning. It is somewhat different, it is similar in that you are using a programs inflated currency, that being facebooks stock price, to help engineer a very large deal, but there are Enormous Growth metrics for this company at least potentially and certainly in place right now. And as far as were aware, it does seem to be profitable. Of course, we dont have real numbers to go by. But there are differences here. I would just offer a couple of quick metrics as well that i picked up this morning. You mentioned 42 per user, thats only 9 higher than what google paid for youtube on a peruser pay sis when it bought youtube. We all know, of course, that has added enormous value. 14 higher than what instagrams purchase was for facebook. So, when you view it that way and the way both of those businesses have been so additive to the acquirers, what would instagram be worth now . You can make an argument this makes sense. Facebooks current price per user is 135, if you bought twitter you are paying 160. Its interesting the tock hasnt come off despite the fact that theres an 8 dilution is, the price action is what it is, and even with the 35 gain more than doubling over the stock last year are still hanging in at this price. And and we know why Mark Zuckerberg has been talking about facebook as more than the app with a blue flag, its a mul multiapp kind of company. Lets get more on the deal between facebook and whatsapp. Facebook is about to begin the worldest biggest mobile messages. It handles as nearly as many Text Messages as the entire Telecoms Industries 1 billion text business. It has 450 million monthly users and 70 use the Service Daily and its growth is breaking records. Its doubled its user base in the past year. Whatsapp sends photos and messages and video without carrier texting fees, its free for the first year and charges 99 cents annual after that and theres no word on how many users pay and it does not include adds. The price tag parked valuation concerns sending facebooks stock lower after hours but Mark Zuckerberg stressed the value of the companys growing scale and said in a Conference Call that though he does not want to introduce ads like on facebook hes very confident that people will pay. The services in a world that have a billion people using them are all incredibly valuable and from that perspective, you know, its we just think that and the growth rate that they have today, and the model thats early and promising in place that they have, we see a pretty clear trajectory ahead and we were very excited to work on this. Put it in context, whatsapp has three times Twitter Daily active users and three times daily active users. And while facebook is paying 16 times what it paid for instagram, whatsapp has 15 times instagrams users at that purchase and its already making money. Well talk again later on in the morning. Lets bring in john steinberg, president and ceo of buzzfeed, a cnbc contributor who has been shouting from the rooftops that you need to get to know this company. You started talking about it back in january. And you like the deal. I like it. Weve been obsessed about this company. We integrated it into buzz feed in october and weve had twipes the number of shares on it in the past week than we had when we started out and not to mention that we are now seeing more shares of buzzfeed content to Whatsapp Button than we see to twitter. Its massive. 70 of those 450 Million People use this thing daily. It doesnt take that much to monetize something thats that big. Facebook only montized at 6. 60 per user. They are not going to do advertising. That would seem to be very clear. Its not an advertising platform. Its communications. So, when you say monetize, you raise fees and increase users, what . There are so many different ways. They can charge people to send messages. This is basically the phone c company of the future. Its taken a big piece out of the hide of text messaging, incredibly high margin business for carriers much of it is going on in europe which many people here are going who are these guys . When i talk to people anyone who has business relationships or friends in europe or crosscountry is using it, the only people that dont really know this company in the u. S. As zuckerberg said on the call it doesnt get as much attention in the states as it deserves. Its another case where apple has lost out again by making imessage a closed standard that only works on those devices theyve given up the world to own their small pie. Do we need to justify it on a monetization basis or can we simply say this is a defensive move by zuckerberg in order to gain more users and importantly not be challenged in the future by whatsapp as it evolve and could do some damage to zuckerbergs base business . I think the rules have changed and you half to do the massively bold moves, everything changes so quickly that zuckerberg has a high priced stock, ill pay down 10 , rinse, wash, and do it again. You basically have to keep doing these things. Before you go on just to give you just a testimonial to how you had brought this to peoples attention, this is sound of jon on this show not too long ago. Twitter is the oop. Not sure weve got that. I know the control rooms working on it. I can hear them screaming to each other in the background. This is, like, the biggest secret that everybody is using, right . 400 million active, not registered, active monthly users on whatsapp. Its way bigger than twitter. Messaging service. Messaging. Allows you to get away from text messaging charges. Its a huge social experience and it makes a lot of money. When people now say valued at 76 times. Yep. Washington post. Is that more a comment on the post or on the price that facebook is paying. I think when you look at it compared to twitter and facebook on the price per user as david pointed out, look, i mean, its full priced. It has to grow into everything now but thats what weve seen with all of these stocks. There is zero room for missing but the company has so much revenue at this point and so much growth that they can cloak it for years, basically. Can i pick in particular what this means for twitter. Does it redefine the space . I want to play you just a clip of what the Ceo Dick Costolo said on the Conference Call two weeks ago when he spoke about why twitter was unique. This was his definition. Twitter is the only platform that is simultaneously public, real time, conversational, and widely distributed. No other platform combines all these elements at scale. Anyone can create a tweet and tweets can be read by anyone. And this has created a level Playing Field essentially democratizing content creation and distribution. As a result twitter enables a single voice to echo around the world instantly and unfiltered. Is twitter still unique or does whatsapp challenge that premi premise . Its true today. Right now whatsapp is a private messaging group. And twitter is trying to bring it in with the messaging tab that theyve put in the app, whatsapp to expand to a broadcast technology. Wechat in asia is broadcast as well and tomorrow morning they could decide that they want it to have broadcast as well and direct collision course with twitter. I should also mention facebook is now diverse 70 fydiversefied. There could be carrier fees its a real second revenue opportunity. We should mention, by the way, the likes of aol may be up a bit and blackberry with its instant messenger and interesting to note aol still out there with the old instant messenger. This is five times what aol value is. The added wrinkle that at least fortunes reporting google tried to go after them for 10 billion and obviously lost. Everybody in the valley is talking about this company, has been talking about this company for months. It was just weird to me that with that scale of usage more people were not discussing it in the mainstream, but, yes, everybody wanted to buy this company. If you compare this to the one that got bought last week for 900 billion, this has 450 million active. 150 versus 450. This is so clearly the messaging winner. Whats amazing how quickly it changed. A company formed in 2009. And when you go back and think about google, 15 years old second most valuable company in the country. Thats an astounding thought and i think it all goes to how quickly everything changes. And the power of the tech titans that have billions to spend and can do a deal literally within days. Bottom line it for us, what should shareholders bear in mind . It was a very smart move and very expensive move. They should be concerned about how expensive it was but they are invested in a stock where the founder is willing to do the bold e of moves in a world that changes so rapidly. You stick with zuckerberg. I stick with him. Hes 20 of the company he owns. He took 2 billion of his. What is 10 on a stock that why do they need 3 billion . They just paid the guys 16 billion another 3 billion seemed to me a little bit like for 50 people. It was a sellers market apparently. Yes, it was. Jon, thanks for kicking it off today. Well see you next time. Were obviously going to continue to stay on top of this deal throughout the morning and tesla shares getting a boost after posting results last night. Got to hear what elon musk had to say on the earnings call. And one more look at futures we were negative for most of the morning but managed to turn some of it around. Opening bell is 17 minutes away. Tony stewart in my career, ive learned a thing or two about having the right equipment and a great crew. Ive also learned how great it is to do the things you love. Thats why im happy to be part of the bass pro family. Because a name you can trust, people who stand behind you, and equipment you can count on engine starts mean everything to me. Bass pro shops. Where commitment, passion and the Great Outdoors all come together. 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. 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With all the good years ahead, look for the experience and commitment to go the distance with you. Call now to request your free decision guide. Tesla reporting Fourth Quarter operating earnings of 33 cents a share well above what the street was expecting. The electric carmaker says it expects to deliver more than 35,000 model s vehicles this year. Teslas ceo elon musk on last nights earnings call, take a listen. To get to a sort of the height of sort 1,000plus production rate we do need sort of a new final Assembly Line which were in the process of constructing. And then well transition the final assembly to that hopefully around the end of the Third Quarter or thereabouts. And i think theyre building a new massive battery plant at the same time so the stock, of course, rose above 200 last week and its continued to make gains on that. 56 rise in production this year is what they are forecasting. Yeah, they do say the lithium ion constraint will hold back capacity the first half of the year. Gm has 75 times the revenue, but some say not a lot of the legacy headwinds that gm faces. Right. It could be, what, 35,000 automobiles a year in the not too distant future, but getting to scale in the automotive business is not an easy task and bringing your suppliers along and having to come up with a new batterymaking factory is not the easiest thing to do. But it is the core of the business if you can get it right. If you can guest the batteries right. Did you see the comment that we got in one interview that he confirmed theyd been talking to apple but he said that a deal a deal what is the quote here . The deal with apple is unlikely. Right. Also interesting they did acknowledge that sales dropped off a bit after news of those fires. And obviously bounced back, but with almost 900 million in cash, part of the thinking now is they may have the money on hand to ride out any future turbulence if they have more episodes like that. And or hit the market if they want to, Capital Markets are very generous right now. Given the exuberance by which these shares are met, one could imagine they could do an Equity Offering with not too much trouble if they needed to raise more money. Its a nice position to be in when you are trying to Fund Future Growth and everybody believes in you. Cramer is pretty active on twitter as we are talking right now. I wonder what his thinking would be. He tends to say dont get involved in a cult stock. It might have given some people a pause. I saw one firm upping it to 245 a share. It was a disappointment last night, thats not going to go into full production until next year. 2015. But the production increase they are going to go from 600 a week to 1,000 a week by the end of the year and musk has been called the businessman of the year by fortune, hard to discount that guy. Hes one of the biggest brains in the country. Yes. One of the most exciting. And hes not building an app. Which is nice. Somebody with a lot of brain power is not making an app. Walmart issuing a forecast that has disappointed the street. What can Doug Mcmillan do to turn the tide . Well talk about that. One more look at futures and well get the opening bell in a few moments. Squawk on the street is back in a moment. Walmart reporting Fourth Quarter earnings of a buck 60 a share, slightly above consensus, but revenues missed forecast and the same for the fullyear earnings guidance, lets bring in stacy ridlets and David Strausser, david, let me start with you, give me your take of not just on the quarter, of course, but more importantly on the guidance. I think the guidance i think were seeing something were going to see a lot of other places. Were seeing a weak start to the year because of weather. They talked a lot about Higher Health care costs, they talked about a weaker lowend consumer, none of that is a surprise. The other thing they talked about capx and increasing it in the u. S. And away from the international capx i think that will be a bigger story some of the things they are doing on ecommerce and neighborhood capx. The growth of amazon and the seeming decline, its not a decline of walmart but its hard not to notice, isnt it, david . Over the last, lets call it, five to ten years . Except if you look at the last holiday season, this is an inexact science because you had to make a lot of assumptions. Walmart got ten cents of every incremental retail sales this holiday season. They were a share gainer. Amazon had more than that. We estimate 13, 14 cents for every dollar of incremental sales this holiday but the two of them make up more than holding their own right now. Isnt it amazing, two of them 25 . Stacy, 473 billion in sales for the year. Constant currency basis up 2. 5 , that the best walmart can hope for . Do you know what, right now the consumer is under immense pressure. They are talking about that entire decline being because of the reduced food stamp benefits, so thats not something thats going to change. You know, i was sort of hoping that they were going to kitchen sink the year. Theyre talking about the low end of the 3 to 5 sales increase. But also you have to remember that theyre up now againstcomp consumer is under immense pressure and thats not going to change anytime soon. Neighborhood market comps up five. What does that do to the thinking we talked about yesterday with this Family Dollar . Analysts suggestion. Yeah. So, there was some talk in the market yesterday that walmart should buy Family Dollar, but clearly walmart is talking today as david just said about accelerating their smaller Format Stores. Theyre going it alone and theyll do it themselves. Those were actually comping up 5 , those appeal to the fillin trips, the frequent trips that the consumer is making that walmart is missing out on a bit now so they are trying to capture that part of the market. The problem is, its such a small portion of the business even though theyre opening more stores this year than it really is not going to move the needle in the near term. Although some people, david, who follow the Dollar Stores are excited by the fact that walmart chose to include this language, the projected Capital Expenditures and Square Footage details exclude the impact of future acquisitions. Yeah. That some people tell me they dont usually put that in there. Anything to read in the words . I saw the note that Mark Eckstein rote and hes a smart guy and my issue, i think the fear there is the ftc and im just not sure in the Current Administration they could get a deal like that done. And usually when they are talking about acquisitions, i think theyre focused more outside the u. S. For that reason specifically regulatory. Really . Antitrust . Finally david, new ceo here, anything we can expect in terms of the significant change from the leadership of mike duck . Probably the biggest change i saw today was mike duke talked about the productivity loop which was more about cutting sgna and then drive sales. Doug really today talked a lot about consumer first, customer focus. He grew up, you know, through the stores as a customerfacing guy and i think thats going to be the biggest subtle change i saw today was him focused more on the customer as opposed to productivity changes. David and stacy, thanks to you both, appreciate it. Opening bell not too long away. By the way, if you are looking at futures, the market pmi, u. S. 56. 7 is the best in february in about four years and that has turned futures around. A big jump in back orders the biggest jump since the financial crisis, that changes the optics arguably in advance of the official data, carl. More on that and the Facebook Whatsapp deal when we come right back. Through sunday, save up to 500 on beautyrest and posturepedic. Get a sealy queen set for just 399. Even get 3 years interestfree financing on tempurpedic. But hurry, sleep trains president s day sale ends sunday. Like carpools. Polly wants to know if we can pick her up. Yeah, we can make room. Yeah. [ male announcer ]. Office space. Yes, were loving this communal seating. Oh, its great. Yeah. [ male announcer ] the best thing to share . A data plan. New at t mobile share value plans for business. Our best value plans ever. For example, you can get 10 gigs of data to share. And 5 lines would be 175 a month. Plus you can add a line anytime for 15 a month. Sharings never been better for business. [ bell ringing, applause ] five tech stocks with more than a 10 . Change in aftermarket trading. All the tech stocks with a market cap. Of at least 50 billion. Are up on the day. 12 lowvolume stocks. Breaking into 52week highs. Six upcoming earnings plays. That recently gapped up. [ male announcer ] now the world is your Trading Floor. Get realtime market scanning wherever you are with the mobile trader app. From td ameritrade. Youre watching cnbc squawk on the street live from the Financial Capital of the world. A busy morning here as we await the opening bell in about 90 seconds. Havent even really gotten to the marriott earnings, nelson peltz back in action when it comes to pepsi. But the big news, of course, if its not tesla and walmart earnings its facebook buying whatsapp for 15 billion in cash and stock. Talked about it a lot at the top of the hour and jon fortt joins to us give us his take. Steinberg likes it, what your take . It does not make Financial Sense right off the bat. I dont think it does. You can compare revenue per user, this is a service that has no advertising opportunity. Lots of its users in emerging markets where youre not going to get them to pay a lot more over time. But that said, were in this interesting land grab period for mobile and to some extent from social still. This is a play for scale by zuckerberg, i think its really interesting to compare next to the nest deal that google just did where that was a very different sort of play. Margin, you know, specialized, highend equipment, this is broad service, global. Well see who was right. All right. Controversial. Controversial. Yes. Definitely. I mean, somebody last night said zuckerbergs not afraid of the innovators dilemma and i wrote back and said you mean the acquir acquirers dilemma. 10 of his company for this. 10 , that is a lot. You got to wonder how that affects the thinking internally at facebook. Yeah. There is the bell. And a look at the s p at the top of your screen. Down here at the big board Renaissance Capital celebrating the recent launch of the renaissance ipo etf. And tarrys pharma, its been a big couple of weeks for pharma in the m a space. Comcast, Time Warner Cable, forest, Facebook Whatsapp, steals. It pales by comparison, but theres a definite temperature rise in m a and im always making rounds of phone calls and i will say there does seem to be a little bit more confidence lately that youll start to see a rising pace of dealmaking and not to mention safeway which we reported on yesterday and came out and said that it is in talks. Well have a little bit more on that in a few minutes. So, yeah. Theres definitely something going on here. And one deal can beget another although we dont seem to be at that point yet but when it comes to some of these companies that we barely heard of going for 16 billion there may be more of that yet to come. Not that theyre going for that high a price but the continued purchases whether they be private or not of these really i Mean Companies that are virtually in their earliest stages. Can i come back on what you said that its not worth the money . Twitter has a market cap of 30 billion. Doesnt whatsapp have twice as many users as twuilter . Yes, more than twice as twitter, because were counting monthly active users you cant compare that against twitters total registered users base. We dont know how many are active. Whatsapp is gigantic but its a different sort of service. Twitter, a lot of it is in developed markets, they are clearly going after advertising and selling user data people. And whatsapp founders have come out strongly against that model. You already pay 99 cents a year to use it. Eventually you pay that after the first year. Well see how many people stick around to do it. It is a different Business Model but its replacing the Telecom Companies which are important in emerging markets mobile telecommunications where you dont have the buildout on infrastructure. This is a type of play on global growth. Its not entirely replacing them, because you still need a phone and service but you dont have to pay the carrier on top of it. Its the similar to broadband versus cable tv thing we see happening. If they get to a billion users which many people expect they will given their current growth rate and they raise prices to a couple of bucks a year. I know youre paying a fee to the app download in other words so theyre taking a piece, but you get to a decent revenue number fairly quickly with what i would expect would be an extraordinarily high margimargi. Well have to see if they do that. Theyll have to reach a huge scale to afford to do that and slow down the growth. Your reaction to facebook opening mildly up in the green . It shows a lot of confidence in facebooks overall trajectory. Im not saying its a bad move overall but i dont think you can justify it financial. Maybe this is a special period where they need to grow scale. Defensive. Whatsapp doesnt eat their lunch . Its one of the few companies that had the kale to destroy facebook potentially, entirely different model, why not take it out . When we look back at some of the deals, not all that have been done, for example, youtube we could have questioned the valuation, oh, my, clearly that has been an incredibly accretive deal for google and not to mention instagram for facebook. And with youtube you have the subscription possibility and the ad possibility, you know, it was popular in developed markets where people had more money to spend. I think its kind of apples andernings to compare the different kinds of services. Facebook and whatsapp have their work out cut for them to really scale it and justify it financially. I dont know if they can. Our producers back in englewood have put together a list of s p 500 companies that have a market value below 16 billion and its 47 of the s p and they list them here. But happens to not really the point with tech, is it . Because the point is tech is that you have such a mass audience, 450 million with just 50 engineers and whatever it is. Your potential scaleability, your leverage and your margin is just phenomenal. It occurred to me this morning when i was brushing my teeth was what would have been a fair price for the newspaper industry to pay for craigslist in 1999 . Right . Not making a lot of money. Cant justify paying billions for that financially. But, boy, would it have been worth it. Yes. Defensively. So, theres lots of different ways to look at the Strategic Value of Something Like this and we wont know for a few years how smart it was. Its startling the employee numbers in these company. And gileads purchase of pharmacet, this is a company they bought for over 11 billion in the biotechnology industry, it had about 90 employees. I mean if somebody said whatsapp is valued about what omnicon, 50 employees, 71,000 employees. Thats overhead. Thats overhead. That is the cutting edge of innovation and thats the value. Thats why yesterday we were talking about people not going on to wall street anymore, of course, theyre going to go into a startup. Meanwhile how do you get the employment rate up with those numbers . I think about the missed opportunity for the individual investor here when you have a company the scale of facebook controlled really by zuckerberg, buying out a company like whatsapp which has enormous global scale and potential but investors never got a chance to go directly to go to whatsapp and get into it while it was buy facebook and double their money in a year, more than double their money in a year and bet with zuckerberg . I dont want to ignore some of the other movers because walmart is taking it on the chin down 2 on a very large cap name. 1. 60 does beat by a penny but talking low end of the range for the rest of the three to five was the guidance. They see 511 to 545. Streets at 554 and, david, youre cutting your forecast. Your margins are coming down, your food costs are going up. Your return on invested capital is going down. I mean, some wonder why this even called a defensive name at this stage. Its a good point, carl. And given that issuance of guidance, you know, well see, but we heard stacy say they didnt kitchen sink it, she thought it could have been even worse. You do have a new ceo i think it was interesting we heard from David Strausser in terms of change of tone and the focus on the call at least versus mike duke. But its hard. When you are 473 billion in annual sales, it gets hard to move the needle toll a certain extent. I and i would argue that the advent of amazon regardless whether they say they continue to take share, you can look at the two and see what amazon has done or at least argue what it has meant to walmarts business over time. We got a lot of other stocks to watch. If i can quickly mention a couple before we get to bob. Directv shares, they also reported numbers. Those shares are up, dtv, almost 2 this morning, u. S. Numbers were quite strong. Latin america there was a bit of a drop in growth. Well see what comes out of the Conference Call. Sales and marketing cost line was higher. This is a big name apparently among european accounts who really like it and they continue to buy back stock. And finally our Parent Company has not had the greatest of runs here. Those comments and actions from the s. E. C. Regarding net neutrality, they are big. And something we need to keep a very close eye on in terms of where that debate ends up, what wheeler the new fcc chair really decides to do here, but comcast has been taking it hard. Today it is lets call it flat at 5160, but its given up a number of dollars in part because those who may short the stock to set it up with Time Warner Cable but also because of the concerns about net neutrality. You want to mention safeway . Ill do it in the faber report. Its one of the top gainers. Lets get to bob pisani on the floor to see whats moving. Good morning, the dows up 34 points as we start the day. The most important thing is walmart. Remember, they guided lower at the end of january so the fact that they came in around consensus it was not terribly interesting. I think more important was the 2014 guidance, 510 to 545, well below the expectations, 554 is the consensus here. They gave Sales Guidance toward the low end of the expectation they were talking 3 to 5 and now they are saying its toward the low end of the year and thats why the stock is trading down. Walmart has essentially gone no where for nearly two years. Its not like the stock is going anywhere. The issues for them, they were explicit on what the problems were for the customers. Reductions in government benefits number one, they cited that as number one. Higher taxes. Tighter credit and lets bring in, of course, health care. Higher Group Health Care costs as well. Thats what walmart has cited. Its interesting they did not emphasize growth in large stores anymore. Theyre emphasizing doubling the number of small stores that are out there. 270 to 300 theyre going to open in 2014 small stores, thats double the amount they currently have, so sort of changing an emphasis in the way walmart is talking. Lets move on here, chinas numbers were disappointing again. We have two months in a row where the flash manufacturing numbers were below 50. Thats causing a little bit of concern back there. You see her asian markets are slightly down. Nikkei down 2 . Ive been asked whats been going on with the big financials in 2014. I havent heard any large issues here but take a look, goldman, cit group down 7 . Never mind the s p is only down 1 . The same issues are around that were around in 2013 as far as i can see. Theres a weaker Mortgage Business that weve got. The sluggish Capital Markets that are out there and theres a flattish net interest margins that are out there. Those are the mawjer issues, i dont think thats changed at all. Finally take a look at the earnings, you know what is going on with tesla, thats a historic high for tesla and safeway and david will talk about it in a minute and good earnings but the Company Appears to be for sale. Avis beat, 2014 guidance appears to be below expectations but the stock is trading to the up side. Marriott, the 2014 guidance in the middle of expectations and crocs a loss not as bad as expected and sales beat more than people expected from them. Back to you. Thanks so much, bob. You mentioned safeway and well focus on it briefly in the faber report. It was yesterday before the closing bell that we told you to expect to expect safeway to Say Something about its openness to exploring alternatives and i also reported that it had been in conversations with a number of private equity firms of late. That, in fact, confirmed by the company briefly not exactly with great detail but saying that it is in a or in discussions concerning a possible transaction involving the sale of the company. The shares, of course, as you might expect are up. This after what was not a good quarter for the company. At all. And, in fact, had it not been for the mention, of course, of the sale talks, that we were able to tell you about a bit early, the stock would likely be down and down rather sharply. There are many who are short this company. The simple thesis . Well, youre talking about a low margin business with very high layers of competition. A huge pension liability. Unionbased cost structure, thats not a good combination they would say and, of course, the fact is they put out guidance of a buck 15 to a buck 35 for this year versus what had been an expectation of 1. 68 for the company. This morning a lot of divergent opinions. Ubs, for example, comes out and says, hey, we dont think we see it taking the value of around more than 31 bucks a share. Thats below the current stock price. Why . Well, a number of different reasons. We think the share price is likely a barrier, in fact, to getting the deal done, that being that it is above 31 bucks a share as you take a look at safeway and the map and where it operates. We shall see. My sources telling me there have been conversations going on for some time and, in fact, they are moving down the road. And the list is fairly high, the possibility you may, in fact, see a transaction here. Dont forget it was last fall, i think september 17th if i recall, when safeway put a poison pill in that gets enacted at 10 . They did that because they had an activist and that activist turned out to be jana, it was at 6. 2 and its now a bit lower than that, but still an active participant in those shares or at least it was until the current runup in stock price. Well see where it all ends up, of course. You do have some debt but you also got an enormous amount of cash at the company and they are, by the way, also saying theyll do a tax redistribution of the rest of the black hawk shares and try to monetize their stakes in casa lei. Im focused on a company with 171,000 employees and lets call it an 8. 5 billion market value. Second largest in the country. Right. And, of course, were just seeing a company sold for twice that that has 55 employees. We know about margins in groceries, man. A little different maybe for communications apps. All right. Lets get to bonds and the dollar. Rick santellis at the cme. Good morning, rick. Good morning, carl. Well, if you look at an intraday of tens you can clearly see its been rising a bit. Now, we could say it was pmi that turned things around. Pmis the kind of three letters of the day. Chinas were disappointing. The eurozone in aggregate were all above 50 but they werent matching up to the expectations, they were all a bit lower. That seems to be a force. Look at the twoday chart and you garner more information and its only incremental but only higher than yesterdays yields after the fed minutes and indeed if you open the chart up year to date on tenyear note yields it should be no surprise as 2. 75 is big on the charts, its big psychologically and for the retracement folks out there and we need to pay close attention. If you consider whats going on with interest rates, maybe whats best to do is to try to figure out whats making them move and i think the best way to do that would be to look at other markets. The nikkei had a lot of talk when it had its big up day, but very few seem to be noticing today its down a little over 2 . Heres the issue, the dollar yen still seems to be giving you a lot of information, okay . The dollar has improved. That seems to be showing the equity markets at least in the states have improved a bit. But if you overlay that chart, and this is a twoday, we can do a year to date and its even tighter, the dollar yen against tenyear note yields seem to keep you out of trouble, but at the moment unchanged on the ten year but at a very, very critical point with more data yet to come. Carl, david, back to you. All right, thanks so much, Rick Santelli. A very busy news day, we want to get to natural gas in a moment but a story related to natural gas a number we brought you months ubrey mcclenlendoclendon American Energy raised a good amount of money to buy more land in the utica shale, theyve now raised 2. 9 billion overall. They aujs ujuj ujnnounced seve 3 1 2 convertible subordinated notes. Why do i mention this . It gives the overall valuation of the company that will be issuing shares to 5 billion from what had been 1 billion when we first brought you the story. Some of that programs due to the big rise in the price of natural gas and for that lets check out the action in commodities and go to jackie. Take it away. Good morning, david. Lets stick with the theme and talk about energy and nat gas. We are seeing selling pressure in the complex. Nat gas after hitting a fiveyear high today coming back down slightly but still over that critical 6 mark. Were going to get the inventory numbers out for the week ended february 14th. Traders are looking for a drawdown in supplies of about 250 billion cubic feet. To put it in context, that is higher than the fiveyear average of 118 billion cubic feet. Weve been seeing a few consecutive weeks of these drawdowns so this number will be really critical. I want to switch gears and talk about oil prices as well, after the weak manufacturing data out of china we are seeing pressure on west texas intermediate and brent as well, but wti holding above 103 a barrel and well get that inventory report at 11 00, it was delayed because of the holidays and well bring you the numbers as soon as we have them. Back to you, carl. Grakky, thank you so much. When we come back a tesla shareholder weighs in on the electric carmakers results and wall streets reaction. The stock is up more than 10 . How much spark is left in that stock . Keep it right here. [ male announcer ] a car that is able to see, to calculate, to think and can respond to what it encounters. Even if that means completely stopping itself. Its the stuff of science fiction. Minus the fiction. The 2014 eclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. Cozy or cool meow or woof . Exactly the way you want it. 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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. Shares of tesla higher after the Company Posted betterthanexpected earnings. Drew cups is a tesla shareholder and he joins us to talk about their results. Drew, good morning. Good morning. Where did you get in on this name and at 215 are you looking to get out . Weve been shareholders since day one. First couple years it was kind of tough to hang on to because it was all promise and no delivery. Last year has been a whole lot of delivery. Still a lot of promise. I think weve had success investing in tesla in these kinds of companies by reminding ourselves of the perspective, about what the opportunity is. And here the opportunity it still dwarfs the current size of the company, and so we continue to be engaged, continue to like our investment. I would say so. Sure, there is downside valuation is challenging but theres a big opportunity in front. How would you characterize, what is the downside . Is it an entry from one of the bigger players . Is it manufacturing constraints . Is it the challenges of going vertical . What is the key obstacle that musk has to walk over . Great questions. Your list is perfectly relevant. Any of those things can happen. What gives us decent confidence is just how well theyre cuting. How large the lead is. Theres just no one else that has the scale that tesla has and is talking about within the electric car market. So, yes, there are bigger companies, but no ones bigger in what tesla does. One of the things that we keep talking about internally is that no one is moving as fast as tesla. Its really hard to catch someone if youre not moving as fast as they are. Thats a key. Musk obviously was cagey when asked about what that meeting was between himself and the head of apples m a, what do you think it was about . What would you expect to come as a result of that . Carl, i have to admit, i just i dont that doesnt enter into the equation a whole lot from our perspective. Its hard to come up with a version of downside from that meeting. Theyre two great leadership companies. They probably do good things together. But i just i dont know, i dont have a hunch of what the specifics were there. Well, congratulations on getting in on the ground floor. Thank you. Its a nice ride. Its exciting its an Exciting Company for a shareholder and an american to watch. Yeah. Its an exciting time. In american business, no doubt. Drew, thank you so much. Drew cupps talking tesla today. Even with that rally, the market cap of tesla is 26 billion. Thats only 1 1 2 times of what zuckerberg is paying for whatsapp the point we were talking earlier. Well talk more about the facebook deal when we come back. Stay with us. In todays market, a lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price, maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Sometimes they just drop in. Always obvious. 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. Througet a sealy queen set 500 on befor just 399. Osturepedic. Even get 3 years interestfree financing on tempurpedic. But hurry, sleep trains president s day sale ends sunday. As you probably know by now facebooks acquiring whatsapp for a whopping 16 billion. It does bring us to this mornings squawk on the tweet. Hollywood couldnt script it better if the whatsapp deal were the sequel to the facebook movie the social network who the would the sequel be called . Tweet us squawkstreet. Everybody is saying whats cool, 16 billion, thats the obvious joke. Im just wondering how many annoying whatsapp comparisons were going to be doing here for the rest of the morning. For a long time. When we come back, the philly fed at the top of the hour. Dont go away. Eryone eryone tony stewart on race day, you dont go out there for the crowd. engines roaring you dont do it for the money. You dont do it for the press. Or the girls. Well. Maybe for the girls, definitely not for the press. You go out there cause youre a driver and you love what you do. You go out there to race. crowds cheering engines roaring and you better be ready, cause im coming back. race cars passing by. Crowds cheering im bethand im michelle. And we own the paper cottage. Its a stationery and gifts store. Anything we purchase for the paper cottage goes on our ink card. So you can manage your business expenses and access them online instantly with the Game Changing app from ink. We didnt get into business to spend time managing receipts, thats why we have ink. We like being in business because we like being creative, we like interacting with people. So you have time to focus on the things you love. Ink from chase. So you can. Welcome back to squawk on the street. February Phil Fed Business Outlook is down 6. 3, down 6. 3, we were looking for a number between 7 and 10 on the Positive Side last month,. 4 unrevised. The last time we had a number this weak, boy, we have to go back a bit. You have to go back to february of 13. February of 13 to see a weaker number. Lets look at leading indicators for january, up 0. 3 met expectations and last months 0. 1 revised to unchanged. The philly fed Employment Index dropped from 10 to 4. 8. If we look at new orders it went from 5. 10 to minus 5. 2 there are big swings which philly is known for, how this will stack up considering the turnaround based on a pmi that most people dont normally talk about will be very fascinating. Squawk on the street, gang, simon and boys, back to you. Thank you very much, rick. We start the main part of the show now with facebook. The social Network Buying the messaging Company Whatsapp for an incredible for many people 16 billion. So, now that whatsapp is off the market, whos next and can you buy it . Julia boorstin is live in los angeles with the answers to that. Julia . Well, simon, youd have to have very deep pockets. The 16 billion acquisition shines a spotlight on just how valuable messaging and social apps are potentially raising price tags, which other startups could be up for grabs. Snapchat drew offers at a 3 billion valuation. The messaging app that focuses on privacy, in december raise the another 50 million. Well have to see if its 400 million daily messages draw more acquisition interest. And snapchat isnt the only hot messaging app but you may not have heard of the other ones because they are overseas, theres a hybrid of facebook and twitter its a chinese microblogging platform and last year alibaba invested 586 million in the company at an estimated value north of 3 billion. The Parent Company is traded on the nasdaq with a 4. 8 billion market cap. Popular in japan, taiwan and thailand is a startup called line, it has more than 340 million registered users offering text messaging, and voice calls and photo sharing and games. Its free but it charges for stickers which users can add to chats. Its developed by a Japanese Division of neighbor which is a Korean Internet Company and then theres chinas leading messaging app wechat with 272 million monthly active users. It earns most of its revenue from games. Its already owned by giant media giant ten cent but is drawing growing attention here in the u. S. Now, Facebooks Whatsapp acquisition even puts blackberry in the spotlight. Sending its shares higher because of the perceived potential of its mobile messaging service. So, who could be in the market to maybe snap up one of these, google, twitter, microsoft, yahoo or even apple if it wanted to break out of its closed ecosystem. Carl . Thats been mentioned a couple times this morning, thank you, julia. Our Julia Boorstin. What are the implications moving forward for the major deal for facebook and the rest of the tech sector, lets bring in the senior Portfolio Manager and the head of meeffedia research from cant ee cantor m see the impact on stock and the monetization dont appear to be a nearterm phenomenon. Do critics have a point . I think they have a point. When the Company Acquired instagram for a billion dollars about two years ago and clearly those concerns have now been put to rest with that platform going from 30 million users to somewhere between 150 and 200 million users so we think instagram went from a billion dollars to probably between 5 billion and 10 billion today. Yeah, i think today its really hard for one to put their, you know, head around a 19 billion value for a business that has very little in terms of revenues, but strategically i think its really important and i think they did a great job taking it away from google. Chris, can you paint a bestcase scenario on how this is really worth 16 billion . Say, three to five years from now . Yeah. Theres a theres a very strong case to be made on the Positive Side for this. When you look at the users and the usage data that were seeing out of whatsapp, this company could actually have a billion users within a short amount of time, programs erhaps as early year. In the social networking world, they are based per monthly active user. In this situation you can actually see the company being valued at something closer to 50 per monthly active user over time. Why . Why would it be worth that if they are charging a dollar a year . Well, because the idea if you have all these users, you are undermonetizing the usage at only a dollar a year. Its very unlikely that the longterm scenario of this is based on a dollar per year usage. With this kind of usage, so what you have is multiple chances at the revenue stream. You have not only a subscriber, but you also have a potential for advertising or ecommerce down the line. Thats where it looks interesting. There is risk to that obviously. The biggest risk which hasnt really been discussed is the stickiness of this user base, right . You have 50 employees at whatsapp that created this wonderful mechanism for messaging, but is that something that people will be using a year, two years, three years from now . Thats the biggest risk. I actually dont think if were talking here a year from now that theyve got a billion users, i think this will be a home run deal. That to me is the clear part about this. You know, for many people watching here, i think they will see it through the optics of Mark Zuckerberg, a market cap of 117 billion. And still he is out there fighting. Some would say bid defensively or aggressively, we could discuss that, but the guy is out there. Hes in the streets. And hes fighting for his tech corner. Well, look, this is a this is a very exciting environment right now. Its good to be a developer, its good to be facebook and its good to be twitter because the amount of innovation thats going on is pretty incredible and the incumbents are just not up to snuff with all the innovation thats going on. So, i would not want to be a telecom company, i would not want to be charging for sms right now. This is a 100 billion market that this particular player is going after at least in phase one. Theres voice, theres video eventually. So i think monetization is really, really real here and i think over time as chris said earlier, i think this deal in 22 two, three years will be one of the better transactions that facebook has done. But, you know, its a little hard to kind of, again, see that, knowing how, you know, the size of the Employee Base right now. Yeah. We continue to be pretty positive. We dont know if its google, youtube or aol, time warner quite yet. Thank you, guys, appreciate it very much. Thank you. Thank you. Our next guest on the show wrote a piece for forbes. Com, he wrote it back in december of 2012. About six months after zuckerberg had first contacted them. Eric jackson wrote then at the time in a given decade in technology there are only a handful of companies that come along that have a chance to plot a course to stay independent and end up exerting enormous influence on the rest of the tech ecosystems. Facebook was one. Twitter was one. And whatsapp is one. Eric jackson is the founder and managing partner of iron fire capital and a forbes contributor. He joins us now on the cnbc newsline. Eric, welcome to the show. Hey, simon. I guess the question is should they sell if its 16 billion . Well, with 19 if you include the stock units that are coming as well. I can never fault anybody, the two founders, nfor taking the money. Its a huge amount of money obviously. But i stand by my assertion over a year ago that, you know, had whatsapp stuck to its guns and stayed independent, they had a chance of being a massively Successful Company in the way that facebook did when it managed to squeak out of getting bought by yahoo for a billion. But success in what terms, eric . Given that the founders say they dont want advertising, they could have a billion users but they still wouldnt have monetized it, they certainly wouldnt have this amount of money in their back pocket now. Well, i think its silly to look backwards and say, hey, this is only a company that made 20 million last year, how can we justify this price. You have to look to the far east, you have to look and how to monetize the services to foreshadow what is possible with whatsapp as part of facebook. Like the previous guest said, a few years from now this is not a service with 470 million users, this is a service with at least a billion, maybe 2 billion users and what you can monetize with that is huge. And i think its more on the ecommerce side not on the advertising side. Right now in china, if you use wechat and you get into certain Taxi Services and imagine doing that uber over here you can get a discount on what you pay for the taxi fare if you use wechat versus another service, well see opportunities like this all the time in coming years. This is jon fortt but theres only one or maybe two times that facebook can do Something Like this at this scale, right . What zuckerberg has in effect done is made the we the, sorry, whatsapp people like early employees of facebook. Thats the size of the stake and the exit that theyre getting here. I mean, what does that say about how important or how dangerous facebook felt like this company is . Well, i think smartly i think zuckerberg is acutely aware that his leadership position today is ephemeral, its temporary. And he is he goes by the antigrowth mantra that only the paranoid survive. And if there is any upandcoming service thats showing promise, hes going to take those guys out and hes going to you know, you could say the stock is inflated or not, hes going to use the assets in his possession to get these people in the fold. As opposed to, you know, yahoos playbook from ten years ago which is saying, i dont want to pay that extra billion to buy google, i dont want to pay an extra, you know, 200 million to buy facebook, hes seen that playbook has failed and, you know, i got to tip my hat to him. I think its incredibly brilliant of him. Its ballsy. This is instagram, you know, people howled that that deal was overpriced. Right now that looks like the best and one of the cheapest internet acquisitions ever done. For sure. For sure. Eric, just before we let you go, bottom line it for investors, what should they do . What are you doing as an investor . For me, unfortunately, a lot of these names are private. I am long blackberry. I think bbm is, you know its obviously it could have been whatsapp had they gone Cross Platform a couple years ago. But bbm is still a service with 100 million users and messaging is the new hot service. Youre going to hear about these kind of apps more and more and google and others are going to be desperate to get into the party. Thanks for the analysis, eric, always good to hear from you, eric jackson from ironfire. To sell or not to sell, whats a. M. May be ca whatsapp may be cashing in but fiend out what Snapchat Ceos said when i asked him about the future of his business. I think its a little too early to say, right now we think the market is in its adolesce e adolescence, were focusing on creating a great product that people love to use and obviously monetizing that. And tumblr Founder David carp was happy to join the team at yahoo after that 1. 1 billion acquisition. Ive been incredibly openminded about the structure, the organization, the company that were building. For me its been about the mission, and this is an incredibly opportunity to serve that mission for a long time. Jon fortt, are you celebrating today, you think you got in too late, too early . You definitely celebrate. I really feel like what Mark Zuckerberg has done is put him in a time machine and made him almost a cofounder of facebook. On the board . Yeah, on the board. This is, like, an ideal situation ten years from now what the company would be worth and hes got it guaranteed right now. But when you look at those founders and listen to them, they have such strong sort of mantras that they stick to and weve heard the same about this guy that he has a message, you know, with his three things that he always follows including no advertising, no gimmicks. When you go into a company like facebook obviously Mark Zuckerberg said he wants to keep it run by the current management, but how much is that compromised . I dont think it is compromised. Its an interesting hedge maybe on Mark Zuckerbergs part. Heres a company thats not really about being a public, open social network. Its really not about advertising the way facebook is. One of the dangerous mimes out there that maybe facebook will start charging a dollar a year. Well, whatsapp is actually doing that. Well see. And it adds international diversity, jan koum is actually from the ukraine where you at people are dying of violence. He grew up in the soviet era. He spent how long at yahoo . Ten years . Yeah, i think nine years at least. Nine years at yahoo learning his trade. This is the scene in kiev. So to take somebody from that background, from the soviet era with his views on communication and the open networks and for freedom of information adds a different perspective to the facebook board. It certainly does and weve heard from sergey brin a similar perspective, you know, one of the cofounders of google. It would be interesting to hear kind of what those conversations are like with them deciding who to go with. Not to mention for every facebook theres also a myspace which can be a at least an example of when it might be smart to sell. Yep. Yeah. Perhaps. That was in a conglomerate. That was not run by originally it was. News corp. Bought it and it had great value for a while. Yes, when they paid for it. They only paid they didnt pay very much for it. It was worth as much as ten all right. Lots of lessons all throughout. We can talk about that there are a lot of angles on the story and well pursue many, many more on squawk on the street. We want to point out the big consumer name of the day, walmart, beating estimates, the stock is under pressure, though, this morning and Courtney Reagan is back at hq to tell us why. It looked like the guidance disappointed. Its one of the things that disappointed. The question is can the retailer do anything to trump the economic headwinds that are really squeezing its core consumer. Iterned with its profit would come in at the lower end of its previous range which it did, though edging out consensus by a penny. Revenue missed expectations and while they didnt break out the impact for the Fourth Quarter they said there was a negative 5. 1 billion currency impact in a year the second highest in recent history. For the sixweek holiday period, samestore sales were positive and the u. S. Ceo bill simon said without the reduced food stamp benefit, comps actually would have been flat, so thats fairly significant. Traffic dropped by 1. 7 but transactions were up by 1. 3 , so on a prerecorded Conference Call new ceo Doug Mcmillan said comps are a priority. They said comps are negative for the first two weeks of february due to the Severe Weather saying at one point 200 stores were closed. Simon also said tax refund activity is slightly lagging last year. Looking forward, walmarts guidance short of analysts consensus, cfo Charles Holley notes reductions in the food stamp benefits and higher taxes and tighter credit will weigh on it Going Forward and Health Care Costs are expected to total 330 million this year as well. While the traditional walmart format may be struggling the company is betting on the small neighborhood Format Stores for 2014 growth, nearly doubling the planned expansion to 270 new locations from 150. And on a media call simon said the small format store does four times the sales of a dollar store when asked whether an acquisition had been considered for expansion. We spoke about that yesterday. Thats a big part of the story. Thanks, court. Tesla reporting record sales in the Fourth Quarter. The stock as you can see off the highs of the day but it was up about 10. 5 . Whats ahead for musk and the hightech auto company . More on that when we come back. 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Plus, free delivery, setup, and removal of your old set. Keep more president s in your wallet. Sleep trains president s day sale ends sunday. Superior service, best selection, lowest price, guaranteed. Sleep train your ticket to a better nights sleep welcome back to squawk on the street. Im phil lebeau with some breaking news from porsche. Porsche is telling owners of 2014 model year 911gt3s to stop driving their cars immediately. There are 785 of them around the world, 408 in the United States. Porsche is telling owners stop driving them immediately as the company investigates a couple of fires in europe where the vehicles appeared to have spontaneously combusted and caught on fire. Again, porsche telling owners stop driving the cars immediately. Were going to continue looking into this story. When we have an update for you a little bit later on today. Lets transition to a big story in the auto industry, this one from tesla coming off basically betterthanexpected nin the Fourth Quarter and for all of 2013 and when you take a look at shares of tesla, this stock at one point this morning was up more than 10 . Whats driving this stock higher . Well, take a look at the catalyst, especially when you look at how this company is expanding both here in north america and around the world, 35,000 model s are expected to be sold here in the u. S. And around the world in 2014. Thats a little more than people were expecting, but overseas sales will be double than in north america and in china demand is climbing. And heres what ceo elon musk had to say about what they are exing. Ing to see in china. Based on Current Trends it seems well be unlikely to satisfy demand for china this year. For teslas factory in fremont, they are currently changing bloi line ing assembly could be ready by the Third Quarter and they are in the process of finalizing plans for building a battery factory, teslae pat partners working together to bring down the price of battery price. Sure they sold only a little over 22,000 vehicles but teslas market cap, carl, is half of what General Motors market cap is. Tesla 23. 7 billion and guys back to you. I have a question because speaking to that moonshot of the stock move for tesla, what could stand in teslas way . To me it seems the constraint are the price point if you are looking internationally and some of the battery issues. How is it dealing with those things . Its execution at this point. You are talking about the battery being a primary concern, can they bring the price down toe the mass market tesla in 2017 can be sold in the 40,000 range and still be sold at a profit, that will be a big challenge. All right. And whether it trades as a tech stock or an auto stock is another thing. Phil lebeau always good to get your perspective on tesla. Coming up were live from sochi for the latest on whats happening at the winter games. Well be right back. All stations come over to mission a for a final go. This is for real this time. Step seven point two one two. Verify and lock. Command is locked. Five seconds. Three, two, one. Standing by for capture. The most Innovative Software on the planet. Dragon is captured. Is connecting todays leading companies to places beyond it. Siemens. Answers. Here in philadelphia you can access a philly cheesesteak anytime, day or night. Just like you can access geico anytime, day or night. There is only one way to celebrate this unique similarity. Witness the cheesesteak shuffle. Cheesesteak, cheesesteak its the cheesesteak shuffle huh every day, all day, cheesesteak, cheesesteak every night, all night cheesesteak, cheesesteak 9 a. M. Cheesesteak 2 p. M. Cheesesteak 4 a. M. Cheesesteak any time ruh geico. Fifteen minutes could save you fifteen percent or more on car insurance. We are approaching the final days of the Winter Olympics and team usa appears to be finishing strong. Our Michelle Caruso cabrera is finishing strong after the interview this morning with the dutch speed skating coach and she joins us from sochi, hey, michelle. Reporter hey there, carl, lets show you the medal count right away to show people what youre talking about. Number one for the United States, both in total numbers, total medals and the number of gold medals, russia number two, and netherlands with the third number of medals and the most in speed skating. And american ted ligety won gold in giant shloam and he won the first alpine gold medal for the United States. American gracie segal came in first in the Short Program and shes close enough with her score she can still medal tonight when they conclude with the longinform progr hiform pr. The russians had a loss in mens hockey and last night the 19yearold womans figure scapter fescapt skater, she fell. Shes still in fifth place believe it or not but a lot of things will have to go right tonight for her to get anywhere near gold or even medal. Speaking of which thats one of the highlights tonight. You can see a lot of other things as well on many of the nbc channels including the freestyle skiing, cross and the half pipe which is also exciting. We spend a lot of time with the dutch speed skating coach. Talked to him about why his team won so many medals. 21 and the americans didnt win any even though they were expected to. Remember, there was a very big controversy about the new under armour suits the americans were wearing, the mach 39 which they dropped midway through the games because according to reports some of the skaters worried it was causing too much drag. We asked the dutch coach about whether the suits matter. Yeah, the suit was one of the reasons but not because it was bad, because they believed it is bad, because for skating you have to believe in yourself like american always do, americans always believe that they are right, always believe that they are the best, yeah, but thats not true. Reporter you got to go on cnbc. Com we have both the live interview and a taped interview, explosive, what he said about american football is very tough. U. S. Speed skating officials said there was no evidence that the suits were contributing to the poor performance and remember, of course, curling on cnbc and tonight is the gold medal round from 5 00 to 8 00 p. M. Dont miss it. Guys, back to you. And as far as fashion goes, its got to be the norwegian curling teams pants that really, really take the prize. Johnny ware gets the Fashion Awards for the olympics. Reporter but they brought seven new pair of pants, one for every single competition and theyve gotten a lot of commentary. They have a Facebook Page dedicated to their pants. Really . The pants page. You need hot tea. Reporter i do. Michelle Caruso Cabrera live from sochi. Facebook making a lot of headlines with the 16 billion purchase of whatsapp. Is it really worth 16 billion . And if not, how much is it really worth . The answer next. P early. Up late. Like this dozens of tax free zones across new york state. Move here. Expand here. Or start a new business here. And pay no taxes for 10 years. With new jobs, new opportunities and a new tax free plan. Theres only one way for your business to go. Up. Find out if your business can qualify at startupny. Com [ car alarm chirps ] [ male announcer ] we dont just certify our preowned vehicles. We inspect, analyze, and recondition each one, until its nothing short of a genuine certified preowned mercedesbenz for the next new owner. [ car alarm chirps ] hurry in to the mercedesbenz certified preowned sales event. Visit today for exceptional offers. Facebooks billion dollar deal for whatsapp has elicited plenty of reactions including one from the wall street journals dennis bermen is joining us is to talk about it is the aforementioned tweeter himself as well as Jon Steinberg, cnbc and president and ceo of buzzfeed. Looking at your tweet, dennis, got a lot of attention, the prostate addiction to smartphones you noticed on the street this morning, 19 billion not so bad. Wherever you are, the human race has morphed into a bent shoulder person looking at their smartphones and theres at least some logic to the crazy, crazy price, some logic that 450 Million People on the whatsapp application, theyre spending an incredible amount of time there. Facebook has a mortal threat or at least a threat from those sort of services, why not spend whatever it takes to at least eliminate that threat. That at least is some logic. I still think the price is crazy and id like to know what jon thinks. Jon, go ahead. I love simple math, lets do some simple math. 241 million users on twitter. And an average of 2. 75 is what each user generates per year for them, 30 billion market cap. Its more than 30 billion . Whatsapp you have 450 million user at 1. 38 would be 16 billion in market cap if you do apples to apples. Dollar 38 isnt hard to get to, and that simple math shows you how maybe zuckerberg looked at. When you talk about the valuations, its so hard to put numbers on it, you can do this, and the question here i think speaks to your tweet is the vision and what Mark Zuckerber is trying to do to dominate mobile, and apple and google actually own the operating systems. I like to think of it as facebook putting together an assembly of companies a Digital Holding km, cmgi for those of you who recall the last great internet bubble days, that comes to mind. I like jons math, i think we have to think that a 1. 38 per subscriber, they wont get it from each subscriber it will be a much smaller terms who of take up the service. On the bold case you can say that facebook got a lot more takeup of the application across the platform, lets say they get to 800 million users, its not crazy if you believe they can convert the users to paying customers. Facebook will love the cmgi comparison, dennis. Hey, sequoia, sequoias going to make 50 times their money, what does that mean . To me, well, sequoias obviously had a bit of a downstreak of late and some of the old guard of Silicon Valley are reasserting themselves after the Angel Networks out there really took a lot of the powder out of the game because they were getting all the upside. What does it mean . Its a once in a lifetime investment, thats what it means. They did it. They hit the jackpot. You are talking about the real power ball. I would love to be in Silicon Valley and hope you do reporting. Everyones heads must be exploding and the jealousy and envy is all happening now. The rich get richer on this one. Not only do they make a home run on this, their initial investment of 60 million worth 3 billion but now theyre the name on everybodys tongue, every young entrepreneur will want to talk to them. Not tiger global owning a big stake of it, just sequoia, 8 million in, 51 million, it was secret that no one even knew about. Theyre back on the map. Jonathan steinberg, you are a young entrepreneur, youve been working really hard, do you find yourself envious when you look at this . Not that buzzfeed is not success. Jon ambitious, i dont think so. They call them unicorns, and someone called this a doubleheaded unicorn, its not even 50 employees that are going to split the employee the employee pool on 19 billion and not even counting the 3 billion earnout package, like, its insane. Watch sequoia, obviously. Dennis can you give us name of who you are watching in terms of Deal Properties in silicon . Line is a big app out of asia. Wechat obviously a whole different ball of wax out of china. I will say if facebook has to spend roughly 10 of its overall val ow a company that makes 20 million, maybe the multiple for facebook should be lower than the markets giving it credit for. Almost like an investment. Its a little bit of a risk. Maybe we have to think of facebook that way, too. I wouldnt say cmgi, i would say liberty and zuckerberg knows how to use his stock to do a purchase. Hes much more financially sophisticated than people have given him credit for. A great product guy and stock user. Maybe he should buy time warner. Could be next. Its happened. Its a drop in the bucket especially if they get rid of time magazine. Okay, guys, well leave it there, thank you, Jon Steinberg and dennis bermen. Speaking of facebook who do you think is more influential in business over the last 25 years, Mark Zuckerberg or twitters jack dorsey . Not that any of them, of course, in business in for 25 years. Lets talk about pepsico, david, im glad you are here, nelson peltz the activist investor has raised the stakes on pepsico. Remember, hes been pushing for pepsico to separate its business the snacks business and the beverage business. Pepsico came out with earnings last week, said it has been doing a comprehensive review of peltzs proposal and decided no to the do go there that it will maximize shareholder value by keeping these two together, saying they are synergies in the businesses and its in the best interests of shareholders to keep them together. Last night the wall street journal first reporting that he sent a letter to pepsicos board saying the weak results highlight the fact that they need to split these businesses. And i also want to read you a statement from pepsico this morning in response. Well, first, lets start with the peltz statement. He says we find that managements rationale for maintaining the current structure highly subjective, full of platitude and lacking strong supporting analytics. What is the benefit of scale and synergies if pepsico loses market share in critical segments and delivers lower sales margins, excuse me, earnings per share growth and total shareholder returns than piers over an extended period of time . One bone he picked with the pepsico review. Lets get to the pepsico statement to get the balance because both have been vocal and defensive. Pepsicos management and board of directors has clearly spoken on the issue and we engage constructively and invested large amounts of management time and significant Financial Resources analyzing the proposals. Management and the board have spoken clearly. The focus is on delivering results for our shareholders and not new costly distractions that would harm shareholder interest. And theyre confident that theyre going to be able to deliver shareholder value through this. David, it raises a lot of questions in terms of what shareholders will side with. Obviously nelson peltz will make his case. And a 1. 2 billion position in a 122 billion company, it is small to say the least. At 1 or so. But that said, the key is can he win over other shareholders. This debate has been going on for quite some time, of course. You hit some of the salient points there and hes still coming. Nelson is nothing if not tenacious and one would expect hell continue to bring this fight to pepsico but they continue to maintain and after a long review, of course, as you said and they said in their own statement that these two businesses belong together. It is interesting to note in activist circles youve got him saying please split pepsi. Thats his playbook. And then dan loebs sending a letter to his own fund holders but recommending that dow chemical split itself up. That is a battle programs yet to come. Dow also saying were not interested. On a number of different activist fronts this is the idea at least embraced by those who are active but well see whether other shareholders agree. I want to mention hes not picking on anyone. Its an interesting quote that came from the journal article not trying to remove anyone but trying to break the company into two. The dow is up 58 points. Lets get over to dom chu for a market flash. Dom . Lets continue the conversation on beverages. Cocacola is increasing its Quarterly Dividend by 8. 9 to 30 cents, 30. 50 cents per share. This is the 32nd annual consecutive increase in terms of the overall annual Dividend Increase and cocacola shares trying to recover on the 4 drop in earnings. At least some upside on todays trade. Back to you. Thank you very much, dom. Still ahead on the show the ceo of marriott will join us to explain why unlike other lodging companies Arne Sorenson is accelerating cash to shareholders and why the recent bad weather may be boosting the fortunes of that particular industry. Squawk on the street will be right back. 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. Where you think youre gonna go when your times all gone . [ male announcer ] live a full life. The new lexus ct hybrid with an epa estimated 42 mpg. The further you go, the more interesting it gets. Lease the 2014 ct 200h for 299 a month for 27 months. See your lexus dealer. Welcome back to squawk on the street. And thursdays edition of santelli exchange. Lets start out talking a bit about japan. It wasnt that many days ago they were able to goose their stock market close to 14,009, why . Because they have a program, of course, that is putting money in the system and before it ended they juiced it up and doubled the size. It didnt even hit its first set of limits. Old news. But why is it important . Because the market was down today. Down today. About 2. 1 . And at 14,400 and change its not far away from its closest close of the year of 14,000. I think as the poster child of large qualitative and quantitative easing, this is market to Pay Attention to. After 2003 after years and years of currency intervention and spending billions and billions of equivalent dollars doing so, they threw their arms up and stopped doing it. Why . They lost to the market. We need to watch this. Second issue, we talked about retracements. We talked about how the fiveyear important 38 retrailsment from its highyield close at the end of last year is 156, 276 for ten years. Now, whats port is these are predicated on the low yields which were around 144 on february 3rd and fives and around 158 for tens. But the key is weve recently closed one basis point below those. And well potentially do it again. This is more art than science to many technicians. Its only on a closing basis and you want to give it slippage. Key areas today. Last point, you know, when we think about europe, everything that they seem to be doing especially when you look at some of the history on the Securities Market program, its about the prop up banks. Heres the nominal value of the countrys holdings here in their own paper and definitely its decreased. This is the end of 2012, the end of 2013. But 185. 7 billion euros is still a lot. We need to monitor that and, remember, the yields have gone down helping the positions on book value. Back to you, sara. All right, very topical, as always, Rick Santelli on europe, japan, and the bond market. Coming up next who has been more influential over the last 25 years Mark Zuckerberg or jock dorsey . That question especially interesting right now after facebooks massive deal about whatsapp last night. Well bring you the case for both sides after the break. When you order the works you want everything. An expert ford technician knows your cars Health Depends on a full, complete checkup. The works. Because when it comes to feeling safe behind the wheel, going the distance and saving at the pump you want it all. Get our multipoint inspection with a a Synthetic Blend Oil change, tire rotation, Brake Inspection and more for 29. 95 or less. Get a complete vehicle checkup. Only at your ford dealer. Tdd 1888648602121 tjust waiting to be found. Ties tdd 18886486021 at schwab, were here to help tdd 18886486021 bring what inspires you tdd 18886486021 out there. In here. Tdd 18886486021 out there, tdd 18886486021 there are stocks on the move. 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Who should make the list . Today we have a faceoff for you. Its the social media showdown, Julia Boorstin is making the case for Mark Zuckerberg. Carl is here to argue for jack dorsey. Think of it as the hunger games of business news. Great. Im up against katniss. Julia, you start. Battle to the death. Simon, forget about the past 25 years. Mark zuckerberg changed the world in just ten. Building the 15th Largest Company in the u. S. , a service that 1. 23 billion people use monthly. 757 million, over 10 of the worlds uses facebook daily. Thats all the more impressive consider that twothirds of the world doesnt have access to the internet. Zuckerberg effectively built the multibillion dollar social advertising business and successfully pivoted from alliance on the desktop to being a mobile first company. Now hes taking on mobile messaging with a 16 billion acquisition of whats app. Plus, zuckerberg has become a force in politics push for Immigration Reform because ford got u. S. Organization and he and his wife donated nearly 1 billion last year making them the most generous americans. So, carl, can twitters jack dorsey top that . Im going to try. Dorsey may not be as rich as zuckerberg but his legacy is just beginning. Unlike zuckerberg who badly miscalculated mobile, dorsey saw mobile as the future from the beginning. That goes back to his earliest tweets about where he was physically in san francisco. Dorsey knew the end user could and should change the product. The result, hashtag, trends, tools that facebook has since borrowed, some say stolen. Dorsey has proven hes more than a one trick pony with square. The mobile payment firm as investments with starbucks. And who did disney pick when choosing the board . Jack dorsey may be the only exec on this list with a tattoo running the length of this arm. In short, dorsey is skating where the puck is going and we havent seen the last of how hes changed american business. You know, julia, that was a pretty big fight back there from carl. Wow. Well, yes, i have to say even though dorsey is on disneys board, so is sheryl sandberg. Facebook is represented on disneys board. You know, its actually, today the whats that deal is it makes it a more interesting point. Is zuckerberg going to be a rollup artist where he c conglomerates into various social platforms or is he going to expand beyond tech and innovate the way i think dorsey arguably is. I think, carl, that sorry. I was just going to say that i think that zuckerbergs move in the past 24 hours shows just how ambitious he is and how big his vision is for sort of owning the way people communicate both on traditional mobile messaging, control that texting market, as well as social networking. I think hes setting his sites before high and everything he accomplished in the past ten years he can accomplish even more in the text then. Yet, julia, its still all social media unlike google who is going to rebut it. Yes. Google is going to robotics but google has been making investments that havent paid off. Messages is sms texting. Zuckerberg is taking on the el codes. These are both incredibly young guys. Its the next 25 years that may define them as opposed to the last 25. Great point. Dont forget to vote. Well played, boorstin. I was just going to say, it reminds me of disney, create that portfolio. All right. It is tweet time. Our top story today, of course, that facebook story acquiring social messages app for a whopping 16 billion. That brings us to this mornings squawk on the tweet. Hollywood couldnt script it better if tbet better the whatsapp deal to the network. What would it be called . Get creative and tweet us at squawk street. Anything we purchase for the paper cottage goes on our ink card. So you can manage your business expenses and access them online instantly with the Game Changing app from ink. We didnt get into business to spend time managing receipts, thats why we have ink. We like being in business because we like being creative, we like interacting with people. So you have time to focus on the things you love. Ink from chase. So you can. Make it happen with fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Squawk on the tweet. Facebook is acquiring whatsapp brings us to this mornings tweet. Hollywood couldnt script it better. If the whatsapp deal were the sequel tout facebook Movie Network what would it be called . How aol instant messager got its groove back. The good, the bad, and the texty. How to lose a subscriber in ten dates. Not bad given the material we have to work with today. Meantime, at 1834 were getting close to break even again for the year to date despite philly fed coming in no good today which is weird given the market pmi market. Com. It was okay. Pmi was very strong. That could be the trend. The trend could be that. See you a little bit later on, guy. If youre just joining us this morning, heres what you missed early on. Welcome to squawk on the street. Heres whats happened so far. The price theyre paying is only 42 per user. Put that in perspective, twitter goes for about 150, facebook itself is 140, linkedin, 120. When you look at the scale theyre getting in their reach, theyre getting what theyre pay for that, its not a bad deal. Could they get more than a billion users and maybe the bigger interesting question is could you generate more than a buck per user per year. If the service is successful they should be able to get well above that. Yeah, theres a case here that this is a nicely financially accretive deal long term. We are announcing more shares of busby con toent the whatsapp. Clicking the Whatsapp Button than tweeter. This thing is massive. Given the exuberance by which these shares are met, it could not be too much trouble if they needed to raise more money. Its a nice position to be in and everybody believes in you. There is the bell. Zuckerberg is acutely aware that his leadership position today is temporary and he is he goes by the andy roast mantra that only the paranoid survive. And if there is any up and coming service that is showing promise hes going to take those guys out. Welcome back to post 9. Breaking news. Inventories, hey, jackie. Good morning, carl. The department of energy just releasing crude Oil Inventories for the week. A build of 1 million barrels. That was a little bit of a bullish number seeing a pop in prices. Traders were expecting a 2 million barrel build. Let me put this in context for you in line with the fiveyear average. Analysts are find that refinery utilization rates is declining and that is consistent with the build weve been seeing over a last couple of weeks. If utilization rates are about 86. 1 of capacity, that means we are still churning out pretty much a lot of crude and that supply is very stable out there if the price, however, are staying elevated partially because this is a technical trade. Also because of the cold weather outside. And then couple that with the equity market strength were seeing as well. Last but not least, just want to talk about natgas. That number did come out in line with expectations. We just dipped under 6 but now we are back above that level. Back to you. Near fiveyear high, thank you very much. Road map for the hour begins with the deal thats the talk of wall street. Facebook buying whatsapp for 16 billion in cash and stock. Weve gotten various perspectives on the deal and what it means for investors. What is the future hold for hotel giant Marriott International . Simon will be talking live with the ceo about the travel landscape. And apple shares have skyrocketed. 4600 in the past ten years. Barclays analyst have had an overweight rating on this stock the entire time but now downgrading apple. First up, Facebooks Whatsapp much is the biggest acquisition so far. Does it make sense for the growth of the social networking company. Joining us this morning is kara swisher for re code. Nbc news group is an investor in re code and has a content sharing partnership. I loved reading your piece this morning. You do call the figure jaw dropping but maybe not as expensive as the numbers seem. What do you make of it . You know, facebook doesnt have a phone, google has a phone. Apple has a phone. Even microsoft has a phone. So mobiles is where everything is at. I think facebook strategy is i call it strategicy. Whatsapp is one of them globally. Its not that wellknown in the u. S. But its quite a powerful out side in europe and in asia and different places like that. You draw some parallels to disney. Uhhuh. Which as we know body spm bought marvel, pixar, lucasfilm. Is this about rolling up content, so to speak . Its the content of the internet. I mean, its an interesting thing because people are putting content into this which is what they do with facebook. Its sort of everybody is painting the fence tom sawyer way. Whatsapp is a powerful kind of thing like that the way instagram is which is much less money, just a billion dollars. They tried to buy ways. Google got that. I think they couldnt afford not to have this one if it got the googles hands or apples hands or microsofts hands that would have been difficult for facebook. This is jon fortt. This is a Staggering Amount of money, ten times what google paid for youtube. Whats the impact of this going to be on Silicon Valley, maybe on facebooks engineers and what they feel theyre worth on what the next hot startup goes for . You have to have a global footprint like whatsapp does. It just cant be anybody because a lot of little ones are sell for nothing. You know what i mean, the ones that try to be in messaging and didnt do as well. Consider selling but its 10 million, 20 million. So i think that, you know, you really do have to have a global footprint. I think thats the critical thing. Theres so much activity in china around we chat and rokutan was sold for close to a billion dollars. You have have a global footprint, a viral growth. I was happy with i was snap chat today, i guess. I would be happy if i was a bunch of companies. Poi pinterest, for example. Whats next . Where is it on this journey and so dominating your phone . Well, it didnt do a very good job with home. That died a sad little death. Its still around but it nobody was picking it up. That was the attempt to put a shell over android and it didnt really work. And so i think they theres a lot of must have apps. Thats what theyre going to try to do p. If you cant have the comcast or one of the big Cable Companies be Something Else that they need to have, i mean, hbo was very valuable for time warner. Espn is valuable. So these are things consumers want. A little bit like aol back in the day or icq but that was a long time ago. Kara, give me the dirt on what they made about sequoia and the money they made and dynamic of bankers that was used this time and not instagram. This is still a marks deal. I think hes got a cold today because hes so tired. But he does, actually. I know that. But he you know, this was Mark Zuckerberg pushed through. It was very important. And so, you know, i dont think they got 16 times the money because there was an Investment Bank present. I think this was the price. I was talking to miki last week and he was thinking whatsapp was in the 10 to 15 billion range which is why he paid a lot less for viber and for sequoia, pay dirt, right . Pay dirt. Tiny investment turned into a big one. They sold they were an intragram investor, too. A litter one but they were an instagram investor. You dont get many like this. I think theres probably a lot of gnashing of teeth in Silicon Valley. What are the chances we look back on this and say, man, the messaging companies were worth so much, making so much money now, i dont know why people didnt make even more for them. Im not a detractor of this deal. Its a lot of money. When i told people in the a room they went, what . What are you talking about . If they can develop it and monetize it it will be worth it. If they cant, it wont. Instagram is very popular but it certainly hasnt grown in the way that whatsapp has been growing and others. Once you buy these things do they really truly turn viral, they keep turning viral now. At the time that google bought youtube everybody had their mouths open again and nobody could doubt that deal as it turned out to be a great one for google. In lots of ways that we dont even understand. But a lot of people, kids especially, are not on facebook. They are on these apps. Theyre on instagram, on kix and whatsapp across the globe. If people arent using facebook, you know, maybe its good that facebook owns the other ones theyre using. They have a lot of choices. Yeah, i remember in sochi last week i asked one of the athletes who won gold. I said, are you on tender . She said i dont even have a Facebook Page. Your point is well taken. Thats another one. Tender. Watch that one. See you later on. Thanks. Kara swisher in san francisco. Lets look now at whatsapp and specifically the people behind it. Josh lipton is outside whatsapp headquarters right now many mountain view, california. Good morning, josh. Good morning. Were here in mountain view, california. Thats where whatsapp is headquartered. The founder of whats app are newly minted billionaires thanks to facebook, the social network, paying 16 billion for whatsapp. You look at those founders. Jan koum held a 45 stake in the company. He will be joining facebooks board. Jim getz says koums experienced growing up in communist ukraine pap thats what shaped his approach and appreciate communication that wasnt about communication, that wasnt tapped. As a teenager after arriving here in the u. S. , koum and his family lived on food stamps but he wanted to stay in touch with his family back in ukraine, back in russia. And that was the real motivation to build this messaging service. His partner brian acton, a former yahoo employ we where he workeding on advertising, according to wired, he tweeted in 2009 that facebook turned him down for a job so he went on to cofound whatsapp. Now, whatsapp has a very lean team. Its only about 32 engineers. That means one developer for every 14 million active users. That is an unheard of ratio vcs will tell you here in the industry. Carl, back to you. Big story today as well. Josh lipton out west. When we come back, showdowns in sochi, up when it comes to hockey. Live update from the Winter Olympics as u. S. And canada women faceoff today. Plus, Rick Santelli in washington. What are you watching . Were going to be talking about not only whats going on with regard to japan and maybe china, were going to talk about how we changed some significant data points with methodology like gdp and dpi. With the always loud and outspoken peter shift. Youre going to want to see this. Were going to pack more words in three minutes than any other two people on the planet. Bottom of the hour. [ male announcer ] once, there was a man who found a magic seashell. It told him what was happening on the Trading Floor in real time. The shell brought him great fame. But then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their Trading Platform. [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a. Shell. Get live squawks right in your Trading Platform with think or swim from td ameritrade. Get live squawks right in your Trading Platform these are the hands a pediatrician. These are pioneering advances in heart surgery. And these are developing groundbreaking treatments for cancer. Theyre the hands of the nations top doctors. Kaiser permanente doctors. And though they are all different, they Work Together on a Single Mission saving lives. Discover how we are advancing medicine at kp. Org join us, and thrive. Technology one of only three s p sectors so far that is positive for the year after finishing in the middle of the pack last year. Can tech lead the way for markets to go even higher . Dominic chu joins us now to explain. Hey. Sarah, theres a reason why many traders and investors care about tech stocks as much as they do. Its because its the single biggest sector in the entire s p 500. The Overall Index is made up of a lot of components. Tech stocks is the biggest one of them. Its more than the consumer staples, materials, utilities and telecom combined that also means its a sector with the most influence over the direction of the s p 500. Now, since the depths of the financial crisis in march of 09 tech stocks have been run of the mill performers. Tech ranks fout in ters of best performer s since then. Decent but not great. That being played out last year as well turned a very respectable but slightly underperforming 26 return in 2013. Good enough for fifth place out of ten. Again, one of the mill. This year though more optimism from investors so far in 2014. Tech is just one of those three sectors. Positive. It trails just, utilities and health care. Does that mean we are seeing a leadership again for the overall market . Well, one compelling reason is valuation. Traders are looking at stocks emerging from the financial crisis. They hit their record highs. And then you can see its trading at around 21 times earnings. Thats a big deal for a lot of tech stock investors. That was back in 2010. Valuations have come down to around 17 times earnings. You can see there in that chart. Thats higher than the overall s p 500. Still, pretty in line with what were seeing in terms of valuation. Whats driving the tech trade now. Tune in to power lunch were going to break down the more specific groups making waves. A lot are in the news even today. Back over to you. That is nice analysis. Thank you for that. Hockeys in the spotlight at the wirnter games as russian fas still in shock over their teams defeat yesterday. Brian sullivan is in sochi with more. Good evening. Carl, thank you very much. Do appreciate it. Its still a little bit tough here with the mood as you might imagine. This was something that everybody hoped would happen we would see maybe a russia canada at last. It is not to be. We talked to locals today. Nah, its tough but theres always next time, i suppose. Theyre trying to put a brave face on. Still, in about 45 minutes it turns to womens hockey. United states and canada are going for the gold medal so thats going to be happening. Were going to give you live updates on the scoring as the day and night goes on. And then tomorrow night we see the men go at it, the same matchup. Usa canada. That the that in the semifinal. Theyll play the winner of sweden finland for the gold med medal. Earlier today bob suter on the 1980 miracle on ice team was here in the olympic village. His son ryan actually plays for the current u. S. Mens team. So we got a few minutes with bob and we asked him what he thinks the chances are that the u. S. Will repeat. I think their chances are good. I mean, you got to get to the game to have a chance. And the canadians are, you know, very good and probably the favored because they have so much depth. But i think the u. S. Has played well enough to beat them and to win it. You know, bob brought his gold medal, carl, along with him. It was in a tiffanys case. I said, are you going to walk around with this thing around your neck . And we both decided that maybe here right now it probably wasnt the single best idea. And i will say this. United states looking pretty strong right now. I know weve had some failings, speed skating probably most notably. But currently were atop the medal board. The United States has 23. Russia netherlands at 22 each. Every single one of those netherlands medals have come in one sport. You know what that is. That is the aforementioned speed skating. He had tough words there. The u. S. Atop the leaderboard with 23. On street signs i know you got to ski. I got up to the Mountain Center today, kelly lynn forced me to get in a fourmen bobsled with three other u. S. Bobsled members. I got in. Its a struggle to get out. Its a tight fit. If you just need comic relief, watch the 2 00 eastern time hour. They dont make bobsleds for guys your size, brian. Youre a big man. Your, what, 68, 69, Something Like that . No, no, maybe wide. You know, im 64 but ive been eating a lot of boorst. It was tight getting in. I did get out, im here. Those potato pancakes will get you every time, brian. Talk to you soon. Coming up on the show, should you be making room in your portfolio for Marriott International . Simon has a live interview with the companys ceo on earnings and the business of travel. More when squawk on the street returns. Pay my bill. Phone your account is already paid in full. Oh, well in that case, back to vacation mode. Boots and pants and boots and pants and boots and pants and boots and pants and boots and pants. Voiceenabled bill pay. Just a tap away on the geico app. Huh, 15 minutes could save you 15 or more on car insurance. Yup, Everybody Knows that. Well, did you know that some owls arent that wise. Dont forget about im having brunch with meagan tomorrow. Who . Seriously, you met her like three times. Who . Geico. In a 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. Send it over to dom chu. Check out whats happening with juniper network. Finlands nokia is considering buying it to merge it into the Telecommunications Network gear business. Nokia and juniper are already in a partnership jointly developed and sell Network Equipment to carriers. That stock is up 3 off session highs. Back over to you. Both names go back a ways. Thanks. Hes headed overweight rating on a for ten years, ten years. So why has barclays analysts decided to downgrade apple now . He will join us later this hour to explain. Squawk on the street will be right back. From new zealand, textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Like carpools. Polly wants to know if we can pick her up. Yeah, we can make room. Yeah. [ male announcer ]. Office space. Yes, were loving this communal seating. Oh, its great. Yeah. [ male announcer ] the best thing to share . A data plan. New at t mobile share value plans for business. Our best value plans ever. For example, you can get 10 gigs of data to share. And 5 lines would be 175 a month. Plus you can add a line anytime for 15 a month. Sharings never been better for business. One of the stories thats been overshadowed by facebook today is marriott earnings. Unlike other ceos in the industry, Arne Sorenson of marriott is is selling share buybacks despite the revenue is down in the Fourth Quarter. We do live now outside d. C. Where Arne Sorenson, ceo and president of marriott have your wrapped up todays call. In a nutshell how would you sum up where you are in the Fourth Quarter . What happened . Briefly, if you would. Well, our Fourth Quarter was good. I heard your intro saying that our profits was down. Thats because of a funky comparison issue on our calendar. A year ago the Fourth Quarter 2010 we had, believe it or not, four months in our Fourth Quarter. This year we had three months in our Fourth Quarter. Thats what causes the year over year performance we talked about. When we look though through that at 13, what we saw in the Fourth Quarter was about 5 same store growth which is quite healthy, a sign that the economic recovery is continuing. Primarily in the United States but also actually better performance than some market in the world. China for the first time we saw 3 growth in the Fourth Quarter. In the early quarters in 2013 were weaker and so we start 2014 with another good year behind us and i think feeling good about the economic recovery continuing in our Business Model performing well in 2014. Arne, reading a lot of the analysts notes going into the call, the sentiment is the fact that you are accelerating the buybacks on the calculations that citi has done, maybe 1. 2 billion during the coast of 2014 which is about 7 of youre out standing shares. 50 as much as you did this year. I mean, why accelerate the buybacks when others are decelerating them within the industry . Well, our plan is to invest what we can in grow ourg business, attractive economic returns. In theory, we would use every dollar to do that if opportunities existed. We find that there are not enough opportunities to use all of our capacity. So we return the balance to shareholders. In 2012 and 2013 one of the Big Investments we made was to build these three addition po hotels. The first of which opened in london in september is doing spectacularly well but we already sold that to a longterm owner and weve entered into agreements to sell the other two additions. One we think we will do in 15. When we look at the cash well pull back out of those deals plus the operating cash flow we get back, we think we will end up with a billion and a quarter to a billion and a half that we can return to shareholders in 2014. The other significant amount of commentary comes over the conservative nature of your guidance, particularly here in north america. People just so everybody catches up here. Revenue per available room, rev par is the benchmark is what theyre looking at. You say it could be a 4 to 6 gain here over the year. If you look at that, people are saying 6 . International, youre 100 basis points behind, for example, starwood. When you were challenged on the call, what did you say . Are you being overly conservative . Well, i think theres a thematic point here. I think much of the market, particularly the u. S. Focused market a year ago. Our perspective here is that while there are some positive signs, employment continues to move, gdp may be growing faster in recent times than they did before. We still are thinking about 2014 is going to look a lot like 2013. Gdp growth, which is solid, but not necessarily spectacular. Now, if were wrong about that and hopefully we will be. We obviously would love to see the economy come back stronger. Sure. Then well see the rev per numbers at the higher end of the range. Until we see more proof. Go ahead, simon. Running out of time. I want to ask you one final thing. We have some really stunning figures that have just been released at the industry level for what happened through the bad weather last week. Total u. S. Rev par increased by 6. 8 up the scale rev par by 8. 3 . Is bad weather now clearly good for your industry . Bad weather is good in some places and its bad in other places. The worst thing for us, although the best thing for society, so let me acknowledge that right away, is a long in advanced predicted storm. Its good for society because people can plan for it, they can get home, they can do what they need to do. From a Hotel Perspective it means people have a chance to get home and they have a chance not to go with they might be going otherwise because of the storm. More often than not, though, the storms come up suddenly. You dont know exactly where theyll hit. So we have what we experience is people cant get in to marks. Thats bad. We also experience that people cant get out of markets. They tend to offset each other. Weather tends to not hurt us. Good to see you, sir. Thank you for sparing the time. Arne sorenson joining us there from Marriott International. Have a great day. Thank you. Close in the uk and across europe are just happening a few seconds ago. Simon would normally handle this but because he was doing the interview, ill take it. Pm irksz did fall slightly in february to 57. Also that over night data from china showing the pmi in that country hitting sevenmonth low. That news did weigh on a mining sector. Some down beat earnings from the likes of paa system s adding to the negative sentiments. You can see the continent, mixed markets today. Thats not counting the added geopolitical tension in the ukrai ukraine. We want to go back to the story of the day here in u. S. And really globally, facebook buys whatsapp. They are trading lower this morning. What will p the acquisition mean for shares of fate book Going Forward . Lets bring in two top analysts on the stock. Managing director and Senior Research analyst and Senior Analyst with susahana. It looks like for the most part wall street is positive on this deal. Make a case for why you think this is a good idea for facebook to be paying more than double its annual revenue for a company that barely makes any revenue. I think the strategic rational for this acquisition is actually quite sound. This is ultimately about grabbing more mine share on mobile and grabbing more real estate on mobile very limited real estate, i might add. And also in many ways defensive move because there is speculation that google at one point had wanted to buy whatsapp for 10 billion. The market here is a 100 billion market and modernization will come later. This company, whatsapp, is producing as much messaging volume than most of the services out there combined and is growing, its doubling it doubled last year, its user base. This is about where the user base is going to be in the future. Brian, i know you also have a buy on Facebook Stocks. Going up to 70. Yeah. Youre also positive on this deal. Why . Whats the value for facebook . Three very important things. The first point is it enables facebook to kol continue to control the entry point of how people are enter aking in social online through messaging. Secondly, it also addresses the teens and tweens because the most popular demo on whatsapp are the 12 to 17yearolds which is very important that facebook keeps them in their eco system so they the graduate those users to the other facebook Core Platforms and social platforms over time. This is a Global Platform on whatsapp. They are the leading messaging Service Throughout europe, latin america, a lot of countries throughout asia. And so over time you would hope that facebook can take that traffic and parlay it to more social growth as well. A lot of analysts are pointing to the fact that theres more engagement on whatsapp than on facebook and twitter. Thats a sign of strength. But theyre not monetizing that. If youre charging their subscription fee and not using advertising, why does that matter . Well, i think modernization will happen. This is a 100 billion market. So right now its about user growth, engagement, and, you know, ultimately through subscription, through ecommerce. We can look at some of the Asian Companies and theyre monetizing the messaging services quite well. That will follow. Its just not a focus of theirs right now. Brian, the knock is, if there is a knock today, zuckerberg is spending money defending existing businesses, right . Yeah. And that the cost of keep that engagement going up is higher than some people are comfortable with. A couple of downgrades based on that today. Whats wrong with that . Its a fair point that the 19 billion is a big number. Right . But the other big number is 450 Million People on whatsapp. That is rare. There are only five other platforms online that has users that big, google, facebook, microsoft, and wiki. If you look at the 19 billion on a per user base this is around 42. Its not that far off from what google paid for youtube or even what facebook paid for instagram. If you think of it in that way, right now the numbers seem large and theres a lot of headline shock to it. In two or three years when its a big piece of controlling the eco system, it wont be. If you dig through this deal it seems like they fade so much of it with facebooks own stock, almost 8 , what does that say about where facebook thinks its own stock is going and what it should be worth. I was going to say that exact point. That, you know, Facebook Stock is at an alltime high right now, or close to it. With this strong currency, they are able to take advantage of the market conditions. So again, i think most of this is in stock and it also aligns the interest of the whatsapp founders and employees with facebook Going Forward. All right. Thanks to you both. Great to get to you. As i said, a lot of analyst enthusiasm about this deal. Good to see you. Thank you. When we come back this analyst has had an overweight on apple for a decade so why is he town grading the tech giant this morning . Years old. Im going to have to rethink this thing. [ man ] i looked around at everybody else and i was like, are you kidding me . [ dan ] its just human nature to focus on the here and now. So its hard to imagine how much well need for a retirement that could last 30 years or more. So maybe we need to approach things differently, if we want to be ready for a longer retirement. Coming up at the top of the hour. Everyone buzzing at facebooks 16 billion deal. But what do they get for that money and how will whatsapp make money. Plus, how will the other stocks in your portfolio be . Turning to lasers for faster data. Were going to talk to the guy theyre hiring to hook them up as well. You may think chart watching is nerdy but we have a technical expert who will show you three. They say they are poised for a major breakout, all ahead on the half. I have a news alert. The white house putting out a statement on the situation in ukraine saying they are outraged by the latest images urging the president of ukraine to withdraw Security Forces from downtown kiev. It follows the president s comments yesterday saying the protesters themselves need to watch out and not step over a line. He said those who do will face consequences. There is a live picture of kiev as nightfall comes over the ukraine. Meantime, decade long honeymoon is over. Next guest had an overweight rating on apple for ten years but today he cut the stock to equal weight. Here to tell us why the downgrade after all of these years, ben is a senior i. T. Hardware and data networking analyst at barclays. It is great to have you back. Good morning. Thanks, carl. We sat through many mac world together and youve held this overweight through some uncertain times. Whats different now . Well, i think that its in a trading range. I think that its okay to say that. If you remember when microsoft became the Largest Company in the world and hit its peak market cap toward the end of the tech bubble it really had trouble ever getting back there and it never did. And if you look at maybe after 2003 when there was a little bit of a comeback for microsoft, the Company Never really rerated it. It bought back stock and kind of got in a funk. I kind of think that theres an analogy to apple here. I think that basically there is going to be some come movmodity the Smartphone Market, where its hollowing out some of the hardware. Were seeing a trading range where apple is going to be buying back the stock. The next big thing might not be enough to break apple out of the high 500. Thats where were coming from. Weve done an analogy versus microsoft. I think its okay to stay at trading range stock. Obviously before the appleonians go crazy for us on twitter. Why not use a smartwatch or television or new product to argue that thats going to raise the multiple Going Forward . We tried. Listen, we agonized over this call. To all the apple watchers we empathize, were one of them. Bewe looked at the smartwatch opportunity. We got only 3 or 4 a share of incremental earnings from a smartwatch and looked at our pipeline of everything we can come up with out of asia and our thinking. And everything looks like its a new category or a device thats made to sell more iphones. And we think that actually its going to be tough for iphones to ever grow again over 10 sustainably. And the smartwatch is actually going to be small. Its going to cannibalize some i ipo ipods. Its really an iphone companion devi device. Its designed to help you sell more iphones. I think its going to be tough to grow over 10 . What about a major acquisition . Obviously facebook raised the stakes in Silicon Valley today with this 16 billion buy of whatsapp. Anything out there on the horizon that could change the trajectory of apple especially in light of the recent reports that apples deal makers is meeting with elon musk. Look, and then musk was on the tape saying that something was unlikely. We dont know whats going on there. But it would be great to maybe see something happen in web services. What we said distinctly today is that the market is going to move more towards social cloud and me messaging type service wheres the actual smartphone itself gets hollowed out a little bit. Google so far has made an internet of things play there. We want to see what apple does. If apple does something to strengthen the position there they could get more positive. I think they will do some payment stuff this year and do some content deals. I think theyll make some good steps. I dont know if its enough to change our view completely. Finally, ben, what percentage of your move today is just about tim cook, what you think hes capable of, what you think his world view is versus what we knew about steve jobs . Thats a hard question. You know, tim is a guy ive known a long time. And hes a gee i look up to very much. Hes obviously a guy, when i did the most work on apple back when i had a buy in 2004 i looked a how they revolutionized the supply chain and fell in love with what he did there. I think now, its not as much some people criticized him. I think theres a law of numbers here and hes got the iphone and doing the best they can to grow it. I think tims next challenge is is what he does in web service, socialization of the Smartphone Market and the internet of things. If he makes a big step there, then ill have to run to my typewriter as we say and see what we can do. Yeah. Well, youre the ax on some of this, ben. Thanks. Thanks a lot, carl. Appreciate it. Glad to see you got back safely from russia. Thank you. Weve been talking all morning long about facebooks gigantic 16 billion purchase of messaging Company Whatsapp. So that t got us wondering what else can 16 billion bayou . Weve got answers for you next. Dow is up almost 80. Gets at the time to dom chew with a market flash. Check out fapharmaceuticals, news on Huntington Disease treatment hit primary end points on tile phase two. Its already trading five times the normal. Stock is up 13 . Still the Second Company this week talking about that huntingtons disease, which is a neurodegenerative disease. Thank you, d okom. A lot of green on the screen today. A mixed day. Market leaders like financials recently and tech have been on the downside today. Generally some of the less active ones, Telecom Stocks doing better. Interest rate sensitive stock. More defensive names. Look here. Theres your leaders. Telecom, Utility Consumer staples. Financials sort of lagging again here. Bank stocks have had a tough time. Citigroup having a tough time all throughout this year. Technology also lagging. Thats been doing pretty well overall. Weve been trying to figure out the eskffects of the weather. I want to talk about cons. Cons is a retailer that operate in the south. Think of pc richards for the south. Electronics. This is not a typo. Down 31 today p you they came out and unexpectedly cut put a full screen. Cut their Fourth Quarter guidance and cut the full year next year guidance overall. They cited two reasons for why they decided to cut it. Higher delyenk quincys around te loan. They also decided lower than expected sales growth. The thing thats interesting is theyre in the south. The impact of weather is going to be relatively minimal. They did say there might have been some impact on their ability to repay the loans because some people might have had a little bit of problems because slightly higher, weather related bills. Overall, youre having a hard time. They specifically cited weaker sales growth around electronics next year. This is not a weather related issue. We cant keep blaming everything on the weather. There may be Something Else going on here. The stock is down about 30 . Overall, looking at the economic data, impressed from philly and Empire State Manufacturing to the numbers on house that we saw in the last couple of days. Rather disappointing here. Tape inflation on the cpi and the ppi. The economic picture is very muddled due to the weather. Not good enough for really robust growth overall but still the stock market is holding up. S p 500 we said yesterday almost touched an historic high. We got close to closing 1848 is the key there. The markets are still saying, still believing that we have some clear indication that the weather is the primary issue here. I keep bringing up cons, for example, guys. Let me move over here. Because we are concerned, im concerned that it may not explain everything. It may only be 60 of the problem. If thats it, the other 40 really is some weak economic data. Thats why a xon company kind of stands out to me where the pay sick issues arent really weather related at that point. This Company Sells in the south, way, way down in the south primarily. Youre looking for stuff that proves one way or the other. Its still a muddled picture. Also seems to be blaming the weather and not really playing much stock. Seemed not to be too concerned about the weather. Were looking for stuff thats right on the horizon right now. Theres something that happened this morning. Thanks, bob. P bob pisani. What can 16 billion bayou . It can buy messaging Company Whatsapp and a whole lot more. Sheila is back at hq with interesting saexample. It really a landmark. Youve got to talk about the deal. In terms of size, its gigantic. The largest internet deal of the decade and fifth Largest Technology deal of all time pendant. And when you look at it compared to other people in Silicon Valley, smokes them. Trumps the deal at ellison. Its bigger than any deal that microsoft has ever done and it puts googles recent deals to shame. As for apple, it doesnt even make this grid. And to put it in perspective outside of tech land we took a look at what else 16 billion benjamins can bayou. How about a couple of countries . Once a valuation is worth more than twice the gdp of sunny her budd bermuda and jamaica. You have your pick of 230 companies in the s p, Companies Like southwest airlines, starwood hotels, or if youre in the mood for celebrating a little bit, how about spirits from consolation brands. That deal is bigger than all those xaerns. Yes, the absolute size of the deal is eye popping but of course if you guys have been talking about all morn, it doesnt really tell us anything about whether its a good deal or not. Remember, when google bought youtube for 1. 65 approximately in,0006 peep thought it was a steep price. Now youtube is estimated to bring in 5 billion in revenues and, in fact, is one of the biggest parts of googles overall business. But, of course, bigger isnt all better when it comes to deal making. Good to talk about aol and time warner and their merger in 2000. The deal at the time was valued at a whopping 165 billion. It was also considered a major game changer. But of course, as we all know, that didnt turn out so well. Sarah . All right, some skies and scope on that massive deal. Thanks very much. Were having a little fun this morning with tweet time on that top story. Facebook is acquiring social met sages app whatsapp for 15 billion. 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Other side effects include dry mouth and constipation. Nothing can reverse copd. Spiriva helps me breathe better. Does breathing with copd weigh you down . Dont wait to ask your doctor about spiriva. Bitcoin down almost 18 this morning. Continues to fall. Another crash here for the virtual currency. Lets bring in Mary Thompson for more. Mary, do we have a reason for the selloff this morning. There have been some problems with the number of the exchanges on the that trade bitcoin. That is basically reflected in the price. Most importantly one of the best known exchanges, the price bitcoin there far lower than what were seeing there at 588. 72. Some exchanges have been hit with old World Problems from the new world currencies, denial of service attacks. Mount ox has been reluctant to allow users to withdraw any of their bitcoin deposits. That has community up in arms because of this. They are questioning vary fication they typically didnt. Thats keeping pressure on the price of this Digital Currency. Never the less, of course, some of the proponents continue to move ahead in hopes of legitimizing bit koicoin and ot currencies. This comes on the day where the first bitcoin atm opens in this country or one of the first, in austin, texas. I was excited about this this morning. Carlton making fun of me. Its busting into the mainstream. To the point where israeli Central Banks are warning people about it. There are warnings and regulators on top of this, mary. Clearly the pro upponents have case here. There are a couple atms that have launched so far. It continues to move into the mainstream. Of course, there are, you know, there are questions at regulating this currency, et cetera. One other thing we want to note, of course, is that the other day the twins of facebook fame filed for their wink dex which is similar, an index that would track the price of the bitcoin. One of the problems with this Digital Currency is its traded on a number of different exchanges and that means theres lot of volatility and difference in the prices depending on the exchange. They want to consolidate it to get a better price. While it looks like a steep slide from the 1,000 in december we should note that two years a i go it was trading less than 10. So its been unbelievable. Mary tohompson, thank you. Tomorrow we will talk to the ceo of the Company Behind the First American bitcoin atm launching in austin, texas. Before we go, squawk on the tweet. If this whatsapp deal were the se quet to a facebook movie, what would it be call . Jan and zucks bogus journey. Daniel write, blank check 2. Im not sure exactly what that means but generally good entries today. Im surprised more people didnt play up with the whats p whatsapp, whats up. Lets send it back to wapner and the halftime. Were going to be talking about this story and the larger trend as well of m a and tech. You saw the numbers im sure. 42 billion already in tech m a. The highest since the docom bubble. Its likely to be a trend to follow throughout the year. My favorite talking to kara today said if im in snapchat im happy today. Im sure they are. Welcome to the halftime show. Whatsapp with that, were breaking down facebooks biggest deal over. Did zuck over pay and what does it mean for google, apple,