Good Tuesday Morning i am Carl Quintanilla with Morgan Brennan at post nine of the new york stock exchange. Jon fortt is in los angeles at the adobe max conference his sit down is a few moments away with Shantanu Narayen we start with uber shares down, despite the beat as losses for the quarter top a billion. Guys, good to see you. Dan, how much is this downward trajectory in price driven by model complexity relative to competitors . It is a small piece here, no doubt this is a black eye quarter for dara and uber, missing ridesharing metrics. You combine that with what theyre spending on eats, thats the one, two punch sending the stock down, could be an avalanche with lock up expiration. Do you buy the target of adjusted profitability by 2021 i do. I think it is not as much stretch as it would appear to be you look at the core ride share business, they came out with segment margins this quarter, 22 , a four percentage point improvement from a year ago. If they continue on that pace of improvement, get to 30 segment margin, take uber eats business from the meaningful losses produced this quarter down to say a negative 20 margin, we can get to break even in 2021, just on those assumptions. You look at the pace of improvement in the take rates, competitive environment, what they said about latin america this quarter, also seeing improvement, to us, it is not a stretch. We think theres a lot of profit power in this business thats just starting to move the right direction competitively. Dan, economics for food delivery has been tough. Seeing it play out in earnings season, including uber numbers yesterday. How do you think longer term uber addresses that part of the business, what do you think it means for the profitability story . Great point it is atale of two cities when you think of earnings. Ridesharing, some core business looks to be heading the right direction. If you look at eats, theyre spending more money than 1980s rock star. That money continues to bleed on the bottom line. Look at grub hub, last week, a lot of investors are looking at that business, figuring does it make sense for them to scale it down this continues to really be the overhang on the stock. This is something dara and uber need to steer through. You can see with today, i can tell you about my conversations with investors, the credibility is lacking in terms of how theyre hand holding through the story. Lloyd, looking at this quarter from uber, i was reminded of that indigo girls lyric, twice as cloudy as i have been the night before and i went in seeking clarity seems like massive amounts of capital in the delivery space, transportation space are clouding the underlying Business Model. I know they gave that profitability, but i dont understand how the model works is that a problem as you project what the company should be worth to investors now look, i think thats something that i think has been part of the challenge with the shares since the ipo theres just a lot of moving parts. You have a business like lyft thats strictly u. S. Ride share, uber youve got ride share globally, a lot of competition globally, then you have the eats business same thing but at an earlier stage with more private capital coming into the space. The magnitude of the complexity has been an issue. I think the company has done a good job, starting to spell it out in more detail with segment margins, providing a little more hand Holding Around the trajectory of the business towards profitability, but thats part of why the stock has struggled. Dan, we have seen this paradigm shift for a lot of the companies from growth at all costs to becoming more efficient to finding paths to profitability. Seeing it play out with uber and lyft also seeing it play out with Companies LikeVirgin Galactic that hasnt started its service. Last week when the company went public they were stressing gross margins. Peloton, trading lower on the heels of earnings today. Given the facts that there seems to be a shift, is profitability the main thing to hone in on or are other metrics just as important, especially with uber with five divisions to dig into. It creates a quagmire for uber and a lot of companies. Theyre trying to change the Business Model on the fly. The worry is profitability in 2021 if you look at that relative to street expectations, at what cost what happens to growth the thing investors put the white flag in terms of names not showing profitability. For uber it is a balancing act you look at 100 million plus consumers, monetizing that install base, thats why this is a unique asset i think theyre less confident to get through it. Thats why the next few quarters, it is a fork in the road situation this becomes a massive speed bump, post ipo or sign of broader issues thats why going to lock up this week, i think that continues to weigh on shares. Lloyd, what are expectations for expiration of this stock lock up . I ask that because you look beyond may, saw major selling in the name when the expiration happened, but the company, the stock had jumped triple digits not the same for uber, it is trading below the ipo price. Do you expect the same activity on price of shares i think were seeing that as we speak i think were getting closer to the end of that. As you noted, i think a lot of investors privately in uber were buying at higher valuations privately, we may not get as much selling pressure as people fear we talked to a lot of investors who are interested in buying the stock, but waiting to get this passed once we get this absorbed, it may take some time to absorb the new supply we think it is level and the stock can start to grind up from here, but i think we have to get to wednesday, see how much supply comes to market finally, dan, on eats, to put a period on it, i wonder if you think post grub whether or not we should expect any pivot in strategy overall in food delivery from these guys yeah, grub hub was having a moment i think what youre seeing with uber, i think theres a strategic shift. They have to really decide where the line in the sand is in terms of investments and profitability. If you include ride share, it is profitable theres a 10 to 12 overhang because of eats and business thats bleeding money. Right now this is really for the board, for dara, for uber, this is big question for them Going Forward in terms of how they handle eats, especially in light of everything with grub hub and others guys, well watch it. Quite a print. Well talk more about it all day. Dan, lloyd, see you later. Sure will after the break. The exclusive with Shantanu Narayen. Dont go anywhere. Squawk alley returns in two minutes. With every attempt to free itself, it only becomes more entangled. Unaware that an exhilarating escape is just within reach. Defy the laws of human nature. At the season of audi sales event. Im happy to give you the tour, i lohey jay. It. Jay . Charlotte oh hi. He helped me set up my watch lists. Oh, hes terrific. Excellent tennis player. Byebye. I recognize that voice. Annie . Yeah she helped me find the right bonds for my income strategy. Youre very popular around here. Theres a birthday going on. Karl he took care of my 401k rollover. Wow, you call a lot. Yeah, well its my money were talking about here. Joining us for karaoke later . Ah, id love to, but people get really emotional when i sing. Help from a team that will exceed your expectations. Welcome back to squawk alley. I am jon fortt, here in l. A. At the Los Angeles Convention center with Shantanu Narayen, ceo of adobe how many years have you been doing this in l. A. We have been doing it i think almost a decade now, jon. Long time 15,000 people, a million going to stream it want to talk about announcements you have here. First, i want to ask about guidance a lot of people like it. Digital experience, subscription bookings you say up 20 plus, some people were worried about that a month and a half ago after earnings put into context what you were explaining about bookings when you talked about the quarter versus what you gave yesterday. Thank you for being here, it means a lot to us. As relates to what we talk about at the financial Analyst Meeting yesterday, first we reiterate macro trends are driving growth across all growth initiatives, unleashing creativity, accelerating document productivity, empowering Digital Businesses, specifically as relates with digital experience business, we introduced we think a revolutionary product, adobe experience platform. Every Business Needs to become a Digital Business we think of bookings in that area will continue to do exceedingly well. Take me 30,000 foot view. Where does the creative part of the business, where are the creatives fitting into the adobe engine you built out marketing, now building out experience. Tell investors how it fits with everything else. I think in our core we are a content company. We think that content is fueling the digital economy. On the creative side specifically, everybody has a story to tell. I think the theme of the conference is creative for all, whether k to 12 student or largest enterprise in the world, you need to create content across every digital device, new media types that emerge. That business continues to fuel incredible growth we have seen as a company a lot of Companies Use content for engagement, it is a go to thing. Apple has a streaming thing going, amazon has been doing it a long time, netflix, disney, et cetera, google thats all stuff that adobe in some way touches what does that say about engagement and the role you play in what all of these Massive Companies are trying to get . Well, at the end of the day when you are consuming any piece of content on any screen, we want to play a role in making it happen whether it is in the car you drive, whether it is in the airport, whether you go in and check into a terminal, all of the video youre consuming on the internet, retail stores, in las vegas, you look at whats happening with digital displays, everything is content which is digital, needs to be personalized, engaged. Adobe is playing a massive role to create content, manage content, and deliver content, jon. You told analysts here not to expect big m and a in 2020 given the guide, otherwise i thought maybe they have to digest some of the experience stuff and thats why, but looks like youexpectto digest fine why not dig m and a in 2020 sfwl you followed us a long time. Were thoughtful how we do m and a. Try to make sure technology, that we can accelerate the business did two large deals, ma general tow Commerce Business allows you to address the last mile, doing well, market to help companies with consumer orchestration is doing well really good portfolio of products we announce a great product yesterday, we feel good about the portfolio, jon, and it is about execution at this point. I want to ask you about tablets because your chief product officer saw him at the microsoft event a few weeks ago with the surface prox and adobe running photo shop and other things on that, then you announce photo shop for ipad here tablets have been around such a long time, there was a sort of extraordinary promise that arguably on the unit side they havent lived up to. Now at this point i feel like youre leaning hard into them. Why now . Whats different about that market at this point versus five years ago. Couple things that happened the first is desire by adobe to help people wherever inspiration strikes to being able to do whatever content creation they need to do tablets have become incredibly more powerful. Far more intuitive, some cases we introduced a product is it a churn reducer you have people subscribing, does it add that much value to do that on the go, that it is worth it for you there it is both engagement and return user to use your terminology. There are a number of people for whom the tablet will be the only Computing Device they have the fact that we have photo shop, all of its glory, tremendous engineering feat. Showed illustrator for ipad yesterday as well. In terms of multiple devices being used in content creation process, even more, taking advantage of benefits of some devices, you can take a quick picture, when you take a picture with a tablet device, you can edit it. Announced photo shop cameras i think were rethinking the role of mobile and tablet devices in the creation process. I want to ask you about the macro a bit. The markets are at or near alltime highs, vix is low, yet were talking so much about uncertainty. Waiting for the next tweet, trade tiffs and wars will go how are you feeling in terms of certainty to run your business based on some of the macro factors that you have little control over youre right. Anything as relates to fed actions or trade issues are i think dominating the narrative now in terms of the conversation when we take a step back, think about whats happening fundamentally with businesses, individuals are investing in themselves with skills as far as relates to creative. Documents, accelerating document productivity, automating, inefficient paper based processes continues to be important. Every enterprise realizes they have to be a Digital Business and engage i think macro trends are in our favor and i hope we dont talk ourselves into a slowdown globally. Youre seeing your customers continue to be confident enough to invest in efficiency and growth we are seeing strength continue to be the case at least in the u. S. Market and other major Global Markets in which we participate. Shantanu narayen, thanks for being with us. Thank you so much back to you guys. Thanks, jon. After the break, Lessons Learned from the failed wework ipo, what jamie dimon told us in the last hour. Were back in a minute ladies an, your attention please. Geico would like to take a moment to say thank you to our military Service Members at home and abroad for all their hard work and sacrifice. We all sleep easier knowing youre out there keeping us safe. And on a personal note. Sfx jet engines. I just needed to get that off my chest. Thank you. Geico proudly supporting the military for over 75 years. Woi felt completely helpless. Hed online. My entire career and business were in jeopardy. I called reputation defender. Vo take control of your online reputation. Get your free reputation report card at reputationdefender. Com. Find out your online reputation today and let the experts help you repair it. Woman they were able to restore my good name. Vo visit reputationdefender. Com or call 18778668555. Wilfred frost talked to Jpmorgan Ceo Jamie Dimon in an exclusive interview last hour. He spoke about adam neumann and the leadup to the scrapped ipo take a listen. There are lessons to be learned about the valuations, how you go public, how you treat the public shareholder, et cetera those lessons should be learned by everybody that wants to go public. Do you feel sorry for adam neumann in all this . Im not going there, i dont know but he was advised by some, including your bank, that a high valuation that has currently been achieved was possible so is there some level to which he was mislead by some advisers like jpmorgan and morgan sacks. You dont know the private advice we gave him or the company. When it became a problem, we got a letter, being criticized, no, you rolled up your sleeves, tried to find a solution at the end of the day, you offered them a fully financed deal that can get them to the next stage of life i think theyll have a future life want them to do that only 14,000 a lot of Lessons Learned by everybody involved. I learned a few myself trying to get him to pledge that jpmorgan wouldnt work with companies with similar problems in corporate governance, he wouldnt go there. He said if i had my druthers, i wouldnt have a buy back, i would be building my business. If i had my druthers, wouldnt have a dividend. Dynamic interview to say the least. On the we stuff, you have to ask about that one of the wework biggest lenders, third biggest outside investor, 100 million in mortgages and other loans to newman, shopped around, theres credit facility, underrighter f underwriter, jpm had egg on its face in the midst of wework draum a. A comprehensive interview you can watch the whole thing at cnbc. Com. Meantime, european markets are set to close in a few minutes. Seema mody has todays breakdown over the Market Action overseas. Following a positive session in china overnight, in europe, higher across the board. The stock is trading around four year highs european financials are the stand out sector, trading nearly 20 off the lows hit back in mid august european banks are outperforming large cap peers in the u. S. Over the time frame part of the reason, rising yields the yield on the german 30 year and 20 year bonds, both trading in positive territory. Remember, at the end of august when the talks were on the ropes, 30 year bonds were low. Were seeing the bond mashlrket with implications. Jewelry retailer pandora, tumbling more than 11 , after reporting profits and sales that missed forecasts, same store sales, excluding hong kong, fell 10 last quarter that stock now down 18 . And trivaga, tumbling on lowered outlook for Fourth Quarter as major advertisers pull back on spending the Company Announcing a leadership change. Founder, ceo is stepping down by end of the year, we placed by cfo. A troubled booking site in the past one year, ahead of expedia results tomorrow back to you. Thank you very much. Lets get a news update. For that, we turn to sue herera at hq. Good morning, sue. Good morning, carl. Good morning, everyone heres whats happening. At least three women and six children apparently u. S. Citizens were slaughtered by drug Cartel Gunmen in northern mexico a mexican official says the gunman may have mistaken the group suvs for the cartel. Nigerian firefighters trying to extinguish a fire at one of the largest textile markets. Well known as one of the best places to buy colorful fabrics, apparel, shoes. Roger stone arriving for trial over charges related to alleged efforts to exploit Hillary Clintons