After hours. This comes as some of the biggest names in tech have been solid gainers since the brexit lows. Take a look at the performance of facebook, google and apple since june 24. With stocks, of course, overall near record levels, is big tech where you now want to be . Pete najarian. I think its where youve been wanting to be for a while but brexit opened up that door even wider because everybody started looking. We all know about the utilities, we all know about telecom. They had to go somewhere else with money because they saw valuations getting extremely stretched. Where did everybody start to look, simon . They started looking towards tech. Look at all these various names. Even look at Something Like seagate. You look at yield, you look at valuation and suddenly people started saying, hey, look, not stretched, havent made a move. But i would warn you right now, tech has been on an absolute tear run to the upside. This run off of the brex it lows to where we are right now, look at the way microsoft has moved. Are you saying its too late . I would either start taking something off and do a stock replacement strategy. I bought cisco, for instance, on that dip. I would start thinking about a stock replacement where id sell my stock, buy upside calls, still be involved in case theres upside. But at any moment we could see some selling. I think hes 100 right. Im not bullish on ibm, im not bullish on a lot of these names, although microsoft was a beat. If you look at the yields, thats what everyone has been chasing. The fed has pushed people back into risk. The fed has pushed people into the market, and the market has been forced to look at multiple expansion. You can look at xlus, xlps. Everyone talks about them being overvalued. Weve never seen an environment like this with yields as low as they are. Youre going to look at multiple expansion and youre going to look at the market repricing. Look, i think the microsoft quote is very good. We just mentioned right before we came on the difference between Gaap Earnings and nonGaap Earnings. He makes a good point except the market hasnt compared about that for the last couple years. Pete says its right, 56. 5 on microsoft was resistance last year. Its imperative that it breaks through the upside. But what youre seeing now to me is the reason why microsoft trades at 18, 19 times forward earnings as opposed to ibm with 11. People say why the disparity . The disparity is because microsoft made the turn in their business five years ago. Ibm is trying to do it now. Ibm is late to the game. What about the broader point about big tech and valuations and multiples . I think cisco is very reasonably valued. If cisco were to get through this 30 level, which has had difficulty quite some time, its off to the races on the upside. The good news with cisco is the market is bailing you out number one and they dont report earnings until all 14th, give or take, so you have a lot of room for that stock to run. A lot of people played microsoft long side into earnings. But cisco specifically sets up interesting to me on the long side in earnings next month. Well, i liked google this year. I think that the thing i like about google and facebook which im long is the brexit situation didnt have much effect on their business and shouldnt have much effect on their business. Youre talking gross. Its a different take to the conversation we had here. Definitely. Thats a risk that i find more attractive. Apple ive been long and really has not had a stellar year at all. But im going to happening on to google. Maybe ill think about petes, sell some upside calls. I dont like stock replacement because then i have a gain. Yesterday we talked about why the market can go higher. I would not say that you should be a buyer at these levels because im still really 70 to 75 in cash. Im placing my bets, im shrinking the size of my holdings. I still am out of disney and apple. I got into j. C. Penney. Why are you 75 in cash . Because i think that the market is topee here. Theres no real volume. You just told us that the multiples were going to expand because people were forced into it. I said they can go higher. Right. It doesnt mean that they should and it doesnt mean its going to stay there. The volume has been atrocious. This was the second lightest volume day outside of the thursday before easter. Thats not conviction. People are not buying into it. Theres no panic. Youre consolidating for the summer. But people are not buying into it so theyre not covering short. Yes, it can go higher, but we get one blip, one sniff of weakness on the earnings front and this market comes in as quick as it went up. The one thing i would like and i would not necessarily disagree with what youre saying, karen, we have to understand we do have growth, its in old tech and there is growth there. You look at cisco, thats the company in the midst of a transition, a new ceo taking them in a different direction. Intel is the same story. How can you say theres growth when revenues are coming in the likes of ibm . Thats a different story and i dont like the path in which theyre moving right now and theyre not moving to growth fast enough. You look at the transition of a cisco or of intel or of microsoft, very rammed transition as theyre moving themselves away from where they were old tech into the new tech and into the growthy world. Lets get more on microsoft. Joining us is colin guinness. Would you agree with what youve heard now . Simon, its a nice, solid quarter to end their year. June quarter is their fiscal year end so they have a lot of skin in the game to hit their targets. They came in at the high end or above for each segment on revenue. That eps beat, half of that was just because of a fabled tax ralt but the other half is because of good cost control so its a nice, decent quarter. Even with the gains in the after hours, the stock is still flat roughly for the year. And your recommendation, therefore, is what . We still have a hold on it. We have 700 bips lagging the s p and theres nothing thats really changed in our view to this report as we look to the back half of the year. What about this commentary coming from pete about redesigning the company, moving into cloud, growth in those important areas. Do you buy into that . Absolutely. But its like one of those old ebay situations where youve got the paypal component and the marketplace component so youve got nice growth businesses and youve got some businesses that are lagging. Theyre legacy businesses. I mean the phone revenue dropped off a cliff. Of course that all got shut down but its still a sore area for microsoft. If they could have carved this business up into two, youd see multiple elevation happen on the more desirable parts of the business, but thats not happening. I wouldnt be jumping into it necessarily right here. Colin, its karen. What is your read through to amazon and how competitive will this business get when you have google entering and microsoft and amazon . Thats a fantastic question thank you, colin. All right. Because are we going to be valuing the cloud businesses at too great of a multiple right now, which todays excitement over the cloud could be tomorrows utility provider. And so is aws in particular the investor excitement around that overheated because that 28 margin and jeff bezos, your profit margin is my opportunity. You know that everyone is gunning after aws and price is one of the leverage that they can uses. Colin gillis, 60 price target at microsoft, is that what you have on it. Thats right. Im a math guy so that looks to me as if its trading that puts it like 23 times next years earnings. Is that accurate . If so, how do you justify it given everything you just said . Yeah, well, you know, its a garp name, growth at a reasonable price. So its dictated by the market. If you want to invest in this space, i think theres more upside in google. But certainly you can just phi justify it by the growth rates. Office 365, growing 59 year over year, so theres good parts of the business in there. Good to hear from you, colin, have a nice evening. Lets trade it, karen. That was a fantastic question too. I appreciate that. Its okay. Its sort of no mans land for me here getting to his point. Its not cheap. There is some risk there. They do have linkedin coming down the pike when they have to integrate that, so its kind of lukewarm and i have no position here. Still ahead breaking within the hour, reports of a major shakeup now at Rupert Murdochs media empire, notably fox television. Roger ailes, the powerful head of fox news, is under fire but his status is still unclear. Our own david fabert is working the story and will join us shortly. Plus youre looking at a live shot of the Republican Convention as day two, of course, is now under way and donald trump has found a new enemy, it would appear, wall street. If elected, the gop is saying that it would go through with some of his threats to break up the banks, a top analyst will weigh in. Later netflix losing a whopping 6 billion in market cap after its dismal earnings report, but one widely followed analyst says its still a must own. Hell be here to explain when a busy fast money returns. The end appears near for the powerful head of fox news. David fabert has been following the story and joins us now with the latest. Is roger ailes out now . It does appear that is the likely scenario at this point. As we reported earlier and many others have been reporting through the course of today and yesterday, a decision is expected in the near term, thats according to people that i have spoken to who are familiar with what is the situation, lets call it that, at fox news at this point. They do expect that that decision will be forthcoming shortly and will involve the departure of mr. Ailes. Of course the man who built fox news into the powerhouse that it is culturally and financially as well. Dont forget a very important engine of the growth that 21st century fox has seen over the last decade and of its current earnings and cash flow and revenues. This, of course, coming out of an Ongoing Investigation that is being conducted by the law firm of paul weiss into his conduct in response to charges that were brought by a former employee at fox news, who alleged that she was sexually harassed by mr. Ailes. It does not its not clear whether or not fox is going to wait until the judgment is in from paul weiss before making its move or whether in fact that is something that will actually happen sooner. These investigations typically do go on for some time, but again sources indicating that a decision they feel needs to be made in the near term. That decision, of course, shared in some ways by foxes chairman, lockland murdoch, its Ceo James Murdoch and of course the man who founded the Overall Company itself, Rupert Murdoch, who is consulted im told on all of these decisions. But again, a significant change in leadership seems to be in the offing at fox news. I would share a statement that they shared on twitter, essentially saying moments ago, roger is at work. The review is ongoing. The only agreement that is in place is his existing employment agreement. You can see the time of that tweet. I guess, simon, thats the way now major corporations like to communicate, via tweet. It is, as you rightly point out, an extraordinary its a phenomenon what ailes has managed to do both editor kael, right or wrong, and as a profit center. The inevitable question is, is this like apple without steve jobs moving forward. Do we have any idea who might replace ailes and the degree to which the business could be impacted . Those are key questions, of course action and i dont know. Speaking to a number of people, some indicate there is a plan for succession. It may involve internal and external candidates. Others say there has not been as much of a plan as one might have thought. Dont forget mr. Ailes is 76 years of age. The idea that he would be continuing a long period of time is not one entertained by many. In terms of the investment implications, near term i think many expect that fox news will be run the way it has been for over the last 20 years and that very little will change. But over the longer term typically when you have new leadership, things can change. Although i would say in speaking to a number of significant media investors, some of whom own shares of fox and know it well, there seemed to be very little concern for any real change at the top of fox news, despite what is its significant contribution. Youre talking about last quarter 1. 375 billion in operating income before the companys Cable Networks and a lot of that was from fox. Thats a significant percentage of the overall numbers at the company. David, its karen. Let me ask you something. With that statement, that tweet was hardly supportive of ailes, so i would think theres a lot of pressure to get him out as quickly as possible. Also, would you think they would settle the carlson suit together . You know, i dont know the answer on the carlson suit. I do sort of stand by my reporting and i know theres a lot of other stuff out there right now. As you might imagine, this is a broad news story, not just a financial one, karen. And i think that there is a sense that when you have this kind of instability to a certain extent, or at least a lot of questions being asked within an organization like that, you do want to move fairly quickly to address them. In fact somebody who is involved said this needs to be addressed in the near term. And again, it does appear that that will result in either retirement by mr. Ailes or his resignation or perhaps something that may be called a firing, even though we all know those terms can be interchanged to a certain extent, even though in a press release it will all be very kind. Nice to see you working the evening, david. And you, simon, and you. Dont push yourself too hard. No, i wont. Dont fear. Ill see you tomorrow. Thank you, david. For more reaction on this developing story, lets bring in rich greenfield who covers 21st century fox. Good evening. Whats your reaction to this . I mean we kind of knew that there was trouble here. On the one hand its not a systemic problem because its one person. On the other hand, he appears to have been the creator of this phenomenal profit center. Theres no doubt that hes larger than life as a character in terms of creating something and doing something that i dont think youd find anyone on wall street when fox news was first being launched who thought it was a plausible idea. In fact i think most Research Reports basically looked at it and investors thought it was basically flushing money, that it was impossible, literally impossible to compete with cnn. So roger ailes essentially has done the impossible in terms of building fox news into the size of the business that hes created over the last 20 years. I think the real question, though, is right now were at a critical juncture that no one is talking about. Fox news has just filed a lawsuit against one of its largest distributors charters. There was a major lawsuit filed where basically charter is in process of digesting time warner cable. Charter is basically saying that our rates now apply to all of the acquired subscribers. Fox news is basically filed a lawsuit literally just this afternoon claiming that that is not in fact true. So its a really interesting timing that youre losing potentially, again potentially, losing your leader just in the middle of what is a very, very important Legal Process thats going to play out. Can you give us any idea of the scale of what the figures are here and the degree to which the stock might be impacted . This is a very big company overall. Its a very profitable center within a very large company. Simon, youre raising a great issue. Cable networks are the life blood of this company. Theres no doubt that if you look across the regional sportsnet works, the fox networks but Cable Networks are the life blood of overall 21st century fox. The Fox News Network has been a huge growth driver. Its hard to separate fox news from the other Cable Networks of the they really leverage the combined broadcast because youre selling the whole package youre bundling. Let me ask you one important question. I mean is fox without roger ailes like apple without steve jobs . You know, i think you would probably put that far more into the Rupert Murdoch category. So its murdoch, not ailes. Rupert built this company, the whole company from nothing. He allowed someone like roger ailes to come into the company. He allowed someone who is essentially more of a maverick to do something that at the time again seemed investor reckless. But i dont think you can say that just happened without rupert. Rupert allowed talent like that to basically flourish. Look what rupert has been able to achieve over decades of a career. With a relatively handsoff approach, as im sure the legal case will confirm. We have to leave it there for the moment, rich. I know that youre going to be coming back. Lets trade this, steve. You know, when you look at biotech and you look at financials, the political cycle is a headwind to both of those spaces. When you look at media, to me this is going to be the largest covered election that weve all seen in our lifetime. I think that all of these Media Companies are buys. Cbs, fox, i think all of them are buys. Wow. Heres a stock that topped out at 40 at the beginning of 2015, lets just say, spent all of 2015 going south in an environment to steves point where it should have been really flourishing, it didnt. Finally at 28 now. I can make an argument that maybe the environment there, and im not an insider at fox, but maybe he created a toxic environment. With him leaving, if he is leaving, maybe theyll flourish and do better. So this might actually be a buy the news type of event. Ill say this, though, valuations in the entire space have been ratcheted back since that disney Earnings Call about six months ago or so. We have to take a break, guys. Lets have another look at microsoft rallying on the big earnings beat this evening. Well hear from the coo on the quarter and the competition on the Conference Call that begins in eight minutes time. Im simon hobbs, youre watching fast money on cnbc, first in business worldwide. Heres what else its coming up on fast. Ladies and gentlemen, this man could be your next president. Listen you [ bleep ] and one marketwatcher says it could be doomed for one group of stocks. Hell explain. Plus, netflix shares are tanking. And the butcher begins. And thats really bad news for the analyst who said this. This is a mustown sglauk to so is netflix biggest bull ready to throw in the towel . Find out when fast money returns