Thank you for joining us on squawk alley. John is at merge in miami, flori florida, and we will get to him later, but at post 9, kelly evans. Good morning. And joining us from out west is jason calakanas who is an invester and we have a lot going on in the market, and dow and s p 500 nasdaq posting the intraday highs today, and the dow is holding e steady above 18,000, and russell 2,000, and the dow transports are out of correction territory, but start with the netflix today, jason, because the shares have been hit hard when the company gave weaker than expected subscriber guidance for the coming quarters and 2 million additions rather than the 3 million that the investors were expecting, and also, there was a offering of prime video stand alone which was talked about on the Conference Call from reed hastings, and we have that. So take a listen. Hulu is doing great work, and amazon, and hbo and showtime, and so many competitors, and everybody is working hard to build the best content. And so we are seeing the growth in the overall internet tv market, and of course, that is displacing the linear tv, and it is natural that everybody is coming in as they real ize that the future is internet tv. Jason, he seems to be saying that what is good for the competition is also good for us. Do you buy it . Yeah, absolutely. I think that it is a company that has defined a new category which is going to be the First Company to become a unicorn not by having a billion valuation which they have done for some time, but by having 1 billion paid subscribers, and they are 8 of the way there and if they add 25 million subscribers a year, and they go on the international march and do what they did here in the country in euro europe, asia, south america, which i believe they are capable of doing, we could be looking at what google did to advertising, and facebook did in advertising, and what google did with androi android, and we could see it happening to the entertainment business where they have hundreds of millions of paid b subscribers, and now, of course, they change the guidance a little bit and it is the entertainment business, so it is going to be hitdriven. They have had a bunch of hits, but for 8, or 9 a month, this is the greatest value in entertainment, and with millenni millennials watching the tv on the phones and the ipads and just totally giving up on the cable and subscription tv, this is is a huge, huge company, and so i would take a tenyear view of this. And they created a market, and think were the first movers here, and it is no doubt about that and it is now a Company Whose stock is down 11 today and trading at 100 times next years earnings, saying it is is cash flow negative and burning a million on content, and what do you do with that if you are an investor . Well, yeah, listen, you are getting into the arms race with jeff bezos who is known for taking your margin and destroying it, and building the market share. So when i look at a company like netflix coming up against amazon, they have actually got amazon changing their game. Amazon wanted to sell amazon video as part of prime. It did not work, and the people were saying, how do i get the amazon video, and so they have to copy the netflix sign and this is a good sign that jeff bezos is having to follow their strategy, so i am not worried about that at all. If you are going to be holding the stock, hold it for 5, 10 years, because we will be looking at 80 million subs and laughing saying they are at 300 million, and how possible to get 300 many Million People to pay for a subscription to something, and im not talk about the reach, but paid subscribers. Sure. It seemed impossible to build an ad Network Global in nature, but google did it. It is the same thing, when you take out the frik shup and the decisions that studio executives have not been able to make based on the subscriber data, and when they stop watching a scene from daredevil or house of cards and they know who wrote the dialogue that killed the series. And it is the same way that Warren Buffett says if he wants to be in a stock and does not check the price, and even if he it does not trade, he is still comfortable being in it. Sure. And you bring up this point of comparing netflix comparing it to the ad platform to facebook or netflix, and part of the appeal is not having the ads and are you talking about twotiered thing Going Forward and where maybe people are resistant to the price hikes, and free option with more ads and the twotiered hulu approach, and where is advertising becoming a bigger part of netflixs future . I dont see the advertising actually, but them comparison is that googlele was able to build a ad network that transcended one region and went on the global basis. And we looked at google for a period of time saying that the u. S. Is slowing down, and so much reach hitting 90 of the market in the u. S. And they claim 85, but it is probably more like 95, and so not that netflix is going to be adding advertising, but the way they grew across the borders, and direct to the consumer which has not been done. When you look at the espn and the discovery or the hbo, they have always had an intermediary, and Cable Networks to sell the content to or the satellite providers, and they were in the process of selling to the distributors, and netflix is in the direct one to one level of each consumer to getting the credit card and transcendently but beautiful as a business. Lit trade everything, and 400 or 500 million subscribers when we come back in 5 year to play this clip. And so in the next few quarters the growth there, and meanwhile, we have to move on. Federal prosecutors are launching a federal investigation into whether theranos misled investors on the technology and information. And yesterday, Elizabeth Holmes took on questions with a 9 billion valuation as rekrecentls a year ago. And jason, this is like a onion, and you peel back each layer and each one will make you cry a little bit more. And how are the founder ss and e boards regrouping and learning from this situation . Yeah, this is an embarrassment for Silicon Valley. It is just a complete and utter train wreck, i believe. My gut tells me. I dont have all of the data it is a complete washout and going to zero. I think that it is going to be criminal, and there is going to be a lot of lawsuits for time to come. When the wall street journal first got the hooks into the story, and really it is pulitzer Award Winning group by jared cararue, and elizabeth literally attack ed the wall street journal, and now six months later, they have her dead to rites, and everybody is coming out the criminal prosecution, and their partners are dropping them, and now she is sorry, and now on the todtoday show, and is bizarre. The worst crisis pr, i have ever seen in my life. It is not a joke, and one thing to drop out of harvard to create a social network, and another to drop out of stanford and not get the degree in, you know, in advanced sciences, and then create a blood testing lab, and they have attack ed the wall street journal every time theym come up with more data, and it is really dangerous stuff. It was never a Silicon Valley company, and i object to calling it that, because they did not have Silicon ValleyBoard Members baushlg of the generals, and the people that nothing to do with the former secretary of state, and governmental officials that was criticism lobbed at the company. And what should have a board have done in this decision, but this is a company, jason, that started 13 years ago, and this is not a freshmanlevel problem. Right. It is amateur hour in terms of the management, and amateur hour in terms of the board, and i think that it is doing to be a huge fraud. If you look at how we do things in Silicon Valley, you have very, you know, experienced hard core venture capitalists who come in and they do due diligence, diligence, and they bang on the technology. Every venture capitalist who went to them to try to look at the Technology IncludingGoogle Ventures bill maris over there barbequed them, because he said we could not see the technology, our people were not allowed to see the technology. And i know a venture capitalist who had a person to go to work there, and they were not allowed the see the technology before they took the job so it is a circle the wagon bizarre mentality with red flag after red flag and i believe there is stuff coming out that is even more salacious, and bizarre, especially between elizabeth and this sonny bouni who is there, and i have been pinged about an inappropriate relationship going on there, and wall street journal on my podcast said they are investigating it, and i d t dont know, but there is going to be a crater there, and 9 billion and hundreds of millions in debt, and lost in investment, and who knows whose money is there. And you will be getting a lot more pings after saying that on national television. We will talk to you soon. Jason calicanis. Thank you. And now, checking on the share shares of ibm after the Company Reported the worst revenue after close last night. The shares are down 5. 5 , and john ford is going to join us from the emerge america conference, and john, the shares popped up on what is a strong top and bottom beat, and then people went through the details, and we went through the call, and they have not gotten out of negative territory. Yeah. The numbers were not that, and not a bad quarter, and you are to keep in mind that ibm has had a runup since february when it hit the lows arnsd the recent lows anyway, and the fundamental questions around ibm have not changed an year or two ago, it is the pain in china and the pain is in latin america, and particularly in brazil. Software which is the engine of the company, and the company was about margin of software and deploying it through people, and through service, and the software is not the engine that it once was and not showing the strong growth anymore. The question is as the legacy fall falls, will this start to show up on the top and the bottom lines. What is not clear to me is that ibm is that they are still with the people centric strategy, but we need different people, and we are moving into the cognitive computing, and the cognitive solution, and so they need watsonlike help on the ios. I think that the invest or thes have to ask the fundamental question, are people still the answer in the cloud era . If not, ibm could be in trouble. If so, not as bad as at lot of people think. And jon, also busy in miami as you caught up with legendary skateboarder tony hawk. What did he have to say . I talked to him a little bit about the partnership with sony on the action cameras, and of course, he is taking on gopro as far as that goes, a i asked him why he is excited about that. Take a listen. I was excited to be partnering up with sony because of the camera history, and people say the gopro, but sony has the long, long history of the cameras and lenses and experience. So it was really fun to sort of sew people that there is another option there. I mean, between them and my partnership with many in the last couple of years, it is amazing, because i have had a whole new opportunity to be in marketing and advertising that i never dream ed of. And one of the most fascinating things about tony hawk, think about it, if you have never been on the skateboard, chances are, if you are, i dont know, 20 to 50, you know who tony hawk is, and not a lot of the athletes can claim that kind of the brand strength. Michael jordan and mike tyson and joe montana, and Wayne Gretzky got bigger in their sports, but i asked tony hawk how he was able to build a brand of that strength, and technology had a lot to do with it. Take a listen. Well, video games was huge with my name on it, and it is transcended the action sports, and they liked the video games. Some kids think that im a video character and not a real person. On stage here at emerge, he told me that activision offered him half a million to sort of buy out his royalty rights after the game came out, and he had been having trouble, and he thought about it, but he had stabilize so he thought that if they believe this game is that good maybe i ought to stick with it, and the best financial decision he made, and within a year or two he had made that half a million and e sequels upon sequels, and the gift that ep keeps on giving for tony hawk, guys. Maybe he is a video Game Character then, jon. Great stuff, and i love to hear about it. Jon fortt down there in miami. And we will have exclusive coverage for all day. Later on power lunch bob grifeld, and then we will be speaking with mr. Worldwide himself, the musician and entrepreneur pitbull at 1 00 p. M. Eastern time. And now, looking at the dow up 63 points despite the earnings misses and the share reaction with netflix, and ibm. And goldman seeing a nice gain after ceo lloyd blan kkenstein said that they have more shares. And there have also been earnings citing the Political Climate as well. Yes, and we will hear more about that as well. And as apple is testifying on capitol hill, we will talk to googles head of security. And also, Keith Meister, a onetime carl icahn protege is going to be with us, and another rough quarter ahead for yahoo, and a top analyst going to tell us what to expect on earn ining after the bell. Squawk alley is after the break. You shouldnt have to go far to get the help youre looking for. Thats why at xfinity were opening up more stores closer to you. Where you can use all of our latest products and technology. And find out how to get the most out of your service. So when you get home, all you have to do is enjoy it. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Welcome back to squawk alley and you are looking at capitol hill where apple is test iffying about a case on the iphone, and we will bring you any updates. And the worlds most popular operating system is more secure than ever. We have josh lipton in San Francisco with that story. Hi, josh. Well, kelly, google is out with a new report today detailing how it protects the 1 billion android devices. Last year google performed over 400 million checks of devices per day for security issues, and helped to find and wipe over 200,000 lost or stolen devices per day, and checked over 6 billion installed apps everyday installed for malware. And one other point that chief Adrian Ludwig points out, less than 0. 5 of apps installed had a potentially dangerous app installed. I dont believe that the apps are getting worse, but the defenses are working faster than the attacks in the mobile space anyway. And not everybody is android fan though, because critics say they are less secure than iphone s, because they control the hardware and software, and we know that with the hardware p t partners like samsung and htc have varying degrees of security, but google counters that it is actually an advant e advantage. There is not any single team that is the most Effective Team in the world. I think that in practice, you want the bring in as many people as possible from as many walks of life, if you are will. That mean having different security teams at different oems in the context of android, and lots of companies that are investing in security. And ludwig says that google is investing more every year in Android Security both in terms of the people and resources. The company paid security researchers more than 200,000 to fix more than 100 vulnerabiliti vulnerabilities. Kelly, back to you. And yes, even as the european regulators are looking at the android practices. Josh, keep an eye on it, thank you. And up next, Keith Meister is going to sit down with david faber and he is a whole food brand supporter, and we will see what that means in other markets. Welcome back, and lets get back to david faber with another investor and heavyweighter with the investor summit. Keith mice te of corvex management. Yes, Keith Meister is joining us and also a board member of yum and other brand s s in the news, and i have to ask you, will you comment, that you have a merger agreement with ete, and as a board member, how do you view the Current Situation to put it mildly that is somewhat hostile between the two partners . Well, david, thanks for having me, and thrilled to be here at the 13d monitor conference, and so thrilled to participate. In terms of the williams e. T. As you suggested, im limited to what i can say as drirector and largest shareholder of the company. As a director, williams has put out several, and i will say the following, several public statement, and the most recent is april 6th, they filed a press relief in which we stated a unanimous consent to the enforcement of the merger benefits to the transactions of the shareholderers and commence litigation to help ensure that our shareholders would get benefits of the merger that the williams board did a fantastic job on behalf of the shareholders to bargaining for, and our goal is to get the benefits of the agreement. Our board continues to recommend the transaction, and we are seeking to get a Registration Statement effective to mail and have a meeting and close soon thereafter as possible. Right. I wonder as a board member, to the things they have been reporting this morning, for example, the efforts in the belief of some that kelsey warren, the man who runs ete to put it bluntly by lowering protections in s4 that are below what people believe they should be, and issuance of the convertible, and you mentioned the lawsuit to try to rescind that to the insiders and most recently having latham and watkins and say having, but unbleer what happened and offer a necessary opinion on the taxable nature of the transaction that it needs in order to go forward. And what are you thinking when you sit as a board member and see all of these things happen by the partner . Well, so, there is a lot to the question. And there has been at lot of the market commentary around it. It is not appropriate as h me in a board member to he said she said debate. But stepping back as a large shareholder here, you la