With me, as always, jon fortt and Kayla Tausche at post 9 as the dows down about 20 points. Busy day for poll kicks and business. One week since the inauguration. The president front and center on the world stage, moving one step closer, some say, to a trade war with mexico, ramping up rhetoric this morning, as the president welcomes his first foreign leader to the white house today. Our john harwood is at the white house with all the latest. Good morning, john. Reporter good morning, carl. You know, President Trump did not back away from what happened yesterday when the mexican president canceled their visit next week. He came before the republican retreat and said we have mutually decided to put off this meeting, unless we are treated properly and with respect, there is no point to it. Today he sent out a tweet underscoring that complaint, saying that mexico has been taking advantage of us for years on securing the border and on trade, and that has to change now, in all capital letters. But of course, in an hour, hes having a meeting, his first meeting with a head of state here at the white house, theresa may, the british Prime Minister. Who came to power after the brexit vote in britain, has some overtones of what happened in the United States. And she made the case yesterday to the republican retreat that she and President Trump may start out by forming a bilateral trade relationship themselves. Im delighted that the new administration has made a trade agreement between our countries one of its earliest prooiferts priorities. A new trade deal between britain and america must work for both sides and serve both of our national interests. It must help to grow our respective economies and to provide the highskilled, highpaid jobs of the future for working people across america and acrosshe uk. Reporter now, a u. S. uk deal is only the first of Bilateral Agreements that this new Administration May seek. Republican members of congress who believe in free trade told me yesterday at the retreat they want to see what other Bilateral Agreements follow. Of course, he withdrew from the transpacific partnership. Those are also potential countries and partners for the United States in new trade deals. John, thanks for that. Keeping in line with the president s policy, the british Prime Minister also struck a Foreign Policy chord at that retreat yesterday. Take a listen. The days of britain and america intervening in sovereign countries in attempt to remake the world in our own image are over, but nor can we afford to stand idly by where the threat is real and when it is in our own interests to intervene. We must be strong, smart and hardheaded, and we must demonstrate the resolve necessary to stand up for our interests. Joining us, tim adams, the institute of International Finance ceo, former undersecretary of treasury for international affairs. And joining us on the phone, just named today to trumps American Manufacturing initiative, alliance for American Manufacturing president scott paul. Guys, happy friday to both of you. Thanks for being with us. Scott happy friday to you, too. As it came out, what should the market, what should our listeners and investors be thinking about, with regards to trade, given all the rhetoric this week . Well, i think that initial hype verventilating and policy twitter obviously treats a lot of uncertainty, but the important thing is to look at the long gain here. The fourthquarter gdp, the deficit was a drag on it. So this is a longstanding challenge. I do think for those who thought the president s Campaign Rhetoric on trade was just that, its going to be a disappointment, and that there is going to be a rebalancing. The important details are how that occurs, how orderly it is, and look, there is tremendous up side for companies that produce in the United States on this. Its obviously, we have a lot of trade relationships that need to be managed carefully. I think the president is putting together a team thats very capable of that, but theres also a serious need for reform. Scott, just to follow up on that, i mean, ceos of Manufacturing Companies are the diplomats on the ground overseas figuring out where they ca move jobs, where they should invest, and im wondering if you think theres a little bit of good copbad cop dynamic going on, where you have the president who is taking his rhetoric up a notch against mexico and against other trade partners. What position does that put ceos in . Well, i think theres more pressure on ceos to look at the United States as a production platform as well as a sales platform, and i think that theyre aware of that. Youre right, Global Companies have lots of relationships to manage. I mean, there are a number of companies that do business in china that face serious hurdles, serious barriers, lots of unfair trade practices. They tend to be shy about expressing these for fear of retaliation. So i think that having a government that can have your back on this as well could be mutually beneficial. Again, this is a longterm process. There is lots of reform that needs to occur. And i want to see it happen in an orderly fashion but in a way where we can grow back some manufacturing jobs as well. Tim, it seems that the stakes arent negligible for the u. S. In a tiff with mexico. Im looking at some stats. U. S. Exports to mexico are up 468 from 1993. I mean, granted, imports from mexico up more than 600 in the same time period. But i mean, this isnt a situation where we want china coming in and developing a better trade relationship with mexico, is it . I mean, theyre right there to the south. Right. You know, its an important trading partner for us. Depending on how you measure it, second or Third Largest trading partner for us. Its a Friendly Neighbor to the south. We need good relations. You know, the president ran on a very effective platform of Capital Formation, job creation, economic growth. Im afraid, i think this is a bit of a distraction from that message and i look forward to getting back to those issues of Capital Formation and job creation. And you dont think manufacturing are you saying that the share of manufacturing of overall jobs means all this attention is misplaced . No, no. Manufacturings important, but its only about 12 of the economy. You know, if you look at services, for example, the industry that im in, we actually run a 250 billionayear surplus in Services Globally and in the Financial Services industry specifical specifically. So services are an important part of the u. S. Economy. 8 Million People employed in the service alone, almost as many as in manufacturing. So you have to look at the full sleeve of all the sectors of the economy, not just one. Manufacturing is important. I don want to take anything away from it. Tim, ler day, of course, we will see that meeting between President Trump and the uk Prime Minister, who on wednesday to her own Parliament Said that in looking for a uk u. S. Trade deal, in doing that, we will put uk interests and uk values first. Every country wants to put their own values first in seeking a bilateral trade agreement. I mean, whats the potential that we cant reach deals with these countries . Right. Well, youre right, any time you have a trade kedeal, youre givg up sovereignty. Thats the nature of the agreement. We run a slight trade balance with the uk, but relative to other trading partners, theyre about fifth or sixth on the list. Sure, lets do a trade deal with the uk. Im for trade deals, bilaterally or multilaterally, the more the better. Its worth negotiating. Theyre a special partner, as she mentioned yesterday and will mention again today, but its quite small relative to other trading relationships like mexico and like many of our asian trading partners. Scott, we hope youll come back and give us an update as the initiative meets with the president supposedly again and again. Thanks for your time. And tim adams, thanks to you as well. A lot to talk about when we come back. More on trumps tough talk on trade with mexico as he prepares to sit down with theresa may. Then, how the cloud is boosting bottom lines at intel and microsoft. A lot of big cap tech earnings. And google parent alphabet struggling to convince that mobile is just as valuable as desktop when squawk alley comes right back. Announcer post 9 sponsored by fidelity investments. Innovative ideas for serious investors. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Still trying to find how ara good site. Going . They all. Want. To. Charge me. Have you tried credit karma . Credit karma doesnt do taxes. Does credit karma do taxes . Yeah, and theyre totally free, so theyll never take any of your refund. Oooh, credit karma. Huh . We. Probably still want those. Yeah, good call. File your taxes for free with credit karma tax. Welcome back to squawk alley. A number of tech movers to check on this morning. Take a look at microsoft, posting betterthanexpected results on both the top and bottom lines, partly thanks to its growing Cloud Business. Alltime highs for that stock today rivaling the dotcom boom of the late 90s. Intel also getting a bump from the cloud, the chipmaker out with betterthanexpected results for its most recent quarter, helped by a strong Holiday Season for highend pcs. And then theres googles Parent Company alphabet, missing on the bottom line but beating on the top, that thanks to mobile. Alphabets cfo says the companys diversifying beyond just advertising. Shares of that company hitting alltime highs. To discuss, blajie shereen vaasen andark maney, tech analyst at rbc capital markets. Bilaji, do you see any themes emerging from the earnings we saw yesterday or is it still a storybystory basis at these companies . Well, i think theres a couple of really interesting things. First is that its pretty clear that satya has turned around microsoft which is extremely hard to do at a company that size. He may not have gotten the press he deserves for that, but its absolutely remarkable. You can kind of see it in every product. The fact that azure is now a close number two well, not a close, but far away from google as the number two cloud is impressive. Its been a long time since microsoft has distanced itself from google on something. The other interesting thing is to see that google is reducing its dependence upon advertising, down from about 89 to 85 for the alphabet business. Thats something people have wanted for a long time. Theyre starting to do that. And third is that it looks like the other bets are maybe starting to pay off where ruth prots discipline has reduced the top line by 75 . Those are three interesting things i saw, at least. Mark, when you think about what you saw, you have microsoft becoming more and more of a Cloud Company by the quarter, google becoming less and less of a Search Company on desktop, although its still far and away the lions share of the earnings there, but do you think that that makes either one of them a better bet than the other . Well, thats a tough e. Look, we like google as a stock here. Its not one of our top three picks. This is pretty much the consensus long in the largecap internet space, which means that the stock can grind higher through the balance of the year. It probably doesnt gaap higher. We thought results were very solid. Look, this is 28 quarters in a row of 20 yearoveryear organic Revenue Growth for google. I dont think youll find any company in history whos done that, so it says something about how sustainable this is as a playoff of secular growth. And to their enormous credit, they have these other bets that are coming in that will help them in the future google cloud, google play, their devices. We like the strategy of the firm. The stock is reasonably valued here. We think it can grind higher through the balance of the year. We like the setup. One of the things thats jumping out to me in this earnings season is that this shift to the cloud is eating into traditional business in all kinds of ways. Were seeing that in interet with their Enterprise DataCenter Business not really keeping up, but the Cloud Data Center doing well. Were seeing it in microsoft, vmware. Well have the ceo of vmware on in just a few minutes talking about the same thing. How is that affecting the view on the ground in Silicon Valley and the Business Case that startups are making for investment . Yeah, really good question. I mean, one of the things thats interesting is lots of things are talked about in Silicon Valley and become sort of mainstream, and then you know, then they stop talking about it and just do it. And then the rest of the world is sort of catching pup ining. The debate over cloud is something that happened maybe 10 years ago, maybe 15 in the valley. And then with sgoogle maps and so on, what they did in the early 2000s like gmail in 2004, gmaps in 2005, sales forces rise over the course of the 2000s, the technical debate over cloud versus onprem, folks pretty much use cloud for everything. Youll build an api and that will have all your clients work with it. Now whats interesting is kind of the reverse kind of trend is just starting where folks are actually looking at the billion mobile phones as sort of the next data center. This is something that my partners and i at Andreessen Horowitz have written about. Uber is the first to do Something Like this where theyre actually using their millions of phones by their drivers as a backup center. So in some ways, while cloud is rising and will continue to rise, there is a trend of decentralization thats just starting. Mark, you did hear these companies address the Incoming Administration, talk a little bit about what repatriation would mean, specifically about what paypalisade, that it would make a big difference for shareholders if they could bring money back in a taxefficient way. I mean, did you get anything to hang your hat on from these Companies Last night about exactly where the Incoming Administration will impact their bottom line . No, it didnt come up from google so much. I think our broad point is when people look at growth tech, they dont really buy growth tech because those companies are returning cash to shareholders. Thats not the investment pitch. That said, some of these companies i think google is in there, i think ebay is in there that have relatively reasonable multiples, closetomarket multiples, i think their holders would like them to return some of that cash to shareholders, and they are doing that. Its a very positive trend. I mean, ebays been doing that very substantially, and google didnt buy any stock in the december quarter, but they made it very clear theyre going to do that in the march quarter. They already have the authorization to do that. Thats a positive thing, a sign of maturity in the sector. And another thing, kayla, the gapification of the internet. Its nice to hear googles management say that the stockbased comp is a legitimate expense and were not going to try to adjust it out. I think thats a wonderful thing. Quickly, if you can, i had never heard, at least on squawk alley, somebody talk about a billion mobile phoness the next data center. What does that concept mean for the likes of qualcomm that has a lot of technology in the chips for what might be the next data center . Great question, and i think, actually, it will amplify qualcomms business. Intels biggest mistake, as their ceo will admit was missing mobile, and the reason why they missed mobile was they had kind of gone all in on the one laptop per child concept. Then a couple years later, steve jobs came out with the iphone and they thought it would be similar to these small laptops, and of course they were wrong and it was humongous. So, qualcomm got the mold business and this concept of the billion phones as the next data center is sort of obvious in the sense that there is an enormous amount of commute power right now. Well be developing technologies over the next five to ten years to make use of that fallow compute time, but it may be possible relatively soon to start getting a phone which when its passive, when youre not using it, is using its compute to do computations for other people, because its sort of like airbnb, where you take the Spare Capacity of a room and so on, right . Balaji, before we let you go, you took a meeting at trump tower earlier this month and reportedly were up for the fda job. But on the same day, you tweeted, dont argue on twitter. Build the future. Can you talk about that meeting and whether your tweet was referencing a rallying cry to Silicon Valley or to washington . Well, basically, you know, i briefed the president on topics related to regulation and technology. Im really happy im off twitter. It was a big distraction and ive gotten a lot of work done since then. So its pretty awesome. So no chance you or andreese