And as the Company Continues to spend heavily on expansion and Product Development and items like it new kindle line, revenue rose 27 also short of forecasts. Am that sons further Quarter Sales outlook is now shy of analyst estimates and amazon shares did fall in late trading yesterday. You can see that on the board there. 221. And Computers FeaturingMicrosoft Windows 8 hitting store shelves today. The company is opening 32 pop up stores just for the holidays. Its designed to run on a variety of devices. Pcs, lab tops and tablets. We heard from Steve Ballmer about it yesterday. Joe. Fiscal cliff still about two months away, but the combination of scheduled tax hikes and spending cuts may already be impacting the economy. The Washington Post citing a report by the National Association of manufacturers says companies are bracing for the fallout by cutting jobs and delaying big purchases. Government data shows Business Investment stalled in september. The report goes on to say if Congress Fails to address the cliff, 6 million jobs could be lost over the next year, that would push unemployment to near 12 . And what were hearing is not a whole lot different than what were hearing from the eceos. Lets look at stocks that could move. Expedia earned 1. 32ed a share. Lets look at stocks that could move. Expedia earned 1. 32ed a share. Results were driven by strong hotel bookings. D a share. Results were driven by strong hotel bookings. A share. Results were driven by strong hotel bookings. Deckers 14 cents above estimates. Revenue was short of consensus. An footwear maker also lowered Current Quarter guidance as sales of its ugg shoes declined. I have a pair that are like canvas tops and ive worn them a lot. Are they the ones that are fur lined . No. Those are the traditional uggs. Well, you know, when i wear them, penelope says i look like gilligan. Theyre dorky. And coin star earned 1. 14 a share for the Third Quarter, one cent below estimates. Coin star seeing weaker demand for its red box dvd rental business and, andrew, so much for that china bureau for the New York Times. Just reading this now, these are communists. Spread the wealth. 2. 7 billion. Lets explain whats happening. It takes big story this morning. The New York Times reporting this morning that family members of chinese Prime Minister wen quietly amassed a small fortune while he has been in power. The types says that his wife, son, daughter, young are brother, brotherinlaw have become extraordinarily wealthy racking up assets worth 2. 7 billion. The that i am names of relative hitting behind partnerships and investment vehicles using friends and business partners. The Chinese Government is denouncing the report saying it smears china and there are also reports that beijing is blocking the story on the internet. Yesterday afternoon, ive known the story has been coming for a long time, a number of Business People i know in china actually sent emails from gmail accounts saying do not email me, do not contact me from your times even for me. No matter who you are. It just come out within a half hour. It was like wildfire. And youre right, the New York Times does have a bureau in china. They started a chinese language website. So this article is in chinese. There are people that are finding ways to get around to get to the story. But its an extraordinary story in part because wen has always presented himself as a man of the people. They always do. And throughout this whole period, his wife and so many of these individuals, all sorts of business partnership, government state sponsored incredible. What were finding out is not surprising, but whats surprising is that in that country we never would have found this out before. And certainly their own domestic would never ever find out any of this. And in this case, i have to hand to the times. There is a role for the New York Times still. Thank you. Wen said in the past just talking about how hes kind of painted himself, he came from this poor background, but hes said in the past that leaders should ensure that family members and friends do not abuse government influences. P. And thats the other interesting aspect of the piece. While there is nowhere does it say its implied throughout, but unclear whether wen was actually endorsing any of this. In fact he talks religiously throughout the piece in other places from comments and questions that hes answered about how this exact issue, that the family may be abusing their power. He has to know that everyone around him just got the top 200 guys in China Average net worth whats the number . No, but after reading this, do you think that its no question. Average is probably hundreds of billions of dollars for the top 200. And the other thing thats interesting, this was not an unsophisticated plan. Meaning the motherinlaw is doing it through five different partnerships in other peoples names. This is the only member of the ruling class that has amassed a fortune. And even in north korea, the ones that are thats how you keep people in line. How about david piece this together . Hes been working on this for almost a year now. Its been a long time p. I actually saw him a couple months ago and we spent time talking about the piece. And i knew it was going to come and i thought it would be powerful, but i didnt know how far he had gotten into it. A little surprising that the times it dispatch one of its reporters away from the romney investigation of his wealth to go over to china. They were able to spare him . Probably a cadre working on romney. Digging in to his garbage. Davids invested a lot of his time. You ignore me. Wise course. Did you see Victor Pandit . Youre trying to avoid this wall street journal editor kral. They channeled you. Liberals confuse a progrowth plea with a tax rate hike. This is the same discussion we had yesterday morning where we were talking semantics whether you call it a rise in tax revenues, lowering tax rates, higher effective tax rates. You were taking it immediately as a stamp of approval from the ceos to raise taxes, which is what theyre talking about is a progrowth plan. All the ceos can say we agree, but once you actually get down to the devil and the detail, it will be much more so you lost that argument yesterday. So today you booked Larry Summers, peter orszag, Jared Bernstein. Im going to be youll be just fine. No, im not. High bladder is really acting you up. Ill be leaving a lot. Vacating the set . Dryeah. We do have peter orszag. Theres a piece in the New York Times that explains the cover, sort of the history of the pandit exit. We all woke up last week and he lost his job. He said that he had resigned on his own. Its an incredible story because what it explains is that the chairman, michael oneal, literally had him come in the office, he had no idea what was happening, the day after the day of the earnings report. Just a regularly scheduled meeting. And he says i have tlooe press releases here. I have one press release that says that you are going to resign immediately. I have another press release take says youll resign by the end of the year and another press release that says youve been fired without cause. What would you like to swleelec. This races questions about disclosure. Obviously oneal wasnt on the conference call, but to know you were going to spring it on him is i dont understand why it would go down that way. Didnt pandit tell maria things that what did he tell her . Pandit told maria and by the way told other reporters that it was his choice. Out of the three. Thats what we said at the time, that it was his decision to com bli with the request from the board to leave. Whenever we read stuff and we see the stuff, we should know, we he should be able to sift through people wonder why were cynical. P. Exactly. Lets get a look at the markets very quickly. We have seen a lot of red arrows today after they ended modestly higher yesterday. This morning dow futures down by close to 80 points. Ross westgate is standing by in london. Ross, good morning. Very good morning to you. We are weighted for the down side right now here in europe. About 8 2 decliners outpacing advancers. We bunsounced off the session l. Right how losses just over half a percent for the ftse. Xetra dax half percent. Ibex down a percent. S p coming out today and downgrading bnp which is the biggest french bank. The stock here down 2. 8 . Now, socgen and Credit Agricole werent downgraded, but their outlook was cut to negative. S p citing their vulnerability to a possible recession in france. Now, the thing about these today, these stocks have done incredibly well since july. The case of socgen, up 57 . Bnp 47 . Credit agricole up nearly 100 since late july. So they have had a huge rally from the middle of the summer. And so they are going to be vulnerable to any negative headlines at this point. And a lot of people saying banks having been a point of being undervalued are now overvalued, as well. So thats where we stand. With yields, italian and spanish yields slightly hire. Ten year italian 4. 9 . But we did have a zero coupon bond auction. Ten year spanish yields still fairly contained. Comfortable enough at the moment for the spanish government. Gilt yields a little bit lower. Thats where we stand in europe. Back to you guys. Lets get a check on some of the other markets starting with oil prices. The futures you saw how weak they are. The markets really will be focusing on the Third Quarter gdp report. Expectations are that its going to come in at 1. 9 which would be improvement over the first read. But people are watching this very closely. In the meantime, you can see how oil prices down around 73 cents. That shows you the concern about the economy. Also take a look at the ten year note. This morning the yield is at 1. 768 . So the yield has come down slightly from yesterday when it was above 1. 8. Dollar this morning is at this point stronger against the euro and the swiss franc. Right now the euro at 1. 2912. First time weve seen it below 1. 30 in a while. The yen and dollar at this point, dollar down against the yen. And you can see gold prices at this hour down by 8. 30. 1704. 40 an ounce. When we return, well talk more about apple, profits missing the hark there. Will the ipad mini give the next quarter a boost and how many iphone 5s do you need to sell to keep wall street happy. Well find out right after this. And Hurricane Sandy making it way north. Well get the storm track from the weather channel. That is next right here on squawk. [ horn honks ] hey, its sandra from accounting. Peter. I can see that youre busy. But you were gonna help us crunch the numbers for accounts receivable today. I mean i know that this is important. Well, both are important. Lets be clear. They are but this is important too. [ man ] the receivables. [ male announcer ] michelin knows its better for xerox to help manage their finance processing. So they can focus on keeping the world moving. With xerox, youre ready for real ness. U. S. Equity futures at this hour are weaker. Dow futures down by more than 75 points. S p 500 futures also down by about 10 1 2. A lot coming from the bad news from apple. Not great news from amazon either. Weakness across the board. Time for squawk sports. Tampa bay went into minnesota to take on the vikings. The bucs came away with the victory, 3617. Also the San Francisco giants are halfway there. The giants beating the tigers in game two of the world series and they have a 20 lead in the best of seven series. Predicted that on my very successful facebook, what was it, office hours. One of the questions hchas a national leaguer, i have to go with the national league. I think the dh ruined baseball. But i said the giants in six. So i might be wrong because it might not be maybe four or five . They got the triple crown guy on detroit. They have to come eventually. Hurricane sandy headed for new jersey. How do they know its its such a small theyve changed it. Last night they were thinking right for new jersey. Its widened out since then. It could go Miles Per Hour from de anywhere from delaware to cape cod. Hurricane sandy on track to strike the east coast. Alex, youve been doing this a while. In terms of how much can we really know . Its just probabilities at this point. I dont immediate need to put t windows up just yet, do i . Its more a situation of being alert and being aware that this system is out there. Because at this point, its looking more and more likely that there will be some impacts. Just a matter of exactly where at this point. But lets show you whats going on with it. Right now 80 miles an hour sustained winds. Moving to the northwest at 13 miles an hour. Moving right now through the bahamas. The center of the circulation is right about in there. So most of the nasty weather is on the northern end of the system out over most of the open waters. But were still feeling some impacts well out away from it. Look how large the circulation is. Were talking impacts all the way down it puerto rico and over toward hispaniola. Haiti getting a good dump of rain there. So not a good situation there with flooding problems. Already start being it see outer fringes reach up to the carolinas. So where is it heading . The general motion of the east coast here for us and thats doctor we have some of these watches and warnings in place. Still a hurricane warning up through the northwestern portion of the bahamas, but we have Tropical Storm warnings in the red for portions of the east coast of florida. So Tropical Storm conditions expected there in the next 44 hours. And then the newest information our Tropical Storm watches that are up for north of savannah all the way up to the eastern sections of North Carolina. Potential path, here we go. It will snake its way to the north and west and then head east. So away from the east coast as we head through today and into early part of the weekend. But then what happens is it turns more back to the east coast end of the weekend in to early next week and you can see the large spread from North Carolina care up to southern new england. Those area need to be prepared. Thank you, alex wallace. We appreciate it. A slowdown in ipad sales resulted in a miss for apples Fourth Quarter. A big miss. Joining us is brian white from topeka capital markets. Ill be tough with you. You have a 1111 price target on this stock. What is wrong with you . Well, you know, i think apple is still significantly undervalued here. What was encouraging on the december quarter outlook was the revenue guidance. So the real concern was over the gross margin. 36 for the december quarter. But the revenue outlook of 52 billion was actually very strong. Why has the street been so off recently on apple . And i know for been years it felt like apple was sandbagging its numbers. But in the past couple of quarters, this seseems to have a regular occurrence. The iphone is ramping at a different time of the year. All started last September Quarter when the iphone 4s launched in october. The street didnt exactly know how to model that seasonality. And youre seeing it again. And this iphone 5 is a much bigger launch than 4s. So people are really grappling with how do you model the seasonality. And i think the supply constraints obviously have been a big issue, as well. So do you listen to the call, look at the numbers and say, okay, this 1,000 target i have making no sense anymore . It absolutely makes sense. We cullly raced our calendar 13 numbers, which is what our price target is based off of. So when you think about the gross margin of 36 , okay, its down from 40 in September Quarter, really whats happening is 80 of the december quarter revenue is from new products over the past six weeks. New form factors. A lot of transition costs as you ramp this up about so that this will come and go. I think theyre being ultra conservative because they dont exactly know the impact in december quarter. So we would absolutely be buyers here. This revenue outlook with your arrest get, what would the market cap for the company be . Just over a trillion dollars. Its 19 times earnings. Very reasonable for a company thats growing at this rapid pace. How do you feel about the margin compression . Because that was an issue that a number of analysts seem to be paying attention to yesterday. This was the lowest margin number they had come out with, 36 . I would say at face value, its a surprise. When you think about their commentary on the call, 80 of the revenue in december quarter are new products. Weve never seen that in the history of the company. And thats in the past six weeks. So number one, it definitely has an impact. Theyve totally retrofitted the portfolio with new form factors. Number two, they didnt totally know and theyre being ultra conservative to make up for that lack of knowledge. Do you have any sense that the replacement cycle will start slowing down . Maybe less so for the phones, but more so for the pads . I think the ipad mini will change the game here. We said we think next year theyll sell 30 million and 48 million the next year. So i think in certain instance youll have consumers go out and own a regular ipad and own an ipad mini which goes on sale this morning. For you to get to your trillion dollar number, do they have to come out with a Game Changing device that we didnt know about, the itv . We had an analyst on yesterday that said they should buy tesla and get into the car all sorts of fantastical if not fantasies about what should happen. Absolutely not. Their market share in the core markets is tiny. So they still have a big opportunity to gain share in their markets. Ipad mini opens up a whole new product opportu