tv Squawk Alley CNBC July 8, 2019 11:00am-12:00pm EDT
♪ ♪ i put a spell on you and now you're mine ♪ ♪ watch out ♪ watch out ♪ watch out >> good monday morning welcome to "squawk alley." i'm carl quintanilla with morgan brennan, deirdre bosa is here, jon is off today markets down about 138 we'll start with apple shares under pressure after some mixed notes on the street. rosenblatt downgrades the stock. shares down about 2.5% joining us to discuss, raymond james analyst chris caso and our own mike santoli is here >> i can tell you what we've got to say we've been cautious on it for a bit of a while and it's really driven by the iphone cycle last year's cycle wasn't very compelling this year's cycle, as we expect, it's not going to be very different. so, you know, kind of more of
the same this year what we're hoping for, as you go into 2020, is that perhaps 5g starts to be a catalyst for the shares, but you've got to get through the cycle first. >> what happened to the last half year we spent talking about how services and wearables will make up for whatever weakness there may be in the classic cycle? >> yeah, and that hasn't been our call and the problem -- with the services is that it's just too small as a percentage of the total. so services, as one of the examples, you would have to add, for the video service, about the equivalent of ten netflix to offset what the loss -- you know, the decline in revenue from iphone over the last year so it just gives you a sense of large numbers, because iphone is so large >> that puts a little context around it. >> mike, i mean, apple is trading lower today, but so are the other f.a.a.n.g. names, as well is this one of those scenarios where we need to be talking about more about the impact that f.a.a.n.g. has on the broader market >> to some degree, yeah, morgan. obviously, the more the story about the market is, let's just
buy big companies with stable clothes and long-term growth profiles, because bond yields are low. in other words, if it's just about that kind of quality and defensive trade, a stock like apple will do fine and that's been the story of the recovery the more it's about what are the earnings catalysts, exactly what's the pace of growth from the next few quarters and it becomes a little bit more like, i'm not sure we can get past these valuations right now and i think for apple, and to a lesser degree, the rest of f.a.a.n.g. and the overall market, sentiment is kind of cautious right now you only have half of apple analysts recommending it at the moment >> you can see a lot of the big tech companies going to this apple with the apple goldman card is the market taking that into account? do you think there's so much focus on services, but perhaps finance services could be sort of an -- an attractive point for apple apple? >> and it is and i think that's an attractive business for them. but it's a large long numbers problem and it's a piece of the services business. so our view on apple is, if you
fix iphone, get iphone backs to growth, then services becomes you know, kind of the cherry on top to kind of keep the stock moving but nothing works unless iphone works, because it's just so large. >> so what meeds needs to happe5 and what additional features could you build on to a phone through 5g that would reignite enthusiasm >> it's a good question. one of the questions generally is why 5g? why am i going to want a 5g phone? and first i think they're going to market it very strongly, because the whole industry kind of needs a catalyst right now. i think that will be part of it. part of it will be coverage, just being able to get bandwidth in a sports stadium, something like that, that you'll want one. but i think what's important, and one of the things that gave a glimmer of hope to us a month or two ago was the agreement they had the qualcomm. the agreement with qualcomm gave them the ability to use qualcomm modems the intel modem wasn't working, so they wouldn't have had a 5g
phone. and the other thing is getting it to all price points that's one of the issues, the phone is a bit too expensive to draw product cycles. >> what do you make of the chatter around johnny ive leaving and what's left of the company? can apple survive on services or does it need this next innovate product? >> i think the conversation has gone back and forth between, is his leaving a symptom of where apple is at right now? in other words, is the cutting edge design and the product-centric focus is not really where the company is, or was it just they weren't utilizing him correctly and he's offer to other things? i think obviously apple can survive it, but the question is, can the market pay up for that services business, when it isn't really purely a distinct edge that apple has, except for the fact that it can harvest from this ecosystem the same kind of things that people are getting from theirs, it just happens to have a bigger one. >> chris, the same question to you, your reaction to johnny ive
making his departure last week and to play devil's advocate on the heels of that "wall street journal" report last week and some of the other coverage we've seen, could it actually potentially be a positive catalyst for this company? >> possibly. t johnny ive is legend in the industry, so it's hard to replace him, but with that, apple needs another hit, right and there hasn't -- since -- i mean, the apple watch was a legitimate hit, but again, just small relative the iphone. but they really need a home run with this next iphone. and i'm sure whatever's been planned for 2020, johnny ive has certainly been involved in that. they certainly need that but whatever the new team is working on now is probably 21, 22 >> the argument against the idea that he just wasn't cutting it anymore. the product design wasn't cutting it is, who else is what has outflanked apple in terms of pure design samsung had this foldable phone
that went away because it was a bust maybe that's where the technology is at, because they're at a point where it's as good as it's going to be >> you could argue some of the chinese firms are arguing about that direct innovation so what do you think about what's going on in china >> that was going to be my answer to your question. huawei has actually arguably been the most effective handset vendor over the last year or so. there are very good phones coming out right now and with all the trade stuff coming out, that adds another interesting element to this. >> huawei does not have that chip piece, right? american chips are still seen as the gold standard. do you think that now they can actually get there, now that there's sort of been a fire under them to start doing it themselves, if they have limited supply to u.s. suppliers >> i think it's very difficult for huawei to exist as they do now without access to u.s. semiconductors going forward huawei actually, like apple, does make some of their own chips. the processor is done by them. they actually make their own modem, they don't use qualcomm for the modem.
but they still need u.s. semiconductors there are certain pieces that you still can't get from anywhere but a couple of u.s. manufacturers. >> one last thing. i know it's all retrospect, but did they pivot to service too late did they let this basket of phone reliance go on too long? >> i don't know. if you went back to last time apple had, you know, a weak product cycle and it -- you know, this is going back five years ago, that's one of the things they spoke about, too, was about a pivot to services. and that pivot was successful. interestingly, one of the pieces of services that has grown the most according to our analysis is actually apple care and the ability to get another 100 out of us on top of the phone and that goes into the services bucket, which is good but actually, that's one of the issues going forward, that apple care now, because they've raised the price on that, they're probably limited in their ability to raise price on that >> and you're only going to sell the $100 coverage if you're selling them a $1,000 phone.
>> so what you've had over the last couple of years is apple care pricing has gone up pretty substantially and they've seen the benefit from that, but again, now that phone sales are starting to decline year on year, that's going into service as well. >> chris, myselike, thanks, guy. fascinating, we'll watch that and see how much resilience this rosenblatt call has. let's turn to wework the company looking at a plan to sell its debt according to a source familiar with the deal. "the journal" reported over the weekend, it could be as much as $3 to $4 billion worth of debt to fund its growth ahead of an ipo. this is about wework trying to shore up some confidence here. it has had a rough last six tight months it was supposed to get billions of dollars more from softbank. that investment was scaled down. we also saw recently in the last few months wheremutual funds mag down what softbank had valued a $47 billion valuation. it's very interesting. the source i spoke to called
this a bridge to profitability and it really echoed what we heard from the lyft and uber i-i ipos so it seems like wework wants to get closer before they go into that ipo >> the key question here is, does raising more debt shore up investor confidence? especially for a company that has not weathered, like many start-ups we've seen, that has not weathered an economic downturn >> absolutely. and i think our ipo reporter, leslie picker, was chatting about this too and mentioned, make it more attractive in ipo, if they're going to have more debt on the books. but yo but, you know, what i've heard is they're just changing their capital structure. they're a hugely capital intensive business they have some of the most expensive property around the world. so it will be an interesting one. we'll see when they get there, to that actual ipo i'm hearing the end of this year, perhaps the beginning of next year, but i think there are still a lot of unknowns.
>> i wonder if any debt offering or any raising of debt allows them to move that date up or not? >> right >> and remember, they did raise debt last year, $702 million obviously, that is a much smaller amount but we've seen their financials. and the big question, is this more of an uber or lyft? yes, probably, because it had $1.9 billion in losses last year or is it more of these -- the ipo market has done very well save for those two names i think wework wants to differentiate itselvf before it tops the public markets. >> we certainly will see coming up, what bill gaetz sa said this weekend about steve jobs and why wizardry was involved and later, china's play to unseat silicon valley. hannah nada joins us right here at post nine next. we're back after a quick break dow's down 125 ♪ i want it that way...
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welcome back to "squawk alley. stocks selling off this morning with the dow down triple digits. investors still uncertain over china and trade. the president spoke an that issue yesterday. take a listen. >> reporter: right now china's not very happy, because thousands of companies are leaving china and they're going to other places, including the united states because they don't want to pay tariffs. and the other thing is china is paying the tariffs they are devaluing their currency and they're pumping money in
that's paying for the tariffs. our people have not been paying for the tariffs. >> joining us now to discuss, ben harbor, managing partner at msa capital and haney nada, both here at post nine. haney, i'll start with you, because the last time you were on "squawk alley" back at the end of may, one of the things you mentioned is that you see the u.s./china trade fatalks moe of an ideological issue rather than an economic issue do you still see that as the case and if it's ideological, how crucial is tech to that? >> i think tech is probably the center of where the ideologies clash. think about china as the young silverback going after the older, dominant silverback there's going to be a lot of jostling and wars happening between u.s. and china i mean, not real wars, but like wars around trade, wars around policy, wars around like how you think about democracy and where democracy fits you know, the things -- the stuff that's happening in hong kong, the protests that are
happening in hong kong if you're in china, you're not hearing anything about that. that is completely blacked out that is the biggest fear of the chinese government right now and they don't want to import that kind of democracy or political power to the people in china. >> i definitely want to get into more on that in just a second. but ben, first are we in a cold war a tech cold war with china >> i'm worried that what's been done is irreparable. >> why >> i think that using tariffs or using these recent bans, adding huawei to the entities list, cte a year ago, as bargaining chips in a trade war have now opened chinese eyes to the uncertainties that they face in working with u.s. suppliers and the unpredictability of this government and how it regulates technology and as a result, there's a deep urgency and speed to develop self-sufficiency, expand it to new, emerging technology markets, and wean themselves off dependence on the united states. >> but same question i just asked chris there, right do they -- i think there's always been that drive, maybe
it's a little more urgent now that there's sort of access to american suppliers has been threatened how do they actually get there qualcomm, intel, they're still the gold standard. is huawei really going to be able to have the capacity to develop chips on that level? >> it's a great question right now, actually people like qualcomm and silex, they're cutting their investment into r&d right now, reducing the number of engineers as they're dependent on stock price and appealing to public markets. whereas on the chinese side, there's massive amounts of talent and capital being down at this there's now demand locally whether there wasn't before, because they could always fall back on u.s. supply. so at the end of the day, we think it's five to ten years out from being on par with the u.s., but that drive now is on overdrive. >> as i recall, your stance has been that we sort of need to put them in their place to some degree, yem you's? >> i'm a hardliner on china in that they need to open up their economy for our tech >> did you see any of that out
of g-20? >> back to more soybeans soybeans won't win elections, but long-term prospects around chips and semiconductors and technology, that's not going to win the election >> and i can't help but think that when you do see things like these celebrated, ratcheting up protests in hong kong, that that's only going to hinder any kind of argument for tech to come in there more dominantly. >> exactly that's going to be the stalemate. ben absolutely correct they now have the capital and resources to invest in infrastructure, technology, and science, and develop technology that we don't have today >> do it on their own, not copy our blueprints, right? on chips, with on airplanes, on mobility >> companies have done this throughout the century they copy one another, build on top of one another's technology. that's been lahappening. you look at the high-speed train issues and the amd technology transfer now china has the capital and means to do it
about who's buying one and how we kind of balance out foreign demand and things like that. >> thanks for joining us today getting a market flash this morning on symantec. for that, let's turn to dom chu. >> i want to call your attention to what's happening with those shares they are up 3% the move is following a bloomberg report that the big chip maker has secured financing to acquire that firm in an all-cash deal. broadcom sees cost savings of around 1.5 billion a year. sources told cnbc last week that those discussions between the companies were underway. broadcom for its part, guys, is down more than 2.5% so far today. we'll watch both of those as the deal chatter intensifies between those two companies. back over to you guys. >> we certainly will thanks for bringing that to us taking a look at the major indices, all breaking multi-day win streaks friday, again, lower this morning
welcome back to "squawk alley. european markets set to close momentarily. seema mody joins us now with a breakdown of today's action. >> and stocks in europe driven lower by european banks following deutsch bank's announcement that it will pull out of the global equities business and cut 18,000 jobs by 2022 the bank says it's aiming to reduce adjusted cost to around $19 billion over the next several years. shares are down over 5%. in greece, a sell on the news response to mitsotakis getting
elected. shares in greece have increased on hopes that he would win now the focus will be on the budget that he puts together over the course of the next month. finally, emerging market investors waking up to a tumbling lira after president erdogan unexpectedly fired the central bank's governor for not lowering interest rates. the decision comes weeks before turkey's next monetary policy meeting and is yet another sign of erdogan's intention to undermine central banks. the timing is notable. it comes as turkey is in the process of receiving a major russian defense system that could trigger a review by the national security council and u.s. treasury over possible sanctions. all of this uncertainty weighing on the currency. it's now down about 25% against the dollar over the past year. guys, sending it back to you >> incredible. thanks, seema. let's get to sue herrera and get a news update as well. hi, sue. >> hello, carl hello, everyone. here's what's happening at this hour the state department launching an advisory commission on human
rights secretary of state mike pompeo making the formal announcement this morning in washington >> the commission is composed of human rights experts, philosophers and activists, republicans, democrats, and independents that very backgrounds and beliefs inl provide me with the values >> in a state tv interview, a spokesman for iran's nuclear agency hinting that that country might consider going to 20% uranium enrichment 20% is a short technical step away from reaching weapons grade levels of 90%. he also suggested using new or more centrifuges which are limited by the deal. and spanish officials say four people were injured in the second day of the running of the bulls. eight bull runs are held in p p
pamplona every year. why eight, i don't know. one would seem to be enough. but that's the news update this hour, guys i'll send it back downtown to you. morgan >> sue herrera, thank you. skbltill to come, more on today's move in apple. rosenblatt downgrading the stock. our next guest says, we'll get the news apple's at 235 we're going to ask him why he's so bullish next. stay with us that's what happens in golf nothiand in life.ily. i'm very fortunate i can lean on people, and that for me is what teamwork is all about. you can't do everything yourself. you need someone to guide you and help you make those tough decisions, that's morgan stanley. they're industry leaders, but the most important thing is they want to do it the right way. i'm really excited to be part of the morgan stanley team. i'm justin rose. we are morgan stanley.
welcome back to "squawk alley. turning to apple shares still in the red this morning, but our next guest remains establish on the stock, saying that worries over china numbers are just noise that's wedbush securities analyst as well as tom fort who also has a buy on the stock. gentlemen, it's nice to see you in person this morning dan, you've been conducting checks, your team has, component makers on the ground in asia so looking at the note this morning, which shares are reacting from rosenblatt securities, why do you think that fears may be overblown? >> in terms of all of our checks, we see a slight tickup in terms of units, 180 million for the year and in terms of china, weapon continue to have 60 to 70 million iphones in the next 12 to 18 months for us, even though there's a lot of noise, i think the china overhang is about a $20 overhang on the stock and we're not seeing it in terms
of fundamentally, in terms of any kind of cracks in the armor. >> tom, looking at the broader picture in the trajectory that we've seen, iphones go in, surpassed earlier this year by huawei, to become the number three smartphone provider, where is this all going? and we talked about this earlier, can investors rely on services to keep growth going? >> the answer on services is definitely yes, but the way i would think about the iphone is, really, i think there's going to be a lot of pent-up demand for 2020, because the 2020 iphone should have 5g so i think expectations this year should be pretty modest and then on the services front, the big opportunity for apple is to diversify their revenue away from the 60% that their generating in smartphones today, and you're seeing that in financial services with payments, advertising, while protecting consumer privacy, health care, proprietary content with appletv plus. so i'm less concerned about how the iphone is going to do this
year as they diversify away from the iphone but next year is the bigger story on 5g. >> is apple behind the ball on 5g, "a." and "b," do consumers care that much about having a 5g phone >> they will care, because it is materially faster, the speed but for 2019, the expectations in general for 5g devices is pretty modest. so i definitely think it's going to be a big news fornext year and does make a difference in material and speed to consumer >> rosenblatt in their call said it's not a short in their view because of, in part, the cash balance in buybacks. has the conversation changed much we've talked about this for years, what are they going to do with the cash. what could they do with their cash are people talking about it differently than they were >> i think definitely talking about it more significantly than they were. because fundamentally, they definitely need to pivot on the services side. the question is, do they finally -- especially with ivy in the background, do they make an acquisition on the content side, which we continue to believe is something that could be on the horizon. i think that's the question.
look at the buybacks, that's been something where the investor is getting long in the tooth. they want to see more m&a and more significant investment of capital. >> i definitely agree with dan on that point. i think as they diversify away from the iphone, it may be an opportunity for them to leverage their balance sheet to make some smart acquisitions to do so. >> in content or in another area >> in content, financial services i think there's a lot of different areas, a lot of opportunities for apple there. >> so car is still a little bit fanciful in your view? >> yes, car is fanciful. >> that continues to be a fantasy i think on the car side. i think the nail in the coffin in terms of project titan, even though there continues to be some talk there, for all it's all about content services, the streaming, and an iphone montage. >> if they are making acquisitions tied to autos and tied to the car and they've been, you know, making hires, et cetera, based on the reports we've seen, why is it fanciful why is it a fantasy, the car
nunu initiative >> i think there were a number of years ago where they maybe looked at that strategy. but fundamentally, we've in terms of m&a candidates. >> apple has also made a big bet on privacy they're sort of differentiating themselves from the other big tech companies does that actually affect their bottom line? what does that mean for the company at large, especially when you see some of the other big tech names and the f.a.a.n.g.s? >> it's actually a big opportunity. and apple could go to the consumer and say, like they're doing with news plus, pay us $9.99 a month and we'll give you either an ad-free content experience or a true opt in advertising experience we won't sell your data, your data not how you're paying for the service. so i think it's a huge opportunity for apple. >> when do we start to see that show up in the bottom line
>> i think it's about the streaming service, for them to launch in terms of bundle -- that's where right now the terminal has been when they formally launch the tv service and what the bundle strategy we continue to think, that serve as $100 million consumers in the next three years in terms of what they can get. >> you're both pretty bullish on apple. what do you see as the potential risks for the company? anti-trust or something else >> it's definitely china if you look at the government basically easing restrictions on huawei is good for apple to the extent that it's a thawing of the relationshipi between china and the u.s. 20% of their sales, that's the big risk for apple >> is the thawing of trade talks and whatever huawei is going through, is that better for samsung than apple it's the number one smartphone maker and they've got things like 5g and chips that apple doesn't. >> i think it's most beneficial to apple >> and we agree wholeheartedly there, in terms of the trade
talks. it continues to be a china story for apple. that's why we think a 20 to 25 overhang on the china trade situation on apple but it does come down to the 20% that's coming from the demand side, 60 to 70 million iphones in china >> guys, with thanks so much for being with us this morning dan ives and tom fort. well, a weak summer season for the box office tempered by spider-man's debut this weekend. julia boorstin has more from l.a. julia? >> reporter: hey, morgan well, marvel studio's spider-man released by sony was another superhero setting, another box office record. the film bringing in $185 million in its first six days in north america. that's second only to the independence day record set by the transformers sequel back in 2011 and globally, the film has brought in over $580 million in ten days this is a win for sony and marvel parent disney, putting the film on track to profit from the reported $160 million budget
but even with this win, the year-to-date box office is still down over 8% from the same period a year earlier. a number of sequels including "men in black" and "x-men: dark phoenix" have fallen short about expectations, sparking concerns about franchise fatigue. yet, superheros continue to rule with the biggest film of the year, disney's "avengers: end game" closing in on "avatar" for the highest grossing film of all time "avatar's" number is $2.7 billion worldwide. this comes after last weekend marvel re-released "avengers: end game" with a deleted scene to draw moviegoers back again. with spider-man's massive showing, there is hope for the box office to close its gap with last year, with the "lion king" live action remake coming out next week and a "fast & furious" spin off in the beginning of august, but it's superheros that are fighting offfranchise fatigue. and there's only one more comic
book movie warner brothers "the joker" due out around thanksgiving. we'll have to see how all of these other franchise films fare guys, back over to you >> julia, morgan and i were just laughing because it doesn't feel like there's any more movies anymore. but my husband cannot resist a marvel or a superhero movie. seriously, what's new this year? is anything going to make a dent at the box office? >> well, there's a new brad pitt movie that's coming out that i think it's called "once upon a time in hollywood," that's expected to be really big, a summer movie, but could get awards attention and i think there's a lot of excitement about the "star wars" movie coming out in december it's been a while since we've had a really big "star wars" film and i think there's a lot of anticipation there. and we'll just have to see about these other franchise films like "lion king." there's been so much anticipation for this movie. the digital animation is so -- seems so realistic, that we'll have to see if it draws a broader audience than something
like "dumbo," which was also a live action remake that didn't fare so well earlier this year >> we want back to "star wars" and "lion king," the movie i want to see is the beatles one >> "yesterday. >> yeah, at least a new concept there, at least. later on in the show, don't miss former mlb commissioner bud selig later this afternoon on "the exchange. the santelli exchange is up next don't go anywhere. when you consider that more than half of american households are invested through mutual funds or pension funds in this market, i don't want the fed to pull the rug out from under them by taking a position that is not conducive to further pvingrodi the liquidity for this growing economy.
i'm scott wapner here's a look at what's coming up on the "halftime report." today is a day to dramatically reduce your exposure to stocks as one wall street firm suggests today. we'll debate where your money will work best in the months ahead. plus, we're trading the downgrade parade today apple, verizon, american airlines, the regional banks and more all getting the axe we'll find out whether you should get out of those stocks as well. pepsi, best buy, and delta all slated to report and we'll see you at noon on the half. carl, a little less than 20 away we'll see you then >> scott, thanks in the meantime, let's get over to the cme and get the santelli exchange. hey, rick. >> good morning, carl. you know, right before we came
to this portion of the show, you heard dr. judy shelton i interviewed her on friday. and she brought up to very interesting points the markets fully do expect an easy, to matter what part of the marketplace you look at, whether it's fed fund futures, the yield curve, the stock market, investors, it seems pretty much everyone is in one voice, they expect an ease dr. judy shelton pointed out should we not get an ease, it would be like pulling the rug out from underneath the markets. let's start with that. because i do you saunderstand t. and it isn't easy being a fed official or a central banker back before we had several large crisis-involved policy chapters, it was all about nudging let's look at the pillars of our fed. price stability and maximum deployment well, it has become so much more the notion of pulling out the rug makes sense insofar as how many of you out there, as
investors, have bought stocks or held on to them longer than maybe you would have, given the global weakness that seems to be spreading if it wasn't for the notion that there's been an advertising campaign that the fed is going to ease i'm not sure i completely buy into that, but there certainly have been some phrases, some changes in the statement, some questions and answers where it seems as though an insurance ease is kind of out there. the problem is, why should the fed or any central bank be put in the role of the psychologist for the stock market you know, before the last crisis, especially, when the central bank looked up at the boards and tried to divine what investors were looking at, investors moved many of the markets based on the fundamentals now it's really all about the central banks. and when i look overseas, sigh plenty of liquidity, plenty of stimulus, plenty of negative rates. can you get anymore stimulative than that? but yet i don't see that the
issues that these policies are meant to address are going away. there is no substitute for real organic growth or structural changes that lead to better organic growth i thought one thing that dr. judy shelton hit on early was so important, that good policies we the government and good policies throughout the economy yield good economic results. well, i'm not sure that a liquidity jolt is exactly what the economy needs from a fundamental aspect if it's gotten to the point that needs and wants of the stock market overwhelm the real notion of what central banks are supposed to do with regard to the fundamentals of the economy, then we're really not trading in the stock market anymore we're trading a government utility of investment. morgan, back to you. >> rick santelli, thank you. the nfl's 100th season is only a few weeks away. can you believe it but with a major union negotiation hanging in the
balance, eric chemi is back with hq with the details of that story. >> morgan, that's right. nfl owners are reportedly planning to ramp up talks in hopes of reaching a new collective bargaining agreement. the current agreement lasts two more seasons, but there are several reasons to get a deal done as soon as possible for one, this upcoming season like you mentioned is the nfl's 100th season and the following year will be the 100th anniversary season it's two years of positive marketing momentum that the league doesn't want clouded with ongoing labor drama. getting a deal sooner would give the league strength in the next round of negotiating its multi-billion television contracts. think about cbs, disney, fox, nbc with a lot players with money to spend there are a lot of sensitive issues at stake. first, it's the simple split of money between players and owners right now the players get about 48% of growth-shared revenue but there are a lot of ways to split that money, including deductions that owners can take
off the top line before the revenues are split, as opposed to deducting it from the bottom line after the revenues are split. that being said, there's certainly no guarantee of a deal getting done soon. many coaches' contracts now have clauses protecting them in case of a work stoppage and the head of the players union recently sent out a note to all players, advising them to save as much money as possible to get them through an entire year of no work. back to you, morgan. >> wow, one to watch eric chemi, thank you. when we return, silicon valley legend john sebold joins us
the era of mass extwinincten that's how john sebold is describing this. it's in his new book, "digital transformati transformation." goes into stores tomorrow. which companies are most vulnerable to this new wave of destruction and which are posed for big opportunities. tom sebold, founder of sebold systems sold to oracle in '06 is with us here at post nine. >> good morning, carl. >> congratulations on the book >> thank you >> you're putting together some big thoughts, right? how do you simplify it for the reader >> well, digital transformation is kind of on the forefront of
the agendas of boards and ceos and what seeit seems to be aboui that we're going through a mass extinction of that toys "r" us, westinghouse,years. toys "r" us, westinghouse, kodak. they're gone you know, ge is off the list now. in their place, we have companies that you talk about every day with new dna that are all about cloud computing, ai, like amazon going after retail we have, what, 8,000 retail outlets closed in the united states last year or airbnb, you know no buildings, no facilities. and, you know, they're dominating the hospitality industry with the market cap greater than the sum of all hospitality companies in the world. again, it's all about ai, cloud computing. tesla, ai. iot and cloud computing on wheels disrupting the auto industry so we have a new
generation of technology and i think the ceos of cat and 3m and boeing and royal dutch shell are adopting this technology so that they can survive and thrive in the new economy. >> you mentioned a number of industrial heavyweights there and certainly i have seen this in the fact that the industrial internet of things and many of the companies are essentially becoming the other tech companies. i would argue that honeywell probably belongs in the bucket too. when you look across corporate america who is adopting this technology and maybe getting it right and who isn't? >> jpmorgan, bank of america international services in health care and in manufacturing, 3m. caterpillar, shell baker hughes is huge in digtization of oil and gas worldwide. so - >> you mentioned jpmorgan, what about goldman sachs?
david solomon has said that it isn't valued like a tech company but maybe it should be. >> i have to talk with david about this, but you can't count goldman out. they understand technology i would be amazed if they're not at the leading edge of this trend. >> another company, a great ship, which is ibm they have been trying to complete this transformation for many, many years first it was ai and watson, now they're shifting to the hybrid cloud -- not kind of, but they're shifting to the hybrid cloud. are they doing it right? are they able to complete this transformation >> candidly, i think there's reason to be concerned about ibm. ibm is a great national treasure they missed the cloud. i'm not sure how you miss the cloud but they missed it, okay they seemed to have missed ai advertising aside where they do a lot of good advertising around watson but there doesn't seem to be much there i think there's reason to be concerned about ibm and, you know, i'm hopeful they figure it out because if i were -- if ibm were to disappear from the planet it would be a sad day.
>> they made the huge acquisition of red hot, is that too little, too late >> well, it's certainly a lot of money right now. whether that, you know, tends -- turns out to be the salvation for ibm i think ask -- is left to speculation. >> you mentioned ge. which for a number of years under immelt talked about the industrial internet, right being able to read metrics from the machine through digital means. how do we know whether companies are doing this for real or just marketing and it >> ge i believe spent $7 billion on this ge digital effort and they have i think not one production customer in the world. so it was something of a disaster you know, this idea that, you know, large industrial corporations can develop these technologies themselves doesn't seem to be working out >> the fact that we are seeing this mass adoption of technology, this sort of reordering of the corporate world in the midst of all this technology when you talk about
something like ai or facial recognition for example was in the news again this weekend, some of the new technologies, are there enough rules in the road in place or is pandora's box being opened in terms of the unintended consequences? >> there are enough rules in place particularly as it relates to facial recognition. this is a technology that's easily gamed and so i think, you know, that's a very scary technology that we need to keep our eye on. i think the rules as it relates to privacy and security and social media i mean what's going on there is truly scary. and governments need to regulate before we have enormous problems >> given the convergence of all the issues you're talking about, iot and ai wouldn't it have been more fun to start siebel than when you you did >> it was the professional experience of a lifetime it was a professional experience of a lifetime. >> it worked out for you. >> we built one of the world's
great companies but c 3, is even greater. we can take advantage of it for great social and economic benefit. the problems are extraordinarily difficult and it is truly fun. >> quickly, how does this play out between the u.s. and china given that technology is a key part of the talks. >> i think we're at war with china as it relates to ai. full game on warfare i think that this is not a war we'll want to lose you know, it was -- vladimir putin says whoever wins the battle on ai dominates the world. i think the chinese are taking a traditional authoritarian topdown totalitarian approach to it and the united states is very messy, free market, people doing things in garages. we'll see which system works let's hope we don't lose. >> tom, you always give it to us straight congratulations again on the book "digital transformation, survive and thrive in the a erof mass
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imitate the bad parts of steve, of at times being a [ bleep ] and it is -- i have yet to meet any person who in terms of picking talent, hyper motivating that talent and having a sense of design of oh, this is good, this is not good so he brought some incredibly positive things along with that toughness. i always said that i was like a minor wizard because he would be casting spells and i would see people mesmerized, but because the spells did not work on me i could not cast the spells. but i see them and i would say, hey, wait, don't don't. you're going to work even more than i would ask you to. this is no, this is crazy. >> a master at casting spells, that was bill gates on steve jobs over the weekend. i don't think i have ever seen gates as animated in the 30 second bite. >> some microsoft billionaires
have a thing for basketball like paul allen but gates has a thing for magic. >> for harry potter maybe? but i love the back handed compliments, sort of flattering him and at the same time calling him a bleep. >> even as we say good-bye -- a fascinating interview. a big afternoon ahead. let's get to the judge in the half. >> carl thanks i'm scott wapner why one wall street firm said it's cutting the exposure to equities to the lowest level in five years so is it time for you to reassess where you stand on stocks it's 12:00 noon, this is "the halftime report." >> morgan stanley is downgrading global equities as powell gets tough for questions from congress plus, a day of several big downgrades, apple, verizon and the regional banks and