tv Squawk Alley CNBC July 25, 2019 11:00am-12:00pm EDT
post nine of the new york stock exchange morgan brennan has the morning off. dow session low was about 150. we'll start with this rally in tech leading the s&p to record closes yesterday these regulatory headlines out of d.c. not slowing down the momentum out of the valley evaluation partners, early facebook investor, roger mcnamee is with us to talk about facebook's print they can't lose. >> no. >> what would it take to slow these guys down? >> to be clear, i think from an investor point of view, they're delivering exactly what investors want and as long as that goes on, the stock is going to be fine to me, the question is the policy one that all of us as citizens that our government has to ask, which is, should there be some limit on what businesses can do when the actions of that business affect public health, democracy, privacy, and competition. and, you know, we're wrestling with that right now and the government's getting its gears moving, but it goes slowly
and until i guess it's going to need to get a lot more momentum behind it before investors are going to pay any attention at all. >> so if you were just a strict portfolio manager in tech, you would probably be long here, right? >> oh, yeah. >> and would remain so >> it's been a fantastic stock and there's no immediate reason why that wouldn't continue the challenge, i think, is that the level of pressure from washington is going to increase. yesterday, we had three different government agencies in the headlines, right we didn't just have the federal trade commission we had the department of justice initiating something new and we had the securities and exchange commission and the thing is, with the doj and the securities and the exchange commission, it may not be entirely civil actions we're talking about. and that raises the stakes dramatically so i think if you're a portfolio manager, you have to look at this with some degree of caution that you didn't have previously. >> but at the same time, facebook is down 7% over the last 12 months, while ebay is
occuup 20 so one could argue, it had a spike about a year ago i think over the past two years, it's still up less than 25%. but given how other tech stocks have done over that period, facebook has kind of underperformed one could argue that it hasn't been a great stock and even given the issues that they have -- >> and jon, i think the real point that you're making here is that the issues that are coming to facebook right now are not unique to facebook >> i'm just saying, facebook might still be argued to be undervalid relative to all of tech -- >> either that or we're going to see the actions of the government relative to google, microsoft, and amazon affecting those stocks in a manner more similar to what we've seen already at facebook. because i don't think this is a facebook exclusive problem they have cambridge analytica. the other guys didn't have that really bright, shiny light and there's a film out just
yesterday on netflix called the great hack which really delves into that which i think is going to increase pressure but at the same time, i do think you have at google all kinds of regulatory issues on the horizon. >> it feels like what you're saying is everyone is reacting to what they're doing, but what if all of a sudden lawmakers get proactive or do you believe that that's just not going to happen? because that could fundamentally change their business model? >> from your lips to god's ears as far as i'm concerned. because i spend a lot of time in washington and the thing i can tell you is inside the trump administration, both the department of justice and the -- in the anti-trust division and the federal trade commission are doing things that their counterparts in the last two administrations would not have even contemplated that is a huge change and really deserving of great praise. inside the congress, on both sides of the aisle, you now have very strong advocates. so you have this unusual thing of a massively polarized country, and yet here's an issue that's bringing everybody
together and by the way, justifiably. justifiably. i think, again, i don't -- i am an activist, but i'm trying to argue for having a conversation about this for getting the full information on the table the issue that facebook is going to be wrestling with next, which i think will tip over to the other guys, are the issues of the securities and exchange commission relative to advertising. and you know, exactly what is going on there and what are the implications of having had fraudulent user counts or manipulation of users and what does that imply if the company bought or sold stock during those short periods there are going to be investigations of those things, and we'll have to see what happens. but from an investor point of view, you have to factor that in now, because that's not like a maybe, that's at -- we're at the beginning of that. >> although, what's also not a maybe is the first revenue acceleration in three years. julia boorstin's got more on the quarter.
julia? >> reporter: well, carl, facebook may have beat expectations on the top and bottom line, which initially sent the stock higher after-hours, but then it turned negative when c faux dave weiner pointed to some potential problems ahead he said facebook's revenue will see morepronounced deceleratio in the fourth quarter goingint 2020, saying that's partially driven by, quote, ad-targeted related head winds and uncertainties. mark zuckerberg said it's been valuable for clarifying regulations going forward as well as the company's new focus on secure communication. he also talked about one other new focus of the company, ecommerce and payments take a listen. >> these are huge and important spaces and we have efforts in several major areas to deliver qualitatively better experiences than what exist today. from instagram shopping to facebook marketplace to payments across our apps to the new libra project that we announced to 27 other companies recently
these efforts are important both for our profit experience and for our business >> reporter: now, analysts are large lly bullish on these results. we have counted nine analysts that have raised their price targets on these numbers guggenheim writing, quote, while the facebook-focused regulation appears introducei, we believe that the spirit of the requirements will likely be applicable across the internet and social media peers and most readily addressed by the financially strongest players, of course, like facebook and we did hear a note of skepticism, though, from laura martin she writes, facebook is a target of regulators, we believe, which implies it no longer competes on a level playing field. this is an investment risk its competitors do not have. and of course, now that we know about the ftc anti-trust investigation as well as that department of justice anti-trust probe, we'll have to see how much of a distraction all of these different issues are as the company tries to innovate and fuel new revenue streams back over to you >> all right
julia, thank you very much laura martin is not a big bull she's been raising a lot of concerns around this company >> and the thing is, for everybody else, i think the point they're making is fundamentally correct, if all you look at is the ftc announcement yesterday because the blanket immunity to the executives and the company for the things that are known as of last week or whatever the date was that they said, i mean, that is immensely valuable and if you're a shareholder, you're looking at that, taking that to the bank and if the ftc were the only possible regulator, then i think the stock going up would be perfectly rationale. the other problem that i think everybody needs to pay attention to is we've talked about this before your facebook newsfeed today has a lot more ads than it had a year ago you know, perhaps twice as many. i mean, in my own feed, about every fifth or sixth piece worr this for years >> that's right. but what's the density that they
become classified advertising? >> but are they good ads, that's the question and the data that facebook has makes their ads better targeted than the average bear, right >> i don't dispute that. but at some point, if it's just a stream of ads, engagement is going to decline i'm just saying, there's a limit to how many ads they can put in. and it feels to me like they're adding >> so they're looking to new revenue streams, right and i find it so interesting that what they're looking to is ecommerce and payments talk about opening yourself up to regulation. look at what libra has already, you know, lit a fire under regulators and lawmakers so are you positive on this? and is that actually going to help them or hurt them >> to me, they're pieces of the payment thing that are a no-brainer, right? the idea of doing cash transfers over messenger or whatsapp, those are things, those are established market opportunities that they should be really good at and shouldn't be that big a deal >> yeah, good at, but is it smart for them to go into. >> libra is a disaster
>> i'm not even talking about libra. >> nothing solves that distribution problem than being the retailer itself. then you can say, look, advertiser, we sold it, here's who we sold it to, here's the ad they saw before they bought it >> their market opportunity is a big opportunity. i've heard some things that said, scale wise, it's in the same basic geography as ebay, but they get essentially no revenue from it and they clearly can monetize that. facebook's problem is not an inability to monetize business that it has. facebook's problem is that it can't seem to do the monetization without causing massive distress to society. and that should be possible. >> why is shopping with instagram taking so long to take off? these things, you make it sound so simple, but they haven't been able to get it off the ground so quickly. >> i don't know. at the end of the day, these are rar sma very smart people, but their skill sets are very specific, and as they move into these new markets, you can imagine the financial services, you need
a broader skill set than you need for doing just, you know, a news feed. and whether they have good enough people there, i think you can state with some confidence that the first pass on libra was underdeveloped relative both to market need and to the regulatory requirements of that space. and that facebook could probably, you know, do a better job if it wants to get that through. >> we had one guest last week call it the worst product launch in history so let me move on to tesla, though, the other big earnings story of the morning down double digits after reporting this larger-than-expected loss. phil lebeau will help us understand what happened in the quarter. phil >> reporter: a lot to unpack here, carl tesla right now on pace for its worst day of the year, its worst day since september of last year, and if it falls much further, it will be the worst single day for tesla shares since 2013 here's what the company reported yesterday. a wider than expected loss the automotive gross margins is
getting a lot of attention, because they fell under 20%. they're down to 18.9% in the second quarter and yes, they had stronger free cash flow, but that's because you had a greater than expected number of vehicles delivered tesla did reaffirm its guidance for 2019 eliveries but if you're expecting a linear path or at least some certainty about the financial results over the next several quarters from tesla, well, listen to elon musk on the call last night >> your q3 and 4 will be good, 1 will be tough, q2 will be not as bad, but still tough, and then, i've said like q3 and q4 next year will be incredible. >> reporter: all right were you keeping score tough, not bad, incredible in q3 and q4, at least that's the prediction of elon musk at this point. as you take a look at shares of tesla, we should point out that chief technology officer j.b. straubel, who has really been with the company all the way from the beginning, basically elon musk's right-hand man, he is moving into an advisory
capacity he will step aside as chief technology officer so for tesla bulls out there, they're looking at this and saying, look, they're reaffirming guidance, but carl, you've got to look at these automotive gross margins and you can't underestimate the importance of j.b. straubel. even though he will still be an adviser at the company, he will not be the chief technology officer. carl >> phil, thanks so much. good picture of the quarter. we'll talk about it in a moment. but i do want to get to bertha coombs at the nasdaq and the opening of this new ipo. >> we just had livongo open for trade, the stock price at $28 a share. that was above the initial range of $20 to $23. just opened up 45% above $41 a share. that's going to give them a valuation today of about $2.8 billion or so, give or take a few hundred thousand dollars this is a company that does digital health management. they are famous for helping people manage their diabetes in fact, they have one of their
164,000 members here today talking about how it helped him avoid having to take insulin but they've also branched out into mental health and other chronic disease management as well the company is growing very quickly, their revenues more than doubled the last year, above $66 million. but their losses doubled, as well so they are not yet profitable nonetheless, this is one of the health tech stocks that a lot of folks have been watching in silicon valley they are paid for by enterprise companies and growing very quickly. again, livongoright now up mor than 50% in its debut. back to you. >> bertha, it's getting to be a habit with some of these new issues >> yeah. >> roger, on tesla, the journal today argues that it's in danger of no longer being the market's growth darling >> yeah. i mean, today's announcement doesn't read well, at all. with my portfolio manager i had
on, you know, the departure of the cto, that is very poorly timed. and you know, you look at this -- we've had all of these issues on their production capability and just how much do they give up by not being really extraordinarily good on the blocking and tackling? they built this incredible brand, and yet now that they've got all of these people interested in the product, they're creating all kinds of trouble for themselves and to me, that's really scare >> core question it's margins or deliveries, right? which one do you want to focus on because if you're focused on margins this morning, 18.9 does not make you happy you want to be, you know, 21ish, but if you're focused on deliveries, hey, you know, i guess logistics hell is kind of in the past, in a way, although they seem to have some painter's tape in some of these cars but, hey, they're churning them out. cash flow looks a little bit better >> yeah, you know, it's not the end of the world
but at the same time, these are the issues, jon, that we've been talking about all along. that why should you have to make a trade-off between deliveries and gross margins? there are a lot of businesses, when you ship more product, your gross margins get better, not worse. and to me, this is -- this is just a sign that they haven't solved job one of being a car company. and -- >> is job one judged quarter to quarter or judged by the longtime >> both. >> who else isinnovating like tesla, just to play devil's advocate if we don't look at this on such a short-term basis, what's the story? >> i am one of these people who talks -- you know, i'm not a car person, but when i talk to people who own teslas, they really believe, right? and that to me feels like a really strong foundation to the whole thing, but when i talk to my friends who are car people, they look at the manufacturing issues and they look at that like it's going to be catastrophic if they don't get their hands on it right away
and i have a former partner who, you know, he does technology for a living and he happens to be a car buff and he just -- he thinks this is a disaster in process. and i'm not in a position to judge that i can see a great brand, i can see people who love it and to me the brand creates the opportunity to fix the manufacturing issues but at some point, you've got to do that. >> it reminds me of apple before tum co tim cook >> yeah. >> okay. okay i hear you >> brilliant guy at top, lots of ideas, always coming out with new stuff, people who love apple really love it, but, boy, their operations -- >> and part-time ceo >> hey a lot of parallels >> and a car person who is also a tesla person and see what they say. >> i mean, i just -- to me, i want tesla to be successful, because i want to believe you can create a car company and create, you know, in traditional industries, you can really break out and make things work so i'm cheering for them but this doesn't make me feel better >> well, that's why brand-new
car companies are few and far between. >> yeah. >> roger, thank you. >> my pleasure >> good seeing you two days in a row, roger mcnamee. >> later this hour, livongo just opening for trade. the executive chairman joins us in just a few moments. that stock is surging off the bat, up 60%. stay with us so, every day, we put our latest technology and unrivaled network to work. the united states postal service makes more e-commerce deliveries to homes than anyone else in the country. e-commerce deliveries to homes - stand up if you are first generat(crowd cheering)ent. stand up if you're a mother. if you are actively deployed, a veteran, or you're in a military family, please stand. the world in which we live equally distributes talent,
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does the payment company miss on revenue and cuts its full-year revenue outlook delays product integration and pricing initiatives as well as currency pressures having an impact the company also coming up short on venmo payment volume by some $4 billion this is a very important metric, guys, because this is supposed to be the future growth engine when venmo came out, it was a wild success, because it was popular. but it came out a long time ago. there are more and more competitors. you've got zelle, you've got square cash coming out, and paypal hasn't really monetized it in a significant way. yes, more merchants are signing on, but on last night's conference call, talking about adding emojis, but engagement was never the problem. >> i wonder what the business model behind that is because venmo socialized payments, i think some older people, like myself, don't really want everybody in the world to know who we're exchanging money with.
so how exactly they're going to capitalize on that, especially as payment volume maybe isn't showing up as expected how do you turn that into a viable business? >> the idea is you get more merchants to sign on and you take a cut of those transactions, it's been slow going, but one of the reasons that paypal lowered its full-year guidance is because they have all of these partnerships in the works, but integration is becoming a little slower than expected so you need to remember, paypal is one of the hottest stocks in the hottest payment spaces, and it has an incredibly rich valuation, including visa and mastercard and they're getting into more digital transactions so paypal has to make the case they're going to have more growth levers going forward and be able to compete with others >> obviously, the revenue outlook not helping. did they give any clarity on libra last night >> you know, i was very surprised. visa and -- actually, i'm not surprised given what we've heard. i'll take that back. i thought there would be more questions from analysts, but the consensus seems to be that it is
just too early to know anything. and they are being very cautious, hedging their bets visa's al kalie just said, we just signed on, we haven't completely signed on, we signed our intention, but nothing is final yet. let's get to kayla tausche in washington with some breaking news this morning. >> carl, the department of agriculture is unveiling the details of that $16 billion aid program first announced in may top agricultural officials told reporters the program would see $14.5 billion go to a market facilitation or a direct payment program to farmers that will cover a wide variety of crops. signups begin on monday, payments will begin next month and go through the fall and winter, if the trade situation hasn't resolved. the payments will be based on acreage products and the county where they're ocated there will also be a $1.4 billion fund to purchase certain excess crops as there was last year agricultural secretary sonny perdue said the program was entirely justifiable when asked
about funding farmers hit by trade war versus businesses in other industries he also discounted the idea that farmers are getting overpaid, saying that academics who are calculating the cost of the trade war are not the ones struggling to pay the bills. he does believe china could still buy farm products at president trump's insistence and suggested some of that may already be happening or be in the works right now. he says there are no plans for a 2020 aid program, but he also said he didn't believe there would be one this year he said he will be monitoring the trade situation throughout the fall to see how and went anymore payments should be made. carl >> all right ly take it, kayla, thank you i will take it, that's a big deal certainly with the political season gearing up. and when we return, back to tesla, those shares continue to get crushed this morning tesla bull and elon musk's favorite youtube analy jns lerhihourstoi stay with us
percent and european markets just closing seema mody joining us with a breakdown of today's action overseas seema? >> not the type of market reaction you would expect on an ecb monetary policy meeting. european stocks are down, but take a look at the euro. a big intraday reversal. it initially hit a two-year low against the dollar after the ecb signaled future stimulus, but when ecb president mario draghi took questions from reporters, he didn't exactly outline the steps the central bank will take in september, which then sent the euro higher at about 111 against the u.s. dollar. economists are still expecting the ecb to cut rates in september, and if so, europe would be joining a growing number of central banks that have already cut rates of the major economies, eight have cut rates since april, that's including turkey since firing its central bank chief earlier this month cut rates by over 4%. that was in today's monitory policy meeting in total, 15 central banks have
cut rates so far this year and with global growth concerns front and center, other countries across asia and latin america are expected to embrace this dovish policy merrill lynch forecasting nine more central banks including the federal reserve will cut rates this year. so, of course, carl, that brings up a lot of questions. what does it mean for the u.s. investor what does it mean for the fed? some economists say that a fed rate cut next week certainly doesn't guarantee a weaker dollar, because they will coincide with, again, these other central banks trying to do the same with their currency back to you. >> not to mention the amount of negative yielding debt around the world. seema, thank seema mody let's get to sue herrera this morning and get a news update. >> hello, carl hello, everyone. here's what's happening at this hour the justice department says it will carry out executions of federal death row inmates for the first time since 2003. the department says five inmates will be executed starting in
december in 2014, then-president obama directed the department to conduct a review of capital punishment, which resulted in a freeze on executions accused pedophile jeffrey epstein was found injured and in a fetal position in his jail cell in new york city. he was reportedly found semi-conscious with marks on his neck sources tell wnbc that he may have tried to hang himself or use the incident as a way to get a transfer, but he may also have been attacked by an inmate overseas, boris johnson held his first cabinet meeting as british prime minister, pledging to break the brexit impasse that brought down his predecessor, theresa may. >> we have a momentous task ahead of us, a pivotal moment in our country's history. we are now committed, all of us, to leaving the european union on october the 31st or earlier. no ifs, no buts. >> you are up to date.
that's the news update this hour back downtown to everybody on "squawk alley. jon, back to you >> sue, thank you. now one of silicon valley's premiere health tech start-ups, livongo, surging in its debut over at the nasdaq this morning. shares currently up 53%. livongo executive chairman glen tullman joins us now first on cnbc glen, good morning congratulations. >> good morning and thank you. >> so 679 clients, 50,000 new members added in q1. you say you're saving clients with diabetes nearly $2,000 per year how? >> well, most important, what we're doing is we're creating a way to empower people with chronic conditions to live better and we started with diabetes and now we're transitioning and adding hypertension, weight management, diabetes prevention and behavioral health. and what we do is we put the actual consumer back in charge of their health care and we
empower them with insights and information that makes it easier for them to live healthier and better lives >> now, investors are going to want to know, your r&d costs doubled year over year marketing costs more than doubled, so did administrative costs. when do those costs stabilize for you? what's the outlook, the strategy over the next two, three years >> well, one out of every two adults, americans, is dealing with a chronic condition, and that's not even talking about the international market so we're continuing to invest in building the business and so i think you'll see our continued investment in r&d and the other areas you mentioned. that said, as we scale, those will become a lower and lower percentage of our overall spending >> glen, why go public now you're relatively young, in terms of start-ups, started in 2014 and you're sort of breaking a drought here the first year since 2016 that any digital health company has
gone public. so what went into this decision? >> well, today, going public is really a branding event. and we deal with 20% of the fortune 500. those organizations like to see that we're stable, they like the transparency of public companies, and we also wanted to make sure that we had a currency to use for acquisitions as we grow our platform, our whole-person platform, to serve more and more people with chronic conditions so i think there's a number of good reasons to go public. and we also, because we're a sass-based recurring revenue model, we have great stability and predictability in our numbers. and i think that's an important element of being a public company. >> how much are you like an enterprise software company, given that you have a relatively small number of, i guess, clients versus a large number of members and i imagine your sales force really has to operate much
like an enterprise sales force in satisfying those clients. >> well, we do we have a lot of great distribution clients, so whether they be health plans or large pharmacy benefit managers, they help us distribute our platform. and to reach those members but you're right, we look very much like an enterprise from the standpoint of a very efficient selling machine, that allows us to reach a large number of members. and we'll see that continue to scale at a very rapid rate >> to what extent are you going to rely on consumer hardware, like the apple watch, like alive corps's devices, consumer-facing software as you advance and do that marketing, that brand awareness and try to grow? >> well, we have relationships with, as you mentioned, with apple, with samsung, with fitbit, all of the latest technology we have a partnership in the cgm or continuous glucose monitoring
world with abbott, with their libre device so we expect that all of that will become part of the information that we feed into our applied health signals engine and that's what allows us to generate better and better insights and what we call health nudges that make it easier for people to stay healthy so, we're happy to actually take information from all of those various devices. >> big year for digital health i ipos glen, thanks for being up with that stock, up near 60%. >> thank you thank you. still to come this morning, a near 30% rise in revenue for facebook from a year ago not enough to keep the stock in the green today. back below 200 cisco's john chambers is going to join us, talk about their earnings and the regulatory actions that were taken yesterday. dow down 110, not far from session lows of down 150 back in a moment ♪ lower carbs.
this is a major shift for us but we built services that billions of people trust every day to communicate with the people they care about privacy has always been important to the services we provide, and now it's even more central to our future vision for stoeshl networking it's critical that we get this right and we're going to build it into all of our systems >> mark zuckerberg stressing the company's focus on privacy on yesterday's conference call. all of this as facebook faces
scrutiny from the ftc, the s.e.c., and the doj and lawmakers for that matter. our next guest calls this big tech's, quote, mid-life crisis joining us now is cisco's chairma chairma chairman, john chambers. john, nice to see you this morning and thanks for being with us. >> deirdre, it's a pleasure as always, and carl and jon, good to see y'all as well >> explain to what us what you mean by this mid-life crisis and are all big tech companies in the same phase? >> no. i think what you see is any company goes through periods of transition jack welch taught me many years ago, you'll never have a great company until you have a near-death experience and that is true. cisco saw it in 2001 but what you are seeing, however, is very concerning. if the major tech companies don't focus on tech for good and a balance between traditional capitalism, if you will, and a social obligation to society on creating jobs, et cetera, there
are going to be a lot of challenges the most recent being privacy. and this is where the companies must get ahead of the regulators and the lawmakers. if you re-think about it, their currency is very simple. it's track record, it's the relationships, both with people and with the citizens, and it's trust. and at the present time, facebook clearly is behind in catching up on those issues. >> and john, you've said that jeff bezos of amazon has done the best job of growing the business amid all the scrutiny how much of this has to do with a different business model, or are there any lessons that perhaps mark zuckerberg could learn from how jeff bezos has been handling it and to me, it seems like he's been avoiding it, because he hasn't had the same level of scrutiny >> well, it's several comments first, if you really watch about amazon and what jeff has done, jeff has built an amazingly powerful company and clearly leads in so many segments of the industry his challenge will be different. i think you saw secretary of
commerce -- i'm sorry, secretary of the treasury say the other day, concerned about the amount of retail jobs destroyed, et cetera so i think the issue ares that the companies had to be very careful on regulation and antitrust. if there's one company that's done the best job on balancing that, and i think they learned from their mistakes in prior generations, it was microsoft. they clearly went through challenges on anti-trust and regulation two decades ago and if you watch what he's done, he's done an amazing job of understanding government, fair requests, impact on citizens, impact on customers, and he's threaded that needle pretty well i would say microsoft would probably be the model for other companies to watch what nobody has talked about, however -- >> although, john -- >> sure. >> i was going to say, goldman has done some work looking at microsoft's share of software industry sales and if you go back to the consent decree, that growth rate really flattened out i just wonder whether or not facebook faces the same kriind f risk in their business
>> i think it depends entirely on how quickly they react. and i think that was you, carl if you watch what microsoft did is they reacted slower, and now if you look at the growth rate, they're beginning to grow very, very fast in many areas, from missouri to other categories so i think a lot depends, does facebook reinvent itself does it deal with a very legitimate request of government and citizens does it do the classics? do you -- are you visible? do you articulate the problems do you get ahead of the regulators who respond to it do you give regular updates until you see the progress if they do, they'll come through it fine. but this is a three to five-year challenge they're going to face. my worry is more the reverse it's like the digital health care company that you saw before with such a tremendous pop and his reasons for going public were very, very good but if we put regulations like sarbanes-oxley and we begin to do this with privacy and begin to have unintended consequences from the regulations on the big companies that perhaps some of the regulation and government
actions were very deserved, the impact on small companies should be taken into consideration for every legislative and regulatory decision it could have a huge impact on the number of ipos you see >> john, this is jon fortt >> hey, jon. >> yesterday, from the dissenting ftc commissioner to some others, we heard more of this term "surveillance kpac capitalism," really going at the core business model in targeted advertising. do you think that potentially has legs and are there changes that the likes of facebook, google, even amazon can make to the model that modify it to kind of mollify their critics without destroying their model entirely? >> the answer is yes and yes if you watch, i've always been more a proponent of the privacy issues that europe led with. and all the regulators know that if they move, they will make mistakes along this way. this is why i believe that these companies have to get ahead of that model
i'm writing an op-ed for cnbc, which goes up today, that talks about a new form of capitalism one that both focuses on the financial returns, but also the effects on society and the job creation and i think facebook and others have to get ahead of that game and do as much in giving back as they do in terms of creating economic wealth. if they don't, regulations will get tougher and anti-trust will come >> certainly, john thanks very much for being with us this morning. john chambers. >> it's a pleasure, as always. y'all have a great day >> good to see you, john just ahead, speaking of microsoft, former ceo and l.a. clippers owner steve ballmer reaction to his two newest plays.er we'll get you reaction to that press conference if you missed it dow's down 116 we're back in a moment
i'm melissa lee in today for scott wapner here's a look at what's coming up on the "halftime report" at the top of the hour. the moment of truth. big tech all reporting earnings after the bell and why this market may be setting up for a strong second half rally and airline stocks are getting slammed today. how much more turbulence is ahead. that and much more ahead at the top of the hour at noon on the half jon, over to you >> thanks, melissa and after the break, do you remember this? >> and so where specifically will you be in terms of -- >> next. next >> bonehead questions are not cool
next >> that was may 2nd of last year elon musk ignoring analyst questions and devoting 15 minutes of his earnings call to one bold shareholder after the break, we'll get that shareholder's thoughts on what musk and tesla are up to now n'goway. fun fact: 1 in 4 of us millennials have debt we might die with. and most of that debt is actually from credit cards. it's just not right. but with sofi, you can get your credit cards right - by consolidating your credit card debt into one monthly payment. you can get your interest rate right - by locking in a fixed low rate today. and you can get your money right. with sofi. check your rate in 2 minutes or less. get a no-fee personal loan up to $100k.
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how'd he get out?! a camera might figure it out. that was easy! glad i could help. at xfinity, we're here to make life simple. easy. awesome. so come ask, shop, discover at your xfinity store today. tesla is on a rocky ride today after posting worse than expected second-quarter earnings on pace for its worst day of the year as losses and revenues
disappoint ceo elon musk had this to say on the call about the company's future. >> q3 or 4 will be tough q2 will be not as bad but still tough, and then like q3 and q4 next year will be incredible. >> and that i believe was last night, not may 2nd joining us is a tesla shareholder and youtuber who made a name for himself on a tesla earnings call when elon musk made an earnings call and shut down walled street analysts. >> we're going to go to youtube, sorry. these questions are so dry >> that was may 2nd. uteener who then spent 23 minutes asking him questions, hyperchange ceo and founder galileo russell here with us at post nine. thanks for being here. >> thanks for having me. >> it seems to me like whether you like tesla or not, given the
results that we've seen, it's a risky stock, risky bet people need to understand that, right? >> definitely. i think of it like a startup investment it's rapidly growing, and that's why i get frustrated with the short-term financials instead of taking a step back and seeing the progress this company is making this cash flow, 600 million plus, that's what everybody was pointing out before this, look how much earnings they are pushing and now they are pumping out cash flow and everybody is moving to a different part >> it's margins or deliveries. if you were concerned that tesla has less runway than maybe some people think to prove out its model and it has to stabilize and you're concerned about margins, this quarter is bad if you think it's got a lot of runway and you think about the improvements it's been done, you are a fan of the latter. >> if youback out all the regulatory quarters, the quarter's margin has improved.
another big trend that's played out is the high-margin software is getting booked as deferred revenue until they roll out the features even though they are getting the cash up front and that's why the earnings and service levels looked worse and the cash flow is strong. what matters at the end of the day is the cash in the bank and that they are actually collecting that revenue up front. the gross margin over the long term, seeing a lot of positives building in the software and autopilot revenue that's not showing up on the gap statement. >> aren't you concerned about credits? we can strip them out if you want because it is going to be a problem. rather have it go the other direction. >> the company can survive and bring a compelling product to market without any regulatory credits, and i think they need to do that to make it a viable company. >> now, it was a year ago when you asked your question and he went to youtube and at the time you said basically the entire wall street model just got disrupted and you predicted more questions like that, but what we've seen, especially last night, was to go the pretty traditional route. what do you think now? how are earnings calls going to go in the future, and if you
could ask elon musk a question, what would it be >> i'm an adviser to a company called say which opens the tesla earnings call and that came out of the let's go to youtube moment and that's a product that many other companies products will use and is actually changing earnings calls, so i do think -- the other thing i wanted to highlight is tesla's investor relations strategy since then has really, really improved and got away from the short-term metrix to the long-term autonomy the biggest news out of the earnings call is they want to show a road map to get to a tera watt, up 30x from their initial plans which is real, really exciting which shows that the company is planning to get much, much bigger from from here. >> my criticism is tesla is like apple pre-many tim cook. people have the products, love it and the train is running on time and the predictability has not been there what do you think? >> i think that couldn't be a more perfect example elon musk i think is a genius,
brilliant engineer and does miss targets sometimes, but if you take the good with the bad, he's an unbelievable leader and everybody is like what's about elon like he's a negative he's the biggest reason i'm in this stock i'm betting on the jockey and not the horse. i think he's an incredible ceo. >> i haven't heard a single wore from you about the company and if you had to choose one what would that be? is there anywhere where you can understand where the bears are coming from? >> i think the core skepticism and criticism is they are moving so quickly so sometimes they move up on seemingly easier things because they are moving so fast and trying to do so much, so i think if the company were to get in trouble, it would be part of that mentality, but i think that's just -- you have to take the good and the bad. this is a rapidly growing tech startup. that difference in culture which allows them to move fast because i think this is also the biggest advantage. >> galileo russell, covered a lot. >> thanks for having me. dow is down 135 on this thursday morning approaching session lows once again.
pretty cool. pretty damn cool the whooo! >> los angeles clippers owner steve ballmer, former microsoft ceo, being himself and excited over the new additions to his team, leonard and george it brought to mind all those windows meetings, jon, right, where he was more excited than even that. >> the great thing is kawhi leonard is like fun guy because he's not like fun guy. he's so stoic on the court until the win and steve ballmer is the exact opposite so they should do a campaign just on that. >> i feel like i'm being trolled a little bit i'm a raptors fan and being forced to watch thisclip over and over again this morning. >> canadians could learn to trash talk a little bit. >> yeah. there you go you got your win you should be happy about that. >> obviously, it's been quite the session as we digest facebook and ford and tesla. tonight will be huge amazon, alphabet, intel all after the bell i think we'll also get -- what else is beside that, google,
starbucks, expedia is going to be probably the -- it is the busiest day of earnings season. >> yeah. more importantly we've got intel's ceo on "squawk alley" tomorrow to talk about the results, whichever way they fall. >> and lots of other things, i'm sure no shortage for the intel ceo. china and huawei. >> that's going to be big. let's get to melissa and "the half." >> i'm melissa lee in for scott wapner a big moment of truth for big tech it's 12:00 noon, and this is "the halftime report." >> get ready for amazon, alphabet and intel after the bell more than $2 trillion in combined value what's at stake for this tech trio and this market airline anxiety. shares of american and southwest getting clipped. is more turbulence ahead for this group two things are happening in this market right now that may be signalling a strong rally ahead. how to position for a seco