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tv   Squawk Alley  CNBC  November 6, 2017 11:00am-12:00pm EST

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stocks holding on to fractional gains. health care in the headlines as shares of mylan are gaining ground, despite a somewhat disappointing earnings report. valiant is selling one of its units and a report teva pharmaceuticals will be. that does it for this hour of "squawk on the street. let's send it back downtown for the start of "squawk alley." guys, back over to you >> dom, thanks very much good morning, it's 8:00 a.m. at broadcom headquarters in irvine, california, 11:00 a.m. on wall street, and "squawk alley" is live ♪ ♪
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good monday morning, welcome to "squawk alley. i'm carl quintanilla with john fortt, sara eisen at post 9 of the new york stock exchange. what a morning for tech, john. >> yes, indeed broadcom confirming its takeover bid for qualcomm the cash in stock offer valued at $70 per share, or $105 billion, excluding debt. qualcomm acknowledges receiving the offer. for more we're joined by a tech analyst at william blair and analyst at rbc capital markets is on the phone. actually, i want to start with you, amit. so, broadcom's side argues, i had a chance to have a few conversations this morning, that qualcomm hasn't traded at $70 a share since a year ago it's been three years since it was at $80, so this actually represents fair value, but we've seen qualcomm under pressure now from apple on the licensing front. a year ago, and before that from
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china, though it was able to resolve much of that does that argument hold water in your view? >> yeah. thanks for having me, guys i'll say, you know, factually they are right qualcomm has not traded at $70 in a while, since the apple litigation started, and i do think one of the big levers is, a, i can integrate this asset much more efficiently operationally, they have a good history, but the second thing may just be broadcom and apple have a much more cohesive partnership in contrast to the hostility and lawsuits you have between qualcomm and apple, so broadcom may think, and we think it's fair that they could resolve these regulatory litigation issues more easily than qualcomm is doing right now. >> neil, are investors really fed up enough with qualcomm to totally give up on this highly profitable licensing model especially given that they were able to work out a lot of these issues with the chinese oems
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more than a year ago before these latest issues with apple cropped up, because it seems they have to be fed up with this management team to throw in the towel and embrace broadcom, or am i seeing this wrong >> no, you bring up a good point, but first of all, thanks for having me this morning i just want to bring out a couple of points the first thing, in my opinion, this announcement is a pivotal moment both on the licensing front and chips front and far reaching implications in the consumer electronics world as amit referred to on the licensing front, this could mark a new benign environment that broadcom will take versus qualcomm now, while you said, rightly so, that some of these litigation issues have been resolved, they are still a thorn for many on the chips side, this will create a massive company and we can expect the pricing economics move towards a semiconductor industry on the deal itself, there's so many moving parts.
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you've got the part that is unresolved, the licensing part, some are speculating softbank may be involved in it. i do not believe the current status, both on nxp and licensing will be as is with broadcom something has to give way. and finally i expect qualcomm to fight back this is a company that never wanted to decouple their licensing business from their chips business so expect a lot more fireworks over the next six months to whenever this is going to close. >> what's it say about overall not just maybe this particular deal, but broadcom's overall m & a appetite, where does it end? at what point would their appetite be sated? >> well, it's a great question for them but listen, i think they've been very complicit, they believe there are a host of semiconductor companies, qualcomm is just a big one, that are run inefficiently with a
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high optics structure. qualcomm has a 15% m & a structure, broadcom has 4% they believe it's logical to play the consolidator. if they have the deal done, the only thing to look up to would be intel and samsung at that point. >> john, i was going to ask you, because i know you've been covering this long running battle between qualcomm and apple, it appears from a lot of the analysts' reports, like these guys we're talking to, that they deal view this deal favorably. do you see that? >> yeah. i mean, because -- >> broadcom has the relationship >> right in order for this to make sense as an investor, you have to believe that qualcomm's licensing model is outdated, that somehow the apples of the world have the leverage and they are not going to be able to get paid this high amount for their technology so you have to think the stock price doesn't belong up at 85 or $90 a share. if qualcomm were up there, it would be worth more than
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broadcom in the first place. these two companies are very close together in value. so i'm not -- of course, apple would want this to happen, because broadcom is implying through this that their relationship with apple, they'd be demanding less, they'd be basing it perhaps more on the chip set business, less on that high profit licensing, but i just wonder if investors, given qualcomm's track record and working these things out but being tough and insisting on high profit, if investors are going to throw in the towel on qualcomm we'll see once they start making their case one way or the other, though we, of course, expect not. >> anil, final word from you, the antitrust concerns, regulatory environment we don't really know from the trump administration this would be, what, number three in terms of global chip makers behind intel and samsung? >> absolutely. and you bring up a very, very important point, because what will happen is that you're going to have these massive semiconductor companies that for
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the first time will have pricing power. if you look at the overall semiconductor industry, we've not seen a lot of ipos or innovation so what i believe over the next decade, you could potentially see a super cycle of innovation in the semiconductor industry where the big boys are not really innovators, but more scale players, and you have the new guys coming through ipos innovations with all the new ideas. >> all right, we're going to need more m & a reporters. >> we've got some pretty good ones, i think we're okay anil and amit, thanks for joining us meantime, the other top story we are following for you, an anticorruption crackdown sweeping across saudi arabia this morning among those arrested, government ministers and prominent members of the country's royal family, including prince bentalab.
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what does this send to investors? >> well, certainly a purge of the rich and the powerful, a major crackdown that targeted big business leaders, as well as former and current government ministers, as well as members of the royal family and the charges, possible charges sweeping everywhere from this crackdown that we say the crown prince is trying to force on corruption, as well as to the possibility of money laundering, as well as abuse of power. it's interesting to note that the crown prince came out and said the message is now clear, this is a top-down sweep and no one is immune or above the law we mentioned alwalebb, chairman of kingdom holdings with high profile investments, those shares traded down for a second day, unsurprising there, but it was interesting to note this was as the company released a statement, the ceo saying he does believe they have the full support of the saudi government. now, over the last several hours
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we've heard more and more reports that the saudi government has already begun freezing accounts and assets of those named in wrong doing, but we'll just have to wait and see what happens next. in terms of what the investor sentiment, originally shares were trading down yesterday in saudi arabia, but over the last several hours we saw a pick up in investor sentiment and the idea being this is not only solidifying the power of the crown prince, but showing there's a push to end corruption and to improve transparency. guys >> hadley gamble, thank you very much for that. for more on the anticorruption purge in saudi, we're joined by james jeffrey, former ambassador to iraq and turkey and former security adviser to president bush ambassador, good to have you back, good morning >> thank you, good morning >> we've had some guests on this morning who say it is, indeed, a coup of sorts. others say it's a more fematically pure crackdown on corruption are you somewhere in the middle?
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where are you in this? >> this is dramatic, because he's going after major elements of the ruling saud family in order to consolidate power it is about corruption, because there's a lot of that and it's hamstringing the entire growth of the economy, which he is committed to, but he's basically assembled in his hands all security and diplomatic power, all energy power running the initial public offering of aramco and the opec production cuts, and the reforms of the country under this vision 2030 plan that will move saudi arabia away from its reliance on oil, move it away from reliance on the old way of doing things, which includes corruption, and against the chokehold that the religious leaders have on the country. this is a huge thing and he needs a lot of power to do this, but assembling all of that power means that he can't afford any slip-ups >> so you think in terms of capital flow in or out of the
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country it's more of an encouragement than an inhibitor? >> i think two things. first of all, saudi arabia was heading for disaster i was over there and talked to him a year ago, and they were eating up about $70 billion a year of the sovereign wealth fund to support their budget and their military activities in yemen because of the low price of the oil what he has to do is to diversify the economy, somewhat like iran has diversified its economy, while also trying to find a way to get oil prices up. he succeeded to some degree with that with the $60 a barrel we've seen recently, but whether this vision to create a, if you will, a dubai and a silicon valley in saudi arabia will work or not, we don't know. that will be determined whether investors in the long run see saudi arabia as a good option. >> ambassador, to carl's question, what happened this weekend, the consolidation of power, how should global investors view that? isn't it just a reminder this is
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sort of an autocratic system and if you do pour money into it as a banker you could get tangled up in some of these corruption charges and scandals with prominent investors like prince alwaleed >> sure, but that was a problem before i do think that the crown prince is sincere about fighting corruption that's in all of his body language, and it is an important problem, but he's going to use the massive corruption as a way to build popularity among young saudis that's his target audience if he can succeed in that and develop the rest of the economy, this idea of silicon valley, plus dubai, as well as a big gas station for the world, then he will have made a remarkable transition the problem is, because he is going after a lot of sacred cows, there's some risk to stability. >> ambassador, what convinces you that this isn't replacing one type of corruption with
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another, and who's behind the crowned prince in this at 32 years old, perhaps he's come up with this himself, but it seems unlikely. >> his father is behind him. i also met with his father, the king, but it's very clear his father has basically passed the baton to bin salman, so who's behind him are technocrats and others who want to see a more modern saudi arabia because they know the current model based on oil won't work in the 21st century with what we're doing in america and elsewhere with the shift in energy markets, so this is the right approach to take, and he's not going to eliminate all corruption what he's going to do is eliminate the massive unchecked corruption with tens of thousands members of the royal family getting involved in it. it will now be fewer people, it will be more under control, more like china than russia, if you will >> ambassador, we have to go, but really quick, what happens to alwaleed?
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>> to who? >> prince alwaleed >> in the end all of these guys somehow survive. the royal family is not going to be putting people in jail for a long time or executing people. >> ambassador james jeffrey joining us on saudi. ambassador, thanks again >> thank you >> good color there. when we return, the latest on the president's five-country trip across asia we'll go live to seoul, where he's going to head tomorrow. busy day in tech between broadcom, qualcomm, nasdaq at record highs we'll talk to morris mark. and then we'll have microsoft's newest gaming atnsole, the xbox 1x at post 9, wh it means for the gaming industry when "squawk alley" returns in a minute.
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president trump's tour of asia is under way. live to kayla tausche in seoul, south korea. kayla, what can we be expecting? >> good morning, sara. trade on this trip is just one of the dialogues taking place. the other, of course, is the ongoing situation in north korea. just about an hour north of where i'm standing right now there have been some important developments, specifically this week today we got some symbolic new sanctions from seoul and tokyo, tightening the screws on their neighbor for the first time, if only symbolic in nature. the u.s. treasury and state departments put new sanctions on individuals and on financial institutions in china in just
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the last week and the president says the u.s. could very soon make a decision on whether to name north korea an official state sponsor of terror. that could even happen on this trip here in seoul there have been peaceful protests for and against trump's strategy with pyongyang. protesters are calling out trump's comments that if people die in this escalation they'd die, quote, over there and so far it's reported that 8,000 police will be on hand for trump's wednesday speech at the national assembly. recent polls show that 60% of people here in south korea have a favorable view of the united states many also are in favor of u.s. military assistance, but a lot of them that we spoke to today say that they are worried about how president trump is approaching north korea. >> translator: now that north korea and u.s. are confronting each other, i feel more worried. we are more fearful there might be a war as a korean, i'm worried
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>> translator: since trump was elected as president, the relationship between u.s. and korea has been worsening >> translator: instead of him making strong statements on north korea, i hope we can have a peaceful resolution through dialogue and meetings with north korea. >> senior administration officials tell reporters that the campaign to isolate north korea is both economic and diplomatic, but with the president openly questioning his chief diplomat rex tillerson with abe today saying it's not the time for dialogue and south koreans here doubting whether a diplomatic was ever even open, that route appears to be elusive. for now guys, back to you. >> kayla, thank you very much for setting that up from seoul, south korea. tonight our kayla tausche. for more on the president's trip to asia we're joined by elizabeth economy, foreign relations director of asia studies. welcome back, elizabeth. nice to see you. >> great to be here.
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>> so, clearly north korea's top of mind for south korea. is president trump going to get any help that he's been seeking from china, or is he getting that behind the scenes when it comes to fighting north korea? >> yeah, i think president trump has actually been reasonably successful over the past ten months or so in getting the chinese to ratchet up the sanctions that it is willing to place on north korea you know, from a chinese perspective, what they want to do is have the united states and north korea sit down at the table and negotiate. they put forth this proposal for freeze for freeze, where the u.s. would freeze our military exercises with south korea and north korea would freeze all testing. problemmatically, neither north korea nor the united states appears interested in this particular proposal, so i think president trump is going to go to beijing and ask them to do more he's going to ask them to turn off the oil spigot, because there is a belief within the white house that that is
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actually the key to putting enough pressure on north korea to get them to the negotiating table in a weakened position >> how do you marry that with what the president is also going to ask for on trade? obviously, investors are watching this as the most consequential economic relationship in the entire world. how does he do that dance of trying to get that trade deficit narrowed and it's much bigger than japan or south korea, and also get what he needs on north korea >> right, so our trade deficit with china is the largest one that we have and the president has pledged to make progress on it and to date, in fact, it looks as though the trade deficit is only going to grow over the course of 2017. but, you know, although the president has made a linkage with north korea and trade saying maybe we're willing to take a softer line on trade if you'll do more on north korea, that's not really the way the chinese play the game. they themselves have tried this kind of coercive practice and failed and i don't think they are going to be swayed in any
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way to do more on north korea, because of what we're willing or not willing to do on trade i think the president has signalled some unhappiness with china in terms of levying tariffs on aluminum foil he's threatened additional tariffs. i don't think those are going to have any impact on china what we need to do is work with our allies to bring multilateral pressure to bear on china for market access. that's the kind of change we need to see and i don't think we're going to get progress on that in this meeting in beijing. >> why does that incentive not work in their case what is more important to them than avoiding any kind of trade sanction or having a less valuable trade relationship? >> well, i think they believe that when it comes to this kind of, you know, trade -- bilateral trade tariff emphasis, yes, it signals unhappiness on the part of the u.s., but they are perfectly willing to go down that path and watch, you know, levy a tariff back on us so what we need to do is get
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real market access, you know, one single tariff on aluminum foil or aluminum or steel is not going to make a difference it's likely to lead to lost jobs in the united states, higher prices for american consumers. again, there are many other countries throughout the european union, japan, south korea, all of whom share u.s. challenges when it comes to market access in china protectionism in china, state-owned enterprise subsidies in china we all face the same issues, and if we work together, then we can push back. >> elizabeth, when the president makes a statement like he did about japanese auto manufacturers manufacturing in the u.s., that doesn't line up with the facts, does that matter on a trip like this, or have his counterparts overseas in asia sort of figured out how to translate trump? >> you know, of course it matters. it's embarrassing. i think it's embarrassing to us, to the united states, that he would say japan needs to
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manufacture cars in the u.s. instead of exporting them, when it turns out three-quarters of the japanese cars sold here are manufactured here, but i also think that promise abe and more broadly the japanese leadership recognizes that the president is prone to this kind of mistake and, thus, is willing to push it aside. of course, they'll push back, but it's not something that's going to cause the relationship to go into a downward spiral >> we'll see how he does the rest of the week a lot of photo ops and pomp and circumstance, as we have been saying elizabeth economy, thank you so much, for the council on foreign relations. when we come back, big bet on sprint in the wake of the big t-mobile deal. plus, watching shares of intel and amd. both companies confirming they are working together to take on nvidia and the pc graphic chips market "squawk alley" back after this global markets, tf
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it is a busy monday for tech in general and for softbank. our deirdre bosa is at one market with the latest on them deirdre? >> good morning, carl. softbank shares fell over 2.5% overnight on the defense of the decision to end merger talks with t-mobile. he said overnight that he felt, quote, great after the talks ended because it ended the indecisiveness and allowed him to increase softbank's stake in the company. he also talked about sprint's contribution to the business overall, saying that it is integral to the future of softbank and what he calls its core business, the information revolution sprint has been a bright spot in softbank's earnings as turnaround efforts start to take hold, but analysts have said sprint needs a deal to compete with verizon and at&t. when asked if he would still look for other partners, he said anything is an option without giving further details this morning or david faber
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reporting softbank is willing to regauge with charter on a deal also as part of that web cast overnight, masa commented on the $93 billion vision fund, which he credited to boosting softbank's overall operating profit and talked about the uber deal, saying the target could shift to rival lyft. he also talked about meeting with saudi arabia's crown prince in riyadh and said softbank wants to, quote, go bigger in saudi arabia and would be actively involved in the prince's mega city investing in saudi energy, those comments coming on the heels of the political shakeup over the weekend. guys >> i guess it's not deterring him. deirdre bosa, thank you very much straight ahead on "squawk alley," we'll speak to mark asset management ceo morris mark talking broadcom, qualcomm, and the saudi arabia crackdown and investors when we come back. i was having a good round,
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good morning, everyone, i'm sue herera here's your cnbc news update at this hour. the dmv releasing its official photo of texas church shooter devin patrick kelley kelley killed 26 people and
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wounded 20 others in the attack in sutherland springs. texas governor greg abbott says kelley appears to have selected the church for a reason. >> there is information surfacing that there may have been a reason why this particular location was targeted that information may be coming out today or tomorrow, in the coming days, but i don't think this was a random act of shooting a randomly chosen location but, obviously, someone who was very deranged. >> paul manafort and rick gates back in court this morning the bond hearing to determine if the two will have to remain under house arrest they are accused of laundering the profits of foreign consulting work. both have pled not guilty. and 400 migrants cheered as they reached port in southern italy. they were rescued off the coast of tripoli over the last few days rescuers say they were in relatively good health that's the news update at this hour back downtown to "squawk alley." carl, back to you. >> sue, thanks so much
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let's get to seema mody and get a european close here. >> european stocks are off to a slow start for the week. banks among the biggest decliners, especially in france. here's why socgen extending losses, which included a 15% slump at its investment banking arm as you can see, jpmorgan, morgan stanley, and deutsche bank among the firms lowering targets today. bnp, credit agricole also down merger talks between t-mobile u.s. unit and sprint collapsed over the weekend you can see the stock took a big fall here, down 3% in europe on the economic front, euro zone composite pmi revised upward in 56 flat, that's down from 56.7 in september, but it still indicates solid growth that's well above the 50 mark, which operates expansion from
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contraction. mean time, accor hotels off the lows of the session. the declines came after the company's third biggest shareholder was arrested as part of what saudi arabia is calling a corruption crackdown keep in mind prince's kingdom holding company has extensive investments in hotel properties across europe, including london savoy, raffles, and moven pick and we finish with a turkish lira rising against the u.s. dollar the u.s. embassy in ankara, turkey, announcing it has resumed visa processing for turkish citizens on a limited basis. according to reuters, a source saying his country might reciprocate as a result. we're also expecting the prime minister of turkey to make a visit to the united states this week back to you. >> seema mody back at hq, thanks so much. tech sector continues its strong rally with the nasdaq hitting another record high. of course, broadcom announced
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that giant bid for qualcomm and what would be the biggest tech deal ever. joined by morris mark, ceo at mark asset management, which has a stake in qualcomm. >> thanks, carl, appreciate it >> do you believe they can back this luster up >> i think it's a great idea i think it makes a ton of sense. i think qualcomm has been in a state of denial for a long time. we have a small rooting interest in broadcom, but we're really impressed with how the management's been running the company and i think this makes all the sense in the world >> does it say more about broadcom's ambitions or qualcomm's inability to pivot? >> a little bit of both. the phone has changed. 75% of qualcomm's income is royalty income predicated on roughly a 4%, 3%, 5% royalty when you had a $2 phone and all it was was a phone, makes sense. it's a computer now and it's got so much more in it and i think they have to adjust their ip and
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royalty model for that i think apple is trying to educate them i'm sure samsung feels the same way. i think that broadcom gets it, and i don't think qualcomm has >> apple is still managing to charge more for its intellectual property, as we see in the iphone x, while telling qualcomm's we don't want you to do that, so my question is, are we at a period where we were with enterprise software when oracle started rolling up a bunch of application companies is that your argument? and if so, what other companies should investors be looking at as being part of this? >> i think it's simpler than that apple is a consumer franchise, and it can charge whatever people are willing to pay, because that's us, and there's a tremendous amount of value in the product. i don't have to buy a camera or as many toys for my grandchildren. it's all here. i think that qualcomm's case
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it's a negotiated royalty based on what courts think the ip is worth. very different either way i look at semiconductors, i think the opportunity in semiconductors is great. you have to have something that's propriety, be innovative and keep going companies like nvidia or intel, which exhibit that, or for that matter broadcom, great opportunity. >> yet that's been the story for a long time now. they've been darlings of the market the stocks have run up so far, so fast, and some are wondering if we're nearing a cycle top what's this deal say about that? >> i think that we're in the middle of a -- an accelerating cycle, digital disruption which is going through the world, and the companies that have products, components, chips, and facilitate that have got a great opportunity. whether it's in the price or not, i think you've got to look at each one. we like nvidia we do not think it's too expensive, because we think it
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has a tremendous franchise in gaming, artificial intelligence, and autonomous devices, and those are the places you want to be but it depends on the company. >> so are you mentally prepared for a -- an m & a super cycle in chips specifically >> i don't know about chips specifically i think that we have an environment where there's a lot of change. there's a lot of value in certain businesses that is not being maximized, and particularly if we get tax reform or when we know that we won't get it, one way or another, business will know what the rules are. there's an awful lot of companies, tech companies, that have a lot of cash and there's great opportunity to build value. >> i was going to ask you whether or not this past weekend the roll out of the bill, the mark up this week has pushed you to buy or sell either way or expect one thing or the other. >> we try to be prepared, we don't try to predict we want to be in places that we think will do well, but i think in a situation like this we'd
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rather know what the rules are, then we can act. >> i want to go back to qualcomm quickly. qualcomm owns the smartphone business from everybody that's not apple. shared gains in china and southeast asia, in india, this latest quota with snap dragon. do you think that broadcom's leadership is going to be able to extend that when they haven't necessarily shown a capability in that application process or business >> well, here's the thing. qualcomm gets 25% of its earnings from the manufacturing sale of the chips. it gets 75% of its earnings from licensing its ip so i think that's the issue. the issue is, i think broadcom has a lot of ip and gets paid for it, and it has the same customers. i think they believe they can work out a better deal perhaps negotiate something. >> speaking of knowing the rules of the road, you're still an investor in twitter, right >> no, we're not we've been in and out of that stock, but right now we do not
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own it >> i wanted your thoughts maybe in general then on the saudi crackdown that we saw this weekend, prince alwaleed bin talal is an investor in twitter and global ramifications for investors. >> i don't want to get into foreign policy i think twitter is very well run, we're intrigued by it, but it's not inexpensive yet we want to see advertising turn and whether they can increase the dau growth, and i want to stay away from the rest of that topic. >> what about snap >> i think snap's got some interesting ip also, but once again, they haven't developed a good advertising model i think when guys get out of business school or get out of tech school, they want to go to work for facebook. they want to go to work for alphabet i don't know whether snap is able to attract the kind of talent, the deft of talent, you know, the companies that i think are going to do well are the ones attracting a lot of talent, engineering talent and business talent that's what we're going to look
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to but i think we continue to look at these things, because we try to keep an open mind >> snap reports tomorrow night twitter upgraded today, not helping the shares much many morning. morris, thanks, see you next time >> sure, thanks a lot. straight ahead, a closer look at microsoft's newest console, the xbox one x and the company's 4k gaming bet. first, rick santelli, what are you going to have for us today >> you know, i continue to watch all the interest rates along the yield curve, thinking that we'll get another tightening in december there's going to be a pile-up in the middle of the curve, and ouaf'rgog tk e intoal abt ter the break. ♪
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feel that? that's the beat of global markets, the rhythm of the world. but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it.
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nasdaq. rewrite tomorrow.
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i'm scott walker, coming up today on "halftime report," my interview with bill ackman as he makes a pitch to adp shareholders less than 24 hours before the bitterly contested proxy vote also making a change in his long held position on herbalife and the call on intel that will make investors take a long, hard look at that stock "halftime report" noon eastern carl, we will see you in just about 15 minutes >> scott walker, thanks a lot. we'll go to the cme right now and get the santelli exchange with rick good morning, rick >> good morning, thank you, carl you know, at the end of 2008, i believe it was the tenth rate cut that put us at that zero to 25 we used to have one rate, now we have a range since then, of course, decembers
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are wild, so it was december of '08 the cut, december of '15 we moved from 25 to 50. december of '16, 50 to 75. march and june moves us to 1 to 125, so the issue is, what's going to happen to the curve as i'm speaking, i want you to look at a chart. this chart begins in the beginning of 2015 for two-year note yields. many traders on this floor have really jumped on this trade and it's really accelerated with respect to the flattening. and many traders have an edge. they look to what's going on around the globe, particularly japan and europe, and they see more downward pressure on their structured rates in the long run, which aids and abets the flattening yield curve, but let's consider december is on the table, very little doubt on this trading floor we're going to get another tightening to put us 125 to 150 in december, so will that invert the curve? it's not an easy question. as you look at the two-year note
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in the beginning of '15, i'm trying to gauge. we started to anticipate the market around august, september, october, what was going on, but to me if i had to pick a level that seemed comfortable for the two-year note at the time when there was still some doubt, it was around 70 basis points and in 70 basis points is where it was plain now we're at 162 granted, we've had four tightenings, 100 basis points, that makes sense so if you add another 25 in, that's going to make everything pretty close, especially when you consider we're just under 2% in the five year, the seven year is at 217, tens in the 230s. the long end of the market, if you look at january of '15, we're still toying with 2% granted, we had a lot of volatility, toying with 2% so the short of this is, is that many traders are going to continue to hold it. they do think an inversion is possible is an inversion when short rates
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like a two year may be higher than five-year rates, seven-year rates, but all of this is going to be flat maybe at that point many traders think 30 basis points will separate everything on the curve other than the 30 year i'm not sure what it means, but i'll tell you this, every trader on this floor seems to continue to play for it, so any steepening will be met by an aggressive trade to the upside sara, back to you. >> good color from the floor on the stubbornly low bond yields rick, thanks still to come, microsoft making a big bet on gaming with its newest console, the xbox one x. a live look right he oren post 9 when "squawk alley" returns.
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microsoft's newest gaming could be sell, the xbox 1x hitting store shelves at midnight the company is betting on the future of native 4k gaming joining us now phil spencer, microsoft executive vice president of gaming. phil, great to have you here you were practically born at microsoft. i think your 30-year anniversary at the company is coming up next year. >> yeah. >> so tell me about the conversation that you had where you were made an executive vice president of gaming. why did that happen and why is it important to the future of microsoft? >> the gaming industry is growing across over geo and every demographic. microsoft has unique strengths that really play to where we see gaming going
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you see the digital transformation happening in so many industries. it's happening in gaming we obviously have xbox, azure, microsoft research we have products like xbox live and minecraft, so it's really just a time to go after a market that's growing like crazy, and microsoft has the right to be there. >> where does the 1x fit into the business strategy? because it used to be you had the console cycles, maybe four or five years long. >> yes you >> came out with the thing, subsidized it had it and eventually made the money back you're coming out with different versions of the console now where every year or two there's a different version in the current cycle. why is that and why is it good for business >> the business model hasn't changed. still a sockets and building and engagement and monetization on the sockets. consoles are critically important. the xbox 1x, 4k, most powerful gaming cancel ever made. people are playing on phone, on pc, so our focus is how do we reach gamers wherever they are with the right content and the right service? you know, and it's been a great
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journey over the last -- lay three and a half years in this role and seeing where gaming is going. console is critical, but all devices are critical. >> is it analogous to desktop phone? i mean, what share of mind does the console still get given that the phone is becoming a source of game? >> phone is critically important. we have a lot of resources focused on how to drive engagement on phone and products and services the way to think about console it's your highest value gamer, the person who plays and buys the most, but the thing that's also important is that customer is actually your most valuable customer across every device people don't play by device, just like the way you watch tv watch tv all across all your devices and people play across dy vices so we'll focus on windows customers and console customers and pc customers and we see customers across all these devices. >> what about the oculues 3-d
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and how do you expect to get competitors from that? >> we just launched mixed reality headsets with our partners and windows for the longest time has been a very creative open platform for people doing the creations i think we're on the long road in terms of building the right experiences for people that's where we are in vr and we're investing in that level. >> it's interesting that you talk about the console as sort of the premium platform. >> yeah. >> for gamers. >> the xbox 1x is going to be the premium tier of that premium platform what is that going to do for your whole ecosystem how do you expect the target customer for this console which you say isn't for everybody to respond? what else are they going to buy? >> two consoles in markets the xbox 1s and 1x plays all the same game that this console plays it's at a lower price point. more of a family somebody just getting into gaming this is for the person who is, you know, the discerning connoisseur of gaming, has a 4k
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television and wants to see the best visuals in what they are building it's about giving customers choice, playing on pc, phone, any other platform. >> how much stuff is the customer going to buy when they buy this >> this device is targeted to the customer who buys and plays the most kind of a socket and engagement business you want the most valuable sockets, and that's what gamers who are looking at xbox 1x are an incredible group. >> seems like they will probably buy a lot of stuff even though you don't want to put a specific prediction out there phil spencer, thanks for joining us. >> appreciate it. >> some details on jack mah's new venture in a moment. feel t? that's the beat of global markets, the rhythm of the world. but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow.
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a few weeks ago we watched as al bapa chairman jack mah dressed up as michael jackson for the company's annual birthday celebration now he's not just walking the walk, he's talking the tack, going inside the recording studio with chinese singer fae wong ♪ >> i don't know how much has
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been retouched audio-wise, but he sounds good sounds very good. >> jack mah is so smart with his cultural references. here we have jack mah billionaire every map, and if i may take a stretch here, as we're seeing the shake-up in saudi arabia and a lot of people are wondering how the chinese government is going to treat this new wave of entrepreneur billion airs like jack mah, if there's resentment perhaps it sure helps when you've got him willing to make money of himself, put himself out there and connect to things that everyday people like i have to imagine you see this, jack mah, how bad can we be? i'm sure he's rich how bad we all want to be here. >> i'm not sure how strategic he is. >> you heard him here at post nine. >> he knows how to work an audience and bring students along. started as a teacher massa with his comments, some
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directed directly at bezos and then mah, and there are more billion airs in asia than the united states as of last week. >> plus, who doesn't love chinese pop music? >> i don't but it's mainly because i'm ignorant of it have sara give you one of his play lists. >> we'll see how many of his albums sell on singles day. >> let's get to wapner and "the half." >> and welcome to "the halftime report." i'm scott wapner we begin with a an exclusive interview, billackman and the final fight over adp the proxy vote less than 24 hours away and the company's future hanging in the balance. the stakes also high for mr. ackman himself after two tough years and questions about his own future as an activist investor. bill ackman back with us here today in studio. welcome back. >> thank you >> let's start. this is the final push how are you feeling going into this vote? >> great. >> yeah? >> even though david faber earlier reported that according


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