tv Squawk Alley CNBC June 12, 2019 11:00am-12:00pm EDT
♪ ♪ ♪ ♪ ♪ welcome to "squawk alley," i'm carl quintanilla, here with john ford at codecon, joining us morgan brennan, mark santelli in new york and the street is watching closely the latest tech ipo cloud strike, indicate agriculturally of more than 80% above the price range. joining news scottsdale, recode's co-founder and cnbc
contributor, kara swisher, awith casey newton of the verge. we're going to begin with an apology by several big tech ceos i'm sorry and we can do better take a listen. >> instant feedback, is, is probably confusing to healthy conversations. >> i've been out publicly. setting aspirational goals for the organization and trying to create more concrete accountability in the organization for moving faster i think that we've, we've made progress, but it's not as much as i'd like us to make >> it's hard to ask for accountability from a corporate structure in which ultimately their loilds lie with the shareholders and employees, if someone is going to regulate speech on the internet it should be the government. >> one of the things i'm most excited about in our efforts is to switch to proactive enforcement of for too long we
relied on people reporting things to us >> i think the mistake that we made was more about, not focusing enough on the unintended negative consequences of connecting so many people such a large scale in the very early years. >> thought it was important to be up front about that and to say that was not our intention and we are really sorry about that >> we talked about this yesterday. it's striking to hear it all assembled in one piece of sound. >> very, very sorry. so sorry >> did you anticipate this being a theme? is it a theme? >> well you know what are they going to say we're trying to do better. we understand the problem? you know, it started last year by mark zuckerberg and sheryl sandberg and facebook. but i think it's still the same idea of that they're trying to do better. we're working on it, we acknowledge the problem, we're so sorry and by the way, we're working on it. as opposed to anything else. >> casey, the way that they're working on it, arguably is by continuing to be big another theme is, we need this
size, we need the expertise, the raw people power that we can bring to bear, in order to solve these problems and in a way, it's an ingenious argument, both the problem itself and efforts to break it up >> if you do that, the problem gets worse >> frankly i think it's a distraction from the fact that it's the size of the companies that causes so many problems or at least why the problem seems so consequential the fact that they're so big that things seem to be breaking all around them before they can fix them break them up into intensives. one yesterday was on china, venture capital. one of the arguments that came out of that session was arguments to be big helps. if we're going to economic war with china the chinese companies argue it over there and the big tech companies argue it over here we're. >> the question is, what's the war? are we going to war over facial recognition, does china really have a chance of running the
western internet i don't think so sit what is the war? they just put it out there as, a little bit of fearmongering. we have to keep up from an innovative point of view most of the innovations come from small companies, they don't come from large companies and the point that scott galloway made yesterday, the pivot podcast, a professor at nyu, for a lot of these violations, most ceos get fired that was an interesting point he was making >> it seems like if scale is a necessary part of the st. louis, we're going to head to head with china -- we're doomed. because china does big that's like what they do the state planning, the companies can be huge, if the government wants them to in a way that we can't necessarily do here. is that framing the argument the wrong way to frame it around scale? >> i think it's a slippery slope. the only way we can compete with
china is if we also have an an authoritarian regime >> the argument yesterday was, if the strength of data, we're all about data now, is the creation of more data, then china wins because they create -- >> what's up with data it depends on what the goals are. what it is is to put up these headlines versus what's the realities of it. mostly invasion has come from these internet companies which were scrappy, which were interesting. the st. pauler they are in a lot of ways, how more quickly they can move the smaller they are >> is i want to know what the actual fight is. what is, what is the goal. what is the fight. what are we going for? >> one of the big changes i've seen over the past couple of years is the conversation over chinese innovation we chat has freaked a lot of people out culturally there's something about china, technology, they cath innovate, they're just copying.
now a lot of u.s. companies are copying china. >> so what >> that's how innovation works. >> exactly, but the conversation about china, which i think was biassed in a weird way before has definitely shifted i'm not sure we've noted that as firmly as we should. this is no longer china that just copies. that's not really an argument any more >> it's a chinese economy, it's helped by the government and our government doesn't do that the ceo of delta talked about that someone was asking why the seats weren't better he was talking about middle eastern airlines and he said if the government wants to give me tens of billions of dollars, i would be happy to spend them on beautiful sites, but we like to compete. this is about capitalism if you want a surveillance economy, sure, they're going to win. if you want something else i'm not so sure. >> i think that's exactly right. one thing i would say where we are seeing something interesting out of china is the tick tock.
the fastest growing social network is a chinese company tick tock about tiananmen square that's an interesting argument >> net bearish things to say about virtual reality and even ai, we're talking a lot this morning about this deep fake post of mark zuckerberg. and what that portends for video editing and the future and trying to fool people who believe they're seeing a face that's moving and are saying what he's saying >> i'm right now looking at carl quintanilla with a picture of neon on his chest. which i know is fake this is what's coming. all this stuff is coming and it's been widely available available in a crude form and now it's going to be in ways very hard to track deep fakes is going to be a big issue going forward around propaganda advantage, china, because it's propaganda we'll have to contend with that and these companies will have to contend with that. >> if you look the at the facebook video, people haven't
seen it yet, facebook said we're not taking down the post does their attitude change when they're the snargt. >> they're going 0 the same approach they'll take with the pelosi video they'll going to fact-check it and once they know it's fake, they're going to radically change the distribution. >> they can't take it down they didn't take pelosi down >> is there no other choice? because with the pelosi video, i found it odd they said they framed it in a certain way. then i went back and looked at the original video i couldn't find the context, it seems depending on what view you have on this content, maybe there's context there, maybe it's not it seems very early. it's not like this is a solved issue for them >> i think the labelling we both talked about this. the labelling on it was inadequate it's very hard as it it rate its around the service
>> once we start to get into questions of who is going to designate which is what i think it's going to be tricky. >> and when you let anybody do anything, they will do anything. they built it this way it's working this way and it's working perfectly and maybe not so great for society that's what it is. >> 30,000 feet lessons from this year's conference versus prior years? what's different this year >> regulation, talking a lot about regulation and breaking up and whether these companies should be broken up i think everybody did address that issue and whether it's good for the economy. whether it's not good. i think that's the discussion is clearly what are we going to do to put guardrails around tech companies? what does that look like we've been talking about that a lot as you know. i think we're really there especially with the government and this week alone, trump talked about it, doj, megan
delrahime, about the at&t thing last year, talked about it >> the other shift this week, john and casey, if we're really there as kara says, do investors have it right? that a break-up is bad because some analysts are now starting to take pen to the envelope and saying maybe it's actually worth more as a sum of the parts. >> when you look at the regulatory ricks they're facing, the fines they'll be paying off and the massive amount of money they're spending on the content iteration. i do think some companies would be more profitable and nimble if they were smaller. >> the argument i would make, what i think is the right thing to do, if facebook and google have these amazing content moderation tools that have so effectively internally you break them up and the smaller companies got to buy those tools, right it becomes revenue. >> people think there's a lot of value. you know scott talked about it yesterday. but there's a lot of value in breaking these companies up. it was interesting that and
jassey from amazon said i don't want to be ceo susan wajisky when asked about youtube, said i don't know nobody wants to be the ceo the question is will there be a separate instagram, a separate whatsapp a separate youtube a separate aws you can go through all the companies. >> you agree with galloway yesterday when he said people would want to buy instagram. >> i think initially he's made the case that if you start to really as you said, get your pencil out. it could be an interesting thing if instagram was made to be friends. one of the things that made him laugh is he didn't have the autonomy that he wanted. it's rolled into the big blue app. >> facebook is the future of facebook facebook proper is kind of plateauing in some ways, they see tons and tons of growth in instagram. they're the most strategic investment they've ever made there's a ton of value in that thing. someone else would happily find
that value. >> code is always about what's next this year mobility got a nice position in the spotlight. we had a little fun at the mobility lot at code yesterday you got to watch this. >> ready, one, two, three. >> chase >> whoa, whoa. this is reg. >> i'm giving it all she's got. >> come on, you wimps. >> kara's got such low resistance >> oh, john. slow i'm like dan caa, they're like, i don't even know what.ica, the don't even know what they snooze, they lose >> okay, lead foot so maybe this is not the fastest. are you going to buy me one? >> ahh, there we go. >> 105 degrees yesterday >> is that what made you so slow >> lightning the queen >> what's the deal, guys >> we didn't show the other video where we were on the
three-wheeled. i beat you on that one >> yes, you did. you cheated, probably. >> scooters, trikes, how much of this do you think is going to be real >> very real i think the idea of alternative ways to get around city. the three-wheeled trike. you see all the different options. people want different options if they're shopping the 3-year-old trike versus a scooter versus a bigger thing and there was teslas there obviously the jet pack which casey going to use to get to work you looked great. >> that was not me actually flying, full disclosure. that's a deep fake. >> but i think these alternatives and cities as they get bigger, everybody is moving to cities. all the demographic trends show they've got to show alternative transportation methods of all kinds. there was a cool delivery service that went to your house. it was fantastic so all of these requested -- again, innovation of small companies, figuring out where the next thing is going. >> i would say that like, mobility is also a story about politics and regulation. every city around the country
that's had to you know integrate these things into civic life has found they do pose some challenges it will be interesting to see how game cities are to have scooters all over the streets. >> if they figure out a way to organize it with the three-wheeled ones, they have to be more organized. they have to be in a place make reservations. we asked one of them if uber becomes a reservation system for all of these things, it's very powerful idea around uber. maybe it has a real place to be the reservation system of all of these. >> do you think looking at the regulation in a couple years, if municipalities are going to be more nimble than congress is >> of course, of course. and they'll copy each other. something that works in boston or whatever city or berlin, whatever, airbnb, first it's chaos and then it works, i guess. >> we've seen cities, be fairly nimble different cities are setting different policies there's a lot of lab stories of
democracy happening right now. >> congratulations >> thank you. >> and casey was great, had a great time >> scooter queen casey and kara, back to you. >> morgan, back to you. >> you guys are talking about scooters and trikes and maybe potentially electric motorcycles, another code conference attendee, harley-davidson is focused on as well the street closely watching the latest tech unicorn making its debut, cybersecurity firm crowd strike ticker symbol, crwd. the ceo will join us later but first the bertha coombs is at the nasdaq with the latest. >> the stock priced at $34 a share. above the range of 28 -30. right now it's looking to indicate its open above $63 a share. goldman sachs is one of lead underwriters here.
they're looking to match about 2 million shares, it looks like we're getting close there. we'll see when things settle down the company is known for the falcon-based security system and came to fame for a lot ofpeopl when it investigated the 2016 dnc system hack. they're not profitable they filed and said they lost $140 million last year they're a two-time cnbc disruptor. making the list last year most recently again, we expect this to be opening any time now and that indication well above where they priced at $34 a share. morgan >> going to be watched very closely. bertha coombs, strong top-line growth strong retention numbers the ceo of crowdstrike speaking of big stock move, how about 50% upside for alphabet. that's how much the stock could rise if the feds break up the
and terry haines, good morning to you wife seen this decon glomer ration taking place. but not really in tech why do you think more value could be potentially realized if alphabet were to be broken up? >> so i think just as your prior panel, you're just airing said, the bigger these companies are, the bigger the fines get the eu fines google, $5 billion a year because they can. these companies were broken up, these government agency was not feel they had the right to fine these companies billions of dollars. secondly, building on the prior panel you just aired, like the woman that runs youtube doesn't want to be a ceo and the map that runs aws at amazon doesn't want to be a ceo the reason is, people like me yell at them when they don't have returns on capital and
investors mark their stock down. we would much rather have that kind of accountability for smaller pieces of google rather than a conglomeration where everyone hides behind the search engine's wonderful 90% profit margins for their funding when they lose money and they don't perform like business ceos should perform >> we had the comments from the justice department's antitrust chief. he laid out some possible arguments for why investigations and antitrust scrutiny for some of the big tech companies could make sense do you think do you think it materializes >> well think, think what happens, at root, is nothing for a very long time market time and political time are very different times and you're right at the beginning of a google probe the department of justice that i don't respect really gets into gear until after the 2020 presidential election. takes quite a while to do that with the exception -- and
congress is not going to push a probe. i think probably three-quarters of the congress is not, is not inclined to to go break up any of the large companies what they want a regulatory solutions, which probably include fines. the only thing that's going to come about in the short-term, the medium term, really is the ftc facebook revision of its consent decree, that's been on the cards for year now, anyway pretty much everybody knows about that so you know i don't think you're going to get government pressure on this in the short-term, fundamentally. >> terry, just to play flip side to that, i stanley cup why you don't expect to see government pressure in the short-term if you do see any other kinds of malfeasance, misinformation, breaches around data, privacy, et cetera, coming in that 2020 election, doesn't that in turn increase the risk that the skutny intensifies longer-term >> sure to some extent i don't mean to suggest that happy days are here again for
the tech companies but put it in context, it's been a generation since, since the tech industry has had any serious washington scrutiny. they're going 0 get some but i think that's, you know from a washington perspective overall, that's going to be a, a small incremental negative compared to the bigger negatives that going to come out from continued u.s./china trade tensions and probably a long government shutdown this fall. you know, but yeah, you're going to get a little bit of spark here and there whether it be google or some other company. >> laura, as work like yours highlighting the sum of the parts value of an alphabet and others talking about facebook in a similar vein saying look if you broke it up it would just be worth more to investors. for other companies that would prompt an activist campaign or some other institutional investor saying break it up. one, you had founders in control with the companies that in the dual-share class but do you think they have to
make two counterarguments at the same time, these companies one, we work better together and two, together we don't have magical scale that makes us anti-competitive >> well i think the piece that the prior panel was missing, in that we need to add here is the consumer the consumer is deciding to use google because it's ai data engines are better when you enter a search you can break it up, especially alphabet has a lot of hobbies that have nothing to do with search at the end of the day, no matter how small search is even if it's a single piece, and we think it's about $600 out of a $1,000 per-share alphabet value i bet everybody keeps using that search engine. it's not connected to youtube or not connected to weibo and not connected to cloud at the end of the day. don't forget that the consumer is paying nothing and he's getting better data out of the google search engine because it has more searches. so that's a barely, you can't
break up that piece of the company and that really is the source of its monopoly >> is core google worth less if google can't privilege its own search results over third parties? >> is core google worth less -- >> if it can't put movie listings from yelp ahead of those from fandango? >> i'm going say no. at the margin those things generate little pennies, but if you break up this thing it's going to be worth 50% move and google is a clever boy if they had fewer play search engines, they'll figure out to replace that money with pricing to everyone else so i don't think it's worth less. >> thank you both for joining us today. laura martin and terry haines. shares of tesla rising after elon musk predicted a coming record quarter for the company phil lebeau is in chp with more on what musk had to say.
>> let's give you an update on a couple of important products for tesla. let's start with the model y, elon musk said when that production begins next year they expect to have full volume production, mass production by the end of next year and then with regard to the giga factory. they're building one also in china. it brings up the question what about the supply of batteries? can they meet increased demand out there? elon musk said they may even start mining their own materials, getting into the mining business in order to insure battery supply. and with regard to q2, production and deliveries, here's what elon musk had to say. >> sales are, have far exceeded production and production has been pretty good so we're actually doing well and we have a decent shot at a record quarter on every level it's going to be very close. we've got a shot at a record
quarter. >> the key product to look at. model 3, they fell off dramatically in the second quarter. 74,000 vehicles being delivered. we'll get the numbers in the first couple of days for july. as you take a look at share force tess la, you should keep in mind. this is a company that said that perhaps late this summer they could be showing us the tesla pickup truck that's one that people will be keyed in on to see what it looks like and what elon musk really believe these can do when it comes to selling pickups guys, back to you. >> we're waiting to hear more details about this possible insurance offering which could be capital intensive, depending on how they structure that phil lebeau, thank you >> let's send it back down to scotsdale, arizona to john to tell us what else is coming up on squawk alley. >> still to come on "squawk alley," we're waiting the first trade on crowd strike which is
attention from the investor community. strong top-line growth strong retention rates so far. but still, not profitable. we're going to be having the ceo and co-founder of crowdstrike on "squawk alley" in a short while. but -- >> it hits a lot of the magic words that investors love right now. so cloud, security, ai, machine learning, subscriptions, enterprise software. all of that in vogue. >> they've been involved in quite a number of high-profile hacks and discovering who was behind those a unicorn coming into this a strong start in the first moments of trade let's send it to sue herera for a news update. >> here's what's happening at this hour. japan's prime minister shinzo abe arriving in tehran today, with the hope of easing the rising tensions between iran and the u.s. he is the first japanese prime minister to visit iran since the 1979 islamic revolution. saudi arabia is reporting yemen's iranian-backed houthi
rebels is responsible for attacking one of the wingdom's airport. injuring 23 people saudi arabia has been at work against those rebels since 2015. florida lowering flags to half-staff and asking residents to pause to remember the victims of the pulse nightclub shooting. it's the three-year anniversary of that rampage which left 49 people dead at a gay nightclub in orlando the gunman, who had pledged allegiance to the islamic state, was killed after a stand-off by s.w.a.t. team members. and take a lookat this video, a driver blaming an allergy attack for crashing his car in tennessee street video shows the car flipping over before skidding down the road. and eventually bursting into flames the driver got out of the car. he is apparently doing just fine and he's vi very lucky that's the news update i'll send it back downtown to you. mike >> sue, thank you very much.
meantime major indices there largely flat on the day, the dow down 34 points, still having their best month since january, breaking multi-day win streaks, a breakdown and more from code is next. man: stand up if you are a first generation college student. stand up if you're a mother. if you are actively deployed, a veteran,
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alley," we're in scottsdale, got exclusive coverage from the code conference the ceo of crowdstrike going to join us in a few minutes it just opened for trade moments ago. up 90% over where it priced. meantime antitrust and valuation as couple of big themes here at code goldman sachs ceo david solomon sat down yesterday with carl and addressed those valuations in tech and whether investors should be wary take a listen. i don't think we're looking at equity market valuations for tech that look like what we saw in 1999, 2000, 2001. i think because of the massive amount of monetary policy around the world and the interest rates are zero or less than zero, is people have been looking aggressively, or moving up the risk curve and looking for risk assets and people have been willing to pay a lot for growth in that context i think there's a number of technology
companies, where people are really paying a lot for the future prospects of some of these businesses >> joining us to discuss, ceo of all turtles. former evernote, always the evernote co-founder and former ceo, phil libben great to have you here we got crowdstrike at least in this initial trade up 90% over where it priced. we have salesforce, looking to take out tableau for 50% of where it was trading just before then what does that say about valuations and particularly, in tech, that's connected to the cloud? >> i mean it says that it's hard to value tech companies, especially around ipo. but the good news is that at least these companies are going public we had a glut of tech ipos for years and all of these companies are coming to market which means at the very least it's a rock tumbler, but they'll
shake theirselves out. we can kpe to see some sanity in the valuations both up or down when the companies are getting bigger and bigger and more powerful and staying private then it's crazy valuations and no transparency. >> when we talked last week google cloud had just taken out looker for just over $2 billion. yeah, that used to be the range where companies would be going private and now it's an attractive take-out range. now tableau also i mean you've got just a lot of m&a interest overall it seems, a lot of interest in capturing value. larger companies have a big war chest. they have a lot of cash that they can use to acquire companies and going public isn't particularly attractive a lot of the times to early founders and ceos, because of it being public forces you to operate on the public market time scales. which for a tech company is totally kpatable with how to make decisions
a tech company has to be planning things years out and markets no longer care about years out. they're rewarding or pushing companies based on what they're doing this minute this quarter if they're lucky it's that incompassability that forces a lot of executives, founders, to say we got into this to build this product to have an inpact. does it make sense for us to put ourselves under the pressures of this completely incompatible public market time scale if they have a good way to get out of that through an acquisition and it so happens that the money transition is pretty good? why not take it. >> we've been talking about the apology tour that consumer-facing technology companies are making repeatly. is there a split among investors like i'd rather have a company that really caters b to b versus consumer >> i don't think that's the split. i think the split is between
direct and indirect avenue i think the reason for the apology tour is a lot of the big consumer-facing tech companies, facebook, google, youtube. the ones making allot of apologies. their problem is that the fundamental business model is not doing what the customers want, it's doing something else. they have a misalignment between what the values are and the change they want to make in the world and how they make money. which isn't to say that they make money in an unvirtuous way, but they make money in something not directed to their direct product. and the disconnect creates problems and you have to apologize for them in most centralized products have a much more direct business model. they make money when companies pay to use their products. i think you're seeing more regulatory risks, a lot more risks of break-up. a lot more risk of pr catastrophes in companies that have fundamentally indirect revenue models
>> does this regulatory pressure get us more ipos one could argue that there's pressure on google, maybe they can't buy looker if there's pressure on salesforce because of their sizoring eventually, maybe they can't take out tableau does it start to have an impact on what we're seeing go public versus m&a >> i think ipos and m&a will rise and fall at the same time those two things are very linked it has to do with how optimistic or pessimistic people are are about tech and the fundamental business models. if they're optimistic, you'll see more ipos. and more early stage venture capital investments if they're pessimistic, you won't see either right now i think you're seeing high m&a and high ipo because people are in a generally good mood about tech's ability to
respond if we do see a lot of significant regulation, you might have a lower rate, in both m&a activity and ipo as companies need to deal with figuring out okay how are they going to respond but that's like tail wagging the dog. we shouldn't not regulate or not consider breaking up companies because of what it might do for m&a or ipos, we should do the fundamental and important things for society and figure the rest of it out. >> let me get to julia boorstin speaking of a company that's in the spotlight. facebook >> the "wall street journal" reporting that facebook uncovered emails that appear to show that mark zuckerberg, his connection appear to show he was aware of potentially problematic privacy practices at the company. now we reached out to facebook for comment. we is not heard back yet you see facebook shares now trade downing over 2.5%. but this report which is rather lengthy, indicates that the
company has unearthed emails in the process of responding to this federal privacy investigation. and that they have raised concerns about whether these emails would be harmful to facebook, at least from a pr standpoint if the emails were to become public. this is of course, in the midst of a number of investigations into facebook, by the ftc, both for their potential violations of their consent decree with the ftc and the potential for the ftc to be investigating facebook from an antitrust perspective. this really is right now centering on the cambridge an littica scandal and how it sparked broader concern about facebook's privacy practices facebook is in the process of negotiating with the ftc and is expected to settle between $3 billion and $5 billion and "the wall street journal" investigation points to the concerns that these emails would indicate that zuckerberg was not
as oblivious as to what was going object as n as he may have indicated before >> on the dow jones industrial average we've got morgan brennan and mike santelli, mike, we know the settlement and the pursuit of it has been fraught with the ftc and facebook and a lot of guests have come on the show and said what's going to matter is evidence for lack of a better word that shows up versus, it leaks or discovery, this is a piece of that. >> it's a piece of that, carl. i think it shows to some degree how fragile the conviction is that facebook is past these issues or at least has them walled off the stock has not been able to perform and embrace this idea that they have a handle on these things so the ongoing-ness of these issues and the fact that this gives perfectly good clearance for i guess the pressure to remain on, pressing forward, tougher settlements or practices
down the road. and of course, who knows, pressure on mark zuckerberg himself and the job and i think that's all feeding into what's already a vee ve am rehencive wall street when it comes to the business models. >> we're going it go back to julia boorstin for detail as well >> we have reached out to facebook for comment it's worth noting that facebook's response to "the wall street journal" quoted in the story. facebook saying its executives including mark strive to comply with all applicable law and at no point it did mark orny other facebook employee knowingly violate. and they say they've fully cooperated with the ftc's investigation and provided tens of thousands of documents. saying they're continuing to work with them to bring this matter to an appropriate resolution it's been expected that the fine and the settlement of between $3 billion and $5 billion would have been already been reached a lot of questions as to why
that hasn't yet happened but zuckerberg has said he wished he had focused on user privacy and made that his primary focus earlier. but the question now is were some of these internal emails show more of a gray area >> yeah, julia, thanks phil now we're talking about mark zuckerberg's emails it seems like whenever anybody is under pressure in washington, email is at the center of it what does this show about the level of pressure and scrutiny that companies, the size of facebook will continue to be under. >> this is a perfect example of what i was say before the news broke. this is the mysterious and indirect revenue model at work when you have companies like facebook that make money in a way that's disconnected from the core product experience, it's a cascade of problems. regulators don't understand the biz business model so it's hard to regulate there's frustration. so that when things start to turn badly there's little sympathy, little
understanding. it's hard to know what exactly prioritizing an ftc investigation would mean for a company like that. they've already eroded a lot of trust. i don't know at all question mark zuckerberg or sheryl sandberg's motivation. i think they're both as far as i know excellent, upstanding people that want the right thing. they're running a company whose revenue model makes it really tough to just do the correct thing and if you look at the four big tech companies, the two that have to wind up having to apologize the most it seems are face book and google the two with indirect revenue models and the two giant companies that don't have nearly the same problems are amazon and apple. people understand how amazon makes money. people understand how apple makes money. there's a lot more sympathy, a lot more clarity and it's important for these companies to do the right thing for their customers because their customers are what makes money >> and microsoft which arguably is bigger -- >> exactly arguably the fact that microsoft failed years ago historically in
making a big ad business or in search and really what they've done a great job at is doubling down on making products people want to buy. all of this, 2019 is the year where we should really try to return to simple, old-fashioned business models, makeny by selling stuff that people or companies want to buy. it takes care of so many problems >> facebook and google got awfully large. do you think the disconnect that you're talking about contributed to hypergrowth >> i think it did and i think it's a very interesting question about how they should be regulated. whether or not they should be broken up. a lot of conversation the past few weeks about that we need to be very intentionally when we're discussing these things, about what problems we're trying to solve. the fact that people are so fundamentally confused about thousand these companies make money makes these discussions harder people will lash out >> i don't think most people
know, i don't think i know but in the medium term i think what we need to do is, what investors should do is put their money into companies with understandable direct business models ask yourself, look at your portfolio, do i inherently understand how each of these companies makes money and is the way they make money, making a better product for the people who use the product? and i would steer toward the ones with very understandable business models. >> morgan and mike, this morning the point was made that we're in an atmosphere he argues of facebook regulatory if a teak and that's why the stock has been able to hang on mike, i wonder if you think 1%, less than 1% move ratifies that? >> yeah, it's certainly not all that dramatic. i think there's kind of a, you know, to the point of fatigue. it doesn't sound that different from what we've heard before in terms of the company and how it didn't exactly make a priority of the lot of the privacy concerns so yes, i do agree
all the faang stocks are 20% below their highs, by no means are they back where they were when everybody thought they were unstoppable. i do think you have to put it in context. >> carl, john, thank you for that discussion. and phil libben as well. we're going to set our sights on another tech name that's getting a lot of attention today, that's the cybersecurity firm crowdstrike, surging about 80% after its debut a few moments ago. up about 76% now start-up uses cloud technology to defect and thwart cybersecurity breaches and first identified the russian ties to the dnc breach during the 2016 presidential campaign. joining us now crowdstrike founder and ceo, george kurtz congratulations on the ipo >> thank you very much it's a pleasure to be here with you. >> company the ipo prized at $34 last night the stock surging 75% right now. do you think it was priced right?
>> we'll let the market dictate the pricing. i think what we're focused on is building long-term value for shareholders and making sure that our customers are protected. that's the way we built the business. >> so in terms of what crowdstrike does, first cloud fd point protection platform built to stop breaches what does that mean and how does it differentiate this company from what is really a growing list of other cyber cusecurity firms. >> what is fundamentally different is that we really built the first cloud platform for security when you think about workday and service now and salesforce, there hasn't been a foundational cloud platform for security and that was one of our goals when we started the company in 2011 this cloud platform has allowed us to stop breaches and to scale different modules that really hit a specific customer need and it's been well received by our customers. >> now, it's a subscription based product. to what degree is it just, i
guess, tapping into an existing set of tools that allows these companies and you to detect breaches or how much do you have to constantly either customize what you do or kind of forever revise and enhance these detection tools to stay ahead of these breach steps i guess i'm trying to get at, to what degree is this is just a plug into the network and it scales well or it's a constant spy vs. spy game >> it really runs on your end point or computer or server and w workload until the cloud and what we found in the past with traditional anti-virus is that signature base technologies were not capable of stopping breaches so a big part of our platform is actually collecting data at scale. we collect a trillion events per week we use that data to train our machine learning algorithms and we can identify attacks and breaches that have never been seen before at the speed of the network and as crowd sourcing aspect which is the crowd in crowdstrike, really has enabled
us to identify these attacks that are causing the most damage to large and small organizations around the globe and they just haven't been able to do that with traditional, i call, fossilized vendors that are on the -- in the market and this architecture is really changed the game for us. >> so, george, you're using a.i. for good, right? >> yes >> keeping companies safe and protecting them, securing parts of the internet. the flip side of that is when a.i. is used for devious purposes or negative purposes, deep fake being a great example. you have this mark zuckerberg video, this deep fake video that is circulating on facebook right now, for example how much of a threat is deep fake coming into the 2020 presidential elections and beyond how do you prevent it? how do you counter it? >> well, obviously, security is an evolving area adversaries continue to change their tactics and the good part about a.i. is that you can evolve it to identify these sort
of threats no matter if it's stealing intellectual property or credit card information or breaking in and destroying data on someone's computer so i think what's important to realize is that at cloud scale and the way we operate, we have the ability to take all this data, synthesize it and provide the best protection and prevention methodologies for our customers. >> i'm going to send it down to jon fortt, who i think has a question for you, george, as well >> hi. i'm curious about your sales and marketing costs, which are falling as a percentage of revenue but still considerable how do you see those costs either stabilizing or maybe even eventually going down as you grow crowdstrike >> well, one of the things that we're focused on is strong unit economics and 23 yif you look at euou growth rates we've been efficient in that area security in our particular area it's really a green field opportunity. there's a lot of frustration with the incumbent vendors so
our sales and marketing spin has really been focused on capturing market share and delivering our solution into geographies that, you know, we haven't been in or into verticals that we didn't have the penetration when we first started the company. so, we feel comfortable with the unit economics and we feel comfortable with the marketing spend given where we are as a company. >> what should we measure to understand how the crowd part of crowdstrike is getting more effective, that crowd sourcing how are you going to get that crowd bigger >> well, it's really all about the data, and you hear a lot about a.i. and a.i. is great but it has to be used in the right ways and it's not a panacea, so it's easy to come up with an algorithm but it's really hard to collect this data at scale and be able to train these a.i. algorithms and this is really one of the things that we spent a lot of time on is building a very scalable architecture to get this data in, we call it into our threat graph which is
one of the most advanced security databases around and it really allows us to get better efficacy and lower false positive rates in detecting these breaches so, in my view, it's all about the data and will continue to get more and more data it's that network effect and our threat graph gets smarter the more data we actually consume. >> george, i want to get your thoughts on the broader threat landscape right now. i know the company came out with a report earlier in the year that noted that there was increase in chinese hacking activity last year in the midst of u.s.-china trade tensions have you seen that continue? and also along those lines, does it make sense for the u.s. to be labeling huawei as a national security threat? >> well, when we look at the threats, whether it's a nation state, whether it's an e-crime group, obviously, the threats are evolving and they're rapid there's hundreds of thousands of new pieces of malware that come out every day and it's incumbent on companies to be able to protect themselves and it's just been an area that's been
underserved because most of the existing technologies have focused on stopping malware instead of stopping breaches which is, again, part of our core mission >> jon, i think you had another question as well, right? >> i do. thanks, morgan george, there's maybe no category of tech stocks that runs hot and cold like security stocks i'm wondering, i want your thoughts on that and what investors should really focus on metrics-wise to understand the health of the business versus the hype >> sure. if you look in the past, there's been a lot of point product companies that have come out and tried to solve a specific problem but if you just step back, the problem that most companies are trying to solve is not being breached and whether that's, you know, network technology or end point technology, at the end of the day, we see the tip of the breach being the end pointed that's where the data resides, the servers, the end points, the desktops and that's what we're protecting so, from that standpoint, if you look back in history, there
really hasn't been a foundational cloud company born from the ground up in the cloud. there's been no sales force of security and we think we've taken the right approach and created the right architecture to be that fourth pillar of cloud computing, and that's, you know, one of the areas that i think gets our customers most excited, is the ability to rapidly install our technology, just have it work and be able to scale with us and use different modules with that single agent architecture it's made our lives a lot easier and as i like to say, you know, it just works for them and that's what customers are looking for. >> george kurtz, cofounder, president, ceo of crowdstrike, thanks for joining us on this ipo day. >> thank you for having me >> shares are currently trading up more than 70% in these first few moments of trade carl, it has been quite a week so far and we're only at wednesday. >> whoo. >> tell us a little bit more i know, right? tell us a little bit more about your takeaways so far from the
code conference. >> well, i was just thinking, morgan, jon, the two stories that broke in the last 30 minutes, crowdstrike's ipo and these ftc -- this report in the "journal" about zuckerberg's emails sort of point to all the issues we heard at code this year and that is two major narratives, the upside of tech, in terms of growth and valuation, and the downside of tech in terms of regulation and adherence to regulation. >> i feel like we're at peak freakout over this regulation thing, though. and i'm going out on a limb. i could very easily be wrong if, you know -- >> going into election season. >> we are. and i think that's going to distract a lot of people from this particular issue. we're also going into content season, apple's launching a lot of content, facebook continues to, disney plus, of course, coming we're going to be talking about that next year >> julia, before we get to the half, just button up what we need to know as we're looking at not just the facebook headlines but the story itself which is quite extensive on facebook. >> that's right. well, at the center of this "wall street journal" investigation into these emails
between mark zuckerberg and some of his employees, there's an exchange in which zuckerberg asked employees about an app that claimed to have a database stock with data on tens of millions of facebook users now, zuckerberg asked his employees if this was even possible and whether facebook should do anything to stop that kind of stockpiling of data. now, what happened next is that that app was blocked by facebook but there were no sort of larger changes to ultimately fix that kind of data collection. now, it is notable, though, that this happened after the ftc consent decree had been announced but before that consent decree and those rules went into effect so a lot of questions here but certainly a lot of sensitivity to how much mark zuckerberg knew and how aware facebook was that they had a privacy problem. back over to you >> all right finally, julia, it's not clear to me if "the journal" actually secured the emails or talked to people who had seen the emails >> yes so, you know, these emails are not quoted directly, but these
are -- "the journal" says that they have -- that facebook uncovered these emails and these are part of this investigation but it's unclear if they've actually read and had copies of these emails themselves, carl. >> all right obviously, we'll watch that story. another great code, though, jon. >> yeah. >> between you and me. >> see you in new york >> always good to come out to see code >> great to be with you. >> guys, that does it for you. let's get over to the judge and "the half. >> i'm scott wapner, front and center this hour, the big call from a billionaire investor to buy stocks it's 12:00 noon, this is "the halftime report. >> announcer: one week to fed day. what's the message to the markets? plus, the s&p is 2.5% from a new high real estate and staples hitting new highs today. if these sectors are leading the way, what's it say about the rest of th