UK Blocks Microsoft-Activision Deal, Boeing CEO Exclusive, New Lows for First Republic 4/26/23

Carl Quintanilla (0:00)

Market moving insight and analysis. Join Jim Cramer, David Faber, and me, Carl Quintanilla on the opening bell hour of CNBC Squawk on the Street.

Good Wednesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Jim Cramer, David Faber at Post 9 of the New York Stock Exchange. Pre-market is stabilizing after Tuesday's sell off. Lot of moving pieces today. Mega Cap Tech, Ukraine, First Republic, potential house vote on the debt limit, Brent back below 80 A roadmap begins with big tech though. NASDAQ futures rallying after those better than expected results from Alphabet and Microsoft, but in this major blow to Microsoft, the UK blocking the acquisition of Activision Blizzard.

David is working the phones. We'll get his reporting coming up.

David Faber (0:40)

And we'll also talk a bit about First Republic. That stock continues its dramatic slide, of course, as that regional bank looks for what is an increasingly unlikely rescue deal.

Sure as a Boeing rally, it is planning to boost its max production despite an ongoing manufacturing snag. CEO Dave Calhoun is going to be with us in just a few minutes.

Carl Quintanilla (1:02)

Let's begin with the UK regulators blocking the Microsoft Activision deal. The country's CMA saying such a combination would substantially reduce competition in this new cloud gaming market. Both companies say they'll appeal that decision. Activision stating, quote, the UK is clearly closed for business.

David and then Brad Smith with a strongly worded statement of his own.

David Faber (1:23)

Yeah, they can say what they want at Microsoft and Activision. And Activision is being good here in terms of making sure it's going to secure its $3 billion breakup fee. And so it is being a very true partner here by saying a lot of things as well and going along with this idea of appealing the CMA decision.

When the CMA originally came out a couple of months back, remember it was what early February with a very negative potential review here, it looked like they were going to say no because they were also looking at the console market. And we said the deal was mostly dead. Then they reversed themselves and said, nope, we're okay with the console. We're just looking at cloud and the market rallied. And everybody said, well, and we included said, this thing's no longer mostly dead. It looks very much alive. Well, now you're much closer to all dead.

The likelihood of an appeal here of the CMA's decision is exceedingly slim. Something I tweeted earlier. You can take a look at past efforts there.

They won't get there most likely. And certainly within, not within any sort of timeframe that anybody would care about. It could take as long as a year.

There is no statutory timeline for review. They have to make that appeal within four weeks. They say they're gonna do it. That's fine. And then the average review period, again, this is UBS, which took a look at this, is five and a half months. Some have gone as long as a year, but none over the last few years have been successful. Not one appeal has been successful. And so, guys, it does look highly unlikely that Microsoft and Activision will prevail here, even though there are many who say, what are they doing in the UK? They're basing this on a market that doesn't even fully exist at this point. So their conclusion about it being the most powerful operator in a fast developing market for cloud gaming, well, yeah, but it hasn't even developed yet. How can you go there?

But it puts them in line, Jim, with our own FTC in many ways.

Jim Cramer (3:18)

I'm so glad you mentioned that, because the FTC, Leon Cotton, he wrote a seminal article, a Law Review article about how, I know this is going to sound very communist, and I don't mean it to, but the idea that rich people are the only people who benefit from mergers and poor people don't benefit, it was a doctrinal article. In other words, it said that there frankly is a big mistake in the way we handle any trust in this country. Any trust, we must block everything because the only people who gain are the ones who don't need anything.

I'm wondering, is this a doctrine that's now prevailing in the UK?

David Faber (3:53)

You know, you have to wonder that because this is a very curious decision, based at least on the facts as we know them. And it even is more surprising in the sense that Microsoft seemed to be winning the argument over time from the initial review, remember, that looks so negative, to where they seem to be. The body language, by the way, from Microsoft, as best we could tell, was very positive. I mean, they had meetings on Friday at the CMA. Many people took that to sort of look as a very optimistic point. Why would you be meeting with them if you weren't hammering out any details about sort of an agreement, so to speak?