Return to Transcripts main page
First Move with Julia Chatterley
Democrats Zero In On Elizabeth Warren In The Fourth Presidential Debate; Huawei Says It Has Turned A Big Profit Year-Over-Year Despite The Trade War; Warren Buffett Wants To Make A Bigger Bet On Bank Of America. Aired 9-10a ET
Aired October 16, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:21]
ALISON KOSIK, CNN INTERNATIONAL HOST: Live from the New York Stock Exchange, I'm Alison Kosik. I'm sitting in for Julia Chatterley. And here
is what you need to know.
Wrangling with Warren. Democrats zero in on Elizabeth Warren in the fourth presidential debate.
Against the odds. Huawei says it has turned a big profit year-over-year despite the trade war.
And back for more. Warren Buffett wants to make a bigger bet on Bank of America.
It's Wednesday and this is FIRST MOVE.
Welcome to FIRST MOVE. Great to have you with us. Let's begin with a check on the markets.
The U.S. futures are pointing to a lower open here on Wall Street after Tuesday's across the board rally. A weak reading on retail sales seems to
be weighing on sentiment. Sales fell unexpectedly last month, down by 0.3 percent. August sales however were revised higher.
Stocks rose in the previous session after a pretty good start to the earnings season. Bank results came in mixed, but we got market friendly
numbers from Johnson & Johnson, United Healthcare and United Airlines.
Before the bell today, we got better than expected results from Bank of America beating on the top and bottom lines and it shares are higher in
premarket trading.
Meantime, Brexit uncertainty is weighing on sentiment as key negotiating deadlines loom. We've got new trade concerns as well. China says it will
retaliate against the U.S. if a bill supporting Hong Kong protesters is signed into law. China also made a surprise move today to shore up its
economy. It injected $28 billion into the banking system to help boost liquidity.
GDP numbers they come out on Friday. They are expected to show weaker Chinese growth.
All right, let's get to our drivers now. Moderate Democrats led the charge against Senator Elizabeth Warren at last night's CNN-New York Times
Democratic presidential debate in Ohio.
Mayor Pete Buttigieg and Senator Amy Klobuchar went on the attack over who pays for Senator Warren's Medicare-for-All and wealth tax plans. Listen.
(BEGIN VIDEO CLIP)
PETE BUTTIGIEG, (D-IN), MAYOR, PRESIDENTIAL CANDIDATE: Your Signature senator is to have a plan for everything. Except this. No plan has been
laid out to explain how a multitrillion dollar hole in this Medicare-for- All plan that Senator Warren is putting forward is supposed to get filled in.
SEN. AMY KLOBUCHAR (D-MN), PRESIDENTIAL CANDIDATE: I appreciate Elizabeth's work. But again, the difference between a plan and a pipe
dream is something that you can actually get done.
JOE BIDEN (D), PRESIDENTIAL CANDIDATE: We all have good ideas. The question is how -- who is going to be able to get it done? How can you get
it done? And I'm not suggesting they can't, but I'm suggesting that that's what we should look at. And part of that requires you not be vague.
(END VIDEO CLIP)
KOSIK: Was she vague though? Christine Romans joins me live. You know, what's interesting here is you've got this giant field of possible
candidates here. And, you know, Elizabeth Warren, the front runner here, you have to really be -- you have to really be ready to take the punches.
Was she ready? Because I think they all came at her, didn't they throughout the night?
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: You know, this -- and this is what it feels like to be a front runner. This actually
shows you how far she has risen in the polls that she is more of a threat, and people are trying to break out at her expense.
Was she vague? Well, "The Washington Post" calls this the question Elizabeth Warren won't answer. She has been asked in interviews, on the
debate stage by interviewers, on the stump, will you have to raise taxes for the middle class to pay for Medicare-for-All? And she doesn't
specifically answer that question.
Now, to be fair, it's Bernie Sanders' Medicare-for-All plan that she supports. And Bernie Sanders says that, yes, you might have to pay more
taxes, it might have to go up for people for Medicare-for-All, but that your healthcare costs would go down.
So you know, there's a benefit -- a net benefit -- overall. She doesn't go that far. Pete Buttigieg seeing an opening and calling it Medicare-for-All
who want it. He would like people to be able to keep their private employer insurance, which is when you look at some of the polls, that's
what a lot of the public thinks as well.
But clearly, it was the moderates on the stage and people who are not polling as high or raising as much money as Elizabeth Warren, who were
going after her on this particular Medicare-for-All a subject, Alison.
KOSIK: What was the biggest takeaway that you had from this three-hour debate, Christine?
ROMANS: Oh, I'm so glad you asked. Because I've just read a piece about how the Democrats are going to have to be sharper on the economy and
specifically on not letting the President brand the economy as his economy or they won't win. There's a Moody's analytics presidential forecast model
that was just rolled out yesterday. It's only been wrong once since they started doing this back, I think in the 70s or 80s and that was in 2016
when it failed to recognize the Donald Trump would be President.
[09:05:22]
ROMANS: They've tweaked that model, that formula into three forecasts instead of just one. And they find that if everything stays the same, you
will have a second term of the Donald Trump presidency that means, the Democrats if they want to win, they've got to figure out how not to fire at
each other, aim their fire at each other.
But you know, whittle down that crowd, but also start to chip away at the President's exaggerated branding of his personal responsibility for the
success of the American economy.
KOSIK: Okay, Christine Romans, thanks for your analysis on that debate last night. Thank you. And Huawei is showing resilience to the U.S.-China
trade war in the U.S.-led campaign against the company.
The Chinese telecom giant has reported some surprisingly strong results. Clare Sebastian has more with us. She joins us live. Good morning, Clare.
So what's interesting is everybody sort of thought that Huawei would really take a hit on sales and revenue after the U.S. put it on a list prohibiting
U.S. companies from selling technology to the company.
So once again, the expectation was that the company would have some trouble here. It just doesn't look like that happened.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Right, Alison, so far the numbers that we have showed that they're pretty resilient in the face of
this. This is what we have in terms of the numbers for the first nine months of the year. Their revenue was about $86 billion. That's up 24
percent year-on-year in their smartphone division. Don't forget they are the world's second biggest smartphone maker as of June this year.
Smartphone shipment is up to 26 percent year-on-year to 185 million globally. Now, word of caution there, we don't know how much of that is
domestic within China and how much of that is global. The CEO did say in June that shipments outside of China were down 40 percent after the U.S.
blacklisting. They are not a public company, Alison. So they get to choose which numbers they put out.
But on the 5G side, they are still the world's biggest maker of telecoms equipment. They say they now have more than 60 commercial 5G contracts to
date. That's at least 10 more since they last announced numbers in July.
So they continue to grow there. But as I say, this may not be the whole picture. They get to select which numbers and of course, this is the first
nine months of the year. They only were put on the U.S. blacklist in May. So it doesn't actually show the full effect necessarily coming down yet.
There could be more to come in terms of trouble for Huawei.
KOSIK: So what is Huawei saying it's going to do to sort of soften the blow since, you know the biggest impact of the sanctions has yet to really
be felt.
SEBASTIAN: Right. So there are a couple of things. They've been stockpiling technology from U.S. customers that they may now not be able to
do business with. They've been developing their own technology. They rolled out their own operating system Harmony OS amid the discord in
August. They say that that will be a replacement for Android.
The U.S. blacklist prevents them from putting the full version of Android on new phones and I am going to say, Alison, they continue to show real
strength in 5G. They're particularly strong in Europe. They just announced this week, you know, several deployments with Swiss telecoms
maker, Sunrise and part of that may be the price.
You know, I've spoken to a rural carrier here in the U.S., and says that Huawei's technology is about a third to half the price of competitors Nokia
and Ericsson. So they continue to undercut their competitors on price and that is where they continue to show strength.
But a lot of uncertainty still to come. Of course, Huawei was not part of the recent trade truce between the U.S. and China, so we don't know if the
current waiver on U.S. companies doing business with the company will be extended. That expires in mid-November.
KOSIK: Okay, Clare Sebastian, thanks so much. The British Prime Minister updates his Cabinet on Brexit this hour and as intensive talks with Europe
are continuing, both sides are pushing to outline a deal ahead of Thursday's crunch Summit. The Pound is higher this week on hopes of a
breakthrough.
Hadas Gold joins me live now. Gosh, you know, these meetings seem like they're moving at a frenzied pace moving parts all over the place a lot of
unknowns, and the reality is these talks could really run right into Thursday's European Union Summit.
HADAS GOLD, CNN BUSINESS REPORTER: Alison, that's exactly right. There's a lot of moving parts, including a lot of moving meetings. We are
expecting any moment the U.K. Cabinet to come into Number 10 Downing Street behind me for a meeting.
That was actually moved up. It was supposed to be a few hours ago. They've moved it up at the last minute at the same time an important
meeting in Brussels between the E.U. Ambassadors was also pushed down.
So there's speculation that something might be introduced to the Cabinet here, and then perhaps introduced to the E.U. Ambassadors in Brussels.
Things are changing it seems here by the minute as the hours tick down to that very important E.U. Council meeting in Brussels, where ostensibly the
idea is to get to an agreement where the E.U. countries and the U.K. will agree on this divorce settlement before Boris Johnson can bring it to the
Parliament on Saturday where he hopes to get it passed.
[09:10:08]
GOLD: But that will also be a tall order because we are hearing some resistance from the Northern Ireland Party. This is the party that props
up Boris Johnson government. They seem to be still unhappy with some elements of the deal. If they fall apart, then also the support of some of
the more hard right-wing hard Brexiteers of the party may also fall as well and that could potentially ruin any sort of majority that Boris Johnson can
hope to get that deal through.
According to the law that was recently passed, Boris Johnson must ask for an extension to the Brexit deadline if he does not get a deal through
Parliament by Saturday that will extend Brexit until January -- Alison.
KOSIK: So what seems to be the focal points now? The points of contention that both sides seem to be harping on?
GOLD: Alison, it still is all about how Northern Ireland will be treated in this Brexit situation and trying to avoid a hard border between Northern
Ireland and the Republic of Ireland.
Right now, the main sticking point seems to be about customs, about taxes, and about the consent. The idea that the Northern Irish Assembly will be
able to have a veto power over any sort of agreement. That is not something the E.U. wants.
But there is also a question about just how would this realistically work? How would you be able to treat Northern Ireland that would stay part of
U.K.? How would you be able to treat goods that go into there any differently than goods in the U.K. and goods to the rest of the E.U.?
Because there's a question for example, Alison, of let's say, Northern Ireland imports sugar from somewhere, turns it into a soft drink and then
exports it somewhere else depending on where all those products are coming from and where they are made that could affect some of these customs and
taxes.
These are very, very complex situations on top of a very complex political reality as well.
KOSIK: Oh, lots of twists and turns. Hadas Gold, thanks for keeping track of all of it for us.
And these are the stories making headlines around the world. In the Impeachment Inquiry, a senior State Department official told congressional
lawmakers that he raised red flags about Rudy Giuliani's efforts to pressure Ukraine more than six months ago, and was told to lay low as a
result.
Today, another official who unexpectedly resigned last week will share his story with impeachment investigators.
The family of a British teenager killed in a road crash involving the wife of a U.S. diplomat met with President Trump at the White House. But Harry
Dunn's mother said they declined an opportunity to meet with the woman involved, because they said they wanted the encounter to take place in the
U.K. where the crash occurred in August. The woman left Britain for the U.S. after the crash under diplomatic immunity.
Vice President Mike Pence and Secretary of State Mike Pompeo are heading to Turkey to meet with President Erdogan to try to broker a ceasefire in
Northern Syria. Mr. Erdogan says he won't meet them until Thursday.
The Turkish offensive began after President Trump surprised his own military by ordering the immediate withdrawal of U.S. troops. CNN's Arwa
Damon is live on the Turkish-Syrian border with the latest. Arwa, what are you learning now?
ARWA DAMON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, that meeting is supposed to help negotiate some sort of a ceasefire; at least that is what
the U.S. delegations objective is. But we've already heard what President Erdogan's reaction to that proposal is, quite simply, no and that his
country will not negotiate with terrorists.
Look, from Turkey's perspective, the fact that the Americans want to negotiate a ceasefire between the Turks and the YPG, which they consider to
be a terrorist organization would be as if someone were to tell the U.S. at the height of the battle against ISIS to just pause for a second and go to
a negotiating table. That's how strongly the Turks feel about the existential threat that the YPG does pose.
And then there's the reality that the U.S. has basically sidelined itself after the White House decided to withdraw U.S. troops from Northern Syria,
which then caused the Kurds to be forced to turn to the regime in Damascus and the Russians to protect themselves as they were saying from this
Turkish push forward.
And now we have significantly changed dynamics on the ground and there's not a seat at that table for the United States. You have right now in
Northern Syria, key players being the Turks, obviously, the Arab that are fighting alongside them, those rebel forces, you have the YPG and you have
the Syrian regime and it's only the Russians who was talking -- who are talking to all of these parties.
Russia experts are saying are both the playmaker and the kingmaker. It is Russia, presumably that is going to be negotiating some sort of a deal.
But meanwhile, in a number of areas, the battles do still continue like behind us. That's the town Ras al Ain and it's been pretty intense there
throughout the better part of the day. We've been hearing sporadic noises of fairly intense gun battles and explosions. And now you can see those
thick plume of dark black smoke.
[09:15:14]
DAMON: And there are other parts of Northern Syria as well where it's the Russians who are stepping in between the army of Damascus, the army of
Bashar al-Assad, and then the Turkish and their Syrian rebel proxies on the ground.
And so when we look at the big picture in all of this, it's going to be quite interesting to see what sort of leverage the U.S. thinks it has or
how it can even begin to convince the Turks to go to some sort of a negotiating table given how little power and credibility America now has.
KOSIK: Yes, never mind that the U.S. has literally left the building. They have left the country. That delegation arriving later today. CNN's
Arwa Damon, thanks so much for your reporting.
Still to come on FIRST MOVE, banking on Main Street, America's second biggest lender gets a reassuring boost from consumers.
And not so chill. Netflix reports for the last time before the streaming wars heat up. I will be speaking with the company's co-founder.
(COMMERCIAL BREAK)
KOSIK: Welcome back to FIRST MOVE live from the New York Stock Exchange. It's still looking like a lower open for U.S. stocks after Tuesday's across
the board gains.
The Dow begins today's session above 27,000 again. It is just 1.2 percent below all-time highs, and we're looking at tech stocks just about two
percent away from records.
Before the bell, we got results from Bank of America, the second biggest bank in the U.S. Earnings and revenues beat estimates on solid loan
growth, but lower interest rates continue to weigh on results.
Matt Egan joins me live now, so we're seeing the start of Q3. It is definitely not the gloom and doom that we saw everybody predict, at least
so far for the banks. But is this the case that we're just getting started, don't get too excited?
[09:20:13]
MATT EGAN, CNN BUSINESS SENIOR WRITER: Maybe, Alison. We'll see. But you know what, let's take it for now. It's so far so good. The banks have
been a lot better than feared, and we saw that again this morning with Bank of America, which is trading higher premarket on this earnings beat,
revenue beat.
I think there's two really important things to highlight from Bank of America is results. One, the bank managed to narrowly grow its lending
profit from a year ago, and that's despite the recent plunge in interest rates, which is obviously been great for borrowers, but it's really painful
for banks.
During the call, the CFO said that Bank of America is standing by its outlook for lending profits for the rest of the year. The other really
important thing out of Bank of America's report is that the bank is lending a lot despite all these concerns about the economy.
Bank of America reported a six percent increase in business loans and leases. And it also reported a seven percent jump in loans in its consumer
business.
During the conference call, the CEO Brian Moynihan, he talked about his outlook for the economy, and he said, listen, despite these worries about
the trade war, and weaker business spending, he thinks the economy is still in solid shape.
Now, Bank of America's Wall Street business was a little bit more mixed. Trading revenue was roughly flat. The investment banking business was a
lot stronger, it reported a 27 percent increase in fees and that was driven by more M&A and debt underwriting as well.
So all in all, Alison, not a bad quarter for Bank of America and nor for the banking industry overall so far.
KOSIK: And Bank of America in focus for Warren Buffett's Berkshire Hathaway, which made a big bet on Bank of America, and now they're asking
for even more, give me more details.
EGAN: Well, it's no secret that Warren Buffett is a big fan of large American brands and big financial services companies, and so Bank of
America is both of them. So it should not be a big surprise that Warren Buffett's Berkshire Hathaway recently requested approval from the Federal
Reserve to increase its stake in Bank of America up from around 10 percent now.
There's no guarantee that Berkshire will in fact buy additional shares, but it is noteworthy that Warren Buffett is seeking Fed approval. And you
know, it is already -- Berkshire is already the largest shareholder in Bank of America. It's also the biggest shareholder in American Express where it
has an 18 percent stake. It's also the biggest shareholder in Wells Fargo despite that bank's problems.
So I think it's another sign that Warren Buffett likes this sector.
KOSIK: Absolutely. All right, Matt Egan. Thanks so much.
And joining me now with his thoughts on the markets and earning season, Art Hogan. He is the Chief Market Strategist at National Securities
Corporation. Good morning.
ART HOGAN, CHIEF MARKET STRATEGIST, NATIONAL SECURITIES CORPORATION: Good morning.
KOSIK: And now that we're sort of a little bit into our toes in the water for Q3, you know, as I said before, there's just a lot of -- there was a
lot of doom and gloom about, you know, a third quarter in a row of lackluster earnings. What's your take on how things are going?
HOGAN: Yeah, a couple things. So first and foremost, we have to remember all of our earnings are compared to how we did a year ago, right.
So a year ago, we had spectacular earnings because we had a new tax code, a new corporate tax code. So it's unrealistic to think that we're comping
against the three quarters -- the first three quarters of 2018, when we had 20 percent earnings growth is very different.
So having earnings growth is important. I think the second thing is, the economy is back to trend line, which is two to two and a half percent
versus the three percent or 2.9 percent that we saw in 2018.
So that kind of economy is able to drive earnings growth to the low single digits, and I think we're going to see that again.
The S&P 500 had about three percent earnings growth last quarter. We will probably have a similar type of earnings growth. I think it's going to be
driven in large part by technology for example, as a high point and energy will be the low point.
Energy companies are still struggling to make money in this commodity environment and I think that when we think about what we -- how we should
react to earnings, it is much more they -- you know, where investors over invested and where the biggest disappointments break them, and my fear is
that in those defensive trades.
I think companies that we are looking to are staples, companies like utilities, some of the real estate investment trusts that are so credible
because they have healthy dividends are going to disappoint investors on the earnings line because they just have multiples that are historically
high.
KOSIK: Okay, when you say disappoint, do you mean like a bubble bursting disappoint?
HOGAN: No, just -- I think realistically saying, should I be paying 20 something times for a staple company that's growing its revenues at about
five or six percent? So that kind of revenue growth, attracting that kind of multiple because of its dividend yield, I think is going to rationalize
some of that investment in that space.
So we know for the last three years, we've seen the consumer staples, certainly the utilities and a large part, a lot of the REITs have
historically high multiples and lower and lower dividends and I think as investors look at this and say what am I really own here? And then does it
make sense for me to own this at 20 to 25 times when I think there's a lot of value in some of the technology world.
[09:25:12]
KOSIK: Okay, speaking of the broader market, you know, we're seeing stocks close to record highs, if not at highs. Is this is -- now, is this a
bubble in itself considering, you know, we've got the China-U.S. trade war underway, we still yet to get a resolution. Is this sort of the build up
to the big fall?
HOGAN: I don't think so. I think that incrementally the news on U.S.- China trade has gotten more constructive. It feels like both sides want to get something accomplished here.
It's -- you know, this is 18 months into this battle, and the latest of the news, it certainly feels like both sides would like to accomplish
something.
I think at the very least we have a truce with China for the time being and markets can breathe a sigh of relief because when that manifests itself, it
is less uncertainty. We're not afraid that new tariffs are going to be put on. We're not afraid of escalation, at least right now. I think that
makes sense and I think that'll become even more the case as we really get into the presidential election cycle.
I don't think this is an administration that wants to be in a recession or fighting a trade war while running for reelection. My guess is we're going
to see choreographed news around U.S.-China trade get even better as we head into next year.
KOSIK: So this is a market that's actually getting used to the trade war at this point. That's what it feels like, doesn't it?
HOGAN: Yes, well it gets used to it when it's static. When it's dynamic, and there's a lot of uncertainty, when there's deadlines and tariffs are
supposed to go up like they were yesterday and new tariffs are supposed to put on December that's when the market is upset, right?
The month of May was entirely down because of the U.S.-China trade war. The month of August was the saw-tooth pattern because of the going back and
forth on where we sit on trade.
I think the rest of this quarter is probably going to be much more of a, hey, here's the U.S.-China trade war. We can compartmentalize that. We
know where we are, but it's not getting worse, and then the market you focus on things like earnings like we're supposed to.
KOSIK: Okay, Art Hogan from the National Securities Corporation. Thanks so much for coming on the show today.
HOGAN: Thank you.
KOSIK: Okay, and the opening bell is up next. Stay with us. We'll be right back.
(COMMERCIAL BREAK)
[09:30:00]
KOSIK: And welcome back to FIRST MOVE. I'm Alison Kosik. We are live from the New York Stock Exchange and that was the opening bell. As
expected, we've got a lower open for U.S. stocks as the market digests some of Tuesday's solid gains.
News that U.S. retail sales fell for the first time in seven months could raise some new concerns about the health of the U.S. consumer. Retail
sales fell 0.3 percent last month, although some of that was because of lower gas prices.
Meantime, investors have liked what they've seen so far from earnings season, but major tests remain this week. Netflix and IBM report results
after the closing bell today.
Time now for look at our global movers. Bank of America shares are higher. The second biggest bank in the United States posted a third quarter profit
drop of 21 percent as lower interest rates wait on results, but earnings and revenues beat Wall Street estimates.
United Airlines shares are rising. The company's third quarter earnings beat estimates by a full 10 cents a share. United is also raising its
full-year guidance as passenger bookings remain strong.
Shares of General Motors are higher. It is day 31 of the UAW strike. GM CEO Mary Barra joined contract talks yesterday. Union leaders meet
tomorrow in Detroit to sign that a preliminary deal could be getting closer. The big challenge will be getting the rank and file to sign off on
a new deal.
Volvo is unveiling its first ever electric vehicle later today. The Swedish carmaker is embarking on a road to lower carbon emissions, as it
aims to become a climate neutral company by 2040.
The CEO of Volvo cars, Hakan Samuelsson joins us live now. Good morning and welcome to the show.
HAKAN SAMUELSSON, CEO, VOLVO: Good morning. Thank you. Nice being with you.
KOSIK: Talk us through some of the details of Volvo's all electric car?
SAMUELSSON: It is our very first electric car and of course, very important step towards electrification we are aiming for and we will
release now another car every year.
But this first one is a small SUV. It is a very attractive car especially for the U.S. market and it will of course be environmentally friendly, all
electric, but also have some other attractive features.
For example, it has an all-new Android operational system. So I think we will really have a state of the art infotainment system in the car and of
course, you can drive and be environmentally friendly with this car, but I think also people appreciate the very good response, very silent car and
not at least you can fuel it at home. I think that's something our customer will appreciate.
You don't need to go to a gasoline station. You can plug it in overnight and I think that's something really attractive.
KOSIK: What's the range of the car before you need a new charge?
SAMUELSSON: It will be -- we are still not certified, but it will be more than 400 kilometers, oh no, I have forgotten your miles, but you kind of
convert it. More than 400 kilometers. So I think it's enough for the daily usage.
So normally you will charge it at home and I think that's how you will use an electric car.
KOSIK: Okay, you're also making a pledge to cut carbon emissions by 40 percent by the year 2025. How exactly are you planning on doing that?
SAMUELSSON: Yes, that is really -- we are really going to do this in the same way as we have worked with safety. I mean we don't do any add-on
programs to look good so we believe sustainability should be exactly safety. It will be part of the company DNA and it will be a way to improve
our business and to be more profitable long term.
So it's part of our purpose. That has worked with safety, so we see that will work very well also with the planetary safety or contributing to
climate neutral planet and we will do that with electric cars, but we will also do with short term with all of our plug-in hybrid cars which we will
rebrand recharge and we will sell next year.
Although, the next year, 20 percent of our cars will be plugged in hybrids. So we will take a big step there. Plus, we will also work with our supply
chain to encourage our supplier also to be carbon free.
[09:35:00]
KOSIK: So that's a very ambitious move forward just in general but how difficult is it to grow and produce these kinds of vehicles in an age where
tariffs are running rampant and the China-U.S. trade war is still in full force?
SAMUELSSON: Yes, okay we have some headwind of course on the market, but so far, we're quite successful. We are growing in the U.S. and of course,
this car will be very attractive to customers.
Of course, in some markets, there will be incentives, but everywhere, I think the operational costs will also be an improvement. This car will be
lower cost to operate than fueling it up with conventional gas.
So, we have to think long term; of course, short term, the fuel price development now is may be giving us a bit of a headwind because they are
very low, but we need to think long term and then we are quite sure that we should make our cars sustainable and electric. And that's what we are
initiating now and that's why we have these bold plan.
KOSIK: Have the tariffs hurt Volvo's profitability?
SAMUELSSON: Pardon?
KOSIK: Have the tariffs hurt Volvo's profitability?
SAMUELSSON: I mean, you have to see this exactly as safety. I mean you could of course also argue a car without airbags and with outside impact
protection and so on would be a cheaper car and could be seen as more profitable, but we are quite sure it is not - that is not the case.
So we have to make a sustainable car and environmentally friendly car. It will of course, short term cost a bit more with the equipment, batteries
and e-motors, but long term, we are quite sure this will contribute to a higher growth and in the long term, better profitability. This is part of
our business concept long term.
KOSIK: Okay, well, I'm excited to see this new vehicle. Hakan Samuelsson, thanks so much for your time. The CEO of Volvo.
SAMUELSSON: All right. Thank you.
KOSIK: Up next, has been losing first, subscribers and then "Friends." Can it win the streaming wars? I am going to be discussing all of that
with the company's co-founder, stay with us.
(COMMERCIAL BREAK)
[09:40:31]
KOSIK: Go ahead. Grab your popcorn, settle down to watch Netflix tonight. Third quarter earnings, they're coming out, too. They promised to be a
riveting watch. These are the last numbers from the streaming giant before the November launch of competitors. Everybody from Apple to Disney.
For more on what the future holds for Netflix, I'm joined by the company's co-founder. He is also the author of a new book, "That Will Never Work."
And it's about the early years of Netflix.
Marc Randolph joins me live now. Welcome to the show.
MARC RANDOLPH, CO-FOUNDER, NETFLIX: Thanks very much. A pleasure to be with you.
KOSIK: And you're obviously no longer with Netflix, something to keep in mind as we talk. I'll tell you what, this is a fantastic book for anybody
who wants to read it, who wants to know how Netflix came to be, but also it's inspirational. You know, for anybody looking to start a company,
that's the name, "That Will Never Work."
And I was listening to your podcast and you said, your wife said it this way. She said, that'll never work. And you pretty much said, watch me.
And you did make it work, didn't you?
RANDOLPH: You know, I think now is an especially good time to revisit the fact that Netflix actually did start out as essentially nothing.
When we pitched the original crazy idea of video rental by mail, it is true. Everyone, including my wife said that will never work. And it is as
amazing to me as it is to anyone else where we've seen Netflix get to today.
KOSIK: But it's also a lesson in how there's a need for companies especially companies that just start from scratch on how to reinvent the
company, depending on how times change. So we saw Netflix do this, going from DVDs to streaming, went through some growing pains in doing that.
But now there's a bigger hurdle for Netflix, and I know you're not with the company anymore. But how does a company like Netflix, which is still
extremely dominant in this area deal with so much competition?
RANDOLPH: Well, the first thing I'll say is that I think the competition is healthy. Healthy not just for the companies, but certainly for the
consumer.
I mean, in many ways, we're entering this golden age of television. And I mean, I certainly don't only watch Netflix. I enjoy the fact that there's
so much great content being created. But I think if you're to look at what's happening today, you can't help but go back to the very beginning.
As you mentioned, I can't comment on the tactics or the strategies since I'm not intimately familiar, but the thing I know well, is the Netflix
culture.
And I can tell how that culture began, and I can see how those exact same thing is about how Netflix acts like a startup all the time, or exactly the
same kind of things we're going to see it doing as it comes into a much more aggressive phase.
KOSIK: So it will have to continue to reinvent itself for instance, base its strengths on original content and that kept Netflix afloat for so long.
But now it's losing, you know, big shows like "Friends" and "The Office." So how can Netflix sort of reinvent itself again?
RANDOLPH: So one of the things Netflix is famous for is being willing to leave the past behind in exchange for doing what's right in the future.
And I saw that time and time again. I talk about in the book at the very beginning, we actually sold DVDs, and it was at one point, 98 percent of
our revenue.
But we were willing to walk away from all of that, to cut our revenues down 98 percent in order to focus on everything that was going to be the future.
And Netflix did that again when it moved away from shipping DVDs into streaming. It was willing to walk away from the large successful part of
its business in order to make sure it had the future right.
And now, of course, we're seeing this different phase where it's recognizing that proprietary content and single owned content is the key to
the future and you're going to see Netflix go all in on this.
And I think they're recognizing they're still at the beginning of these streaming wars. That in fact, there's still a huge market ahead of us that
in terms of the penetration of the streaming companies we are at the beginning.
And I think they're willing to do what it takes to be successful going forward, no matter the impact is on their past business.
KOSIK: But does there need to be new thinking at Netflix as there are new obstacles headed Netflix's way? For instance, should it be time for Reed
Hastings, the current CEO of Netflix to leave, you know, to bring in some new thinking on how to tackle what's ahead?
RANDOLPH: I certainly would hate to see read go. I mean, I've known Reed since well, well before we started Netflix and had a chance to work with
him very closely, and I can confidently say he is one of the most powerful -- and long word -- most successful entrepreneurs I've ever seen.
And what's extremely rare about Reed is that not only is he very successful as an early stage entrepreneur, he's as good or better when it gets to be
this large global chess game that streaming has become.
I think Reed is the exact right person to continue to lead this company.
[09:45:17]
KOSIK: What's the one takeaway you want readers who read your book to walk away with?
RANDOLPH: So I want this to be in some ways be the untold story of Netflix, that if you really want to understand what Netflix is and where
it's going, you have to understand the past. You have to understand the origins of this famous Netflix culture.
You have to see how it was a startup, how it made decisions, how it was willing to leave the past behind for the future, and how those exact same
things are going to be what drives its behavior going forward.
KOSIK: Okay, Marc Randolph, it's been great talking with you. I can't wait to dig into the book even more.
RANDOLPH: Thank you so much for your time this morning.
KOSIK: Okay after the break, one frustrated homeowner struggling to update her home spotted a gap in the market and now, she is reshaping the
remodeling business. Her story is next.
(COMMERCIAL BREAK)
KOSIK: Welcome back. Here's today's "Boardroom Brief." The European Commission is telling Broadcom to stop applying exclusivity deals with six
of its main customers. The order comes after E.U. Competition chief Margrethe Vestager launched an antitrust investigation in June. The U.S.
chipmaker said it would comply with the order, but is launching an appeal in European courts.
Shares in ASOS are up more than 20 percent after the firm said operational issues are behind it. ASOS says it's made substantial progress towards
fixing warehouse problems, which caused profits to slum 68 percent. The online fashion retailer is working to move from a U.K. focused to a global
model.
Now to a homeowner who was sick of the pitfalls of do-it-yourself who took it upon herself to rip apart and rebuild the home remodeling industry.
Houzz helps homeowners redesign their homes using augmented reality and connects them with design and construction professionals who carry out the
work. Sounds like a dream.
Houzz estimates this is a $1.2 trillion opportunity in North America and Europe. Its platform attracts 40 million users every month, which showcase
the talents of more than two million home remodeling experts. The CEO and co-founder says it was borne out of frustration when she tried to renovate
her own home.
(BEGIN VIDEOTAPE)
ADI TATARKO, CEO AND CO-FOUNDER, HOUZZ: It was very hard to find the relevant people that will be able to execute the dream that we had in our
head, over here, and make it a reality, right? You pretty much had some referrals by word of mouth, from other people, but not necessarily getting
to the relevant people that would be relevant for your style and budget and everything.
[09:50:10]
TATARKO: So it starts there. Then how do you communicate? Right? How do you translate if you don't have the verbiage? If you're not the expert?
So finding the pros, explaining to the pros, communicating to them so that's one side of the equation. What about the pros? They felt the same.
They were very narrowed to whoever they knew in that part, right?
And that was pretty much it, and all of a sudden when you put a platform as a center, and everybody can see everybody and it's very visual. Now pros
can get to the relevant clients. Clients can get to the relevant pros, but the whole process start from to finish is very different. Because you get
the ideas, you find who you want. Now, you know how to execute and with who.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: How do you make money? Because there was a click to buy feature on the website. To your point, it
is very visual here. You're clearly collecting a lot of data about what people are looking at, how they want to achieve the remodeling that they're
doing. So where are the financial benefits here to you? Where do you make money?
TATARKO: So as I said, Houzz was built as a platform, not as the business originally, but the magic of Houzz is community, right? That's the big
difference.
So we brought the technology to the industry and now homeowners like us, and all of these professionals come there. Professionals pay us in order
to expand their business, build their brand locally, be in front of the relevant homeowners. They also pay us for our staff so they can use the
software to manage their business.
We have Ivy and they can basically manage everything from start to finish with the client using the platform. And of course, they can use the
platform. You mentioned the product to source based on what the client is showing them, the visuals that they like and the products that they like.
And homeowners, of course, come to the platform to get the ideas, to find who they want. And they can also pay directly for product. So there is a
lot of synergy between both sides. And we basically monetize based on what the community wanted from us. They wanted the ability to -- professionals
build their brand and expand their reach and homeowners wanted to see more and to find the relevant people.
And the same for ideas, the same for products. It is just end-to-end solution from both sides.
CHATTERLEY: Do you want to go public? Do you want to be standing on that balcony behind me one day? Or are you open to being bought by somebody
perhaps?
TATARKO: Home is such an important thing for people including to us, and that process was so far away from that dream. So technology was needed.
The community definitely helped. We were very fortunate to be there at the right time and the right place in the Silicon Valley to go and put it
together for everybody.
But the goal was not public-private sale, not sell. The goal was if we do it, we do it all the way and we make sure that we serve the community. We
let the business follow what is really needed, and we do it right as much as possible.
Of course along the way you wonder, you test, you try, but that's the whole thing.
And for me, the goal is to create something that for many generations to come, people will be able to enjoy the process, and professionals will be
able to thrive while building magnificent businesses on Houzz.
CHATTERLEY: I have to say, if you've not raised money since 2017, the evidence perhaps suggests that you're profitable enough at least.
TATARKO: You said, you are guessing. But again, we're very, very focused on building what's right for our community, developing the technology. We
do see that it makes a huge difference. Augmented reality, for example, we just released a tile feature. Do you know that if you build the bathroom
or kitchen and you want tile, historically, what would you do?
You would go to a showroom and try to figure out how much you need and what you buy and how it's going to look like? Well, guess what? With the tool,
you can basically in your kitchen or in your bathroom, put the tiles specifically, turn it all directions, measure how much you need, put it in
your cart and send it to your house.
So these type of things, these type of technologies 11X more likely to purchase once you see it with the different materials you already have in
your house, measure it and purchase it.
CHATTERLEY: Advice, finally, to any entrepreneur. Find a great idea?
TATARKO: Find a great idea that you are truly passionate about and you think that you're going to love being in that journey, working on that
thing. Not because you want to exit as you call it before or sell it or take it public, because you're truly going to enjoy the journey and every
single day.
It's going to be crazy -- rollercoaster -- with highs and lows. But if you enjoy what you do and you're passionate about what you do - that will carry
you through the process. You're not going to look for an outcome. You're going to enjoy what you're doing day-to-day and I think following your love
is always the best advice you can give anyone. Enjoy the journey.
[09:55:10]
CHATTERLEY: Enjoy the journey.
(END VIDEOTAPE)
KOSIK: And before we go, a final check on the markets. It looks like a lower open for U.S. stocks as the market digests some of Tuesday's solid
gains.
We've got some news that U.S. retail sales fell for the first time in seven months. It is happening in September. So it's raising concerns that the
consumer may be pulling back on spending.
And we have just begun third quarter earnings season starting with some of the big banks. We heard from Bank of America this morning. This is the
second biggest bank in the U.S. Earnings and revenues of Bank of America beating estimates on solid loan growth, but lower interest rates continue
to weigh on Bank of America's results.
We're going to be watching for corporate earnings after the bell today. We're going to be hearing from Netflix and IBM, so keep an eye on those
stocks.
And that's it for the show. Thanks for watching. I'm Alison Kosik. You've been watching FIRST MOVE. "Connect the World" starts after this
short break. Have a good day.
(COMMERCIAL BREAK)
[10:00:00]
END
