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Quest Means Business
Europe, Earnings Hit Wall Street Hard; Europe Under Ratings Threat; Rating Europe; Contagion in Europe; Spain Misstep; European Stocks Fall; Dow Continues to Fall After Weak Manufacturing Report; Q25; Euro Continues Slide; SAP Sales Surge
Aired July 24, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: It's a case of cut to the core. Moody's now warning even Germany may not be safe.
A cut above. Domino's Pizza earns more than a crust.
And cut the complaining. One business shows how to turn Olympic disruption into a success.
I'm Richard Quest. I mean business.
Good evening. We start tonight with keeping a close eye on what's happening on Wall Street with the Dow Jones.
(RINGS BELL)
QUEST: This is the number that you'll want to see at this hour. The Dow is off 162 points, down 1.25 percent. Having got so close to nearly 13,000, now two days is -- two days of losses, and the reason, you need to look no further. We've got earnings and we've got Europe, which is a major cause of concern for US investors.
Tonight, Germany, though, is brushing off the mud slung its way by Moody's, the credit ratings agency. Moody's has said Europe's most prosperous nation, the most powerful economy in Europe, stands to lose its unblemished Triple A credit rating if Spain and Italy were to ask for financial assistance.
In fact, the way Moody's puts it, it's cut its outlook not just for Germany, the Netherlands, Luxembourg, from stable to negative. And it says the chances of Greece's exit from the bloc are rising. The Grexit is getting more likely.
And even if that doesn't happen, the chances are now that Spain and Italy will need some form of sovereign assistance. And if that happens, that puts the pressure on Germany. The German budget spokesman says if Germany loses the highest rating than the second-highest becomes the best one.
On this program, those echo -- sentiments are echoed by PIMCO's chief, Mohamed El-Erian. He tells us tonight, Germany is Europe's cleanest dirty shirt.
Still with this whole mess in Europe tonight, Jean-Claude Junker, the Luxemburg prime minister and leader of the eurozone group of finance ministers still insists that Germany, Netherlands, and Luxemburg continue to enjoy what he called solid fundamentals.
Now, that's the overarching view, but this is what it looks like if you take a look at the mood and the way Moody's have -- it's not just Moody's. S&P, they tend to sort of move in a pack. The core point, of course, is those that are Triple A are now on negative.
And there you have, of course, what's -- France has already lost its Triple A from one rating agency. You'll remember, that happened last year. S&P, I think it was, lost France its Triple A.
But Germany has been Triple A across the board, and Germany and the other countries in the region, you can see now, are there. But if you then look at the stable Triple As, well, really, this is only eurozone, remember. The UK's also Triple A. Only Finland up in the north is Triple A and stable.
And it's Finland, of course, that's making quite a fuss about Greece and about the way which the bailout is being done.
Below A and -- let's just take that Finland out and show you below A. These are the -- there it is. Just -- I beg your pardon. But anyway, Portugal, Ireland, and of course Greece, they are the ones that are currently in programs and memoranda of understanding, MOUs, with the ECB, the IMF, and the eurozone.
Finally, if you want to look at the debt GDP, look at that. These are the eurozone countries who have a debt-to-GDP of over 50 percent, all except Estonia, Finland, Luxemburg, Slovakia, and Slovenia.
So, what this tells us is the eurozone's debt-to-GDP is now at a record high of 88 percent. That's the average. A record high of 88 percent. The OECD is recommending a target of 50 percent. That is the scenario that we paint for you tonight.
A worsening situation in Spain, worries about what will happen in Italy, a deteriorating situation for the Troika in Greece, and now, suggestions that Germany might at some point lose its Triple A.
Mohamed El-Erian is the co-CEO of PIMCO, and he joined me on the sunny CNN balcony earlier today for a gloomy diagnosis. He said the rot is spreading to Europe's economic heart, and Spain will need bailing out.
(BEGIN VIDEOTAPE)
MOHAMED EL-ERIAN, CEO, PIMCO: I think Germany is slowing down. It is getting contaminated by an infection that started in the outer core.
QUEST: Why can they not get ahead of the curve, then?
EL-ERIAN: Richard, lots of reasons. One is mindset. It's taken them a long time to realize that they have a secular structural problem. Second is politics. What you need is a bold simultaneous approach. Instead, they've taken a sequential approach. And finally, they haven't told the population quite how severe the issue is.
QUEST: With that in mind, do you expect Germany to eventually be downgraded?
EL-ERIAN: No. I don't. Germany is a very strong economy. It has done a lot of hard work in terms of reforming its labor markets. It is exposed to China in a positive way. So, the answer is no.
QUEST: OK. And even if it was, it wouldn't make much difference. Because the US got downgraded, and no big deal.
EL-ERIAN: Yes. We have this concept of the cleanest dirty shirt, right? Investors have to invest somewhere. It's a little bit like you being on a business trip. It's extended, you can't get your shirts clean. What are you going to do? You're going to wear your cleanest dirty shirt.
So, yes, the US got downgraded, but it's still the cleanest dirty shirt. And Germany is an even cleaner -- clean dirty shirt.
QUEST: With the ratings agencies -- you will remember the famous quote, "essential cogs in the wheels of financial destruction." Does anybody take them seriously when they come out and say we're going to downgrade something like Germany?
EL-ERIAN: OK. So, no and yes. No on the investment side. We don't make any investment decisions based on the rating agencies. We have our internal ratings, and we don't really look at what the rating agencies do. So, no on the investment side.
But the whole world is constructed on the basis that these rating agencies know what they're talking about. So, we have guidelines that specify ratings by the rating agencies. So, it impacts on the guideline side, so they're still important, but it doesn't impact how we invest.
QUEST: Psychologically, it does have an effect, which is witnesses by what we've seen today. Every country -- the countries of the north are all coming out frothing at the mouth.
EL-ERIAN: Well, what we're seeing today is really a bit of a technical correction from very low yields that had been achieved over the last few days. If I had been with you six months ago and I would tell you that government bonds would trade at a negative -- negative -- level, you would have told me impossible. Well, that happened at the short end of Germany. And the Netherlands.
QUEST: It is perverse that the UK, which still has a huge deficit, has got a record-low lending -- record-low yield. The US, which has got the fiscal cliff, has a record-low yield. It's telling us that there's something seriously wrong.
EL-ERIAN: Well, what it's telling you is that, in the case of the US and in the case of the UK, they have central banks that are willing to print money in order to buy the bonds, so that helps keep rates low. The ECB has been less willing to do so.
QUEST: Finally, do you think we are now -- the stage is set -- forget the Olympics and the starting gun. The starting gun is about to be fired, if it hasn't already, for another serious dislocation in global economics.
EL-ERIAN: I worry about this for two reasons. One, we are in a synchronized slowdown. So, it's not clear that there is a strong engine that can pull the global economy forward. China is growing less rapidly, Brazil is growing less rapidly, India is going less rapidly. So, I worry that we are in a synchronized slowdown.
Second, the private sector is disengaging from the Eurozone, except for Germany. And that's important to realize this. It's like sucking oxygen out, and as long as the private sector takes money out of countries like Portugal, Spain. These countries will have enormous difficulty generating growth.
QUEST: Do you expect Spain to be bailed? To need a bailout?
EL-ERIAN: Absolutely. Absolutely.
QUEST: Well, that's -- think about it.
EL-ERIAN: Absolutely. This is -- the question is Italy. Will Italy be forced into bailout? Europe can afford to bail out Spain, but Europe will have enormous difficulty bailing out both Spain and Italy.
QUEST: If that happens, what does happen?
EL-ERIAIN: If which happens?
QUEST: IF Spain and then Italy has to be bailed out, they've got to find the money somewhere. How do they do that?
EL-ERIAN: It is going to be problematic. They're going to have to make a very serious decision. A very serious -- this is like a car with two, almost three wheels off the cliff, and you've got to make some really rapid decisions if you're going to bring it back.
(END VIDEOTAPE)
QUEST: Mohamed El-Erian talking to me on the sunny balcony. Spain says eurozone countries aren't doing enough to implement the decisions made at last month's summit meetings. I've got those decisions that they made, the EFSF, flexibility, memoranda of understandings.
Spain says it's -- not enough is being done. It's a direct attack on Greece. Spain's finance minister is in Berlin holding talks with his German counterpart. Al Goodman. Al, this is becoming a -- lovely to see you, as always, of course, but we can't go on meeting like this. It's becoming a nightly ritual that you and I talk over the misery and mayhem of whatever's happened in Spain.
AL GOODMAN, CNN MADRID BUREAU CHIEF: And even more tonight, because of missteps going on between Spain, France, and Italy. What you're talking about, the secretaries for European affairs, or the ministers for European affairs for France, Italy, and Spain met in Brussels this day. And afterwards, Spain issued a statement.
Here it is in Spanish, from their Foreign Ministry, saying that those three countries, Spain, Italy, and France, were demanding that the European Union implement immediately the agreements from the summit at the end of last June, basically to get money from Europe, bailout money, quicker into the member states with a variety of conditions.
But then what happened, hours later, France and Italy said, we didn't agree to that. That's not our statement. So, you have a major misstep in the middle of all of this markets going south and bond yields going up here in Spain. Richard?
QUEST: Al Goodman, who is in Madrid. And since I used Google Translate to do the statement, which did a half decent job, I think, I'm going to take your translation as being better. Al, good to see you, as always. We must stop meeting like this.
Spain's main stock index was the worst performer in Europe. Let's move the wheel, and you'll see, down 3.5 percent. The other major markets just really basically held their own, didn't do much more than that.
Car-makers were the worst performing in Frankfurt and Paris, Peugeot off more than 4 percent. Shows you the market wasn't too badly off if it was only down by that at the end. BMW off by 2.5 percent.
Spain's borrowing costs climbed to new highs, 7.6 percent. That is what you call eye-watering on the way. The yield on the five-year overtook the ten-year equivalent, and that's a sign, really, of deep worry, when you start getting what we call an inverted yield curve, it is a recession, not just a bad, but a bad one on the way.
Finally, Greece's prime minister, Antonis Samaras has vowed to press on with deep spending cuts. Officials from the Troika, Greece's bailout creditors, are in Athens to check if the terms of the bailout deal are being met, and we think we know the answer. Just about everybody, to a man, woman, and dog, tells you that no, the program is off track and needs to be brought back on track.
Tomorrow night, QMB, QUEST MEANS BUSINESS, coming to you live from the German capital. We'll get the views of some of Germany's top chief execs and economic woes on how Europe's largest economy deals with the debt crisis and the possibility of losing its Triple A. I'm in Berlin tomorrow night.
After the break, we are aiming for gold in the heat of the earnings season. The Q25, we've got medals up for grabs.
(COMMERCIAL BREAK)
QUEST: We started the program showing you what's happening on Wall Street. Now, we get into it in more detail. The Dow is off 161 points, 1.25 to -- 1.25 percent at 12,559. After the big losses on the Dow on Monday, firmly in the red again.
The Richmond Fed manufacturing report was a big miss, at minus 0.7, the lowest level since April 2009. One bit of good news in the housing market, and you take good news when you can, and there isn't that much of it, the real estate company Zillow says house prices have bottomed out and that most markets should see price rises over the next 12 months.
So, to the Q25, our barometer, and you'll know, as you can see as we're going through it, this is our exclusive guide to making sense. These are the criteria, which you can always see on our website, and you can follow through. Three -- get them all or none and you get the color, otherwise it's a debate.
And who do we debate with? We debate with, amongst others, Maggie Lake, David Brant, our producer in New York and our producers in London, and we have a real ding-dong, sometimes, battle.
We start off tonight, though, with UPS, the parcel service, United Parcel Service, the largest in the world, by the way. And here's something interesting. They are very big in the Olympics and the Olympics logistics business. They are one of the main sponsors and are certainly reaping in the benefits of that. But, Maggie Lake, when it came to the Q25 -- gold or red?
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: Automatic red on this, Richard. And you only have to listen what this company was saying to see why the Dow is off so much today.
This is a terrible commentary across the board. They weren't optimistic about anything. They -- Europe a problem, Asia a problem. And the thing that really jumped out for me, US growth only 1 percent this year, which puts them on the really pessimistic end of forecasters. So, they're very worried, indeed.
QUEST: All right. Now, as I drop this in, because UPS gets the automatic red, what we are seeing with UPS is crucial because we also saw it with DuPont. These are companies that are performing as best they can, but because of macroeconomic environments, they can't succeed. And DuPont was another example of that. While you tell us that, I'm going to drop the red in.
LAKE: Absolutely. And DuPont was another automatic red. This is a company that tends to be very conservative. They were at the low end of their forecast. And again, Ellen Kullman has done a great job picking up from Chad Holliday of turning this company, focusing on the growth areas.
But things are changing and deteriorating so rapidly. I spoke to her just about two weeks ago in Washington, DC. She said that agriculture, even in Europe, was a bright spot. But when Europe makes up 26 percent of your sales, she talked about how difficult it was managing in this environment with so much uncertainty. Have a listen.
(BEGIN VIDEO CLIP)
ELLEN KULLMAN, CEO, DUPONT: There's not too much clarity about the future, so you really have to change the way you operate, your cycle time shortens to be able to understand exactly what's going on in a given country, in a given industry, an exact period of time. And your decision- making is much, much quicker.
(END VIDEO CLIP)
LAKE: Richard, that is so important, because not only does it impact customer orders, businesses with each other, hiring. This is why we don't see jobs. Businesses are really being paralyzed right now.
QUEST: We go to Texas Instruments. They had one interesting bit. Q- on-Q earnings growth showed a bit of a good, strong barometer, but frankly, when you put -- that was an aberration, we think it was cyclical or seasonal factors, but otherwise, it is a red for Texas.
AT&T. Maggie, I liked AT&T simply for the way they've handled the massive structural and systemic change that had to happen when they lost -- when they lost exclusivity in the US with the iPhone.
LAKE: That's right. A lot of people were really worried about that. This one was up for debate. It wasn't an automatic, there were some parameters that they didn't meet. I think they got three out of five. But you're right. I think we give them a gold. You liked that part of it.
What I like -- I actually don't like it as a consumer. We are using more and more data on SmartPhones. That's bad for me, bad for my monthly bill, but it's very good for AT&T's bottom line. They're going to continue to make more money --
QUEST: Yes.
LAKE: -- off of that as we do more on SmartPhones. So, that bodes well for their future.
QUEST: Unless you've managed to get an all-you-can-eat plan, and these days, they are --
LAKE: No, they're changing them!
QUEST: No -- no!
LAKE: They're changing them!
QUEST: I know! I'm still grandfathered in in an old -- an old one. There you are. There's the gold for AT&T. Finally -- thank you Maggie. Thank you, Maggie Lake in New York. I'm going to quickly do SAP. SAP is the European -- the German software company.
SAP only had four matrices that we looked at because it doesn't have to beat expectations by three, but it met all four of earnings, revenue, Q- on-Q, and its guidance. And when we come back after the break, after we've given its gold, we will talk to the chief executive of SAP.
Now, the Currency Conundrum. Going by the three letter currency codes, which currency appears first alphabetically? Is it the Algerian dinar, the Australian dollar, or the UAE's dirham? The dinar, the dirham, or the dollar? Anyway, we'll bring you the answer later in the program, and no Googling.
The euro's slide continues its pace, a fresh two-year low, off more than half a percent, almost beneath $1.20. The Swiss franc tends to move in tandem, is also down. Sterling's off against the greenback. Those are the rates --
(RINGS BELL)
QUEST: -- this is the break.
(COMMERCIAL BREAK)
QUEST: SAP says it's just had its best Q2 ever after taking software revenues of more than $1.2 billion. And as we all say, we're giving it a gold medal in the Q25. Normally it would be green, but obviously gold with the Olympics.
The chief exec, co-CEO, Bill McDermott, always good to have him with us live from Newtown Square, Pennsylvania. Bill, as I look at your results, it's fascinating, isn't it? Because you're seeing fewer sales, but those that you're seeing are of a larger dimension. People are spending more. So, what are you attributing this to?
BILL MCDERMOTT, CO-CEO, SAP: We have a customer-driven innovation strategy, Richard. We saw some time ago the importance of mobility. There's so many mobile workers in the world today.
When you factor in mobile workers plus machine-to-machine and e-health care and many of the other dynamics of smart metering, mobile is clearly a trend that's going to rule the world by 2020. And we're the leader, because we chose it in our strategy.
Secondly, this idea -- and your CEO just said it -- of the real time enterprise. How do you move all the information and the data of an organization into real time insight for executives so they can make the call, make the right decision and move on?
And then finally, the importance of the Cloud in lowering the infrastructure cost and improving the operational excellence. We focused on all these things for our customers.
QUEST: Right. Those are things within your own bailiwick, if you like. They are things you can control, you can look for.
But in this current macroeconomic environment, when you've got -- SAP's home, you've got Germany potentially being downgraded, you've go the eurozone falling apart, you've got the US possibly going over the fiscal cliff. How does a CEO trade globally in this environment?
MCDERMOTT: You have to be massively agile. One of the things that we do to run our company is we have all the data on all the industries, all the market segments, and all the geographies factored into a real-time pipeline. So, we can see in real-time what transactions are or aren't taking place so we can adjust accordingly.
For example, if southern Europe is off because of the uncertainty, perhaps Germany, Austria, or Switzerland or the UK will be on. And similarly, this is how you have to flex your workforce, your marketing budgets, and the various campaigns and rounds to market.
You can't sit back as a CEO and say they headlines are uncertain, so I'm going to put my feet up on the desk and fail today. You still have to find a way to win.
QUEST: Bill, will you come back on -- well, first of all, will it be a gold or a green next quarter?
MCDERMOTT: Ah, it'll be a gold. SAP goes for the gold.
QUEST: Oh! Oh!
MCDERMOTT: We have 61,000 people that want to win.
QUEST: Thank you. Thank you very much. See you next quarter.
MCDERMOTT: Thank you.
QUEST: Good to see you, Bill McDermott --
MCDERMOTT: See you, Richard.,
QUEST: -- for the gold. When we come back, proving that this is the business program that really does take you to places that other shows don't even begin to think about, we'll take you from SAP's chief exec to the chief exec of a recipe for success, the ingredients needed for Domino's Pizza, and the chief exec will tell us why he believes he's got a tasty formula, after the break.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN and, on this network, the news always comes first.
A video posted online appears to show Syrian troops moving into Nahar Eisheh, a neighborhood of Damascus. An opposition group says heavy shelling has been erupting in and around the Syrian capital. We're told at least 54 people have been killed nationwide on Tuesday. CNN can't confirm the authenticity of that information or, indeed, the pictures that you're seeing.
The president of Ghana has died. A statement from his office says John Atta Mills died a sudden and untimely death. It's unclear how he passed away, but the 68-year old apparently became ill only a few hours before.
Mr. (ph) became president of the West African nation three years ago and was running for reelection later this year. The vice president is expected to address the nation of Ghana shortly.
British prosecutors say eight former staffers from the defunct tabloid "News of the World" newspaper have been charged with illegally eavesdropping on voicemail. The former editor, Rebekah Brooks, is amongst them. Brooks says she never authorized phone hacking at the newspaper.
A law enforcement official has told CNN that if tripwires had been strung in the home of the suspected Colorado theater shooter, James Holmes, the entire apartment building may have gone up in flames. Police believe Holmes rigged up dozens of explosives before going to the local theater and opening fire.
Heavy rain is still falling in Hong Kong, but the ferocious winds that battered the city early this morning have mostly died down. The storm is the most powerful typhoon to hit Hong Kong in more than a dozen years. More than 100 people have been injured and hundreds of trees have been blown over.
(MUSIC PLAYING)
QUEST: When it's raining outside and there's something decent on the TV, QUEST MEANS BUSINESS. What could be better than settling down at home with a pizza and apparently if you look at the latest statistics, that's what the Brits and large parts of Europe have been doing for most of this year. And it's given Domino's Pizza a significant boost in their earnings.
Now they do deliver, but to show you their results, we're going to make a pizza of our own and we're going to put it in that context. I'd better just tidy myself up.
So we have the base, our pizza base. And now we need to add some toppings. And we start with the basics, and for the basics, we're going to talk about like-for-like sales. Well, the basics of like-for-like sales is, of course, the tomato.
And when you think, for example, like for like of 5.2 percent, in Ireland, U.K. and Germany and you add in the fact that there's been a 40 percent increase in online orders, you start to get the idea of why this base has become quite rich.
However, put this into the context of the extra, and in Domino's terms, the extra is 13 percent extra in terms of earnings, which made the first half so successful. If that was only so far so good, bearing in mind some sales were part -- rather poor in the U.S., you have your classic margarita. But they went a little bit further, if you look at the numbers.
First of all, they had the extras of the rain. The rain kept people in and people then ate pizza. And Euro 2012, I think we all used funny- shaped -- oh, hang on; an olive's just disappeared -- there we are. So there we have Euro 2012.
And finally, of course, a little bit of basil, because that, of course, is the Olympics. And once again, Domino's expects that their people will be ordering this sort of stuff for the Olympics. You get an idea of how they managed to get to the numbers where they are.
No anchovies, for the foray into Germany. It's bitter, bitter. Its 10 stores there are likely to make a loss of nearly $4 million as the group builds up its infrastructure. Let's take some olives off for Germany next year. And there you have it, the right balance of ingredients and a result. And to prove that here's one that I made earlier. So Patrick Doyle is the chief executive of Domino's Pizza.
Patrick, I may never get a job making pizzas if you saw the horrific mess that I've made. I suspect you're turning as if you're thinking, what have we done? But your results, bad weather, Euro 2012, a slow United States, your company's relying on the rest of the world.
PATRICK DOYLE, CEO, DOMINO'S PIZZA: Well, you're absolutely -- the international business is just booming for us. We've got just phenomenal global momentum. And you saw the U.K. results. They were up over 5 percent like-for-like in the first half. Our total international business, same-store sales, were up 5.7 versus 1.7 in the U.S. in the second quarter.
So it's clearly right now the story is bigger outside of the U.S. than in the U.S. But we're OK in the U.S. as well. We'll take it. That's kind of in line with our expectations.
QUEST: And the restructuring or the problems of recent years, that I know that companies had to deal with, and you grappled with and you took on -- you took on the nose quite early and quite quickly. Do you believe as chief that you've got a handle on them and turned it 'round?
DOYLE: We're feeling very good about where we are as a brand. The digital side of the business is terrific. We've got the best pizza on the market now. You know, our stock price in the U.S. doubled in 2010 and again 2011. And so we feel pretty good about where we are.
QUEST: So what's your biggest worry? As you look out and you look at the Eurozone slowing down, potential recession -- well, not potential; we've got a recession in the Eurozone. You know the problems. How can you keep extracting earnings from a market that is going -- pardon the phrase - - like a bit of my pizza here, get soggy?
DOYLE: Yes, I mean, we've clearly got to give good value to the consumers. There's a lot of uncertainty out there. I mean, really, around the world, when you look at the financial crises in different countries, you know, that's got to get addressed. We've got to bring the uncertainty out for the consumer.
But you know, we can't control that. We can hope, we can prod but, you know, for us, we've got to deliver great pizza for a good value in this environment until the consumer, really around the world, is feeling better about their own situation.
QUEST: Something tells me you're not going to like the pizza that I've created as part of your economic annual results.
All right. Thank you very much.
DOYLE: You're going to stick to journalism?
QUEST: Believe me --
DOYLE: Thank you, Richard.
QUEST: -- if I stuck to pizzas, you would be out of business. All right. Many thanks for joining us.
(LAUGHTER)
QUEST: (Inaudible). A pizza that only a mother could love.
Coming up next, Amazon, it taps into London's thriving techup (ph). We hear from the M.D. of the retail giant's new digital media center. That's after the break.
This is disgusting. Would somebody please take it away?
(COMMERCIAL BREAK)
QUEST: Time for the answer to the "Currency Conundrum." We asked you which of the following currencies came first alphabetically according to the three letter ISO code. The Algerian dinar, the Australian dollar or the UAE dirham? The answer is the dirham. The code is AED; of course, the Aussie dollar AUD and the Algerian dinar DZD.
I love that "Conundrum" question today, one of the best we've had.
It doesn't have the punch of California's Silicon Valley, London's Silicon Roundabout just got a major new backer in the form of Amazon. The world's largest retailer will open a new creative hub in the city's East End. It will house hundreds of software developers and engineers.
Now the managing director, Paula Byrne, told me earlier when I asked, look, what are they going to do, all this interactive and developing software and softphones and this -- what does it all mean?
(BEGIN VIDEO CLIP)
PAULA BYRNE, MANAGING DIRECTOR, DIGITAL MEDIA DEVELOPMENT CENTRE: These days, people are wanting to watch TV and movies in different ways. It's not just about sitting there with a TV in the living room. It's about maybe using your Xbox. My teenage son watches TV and movies now on his Xbox in his bedroom. The other one watches it on his PS3.
So they watch movies delivered by LOVEFiLM, which is the company that is bringing people into this new center. So what we've got is this center, eight-story building, central London, down by the Barbican. It's taking all of the best developments, engineers and these user interface experts that we talked about. What that means is people who are good at making things look pretty.
QUEST: Right. And is it going to be a global center for Amazon worldwide, or is it primarily U.K. EMEA -- Europe, Middle East, Africa?
BYRNE: Absolutely. And I think this is the really exciting thing about the center we're announcing. It's got a U.K. and European remix but it's also got a global remix. So Amazon customers all around the world are going to have products and services delivered onto devices for them by this team of people who are based in London.
QUEST: How important is it for you that this becomes complete blue sky thinking -- to use that cliche -- but people there really do think of new and original and different ways, not just modify the existing ways?
BYRNE: I think the important thing is for all of us to pull together to give customers what they want. So it's about giving customers big --
(CROSSTALK)
QUEST: Yes, but do you think it's -- the beauty of people like Apple, to a certain extent is they gave us things -- and Amazon, when it started. You gave us things -- you told us we wanted things without us even realizing we wanted them. And that seems to be the trick to true development.
BYRNE: And we'll continue to be doing that. Absolutely. I mean, Amazon always puts its customers first. It wants to do really good services. It's got vast libraries of TV and movie content. And what we're about doing is allowing customers to view that content any time, anywhere on any device.
(END VIDEO CLIP)
QUEST: Anywhere, anytime, anyplace. That sounds a bit like Jenny Harrison when it comes to doing the weather.
And Jenny, despite all that we're seeing at the moment, then some difficult and sad news in terms of Europe tonight to start with.
JENNY HARRISON, CNN METEOROLOGIST: Well, yes, indeed, Richard. You're talking of course about the fires that have been burning across northeastern areas of Spain, where we're talking just a few days ago, I was saying about the fires across in the Canary Islands and other areas across Europe because, of course, (inaudible) the north where we've seen nothing but rain, across areas in the southwest, we have indeed seen some fires.
I'll come back to that in just a moment, because also we've been seeing some really rather dangerous conditions across central regions of the Mediterranean. Rain of over 130 millimeters and also a wind gust of 125, all coming from a very, very slow area of -- slow-moving area of low pressure.
This is it. It'll stay there for the next few days. Very quiet conditions across central Europe and still very hot and dry across the southwest in particular. That front across the north, well, it just sort of worked its way slowly eastwards and eventually hopefully fizzle out. But we've got warnings in place for those severe storms across the central Mediterranean.
This is the area we're talking about with those fires that have actually been burning in northeastern Spain. They actually began on Sunday. And it has taken thousands of people to actually get a grip upon these fires.
Let's have a look at some of the video, because four people have actually died from these fires. And a number of people are seriously injured in hospital. Six people at least are still in hospital, including a 9-year-old boy who was actually in intensive care. It's all the usual story. It was hot, it was dry and extremely windy.
And this is why the fires really did take hold. And in fact now it's been burning over 14,000 acres and just devoured trees, charred earth, of course as well in its path. But also this particular area of Spain flocks of dead sheep also have been left in its wake.
Now as I say, about 1,500 people have been fighting these fires, and also 25 aircraft from both Spain and France trying to obviously put them out. But the situation is certainly improving, the weather conditions have improved, the winds have died down and there's also some more humidity in the air.
Very heavy rain coming through Ireland in the last few hours. That's all from that front that I just showed you lying across northern regions of the U.K. and Scandinavia. But when it comes to the weather, in London in particular, as we're going through the week, well, it's been a beautiful day this Tuesday.
Look at this right now. We've still got 26 degrees as the high temperature, as the temperatures today, not the high, but there's the temperature under those good, clear, sunny skies. And that front to the north is going to kind of stay across these northern areas as we go through the next 24-36 hours.
And as for the forecast, as we go through the next few days of this week, of course, Friday is the day we're looking at. Right now, Richard, there is a chance of some showers late in the day in the evening hours, just 30 percent. So let's hope it doesn't come to that. But we'll keep an eye on this over the next few days.
QUEST: You most certainly will, every (inaudible). Jenny Harrison, I'm not letting you off the hook on this one. That -- all right, we'll leave it there. We'll talk more tomorrow, talk more tomorrow. I'm in Berlin. We'll talk more tomorrow, Jenny Harrison at the World Weather Center.
A tale of perseverance, triumph and an inspirational challenge in the shadow of London's Olympic Park. (Inaudible). It's fish. (Inaudible). (Inaudible).
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QUEST: As you know, I've turned QUEST MEANS BUSINESS into an Olympic- free zone when it comes to whinging and whining. You'll get over it. Enjoy them. Jim Boulden has met the restaurant owner in a similar vein who turned an Olympic adversity into an opportunity.
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JIM BOULDEN, CNN CORRESPONDENT (voice-over): If revenge is a dish best served cold, then smoked Scottish salmon is that dish for Lance Forman. The Forman family salmon factory has been in the east of London since 1905. But in 2005, its factory happened to be right smack in the middle of the planned running track inside the future Olympic stadium.
LANCE FORMAN, H. FORMAN & SON: The area of land where the Olympics is happening, you know, that 500 acres of land was the greatest concentration of manufacturing land in the whole of London, essentially been wiped out for three weeks of sports.
BOULDEN (voice-over): Two hundred small firms were forced to relocate or close. Forman held out.
FORMAN: And after four years of fighting them, you know, we finally got them to understand that the Olympics should not be about destroying 100-year-old heritage businesses and that they should do the right thing and that they should fund us to relocate. That's all we wanted.
BOULDEN (voice-over): Authorities eventually paid him enough money so Forman was no out-of-pocket. He erected a new factory just meters outside the Olympic Park, on the other side of this canal. Then as the stadium rose, so did Forman's interest in the Games. He got an idea.
FORMAN: Everybody has said to me that they've never known a building to be this close to the main stadium, just ever. We think it's completely unique. And consequently, we think that they will all come here to our hospitality space.
BOULDEN (voice-over): On a piece of waste ground next to the factory, a temporary Riviera. Sand is going in for beach volleyball along with palm trees, a night club and hospitality suites.
BOULDEN: Well, if you're wondering what this temporary venue and this incredible view would cost you for the 17 days of the Games, well, it's around $125,000. And that's even before catering costs.
BOULDEN (voice-over): Forman hopes to attract a few athletes and celebrities, not just those who pay for suites, though those suites were not sold out with a week to go.
FORMAN: One of the other messages we've had back from a lot of corporates in the U.K. is well, are we allowed to do anything at the Olympics? You know, (inaudible) have come on so strongly. You know, you can't do this and you can't do that and you can't do the other.
A lot of people think that they're not allowed to do an Olympic celebration because they're -- it -- they'll be infringing on branding.
BOULDEN (voice-over): Forman says he has risked more than $1.5 million to build all this.
FORMAN: There are times in your life when you have to take gambles, but you've got to choose those times well. I am never going to be in a position ever where I'm 100 meters from the biggest event ever on the planet.
BOULDEN (voice-over): It could pay off if the great and the good look over the fence and see a party going on right here -- Jim Boulden, CNN, London.
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QUEST: The entrepreneurs -- and plenty of entrepreneurs are tailoring their businesses to the Games. Our Millennials are no exceptions. David Lloyd, the head of Intern Latin America has brought a group of students to London to work at the Games. This is their welcome party in East London last week. Sport has always been part of David's company.
Here are some of his students in the under 20s in Colombia last summer. As we find out tonight, David has a sporting heritage of his own because, once again, let's look at the making of a Millennial.
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UNIDENTIFIED MALE: From a young age, they've been told they're special. They can achieve whatever they set their mind to. Now they're taking over the workforce and already gunning for that corner office. They are the Millennials, and this is their earlier years.
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UNIDENTIFIED MALE: It's on this quiet and quaint street of West London that meet David's mum, Sara Harrity, and Hazel (ph), the family dog.
SARA HARRITY, DAVID'S MOTHER: Good Hazel (ph). Good walking, Hazel (ph).
UNIDENTIFIED MALE: Back from their morning walk, Sara takes Hazel (ph) indoors.
HARRITY: Come on. In we go.
UNIDENTIFIED MALE: Inside, two photos of her son adorn her desk, a mother's pride.
HARRITY: I think as a toddler, David kind of always wanted to be first, you know, the first out of the bath, the first into the car. I mean, that, I think, was a fairly distinct thing about him, in fact.
He's quite competitive child.
UNIDENTIFIED MALE: Sara has captured every moment of David's youth as the dozen or so albums can attest.
HARRITY: Here he is, having a go at cricket.
David was always -- worked hard, wanted to do well, was a very easy child to motivate actually. I remember his teacher saying that. He was very keen to -- keen to do well. And the thing that was really memorable about David as a child was sport.
UNIDENTIFIED MALE: From photos to these home videos, David's youth has been defined by sport.
HARRITY: I mean, he was captain of his little cricket team at the choir school. He was always in the teams. He loved to play in tennis tourists. He loved skiing. Football, of course, was a big, big thing for him.
He was a goalkeeper for -- in his secondary school and I think he just got huge amount out of that and that, in a way, was, to me, you know, an example of him really wanting to shine and to achieve things.
UNIDENTIFIED MALE: He started competing and winning early on, in everything from skiing --
UNIDENTIFIED MALE: (Inaudible). You got it.
UNIDENTIFIED MALE: -- to tennis -- even a spot of sailing and fishing.
HARRITY: I think I probably didn't particularly tell him, you know, you know, it's important to win because he was obviously so keen to win. I seem to remember saying to him it was very important to be kind, for example.
UNIDENTIFIED MALE: Sport, it seems, has helped define this Millennial. He's learned to fall down and get up again. It's taught him discipline and hard work.
UNIDENTIFIED MALE: OK, David, go ahead. (Inaudible). Close your (inaudible) after each turn. That's better. That's good.
UNIDENTIFIED MALE: His grandfather's support and advice on the other side of the camera has encouraged him to be the best, while still being a team player.
HARRITY: It teaches you fair play. It teaches you how to work as a team. It teaches you good communication. It teaches you how to cope when you lose, in all kinds of ways, sport kind of mirrors -- kind of mirrors life.
UNIDENTIFIED MALE: Luckily, his professional life also mirrors his sporting success.
HARRITY: Well, I've -- I'm so proud of him and I'm amazed by what he's done so far. And I'm looking forward to seeing what happens next.
UNIDENTIFIED MALE: Today, at just 27, who would have thought he'd be a managing director, the young boy who one day pretended to be a CNN journalist.
DAVID LLOYD, MILLENNIAL: (Inaudible) this is the year 1997. I'm (inaudible) to CNN (inaudible).
UNIDENTIFIED MALE: As he is now, our Millennial.
Next week on "The Millennials," in Johannesburg, (inaudible) professional advice on how to get a loan.
And in London, Sam (ph) and Harry (inaudible) customer (inaudible) deliver. That's next week on "The Millennials."
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QUEST: If they ever get my mother to start doing those sort of testimonials about me -- a "Profitable Moment" after the break -- I'll quit.
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QUEST: Like the proverbial pizza delivery boy, Moody's turned up with the goods. And we have opened the box and discovered, unlike this pizza, it smells rather unsavory. There's a pungent whiff of desperation about the Eurozone. And you can't blame Moody's for giving us the facts.
The economies of Spain and Italy are full of holes. Greece is close to a meltdown -- and I don't mean the cheese -- and Germany, Europe's richest economy, doesn't have enough dough to sort it all out.
The economic environment is deteriorating fast. Tonight we heard about it from Domino's, from Mohamed El-Erian of PIMCO, from Bill McDermott of SAP. They have to run their businesses despite the appalling nature of the global economics. And if it carries on unchecked, we're in grave danger of cooking up an unholy mess.
Europe's leaders must heed the message from Moody's and start sprinkling economic pep on the Eurozone before it turns into something that is quite rotten to the core. Business can only go so far. And it must be government that plays it part.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable.
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QUEST: The headlines at this hour: video posted online appears to show Syrian troops moving into the Nahar Eisheh, neighborhood district in Damascus. An opposition group says heavy shelling has been erupting in and around the Syrian capital. At least 54 people are believed to have been killed nationwide. We can't confirm the authenticity of the information or these images.
The president of Ghana has died. A statement from his office says John Atta Mills died a sudden and untimely death. It's unclear how he passed away, but the 68-year old apparently became ill only a few hours before. He became president of the West African nation three years ago. The vice president is expected to address the nation shortly.
British prosecutors say eight former staffers from the "News of the World" will be charged with illegally eavesdropping on voicemails. The former editor, Rebekah Brooks, is amongst them. She says she never authorized phone hacking at the tabloid.
And there's heavy rain that's still falling in Hong Kong. The ferocious winds that battered the city have mostly ended. The storm is the most powerful typhoon to hit Hong Kong in more than a dozen years. But more than 100 people have been injured; hundreds of trees have been blown over.
You are now up to date with the world's news headlines. Next, live to New York and "AMANPOUR."
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