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Quest Means Business
Obama Arrives in Japan; US-Asia Trade Deal; US "Pivot to Asia"; Dow Dips; HBO Shows on Amazon Prime; South Korea Ferry Investigation; Ferry Heroine; European Markets Down; Greece Records Primary Budget Surplus; Europe Debt; Eurostar Earnings; Facebook Earnings
Aired April 23, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
MAGGIE LAKE, HOST: The winning streak is over. Despite the smiles you see up on that podium with Fergie, the star, there, stocks edge lower on Wall Street. It's Wednesday, April 23rd.
A quarter of global trade at stake. The US president starts his Asian mission.
The writing on the wall for Facebook and Apple. The latest results are out this hour.
And prime content for Amazon as it scores a milestone deal with HBO.
I'm Maggie Lake. This is QUEST MEANS BUSINESS.
Good evening. He's on a mission to push forward one of the biggest trade deals in a generation, and it all starts in Japan. US president Barack Obama arrived in Tokyo to handshakes and smiles. It's the first stop on week-long tour around Asia.
Washington is trying to refocus its diplomatic and economic efforts in the region. At the top of the agenda, a massive trade deal. Even before he touched down, though, President Obama took sides in a bitter territorial dispute between Japan and China. CNN's Michelle Kosinski reports from Tokyo.
(BEGIN VIDEOTAPE)
MICHELLE KOSINSKI, CNN WHITE HOUSE CORRESPONDENT: It's interesting, right in the midst of the Ukraine crisis, in which the US has tried to take the lead in finding a diplomatic solution there, here comes this very important Asian trip, where some of the countries to be visited have very similar territorial worries, even disputes with China.
It's not so easy to espouse the values of national sovereignty and territorial integrity in one part of the world and then not address it in another. In fact, one Japanese newspaper asked President Obama about it even before he landed, about these disputed islands between Japan and China in the East China Sea.
And the president didn't try to walk some middle ground. He definitively said he sides with Japan on this as the rightful administrator of those islands and said that the US opposes efforts to undermine that.
Then you look at the Philippines and Malaysia. They have their own issues with China. So, this is sure to be a topic that comes up again. And at times, it is a sensitive one as this trip progresses.
Michelle Kosinski, CNN, Tokyo.
(END VIDEOTAPE)
LAKE: Now, at the center of President Obama's so-called "pivot to Asia," the Trans-Pacific partnership. It's a massive deal aimed at scrapping tariffs and boosting trade between the US, Canada, and ten countries around the Pacific Rim.
Now, the 12 countries would account for 40 percent of the world's economy, and more than a quarter of all trade. The US government estimates it could generate more than $300 billion in new exports.
Now, in Asia, Japan is a major trading partner with the US. The two countries exchange $216 billion worth of goods each year. The TPP would open Japan's economy to more goods from abroad, which is a sticking point.
Currently, it's stalled by disagreements between Washington and Tokyo over beef imports. The deal has been in the works for years and is unlikely to be finished on this trip. Analysts say President Obama and Prime Minister Abe may announce a preliminary agreement tomorrow.
And there's one significant player left out: China. The partnership is seen as a way for the US to try to counter Beijing's growing clout in the region.
President Obama is trying to strike a balance on his trip. He's trying to exert US influence without upsetting major trading partners. Richard Quest sat down with the president of the Asia Society to discuss what's at stake.
(BEGIN VIDEOTAPE)
JOSETTE SHEERAN, PRESIDENT, ASIA SOCIETY: We have to demonstrate that the US really has pivoted or rebalanced to Asia. He's got to give proof points. One is the US involvement and all the disputes that are happening in Asia now. Will the US show forward leadership to be a constructive player and leader in the region to help these nations find their way through that?
And secondly, on the trade with Asia, will he come out and really put that centerpiece in his presidency and the trade agreement between many of the nations in Asia and the US.
RICHARD QUEST, CNN INTERNATIONAL: There is still always the feeling, even though they talk about the pivot to Asia and the new importance of Asia, there is still always the feeling that methinks they talk big and not mean it.
SHEERAN: Well, this is where the proof points have to come in. There's been a lot going on in the world -- Syria, Crimea -- things have pulled the US away from Asia, but now we have to --
QUEST: But what's pulling the US towards Asia? Relations with China have been difficult, on trade protection, they are difficult.
SHEERAN: Well, they're difficult, but this is our biggest trading partnership in the world. This is absolutely critical to the US economy.
QUEST: There are fundamental differences of opinion between the US and China on core issues, whether it's been freedom of expression, whether it's internet piracy, whether it is hacking, whatever it might be -- not that the US comes to the table with clean hands.
SHEERAN: Well, there are many differences. And yet, China has arisen as the second-biggest economy in the world, and we don't have the fabric of resiliency to deal with these issues that you do between the US and Europe, for example.
QUEST: Do you think there is a fundamental difference of how the world is viewed from the United States and from Asia?
SHEERAN: Well listen, Richard, I think it's more complicated than that. I think within Asia, Japan has a view of what the world order should be, China has a view, India has a view, the US has a view, Russia has a view. And we've lost our consensus.
This is why this trip is so vital. President Obama has a big role to fulfill to show the US constructive leadership in helping the world forge a consensus for this century. We need buy-in, and there's no country, really, better poised to lead as we did after World War II. I think the US has to --
(CROSSTALK)
QUEST: They don't want --
SHEERAN: -- inspire the world --
QUEST: No! They don't --
SHEERAN: I mean lead --
QUEST: Asia doesn't --
SHEERAN: -- lead on how we come together --
QUEST: They don't want --
SHEERAN: -- to continue this.
QUEST: -- the US to lead. That's the problem!
SHEERAN: Well --
QUEST: That is exactly the problem! The idea the US will somehow lead the way in terms of that dialogue. Isn't that the issue?
SHEERAN: Richard, I think we're at a critical point. We're either going to foresee another decade of rising prosperity, growth in Asia that will help lift all boats, or we're going to see the kind of tensions that came in 1914 versus 2014. We're seeing the same kind of war of words happening --
QUEST: Right.
SHEERAN: This pulling apart of the fabric of relations in a way that I think we have to be quite serious about.
(END VIDEOTAPE)
LAKE: Now, US markets ended the day lower, but as you can see, only just, down about 12 points. It was back and forth all day. Alison Kosik is at the New York Stock Exchange. And Alison, we lost -- the winning streak is over, but the loss is very modest. What are investors talking about?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: It's -- investors actually right now talking about those Facebook earnings coming in right now. We're getting a little bit of information. We found out that Facebook beat sales estimates, posting revenues of $2.5 billion. Earnings also topped forecast.
So, that's what we know so far. We're sorting through their results on what their mobile ad sales were like. Those are going to be important, because both are key yardsticks for the company and for the broader market.
Speaking of the broader markets, what moved today? Mixed earnings, disappointing housing numbers, all of that giving little reason to buy in. We learned that new homes sales plunged 14.5 percent in March to its slowest pace since last July. Some of that being blamed on bad weather, higher prices, higher mortgage rates, all keeping buyers on the sidelines.
But you look at the losses, Maggie, they're not so terrible when you consider the S&P 500 has been on that six-day winning streak, the Dow's closed higher in five of the past six sessions. So, getting both indices closer to their record highs. At one point, after what was a rough start to April, it's moving a little farther away from that today. Maggie?
LAKE: Farther away and a lot of earnings still to come. Alison, thank you so much.
KOSIK: Right.
LAKE: Well, HBO is opening part of its massive TV library to Amazon. Amazon Prime users, listen up. You'll soon be able to stream many of HBO's hit shows, like "The Sopranos."
(BEGIN VIDEO CLIP)
AID TURTURRO AS JANICE SOPRANO, "THE SOPRANOS": Time for presents!
JAMES GANDOLFINI AS TONY SOPRANO, "THE SOPRANOS": And Grandpa? I told you people I didn't want any presents just --
GROUP IN UNISON: Just a few kind words.
(END VIDEO CLIP)
LAKE: Ah, a present for Amazon users, but like the plot of any good show, there's a twist. HBO's present only applies to old shows. New seasons of shows like "The Newsroom" and "Girls" will take around three years to show up on Amazon.
HBO, like CNN, is owned by Time-Warner. CNN's senior media correspondent Brian Stelter joins me now. Brian, this is all we've been talking about is content. The battle for those eyeballs online. How significant is this deal?
BRIAL STELTER, CNN SENIOR MEDIA CORRESPONDENT: I think it's very significant because HBO has always been very tight-fisted with their shows. They own all of the programs that they broadcast, and they're very careful not to share them in lots of other directions.
Some repeats of some old shows, like "Sex in the City," are on cable. But the value of repeats like that is dwindling, because people expect everything to be available on demand.
And HBO's really good about making things available on demand. The 30 million people in the United States -- 30 million homes -- that have HBO can watch all of the back seasons of shows, like "The Sopranos," already.
But what about the homes that don't have HBO? What about the people who might have Amazon Prime who might want to watch "The Sopranos" from many years ago? That's the people that will now have more access to shows, thanks to this deal.
LAKE: So, who wins here? Is this a win for all around? Because to me, when you're talking about those back shows, they're old enough there are so many new hits that I'm not sure that HBO's really giving any kind of present. And what does Amazon get out of this?
STELTER: They're constructing this deal very carefully.
LAKE: Yes.
STELTER: Amazon gets a bunch of bold name shows they can promote. They can now say, for example, they've got all the seasons of "The Wire," this critically-acclaimed HBO series that, for some people, is still brand- new to them.
LAKE: Right.
STELTER: If you haven't seen it before, it's new to you. But HBO is most importantly still protecting its cable and satellite business. It is making sure that people still need to sign up for cable and for HBO if they want to watch the new hits, like "Game of Thrones" or like "True Detective."
They're having their cake and they're eating it, too. They're figuring out a new way to make money from their old library while protecting their core business.
LAKE: That's right. And for Amazon, as you say, some of the younger people as they come into Amazon Prime maybe haven't seen the shows. Brian, we're out of time now, but content is king, that's for sure, from what we can tell for all these deals. The content-makers are --
(CROSSTALK)
STELTER: Every day --
LAKE: -- the jars to beat, aren't they?
STELTER: -- that is reaffirmed every time we see a deal like this.
LAKE: All right. Well, Amazon Prime users, if you haven't seen those shows, you're going to be happy. Brian, we'll talk again soon.
STELTER: Thanks.
LAKE: Thanks so much. Well, searching for answers in the South Korean ferry disaster. Investigators now turn their attention to the company in charge of the ill-fated vessel. We're live in Jindo with the latest.
(COMMERCIAL BREAK)
LAKE: Hopes have all but vanished of finding any more survivors in the South Korean ferry disaster, 157 passengers are now known to have died, 145 others remain unaccounted for. Investigators are still trying to find out what made the ship list before it capsized and sank.
Today, they have searched the offices of the ferry operator. Kyung Lah joins me live from Jindo. And Kyung, let's start with that. What are they looking for in this investigation? Do we have any idea whether they found anything of value?
KYUNG LAH, CNN INTERNATIONAL CORRESPONDENT: We don't know what they found yet, Maggie. What they're looking for are any safety violations, any improper activity, any financial problems as well. That is the investigative arm that is still continuing, a dragnet that appears to be widening every single day.
Meanwhile, here on the waters of the Yellow Sea, I want to give you a look at what's happening here. You can see, it's still very much an active event right now. You can see that there are flares being dropped from the sky. Those are coming from a plane that buzzes overhead, and they basically light up this entire area.
If you look lower, toward the horizon, you'll see all these bright lights. These are squid boats, and we're getting, perhaps, the closest view yet that we've had of the heart of the rescue, the search itself.
That area that you're looking at, those buoys and that bright light right at the center, that is where it marks the spot where the sunken ferry is just below the surface, 65 feet, approximately, below the surface is where divers continue to try to pull out bodies.
There has been some devastating news overnight that there has been no air pockets found, Maggie, all but eliminating the chance of any survivors. Maggie?
LAKE: Which, Kyung, is so difficult for the families there. And we've talked about how difficult the search is, how dangerous the search is, those divers going down in the middle of the night in an area that's very rough.
And from what I understand, that search is going to become even more difficult and some difficult decisions need to be made as they enter the next phase.
LAH: The next phase being official recovery. This has been a very delicate dance between the families and the rescue teams. They don't want to call it a recovery yet. They don't want to use the cranes, because it is the nail in the coffin, then, the proverbial coffin, on all of these people who are aboard.
And the fact that we're dealing with so many high school sophomores, kids who are 16 and 17 years old, it's something that the country is certainly aware of, and they're being very cautious about it.
But what we do know is that eventually they will have to go down. They're going to cut apart this boat, try to raise it in various pieces, 6,000 tons, Maggie, simply too big to lift in one piece. So that is what we understand will be the next phase of recovery. Maggie?
LAKE: Kyung live for us -- Kyung Lah for us, live in Jindo. Thank you so much.
Well, as the role of the crew plays a key part of the investigation into the sinking of that ferry, there's been praise for a woman who gave up her life to help others survive. Paula Hancocks reports.
(BEGIN VIDEOTAPE)
(WOMAN CRYING)
PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT (voice-over): A mother cries, "I love you! I'm sorry!" as her daughter's coffin passes by. Park Ji-young was just 22, a crew member onboard the ill-fated Sewol Ferry. A crew member who gave up her life so others could live.
These men were part of a group of 17 school friends heading to Jeju Island for their 60th birthdays. Four of them are still missing. They say they owe their lives to Park.
Lee Joong Jae describes how the ship listed so much, the wall became the floor. An open door made the gap between them and the exit too great to step over. "Her colleague was lying on the floor," he says, "hanging onto the microphone, telling passengers not to move."
Park took the keys from him, forced her way to the door, closed it and locked it to keep it shut, so that passengers could walk across.
"She was right next to the exit," says Kan Yin-wan (ph). "She could easily have escaped. That door saved so many lives, it was like the bridge of life."
I ask how many lives? They estimate around 50 escaped through that exit. That's nearly a third of all passengers who made it out alive, helped by just one woman.
"She was just a girl," says Kim Jun-kun (ph), "but she was so brave. If every crew member on that boat was as brave as she was, the disaster would not have been this bad."
Among the first to be rescued, Kim says the captain and other crew members were already on dry land by the time he got there. "While the captain away to save his own life, she gave her life to save others," says this family friend. "We are so proud of her."
Park's relatives don't want to talk publicly, but tell CNN they want to follow her example of thinking of others, although they say they could never do anything as courageous.
Park dropped out of college two years ago when her father passed away to help support her family. She was transferred to the Sewol just six months ago, a step up within the company. Praised for her professionalism, and ultimately, for her courage.
Paula Hancocks, CNN, Incheon, South Korea.
(END VIDEOTAPE)
LAKE: And we'll be right back in just a moment.
(SILENCE)
(COMMERCIAL BREAK)
LAKE: A bit of a down day for Europe markets, but there's good news from Greece, which has recorded a primary budget surplus. It's a key condition for the country to get more debt relief from international creditors. The surplus is $2.1 billion or 0.8 percent of GDP. The news was announced by the Greek finance minister in Athens.
(BEGIN VIDEO CLIP)
CHRISTOS STAIKOURAS, GREEK DEPUTY FINANCE MINISTER (through translator): After all the difficulties that households and businesses have suffered for years, the country and its economy clearly find themselves in a much better position. The high twin deficits over time have been eliminated. Today, the country has surpassed its financial targets. It has achieved a primary surplus.
(END VIDEO CLIP)
LAKE: There have also been some signs of hope for Europe's mountain of debt. Government deficits in the euro area have steadily declined each year between 2010 and 2013. Earlier, I spoke to Bob Parker, senior advisor at Credit Suisse. I asked him whether Europe was still climbing out of the deep economic hole.
(BEGIN VIDEOTAPE)
BOB PARKER, SENIOR ADVISOR, CREDIT SUISSE: The answer is we are climbing out of a very deep hole. And you mentioned unemployment, and obviously, the unemployment numbers diverge significantly from country to country.
If we look at Germany, where growth this year will exceed 2 percent, unemployment is less than 7 percent and going lower. Certain parts of Germany, frankly, there is very little unemployment. The area around Berlin, for example. The area between Stuttgart and Munich.
Conversely, if we look at countries like Spain and Greece, unemployment is still elevated and north of 25 percent. And obviously, that's very unacceptable. Having said that, we are seeing unemployment levels stabilize in those two countries. And if anything, unemployment in Spain is starting to come down, and certainly in the case of Greece, it stopped going up.
LAKE: Yes, which is -- moving in the right direction is important. Are we going to see that two-speed recovery start to kind of close the gap? Are we seeing a sustained bounce in the periphery?
PARKER: The answer is, it varies from country to country. The answer to your question is a decisive yes in the case of Ireland, Portugal, and Spain.
And one thing that hasn't been commented on a great deal has been the improvement, actually, in Spanish competitiveness, and that's why I think, coming back to the issue of unemployment, you're going to be, I think, positively surprised by a fall in Spanish unemployment.
In the case of Ireland, all the macro economic data is currently looking quite positive. And they will have, I think, quite strong growth this year, and they've got a very strong trade and current account surplus.
Portugal we've recently seen very strong demand for Portuguese bonds. They're out or they're coming out of the bailout program successfully. So, that economy has turned around.
Now, to be blunt, the jury is still out on France and Italy. And although Italy's borrowing costs have come down and we've got, I think, an impressive new government in Italy, Italy has still got a lot of work to do to improve its competitiveness.
France is fascinating at the moment. And we're seeing a radical change in French economic policy by the Hollande government. A new prime minister and a new business-friendly economic policy. So I think, actually, France we will see better data in the coming months.
(END VIDEOTAPE)
LAKE: Eurostar, which runs high-speed passenger trains between the UK and mainland Europe, says it's on track for growth in sales and passenger numbers. Revenue in the first quarter rose 7 percent to $381 million, while passenger numbers increased by 3 percent to 2.3 million. CEO Nicolas Petrovic told me it's a sign of Europe's comeback.
(BEGIN VIDEOTAPE)
NICOLAS PETROVIC, CEO, EUROSTAR: Yes, it's a very good quarter. The business market is really now coming back more confidently. And what's interesting is that it's no longer only the UK, it's also the French market is coming back strongly. So, we see some really much more confidence in the corporate market, and it's coming through the numbers.
At the Eurasia markets, it's still good. It's not brilliant, but it's quite good. So, we're very happy with this first quarter.
LAKE: Business spending coming back would seem to fit into this picture of a recovering European economy. Do you feel it's sustainable? What are you hearing from your customers? Are they feeling much more confident about the future?
PETROVIC: Yes, you can definitely feel that, because I see the customers all the time, especially the big corporates, and there's a lot more visibility on the rest of the year. People are planning more long- term than they used to. They feel that the environment is more stable.
It's not just the UK, where it's been the case for already, I would say, six, nine months. But once again, it's also the case in France and Belgium and -- where it feels like the general environment, political, macro-economic, is more predictable.
And so, the companies are now in a mood to think about investing more or getting more business and expanding their operations. So, it's very encouraging signs.
LAKE: And of course, for that important leisure customer, we are coming up on the summer travel period, or at least the period where people are making plans for their summer holidays. What are your expectations?
PETROVIC: This year, we've got quite good expectations, because we can see that the demand is much stronger than in the years before. And for the first time, I would say, since 2009, we are adding up capacity for the summer. So, quite a few additional trains we run all summer to accommodate this additional capacity. So, I would say it's a good picture overall for the Eurasia market.
(END VIDEOTAPE)
LAKE: Well, there are the numbers investors have waited for all day. When we come back, the results for Facebook.
(COMMERCIAL BREAK)
LAKE: Welcome back, I'm Maggie Lake, these are the news headlines. US army paratroopers have landed in Poland to commence exercises. The move is seen as a show of solidarity with Ukraine, which has called off an Easter truce to try to eliminate the threat of pro-Russian separatists in its east. Russia's foreign minister, Sergey Lavrov, said in an interview, Russia would respond if attacked.
Divers searching the wreckage of a capsized South Korean ferry have found no air pockets on the third and fourth decks. The discovery suggests there's little hope of finding anyone still alive on the ship. Divers have pulled 159 bodies out of the Yellow Sea. Another 143 people remain missing.
At least four people have been killed, including two police officers, after a car bomb exploded outside a police station in the Kenyan capital. The blast occurred in the Nairobi suburb of Pangani. The government says police found another device at the scene and had to detonate it, causing a second explosion. It's not yet clear how many people have been injured.
The brother-in-law of Britain's Prince Charles has died in New York. A royal spokesman confirms that Mark Shand, the brother of Camilla, the Duchess of Cornwall, passed away in a hospital after suffering serious head injury during a fall.
Facebook has reported a huge leap in earnings. It has just reported revenue is up 72 percent compared to the same quarter last year -- 72 percent. Advertising revenue rose 82 percent over that same period, beating expectations, in an announcement made after the closing bell. Those are some pretty big numbers and expectations were high. Seth Porges is a technology writer who joins me now live in sub (ph). We were just speaking just before we came on air. There were -- there were a lot of expectations riding on Facebook. They'd been doing so well. They seem to have blown all of those expectations out of the water. What's going on?
SETH PORGES, TECHNOLOGY WRITER: Yes, isn't just that Facebook beat expectations -- but that their expectations were almost insane. You look at their stock price and the multiplier they were trading at was sky high, especially when compared to other saw (ph) such as Apple. They were going into this with insane expectations and they still managed to beat them.
LAKE: Right, so that says a lot about them executing on their strategy. Is Facebook finding new areas as we all move to mobile? Or are they stealing the business from someone else? Can we figure that out yet?
PORGES: Well, it really is mobile advertising is the big story here, because for years people have looked at mobile ads as the sort of black box with untold potential inside. But actually cracking that open has still been a mystery. Facebook, the fact that some half the revenue now is coming from mobile ads means that they may be the ones who are cracking the code and if they can stake their claim on this space going forward -- because that is a space that is only a space that's going to get bigger, bigger and bigger -- if they can stake their claim as the dominant company in that space, well there's untold riches.
LAKE: Yes. One of the things we're going to talk about though, if they're doing that, is whether there's going to be push back, because translated for everyone, that means selling our info to advertisers who want to know more about us. Can they continue that growth without alienating their users?
PORGES: Well, Facebook has sort of been a master of shifting the goalpost in terms of our privacy expectations, and that's only going to continue. And they've done a pretty good job of sort of changing the social norms about what's expected in terms of privacy in mobile advertising. And people have come to sort of expect this. If you're going to play a game for free, you might see an ad and your information might go for sale for that. There's no going back right now --
LAKE: Right.
PORGES: -- and Facebook, you can't just rip the rug out and remove Facebook. Facebook has sort staked its claim as a piece of infrastructure in the way the internet works right now. And this is how they work. It involves our data, it involves our information, and actually removing that or going back, it almost seems impossible.
LAKE: So Mark Zuckerberg went from seeming like a kid in a hoodie who was out of his league at that IPO to really sort of dominating being where the innovation is going on or seeming to sort of really sort of see the future. I want to mention Apple. Their numbers are not out yet -- we're waiting for them any moment. That seems to be the opposite side of the story. Suddenly this is the company everybody loves to hate.
PORGES: Well, yes, so Apple has actually -- has a different problem, the opposite problem. Whereas Facebook has sky-high expectations, Apple actually has very modest expectations. People are expecting sales of their marquee/marquis (ph) devices to be essentially flat which actually means there's a lot of upside going forward because this is an off year for them in their product release cycle. Look at the iPhone which is sort of still their bread and butter of their entire ecosystem. This is an 'S' year, the iPhone 5S. Coming up next is iPhone 6. And the thing that people --
LAKE: But phones have -- phone have plateaued, right? Isn't that --
PORGES: -- it doesn't
LAKE: -- and by the way, 4.6 percent rise in March revenue. We are starting to get those numbers out, --
PORGES: -- Yes.
LAKE: -- we'll continue to watch them, but --
PORGES: It almost doesn't matter for Apple as opposed to say Samsung which has to push a lot of hardware. Because Apple makes money off their existing customers like no other company does. As long as you have an iPhone, even if it's an old iPhone, you're still downloading games, you're still downloading songs, you're still --
LAKE: Is this because of the strength of their ecosystem --
PORGES: Yes.
LAKE: -- of their operating system?
PORGES: Exactly. No other company in the technology industry has this sort of vertical integration where they monetize the customer from the moment you buy the hardware until the moment you upgrade.
LAKE: Right.
PORGES: They don't need to just get that one-time cash-in on the hardware purchase. They make money off you every day you have your phone.
LAKE: That's a really good point. And that is forgotten -- I've heard analysts who remain bold on them say that and they do it better than anyone else -- that vertical integration. But do we need to seem them come out with a watch, come out with a TV? Or is that just noise? Are you focused on something else?
PORGES: Well I think some investors who have more short-term sights will definitely say, "Where's our blockbuster?" If you look back in the past, people remember Apple as this company that had this sort of non-stop parade of hits, of industry-changing hits -- iPhone, iPod, iPad. But if you actually look -- although these things seem like they came one after another in really quick succession, there were years between them.
LAKE: Yes.
PORGES: The iPod and the iPhone it's six years.
LAKE: We forget. We forget.
PORGES: We forget.
LAKE: So where is the innovation happening? I want to go back, I'll turn it back to Mark Zuckerberg. He's been on an acquisition trail, he's extremely young, he's flashing out big bucks for things like WhatsApp and for a virtual reality, and so what do we want to hear from him maybe in this conference call? Do we need to hear about the broader strategy or do these numbers speak for themselves?
PORGES: Well, I think Zuckerberg in particular is going to have to talk about his big acquisitions. When you spend $19 billion on WhatsApp and $2 billion on a virtual reality company that's really cool but most people haven't heard of, you need to explain what you're doing and what your strategy is.
LAKE: Yes.
PORGES: And I think he's got ideas. Because he knew this conference call would come, and he's going to be prepared to answer those questions I'm assuming and I'm hoping for his sake, but these are the big questions people are going to have. What do you do with $19 billion? How can you justify that? And I'm not saying he can't, I'm saying he's going to have to say how he does it.
LAKE: Yes, it's interesting. And he seems to be more comfortable, by the way, growing in that role of having to come up and confront investors. That that is a -- that is an area and a population we thought he was diametrically opposed to. He seems to be getting pretty good at it. Seth, great to see, please come back and talk to us about how you think he's doing once we hear what he has to say.
PORGES: Thank you.
LAKE: As we mentioned, Apple has come out with their numbers -- just crossing. They reported a 4.6 percent rise in revenue, to $45.6 billion. That did beat some of the Wall Street expectations that were out there. Again, those numbers just crossing. A lot more information will come out. We'll continue to follow that for you. Meanwhile, European security body, the OSCE, has accused the Russian government of curbing freedom of speech. That's after a new law demands site visited by more than 3,000 users a day must register with the authorities and verify that information is accurate and reliable. The Organization for Security and Cooperation in Europe warns if enforced, the amendments would "-- seriously inhibit the right of citizens to freely receive and disseminate alternative information and express critical views." A media clamp down has been a central feature of Russia-Ukraine crisis as Diana Magnay reports.
(BEGIN VIDEOCLIP)
DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT BASED IN BERLIN: There's a joke making the rounds on the Russian and Ukrainian Twitter sphere this week. The black and red business card with Dmitry Yarosh, head of Ukraine's Right Sector Party, in all sorts of unlikely scenarios held aloft by the Joker from Batman gracing the ceiling of the Sistine Chapel. The tweet's claiming it's just as unlikely as this scenario reported in Russian media that Yarosh's card was found here at the scene of a deadly attack at a checkpoint in eastern Ukraine, conveniently alongside U.S. $100 bills and weapons near burned-out cars. Proof, pro-Russian groups say, that Yarosh's Right Sector was behind the attack, a claim rejected by the group. On Rossiya 24, Russia's state-run 24-hour news channel, the on- screen bug for the crisis in Ukraine, is three revolving images of the players on the ground. Ukrainian state forces, pro-Russians and balaclava- ed (ph) militants from the Pravy Sektor of the Ukrainian far right portrayed as the bogeyman of the conflict and crucials (ph), the Kremlin narrative that Ukraine is at risk of what it calls a fascist takeover.
MIKHAIL TROITSKY, POLITICAL ANALYST: Fascists I think is now being used to designate all things obnoxious and bad in the Kremlin line of argument.
MAGNAY: This, political analysts say, is the Kremlin tries to reinforce the notion of patriotism through a carefully-honed campaign across state media, tapping into a vein of national pride which swelled during the Sochi Olympics and kept its momentum through last month's annexation of Crimea by Russia. Dozhd TV is one of the very few independent Russian media outlets recently dropped by most cable operators after it asked viewers whether the city of Leningrad should've been surrendered to the Nazis during World War II to avert massive loss of life.
MIKHAIL ZYGAR, EDITOR IN CHIEF, DOZHD TV: It was a huge campaign against us, blaming us for insulting all the veterans of Leningrad siege.
MAGNAY: Zygar says he's now worried about a polarization in Russian society over Ukraine, about a demonization of independent voices like his in the public consciousness.
ZYGAR: The new generation is coming that really believes that there is some kind of fifth column, people paid by the Western countries and who are working just to undermine the greatness of Russia.
MAGNAY: Tuning out the opposition served Russia's purposes in Crimea where Ukrainian newscasts were taken off air and replaced by Russian broadcasts, Crimeans fed a pro-Kremlin news diet in the days before the referendum. Now, the same appears to be happening in parts of eastern Ukraine with the takeover of at least one TV tower by pro-Russian separatists in Slavyansk. Vladimir Putin knows that his main source of support, his direct line to the people, is state TV. Not just as a way of influencing his domestic audience but also now to garner support in Russia's near abroad (ph). Diana Magnay, CNN Moscow.
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LAKE: Coming up, a sneak preview of the new terminal at London's Heathrow Airport. We take a look inside next.
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LAKE: In our "Business Traveller" update, the taxi firm Uber has driven into more legal obstacles, this time in Barcelona. The U.S.-based car booking app has had a lot of trouble in Europe. Now the Spanish Taxi Confederation is threatening nationwide protests saying Uber is an illegal business and one of piracy that is no guarantee for consumers.
Shares in Delta Airlines have climbed to a record high. The company has reported a 5 percent increase in passenger revenue for the first quarter of the year. That's despite losing $90 million and 17,000 flights through weather-related cancellations early this year. It's been a tough winter. And Trip Advisor said there's positive signs for the travel industry. In a survey, nearly 80 percent of people told the firm they plan to make international trips this year -- up 12 percent on last year. The research says the average traveler is planning to spend more than $6,000 on trips this year, a flight jump from 2013.
And talking of travel, take a look at this -- the outside of the revamped Terminal 2. That's what it's going to look like at London's Heathrow Airport, known as the Queen's Terminal. It's set to cater to 20 million passengers a year, up from one million when it first opened back in 1995. Now, after the baggage disaster when terminal 5 opened in 2008, Heathrow promises this will be smooth opening. CNN's Jim Boulden has been given a peek inside.
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JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Last-minute tweaks to get Terminal 2 just right before the grand opening in early June. And get is right, Heathrow's owners must.
JOHN HOLLAND KAYE, HEATHROW'S DEVELOPMENT DIRECTORS: Anyone who's traveled through here ten years ago I think would recognize that things needed to change at Heathrow, and that's why we're here today.
BOULDEN: This is no renovation of what was Heathrow's oldest terminal. The old T-2 was demolished. A new one stands in its place at a cost of $4 billion. It will house 23 carriers of Star Alliance, like United Airlines, South African Airways, Lot, Lufthansa and Singapore Airlines.
MARK SCHWAB, CEO, STAR ALLIANCE: More Star Alliance airlines at London-Heathrow than in any other airport in the world.
BOULDEN: And by putting them under one roof, it means Star Alliance passengers don't have to travel around to Heathrow's other terminals. And, new for Heathrow, printing your own luggage tags.
SCHWAB: Eighty-one of these kiosks distributed across the terminal. These will for any airline allow you to check in --
BOULDEN: Yes.
SCHWAB: -- and to print your bag tag.
BOULDEN: Bag tag -- not just a boarding pass?
SCHWAB: You're going to print your bag --
BOULDEN: OK.
SCHWAB: -- also when you're here.
BOULDEN: Star Alliance estimates 70 to 80 percent of its travelers will then just drop their bags and head straight to security. No need to talk to anyone.
SCHWAB: Very simply here, put your bag up on the belt and whisks away your bag.
BOULDEN: Now of course you may be asking 'didn't Heathrow have problems when the last new terminal opened?' The issue that plagued the opening of Terminal 5 in 2008 was luggage. The luggage system melted down. Now, those in charge of T-2 and those from Star Alliance vow that is not going to happen this time. Why? Because they're going to phase in the number of airlines that use T-2 over the course of the next six to eight months.
SCHWAB: Our first airline moves on June 4th -- United Airlines -- which currently is in two different terminals. Finally, after three years of their merger, is able to come here into one terminal building, but then month by month we're going to bring in three or four carriers.
BOULDEN: Terminal 2 is just the latest phase of an $18 billion redevelopment of Heathrow that began with Terminal 5. Soon, Terminals 1 and 3 will also be demolished.
SCHWAB: All of the airport that was originally designed in the 1940s will have gone in its entirety. We will have a brand new, world class hub airport that Britain needs to connect it to the world market of the 21st century.
BOULDEN: Don't be confused, fewer larger terminals perhaps but still only two runways. And keeping with tradition, the new terminal will now be known as the Queen's Terminal, to be opened in late June by Her Majesty 59 years after she opened the old T-2. Jim Boulden, CNN London.
(END VIDEOCLIP)
LAKE: So Heathrow is hoping the terminal experience will be more pleasant, but will the weather cooperate? That's what we need to know and for that Jenny Harrison is at the CNN International Weather Center for us. Hi there, Jenny.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Hey, Maggie, well these days in terminals airports, there's so much to keep you occupied than to worry about the weather. But so you're right of course it could delay your travels. If you're heading out a bit further afield, it's a very unsettled picture in Europe and it has been for the last few days and will continue to be just that. You can see one big bundle of cloud here pushing up from the southeast. That's bringing with it some more showers, but they should be fairly light in nature. And of course the main thing as well is the temperature has been so very warm again for the last few days. And again, that is likely to continue. So the rain in fact in the southeast for the next few hours -- that shifts out of the picture fairly quickly. Then we have another system moving across the Central Mediterranean and of course all the while another front with a -- another front with an area of low pressure trailing across the northwest, and of course eventually bringing that rain into those western areas.
So this is the picture for the next 48 hours, and you can see again that there's a lot of areas expecting to see some showers and at some times rather more persistent rain. So not exactly wall-to-wall sunshine, but that isn't really affecting the temperatures. In fact, look at these high temperatures. Again, Warsaw in Poland -- 23 Celsius, the average is 14, 22 in Prague, 21 in Minsk. You get the general idea. And as I say, that heat is likely to continue. This is actually supposed to be showing you the temperatures right -- there we go. There's no data at the beginning, but basically what that graphic tells you is that we've got the warm air across central and southeastern areas. It is a little bit cooler across these areas in the east -- you can see by that blue. But look at the temperatures. Warsaw coming down to about 17 by Saturday. That's still above the average of 14. Budapest the average is 18 -- well it's kind of hovering around there by Thursday and Friday. Warm day again on Thursday at 23 and in Berlin just on this long warm streak because the average is 14, but again, for the next few days temperatures actually in the low 20s Celsius. So, I should have to say that certainly even though the people aren't enjoying it, I think the cows are. Look at this, Maggie, moving into spring. Yes, this cow seemed to pose for the picture over in Bayern there in Germany. And of course glorious sunny skies and a nice time of year (ph) generally across much of Europe.
The temperatures on Thursday 20 Celsius in Paris, 18 in London, a little bit cooler in Madrid at 19 with quite a bit of cloud and again the chance of those showers.
But a whole lot better than what is in store across the United States in the next couple of days, in particular the weekend. Right now we've got across the central plains these two big boxes indicating warnings for some very strong thunderstorms. And those continue Wednesday into Thursdays -- those warnings perhaps a little bit stronger because we could actually have some large hail and maybe some strong winds. Not expecting any tornados at this stage. Unfortunately, it is all ramping up that way for this coming weekend. So it really could affect your travel plans then. You got three things going on -- the warm, moist air coming up from the Gulf, at the same time some very cold and dryer air coming in from the northwest and then in particular from the southwest, some warm, dry air. So all of this is combined to actually produce the possibility for some strong thunderstorms and tornados. All of hat particularly for the weekend but up until then, another line of rain showers and thunderstorms working their way eastward. So, just be prepared for all of that if you're traveling. Maggie.
LAKE: All right, Jenny, thank you so much. I wish we could get some of that warm European weather over here. It's having a hard time kicking winter out, aren't we? Jenny Harrison for us. Well, the New York Police Departments, new Twitter campaign has backfired in a big way. We'll tell you what went wrong next.
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LAKE: New York's Police Department is used to handling criminals. Its latest Twitter campaign shows it's not well-equipped to deal with internet trolls. It all started with this tweet. The NYPD asked users to submit photos of themselves with members of the NYPD to be featured on the department's Facebook page. Now, they probably won't be featuring these responses though. Occupy Wall Street, a group that had some famous scuffles with the NYPD tweeted this -- "Free massages from the NYPD. What does your police department offer?" Another Twitter user appreciates the department's hairdressing services. "The NYPD will also help you detangle your hair." Now Twitter has a rich history of social media campaigns going wrong. Just last week U.S. Airways sent a tweet that we can't show you. The company later tweeted this apology and promised an investigation. Before this year's winter Olympics, McDonald's asked Twitter users to send cheers to Sochi. The internet responded with jeers for McDonald's. Gay rights activist Dan Savage wrote, "Hey, McDonald's, you're sending CheersToSochi while goons wearing Olympic uniforms assault LGBT people." Oreo though showed how effective social media can be. The company tweeted out this picture when the lights went out at last year's Super Bowl. The year before that power out, no problem, you can still dunk in the dark. That's why companies keep coming back to it. Peter Shankman is a branding and social media consultant who has advised companies such as Disney and Sprint on their social media strategy and he joins me now from Phoenix, Arizona.
Peter, we know how powerful social media can be and we know that's why you know companies and organizations turn to it. But when you look at this, what were they thinking?
PETER SHANKMAN, BRANDING & SOCIAL MEDIA CONSULTANT (LAUGHTER): You know, this is one of those great -- they look so good on paper, you know? Let's get the communities involved. Because if you -- well, look, I live in Times Square in New York. If you walk through Times Square, 90 percent of the officers' jobs there are to take pictures with tourists.
LAKE: Right.
SHANKMAN: That's what they're doing primarily all day. So, someone in there -- in their marketing and in their communications team -- said, 'Hey, you know what? Let's ask them to take pictures,' and share them, not really thinking this through. This is one of those things that sounds good on paper, wasn't really thought through. The problem with Twitter, the problem with any social campaign, is that you are using the public, and if you have any haters, --
LAKE: (LAUGHTER).
SHANKMAN: -- this is what they live for.
LAKE: Yes.
SHANKMAN: And let's be honest, the NYPD has a lot of photos out there that they probably wish weren't out there, and this was basically a green light to every hater of the NYPD to say, 'Come on, get us. Here we are, take your best shot.'
LAKE: I know -- even why -- and the truth is there has been social media that's worked by the NYPD. There is a famous case of the woman who posted an officer going and buying a --
SHANKMAN: Of course. Great.
LAKE: -- homeless man shoes, which is maybe what they were thinking, but we've been down this road where the mistakes are so evident. You would think by now -- when it was new I could understand it -- but you'd think by now --
SHANKMAN: Right.
LAKE: -- that people who get paid to do this consulting -- and you know this -- would be a little bit smarter about this. Where are we going wrong? You said if you have haters, everyone has haters. How can --
SHANKMAN: Right.
LAKE: -- companies and organizations more effectively -- what's the sort of list of things that you got to check off right away before the conversations goes more than five minutes?
SHANKMAN: Well, the first thing is don't hire a social media expert.
LAKE: Yes.
SHANKMAN: Because they know how to tweet and they know how to post but they don't know marketing and they don't look at the bigger picture. Hire a marketing expert, that's number one. And number two, what you have to ask yourself is how can we do a campaign that highlights our good points while keeping our negative points to a minimum? You know, for something like this, I would suggest having the officers say, 'Hey, you know what?' - - to all the tourists -- 'Hey, if you take a picture with us, you know, feel free to tag it @mynypd. Or have the officers take photos -- 'things I like best about the beat that I work'. You know, or 'things I like best about the neighborhood that I patrol.' Let the officers get involved. You're going to tell me there's an -- not one officer out there without a cell phone? They all have cameras. They can do this. You don't want to necessarily invite the public to take control of your message because it'll never go the way you want it.
LAKE: These are -- these are lessons that are hard-learned, but I got to tell you, why do I have a feeling we're going to be talking about this again soon? The he temptation --
SHANKMAN: Again and again --
LAKE: -- is just too much.
SHANKMAN: -- and again. (LAUGHTER).
LAKE: Yes, but at least we get a laugh out of it. Thank you so much for joining us today. So appreciate it.
SHANKMAN: My pleasure.
LAKE: In a moment, "Business and the Bard" -- Shakespearean wisdom 450 years on.
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LAKE: William Shakespeare fans are marking his 450th birthday, and in honor of that, and the Bard's enduring appeal, we wanted to see what insight he could offer into the world of business news. Take the issue of European debt, for example. "Neither a borrower nor a lender be for loan doth oft lose both itself and friend." That's a little late for the Eurozone to take heed, but why (ph) words -- wise words -- nonetheless from "Hamlet." As President Obama starts is Asian tour, we find talk of foreign trade in "The Merchant of Venice" in the words of Antonio -- "Thou know'st all that all my fortunes are at sea." And he was over 400 years behind Facebook, but had he lived today, he might have stood by his words from "As You Like It." "I like this place and willingly could waste my time in it." And that is he was a man ahead of his time, that's for sure. And that is "Quest Means Business" for tonight. Thanks for watching. I'm Maggie Lake in New York.
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