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Quest Means Business
AstraZeneca Rejects "Final" Pfizer Offer; Side Effects; Sweden's Fears; Some AstraZeneca Shareholders Say Deal Possibility Not Over Yet; Dow Flat; AT&T-Direct TV Mega Merger; European Markets Lower; India's Economy Under Modi; European Elections; Historic Floods Hit Balkans; Balkans Weather Forecast
Aired May 19, 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)
RICHARD QUEST, HOST: It was a day when mergers and acquisitions, all the big talking points, the Dow only manged a small gain of 23 points. But when the lady in green hit the hammer -- several times, it was all over on Monday, the 19th of May.
Ding dong, the deal looks dead. AstraZeneca rejects what's said to be a final offer from Pfizer in the pharma wars.
Talk about a case of 21st century burglary, the US charges five Chinese officers of hacking.
And a lesson in new beginning. The ousted "New York Times" editor addresses the class of 2014.
I'm Richard Quest. We start a new week together, and I mean business.
A very good evening to you. "Pfizer's proposal and business model brings uncertainty and risks." Those are the exact words with which AstraZeneca brought Pfizer's latest takeover bid crashing down.
It would've been the biggest foreign takeover over a British company in history. Now, it's back to the drawing board for the American suitor, which said its offer of nearly $96 a share would be its last. AstraZeneca also insists --
(RINGS BELL)
QUEST: -- this deal is dead.
(BEGIN VIDEO CLIP)
LEIF JOHANSSON, CHAIRMAN, ASTRAZENECA: It's the final offer from Pfizer that the board has rejected. And if you look at Pfizer's language in that offer, it says that it's the last and final. And at the same time, the takeover panel here in the UK are saying -- the rules are saying that it's the final offer.
(END VIDEO CLIP)
QUEST: Now, if it had worked out, this deal had the potential for some unsavory international side effects. And since the offer -- part of the agreement was that it wouldn't go hostile, it would seem to be all over bar the shouting. At least for the next six months. But if you join me at the CNN super screen, you'll see just how grim it all was.
Now, let us begin in the UK, where -- here. Let's see if I can remember the UK, where AstraZeneca employs 6,500 people or so. In parliament and in Downing Street, there were concerns about those job losses, concerns which Pfizer did not put to rest even though it had given commitments to maintain R&D for at least five years. But those commitments to the research center were not considered to be strong enough.
In the United States -- remember, Pfizer had said that it was going to re-domicile itself. The headquarters would remain in New York, but the company would be tax resident in the United Kingdom, it would pay its corporate taxes to the UK, a so-called tax inversion, and the tax rate would have halved from 40 percent to 21 percent. It's the tax flow and tax inversion element.
Now, US lawmakers are questioning whether there needs to be a change in the law so that companies don't invert their tax domicile. Sounds very painful.
Up in Sweden, it was more job losses that was the big concern. Nearly 6,000 AstraZeneca workers, there's a huge medical research center near Gothenburg, and exports amount to around -- or at least AstraZeneca's -- 70 percent of Sweden's pharma exports. And of course, that's a crucial part of the Swedish economy.
We've heard before on this program, Sweden has real concerns about AstraZeneca -- about Pfizer's previous undertakings and not being maintained and not being kept. Now, although the deal has gone away for now, Sweden's finance minister says his concerns haven't.
(BEGIN VIDEOTAPE)
ANDERS BORG, SWEDISH FINANCE MINISTER: We have not received any commitment from Pfizer in that direction, and we are quite worried that even if they would give us such commitment, we would remain skeptical.
Because what they are basically saying is that they are going to cut back something like 10,000 to 20,000 jobs in the overall company, given that they are saying that they will downscale it, as they did with Wyeth, for example.
So, in such an environment, it would be costly in terms of jobs not only for Sweden, but also for the US, and I would guess, also in the long run for the UK.
QUEST: Do you fear that what you could be seeing here is a beggar- thy-neighbor policy in that the country that makes the most noise and stands to scupper the deal, the fastest -- which in this case might be the UK -- is the one that's being almost bought off? And as for the rest of you, well, so be it.
BORG: If you're going to cut back something like 10,000 to 20,000 jobs in a research-intensive sector, I think there will be a lot of losers here, and I would even argue that there are some risks for Pfizer, particularly reputational risks.
They have -- they've shown a very aggressive behavior, and I think there is a reputational risk in the research community, there is a reputational risk among policymakers and also in the republic. I think they have basically been hardballing AstraZeneca, and I think they now should review their actions and really think whether this is in the interest of -- in the longterm interest of their own shareholders.
QUEST: We've already talked to one shareholder who doesn't seem terribly enthused by the offer but does believe eventually a deal will be done in some shape or form. And really, from European policy point of view, you're all going to have to decide which way this goes, aren't you? Because you either move more towards the French GE-Alstom, or you basically have to make these impassioned pleas to shareholders.
BORG: I actually think that there is a strong business case for the Pfizer shareholders to reconsider this deal. And rather to see the opportunity of developing a strong research pipeline in AstraZeneca. But at the end of the day, what we can do is to improve the business climate and to strengthen our own game and to support pharmaceutical research. I don't believe in a regulatory European road here in the long run.
QUEST: And you have been very outspoken about this. Of all the ministers -- senators in the US have spoken out, some UK ministers have spoken out, but you, Minister Borg, you are the one who's come out and basically said Pfizer can't be trusted.
BORG: Well, I think we have a bad experience in this field from when they took over Pharmacia, and I think their track record is pretty spectacular. They have taken over some 134,000 jobs over the last 10 to 15 years, and they've shed some 100,000 jobs in Europe, US, Sweden, and elsewhere.
So, I think we really have a case to be worried about here. And as I said, I really think that the shareholders of Pfizer should reconsider whether this kind of hostile and aggressive behavior from their management is really in the company's longterm interest.
(END VIDEOTAPE)
QUEST: Minister Anders Borg of Sweden talking to me earlier. Some of AstraZeneca's biggest shareholders think it's not over yet. Aberdeen Asset Management is in the top 10 holding. It's got a 2.4 percent stake in AstraZeneca.
It saw the stock suffer its biggest-ever one-day drop. The stock actually fell more than 11 percent -- which I'm not entirely sure that that's the right graph for that particular part of our discussion.
Conversely, Pfizer rose slightly on the New York Stock Exchange. It's left some suspecting a deal may be done, just not today.
(BEGIN VIDEOTAPE)
JEREMY WHITLEY, HEAD OF UK AND EURO EQUITIES, ABERDEEN ASSET MANAGEMENT: So, you're trying to put a value on the pipeline. It's the most difficult thing for us as outside shareholders to do, which is why we're doing a lot of analysis at the moment, a lot of dealing with both the Astra board as well as the Pfizer board, just to make sure that the potential for that pipeline is going to be recognized in that share price.
QUEST: It's really tricky and complicated, isn't it? And it's got completely enmeshed and messed up, if you like, in xenophobic callings of one side or the other. And really, what you're telling me is today that actually it's all about the nuts and bolts of the balance sheet and the R&D?
WHITLEY: These are absolutely the key things. Certainly it's difficult to look at today's newspapers or TV programs and not see a comment on the deal as it stands at the moment. We've had various treasury select committees interview both sets of management. It has certainly got into the public realm.
What we need to do as shareholders is be fair, both to the prospects of all stakeholders in Astra, and ultimately on behalf of Pfizer as well, to make sure they will be good, honorable future owners of that business.
QUEST: I'd like you to take your shareholder hat off and put your city-watcher hat on, your M&A watcher hat. You've seen many of these. Is it your gut feeling that there is a deal that gets done at some point?
WHITLEY: Well, I think your last point is the key point. "At some point," you mentioned just then. It is quite plausible that Pfizer will decide perhaps now is not the time to push and press ahead with any further increase in that valuation in terms of their offer. Astra board might well decide not to recommend it to shareholders, as they have done.
And so, we will find a stalemate, in which case, Pfizer can withdraw. But that's not to say they're going to withdraw completely. They have clearly found a suitable target for themselves. The tax inversion is an angle that they've looked at very closely, the patent box here in the UK is attractive.
So, there are a number of attractive aspects to this deal. There aren't a huge number of potential acquisition targets out there for them. So, I wouldn't be surprised if at some stage in the future, we would be having a similar conversation.
(END VIDEOTAPE)
QUEST: Aberdeen Asset Management and the question of the takeover of Pfizer, or the not-takeover of Pfizer and AstraZeneca. It's all about M&A. Wall Street's been buzzing about another deal. This time, it has a happier ending. Alison's with me to talk about what happened on the New York Stock Exchange. We'll do the deal in a moment --
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: OK.
QUEST: First of all, this is the way -- very odd sort of day. Down, up, down, up, up, up.
KOSIK: Volatility, that's what you're seeing all along here. That's because one trader telling, this was one of the slowest days of the year.
QUEST: Right.
KOSIK: Meaning, if you have fewer people in the game, it's going to cause more of these spikes and little drops, and that's why you saw the volatility. But hey, in the end, look, the green won out.
QUEST: Just up 20. What happened today?
KOSIK: Direct TV, AT&T, the mega-merger really in focus today. We're talking about the $49 billion mega-merger between AT&T and Direct TV. This is the second big mega-merger of the year. The other one, of course, on regulators' table at this point is between Comcast and Time-Warner TV.
As far as the stock goes, we saw Direct TV and AT&T shares both end lower today, not such a huge surprise because since the rumors came out that this deal was in the works, we saw Direct TV shares up around 11 percent in the past two and a half weeks. So, you're kind of seeing a buy on the rumor, sell on the news today.
However, this deal not a sure thing. Regulators still have to give their OK to approve the AT&T and Direct TV deal. Richard?
QUEST: So, what about the regulatory issues here? Are they real? Will these deals go through?
(RINGS BELL)
KOSIK: That really is the money question, because a lot of lawmakers are coming out and saying this could be a violation of anti-trust, they've got a lot of lawmakers looking at this deal saying no way, this is not going to be good.
But it's interesting when you look at this deal. There's this cross- pollination between TV and telecommunications, and what many people are saying at this point, it may seem like an odd fit between Direct TV and AT&T, but there's a reason for this. It's called survival.
And in this age where you want to have the technology, to be able to have other technology, to have programming that could be anywhere on anything anytime, that's why you're seeing these mega-mergers happen. It's anyone's guess, though, if this mega-merger is going to go through.
But I'll tell you what. What I'm hearing is that if the Comcast-Time- Warner deal goes through, that the AT&T-Direct TV deal will go through as well, because you can't have one without the other.
QUEST: Excellent. Thank you very much. Lovely to have you with us in here. Thank you very much, indeed. Alison Kosik joining us. Over on the other side of the Atlantic, major European markets closed lower.
Banking stocks slipped, including Deutsche Bank and Barclay's. Deutsche is now raising around $11 billion from investors to meet regulatory approval and regulatory requirements. Look that that, two up and two down.
Hopes that Narendra Modi will kickstart the economy in India have sent the stock exchange there soaring. After the break, a look at what Modi must do when he takes office.
(COMMERCIAL BREAK)
QUEST: India's SENSEX index closed at a record high on Monday on hopes that the next prime minister will reform the economy. The index has been climbing for the past week, since exit polls suggested that Narendra Modi would become the country's next leader. And just look at how that gain has really -- it's pretty much gathered steam.
The new prime minister has promised to kickstart growth and is viewed as pro-business. He'll be sworn in this week. I spoke to Ruchir Sharma, the managing director and head of emerging markets at Morgan Stanley. He's also author of "Breakout Nations," and Sharma says Modi must work with the central bank to fight inflation.
(BEGIN VIDEOTAPE)
RUCHIR SHARMA, MANAGING DIRECTOR, MORGAN STANLEY: India's had its worst inflation performance in its post-independence history, with inflation close to double digits. So, I think one of the first things he needs to do is to fully back the central bank governor in his fight against inflation, to have an explicit inflation target, to back the central bank governor in his fight against inflation, because that's really what's hurting the poor the most in India currently.
And the second thing has to do with government spending. The government spending on welfare schemes has been out of control over the last few years, and he needs to put a cap on that and redirect some of that spending towards the much-needed infrastructure that needs to be built up in this economy.
So, I'd say that those are the two real priority areas that he needs to focus on to get things moving here again.
QUEST: This question of inflation targeting, the governor of the bank, of course, has raised interest rates. Inflation is over target. But inflation targeting, although most people set at 2 percent, give or take, a 2 percent medium-to-longterm target, that would be new for India.
SHARMA: Yes. But I think that in India's case, 2 percent will never be the inflation target. That's very much for the US and the developed world. For emerging markets like India, an inflation target of 4 to 5 percent would be quite reasonable.
And let's not forget that India's inflation performance has -- was relatively good until about five, six years ago. Before that, India's inflation rate would be consistently below that of its emerging market peers. And it would be -- it would average about 5, 6 percent or so.
This double-digit -- persistent double-digit inflation in India is a relatively new phenomenon and comes a lot from a lot of excessive government spending and wage increases that have been given out which are far in excess of productivity increases.
QUEST: But --
SHARMA: So, I think that this alignment is what he needs to get right.
QUEST: But the relationship between the new prime minister and Mr. Rajan of the central bank, now although it's not as independent as it might be, say, with the Fed or the ECB, there is still -- and certainly, with a central banker like India's central banker -- there is a degree of independence. So, can you see potential conflicts between the two men?
SHARMA: Yes, of course, there can be conflicts, but that's my entire point. There are many parallels here between what happened in the US in 1980 when the US had its period of stagflation and a new central bank governor appointed by the Carter administration in Volcker, and then Reagan came to power, understood the set of problems with high inflation, and fully backed Volcker to do what he had to do to bring inflation down.
I think that's the path that Modi really needs to follow, which is that he needs to understand that the biggest political dividend he'll get is if he can bring relief on the price front for many of India's poor people. So, I think he really needs to back Rajan, whose natural instinct is anti-inflation, rather than get into a confrontation.
(END VIDEOTAPE)
QUEST: And from the largest democratic election in history to a major vote in Europe, often plagued by low turnout. European parliamentary elections will take place this week.
If Europe's economy is no longer in crisis, it is hardly in the best of health. And the experience of the last four years will no doubt be on voters' minds when they cast their ballots. Jim Boulden reports.
(BEGIN VIDEOTAPE)
(CROWDS SHOUTING)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): It's been more than a year since scenes like these gripped any of the various capitals of Europe: Nicosia, Madrid, Athens, Lisbon. Before then, Dublin.
(CROWDS SHOUTING)
BOULDEN: These scenes were a lot more dramatic, but no less important than what is happening now. Ireland, Spain, and Portugal selling bonds once again. Interest rates at or below pre-crisis levels. Growth in nearly every corner of Europe.
MARIO DRAGH, PRESIDENT, EUROPEAN CENTRAL BANK: Ready to do whatever it takes --
BOULDEN: And there are plenty of people who credit this man, Mario Draghi. The head of the European Central Bank drew a red line.
STEPHANIE FLANDERS, JPMORGAN ASSET MANAGEMENT: There was a moment in the summer of 2012 when I think markets had been asking for several years if we want to break up the single currency, who's going to stop us? Which one institution is going to stand behind this currency?
And finally, summer of 2012, the European Central Bank effectively said it would stand behind the euro, and I think that was a key moment.
BOULDEN: But while the European debt crisis is perhaps no longer a crisis, the wounds are deep. Unemployment hovers around 12 percent in the eurozone. Compare that to 6.9 percent in the UK and 6.3 percent in the US. Europe may only grow at half the speed of the world average next year. People in Spain and Greece can be forgiven for thinking little has improved.
BOULDEN (on camera): The economic crisis was just taking hold the last time there was a vote for the European parliament in 2010, when many fringe parties gained seats. Now, those parties are expected to gain even more seats this time around, often by criticizing Brussels just as EU leaders need even more consensus to push through tough economic reform and tighter integration.
(APPLAUSE)
BOULDEN (voice-over): A point brought up time and time again in the debates between party leaders running for president of the European Commission last week.
SKA KELLER, EUROPEAN GREEN PARTY: So, it's very clear that the recipe of austerity has not worked. It has just worsened the situation. We have to overcome that. Instead of austerity, we have to invest into the economy.
JEAN-CLAUDE JUNKER, EUROPEAN PEOPLE'S PARTY (through translator): Employment presupposes jobs. There's no sustainable employment with healthy balance public finances not in place. So, we need to continue responsible discipline on public finances without excessive austerity.
BOULDEN: And the byproducts of this debt crisis? Rock-bottom inflation and the euro the strongest it's been for years, hurting exports just at the time Europe needs to grow.
FLANDERS: In ten years' time, we may say this was a crisis which gave us longterm increase in the competitiveness of European economies, and that's something that in the end will be good for the European people. But it's been an incredibly painful path to get there, and there's still many years ahead of very slow growth.
BOULDEN: And while the debt crisis may have subsided, much of the debt is still here. A challenge the next European parliament and EU president will have to contend with, especially if markets start to worry once more.
Jim Boulden, CNN, London.
(END VIDEOTAPE)
QUEST: In the Balkans, floods have taken lives. They've wrecked homes and displaced thousands of people. In a moment, we'll hear from the Bosnian president.
(COMMERCIAL BREAK)
QUEST: Three Balkan states are experiencing the worst flooding to hit the area in more than a century. Entire cities and villages have been inundated and at least 26 people have lost their lives. In Serbia alone, 24,000 people have been forced to leave their homes.
The Bosnian government says the economic damage will be measured in the billions of dollars. Christiane Amanpour spoke to the president of Bosnia and Herzegovina about the devastating floods in his country.
(BEGIN VIDEOTAPE)
BAKIR IZETBEGOVIC, PRESIDENT OF BOSNIA-HERZEGOVINA: I think we have the attention of the international community, there is good reaction, especially from the neighboring countries, from the neighborhood. So, dimensions of catastrophe are really great and bad. So, this is the worst thing that we've faced after the war that we had 20 years ago.
Hundreds of square kilometers are underwater in some parts -- in some cities and some villages in northern Bosnia. There is two or three meters of water. So the river's out and now it looks like lakes.
CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: And what about the cost? This is one of the most terrible disasters you have faced since the war, and that ravaged Bosnia. I know, I was covering it. What is the cost, and how will you be able to recover?
IZETBEGOVIC: Without international support and without support of domestic people who are not affected by this situation, it would be hard. Because we estimate that the costs of this catastrophe will be measured in the billions of euros.
So it means infrastructure is disturbed. We have thousands of landslides throughout the region. Of course, cities and villages wiped away. Cities underwater and so on. So, it will be measured in billions of euros.
But we will need a few hundred millions in this period, through this summer. So our plan is, actually, to take care of all people who were affected during this summer, and it will take -- it will actually ask for a few hundred millions of euros.
(END VIDEOTAPE)
QUEST: You can see the full interview coming up at the top of the hour. "Amanpour," with Christiane in about 40 minutes from now.
We need to know more about he weather situation in the Balkans, and Tom Sater is at the World Weather Center.
TOM SATER, AMS METEOROLOGIST: Richard, for 120 years they've been keeping records in this part of Europe, and they're rewriting the books on this one. I think it's going to unfold for weeks to come, if not months, to really get the extent of the flooding and the situation.
We're not talking about one small community or one city, we're talking about hundreds of thousands of hectares that have already been planted. We're talking about power supplies and water treatment facilities.
Here is the loop. We'll put this into motion here. Our computer models were hinting that we would have an area of low pressure get cut off from the flow and sit and spin for days. What we did not expect was to get two and half, three months' worth of rain in just two days.
It's been more than just Bosnia and Herzegovina or Serbia. It's Croatia's terrible flooding. We had it all the way down in Albania, in northern Greece to Belarus and Poland have had tremendous flooding. That - - the further extent of that is just amazing by itself.
This is the area that's affected, that's under a state of emergency. This is where we've had the fatalities and the greater extent of some of he concentrated rainfalls. But we're going to break this down even more for you, because it is about -- and let's go back over this -- the cost of this is going to be staggering.
Hydro-electric power supplies and other power facilities, we don't even know what equipment is busted and what's going to have to be repaired or have to be reordered. Then you've got the infrastructure. Once the waters recede, what's left? Sinkholes in roads, highways, bridges, overpass.
Individual homes, the foundational structure of some of these buildings, the integrity may be just gone. Mold will start to grow. The human impact of fresh water and water treatment facilities, waste management, agriculture. How many farmers just spent so much money planting their fields? It could be a complete economic loss for this year.
Look at the sandbags, and this is just one section where volunteers and government police and officials and firefighters, everybody coming together to build the height of this riverbank to 7.7 meters, which saved this town.
Now, the good news is, the rainfall, that organized area of low pressure, has broken down. Some of the energy, however, from Kiev all the way up to Finland, is going to start to produce still some more in the way of some thunderstorms.
So, we will have additional showers, but nothing, I think, that's going to add to the rising river levels, which is our biggest concern right now. It's not so much the flooding, that will recede. It's going to be a slow process. But it's watching the river crest that is already breaking records, continue downstream.
The Sava River runs into the Danube in Belgrade. So, let's talk about the town of Sabac here. This is what we're watching. The record was 5.9 meters, and on Sunday they hit 6.6. The record was 1881. Excuse me, 1981. The river is receding there.
Let's go downstream. Just before it reaches the Danube in Belgrade, the record back in 2006 -- tremendous flooding -- was at the top of this chart. This is 700 centimeters, so 7 meters high. We're not going to see that, but we are seeing an increase in the waters day by day for the next four days, the Sava will start to build there in Belgrade.
This is a month-by-month breakdown of where the water crest should be. In green is your average height. Know how we have a little ridge here, this is for snow melt, this is when we have ice jams. In red is your record crests. This is your 738 centimeters, and that record, of course, is 2006.
But let's now talk about where we are now. Let's put in where the rising waters are already reaching the historical maximum, all right? And in that's in the first -- the month of May, it has already reached our first flood alert stage and will quickly be approaching our second flood alert.
So again, this is critical as we continue to watch this river crest reach the Danube. Now, the Danube is much wider, it can handle a larger volume of water, so it shouldn't be a big concern, but we still have more thunderstorms that we're going to watch.
The next cut-off low, Richard, comes down and spins off the coast of Portugal and Spain. This is not going to produce the type of flooding that we had, of course, in the Balkan countries. It will give them, though, much-needed rainfall and cool their temperatures down. But this is something -- we're going to see this story unveil for weeks to come.
QUEST: Thank you, Tom. We'll have more of that in the days ahead. This is QUEST MEANS BUSINESS, good evening.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment. This is CNN, and on this network the news always comes first. A U.S. federal jury has found the radical Islamic cleric Abu Hamza al-Masri guilty of all terrorism-related charges against him. The New York jury found him guilty of conspiring to kidnap Americans in Yemen and planning to establish a jihad training camp in rural Oregon amongst other charges.
The Whitehouse and NATO claim they have not seen any substantial change in the distribution of Russian troops along the border with Ukraine. The announcement follows Russia's claims that troops have been ordered to return to their bases and away from the border regions.
The South Korean president Park Geun-hye says the country's coastguard will be dismantled and its work given to other agencies. It was a tearful announcement while she made a nationally-televised apology for the ferry disaster. More than 300 people were killed or are missing and most of them school children when the vessel capsized last month.
The rogue trader Jerome Kerviel has surrendered himself to the authorities in France and now he's due to start a three-year prison sentence. The former Societe Generale trader bet more than $60 billion without the bank's knowledge which cost his employer more than $6 billion in losses. Kerviel was said to have wanted a meeting with the French president Francois Hollande to discuss the case.
Manchester United has a new addition. It's a manager. Louis van Gaal will succeed David Moyes who was sacked last month. Meanwhile, Barcelona has tapped Luis Enrique as its new manager. He replaces Gerardo Martino who's out just after one season because (ph) Barcelona failed to win a single major trophy.
The U.S. Justice Department has charged five members of the Chinese military with hacking into America corporate networks. U.S. officials say the hackers sought industrial and legal secrets from major U.S. corporations like U.S. Steel, Westinghouse and Alcoa. It's the first time the U.S. have publically accused employees of foreign powers with cybercrimes against American firms. The case has enormous diplomatic implications.
(BEGIN VIDEOCLIP)
ERIC HOLDER, U.S. ATTORNEY GENERAL: The indictment alleges that these PLA officers maintained unauthorized access to victim computers to steal information from these entities that would be useful to their competitors in China including state-owned enterprises.
(END VIDEOCLIP)
QUEST: CN - China's - foreign ministry released a statement. Calls the charges extremely absurd. CNN's justice correspondent Evan Perez joins me now. So well, look, these people who are indicted - they're not here.
EVAN PEREZ, CNN JUSTICE REPORTER: No, they're not.
QUEST: So they're not going to stand trial.
PEREZ: Not any time soon.
QUEST: So what's the point?
PEREZ: Well, I mean, I think the U.S. believes that by naming and naming these people who work for the secretive unit of the People's Liberation Army in Shanghai that they say is responsible for all of the spying that goes on against U.S. companies, they feel like by naming names and pointing out that they have ties to the PLA, that they can perhaps shame the Chinese government into dealing with this issue.
QUEST: Far from it. The Chinese statement -
PEREZ: That's right.
QUEST: Was robust in its rejection of the allegations and to heap a bit of insult onto it, they also accused Americans of doing worse.
PEREZ: Well, you know, and that's the issue, as Edward Snowden last year revealed that the NSA has this very broad surveillance - mass surveillance - program that spies on pretty much every country in the world. Obviously it's not a surprise that the U.S. has spy programs overseas, and China and the U.S. obviously are adversaries and they spy on each other. So, it's not a big surprise. These guys will never see a U.S. courtroom so long as they don't visit the Philippines or some friendly country where the U.S. might be able to get an arrest warrant.
QUEST: Let's talk about a separate case - a global crackdown on creepware which has resulted in more than 90 arrests. Officials say half a million - half a million computers have been infected with the Blackshades malware. The software allows hackers to take complete control of infected computers, turning on webcams and stealing passwords from hundreds of malsware (ph). You got an exclusive look inside the investigation. Tell me more, this is fascinating.
PEREZ: Well, Richard, we were allowed into the FBI Cyber Command where they were carrying on this operation. They were coordinating with police in France, in the Netherlands, in Germany. And, you know, as they went around the world basically door knocking to try to get some of these guys to give up some of their computers, to also do some arrests. And it was fascinating to watch because you could see the hacker forums light up as the FBI and its police in France and elsewhere were knocking on their doors. And people -
QUEST: But hang on, go back a bit. What was the - what where the hackers doing?
PEREZ: Well, the hackers were buying and selling these - this - software called Blackshades and it is used to hijack your computer. Basically they can do everything from turn on the webcam on your laptop to, you know, take track of - keep track of -- the keystrokes on your laptop as you're entering your bank account.
QUEST: And of course there was a famous case, I think it's Miss -
PEREZ: Miss Teen USA, that's right.
QUEST: -- Miss Teen USA - the webcam was switched on for a month -
PEREZ: For a year. For a year. For a year she was being watched in her bedroom. Her laptop was on the floor. It had a perfect angle to be able to see everything she did as she spoke to her friends, as she came in and out --
QUEST: I don't think we need to get (inaudible).
PEREZ: -- and it - and it is something - well it's very scary. I mean -
QUEST: It is.
PEREZ: You have to be very graphic about it because I don't think people realize how easy this software works. It's off the shelf. It's - basically you can download it for 40 bucks -- $40 U.S. -
QUEST: Right.
PEREZ: -- and you can put it on your computer and you can use it to control someone else's computer.
QUEST: That is the question.
PEREZ: Right.
QUEST: The sting that you watched, the operation that you witnessed - how much of this is the tip of the iceberg?
PEREZ: The tip. This is a huge problem. I mean, if -- the U.S. going after China for cyber spying is - obviously has big diplomatic implications. This is millions of people around the world who, you know, are at risk. Because, you know, they simply get an e-mail that looks attractive and they click on it and it downloads into their computer. Blackshades is just one of many types of software that -
QUEST: Right.
PEREZ: -- computer hackers are using to try to get into - to victims.
QUEST: I shall close mine -
PEREZ: Very good idea.
QUEST: Well, though we've got a few other cameras -
PEREZ: (LAUGHTER).
QUEST: -- mind you. Good to see you, Evan.
PEREZ: Great, thank you.
QUEST: Good reporting. Now, the claws are out at "Quest Means Business." Tiger Stores is hoping to corner shoppers around the world with its hot priced chic. (Inaudible) explains why he's not afraid to tear up the bargain basement business model. This is "Quest Means Business." Good evening.
(COMMERCIAL BREAK)
QUEST: In Tiger Stores you'll find licorice, spice and all things nice. They're also at a very reasonable price. Well don't be fooled. There's nothing cuddly about this big cat - from its sharp Danish design to its ferocious appetite for expansion. Isa Soares when to Copenhagen to meet the chain's founder who told her the ability to change and adapt is essential if you want to be lord of the retail jungle. Not surprisingly, he's today's "Executive Innovator."
(BEGIN VIDEOCLIP)
LENNART LAJBOSCHITZ, FOUNDER, TIGER: Innovation for me is a process. It is not static. It is something that you have to be all the time on the move. You have to change. The world is changing and you have to change with it. If you don't, you die.
ISA SOARES, REPORTER AT CNN INTERNATIONAL: Welcome to Tiger, the Danish discount store with a difference. Disproving that cheap in cost doesn't have to mean cheap in quality.
LAJBOSCHITZ: A year ago a customer said to me, 'When I go into discount store, I feel very poor. When I go into Tiger, I feel like a millionaire.
SOARES: Lennart's store began as a regular Copenhagen bargain shop with clearance products that sold at 10 Kronor or 1 Euro a piece.
LAJBOSCHITZ: I think we started as a pound store and then we started making our own design. And when I say own design, I mean we added graphic design on a product that was already there, and we could see that they were selling much better than a product that was just a solid color or ordinary. It was really actually a tremendous thing. Our profit margin increased about 15 percent immediately.
SOARES: It's the Tiger touch, making the ordinary extraordinary with some sleek packaging, a tough of smart Scandinavian design, setting (ph) enticing price tag. Eighty percent of its products are sold at 5 Euros or less. Key to his innovations, keeping an eye on the customers. Every day Lennart walks the shop floor, basket in hand to experience Tiger through their eyes.
LAJBOSCHITZ: If you were like the boss and you were only in the office, you don't see what's going on in the shop. I have to see the products, I have to see how people evaluate being in our store. If I don't I'm disconnected with the reality.
SOARES: Each month 300 new Tiger products are introduced. Amongst their best sellers are the $8 million packs of licorice sold every year. The four million packs of spices and the 1.5 million pairs of glasses. Keeping his ear to the ground allows him to track the subtle changes in consumer desires and to adapt accordingly.
LAJBOSCHITZ: I don't look at myself as a business person. I look at myself as an anthropologist, and I listen very much to my children, I listen to other people, I travel a lot. I want to know what's going on because I know that I must change every single day.
SOARES: Fifty percent of its products are currently designed in house. The goal is to make that 100 percent. Lennart's innovations have transformed Tiger from a discount to a design store. Yet to stay on top he knows that innovation can't stop.
LAJBOSCHITZ: I look at myself more as the kind of grandfather of the gatekeeper of seeing this process going through. I'm way too old to having all these ideas, so I have to listen and have a good - good people - around me that are very often young because they know what's going on.
SOARES: To this Tiger, to stay burning bright he has to listen, watch and learn. In the jungle of the discount store, you either adapt or you die.
(END VIDEOCLIP)
QUEST: Two and a half weeks to go and still Brazil isn't quite ready for the World Cup if all (inaudible) there is to believed. The build up to one of the biggest sporting carnivals on earth has been blighted by delays, protests and worker deaths, and as Shasta Darlington now reports, our correspondent, although there are signs of progress, there's still a long way to go.
(BEGIN VIDEOCLIP)
SHASTA DARLINGTON, CNN BRAZIL BUREAU CHIEF: A crucial test of what has become one of the world's perhaps most problematic stadiums, the Arena Sao Paulo where the inaugural match will be held in less than a month - Brazil against Croatia. What we're watching right now is the first professional game - home team Corinthians against Figueirense. Some 40,000 fans turned out and they're ecstatic. They say it started off pretty smoothly.
FAN, VIA TRANSLATOR: I got to the underground in (Inaudible), got out here and it was very easy. Everything was organized, everyone directed. So let's go to the game and let's win!
DARLINGTON: The problem is, if you look around, you can see there's still so much work left to be done. The temporary stands where 20,000 people will be seated are still being installed. You can see they're empty, there are hanging wires everywhere you go, the area around the stadium is literally a construction site. Of course people here say everything will come together in the end.
FAN 2, VIA TRANSLATOR: It's fine. The main things are there. The rest, Brazilians are like this - every last minute. But it's come together. We'll have a World Cup.
DARLINGTON: Now, the stadium was supposed to be handed over to FIFA back in December but with cost overruns and deadly accidents, it looks like it's not going to happen until this week with less than four weeks to go. Now, what we've seen is you can play a game here, you can watch a game, but this is still very much a work in progress. Shasta Darlington, CNN Sao Paulo.
QUEST: Shasta sums it up perfectly for those who wonder what's going on. You can play a game, you can watch a game, but it's still very much a work in progress. The ousted editor of "The New York Times" and the graduating class of 2014. They have something in common and we'll show you what it is after the break. (RINGS BELL).
(COMMERCIAL BREAK)
QUEST: Today at Wake Forest University in the U.S., the former executive editor of "The New York Times," Jill Abramson, spoke about her abrupt dismissal in an address to graduates. The college graduates about to being their careers and got advice from a woman who just suffered a monumental setback in her own. Jill Abramson told the class 2014 you have to come back fighting and show them of what you're made.
(BEGIN VIDEOCLIP)
JILL ABRAMSON, FORMER EXECUTIVE EDITOR, "THE NEW YORK TIMES": Sure, losing a job you love hurts. But the work I revered, journalism that holds powerful institutions and people accountable, is what makes our democracy so resilient. This is the work I will remain very much a part of.
(END VIDEOCLIP)
QUEST: And she managed a joke.
(BEGIN VIDEOCLIP)
ABRAMSON: What's next for me? I don't know. So I'm in exactly the same boat as many of you.
(LAUGHTER AND CHEERING)
(END VIDEOCLIP)
QUEST: I suspect her payoff was slightly larger from "The New York Times" than many of the graduates who'll be leaving with large student debts, but maybe not. Over the weekend "The New York Times" publisher gave more details about the decision to fire Abramson. Arthur Sulzberger said the move had nothing to do with sexism or the fact that she might've been being paid less as some alleged. And she - he said he cited Abramson's shortcomings as a manager. As if to add insult to injury, "arbitrary decision-making, a failure to consult and bring colleagues with her, inadequate communication and the public mistreatment of colleagues." Well, that'll do it for you. Kate White is former editor-in-chief of "Cosmopolitan" and author of "I Shouldn't be Telling You This." I asked her why this story has struck a nerve.
(BEGIN VIDEOCLIP)
KATE WHITE, FORMER EDITOR-IN-CHIEF OF "COSMOPOLITAN" MAGAZINE: Well, I think it started as an individual story about her, her getting fired. But it's hit a nerve because I think all of us as women have had times where certain things we do are characterized as negative when we realize if a guy did that, it would be seen at very least as neutral or even positive.
QUEST: Such as?
WHITE: Well, you know, when we're seen as 'bossy' or 'abrupt' or 'brusque' or 'pushy.' It's like - I call it the pushy paradox. You know, in a guy, pushy can seem like, hey, he's all in. And for a woman, pushy is she's up my grill.
QUEST: Right. But a guy who's like that (ph) is a pain, he's annoying, he's a bully. With a woman you'd talk about 'that woman.'
WHITE: Yes. I just think we have a different standard that we have to live up to. And it's seen often as more negative in certain work environments.
QUEST: Do you think Jill Abramson was a - was guilty of this? Or do you think we've got a bad case here to make the point of principle?
WHITE: It may be a bad case because you hear there were issues, that she had a management style that wasn't working in that environment. And yet I think it is good that it opens up the discussion. And I think women have to be aware - you are not in a vacuum at work. You have to be aware of how you're perceived.
QUEST: Right, but whose duty is it to change? Because I can feel many men watching - I know I'm flying the flag for us here -
WHITE: (LAUGHTER).
QUEST: -- who are saying, 'What do you want from us?'
WHITE: Yes, right. Well, look -
QUEST: Quite often women are your worst enemy.
WHITE: You know I've worked in an lot of all-female company environments, and didn't find that to be the case. But I think you have to be aware of how you're perceived. It - we're hard-wired they say - woman are - to be more collaborative and to be more cooperative. And unfortunately people expect that from us. So you have to listen to the rumblings and be aware - hey, is there dissension here because that can bite you in the butt.
QUEST: And she obviously didn't, but - she obviously didn't realize what was happening in the newsroom, or if she did, was oblivious to it.
WHITE: Well, no, I think she did because apparently when she first got the job, she said, 'I know what my shortcomings are, I know I've got to talk less and listen more,' and maybe she didn't do enough of that and realize how much dissension there was and people are going around her to the big boss.
QUEST: You were the editor-in-chief. What was your failing?
WHITE: My failing was I think I overcompensated by being too nicey- nice at times. It's a hard line to walk.
QUEST: That's an impossible line. Because that lulls everybody into a false sense of security, so when the teeth do come out, when you say no - -
WHITE: (LAUGHTER).
QUEST: -- don't do that, I don't like that - and everyone says, 'Well, what's wrong with her today? She's never like this' (ph).
WHITE: I had a boss once in an evaluation said, 'I like that Kate can be kitten with a whip at times.' But that's the line you have to walk as a woman often to show that you can be tough but also you could be nice, but you have to have your allies too. I think you have to get that team behind you who will be supportive and won't go around you to the big boss.
QUEST: Do you think it's harder for a woman to be in the C Suite chair than it is for a man?
WHITE: I think it depends on the field to some degree, definitely. You know you hear certainly in Wall Street it can be tougher. In my business - in magazines - I don't think it was more difficult, but you do have to be aware. You're being judged by a different standard and you can't kid yourself.
(END VIDEOCLIP)
QUEST: It's not every business program that has Kate the kitten with a whip. @Richardquest what's your thoughts on this one and where it's going? Are women judged differently when it comes to working in the C Suite? Not getting there - but once they are there - are they judged differently? We'll have a "Profitable Moment" (RINGS BELL) after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." Thank goodness "The New York Times" is a better newspaper than it is at man or woman management. The statement from the publisher saying that Jill Abramson was "arbitrary decision-making, failure to consult, bring colleagues with her, inadequate communication, public mistreatment of colleagues." Well, that'll certainly endear into people. The real problem of course is whether a man would've been accused of the same crimes in the workplace. How often have men described, 'That woman!' when talking about a senior female colleague when they wouldn't have said, 'That man!' in the same tone or with the same intent. Maybe Kate, the kitten with the whip is correct when she says women are held to a different standard. I just had to say that name again before the program was over. And that's "Quest Means Business" for this Monday night. I'm Richard Quest. Whatever you're up to in the hours ahead, I do hope it's profitable. (RINGS BELL). I see you tomorrow.
END
