Return to Transcripts main page
Quest Means Business
IBM Shares Drop; IBM Faces Crowded Cloud; US Markets Calmer; Russia, Ukraine Nearing Gas Deal; Ukraine Needs Money, Gas; Icy US-Russia relations; Russia Continues McDonald's Crackdown; WHO Declares Nigeria Ebola-Free; Global Ebola Fight; Ebola Puts Pressure on Cocoa Market
Aired October 20, 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: After last week's roller coaster ride, US markets post some small losses. It's Monday, the 20th of October.
The Big Blues. IBM abandons its earnings forecast.
Ukraine's foreign minister tells Richard Kiev needs help financially and help securing its gas supply.
And France's richest man gives us a tour around the museum he commissioned. Frank Gehry's Cloud of Glass.
I'm Maggie Lake, this is QUEST MEANS BUSINESS.
Tonight, one of the all-time great technology companies in American history admits it's struggling to keep up with modern tech landscape. IBM
reported disappointing earnings and announced it will take a hit of nearly $5 billion to dump its loss-making computer chip unit.
All this on the day its former rival, Apple, is set to release results showing its dominance in the industry. We'll have those Apple results and
analysis for you this hour.
The final IBM share prices is still settling down, but as you can see, it's been a pretty brutal day. It's look like it's going to be a loss of
over 6 percent, close to 7. IBM's losses helped pull the Dow into the red during Monday's trading session.
Now, IBM says it is trying to manage in an industry facing unprecedented change. Monday's sale of its chip-making unit shows the
company is shifting to focus on the Cloud, but IBM is not alone. As you can see, its competitors are also trying to get their head in the Cloud.
HP, Cisco, Oracle, and Microsoft are all vying for a piece of the business.
Another competitor, SAP, proved Monday that complications from Cloud computing can affect earnings. SAP cut its 2014 profit forecast because it
couldn't keep up with customer demand for Cloud-based product. Trouble is, it's a crowded Cloud. The likes of Amazon and Google already dominate the
business.
Shelly Palmer is author of "Digital Wisdom," and he joins me now. Shelly, that's all we're hearing is the Cloud these days. Is there room
for everybody in the Cloud?
SHELLY PALMER, AUTHOR, "DIGITAL WISDOM": Well, everybody wants to be in the Cloud, they're -- not only is there not room for everybody in the
Cloud, it's not clear what "the Cloud" is.
LAKE: Thank you! Because that is exactly my -- it sounds like a word a lot of us talk about, very few of us truly understand.
PALMER: So, let's start there. Cloud is simply a proxy for a remote server in a location to you. So, it's the same server you had in your
company, except it's somewhere else now. Most importantly, it's accessible over the public internet.
LAKE: Right.
PALMER: That's really the only defining value of the Cloud. And the software that makes a server virtual or able to be virtualized, meaning you
take a big rack of gear and you make it something that's accessible from the internet, is available to everyone from open source, which is totally
free, to semi-open source, with a little bit of restrictions and maybe an owner's manual around it, to very strict and very business-ized if you
will.
And so, there's this ridiculous heterogeneous world called "the Cloud" that everyone seems to call one thing, but it's a million little things.
And if I'm a business, I don't necessarily need to use Google's Cloud or Amazon's Cloud or Joe's Cloud or Harry's Cloud, I can use my own, because
the tools to do that are actually relatively simple.
LAKE: I'm glad you brought that up, because it sounds like, based on what you described, that this is an incredible inflection point that levels
the playing field.
PALMER: It really does.
LAKE: If you're a little guy, you didn't have to have all that capital and invest in the products that the likes of IBM were selling. So,
where does it leave those legacy players?
PALMER: First of all, this is the big strategic question. The metaphor everyone always used was the metaphor of the power grid. The vice
president of electricity was the highest tech guy at the turn of the last century because his job was making the generators work, and in the
industrial age, if you needed electricity to run your company, the vice president of electricity made those generators work in house.
But within 25, 30 years, by the early 20s, mid-30s, he was replaced, his job was replaced by a line item called "electricity," and municipal
power grid were pretty much how everyone got their power.
And the metaphor everyone's used is, well, the Cloud is going to take over, I'm not going to have my local computer anymore, I'm not going to
have iron stacks, racks and stacks, in my company, I'm going to farm this all out to the Cloud because it's better there.
But the metaphor breaks down when you realize that what makes a server somewhere else, and the server you have in your office better or different
is really or not the same. I don't need the same tools I need to generate power to make my servers available to the public internet in a secure way.
And so, the strategic question comes, as companies realize that putting all their stuff in someone else's hands isn't maybe a great idea,
possibly just the software for making it happen done in-house is a better use of time and resources and possibly safer.
Every day we hear about some kind of crazy hack or some kind of breach. Is Amazon better at defending than I am? Yes, absolutely. Are
they better at somebody whose core business is defending? Not necessarily.
LAKE: So, the question for me is, are the likes of IBM in a position to sort of grab that business and maybe define it? Because let's be frank,
I'm sure there are a lot of small business owners out there who could benefit from the Cloud but don't understand it any better than we did
before you just explained it.
Are they in a position to do that, or is that already being done by smaller, nimbler players? Because there is all sorts of Drop Box, and Box,
and --
PALMER: So, when you start thinking about big companies like IBM, it's a sociology question, not a technology question. Large corporations
tend to want to work with large corporations because there's this kind of idea that, well, if I hired IBM, I won't get fired. And that -- from the
old days, no one ever got fired for buying an IBM computer.
LAKE: Right.
PALMER: Used to be the way people described -- and it actually became a pejorative phrase at a certain point, right?
LAKE: Yes.
PALMER: Because what it said is, I'm old, stodgy, I'm not willing to try something new. But it's super safe. You know what? When you're
talking about the books and records of the company, when you're talking about people's records and their contact information and stuff that we read
about every day, you know what? I might want to trust IBM if I'm a corporate person.
So, big corporations tend to work with big corporations. That's going to be fascinating now, because as you just said, there are lots of small
entities coming, chipping away at what we perceive to be these large tech giants who should be invulnerable.
They're anything but, and this is an inflection point, and we are at a time when there is going to be a major shift, strategically, at every
corporate level. I want to be best for my company. Does that mean working with an IBM, a Microsoft, an Oracle? A Google? An Amazon? Maybe it
doesn't anymore.
LAKE: But we shouldn't necessarily right them off. We do have CEOs in place -- and I'm going to think right now of IBM, we heard Ginni Rometty
talking -- Meg Whitman is trying to do the same thing at HP, coincidentally two women doing this, who understand there's a massive challenge, but
they're trying to turn the Titanic.
Does size work against you? Does your experience matter more than the cultural baggage you carry from a very bureaucratic organization?
PALMER: I have to say, I would argue that IBM has done a couple of relatively large strategy shifts in its corporate life so far. They used
to make mainframes, that's what they did. Now, they're this fantastic consulting company that has all kinds of interesting research going on.
Watson and all the question-answering technology, it's --
(CROSSTALK)
LAKE: Exactly, they're pushing the envelope with innovation in some areas that we don't talk about.
PALMER: Significantly pushing, not just pushing, significantly pushing. People like to think of Google as the only innovative tech
company. Please, stop that. IBM is right at the forefront.
And so, the question you've got ask yourself is, are these executives the right executives to lead IBM through this challenging time? I would
argue yes they are. And you know what? If they're not, the shareholders will let them know, so --
LAKE: That's right.
PALMER: But for right now, IBM is doing the right thing. They've gotten out and they've said all the right things, to me, anyway. They said
we understand what's happening, we understand the challenges, and we're going to do our best to rise to them. And that's all any corporation can
do. Are there going to be challenges? Yes. Are they challenges that are insurmountable? You bet.
LAKE: Shelly, for investors who are sitting out there, should we treat anybody who talks about the Cloud in their business strategy with a
little bit of skepticism? We're almost out of time, but should you be skeptical when you hear that word?
PALMER: Anybody who doesn't define "Cloud," they just talk about "the Cloud," peel the onion away one layer, just for fun. Say, "What do you
mean by that?" And then sit back quietly, because the next sentence is going to tell you whether it's a serious conversation or not.
LAKE: All right, Shelly Palmer, so great to catch up with you as always.
PALMER: Thank you.
LAKE: Thank you so much for helping understand the complicated tech landscape a little bit better.
Well, the US markets have just closed on Wall Street, and markets have got some work to do. Small gains to show for it today, but there's a lot
of volatility, too. Cristina Alesci joins me now. Cristina, great to see you. A little bit calmer, a little bit comforting to see these numbers, I
suppose.
CRISTINA ALESCI, CNN MONEY CORRESPONDENT: Yes. As fun as it is, we can't have 300- and 400-point swings in the Dow every day. But the Dow did
take a hit earlier today, as you mentioned, because IBM and the outsized impact that specific company has on the overall index.
Now, you've got to think about sort of the way things are working right now, which investors have shifted their concerns from the global
environment, concerns over European growth, concerns over the potential for China to have a financial crisis, to the concerns over US growth.
And how they look at that is through the lens of US earnings. So, over the course of the next couple of weeks when these companies come out
and report, investors are going to be paying close attention to their future forecasts.
At the end of the day, investors don't really care where the earnings come from. In other words, if it's in the form of financial engineering,
like buybacks, or cost-cutting, it doesn't matter. They want to see EP escrows, and they want to see future forecasts go up.
LAKE: All right, that's going to be really important. And I know a lot of people -- it's going to be interesting, Cristina, to see whether we
pay attention to the numbers now, or whether we're so geared toward that forward guidance to see what we find out --
(CROSSTALK)
ALESCI: So critically important.
LAKE: -- about the global economy.
ALESCI: Yes, especially when it comes to Apple today.
LAKE: All right, thanks so much, Cristina.
Ukraine's foreign minister tells CNN that Kiev is committed to a European future. Richard is in the Ukrainian capital with more.
(BEGIN VIDEO CLIP)
RICHARD QUEST, CNN INTERNATIONAL: Ukraine will need more money. The foreign minister, Pavlo Klimkin tells me the country is committed to
Europe, but will need more help.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
LAKE: As winter draws in for Eastern Europe, the European Commission is trying to keep the gas flowing into Ukraine from Russia. EU foreign
ministers have been meeting Luxembourg to discuss the dispute between Moscow and Kiev over how Ukraine will pay for its Russian energy. This
comes ahead of the three-way talks between all sides in Brussels on Tuesday.
Ukraine's national energy company says it's on the same page as the Europeans in terms of reaching a deal. They say any agreement needs to be
legally binding on both sides and written in a way that means no one can go back on the terms of the deal.
Ukraine's foreign minister says the country needs more gas to ensure the economy runs smoothly and says Kiev will need more bailout money from
its international partners. He sat down with Richard earlier.
(BEGIN VIDEOTAPE)
PAVLO KLIMKIN, UKRAINIAN FOREIGN MINISTER: It's difficult to speculate, but we will definitely need more, also in the short-run. And we
will have right after elections, probably in a couple of weeks, a special mission, IMF mission, to estimate the sum, the volume, which will be needed
for Ukraine in the short-run.
But I would expect that we would need a kind of concerted assistance from the IMF, European Union, and US, to breach the difficult situation
now.
QUEST: But the -- the lenders will not unnaturally say, "Fine, we will stand by you. Fine, we recognize the urgency. We also know the
ultimate goal. But are your reforms on track? We are not going to throw good money after bad."
KLIMKIN: It's exactly my point. We have now this unique window of opportunity. What we have to do now is anti-corruption, good governance,
and to organize the governmental system in order to make it work. But on that basis, we could have a very effective economic track.
QUEST: How do -- I cannot tell you, Minister, how many place I have been to where men of your --
KLIMKIN: I can imagine, actually.
QUEST: -- men of your seniority have talked about anti-corruption, good governance, the rule of law, and on the streets, everybody says, they
don't know what they're talking about. Things are as bad as ever. So, how can you convince the lenders that the reforms are real and the gains will
materialize?
KLIMKIN: I'm in public service for more than 20 years, but I'm a physicist by education. And for me, it's about good laws, but especially
about implementation. If we have another couple of good laws, it's not the way forward. We need real implementation, and we need to show that we
could deliver on implementation.
And if we have more money in our treasury, it would be exactly the sign that anti-corruption laws are working. If not, so why can we talk
about real anti-corruption fight.
QUEST: Can you understand, Minister, how people in this country say the mere fact -- the rhetoric of investigation continues, but the reality
of prosecution is nowhere to be seen, they say is evidence that this corrupt system of judges, police, and politicians, with respect, continues?
KLIMKIN: I fully understand that. And because of that, we will deliver on this investigation. I definitely promise you.
QUEST: Does your gas supply this winter rely on reverse flow, or do you believe you'll be able to get direct flow from Russia?
KLIMKIN: Look, first point: we can overcome this winter even without reverse flow. Secondly, we need to have more gas for our economy, to make
our economy run smoothly, and for that, we need reverse flow, and it's also the point for our energy security.
And we need also more gas to ensure our supply and to ensure effective and reliable transit. And that's exactly our way forward.
QUEST: EU membership is very much the long-term goal for this country, correct?
KLIMKIN: Absolutely. And I'm fully convinced we will become a member of the European Union. I negotiated EU association agreement as chief
negotiator, but it's also my personal conviction this country is about European mentality, European history. And our way is the European way
forward.
(END VIDEOTAPE)
LAKE: We'll play more of that interview on "The Best of Quest," which you can catch at the weekend.
Now, Russia's foreign minister says relations with the US will continue to be frosty for some time. Sergey Lavrov says it's certainly not
a Cold War, and he hopes things won't get any worse.
(BEGIN VIDEO CLIP)
SERGEY LAVROV, RUSSIAN FOREIGN MINISTER (through translator): You know, they have already gone down very far and very deep. I very much hope
that this decrease in our level of cooperation has already reached a rock bottom.
(END VIDEO CLIP)
LAKE: News that Russia is continuing its crackdown on McDonald's won't do much to improve matters. It's getting harder to find a Big Mac or
fries or any of these goodies anywhere in Russia.
On Monday, Russian officials closed nine restaurants. They say they're investigating roughly half of the McDonald's sites in the country.
While local media blames sanitary violations, CNN's Phil Black reports there may be more to it than that.
(BEGIN VIDEOTAPE)
PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT (voice-over): Since Vladimir Putin returned to the Russian presidency in 2012, anti-Americanism
has become a prominent feature of public debate in this country. It reached new heights in the wake of the Ukrainian crisis, with Russia an the
West -- Russia and America -- deploying dueling economic sanctions.
Now, technically, the American fast food chain, McDonald's, isn't targeted by Russian sanctions, but there is no doubt this American
corporate icon is now finding it much harder to do business here. McDonald's says that more than 200 of its 450 outlets across the country
have recently been targeted by unannounced -- and it says still ongoing -- regulatory inspections.
The result, nine of those restaurants have been ordered to close, at least temporarily, for alleged "various regulatory breaches," including
hygiene issues. And McDonald's charity, Ronald McDonald House, which aims to help sick children and their families, is also being investigated for
alleged financial wrongdoing.
Now, the government agencies responsible do not acknowledge any political motivation here, nor does McDonald's. It just denies all the
allegations and says it is working to get its restaurants reopened as quickly as possible.
Phil Black, CNN, Moscow.
(END VIDEOTAPE)
LAKE: After the break, how GPS tracking aided Nigeria's fight against Ebola.
(COMMERCIAL BREAK)
LAKE: The World Health Organization has declared Nigeria free of Ebola. It is a major victory in the global fight against the disease.
Health officials praised measures enacted by Nigeria's government to contain the spread.
Nigeria used GPS tracking to trace cases and lines of transmission. The technology was originally used to fight polio. The government
implemented screenings for arriving and departing travelers, on average, about 16,000 per day. Also, the government used information campaigns to
explain the risks.
Even with the positive news from Nigeria, the World Health Organization says the fight is not over.
(BEGIN VIDEO CLIP)
RUI GAMA VAZ, WORLD HEALTH ORGANIZATION: It's a spectacular success story that shows to the world that Ebola can be contained. But we must be
clear that we only won a battle. The war will only end when West Africa is also declared free of Ebola.
(END VIDEO CLIP)
LAKE: There are plenty of other developments in this outbreak happening around the globe. Teresa Romero Ramos, the Spanish nurse's aid
who contracted Ebola in Madrid, has apparently beaten the disease. She had improved steadily, and then on Sunday, a lab test came back negative.
Romero is still in hospital for now. Officials say she will be asked to donate blood.
An Ebola patient in Norway is also considered cured. The woman was working with Doctors Without Borders in Sierra Leone when she caught the
disease. No details were released about her treatment.
And in the United States, 43 people who had contact with Thomas Eric Duncan have been given a clean bill of health. Duncan is the Liberian man
who died of Ebola in Texas. None of the 43 is showing symptoms, including Duncan's fiancee.
Isha Sesay is joining us now from Nigeria. She has been tracking closely the developments there. And Isha, it's fantastic to see you this
evening. Nigeria is really being held up as an example of how we can get in front of this.
ISHA SESAY, CNN INTERNATIONAL CORRESPONDENT: Yes, indeed, Maggie. One World Health Organization official described Nigeria's victory over
Ebola as a "spectacular success story."
The director of the World Health Organization, Margaret Chan, said if Nigeria, a country with serious security issues, can defeat this disease,
than other countries, too, can have victory when it comes to dealing with importations of the disease.
Now, let's be clear, though. Nigeria was really looking at something like 20 to 21 cases total in this country, which led to something like 7
deaths. It's hard to make direct comparisons with the worst-affected countries of Sierra Leone, Guinea, and Liberia, because Nigeria does have a
comparatively more robust health care system. So, that must be laid out right at the outset.
But there's no taking away from the Nigerian government that their response to that initial first case here in the country back in July was
one of swiftness. It was a swift, coordinated response.
What we saw was the Nigerian government, federal authorities alongside state officials, state government officials, and international aid
organizations all coming together, Maggie, coming together to ensure that they got that whole issue of contact tracing correct.
Maggie, you and I have talked a great deal about the necessity of getting this right, finding those individuals that have had direct or
indirect contact with a patient, individual known to have Ebola, taking them out of the general population, isolating them, and treating them.
And everyone knows that is one of the keys to getting this outbreak under control. It is something Nigeria was able to do extremely well in
part because they were able to convert their health surveillance system, which had been built for polio, they converted that to work for Ebola. So,
that was one of the reasons they were able to get ahead of this.
And of course, Maggie, we must point out that Nigeria also mounted a very, very strong, effective communication system to communicate with the
general public and those that had come into contact with Patrick Sawyer, that man who brought Ebola to Nigeria.
So, a lot to be learned from what they did here in this country. I had the opportunity to speak to the senior special assistant to the
president on public affairs, Dr. Doyin Okupe. Listen to what he had to say to me.
(BEGIN VIDEO CLIP)
DOYIN OKUPE, PUBLIC AFFAIRS ASSISTANT TO NIGERIAN PRESIDENT: On ground, we had, unknown to most people in the world, we had a very robust
national council for disease control, which had been really primed because of previous experiences and engagement in the management of previous
epidemics, like Lassa Fever.
SESAY: And polio.
OKUPE: Yes, and polio. So, that's infrastructure, that's public health management infrastructure was on the ground. And they had more or
less an army of graduates who had been trained in epidemiology management and laboratory and all that.
So, this was the first line of action. These are the first line of people that were deployed to ensure that this happened. And the also, the
minister of health, you cannot take it from me, the minister of health was totally committed.
And the president also put together a communication strategy that really worked. It worked in the sense that it kept the world informed what
transpired about it. It kept the world informed on what was going on.
We communicated with our people and mobilized them so the entire Nigerian populace was really primed and mobilized and fully aware and
ready. So, it was a fight that was fought by the executives in the country and by the people of Nigeria.
(END VIDEO CLIP)
SESAY: A comprehensive and coordinated response, Maggie. As we said, the countries of Guinea, Sierra Leone, and Liberia, they're in a completely
different situation right now.
But those other countries, those other countries on the African continent can look to Nigeria, Maggie, and look to see what preparedness
does for you. If you are prepared, if you put the measures in place, if you have a system that you are able to activate as and when Ebola does make
it to your shores, then you have a better chance of containing the outbreak. Maggie?
LAKE: A very important lesson to learn, very important to bring up that success story, Isha. As we move forward, I know we're going to
continue to talk about the risks that as we get control of it, we fall complacent and believe it's over. It's not over, and those countries that
are still the epicenter --
SESAY: Yes.
LAKE: -- very much need the attention to stay on the fact that they still need help, and we need to get control of it everywhere before we can
breathe a sigh of relief. Isha Sesay for us tonight. Thank you so much, Isha.
Now, as you can see, Ivory Coast is directly next to the epicenter of the Ebola outbreak. The virus has yet to hit the continent cocoa belt, but
prices are already under pressure. Isa Soares reports.
(BEGIN VIDEOTAPE)
ISA SOARS, CNN INTERNATIONAL CORRESPONDENT (voice-over): One of the main ingredients of chocolate, the cocoa bean, is facing increasing
volatility. It's under pressure by the threat of Ebola and the fear that it will spread into the cocoa belt in West Africa.
Already, we're seeing prices spike. The cocoa industry reports the price is up 23 percent from last year, and analysts worry this could just
be the beginning of further volatility.
NITESH SHAH, RESEARCH ANALYST, ETF SECURITIES: Ivory Coast is one of the largest producers of cocoa, producing about 35 percent of world cocoa
output. And Africa in general produce about 70 percent of cocoa -- the world's cocoa output.
So, any threats of that virus disrupting the flow of the almost harvested cocoa beans out of the producing regions could threaten to
increase cocoa prices once again.
SOARES: Ivory Coast is currently Ebola-free, but it borders two badly-affected countries: Guinea and Liberia. And the World Health
Organization highlights it, along with Mali, as being at the greatest risk of infection.
So, it's taken precautions by closing its land borders with these neighbors. But some fear this could prevent the movement of cocoa farmers
just as the main harvest season kicks off.
SOARES (on camera): The fear that the virus could disrupt supply of cocoa beans has forced some of the world's biggest chocolate makers into
action. Nestle, Mars, Hershey, and Mondelez International, among 19 other chocolate giants, have raised $600,000 to help the region fight Ebola, and
they're making contingency plans in case the virus spread into the cocoa belt.
PAUL BULCKE, CEO, NESTLE: Ebola is a very serious matter in society, being part of society, so we take it seriously. We're lucky to say that we
don't have operations, per se, nor factories, in the countries that are most affected.
But we are monitoring very closely because we have people in Ghana, people in Ivory Coast, and whenever it comes over there, then we're going
to be again putting our priorities, which is the safety of all people, the safety of the people that work with us.
SOARES (voice-over): For now, these are signs of nervousness, jitters that show just how a deadly epidemic could cripple the cocoa industry and
local farmers alike.
Isa Soares, CNN, London.
(END VIDEOTAPE)
LAKE: After the break, Turkey's finance minister explains how the threat of ISIS in Syria and Iraq is challenging his country's economic
growth.
(COMMERCIAL BREAK)
LAKE: Welcome back, I'm Maggie Lake. This is CNN. It's time for a news update. Kurdish forces fighting ISIS in Syria are getting critical
help on two fronts. Turkey will now allow Iraqi Kurdish fighters passage into Syria to join the fight in Kobani. The announcement comes hours after
U.S. military planes dropped weapons and supplies for the first time to Kobani's Kurdish defenders.
The Spanish woman who contracted Ebola has now beaten the virus. Spanish officials say they may now ask the nurse's assistant who has been
recovering in Madrid Hospital to donate blood to provide antibodies to other victims. Swedish navy ships, helicopters and several hundred troops
are scouring the Baltic Sea searching for signs of what may be a foreign submarine. Navy officials say there have been three credible sightings of
foreign underwater activities since Friday.
As E.U. foreign ministers meet in Luxemburg to help broker a deal between Moscow and Kiev, Ukraine's foreign minister says Ukraine needs more
gas to ensure its economy runs smoothly. He told Richard Quest this is vital to the country's energy security.
(BEGIN VIDEOCLIP)
PAVLO KLIMKIN, UKRAINIAN FOREIGN MINISTER: We need to reverse flow and it's also (important/the point) (ph) for our energy security and we
need also more gas to ensure our supply and to ensure effective and reliable transit.
(END VIDEOCLIP)
LAKE: Geopolitical tensions in Syria and Iraq have hurt trade and growth in Turkey. However, the country's finance minister believes the
situation is beginning to stabilize. Mehmet Simsek spoke to emerging markets editor John Defterios about the challenges Turkey's economy faces.
(BEGIN VIDEOCLIP)
JOHN DEFTERIOS, "CNN'S EMERGING MARKETS" EDITOR AND ANCHOR OF "GLOBAL EXCHANGE": The slowdown in Europe on one side and conflict in Iraq and
Syria on the other, Turkey's feeling more vulnerable than most economically. I asked the finance minister Mehmet Simsek if the gyrations
we've seen in the market as of late are pointing to something much bigger.
MEHMET SIMSEK, TURKISH FINANCE MINISTER: Very challenging times. I think the decline in commodity prices is clearly bad news for an emerging
market universe, so that's first. Secondly, I think the recent fall in long-term bond yields suggests that there is something wrong out there. I
don't believe that countries like Turkey will - are - going to be starved to capital - the way they were back in 1990s. So I'm a little bit more,
let's say, optimistic. I'm cautious, I realize there are huge challenges out there, but I don't think it's going to be as bad as in the past, partly
because fundamentals are better in emerging markets, but also partly we're now going to get synchronized global monetary tightening.
DEFTERIOS: This is such an uncertain environment. Have you done the calculated downside risk of what's happening across the border of Kobani
and how it could filter in not only in the southeast of the country, but the economy overall in Turkey?
SIMSEK: We now host 1.6 million refugees and so far we've spent $4.5 billion on refugees, and number of refugees are increasing. So that's one
factor. In terms of trade, ISIL, you know, surge in Iraq was a big disruption. But hopefully now things are little bit more stable, more
predictable. And it looks like after the first shock, exports are picking up in terms of our trade with Iraq. So bottom line is geopolitical
tensions have meant probably slower growth, largest -- larger trade gap and even high inflation.
DEFTERIOS: Is there space though for you to cut interest rates any more with the price pressures? Some would suggest it's the high interest
rates that are slowing down growth. You see scope (ph) to lower rates?
SIMSEK: We see inflation peaking at 9.4 percent this year, trimming down to 6.3 percent next year. But in the meantime, we'll maintain tight
monetary and fiscal policy going forward, because clearly there are still question marks, but of course the Fed would obviously follow going forward.
DEFTERIOS: Unfortunately for Turkey, you got into that Morgan Stanley list of the fragile five when your current account deficit was at 10
percent. It's now below 6 percent, but are you still feeling very vulnerable to external shocks because of the prospect of the Federal
Reserve raising interest rates?
SIMSEK: I think the concerns about Turkish economy - back then when Turkey was mention among the fragile countries - were relatively high and
intense and understandable. But since then we've take measures and we are now launching a very comprehensive micro-lever reform programs which we
hope that will put Turkey back on a high growth trajectory.
DEFTERIOS: Perhaps the one silver lining in all this has been the correction in oil prices. A $20 drop will cut $10 billion off of Turkey's
current account deficit. John Defterios, CNN Ankara.
(END VIDEOCLIP)
LAKE: Apple earnings have just come out and they have once again beaten Wall Street expectations -- earnings per share coming in at $1.42.
Wall Street had been expecting $1.31 per share, so pretty large beat. We'll have much more on this shortly. It's a radio, camera, alarm clock,
diary and personal assistant now. Apple says your phone is also your wallet. We'll bring you a review of Apple Pay on day one of the launch.
That's coming up too.
(COMMERCIAL BREAK)
LAKE: Ah, it's going to be all about Apple in the afterhours here. Apple earnings were a better-than-expected $1.42 a share. Analysts had
predicted $1.31 a share, and you know Apple's all about timing. So today was also the launch of Apple Pay - of course. Apple has said its digital
payment system will revolutionize the way transactions are done. Apple Pay is available right now on the iPhone 6. Samuel Burke tried out Apple Pay
today. He joins me with a review. But Sam, before we get to that, we do need to talk about these earnings that just came out -- blown past
expectations. I'm guessing this is because of the success of the app (ph).
SAMUEL BURKE, BUSINESS CORRESPONDENT: It's all about these iPhones - the two new iPhones - the iPhone 6 and the 6 Plus. Maggie, the Street was
expecting 37.8 million iPhones sold - 32.927 million iPhones sold. It's those big screens people wanted them for a long time, and now they're
getting numbers from the big screens.
LAKE: Yes, which is good. And what we're going to have to watch as we watch this, I think the shares trade afterhours is what they say - what
else they say. We know they're rolling out the payment, they did have some wobbles on the IOS, so I'm sure analysts are going to get peppered (ph).
The stock was trading, if I'm not mistaken, at an all-time high --
BURKE: Very close to all-time high.
LAKE: -- right before. So it's priced for perfection, maybe at least very good performance. I would say some of that baked in already. I think
they're going to want to hear what Tim Cook has to say about some of these other products and the timing of the watch. Let's talk about Apple Pay.
Forget what Tim Cook said, you took it out for a test drive as a consumer. What'd you find out?
BURKE: The hardest part was updating to 8.1. It's always such a headache - you have your Wi-Fi connection, you have to plug it into iTunes.
That took me over an hour. And of course you have to have 8.1 on either an iPhone 6 or 6 Plus in order to use that. Once I did that, it was really
all quite simple. Take a look.
(BEGIN VIDEOCLIP)
BURKE: OK, so you can't be in New York without your coconut water, a nice healthy salad and there's somebody in the CNN office who I know loves
pretzel chips, so we'll be getting some of those. Good, how are you?
Female: I'm fine.
BURKE: Lot of people trying out Apple Pay?
Female: Oh, no sir.
BURKE: Yes?
Female: (LAUGHTER).
BURKE: Or am I your first?
Female: You're my first.
BURKE: All right it asked for my PIN. It always would ask for my PIN (inaudible) my debit card. Cash back? No.
(END VIDEOCLIP)
BURKE: And so I just had to enter my debit card PIN number which you always have to do here in the United States, so I got you some pretzels -
LAKE: Oh, you do know!
BURKE: -- because I know how much you like them.
LAKE: (LAUGHTER). The secret's out!
BURKE: Look, it wasn't revolutionary. When I did it, I paid for it, but I didn't have to take out my credit card to do it, and when I did, I
thought, "Oh, yes, this is the future. This is how it's all going to move." So just like the first time you heard a song on iTunes. You know,
you've heard a song before, you said, 'Ah, yes, this is how it's going to be' -
LAKE: If you feel the flip coming --
BURKE: For sure. For sure.
LAKE: Samuel, let me ask you. I think that - we feel that it's going to go digital, and everyone's been saying that - it's just a matter until
we're ready. Is Apple going to be the one to make us put away those traditional wallets? Because as you mentioned, it's sort of out there in
different forms. Everybody's got a little bit of the technology. Is Apple going to make it so easy for us that we decide that that is going to happen
in mass? Because that's what's missing in this piece of the puzzle.
BURKE: To be fair, this technology was already available on Samsung phones like the Galaxy S4, S5. There was already Google Wallet. But it
needed that scale - somebody else to just come in and take the charge and do it with this NFC - near field communication. That's the technology that
was already available on other phones and what Apple is using and I really sense that by Apple just ramming this through now, creating those
relationships with the retailer as we see so many people signing on that never used it until today, that this is going to be what pushes it over the
edge - that everybody's going to go into this now. You have everybody on board it seems like.
LAKE: And we're going to have to wait until everybody upgrades to the new phone --
BURKE: Of course.
LAKE: -- because you can't do it with the older phones. So we're not going to be able to tell instantaneously the first 24 hours -
BURKE: Or even the first six months, --
LAKE: Right.
BURKE: -- quite frankly because you can't use an old iPhone 5S like I have to do it. I had to use another one.
LAKE: Yes.
BURKE: So the stores have to upgrade, and people have to upgrade.
LAKE: Right. All right, it's going to be fascinating to watch.
BURKE: Enjoy the pretzel.
LAKE: We've discussed a long time - they weren't the first ones with MP3 player, but they were the ones who changed the game. If they can do
that, --
BURKE: That's right.
LAKE: -- we'll have to watch that stock. Samuel, thanks so much. We'll share the pretzels later. Work to do still though right now.
Germany's economy hardly grew at all in the third quarter according to the country's central bank. The Bundesbank says things are unlikely to improve
in the fourth quarter because of sluggish orders and gloomy business sentiment, and it's just the latest sign that the global recovery is
faltering, especially in Europe. Jennifer Blanke, chief economist of the World Economic Forum says plenty of economies are sitting on huge untapped
potential for growth. She explains in this week's "Future Finance."
(BEGIN VIDEOCLIP)
JENNIFER BLANKE, CHIEF ECONOMIST, WORLD ECONOMIC FORUM: The future we face today is more uncertain. Most economists think global growth will
average 3 percent per year for the foreseeable future as opposed to 5 percent before the global economic crisis. This means it will take 25
years for the economy to double in size - ten years longer than it would if it were humming along at its pre-crisis rates.
The only way forward is to unlock the talent that's within all of us. We've become used to headlines chronicling the dire state of youth
employment around the world. Average global unemployment is around 13 percent, but the figure is twice as high and then some in parts of southern
Europe, the Middle East and North Africa.
Talent is as important today as capital when it comes to defining a country's economic competitiveness. We're getting better at harnessing
this. In Europe, for example, eight out of ten of the jobs created since 2008 were in small and medium-sized businesses. By getting the public and
private sectors working better together with academia, this flowering of talent can truly flourish and become our economy's new-growth champions.
You can only unlock talent if you pay equal attention to both halves of the population. Gender equality isn't just about human rights. It
makes cold, hard economic sense. Creating genuine equality in the workforce from the boardroom down will have a transformational effect on
many economies. It's been suggested that the U.S. economy could grow by as much as 5 percent if there was true economic equality between both halves
of the population. Japan's could grow further by as much as 9 percent. No economy wants to miss out on that kind of growth. This is why Prime
Minister Shinzo Abe announced at Davos in 2014 that he wanted 30 percent of all senior managerial positions in his country to be held by women by 2020.
He won't be the last to make such promises.
At the World Economic Forum, we set so much store in countries' ability to attract and retain talent, that it forms an integral part of our
annual assessment of global competitiveness. The future we face may be uncertain, but it need not be one of diminished expectations.
(END VIDEOCLIP)
LAKE: It has been described as a ship with sails aloft. This extraordinary building is the new LVMH Foundation Museum in Paris. We'll
visit next.
(COMMERCIAL BREAK)
LAKE: LVMH, the luxury house behind Louis Vuitton, has a stunning new museum in Paris. The cloud-like structure was designed by Frank Gehry.
LVMH Chief Executive, one of France's richest men, Bernard Arnault gave the French president a tour earlier. He also spoke to our senior
correspondence Jim Bittermann.
(BEGIN VIDEOCLIP)
BERNARD ARNAULT, PRESIDENT, LVMH: My client.
(CROSS TALKING)
JIM BITTERMANN, CNN'S SENIOR EUROPEAN CORRESPONDENT BASED IN PARIS: So what happens when one of the world's most prominent architects gets
together with one of the world's richest men? You could just end up with something like this - one of the most striking new art museums. Sticker
price according to architect Frank Gehry? Something more than $130 million. But then it will house the public and private art collections of
the Foundation Louis Vuitton and its very wealthy founder, businessman Bernard Arnault, with a personal fortune estimated at $30 billion.
Take a tour around the building with a normally staid LVMH president, and you get the impression he can barely contain his enthusiasm.
ARNAULT: Beautiful, and here you have this cascade. When you hear (inaudible) and you are sitting here with this on the front step.
(CROSS TALK, INAUDIBLE)
BITTERMANN: In addition to the permanent collection, Arnault intends to bring in temporary exhibitions, creators and designers, educational
activities and performance artists. Like these men. Not just three guys with their heads stuck in corners, but vocalists trying to capture and
recreate the audio resonance of Gehry's metallic and glass structure. For Arnault, whose crafty business acquisitions in the luxury goods sector has
left some calling him "the wolf in the cashmere coat," the Foundation is a chance to soften his image.
ARNAULT: Showing that we are very good citizen and that we are working not only for the profit and gross, but also for something that is
transcendent. France is full of potential, full of talent, but in the middle of Europe which is now in a slowdown. And I hope that we will be
able to push economy of the country, and the economy of Europe during the next few years in spite of this slowdown which I hope will not last
forever. Contrary to what you see in the U.S. where things are more flexible, where you can adapt faster to evolution, is in a way paralyzed by
some very old concepts of the economy and also by excessive level of the state economy.
BITTERMANN: In France, that inflexibility even gave Arnault problems in constructing his new museum.
ARNAULT: Because France is a country worth (ph) as you know. We have a lot of manifestation, a lot of protestors. Each time you do something,
people are against. Even for this fantastic building where we had to go through a lot of contest before being able to finish it.
BITTERMANN: Was there any kind of psychological resistance in France? I mean you had a president who once said he hated the rich.
ARNAULT: I think he has changed. Now he likes free enterprise.
(LAUGHTER)
ARNAULT: Yes, which is right, huh? You know politics - when you want to be elected, you sort of efface (ph). But, I think today we are on the
right track, at least under economic thinking. Now we have to do it, which is more difficult.
BITTERMANN: Arnault, for one, has never let the difficulties of doing things stand in his way despite the resistance sometimes of those around
him. Parisians have already nicknamed the Gehry structure "the glass bird." And like so many other things here when they first arrived, like
the Eiffel Tower and the Pyramid and the Louvre, there's already debate about whether such a modern structure belongs in such a traditional city.
But the Parisians had better get used to it because in just 50 years or so, the Foundation is going to turn over the building and its contents to the
city of Paris. Jim Bittermann, CNN, Paris.
(END VIDEOCLIP)
LAKE: Time for a check on the world weather forecast. Tom Sater's at the CNN International Weather Center. Hi, Tom.
TOM SATER, METEOROLOGIST FOR CNN INTERNATIONAL: Hi, Maggie. We're going to talk about possible air disruptions for the next couple of days.
We'll start with the U.S., but really I think for the U.S., it's going to be a Wednesday into Thursday event and could continue on Thursday. Europe
in just a moment. All is quiet, all is tranquil. If you've got, you know, a flight over toward the States - 21 in Washington, D.C., 19 in New York,
Dallas is at 29. But it's the calm before the storm. It doesn't look very impressive. Right now we do have a cold front that's going to transfer
energy to a developing storm on the coast. One wave moves in, and here comes an area of low pressure. Almost looks like a classic Nor'easter
without the heavy snowfall. So the pressure gradient here really could cause some problems. I think late Wednesday again, and for most of
Thursday. So if you've got flights coming in, keep that in mind.
In Europe we're watching what was our hurricane that plowed right across Bermuda, made its way into areas of the Canadian Maritimes. There's
Newfoundland with winds over 100 kilometers per hour. This is the driving force now that's going to be a wind event. Cold air is going to really
cause, I think, disruptions when it comes to wind gusts. Yes, there will be some gales, there will be some heavy rainfall at times, but this is
mainly about the winds. Look at the winds in London. So this again is for rush hour in the mornings which should/could continue to - what is this,
about 1 p.m. - 2 p.m. So 47 kilometers per hour. That's enough to cause you to keep your seatbelts fastened and your tray tables in the upright,
locked position.
This is going to continue to slide to the east. Snow in the Alps, a little up in Scandinavia as well. But the rainfall just starts to show
now. The first band really started to move in and brings us a little more intensity with the rainfall. The stronger winds will then follow. Again,
watch the deep red - we're getting reports in our forecast models - easily over 80 kilometers per hour. This'll continue into low country, it's going
to slide across areas of Germany, even down to the south. So, again, a couple of areas to be concerned about, Maggie, if you are traveling abroad.
LAKE: All right, call your airline in advance. Thank you very much, Tom.
SATER: Yes.
LAKE: Well Richard will be back with a "Profitable Moment" form Kiev. Stay with "Quest Means Business."
(COMMERCIAL BREAK)
(BEGIN VIDEOCLIP)
QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: Tonight's "Profitable Moment." So, Ukraine has warned the
E.U. and the IMF - be prepared to send more money, get the checkbook ready. Having already sent billions to the country, now the government says
they'll need more to ensure the economic reforms continue and the stability of the country such as it is remains intact.
Well, no one should be fooled - that was always going to be the case. The billion sent already was the starting price, if you like, -- to ensure
that Ukraine remained on the European side, and probably should have been sent many months before. The truth is, as parliamentary elections are held
in this country, the government does seem committed to the reforms, to anti-corruption, true transparency, to improving the rule of law. But with
battles continuing on the East and with elections just days away, this'll be no time for the West to start shillyshallying.
(END VIDEOCLIP)
LAKE: All right, thanks to Richard in Kiev who spoke earlier to Ukraine's foreign minister. For now, that's "Quest Means Business."
Thanks for watching. I'm Maggie Lake in New York.
END
