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Quest Means Business
Facebook Posts The Biggest One-Day Loss In Stock Market History; Donald Trump Is Speaking At A U.S. Steel Factory In Illinois; China Has Now Effectively Killed The $44 Billion Merger Between The U.S. Chipmaker Qualcomm And The Dutch Rival NXP; The Market Is Clobbering Shares That Are Not Performing, Except The Airlines And That Could Be Because The Airlines Have Been Beaten Up So Badly; Imran Khan Claims Victory in Pakistan Election; Greek Government Says Wildfire Were Likely to Have Been Caused By Arson; The Red Cross Says More Than 150 People Have Been Injured After Hundreds Of African Migrants Stormed Spain's Border With Morocco; Facebook Stock Suffers Worst Day Ever; Conor McGregor Gets Community Service Over NYC Brawl; Amazon Earnings Beat Expectations; Amazon Workers Complain About Pay And Working Conditions; Yext Signs Deal to Supply Amazon's Alexa Business Information; Chipotle Earnings Beat Expectations, Shares Surge; U.S. Threatens Turkey Over Detained Pastor; Blockbuster Movies Boost IMAX Earnings; Chocolate Makers Battle Over Trademarks. Aired: 4-5p ET
Aired July 26, 2018 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST: Closing bell ringing on Wall Street, the Dow Jones is higher. The NASDAQ is off. The bell is rung and
that's it, sir. One, two, three strong gavels to bring trading to a close on an interesting Thursday, July 26th. Tonight, post this on your wall.
Facebook post the biggest one-day loss in stock market history. China kills one of the year's biggest merger deals and a special delivery,
Amazon's earnings are arriving any minute now and they are expected to be bright.
I'm Richard Quest, live in the world's financial capital, New York City where of course, I mean, business.
Good evening. It's Facebook's worst day ever by far, in fact, it would appear to be a pretty dreadful day for any stock. It's managed to lose
more value in one day in a company in stock market history. It came after Wednesday's disappointing earnings and a significant warning to investors.
The shares in Facebook closed down 19 percent after Facebook said revenue growth would slow this quarter and next. The Chief Executive, Mark
Zuckerberg is $16 billion poorer to when you woke up this morning. And it's all because of a warning that Facebook says it's putting privacy first
after the Cambridge Analytica scandal, and that would mean having to spend big at a time when revenues are under pressure.
If you look at the damage to the share price, you'll really put it into complete perspective. Now, when we say it's the largest fall ever, of
course, other stocks have fallen by more than 20 percent, but the value that's been shattered as a result of this is what makes it exceptional.
Off a $123 billion of value.
Now, there will be those that will point out that here at 173, they're really only back to the point of April and even before then, we were down
at 150 during the height of the Cambridge Analytica scandal. And that actually, it has been the strong rebound since that that has predicated
this.
But arguably, Samuel Burke is with me in London. Arguably, Samuel, those people like yourself will tell me that Cambridge Analytica was one thing,
but this warning or these results go to the core business.
SAMUEL BURKE, CNN BUSINESS AND TECHNOLOGY NEWS CORRESPONDENT: You don't lose $120 billion plus in stock market value for just one reason. This is
a culmination of reasons going from Cambridge Analytica to all of the privacy issues that we have reported on this very program, terrorists using
the platform. We're talking about fake news on the platform, and while nobody could have predicted or very few could have predicted that the stock
would drop this much in one day.
Mark Zuckerberg has been warning for months and months that if they're going to spend this amount of money that they are spending on policing the
platform, that they won't be able to deliver the profit that Wall Street wants so badly.
QUEST: But Samuel, that's one side of this equation, if you like, that is the supply side, the revenue side, but on the demand side, what always
worries people about Facebook is whether users as many users are going there, and if they are, how long are they staying and what do their results
tell us about that?
BURKE: Is Facebook cool? That's the real question that you're getting to, and it's interesting because just a couple of quarters ago, we thought we
saw the first crack. All of a sudden, a decline in users in the United States, the most important of all markets. But then the next quarter, it
came back, but now, we see this again. Plateau in Canada, stagnant in the United States, declining here in Europe.
So now, we're seeing more and more cracks that comes to a different question and can the other platforms make up for it? There's another
number that Facebook is focusing on now, 2.5 billion - that's the total amount of users using Facebook, Facebook Messenger, WhatsApp and Instagram
and now, they are wanting to focus on that and anybody who knows what's cool right now knows that Instagram is very cool, so anybody buying today,
anyone seeing this as an opportunity, was thinking to themselves - WhatsApp, Instagram - those platforms can deliver value.
[16:05:05]
QUEST: Now, this is fascinating because what he's done of course as he always intended to do was build a suite of properties because if we learned
anything from MySpace and other things like that is, you can be here today, gone tomorrow. And although Facebook is not going to disappear overnight
by any stretch of any imagination, these other vehicles, are they - could they ever take up the slack? Maybe Instagram could, WhatsApp possibly, but
they have yet to work out how they make money on WhatsApp.
BURKE: It's really the Google model. Zuckerberg looked at what Google did. They weren't just dependent on search, they went and bought products
like YouTube. To answer your question, very specifically, Richard, many analysts believe that there is a lot of value left in Instagram to be
unlocked, but on WhatsApp where you and I have had lots of arguments from the day they bought it for $22 billion, almost no analyst sees any value
coming from it right now.
But now that the WhatsApp executives, the original creators are gone, out of the picture, Facebook can do what they did with Facebook Messenger and
start to monetize it. That's what people are hoping for, but it hasn't happened yet.
QUEST: Samuel Burke is in London. Thank you. We appreciate. Facebook is one of a quartet of companies that we refer to as the FANGs, you'll be
familiar with them. They are of course, Facebook, Amazon, Netflix and Google. And you could open put in an "A" in there for Apple and the stock
exchange calls them FANG-plus by adding Tesla, Baidu and Alibaba and a few others.
But these are the Facebook. These are the main FANGs. Now, Facebook as you have seen dropped like a stone today, straight the way down some 19
percent. If you look at the others, Google on the other hand, it hit an all-time high after its earnings. Revenue at the Alphabet, the parent
surged in Q2. Netflix was really interesting. It added viewers, but that wasn't enough, so the share price was clobbered after hours.
Now, Amazon, we had just had the release on Amazon and the shares are surging after hours going well and truly up. Earnings per share, EPS twice
as expected, revenue slightly lower than expected, so they are earning more on lower revenue. We talk about all of the FANGs with Scott Galloway.
Good to see you, Scott.
SCOTT GALLOWAY, PROFESSOR, NYU STERN SCHOOL OF BUSINESS: Good to see you, Richard.
QUEST: Thank you. I mean, I've been hearing all of your views here in the course of the day on Facebook and let's get this one out of the way.
GALLOWAY: Sure.
QUEST: How damaging was this report, this earnings report from Facebook.
GALLOWAY: I think it's a bleb. I think it's a road bump. You've just mentioned the story that will bury it. Amazon is beginning its march to a
trillion dollars. Facebook grew their user growth by only 25 million, which brought expectations down. They only added the population of Texas.
Actually, beat Richard on the bottom line. The earnings were actually above expectations. It's just that the stock had been up 40 percent since
the last earnings call, so there is just some hot air coming out of the balloon, and also, I think it's some pent up rage against management for
not having a cogent response to some of the controversies they faced recently.
QUEST: But it's not a fundamental fissure into Facebook.
GALLOWAY: Oh my gosh, I was fortunate enough to be at World Cup final last week in Moscow ..
QUEST: Oh.
GALLOWAY: Right, soccer fan. Unfortunately, it didn't get there for us, but anyways, the product, the brand, it was everywhere among this group you
would describe as affluent or global leader, hard core soccer fans like myself. It wasn't Adidas, it wasn't Budweiser, it wasn't Nike, it wasn't
Coke. Half the people there were on Instagram, Richard. This is a supernova business that shows no sign of slowing.
QUEST: So the other FANGs, now, we've just had Amazon's results. We haven't got a chance to see them yet, they are more than out, but --
GALLOWAY: Amazing.
QUEST: The revenue is up not as much as expected whatever, earnings - the EPS knocked it out of the park.
GALLOWAY: Most successful company in the world right now. Facebook is dominant in apps, which is a great place to be dominant. Eighty percent of
our time on phones is in apps, so your phone isn't a telecom device, it's a delivery mechanism for Facebook. But let's talk about Amazon, best
business in the world in tech right now. Fastest growing most profitable Cloud? Who is number one? Amazon. E-commerce one out of two dollars,
rolling through the biggest economy in the e-commerce channel, rolls through Amazon.
The technology of the future that's going to change your and my life and every person here, voice, and who has 70 percent share in the home?
Amazon. We have never seen a company firing on all 12,000 cylinders like we're seeing Amazon. There's a chance tomorrow at the opening bell, the
first $1 trillion company and it's Amazon.
QUEST: On that point, too big? Does it need to be looked at?
GALLOWAY: Oh, it's gone well past that. This is a company that can take the oxygen out of any market by just starting at it. It acquires $100
million online pharmaceutical firm. Pharmacies declined by $13 billion, it goes up by $11 billion. It can perform jedi mind tricks on a sector and
put its foot on the windpipe of that company and take down the market capitalization --
[16:10:16]
GALLOWAY: -- before it's even in that sector.
QUEST: Right, okay, so when I hear you talking about this, I start to think regulators should be more active and aggressive against it. I'm not
suggesting this at the moment, I am suggesting necessarily the old days of IBM's big break it up. AT&T break it up, but that is the sort of natural
conclusion to a company that has the commercial power that you are describing.
GALLOWAY: And I think it's the correct one. When the Chinese came in and sold steel to American manufacturers for less than the price to produce it,
hoping to put American steel manufacturers out of business, we called it dumping. When Amazon takes the profits from AWS and uses it to subsidize
the retail platform, thereby putting thousands of retailers out of business, we call it innovation. It is absolutely time to break these
companies up.
QUEST: And the only reason, perhaps we are less likely to want to do so is because the likes of you and I order our whatever it is to be delivered and
it arrives the next day and --
GALLOWAY: We no longer worship, I would say at the altar of kindness and character, but the billionaire innovators, they're the new protective
class.
QUEST: Good to see, sir.
GALLOWAY: Good to see you, Richard.
QUEST: Thank you so much.
GALLOWAY: Thanks for having me.
QUEST: Right, now, while the NASDAQ - the NASDAQ was up one percent and we can blame that on Facebook pretty much, another tech. By the way, Twitter
was also down. The Dow rose in triple digits. Papa John's was down half a percent. The company is being sued now by Papa John himself. This story
just gets better. John Schnatter is accusing the company of being heavy handed. He was ousted after using offensive language on a conference call.
Amazon's billions in profits have made Jeff Bezos the world's richest man and Amazon warehouses are asking why the company can't spread the wealth
around just a little bit more.
Also, Alexa's ambition of world domination comes a step closer. Its brain will get a business class upgrade.
Breaking news, Donald Trump is speaking at a U.S. steel factory in Illinois. We are going to listen to hear what the President is saying as
he talks obviously about the U.S. economy.
[16:05:00]
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I'll tell you what, those three people fight for you all the time. In fact, they fight so much that
I sometimes say, "I don't want to take their call today." But they're with you all the way. Very special people. Hardworking congressmen.
I also want to thank the President and CEO of the United States Steel Corporation, David Burritt. David, thank you. And David actually gave me
a couple of words when I walked in and I said, "You know what, David? I'd love you and Doug Matthews," and some of the folks that you want to bring
if you want to bring anybody, come up here. I want to shake your hand. What a job you're doing. U.S. Steel is back. U.S. steel is back.
QUEST: U.S. steel is back. That's a good note upon which we can leave Donald Trump. We will return when he gets to maybe some meat and veg of
his address. Donald Trump of course made a gentleman's agreement between himself and Jean-Claude Juncker that found supporters and skeptics in
Europe - we talked about it at great length on last night's program.
France's economy minister, Bruno Le Maire said that he required clarification about the terms of the deal. In Germany, the economy
minister, Peter Altmaier described it as a breakthrough.
(BEGIN VIDEO CLIP)
PETER ALTMAIER, ECONOMY MINISTER, GERMANY (Through a translator): I am very relieved. We have avoided a trade war. We now have the prospect of
lower rather than higher tariffs. This means that hundreds of thousands of jobs in Europe and Germany have been secured and globally, we can now avoid
serious consequences for the global economy.
(END VIDEO CLIP)
QUEST: The European auto makers, their shares then rallied obviously because of the threats of U.S. tariffs that we've seen. Just look at that,
Volkswagen saw a gain of 4 percent, Daimler is up 3 percent. BMW is up 4.5 percent. The U.S. President and the President of the European Commission
said no new tariffs would be imposed while negotiations continue.
We're joined now by Todd Buchholz who is the White House Director of Economic Policy under George H.W. Bush. Good to see you, sir. Thank you.
Look, the deal that was done at best paper over the disagreements. But they've still got to negotiate a proper non-agricultural, industrial deal.
TODD BUCHHOLZ, WHITE HOUSE DIRECTOR OF ECONOMIC POLICY UNDER GEORGE H.W. BUSH: Well, of course, Richard there is work to be done. You don't expect
the President to come out with this Excel spreadsheet and fill all the boxes, that's for his minions to do.
But here's the question that was posed by the President effectively over the course of the last year. Is the President against the idea of free
trade? Does he want to shut down world trade and leave the U.S. to some mercantilist cat where every man is on his own, or did he genuinely have an
interest in lowering tariffs around the world?
Well, based on the last 24 hours, it seems that there is a genuine interest in his using his brinkmanship in order to lower tariffs as opposed to
basically build barriers and build walls against free trade.
QUEST: But hang on a second. First of all, agriculture wasn't included in all of this. And we know that the biggest sticking point with the European
Union remains the agricultural nontariff barriers. Secondly, there is the question of how the steel and aluminum tariffs are removed when the Union
has made it quite clear, they are not going to negotiate under the threat of tariffs until they are.
BUCHHOLZ: Well, first of all, I think the union looks like it will be buckling on its claim that it won't be intimidated. I think the European
Union is intimidated. The European Union has a trade surplus with the U.S., therefore, they have more to lose. Now, I am not defending tariffs,
I think steel tariffs by the U.S. drive up the cost for American consumers to buy automobiles and washing machines and we see that reflected in the
downward path of shares in Ford Motor Company and in Whirlpool.
But really, Richard, what we have to ask ourselves is whether Trump's strategy in the end is leading others to make concessions? Now, it's hard
to answer that in advance, and sure, the pages of the "Financial Times" and "Economist" appearing on CNN and all of its media competitors have been
decrying the tariffs. I am not in favor of tariffs, but if it turns out that they lead to better negotiations and a better deal and opening up
agriculture, especially in the European Union, then in the end, we'll look back and say, "Well, maybe it was a good thing that we took a hard line."
QUEST: You know, I've got to admire your argument and debate, Todd because it is a classic exposed facto that once the results are in, we'll be able
to tell whether it was worth the trouble. That's the gist of your point. But I might suggest to you instead --
[16:20:15]
QUEST: -- that the damage being done to the global trading system and to the trussed network of allies, it defies that benefit when you're tariffing
your closest allies like Canada on national security grounds or the European Union and Germany.
BUCHHOLZ: Well, I must agree, Richard. If you can get the Canadians to be upset about anything, George Will, the columnist once said the Canadians
were - now, these are his words, Richard, not mine - cold like vichyssoise he said, cold, thick and hard to stir. Well, Donald Trump certainly got
them stirred up.
And yes, there has been damage, but this is classic game theory. The Nobel Prize winning economist who have looked at game theory, some of you - your
viewers may remember the movie, "A Beautiful Mind" about John Nash, the game theorist said basically, if you want to win the game, you want to win
the negotiation. It makes sense to first of all be surprising, don't be so dependable. Secondly, ask for more than you really will take in the end,
but third, it's important also to find some allies, and I think Donald Trump has been a little bit slow to find any allies in negotiating.
He may have an ally in North Korea, I wouldn't be surprised if he announced there's going to be a free trade agreement with North Korea someday. We'll
send them chicken wings, they'll send us political prisoners and boy bands. But Trump now finally looks like he is finding an ally, at least in
Juncker, who gave him a big wet kiss on the cheek yesterday.
QUEST: And that was enough to give most of us a very funny thought. Thank you very much, sir. Todd, good to see you and we will talk more in the
future. Lovely having you on the program tonight.
BUCHHOLZ: Thank you.
QUEST: Our earnings coming in from chipmaker, Intel. And the chipmaker beat Wall Street estimates. Booming use of Cloud computing drove demand
for Intel's data center chips, revenue up 15 percent. In the last quarter, the CEO stepped down, having a consensual relationship with an Intel
employee, which was in violation of company policy.
Starbucks' third quarter earnings have also come out in line with expectations. Global same store sales rose 1 percent, Starbucks' shares
have had a rough year. They fell more than 10 percent on weak sales. And let's stay with earnings and news. While Europe and the United States are
making nice, things are turning nastier between the U.S. and China.
China has now effectively killed the $44 billion merger between the U.S. chipmaker Qualcomm and the Dutch rival NXP. Qualcomm has given up after
failing to get the approvals. The merger had already got the go ahead in eight other jurisdictions and there is a seriously hefty breakup fee,
excuse me, that has to be paid.
Paul Triolo is the head of geotechnology at the Eurasia Group. Difficult to know what we make of this one. I mean, we know obviously what happened
with ZTE and we've seen how the U.S. - the U.S. put certain restrictions on Qualcomm and on this deal and others, but China has killed it off, which is
a step further.
PAUL TRIOLO, HEAD OF GEOTECHNOLOGY, EURASIA GROUP: Yes, Richard. It think we were somewhat surprised by this action, sort of letting the clock run
out on this deal, which had been under review for quite some time, and our view was that there was really not that much upside for Beijing on this.
The downside is that it opens the potential for example to reexamine the ZTE case, which had been settled, but was implicitly linked to the Qualcomm
approval.
And the other issue is China's regulator - the sort of politicization - what we might call the naked politicization of this review process is also
sort of a reputational risk in China. So, the upside here for China is we think is very thin, other than it's showing a hardened attitude in Beijing
towards the administration and may reflect a consensus that this administration is fundamentally hostile to China and that China should
resist on all fronts.
QUEST: Okay, so we put it into context, with obviously the trade sanctions and trade tariffs, and when you start getting this sort of moves, they
become almost non-tariff barriers. The sort of obstructionist maneuvers that the Chinese are well known for, rather than open economic warfare.
Would you fear more of this sort of activity?
TRIOLO: Absolutely, Richard, I think - if you look at the tariff - the sort of tit for tat on tariffs, there's only so many ways - so high China
can go to match the U.S. tariffs that have been imposed and of course, had been further threatened by President Trump, and so, we expect - see, this
is a sign that Beijing is going to be likely to use more of these informed methods like refusing licenses and targeting U.S. companies operating in
China, harassing them, so this is really a bad sign for the relationship overall.
[16:26:10]
QUEST: Sir, good to see you. Thank you for coming in this evening. We appreciate it. Thank you.
TRIOLO: Thank you, Richard.
QUEST: What a day for earnings, wherever we look, whether it's Intel, Facebook, Starbucks, it's a bumper day for earnings and we need to put it
into context and show you exactly what's been happening. Join me at the earnings share case.
Remembering of course that this is following the share price in the 24 hours after earnings. It's the best metric for what investors are thinking
about and we already see a trend which is clearly lower. There's more stocks that have lost in the 24 hours that seem to have gained, but let's
show you the ones that we've got.
Well, Facebook is down 19 percent, so that one goes right over here, 6 percent and above. I thought we couldn't have anything worse than that on
that earnings season. We then have got of course, Ford, the Ford Motor Company. It lowered its profit forecast and Ford afterhours is down some 5
percent, so put that on just there.
McDonald's had some difficulties, U.S. sales slowed but international sales rose, now McDonald's share price has had a thumping great big run up lately
in the last 12 months, so now it's down just 2 percent on its earnings. You're getting a really good idea that the market is clobbering shares that
are not performing well, except the airlines and that could be because the airlines have been beaten up so badly.
Delta was up 1 percent after earnings. United and Southwest up 6 percent, now American up 5 percent with the Chief Exec, Todd Parker describing it as
the most challenging quarter in five years as fuel rose and investors don't like the cost cutting plan.
So you're getting a really good idea. I'm going to leave you with the share case as we continue with what's next which will be Amazon's report
which is coming up. We've got more details on that one. This is the share case from those that have made 6 percent gains right the way around for
those like Facebook today which is down 19 percent.
(COMMERCIAL BREAK)
[16:30:00] QUEST: Hello, I'm Richard Quest, there's more QUEST MEANS BUSINESS in just a moment. The chief executive of IMAX Richard Gelfond
tells me why the big screen is still king of the Box Office, particularly with blockbusters.
And the Trump administration is warning Turkey it faces sanctions, big sanctions if it -- it must free an American pastor. You are watching CNN,
and on this network, the facts always come first. The former cricket star Imran Khan has claimed victory in Pakistan's disputed election.
Official results still aren't fully in, and it isn't clear whether his center-right party will have an outright majority for which all the other
major parties say that all has been rigged. The Greek government says that this week's wildfire were likely to have been caused by arson.
Now, the response to the deadly crisis was also lacking. A Greek mayor is telling CNN that some deaths could have been avoided. So far 80 people in
his city were killed when the fires broke out. The mayor says that no evacuation order was given.
The Red Cross says more than 150 people have been injured after hundreds of African migrants stormed Spain's border with Morocco. Police say some 600
migrants managed to enter Spanish territory, most of them are now in temporary migrant holding status.
Facebook's stock has fallen 19 percent and it's wiped out more shareholder value than any U.S. company seen in a single day. The selloff followed
disappointing earnings and warnings of slower growth. As for the founder Mark Zuckerberg, his personal fortune shrunk by $16 billion today.
Conor McGregor has avoided jail after being involved in a brawl in New York in April. The UFC fighter pleaded guilty to disorderly conduct and will do
community service and take an anger management class. He was charged after he threw a dolly at a bus at the Barclays Center.
Amazon shares are just off the top, they're still at 2 percent after hours as revenue from the company came in slightly below Wall Street's
expectations marginally. A couple of 100 million on 53 billion, I mean, let's get -- let's get reasonable about this.
The car competing division performed especially well, revenues there were up nearly -- sent(ph). And now the world's -- man is now even richer.
Some of the workers are complaining, they're not feeling benefits -- Clare Sebastian is with me.
CLARE SEBASTIAN, CNN CORRESPONDENT: Yes, Richard, this is a debate that has been growing around Amazon, particularly recently as the share prices
has been soaring to new record highs, making Jeff Bezos the richest man in modern history.
This is something that people feel isn't trickling down to the workers at the bottom, and this came to her head particularly recently on the
company's prime day.
(BEGIN VIDEOTAPE)
SEBASTIAN (voice-over): This was the other side of Amazon's best sales day to date at a warehouse near Madrid. Around a thousand workers walked off
the job, complaining the company should increase pay and vacation time. There were some of the scenes at six facilities in Germany.
UNIDENTIFIED MALE: I'm not sure what to make of those reports, we offer very competitive wages and benefits.
SEBASTIAN: The strikes didn't stop Prime Day from breaking records. The sales rode in, Amazon stocks hit new highs, and CEO Jeff Bezos became the
richest man in modern history. His wealth topping $152 billion.
SEN. BERNIE SANDERS (D), VERMONT: If this were not so pathetic, it really would be laughable.
SEBASTIAN: Having U.S. Senator Bernie Sanders also picked Prime Day for a live town hall on corporate inequality.
UNIDENTIFIED MALE: The pay is not only not worth it --
SEBASTIAN: Seth Keane(ph); a former Amazon employee was on the panel.
UNIDENTIFIED MALE: You know, you're not allowed to sit down, you're not allowed to talk to people.
SEBASTIAN: Keane(ph) worked at an Amazon facility in Virginia last year where he says he earned $13 an hour.
UNIDENTIFIED MALE: I was not in a good place mentally and the isolation of the job made it even worse, and I felt suicidal.
SEBASTIAN: After two months he said he had a breakdown and stopped showing up. The company fired him for tardiness and denied his accession that
employees can't speak to their colleagues.
UNIDENTIFIED MALE: People are not drums, you know, we're not minus bodies that are just swamping to like do these tasks.
SEBASTIAN: In 2016, the institute for local self-reliance compared Amazon's warehouse pay against other warehouse jobs in 11 U.S. metro areas.
[16:35:00] UNIDENTIFIED FEMALE: We found that on average across these 11 metro areas, Amazon pay is about 15 percent less than what workers are
normally paid for warehouse jobs.
SEBASTIAN: Amazon told us our number one priority is to ensure positive and safe working environment. The company also told us it encourages
employees to compare their pay and benefit to other retailers.
The average hourly wage for a full time associate in our fulfillment centers including cash stock and incentive bonuses is over $15 an hour.
Amazon also told us they added $130,000 new jobs last year, still experts say it's all adding up to an image problem for the company.
PETER SHANKMAN, MARKETING EXPERT: As someone who advises major companies. I will tell them, hey, you know what? One of the richest companies in the
world, your CEO is the richest person in the world, you can do something about this.
Think about what having the backing of all the employees would do for the company, for the stock, for the morale, for the brand itself.
SEBASTIAN: Amazon now employs more than half in people worldwide. It seems more and more want their voices heard.
(END VIDEOTAPE)
SEBASTIAN: Richard, more and more employees want their voices heard, but the bottom line is that this isn't affecting Amazon's business in the
slightest, not reaching critical mass in terms of strikes, it's not causing people to boycott and they're still continuing to move into new and
different areas.
Just in the last quarter, they you know, moved into new content deals, they acquired PillPack, an online pharmacy which rattled the healthcare sector.
So it continues to be a company that dominates so many different parts of our lives.
QUEST: Superb reporting, thank you. Clare Sebastian, thank you for that. One of the things that Clare was talking about of course was the different
areas that Amazon has moved into, and perhaps not more so than voice and the ability to give a command and get some information.
For example, Alexa, tell me about CNN.
ALEXA, VIRTUAL ASSISTANT DEVELOPED BY AMAZON: Cable News Network is an American paid television news channel and a subsidiary of AT&T's Warner
Media. CNN was founded in 1985 --
QUEST: Thank you, Alexa!
ALEXA: Media proprietor Ted Turner --
QUEST: Stop!
ALEXA: Twenty four hours cable --
QUEST: Alexa, stop. Actually, you get there. So it knows all about CNN and knows about AT&T and it even knows about Warner Media. But my next
guest wants to load Alexa up with useful business information like opening hours, contact numbers straight from the business itself.
It will make it a lot more useful. For example, if I ask it for the next flight to London from New York, it hasn't got that information. Well,
hopefully, Howard Lerman can tell me the sort of information that is going to and joins me in the C-Suite, good to see you sir.
HOWARD LERMAN, CHIEF EXECUTIVE OFFICER, YEXT: How are you?
QUEST: Good to see you.
LERMAN: Great to see you.
QUEST: This deal that you've just done, what's it about?
LERMAN: We couldn't be more excited about our new partnership with Amazon. For the first time, businesses can control their information in Alexa. So
that means when you ask questions about local businesses, when they're open, what their contact information is.
The information you receive, if it's a Yext customer, will come directly from the source. The ultimate authority on a business which is the
business itself.
QUEST: Right, so you are the conduit between the business and Alexa or Amazon as such.
LERMAN: That's right. Yext lets businesses control their information in intelligent services just like they manage content on their own websites.
So if a brand like a Home Depot or McDonald's would have changed a fact they put into our engine and boom it's updated across 150 end-points around
the world.
QUEST: The difficulty of course is that these voice information services, whatever we want to describe them, they're a long way from the vision that
we've all got. I mean, if I ask her, Alexa, what's the weather? She will tell me what the weather is in --
ALEXA: Eighty degrees Fahrenheit with partly sunny sky.
QUEST: Here we go --
ALEXA: Good night, you can expect just a few cloud --
QUEST: Right, thank you, stop Alexa. Good --
LERMAN: Easy old friend.
QUEST: She ignores me like everybody else. But what's the -- what's the nirvana of this sort of machine? What's the ultimate, do you think?
LERMAN: Voice search is exploding. It's ultimately a conversational way that we as humans can interact with a computer. Let's look around the
world for example. In China, people use WeChat all the time and voice search is dominant.
Over one-third of Americans are now using voice search often in lieu of other types of online searches.
QUEST: But it's still a very unsatisfactory experience at the moment, isn't it?
LERMAN: Well, you should talk to my three-year-old daughter who thinks Alexa is with her all the time, right? She'll yell out to Alexa to play her
a nursery rhyme. So for those of us that are just becoming accustomed to it, I think it's the kind of thing that, you know, when you look at voice
search around the world, it's absolutely exploding.
And today, with our new integration with Amazon, we're able to make that experience a bit more satisfactory from more than 1.5 million businesses.
QUEST: I can understand why you would want to -- obviously, Amazon is huge, Amazon is vast, it has many tentacles and it is the leader in this
area. But it also is a goliath in terms of companies and smaller companies can often fear being squashed by them.
[16:40:00] LERMAN: Well, I think this is a great opportunity for small companies to be able to use their software to upgrade and update their
information directly in Alexa so that they can get found and attract new customers.
With voice search, the way people talk is very different than the way people type. You can talk faster than you can type. People ask for more
specific details, it's not just about, hey, what time is the business open? But I might ask Google assistant, I need a hotel in Hamburg that has free
WiFi, is pet friendly and has parking nearby.
QUEST: But you also have to be to a certain extent -- you just made a good point. Agnostic in terms of ensuring your service goes across all the
different platforms. You can tie yourself to Amazon and Alexa, but you want to make sure that you're available elsewhere as well, aren't you?
LERMAN: As a business, if you're McDonald's, you want to make sure --
QUEST: No, but you're the CEO of your business.
LERMAN: Yes, as an independent player, we zinger information from Google to Microsoft to Apple, the shared case there, all the companies up there
now rounded out with Amazon. And now you can update your information in a Alexa, all four digital assistance from Siri to Cortana to Google
assistant.
We even think information in WeChat in Mandarin, so that a company like a Jaguar, Land Rover or Burberry in the U.K. can make sure that information
is correct in China in the native Mandarin language. This (INAUDIBLE) management the space we operate is global.
QUEST: Really good to have you on set --
LERMAN: Thank you --
QUEST: Thank you for joining us, come back again please --
LERMAN: OK, I will love to do that --
QUEST: Thank you. Now, more earning news to bring you, what a day. Chipotle shares are up some 6 percent after hours, earnings beat
expectations, revenue and sales rose, the new chief executive is trying to improve his image. The stock is up about 50 percent though over the last
few months.
A $100 million is being spent trying to deal with that, the legacy of the past. Donald Trump is giving Turkey an ultimatum, release an American
pastor or prepare for sanctions. That's what we'll talk about after the break.
It is QUEST MEANS BUSINESS live.
(COMMERCIAL BREAK)
QUEST: Turkey says it will never tolerate threats from anybody after the U.S. president issued an ultimatum. Donald Trump said it's up every
sanction on Turkey if it continues to detain a U.S. pastor. The Turkish authorities arrested Andrew Brunson in 2016 and charged him with an
espionage.
Vice President Mike Pence has echoed the views of his boss.
(BEGIN VIDEO CLIP)
[16:45:00] MIKE PENCE, VICE PRESIDENT OF THE UNITED STATES: And to President Erdogan and the Turkish government, I have a message, on behalf
of the president of the United States of America, release Pastor Andrew Brunson now or be prepared to face the consequences.
If Turkey does not take immediate action to free this innocent man of faith and send him home to America, the United States will impose significant
sanctions on Turkey until Pastor Andrew Brunson is free.
(APPLAUSE)
(END VIDEO CLIP)
QUEST: Michelle Kosinski at State --
MICHELLE KOSINSKI, CNN SENIOR DIPLOMATIC CORRESPONDENT: Yes --
QUEST: Department. Look, that is a straightforward threat --
KOSINKSI: Yes --
QUEST: That is not backed up by action, time reaction will weaken the U.S.' negotiating and diplomatic positions around the world.
KOSINSKI: That is true and threats by tweet are a thing lately in the United States. I mean, President Trump threatened large sanctions likely
this morning and you see it backed up by his vice president. Now, we have a third voice in the -- because here at the State Department say there was
this big ministerial meeting on international religious freedom.
So that is the perfect venue to make that threat again with the ambassador for International Religious Freedom Sam Brownback who just spoke minutes
ago and again echoed that. Although, he had a more optimistic tone.
He said that he feels the prospects are very good for this American Christian evangelical pastor who has been imprisoned in Turkey for nearly
two years and was just released on house arrest to be released essentially.
So he also issued a threat and they're hoping that would be I guess the last straw for Turkey to really let him go.
QUEST: Except Turkey, President Erdogan cannot now, whether he was planning to release him or not --
KOSINSKI: Yes --
QUEST: Becomes infinitely more difficult if it looks like you're releasing him under the threat of sanctions from the United States and Donald Trump.
KOSINSKI: I mean, yes or no. But isn't this the pattern that we've been seeing lately. There're some massive threats -- let's take North Korea for
example, there's threat of nuclear war for God sake, then there's some talk and then there's some nice agreement and a big happy, joyful meeting and
then things seem a lot better.
And you know, so it seems like the coarse Turkey has already released this guy on house arrest. It seems like that is a very good sign that this is
going to end well. Why the threats now?
Well, it's possible that's because the Trump administration feels like this will have a good resolution. I think if they felt there were signs that
they were just going to --
QUEST: Right --
KOSINSKI: Exacerbate the situation, then they would be smart enough to keep their mouth shut. I feel like --
QUEST: Right --
KOSINKSI: If they see this coming, they're going to work something out. Remember Turkey has one of the U.S. to extradite Fethullah Gulen over the
attempted coup for a very long time. The U.S. has not been willing to do that.
That could be a stalemate, I mean, that's what everybody has been watching. But now that Turkey has released him on house arrest, it really seems like
--
QUEST: Right --
KOSINSKI: First step toward a good outcome.
QUEST: Michelle, good to see you, thank you, have a safe one.
KOSINSKI: Cheers.
QUEST: Now, a daily briefing podcast is updated twice a day before the start of trade and after the closing bell. So apparently, if I just say
Alexa, what's my flash briefing every week day, to my answer.
ALEXA: Here's your flash briefing from CNNMoney. I'm Christine Romans, this is your CNNMoney morning news --
[16:50:00] (COMMERCIAL BREAK)
QUEST: The chief executive of IMAX says he knows how to succeed in a Netflix world. A series of Summer blockbusters boosted Box Office revenues
at IMAX and helped the company beat expectations. At the Stock Exchange earlier, Rich Gelfond told me why customers are coming in when they could
watch it at home instead.
(BEGIN VIDEO CLIP)
RICHARD GELFOND, CHIEF EXECUTIVE, IMAX: IMAX is in the blockbuster business and the global blockbuster business and this was a great time to
be in it. Some people think the movie business is a declining industry, and particularly when you look internationally, in fact, it's a terrific
industry.
Some of the things like streaming which are affecting the movie industry, people aren't going to go see "Jurassic World" on your streaming. You
know, they might see you on their streaming to watch the news. But for big blockbuster films, you want to see them in an IMAX theater and especially
in these developing countries, you want to see them.
So yes, the winds are out there, but at the moment we are benefiting from the winds rather than a victim of the winds.
QUEST: And do you see much change as a result of studio shifts? So for example, Warner brothers going to AT&T, you're not going to hold change of
"21st Century Fox", where those two years will eventually end up with Disney.
You even got "Sky" which of course is television going across perhaps to Comcast. Will that affect content?
GELFOND: Yes, I think there will be a lot more content created because there will be a more capital behind it. But I think there'll be kind of
two strategies. I think on the theatrical or the movie side of the business, they'll go blockbuster, they'll go big.
Because people aren't going to go to a theater to see a midsize movie that they can get what they want, you know, and they could stream it. Some of
them, they will if it's really especially independent, but that market, I think will start to go more to streaming.
But the big $150 million, $200 million blockbusters, you're going to want to see them theatrically. So I think there will be a dual strategy. So
for example, Disney buying "Fox", I think they'll make "Fox" into more of a blockbuster company --
QUEST: Right --
GELFOND: AT&T, that's a more interesting one, because I assume they'll develop more of a video streaming service, and I think they'll probably use
Warner to create content for that and then theatrically, they'll focus on the blockbusters.
QUEST: And this whole question of the MoviePass, we saw the reverse, stocks split that the media too went in the wrong direction. You're still
not a fan of these ideas.
GELFOND: No, I think MoviePass was the wrong idea at the wrong time. I think --
QUEST: They've got every right, I think -- is there ever going to be a right plan for that sort of all you can eat?
GELFOND: Absolutely, AMC has one now, it's called the stops program, we're part of it, and the way their program works, you charge $20 a month, you
can go three times a week, and you can also go to IMAX for no incremental charge.
The problem with the MoviePass plan was twofold. One, I think the price was too low to make a profit, and the third thing is they went outside and
they were trying to squeeze the studios and the exhibiters and make money out of that.
And there's just not enough margin and that the model just didn't work.
(END VIDEO CLIP)
QUEST: Now, you can hardly go to the movies without enjoying chocolate and plenty of that. Nestle with KitKat is trying to give a modern twist to the
Kick Kart.
[16:55:00] (MUSIC)
QUEST: Oh, my KitKat, my KitKat. After London legal battle, European court of Justice has rejected Nestle's attempt to trademark the four-finger
biscuit, you're familiar with it of course. You can just bake one and well, we'll enjoy it until a little bit later.
Now, Mondelez has its own similarly-shaped snack called the Norwegian Quick Lunch and the court has said that Nestle had failed to prove that the
KitKat shape is recognizable throughout the EU because frankly, the KitKat looks like the Norwegian Quick Lunch.
Somehow being more fortunate Toblerone of course, oh, yes, Toblerone did get the EU to grant the trademark for the pyramid-shaped chocolate.
Experts say the difference is that Toblerone is majors of shape that's part of its advertising.
So you tell me -- get here, you tell me, what's the difference between that and that? And why that one can be trademarked and that one can't. It
doesn't really matter because at the end of the day we'll have a profitable moment after we've just made sure we've involved everybody -- if you want
to keep people happy here, the easiest way by far is free chocolate.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, earnings are good but the market is brutal. And without the earnings share case -- and you can just see, yes,
some stocks do get 5 percent or six percent up on gold earnings and 3 percent for Alphabet, Microsoft and IBM.
But look at this sway that are being punished, Citi, United Healthcare, McDonald's, GE, AT&T, all the way down to Facebook. This market is brutal
and arguably some would say it's because it's priced to perfection. I don't necessarily buy that.
I think that what we are getting is a more volatile market that becomes more unforgiving particularly when you're at it in a quantum trading and
you're at it in the algorithmic moves as well. Which is why over time, we'll get an idea of just how these companies are performing rather than
just necessarily in one or two days.
Overall though, the earnings are good, the trade tariffs are having a potential warning effect in the future and companies are starting to worry
about an economic slowdown. And that's what we're all seeing this month though in this quarter in the earnings share case.
And that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York. Whatever you're up to in the hours ahead, Alexa, I hope it's
profitable. Good night.
ALEXA: I don't know that.
END
