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First Move with Julia Chatterley
Tens Of Millions Of People On Lockdown, Businesses And Theme Parks Close Their Door To Stop The Spread; It's The Democrats Last Day To Plead Their Case In The Senate To Vote To Remove President Trump From Office; How The 50th World Economic Forum Will Stand Out From The Rest. Aired 9-10a ET
Aired January 24, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:22]
ZAIN ASHER, CNN INTERNATIONAL ANCHOR: Coming to you live from New York, I'm Zain Asher and here is what you need to know.
The race to contain the coronavirus. Tens of millions of people on lockdown, businesses and theme parks close their door to stop the spread.
Plus, it's the Democrats last day to plead their case in the Senate to vote to remove President Trump from office.
And the finale in the Swiss Alps. How the 50th World Economic Forum will stand out from the rest.
It is Friday. And this is FIRST MOVE.
All right, welcome to FIRST MOVE coming to you today from New York and also the World Economic Forum in Davos, Switzerland. Julia Chatterley will join
us live from Davos in just a few minutes.
The coronavirus has become a major concern for dignitaries there. The health emergency has rattled global markets throughout this week as well.
That said, if you look at your screen though, we've got a very positive tone to stocks this Friday.
Futures are pointing to a higher Wall Street open with the NASDAQ set to begin today's sessions at record highs. The markets open in half an hour
from now in New York.
European markets are rallying over one percent. New data shows the German economy on a firmer footing during the first few weeks of this year so far.
Chinese markets were closed for the Lunar New Year holiday, but shares in Japan and Hong Kong rose slightly. Stocks are higher today, but Asia's
health emergency could weigh on investor sentiment for weeks to come.
S&P researchers say that Chinese GDP could take more than one percent hit if consumers pullback spending some 10 percent.
The coronavirus could also affect the bottom lines of major U.S. multinationals. McDonald's, for example, is already suspending operations
in five Chinese cities and Disney is shutting down that Shanghai theme park as a precaution.
Asia's health prices remains our top driver this Friday. In China, 30 million people in 10 cities are banned from traveling as authorities try to
contain the coronavirus. The country has confirmed 26 deaths and almost 900 cases. Major cities are canceling Lunar New Year events as well.
Beijing and Shanghai are on the highest alert for a public health emergency. In Wuhan, officials acknowledge that hospitals that are
struggling to cope.
David Culver is in Beijing. Paula Hancocks joins us live now from Seoul. So David, I want to start with you. We all know this virus is spreading very
quickly. Every single day I wake up and I see the death toll continues to rise. When you look at a city like Wuhan, do they have the capacity just in
terms of healthcare to really handle this?
DAVID CULVER, CNN CORRESPONDENT: Looking at social media, which seems to be our greatest indicator of what's actually going on within the lockdown,
Zain, it seems that they are not as prepared for a situation like this.
I mean, this is unprecedented what they've been doing to try to contain it. You talk about 10 plus cities, at least 30 million people -- that number
could go up. And it's not only restrictions going out of those cities, its restrictions within those cities.
So public transportation to get from one place to another also shut down. So people who have been trying to get to hospitals have complained that
they've been unable to do so because normally they rely on public transport.
So Wuhan officials have responded to this and they acknowledge that some people have been turned away from the hospitals. There's just been an
influx of patients and concern and people going and asking to be tested and some people going with fevers being turned way.
Wuhan officials say that they have acknowledged it and that they have asked that that not happen again. They plan to alleviate that situation and they
plan to provide transportation for those folks.
Now, some of these images that I'm about to show you here give a really detailed idea as to what we're seeing within the lockdown zone, if you
will. And we should tell you, we have not independently verified these, but we've had seen them producers going through them, looking at the dialects
and they seem to be genuine.
I want to start with this one which shows some makeshift offices outside of a hospital, tents being used to help with this overflow. That's what it
appears to be in this video.
Now, another one shows a woman who looks to be a healthcare worker. She's walking along a line of patients who look to be trying to get tested for
the coronavirus. She's shouting and she's saying, to get in line, to keep quiet so that they can hear her instructions. She's giving them procedures
and then she says, don't be nervous. It's tough not to be nervous in a situation like this.
And lastly, a video that shows a patient's perspective in all of this. It's from the patient's bed and looking out at that person's medical team, all
covered from head to toe in hazmat suits; not necessarily reassuring, but you don't blame the medical team who obviously are trying to protect
themselves from any potential exposure.
As far as what the government is doing, they have said that they will put a billion -- a million, rather RMB, so about $144 million dollars into this
effort -- this containment effort. They haven't specified what exactly that would look like, Zain.
[09:05:31]
CULVER: But we do know one aspect of that will potentially be a new hospital that state media has said will be built in less than a week's
time, six days is what they're saying, and we've seen some video come out from state media that appears to show bulldozers and front end loaders,
several of them sprawled out across a piece of property in Wuhan preparing to make way for this construction. But six days is the time they're giving
to build this thing.
ASHER: All right, so they're trying desperately in whatever way they can to contain this virus, but no doubt it's certainly a tall order. Paula
Hancocks, if I could just bring you in. How effective do you think airport screenings and quarantines at airports will be in preventing this virus
from spreading?
PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT: Well, we've certainly heard some experts saying that that they have little effectiveness when it
comes to actually trying to pinpoint this virus and to try and prevent passengers potentially with this virus from entering the country.
Now, we know there have been two cases here in South Korea. We understand from the Korean CDC that they were picked up at the airport when they were
-- the health screeners at the gate.
So clearly, those were two cases that were successful. So certainly, it is just one of a number of measures that the airports around the world are
taking at this point.
Here in South Korea, we also know officials are saying that they are told when there are particular passengers or individuals that have potentially
been to these affected areas, they then meet them at the gate, they take the temperature. They try in preventing them from mingling with the general
passengers.
A similar situation in London, we understand at Heathrow Airport. There's a separate arrivals area where planes from the affected areas would come
through.
So it's a real effort by many countries to try and segregate those individuals and those planes from the affected areas from the general
populace.
Now, we do know that the number of confirmed cases outside of Mainland China is rising. Early this morning in in Asia -- Asia time -- 14 people
were confirmed to be infected with the coronavirus and now at this point, we have the latest figure of 22, 11:00 p.m. here in Seoul. One extra here
in Seoul today, an extra one in Japan, a couple of extra confirmed just in the past hour or so in Taiwan.
So certainly, there is a concern that these numbers are rising.
ASHER: Paula Hancocks liver for us there. David Culver. Both of you, thank you so much.
And worries over the spread of coronavirus reaching the picturesque Swiss town of Davos. Julia Chatterley is joining us live now. So Julia, this
World Economic Forum was supposed to be, and in theory, is about climate change and sustainability, but there's no doubt that the coronavirus in
Asia has cast a massive shadow over the agenda.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: We've debated them all, Zain. Thank you so much. The final day here of course, as you mentioned at the
World Economic Forum in Davos. We've talked about the economy, sustainability, climate change, but to your point, absolutely. The last
couple of days, business leaders, politicians, people from around the world very much focused on China's response here, and their handling of this
outbreak.
Richard Quest managed to speak to the CEO of China's largest travel agency. So again, the response here, very important. The CEO telling him that the
authorities in China have improved their response. Listen to this.
(BEGIN VIDEO CLIP)
JANE SUN, CEO, TRIP.COM GROUP: Compared to size, I think Chinese government have invested a tremendous amount of the money in the system. So now they
can show the World Health Organization about the disease, about the impact and scope.
(END VIDEO CLIP)
CHATTERLEY: We'll talk more about this from Davos later on in the show. But I do want to bring it back to the big theme here, which was climate change
and the reaction. No doubt, big energy companies well and truly, front and center here. We're looking for what their response ultimately is going to
be.
Take a look at oil prices, though, and what we've seen over this week. They've been falling. John Defterios had an exclusive interview with the
CEO of Saudi Aramco, too, perfect timing, in light of everything going on. This, of course, the world's largest oil exporter.
John asked him about whether in light of everything that's going on right now, the geopolitical tensions in particular in the region, is the market
too complacent here? Listen in.
[09:10:06]
(BEGIN VIDEOTAPE)
AMIN H. NASSER, CEO, SAUDI ARAMCO: If you compare with the past, any small events like this one would have taken the prices to a new high -- hike and
would have lasted for a longer period of time.
For the time being, apparently the market is assuming that there is ample supply, adequate supply that is sufficient to meet the market's
requirements and demand by different sources, especially the unconventional.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well in fact, the shale production is expected to grow 1.2 million to 1.3 million barrels a
day in 2020. But a much smaller gain in 2021. Are we about the end of that shale boom, do you think?
NASSER: I think the shale -- I would say oil revolutionized the oil industry in the U.S. There is no doubt. They did a great job. They reached
almost as high as 1.6 million barrels in the year and then we are seeing a slowdown.
Our expectation is that in 2020, it is going to be slow depending on which analysis you look at, as low as 400 and as high as 800,000 barrels a day of
additional. It is definitely with time, it is going to slow down. There is a tightness in terms of financial capacity. And as such, it will limit the
amount of shale coming to the market.
DEFTERIOS: From a security standpoint, President Trump talked about having NATO present in the Middle East to police the Strait of Hormuz, even
perhaps protect the infrastructure for security of supplies around the world. Is that a good idea that the burden doesn't just rest with the
producers or the United States at this stage?
NASSER: It is almost 20 million barrels that comes out from the Gulf region and the importance of ensuring the safety and the security of that supply
is the responsibility of the region, definitely, but the whole world.
DEFTERIOS: So you like the idea of perhaps NATO having a role here, so you feel a bit more secure with the broader Alliance.
NASSER: The energy security has an importance for the whole global world, and whatever happens in Saudi Arabia or in the Gulf will have serious
implications on the rest of the world in terms of security of supply and that is important. It is our responsibility that needs to be taken
seriously.
(END VIDEOTAPE)
CHATTERLEY: John Defterios joins us now. JD, this was a phenomenal panel. I'll tweet out a link to it after the show because I want people to watch
this. Your face in response to his predictions, the shale out -- I was like, OK, we're going there. We'll talk about policing the Straits of
Hormuz, but what's happened? Why the conservative views now on the shale plays?
DEFTERIOS: No, it was amazing. This all changed in the last weeks by the way.
CHATTERLEY: Yes.
DEFTERIOS: The estimates for the year were 1.2 million to 1.3 million barrels a day of expansion, a similar number in 2019. But now, the message
from Wall Street is you have to make money. We don't need more production.
And we're at a very interesting inflection point because we had 200 bankruptcies over the last three years, with the burden of $100 billion of
debt.
So the major IOCs are coming in. Occidental paid a premium to go in. Chevron, Exxon Mobil, BP, Total of France are all in there. They don't have
to explore, they know it's there, and they want to squeeze more efficiency out of it.
So this is that turning point on shale. But geez, we've added nine million barrels a day over a decade, Julia, it's about time for it to level off.
And the major Gulf producers have much lower costs, so they're just kind of trying to sit back. Interesting that the price is dropping, though as we
come into Davos because there's no security threat tonight.
I just find it extraordinary that we're just not factoring in risk right now. They think there's plenty of oil from the United States, and the stuff
is still coming out of the Gulf despite all that scare we had four weeks ago.
CHATTERLEY: I know. I mean, if you look at the newspaper headlines, we were heading somewhere towards World War III potentially and I know from your
perspective in the Middle East, it felt incredibly tense at that moment.
I love the conversation about the responsibility, though. We all rely on this energy. The whole world is impacted who polices the Strait of Hormuz
here?
DEFTERIOS: Well, I mean, Nasser didn't want to get into the politics. He will leave that to NATO, right? But he obviously didn't shoot it down
because if it's a wider coalition to police the straight, so much the better. They had a huge scare because of the Abqaiq attack on their
facilities.
They had the pumping station last year pipelines being hit, the tankers south of the Strait of Hormuz. So clearly they'd like to have a shield
here.
The narrative when I talk to sources here in background in Davos, though, was that there was a bold move by President Trump to take out Soleimani,
the General from Iran, and that has now pushed Iran into a box. Now do they strike the Gulf allies like the UAE, Kuwait, Saudi Arabia or not? That's a
huge question. And that's why I'm surprised that we see the price dropping at this stage.
[09:15:02]
DEFTERIOS: Most believe that the United States did the right move. It put the Iranians on the back foot. The jetliner, the Ukrainian jetliner that
was knocked down also makes them very, very nervous to try to do anything else.
CHATTERLEY: Yes, but we're still watching it all very closely to your point about complacency. You're going to be back to talk about Big Oil's response
to Greta Thunberg as well. That's going to be a fascinating one, but thanks. For now, JD, thank you. See you in a bit.
DEFTERIOS: Yes, thanks.
CHATTERLEY: Zain, back to you.
ASHER: Julia, thank you so much. So these are the stories making headlines around the world.
The impeachment trial of Donald Trump is at the end of its first week. Today is the final day of opening arguments for Democrats. They're expected
to move their focus to the second Article of Impeachment, and that is obstruction of Congress.
Lauren Fox joins us live now. So Lauren, up until this point, it's been all about abuse of power. Just walk us through what Congressman Adam Schiff,
who is also Chairman of the House Intelligence Committee had to say during his closing remarks.
LAUREN FOX, CNN POLITICS CONGRESSIONAL REPORTER Well, essentially, he gave an impassioned speech last night, really multiple times repeating the same
refrain that Congress needs to remember to do what is right, and I will tell you that for those in the room, it might have felt a little different
than the previous arguments that he had made.
Remember, this has been 16 hours in counting from Democrats. You can expect them to go another nearly eight hours today in their closing day of
arguments.
But Republicans have their own challenge right now, Zain, and that's the fact that this is wall-to-wall Democratic coverage. Essentially, what
people back home are seeing when they tune into any network, including ours is the fact that they are just seeing Democrats making this argument
against the President abusing power and obstructing Congress in the case of today's arguments, and that's been a problem for Republicans.
In fact, yesterday, Republican leaders told lawmakers that they need to make better use of those dinner breaks, those bathroom breaks. They need to
go find a camera and make a case for the President in part, because there's just no room right now for them.
Now, we all know that this is going to shift tomorrow when the President's defense team begins making their case, but it's a Saturday. Not as many
people may be tuning in. So that's in part why Republicans are really encouraging their members yesterday and today to make an effort to go and
find and talk to the press.
And I'll tell you up here, the press restrictions have gotten a lot more difficult to handle, in part because they have us behind ropes. We can't
walk and talk with members like we normally would. That was all put in by Republican leadership.
So it's a little bit ironic that it seems to be backfiring now on their strategy to publicly defend the President who we know is watching from the
Oval Office -- Zain.
ASHER: Isn't that interesting? Lauren Fox live for us there. Thank you so much.
Hundreds of thousands of people marched through Baghdad on what's being called a Million Man March, the anti-U.S. rally was called by Shiite
cleric, Muqtada al-Sadr to protest the American military presence in Iraq. It follows a U.S. strike that killed an Iranian General in Baghdad.
This is FIRST MOVE. Coming up in Davos, there is deep concern about the impact of the coronavirus. We are live there with the CEO of Hong Kong's
rail operator, MTR Corporation.
And knowing who to trust. The CEO of IBM tells us why it should be them.
(COMMERCIAL BREAK)
[09:21:24]
CHATTERLEY: Welcome back to the World Economic Forum live from Davos, Switzerland.
As we've been discussing, the spread, the outbreak of the coronavirus in China and their response certainly forming a significant part of the debate
over the last couple of days.
Let me just bring you up to speed with the latest that we know. So far, 26 people have died; 900 cases have been confirmed in China. New international
cases have been reported daily.
China, now resorting to a travel ban on tens of millions of individuals to try and contain the spread.
Global rail operator MTR, meanwhile, has suspended sales of high speed tickets to Wuhan. MTR Corporation runs public transport in Hong Kong and
mass transit lines in mainland cities, including Beijing and Shenzhen and I'm pleased to say Jacob Kam, the CEO of MTR Corporation joins me now.
Sir, fantastic to have you on the show.
JACOB KAM, CEO, MTR CORPORATION: Hello, Julia.
CHATTERLEY: Let's just talk about the company's response at this stage. What preparations and what restrictions have you put in place so far to try
and contain the spread?
KAM: The Hong Kong government has raised the alert level. So according to that, we have implemented our contingency plans. Now, we have learned
lessons from the SARS epidemic crisis. So now, we have put in place various measures including at the port, Port Health has put in temperature -- body
temperature measurements, as well as a health declaration.
And in addition to that, we have actually enhance the cleaning of our premises, our trains, and also raised the hygiene requirements for our own
staff.
Because all of these have to be done together in order to reduce the risk to our passengers, as well as to our staff.
The high speed rail tickets to Wuhan has been suspended. This is in cooperation with the Mainland authorities, which is trying, of course,
trying to contain the spread of the virus.
CHATTERLEY: And no sense yet at this stage when you'll be able to reestablish those extreme caution, I guess, is what's being operated at
this moment.
KAM: In fact, at this stage of a health hazard like this, it is probably better to be cautious than to relax. We will of course continue to monitor
the situation.
CHATTERLEY: But so far, you're confident that travel on the rest of the trains, people are safe.
KAM: Yes.
CHATTERLEY: OK. It follows what you've described, of course, and it's just one more challenge, but perhaps the biggest challenge that you've faced
over the last 40 years. I mean, you've been front and center with the protests in in Hong Kong. It's been incredibly damaging.
KAM: Yes, it has been probably the most challenging seven months in the 40 years history of Hong Kong. I am thankful that our staff have performed
their duties, well and professionally. We have managed to keep Hong Kong running, to keep Hong Kong moving.
Our objective is to provide a safe, sustainable, integrated railway service to our customers. Also, we hope to drive our performance through
innovation. So even in the last seven months, we have been able to move forward a little.
We have opened a new fully automatic, unmanned operations line in Sydney, and we have opened a new line in Hangzhou. And we have extended our service
in London on the Elizabeth Line.
[09:25:09]
CHATTERLEY: And then we saw a huge drop in tourism in December. Obviously, this is a separate event now with the coronavirus, but what was January
like? Had you seen a bit of a pickup or are people still quite cautious here?
KAM: In fact, the overall patronage has gone down during the last seven months, mainly because of the social unrest and also a significant drop in
tourist numbers.
We have seen stabilization of the situation in the last few weeks, and patronage has been stabilizing. But of course, we will have to wait until
the citizens are more confident to travel other than their essential travel in order for patronages would come back to normal.
CHATTERLEY: You mentioned the future transport, technology, the exciting things that you're doing. Does China lead in this? Or is perhaps the
optimism about what can be done in terms of the future of transport, a little ahead of the technology at this stage, she says.
KAM: China of course is always keen on taking the technology forward. They have done a lot in the high speed rail area, but they have also worked on
the other associated technologies with railway, as well as with customer service.
In Hong Kong, we have the advantage of learning from all around the world. We don't have the monopoly of good ideas, but we are able to learn from
many different cities and many different railway operators around the world, and we're able to implement some of the good ideas in both our
service in Hong Kong as well as elsewhere.
CHATTERLEY: I tell you what, I've traveled around China. I thought it was absolutely phenomenal, quite frankly. So you've got my vote. The CEO of MTR
there, great to speak to you. Thank you so much for joining us.
KAM: Thank you very much.
CHATTERLEY: All right, guys, the market open is next. We are counting down. Stay with us. We're back in a few moments. Plenty more to come from the
show and from us here in Davos at the World Economic Forum. You're with FIRST MOVE, and we're back in two.
(COMMERCIAL BREAK)
[09:30:00]
ASHER: That is the Olympic softball team ringing the opening bell. It's Friday, the end of the week, end of a week of trading here on Wall Street.
I am Zain Asher. You are watching FIRST MOVE.
As expected, let's take a look. We have got a higher open across the board. The Dow is already up a hundred points, some better than expected earnings
from corporate heavyweights are helping the market move. The NASDAQ is hitting fresh record highs. The Dow is on track for its first positive
close this week.
Let's look at European stocks as well. European stocks are also suddenly higher amid signs that Eurozone business confidence is picking up in the
New Year. The closely watched German Economic Index rose to a five-month high.
Time now for a check of our Global Movers. Take a look here. Shares of Dow component, American Express are on the rise after posting fourth quarter
earnings and revenue beat. Intel shares are rallying. The chipmaker giant is also reporting better than expected results. It's raising its full-year
outlook and is seeing strong chip demand going forward.
We're also watching shares of both McDonald's and Disney, both Dow components are being forced to take emergency actions in China.
All right, and shares of airlines and gambling firms have been hit hard by virus fears. Clare Sebastian joins us live now. So Clare, just walk us
through, just given all of the fares and all the action that companies like McDonald's and Disney are taking, just walk us through how this might
affect their bottom line, given the rapid spread of this virus in the region.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, Zain, it's really hard to know that right now. This is still obviously a very fluid situation,
very difficult for markets and for people in the C-suite of these companies to price in.
But you see them acting out of an abundance of caution. McDonald's as you say, suspending operations in five cities in China. They, by the way, are
in the middle of a big expansion in China, almost doubling the number of stores between 2017 and 2022. So that is worth bearing in mind there.
Disney as well. They're not even in Wuhan or any of the affected cities. They are in Shanghai and they are closing down their Disneyland theme park
and various other bits of the resort, they say because this is in response to the prevention and control of the disease outbreak and in order to
ensure the health and safety of our guests and cast.
Obviously, this being an area where a lot of people will congregate, but Wuhan, don't forget is also to an extent China's Motor City. International
carmakers, the likes of Renault, Peugeot and Honda all have operations there as part of a joint venture with a Chinese counterpart. They perhaps
mercifully, are already closed for the Chinese New Year.
But Renault has told us that they are monitoring the situation and it remains to be seen what will happen when that planned closure comes to its
end, whether they will remain closed, or otherwise a lot of them rely on their Chinese operations to a significant part of their revenue. In the
case of Honda, that was 11 percent.
So these are all factors that we continue to watch. It is still very difficult to predict what will happen here, but a lot of international
companies, Zain are effected.
ASHER: And just in terms of airlines more specifically, obviously you have a lot of flights that have been canceled right now. How are the likes of
Delta and United handling this?
SEBASTIAN: Yes, this is again an international problem. The way to think about it is, we have the direct impact from the closure of the Wuhan
airport. We can look at some of the stocks that are affected there.
China Eastern and China Southern are perhaps the most exposed. They are now down double digits on the week. Cathay Pacific also, its subsidiary Cathay
Dragon operates flights there. They have suspended those and are refunding customers.
Delta also through a coach share with China Eastern operates flights to Wuhan, they're also offering refunds as is United. So this is something
that is hitting the airlines particularly hard.
But the big variable here, first of all, this is the Chinese Lunar New Year, so this is a really busy time, so the timing couldn't be worse for
the travel community.
But also the variable is that this isn't just about direct impact. This is about broader sentiment. We don't yet know how long this will last, how far
it will spread, and how it will impact how the traveling public views this region, whether people are going to hold off on travel there and for how
long. That is, again, something that will affect these airlines and frankly, hotels and other aspects of the tourism industry.
ASHER: Clare Sebastian, live for us. Thank you so much.
Coming up here on FIRST MOVE, our final farewell to Davos. Julia dissects IBM's turnaround plan with the CEO Ginni Rometty, where success is found in
the Cloud. Meantime, guess who's falling from the clouds?
(BEGIN VIDEO CLIP)
RICHARD QUEST, CNN ANCHOR, "QUEST MEANS BUSINESS": It is a lot more dangerous than it looks.
CHATTERLEY: If I slide, I slide into you.
QUEST: I know, and I'll go -- and if I slide, we will be down in the trees before you know it.
CHATTERLEY: You can catch me and then we'll just both make snowmen down there.
QUEST: Snow angels. I'll pay good money to see ma'am do a snow angel.
CHATTERLEY: Yes. You haven't got enough money for that, my friend.
(END VIDEO CLIP)
ASHER: And ma'am actually did it. Richard and Julia settle up as the World Economic Forum comes to a close.
(COMMERCIAL BREAK)
[09:35:15]
CHATTERLEY: Welcome back to FIRST MOVE live from Davos, Switzerland. Two of the big themes that I've been talking about all week and have been on
panels discussing is one, tech for good; and the second, trust in technology. This is something that IBM CEO Ginni Rometty has been talking
about now, for many years.
She has refocused IBM's business on technologies of the future like the hybrid Cloud, quantum computing, blockchain and artificial intelligence,
and that new direction was reinforced, of course with the acquisition of Red Hat for some $34 billion. We've discussed it previously on the show.
That allows software and data to be moved easily between Cloud platforms.
Well, a few days ago, IBM also reported their full year earnings. The results, beat analyst expectations. Ginni told me that her plan to refocus
and reshape the business is driven by trust in the brand, too, and that's well and truly paying off. Listen in.
(BEGIN VIDEO CLIP)
GINNI ROMETTY, CEO, IBM: Actually, I think the results are a great vindication of the strategy. So we grew it all measures you could see, but
the most important thing I think was for the world to see this wonderful acquisition we did, second half last year of Red Hat because of our belief
in the hybrid Cloud in an open world.
You could see IBM better together with Red Hat. So Red Hat hit record results, plus 24 percent, their first billion dollar quarter, and then you
saw the rest of IBM lift as well.
So it's that solution that goes together and you saw our Cloud accelerated through the year, 23 percent growth, and I think the part people -- they
are so excited about that -- they missed the point that margins expanded 230 basis points.
[09:40:03]
CHATTERLEY: OK.
ROMETTY: Because this has been about evolving into, yes, a company on hybrid Cloud and AI for the enterprise, but one that's high value, and that
really pictures in that because we do a lot of divestitures. So you see that in our margin.
CHATTERLEY: More efficient.
ROMETTY: It's more efficient, and it's things that -- our commoditizing, we've moved out. So as people have talked about our revenue, you and I have
talked, I've divested almost $10 billion during my tenure of revenue, because if you have to move out, if you're going to live a hundred years,
you've got to invest in the next thing, and you can't cling on to the past.
So that's what's done it and now, the team has done a superb job, and they're really positioned for the next chapter, and that's why we talked
about position for revenue growth, EPS, free cash flow, it's really in a good -- and it really -- I think it's our clients voting with what we've
really put together in the portfolio.
CHATTERLEY: And you also make a great point as well. You can look at the purchase of Red Hat in in terms of the billions of dollars, but you have to
look at it also in terms of what you've divested in order to streamline the business and prepare for this to be the real growth engine, I think of the
company going forward.
ROMETTY: That's right. That's right, because our view was, you know, the Cloud journey is only 20 percent through and done, and so you've got
another 80 percent to go.
But now is the hard work, and with hybrid Cloud that means, gee, when I'm doing mission critical work, like we were just selected to be the Cloud,
public Cloud for Bank of America. Why? Mission critical means, oh, I better do 500 controls for the regulatory environment, almost continuous
compliance. And so that's the world we've built for.
And I think that's the world most clients are going to have to move toward as we've talked about here at Davos, this is a decade of trust.
And so you can trust us. I'm not going to compete with you. Your data is your data. And I will be sure that you are secure in this environment and
that's what this is about.
CHATTERLEY: Is that what you provide as well relative to competitors? I mean, the obvious point to make is that everyone sees in their different
ways, and your view on the hybrid Cloud and the sort of mix of what companies will want and do want already going forward? Is that what
differentiates you ultimately, from some of the other big players that are looking at Cloud and saying, we also see the potential of this going
forward?
ROMETTY: Yes, I think the biggest thing that differentiates us is our trust and responsibility and security -- it is the biggest thing that
differentiates us. But I do think as well, what we've seen with clients is, it will be a multi Cloud hybrid world.
It's just like renovating a house, you don't do everything at once, you don't have infinite money. And there are certain rooms that are more used
in other rooms and there are certain rooms that you're more particular about. That's just real life of how a client's application portfolio looks.
But we move them to the future at the right rate and to the right places, and so this to me is, we are the only one that gives them a horizontal
platform that says you can use multiple Clouds for certain things. It is horses for courses, but in a secure way and you don't -- in a world we've
talked a lot about skills -- you can build once, run anywhere.
We are the only one that is horizontal build runs, run anywhere. The rest, they've got great strengths, but they're individually as you might say,
each an island on their own.
CHATTERLEY: So if you had to define where IBM is now, to your point, we're seeing the revenue growth. This is now collection of pieces of the
transition period that you've been working on. Where are we now as you look ahead, 12 months strong --
ROMETTY: Yes, strong foundation built. We really mirror with our clients. Chapter 1 is over, Chapter 2 now is how to put all the mission critical
work into the Cloud, and how you put AI through everything you do in your company, but in a trusted way. That's the part we're on now.
CHATTERLEY: Let's talk about that, because you and I were on a panel together talking about trust in technology, technology for good, the fact
that trust is declining at this moment for many different reasons. Fears about what technology represents.
You came out and with your policy lab, a bold statement and said, look, we're going to take ownership of this and say, we're developing, we're
encompassing this kind of technology in our systems today. This is how we think we need to see it regulated. Precision regulation.
ROMETTY: Yes, yes. In fact, actually, we are not the last man in on this. We are the first man on in this topic.
CHATTERLEY: I was about to say you are leading. You are absolutely leading.
ROMETTY: Yes. You and I were talking about it. It was, I think at least four years ago at Davos, we produced a paper that was -- we said, we better
write down our principles for trust and transparency in the AI and digital era.
And we wrote that down, and I can remember bringing it here thinking it was, you know, exciting for everyone to talk about it.
CHATTERLEY: I didn't want to talk about it.
ROMETTY: And I was like, oh, no, no, no, no. And I'm thinking, this is going to be the biggest issue of our time because if data is the most
wonderful resource, it will be great. But it can also be abused, and I think this will separate companies.
There will be good tech, and there will be bad tech -- and every company that uses tech is going to fall on one of these lines. And so we said,
there are a set of principles, you must say what your principles are. You have to be willing to be audited to them and your products, your people
have to embody them.
And so those principles were four years ago. So then we moved on, and actually precision regulation, we started talking about last year and the
idea was -- because I could see what was happening. There's a fear of some of these technologies, which is very natural because these technologies
change people's skills. I do think AI is going to change 100 percent of jobs, not replace.
[09:45:09]
ROMETTY: But change what you do in some of your tasks.
CHATTERLEY: Re-skilling required.
ROMETTY: So re-skilling for really the whole global population over a 10 to 15-year period. And so, of course, people go, gee, do I have a better
future? Number one job to be looked after here is that issue.
So therefore, when we say precision regulation, the first reaction can be, geez, this may not be good for my future, I may not be better, therefore,
AI is bad.
Our point of precision regulation, like Precision Medicine is, if you go to a doctor, Precision Medicine is gee, my leg is really hurting. Well, let me
cut your arm off. No.
CHATTERLEY: That is something else to worry about.
ROMETTY: But that can happen. So very clear points about precision regulation, meaning, first and foremost, the idea would be you should
regulate the use of technologies, not the technology themselves.
Because every one of these technologies we're talking about has a wonderful thing it can do for society, and a dark side, every one of them.
So first on use; the second is on risk. So in other words, if I'm going to use a chat bot to decide the route I travel or the restaurant I pick, no --
really relatively little risk in this versus I'm picking the kind of diagnosis or doctor I'm going to work with. That's a very different answer.
And then the third thing is and it is the most important, I feel very strongly since we ever introduced AI, we, in our own firm, said every
programmer, every builder -- AI Ethics. I have an AI Ethics officer from the very beginning that said, you have to be transparent and free of bias.
People must know what trained it. Am I actually interfacing with AI? They must know as an example, bias because bias by itself is an act of bias.
Bias is your values. So you have to be clear.
So we built products that help companies even -- it doesn't matter who built the AI. It could be Google or anyone, that we could say, hey, there's
a pattern here. You better check. Is that the bias you want in something?
CHATTERLEY: How are we going to achieve this? I mean, you're coming out and saying, look, we've been doing this from the beginning. You're leading as
far as good use of technology, bad use and mitigating the risks of each. But you know, you and I were talking about a Stanford Institute, the AI
Institute, and they were saying more than half of companies now adding AI into the systems in some way or form, that 13 percent only are actually
looking at things like Ethics.
ROMETTY: Yes.
CHATTERLEY: Bias.
ROMETTY: Yes.
CHATTERLEY: Discrimination.
ROMETTY: That's why this isn't solved as -- you can't regulate out of this problem. This is a public-private partnership and every company of any
private institution has got to take responsibility for this, and I think society is going to decide on this.
And I think they're going to decide who they want to give license, you know, trust and license to operate to.
CHATTERLEY: So just to wrap up, in five years' time, when you and I are having these discussions, one about IBM's business and two, about business
response to some of the big technology challenges, reasons to be optimistic.
ROMETTY: Well, look, there are plenty of reasons to be optimistic. I'm optimistic about, honestly that I think we can make this digital era, an
inclusive era that many, many more people can find an on ramp, and they don't all have to have a college degree, 63 percent of the OECD does not
have a college degree. And there are many, many jobs and professions they can partake in this.
And so I'm actually optimistic that with all of our work, and many -- myself, my colleagues have all doubled down around the world on this, this
will be a more inclusive era.
(END VIDEOTAPE)
CHATTERLEY: You cannot regulate your way out of this problem. She is a leader in this field, most certainly.
The 50th anniversary of Davos, wrapping up here, climate change, well and truly I think the key theme here and no one encapsulates that better than
Greta Thunberg. Of course, you got the chance to speak to her, to ask her what's the purpose of coming to Davos? Listen to what she had to say.
(BEGIN VIDEO CLIP)
GRETA THUNBERG, CLIMATE ACTIVIST: Of course, this is the right audience. Everyone is the right audience since -- I mean, both the finance, the
business sector and the political sector, of course, everyone needs to do something. So everyone is the right audience.
We shouldn't be focusing about whose -- which sector is most responsible, which sector has to do most because we need to push from every direction
and this needs -- this change needs to come from every direction.
(END VIDEO CLIP)
CHATTERLEY: Her voice is certainly heard.
DEFTERIOS: It's so powerful. She's short.
CHATTERLEY: She's a tiny little thing.
DEFTERIOS: But I do think she packed a big punch though, yes.
CHATTERLEY: You can give her a hug.
DEFTERIOS: Yes.
CHATTERLEY: In a non-patronizing way. Did she speak to the business community because you asked her that?
DEFTERIOS: Yes, she avoided it. But she said, look, we got the message out because there's 3,000 participants. I started on Tuesday ahead of Donald
Trump. I came in after his speech, said the message and then they finished with the press conference and a march this afternoon, all the way down the
promenade here in Davos. So she feels that she got the message out.
But we have to move away from that point of her being the voice of this action.
CHATTERLEY: Yes. Now what?
DEFTERIOS: They now have to sit at the bargaining table like the Extinction Rebellion for example in the U.K., sources tell me, they sit with the oil
and gas companies already to say what's the realistic transition?
[09:50:09]
DEFTERIOS: Let's push coal out of the market. Let's bring in gas as a transition fuel and get the renewables onto the market as fast as possible.
She got the world attention, you can see the protest here today. Now, they just need to go to the oil CEOs and say, OK, what can we do next?
CHATTERLEY: Yes, what can we do next? Perhaps even just get China to turn off the tap or get Donald Trump to ship a load of LNG over there, but John,
we'll come back to that because Richard Quest and I had a bit of a bet about snow angels. Two beautiful angels in the snow. Take a look at this.
DEFTERIOS: I've got to see this.
CHATTERLEY: We'll do it next year.
(BEGIN VIDEOTAPE)
CHATTERLEY: It's quite deep.
QUEST: Now, there's some nice clean snow there.
CHATTERLEY: Had your chance.
QUEST: Would you like a hand? On, here we are. There we are. Perfect.
CHATTERLEY: Oh, this is virgin snow.
QUEST: Very good indeed.
CHATTERLEY: I think I'll lose my boot. Show me the money, Richard.
QUEST: Go.
CHATTERLEY: This is very cold, Richard.
QUEST: Oh, the hills are alive with the sound of snow angels.
CHATTERLEY: Music.
QUEST: La-da-da-da. How do we get up? We turn over.
CHATTERLEY: Thank you. Not bad. You made a larger dent.
QUEST: Oh, I'm a bit heavier.
CHATTERLEY: You have bigger wings.
QUEST: All right.
CHATTERLEY: How does my hair look?
(END VIDEOTAPE)
CHATTERLEY: So we initially betted 50 quid, I managed to get him up to 500 pounds. And we had to debate about the currencies.
DEFTERIOS: Now, we know what she was like in grade school. She's a little naughty girl giggling.
CHATTERLEY: I'm still like that.
DEFTERIOS: She's been giggling for the last two hours. But that was fantastic, I have to say, and you made a lot of swish, you're not as big as
Richard, you didn't give any space in the snow. It could work on your part.
CHATTERLEY: Synchronized snow angels.
DEFTERIOS: Yes, exactly.
CHATTERLEY: I was the best for that job.
DEFTERIOS: We're using the dollar here. You've got to move away from that quid.
CHATTERLEY: It's strong my friend. Stronger. Small money for charity.
DEFTERIOS: Good for you.
CHATTERLEY: Next year.
DEFTERIOS: Yes.
CHATTERLEY: You're with us. Zain, back to you.
ASHER: Julia, I still can't believe you will regular jeans to do that. You saw Richard in his waterproof gear and you were in regular jeans. Function
over fashion, my friend. Function over fashion.
CHATTERLEY: Always.
ASHER: Lesson learned.
CHATTERLEY: And a spare pair of trousers for an enormously wet --
ASHER: All right, live from Davos, Julia Chatterley and John Defterios there. You are watching FIRST MOVE. We'll have more after this.
(COMMERCIAL BREAK)
ASHER: All right, here's today's Boardroom Brief. Cybersecurity experts say there are still many unanswered questions from an investigation that found
the phone of Jeff Bezos was hacked.
Saudi Crown Prince Mohammad bin Salman was implicated in the hack, but the Kingdom denied any involvement. Some researchers say the report into the
hacking didn't contain evidence strong enough to reach a firm conclusion.
[09:55:10]
ASHER: Former Wells Fargo CEO, John Stumpf has agreed to a whopping $17.5 million fine and a lifetime ban from banking for his role in the bank sales
scandal. Wells Fargo admitted its employees opened millions of fake bank and credit card accounts to meet unrealistic sales goals.
In addition to Stumpf, seven other executives were fined nearly $40 million in total for their years of misconduct.
And another quick check of the markets for you before we leave you, U.S. stocks are mostly higher in early trading although the S&P 500 has been
losing some of the altitude this past few minutes. The NASDAQ is hitting fresh record highs. Strong earnings from blue chips. Intel and American
Express are helping give a boost to the markets.
Next week will also be another big earnings week. We've got Apple, Microsoft, Amazon and Boeing all reporting results.
All right. That is it for the show. Thank you so much for watching. I'm Zain Asher. "CNN Newsroom" starts right after this short break. You're
watching CNN.
(COMMERCIAL BREAK)
[10:00:00]
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