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Quest Means Business
Apple Earnings Boost Stock; Q-25 Earnings Analysis: CAT & Coke; Vegas Mayor Talks Tourism
Aired October 20, 2009 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL CORRESPONDENT: Now that's what I call core profit, Apple sells more Macs and iPhones than ever.
Red or green? We're not talking apples, it's balloons. We're keeping score with the Q-25. The U.S. corporate earnings season is really taking shape.
And rolling the dice, Las Vegas is hoping for its luck to turn, the mayor of the desert city joins me in this hour.
This is the hour, I'm Richard Quest. And I mean business.
Good evening. Booming profits, a legion of fans, a rising market share, and all of this, it's a premium-priced product in the middle of an economic slump. It could only be Apple and the latest results, expected to be better than expected, but they were even better than expected there.
That's worthy of a bell if ever there was one. Apple shares -- results came out after the close of business last night. But there have been the talking point in the market for most of the day. And for this reason, let me just show you, if we come over here. Apple have had a -- the shares have surged on the exchanges.
A generally bearish day on Wall Street, but in after hours trading, they rose to a12-month high. It is an achievement in a market that is perhaps a little bit disgruntled at the moment. That's certainly where technology is raised at the moment. But Apple is managing to buck that trend. That is an impressive (INAUDIBLE) if anything.
The Q4 earnings, fourth quarter, $1.7 billion, an increase of 47 percent. Now, I can't emphasize enough that we knew there were going to be good results, the fact that they were so sparkling, you've really got to dig down deep and try and get underneath them to see what it was.
And the reason was not just the iPhones, which has now become ubiquitous, but also maps too, with their new operating system, the Snow Leopard, and with other various different iPods, iPhones, Macs. It's tempting to say all things with Apple are green and rosy. And I'm afraid tonight that is very much the way it appears to be.
On the Q-25, where we've been analyzing different results, as you can see, so far, we have more reds than greens. But for Apple we took our vote and there really is no doubt that Apple does get a green balloon tonight. We would have actually perhaps used Apple's, but we sort, as you see, balloons. Plenty more of those as the program wears on.
Apple is the talking point. It's obvious people love the products. You hear them saying things like, it's the user experience. The doubters say they're paying over the odds for sleek design. Somewhere in the middle there are those of us that wonder what this phenomenon is all about. Diana Magnay has been tasting and seeing why it tastes so sweet for Apple's success.
DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT (voice-over): These may be recessionary times, but there is one store where the sun always seems to shine.
(on camera): The latest eye-popping numbers from Apple show that more and more people are buying one of these. Here is why a selection of people we spoke to said they think it's great.
UNIDENTIFIED FEMALE: Just because you can do absolutely everything with it. You don't need a map or anything, especially in London, you can just see -- know exactly where you are and where you need to be with it. And we've got so many different apps that you can do everything really.
UNIDENTIFIED MALE: You can phone, listen to your music, and there are (INAUDIBLE) applications on there. It's just endless. I love it.
MAGNAY: William Higham, who has written a book on consumer trends, says even in the downturn people are continuing to spend on personal technology.
WILLIAM HIGHAM, AUTHOR, "THE NEXT BIG THING": People have gone through very difficult times, financially they've got problems. What is important to them now is family, is friends. So people are wanting to stay in communication with them.
MAGNAY: Still, that doesn't explain the momentum behind iPhone sales or why Apple sales rose 25 percent this quarter, while Nokia this year rang up its first ever loss. Higham says the only way to beat a brand with this kind of cult following is to spot changing consumer desires like Volkswagen did in the '60s.
HIGHAM: Back in the '60s, cars were all about size and girth and how impressive it was. And so Ford and Chrysler were doing so well, but then Volkswagen comes along and says, actually, we're small. We're not going to try and be as big as you. We're actually small, and that's special.
MAGNAY: There is still some way to go, though, before Apple catches up with Nokia's market share.
NATE LANXON, CNET U.K.: It's hovering sort of between 13, 14 percent globally, of the total phone market, whereas Nokia, for example, is somewhere around the 40 percent, and say RIM's BlackBerry phones account for about 20 percent. So they are climbing and it's steadily getting better.
But with just the one device, particularly at that price, they still are going to struggle to beat Nokia, at least at the moment.
MAGNAY: The real boost to Apple's earnings came from sales of its computers, up 17 percent year-on-year. The only downer is iPod mp3, victim of the iPhone's success.
Diana Magnay, CNN, London.
QUEST: Whenever we talk about technology, particularly when it comes to smart phones, then we turn to Dieter Bohn, who joins us from Florida via broadband. And it's Dieter's job to know all there is to know about smart phones, essentially is a smart phone expert.
Dieter, look, the iPhone, I'm not a particular user -- well, I'm not a user of straightforwardly. What is it about the iPhone and the Apple cachet that allows them to be successful? You look like you're under 40, you explain it to me.
DIETER BOHN, EDITOR-IN-CHIEF, SMARTPHONE EXPERTS: Well, I think that the main thing is that Apple doesn't simply make products based on what they -- what the feedback is from -- what consumers are asking for. They sit down and think, what are consumers going to want tomorrow that they don't know that they want already?
And the iPhone is a perfect example of that. They took a phone and they just removed as many buttons as possible to make it mostly just a screen. And people had tried that before, but not to the extent that Apple had. And so it turned into a thing that people didn't know that they wanted until they wanted it. And that's Apple's core strength.
QUEST: Yes, but I mean, is it all style over substance? Because this is when it starts to get difficult, doesn't it, Dieter? There is an element that people say, let's take the Macs, for example, and let's take the -- which I -- again, I'm not a user, and I'll talk more about that in a "Profitable Moment."
Is it -- there is a substance there that people find cool?
BOHN: Oh, absolutely. Apple has never made any apologies about having products that cost a little bit more. They don't aim for the low end of the market. They aim for, you know, the middle and the higher end. And part of that is the design. They're one of the few companies that works really hard to integrate software and hardware and put design into both.
And it gives them just a little bit of an edge and people are willing to pay a premium for it.
QUEST: And, of course, in the race for market share, Windows 7 comes along. Windows may have 90-odd percent of the market, but that doesn't seem to affect the business of Apple.
BOHN: No, Apple thinks of themselves like a BMW, or at least most people think of Apple like BMW. They're not looking to sell the most computers or the most cars compared to Microsoft. They want to sell as many as they can at a really good margin. And you can see from the results yesterday that the margin was great.
QUEST: The margin is great. Final thought though, as we factor that in, how important is it that your generation loves to be part of and to be associated -- and I emphasize that not you particularly, because you're independent, you sort of -- you're agnostic on this subject. I'm digging myself into a rather nasty hole here.
Dieter, how important is it that people like to be associated with the cachet over and above, say, the product per se?
BOHN: It's important, but Apple shouldn't hang their hat on that. We saw Sony do that with the Walkman, and eventually it bit them. So Apple needs to keep on innovating and keep on making things compelling and cool for us kids. And they should be able to keep it up. But they can't just depend on that forever.
QUEST: You'll come back and help us explain these trends in computers and technologies and phones whenever. We are grateful. Dieter, many thanks, indeed, joining us live from Florida.
Now the Big Board, the market is open and it is doing business.
And we need to catch up with the numbers as they see at the moment. Oh dear me, down 77, of three-quarters. The market is -- 10,000 is looking a little dodgy today. I wouldn't necessarily put money on where we're going to end on that.
The market is concerned more about housing starts than earnings reports. There were some poor housing numbers from the United States. In Europe, little ground was given, gains -- smart gains of the month. A bit of profit-taking, possibly after indices rallied. They are at the best of the year. So we have to perhaps, as Susan Lisovicz would remind me repeatedly, take that into account.
Small losses, really, three-quarters of a percent here and there, half a percent in Paris. In London, Barclays bank sent 5 percent -- hang on, I've got shares in Barclays. Its major shareholding is converting warrants and selling. Qatar reportedly made around a billion dollars' profit on that. Other banks down as well, HSBC, RBS, Credit Agricole, and Credit Suisse. An interesting day in the markets with results and economic news.
The news headlines, Fionnuala is with us at the news desk.
FIONNUALA SWEENEY, CNN INTERNATIONAL ANCHOR: Hello there, Richard.
Putting personal interests behind those of his country, Afghanistan's president says that's why he is going along with a runoff election two months after his campaign declared victory. The second round is scheduled for November 7th, Hamid Karzai's main challenger, Abdullah Abdullah, is also on board.
A double suicide bombing in Pakistan, at least four people were killed, 18 wounded, when a pair of bombers struck the International Islamic University in Islamabad. The strikes come as Pakistan's army continues its ground assault against Taliban strongholds near the Afghan border.
The U.S. Supreme Court has agreed to hear an appeal from a group of Chinese Muslims held at the Guantanamo Bay detention center. The Uighurs were accused of receiving weapons and military training in Afghanistan. But their case may soon become moot, all of the men are expected to soon to be sent voluntarily to other nations.
New trouble for the U.S. family that sparked an uproar last week when their 6-year-old son was thought to be in a runaway balloon. A Federal Aviation Administration representative says the Heenes may have violated regulations by flying the balloon to close to an airport. The family is already in hot water after the police said the whole incident was likely a hoax.
And those are the headlines. On "WORLD ONE" tonight, we'll have a live report from Afghanistan where President Hamid Karzai has less than three weeks to win over voters before the runoff election. That's "WORLD ONE" at 8:30 p.m. London time.
Richard, back to you in the studio.
QUEST: Indeed, thank you for that, Fionnuala Sweeney, at the news desk.
Fionnuala talking about balloons, that's not the last balloon we'll see on this edition of QUEST MEANS BUSINESS. Reds and the greens, we'll be sorting them out, the Q-25 as we continue.
Recession raises the stakes, we've got the mayor of Las Vegas who will be coming to this table on QUEST MEANS BUSINESS. We're the only game in town.
Place your bet.
QUEST: Now we've already handed out the first Q-25 balloon of the day, Apple. There was no debate. We had our voting earlier, it was a strong green. Green, green, green, green. But if you look at the Q-25, greens have got four -- just over five for the reds at the moment. We've had a lot of results out today. It's not clear cut. Maggie Lake is in New York. And Maggie joins us now.
Apple, it was a no-brainer. Caterpillar gave us a bit more trouble, and Coca-Cola gave us trouble as well.
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: Yes, these two were sort of tough, Richard, especially Caterpiller, because when you first saw that headline, you thought, wow, they beat by 50 cents, I mean, how could that possibly be anything but green?
But then you look through it and it's not so clear cut, is it? I mean, the first thing I asked was, are their results really better or did the analyst just get this terribly wrong? And in the end, I don't know that I really have an answer for that kind of beat, because, OK, they beat estimates.
The positive here -- and there is a positive, is that they are saying that they're expecting a bounce out in 2010. But when you look at the numbers, the profits are down 53 percent, and their revenue is still down 44 percent. So you know, is that 2010's forecast hope, wishful thinking? I'm not really sure. So in the end there wasn't any evidence to give them a green.
QUEST: Not only that, if you read what the CEO said in his statement, "the worst in history," and they're only seeing signs. So, you know, he hopes that 2010 will be better. But he is not able to say that.
I kind of -- I feel a bit guilty, I'm going to -- I think we're going to give them a red, are you a red for this?
QUEST: Yes. I feel...
LAKE: Yes, definitely, you're right. I mean, it sort of seems like that things aren't getting worse, but that doesn't get you a green.
QUEST: And they're doing what is necessary, but I'm afraid it's a red.
Now Coca-Cola, I mean, Coke should -- it's a discretionary product at a cheap price point, and the numbers were pretty abysmal.
LAKE: Yes. That's the problem. And this is really what you're seeing in terms of companies that have exposure to the consumer. Coca-Cola is actually doing well internationally. Their sales are up internationally. It's just not enough to offset that really sluggish outlook in the U.S.
And in fact, even the CEO is sort of saying it's still going to be a tough environment out there. So I don't really see any upside here. You've got to do better than that. Again, this company will be poised to do well when that rebound takes hold. But you know, who knows when that is going to be? So right now, that gets them a red.
QUEST: I saw nothing in their results that gave me -- except Indian and China, India and China. And the moment, I believe, when you see a company promoting India and China as the last bastion of hope, I think you're in trouble.
LAKE: I agree. But let's not write-off India and China since they are a huge, huge engine of growth here for the global economy.
Not only that, another reason that you might want to not jump in but watch this stock as we turn the corner, they are buying back stock -- they had been buying back stock. In some cases, of course, it's just because they don't know what to do with their money, in this case, they're obviously making a bet on themselves. So they are confident -- that shows a little confidence, but, again.
The other thing to watch with Coke is they will benefit from a weaker dollar. They're one of those companies. So but those are stories out there. They're not stories right now, so, again, that brings us back to a red balloon for now, but maybe one to watch.
QUEST: Red balloon, Maggie Lake. I almost think you were on the fence there. You were just about hedging. Maggie, that's our Q-25, the reds are ahead. We cannot ignore the trend. Maggie Lake is in New York.
Now we all use it. We all need it. And we report on it regularly on this program. Oil is the latest commodity. It's enjoying not just a rally, but an absolute resurgence. The price of oil today tipped over the $80 mark. It's the high point for the year.
Now oil may have just knocked back a bit or so, but when we are in these particular regions, $78, $79, $80, we know that something is going on. Paolo Scaroni is the chief executive of ENI, the giant Italian energy company, attending this year's Oil and Money Conference in London.
Charles Hodson asked him if he thinks oil above $70, never mind $80, $70, is here to stay.
PAOLO SCARONI, CEO, ENI: Well, I have to tell you that I'm quite surprised to see such a high level of oil prices. So I -- my suggestion would be that at this point of the economy, prices are probably going to be in the $70 range for the future.
CHARLES HODSON, CNN INTERNATIONAL ANCHOR: So you don't think that we're going to see the kind of levels which, for the economy, are, let's say, going to be troublesome? In other words, $100, $120 a barrel, no return to that, you think?
SCARONI: Well, not return to that in the near term. I cannot exclude that if investments continue to lag in the industry, and demand picks up again, prices might pick up to a level of the $100, $150 we have seen last year.
HODSON: Let's have a look at ENI, because clearly the supply part of the picture is very, very important. You have a good, strong pipeline in terms of new discoveries, but if I look at them, they're a kind of litany of politically dubious areas, somewhere like Iraq, Iran, Venezuela, Libya, even Uganda, these are the countries in which you're involved. That must rob you of a lot of sleep at night, doesn't it, because there are a lot of uncertainties there?
SCARONI: Well, yes and no. Let me tell you just three things. First of all, we go where oil is. If oil were in Switzerland, we would probably have chosen to be in Switzerland. But since it's in Uganda, Venezuela...
HODSON: It's a mind-boggling thought, oil in Switzerland. But anyway.
SCARONI: Well, that's the first point. Second, not necessarily countries that you would consider safe are safe for us. Take the example of the U.K. The U.K. twice raised taxes on oil profits overnight, and this is certainly something we didn't like very much at all.
And thirdly, a company like ours is equipped to deal with difficult countries or what you would consider difficult places to be. And we have been there for ages, normally doing our business in a very normal fashion.
HODSON: Well, however long you've been there, let's focus in on Iran. I mean, we're looking at the worry of a nuclear standoff there, or a standoff over Iran's nuclear weapons. That must rob you of some sleep, surely.
SCARONI: Well, Iran is a different story. We signed two contracts in 2000 and 2001, when the political situation was completely different. And of course, since -- typical of our industry is to invest first and to get our money back in time. We are still in Iran trying to get our money back. And of course we are worried about the political situation of the country.
HODSON: Let's look at Copenhagen. Does that worry you? I mean, are you worried, as a leading energy player, that Copenhagen will be what most people would call a success? What -- let's say what climate change campaigners would call a success?
SCARONI: No, quite the opposite. We are quite happy to see that there is a general consensus on the fact that there is a climate change, that the climate change is generated by anthropic activity, the activity of man. That CO2 is an enemy that we have to fight. And that the temperature of our planet should not go beyond 2 degrees more of what it is today.
Now this will be a theme of discussion in Copenhagen. Now in terms of the solution to this issue, I do not think that Copenhagen will be the end of this story. It will be another step towards a fight against the climate change.
HODSON: Mr. Scaroni, thank you very much, indeed.
QUEST: Mr. Scaroni talking to Charles Hodson on the question of climate change.
Now from the global climate to the employment world, as always on QUEST MEANS BUSINESS, we're keeping track of the highs and lows of job- hunting.
(BEGIN VIDEO CLIP)
RAJA KANAFANI, JOB-SEEKER: I have done so far three interviews. I have one more lined up. I've got homework. I'm waiting for them to get back to me.
(END VIDEO CLIP)
QUEST: "JobQuest," Raja's story, we continue in a moment.
QUEST: We will have more on the balloons in the Q-25 in just a few moments. More companies to get the verdict on their earnings report.
The world economy is one the road to the recovery, that much we know so far. On that journey, we insist on putting a human face on those impersonal statistics, whether it's jobless claims or unemployment numbers. Every week we're keeping faith with job-seekers around the world. This week Rodrigo Medina in Barcelona, who shows us how he makes a little extra money while he is trying to find permanent work.
In Beirut are the freelance copy editor Raja, takes us to his favorite hangout.
UNIDENTIFIED MALE: Last week on "JobQuest."
LES YOUNG, ATLANTA: Well, right now I'm looking for something that's really my passion, and that's coaching and training young people in public speaking.
RODRIGO MEDINA, JOB-SEEKER: I'm in sort of survival mode. So what I'm doing right now, I'm trying to take advantage of all of the things that I've learned through my life and make that into a positive thing.
For example, right now I'm teaching tennis lessons for foreigners. I'm also trying to teach English for foreigners in Barcelona.
KANAFANI: The lottery, got to try something, I might win. Who knows? I might have the winning ticket.
UNIDENTIFIED MALE: You've got...
UNIDENTIFIED MALE: (INAUDIBLE), 28.
KANAFANI: That's it.
UNIDENTIFIED MALE: (INAUDIBLE).
KANAFANI: Thank you, sir.
Well, we're at Torino Express (ph), it's a local hangout. I come here a lot. I've been coming here for almost five years. It's a place to meet friends, friendly faces, cheap drinks. It's a place where a lot of artists come, a chance to meet other artists, compare work, inspiration, drown your sorrows.
It's a good place to pick up the pulse of the city and you get a lot of word-of-mouth, someone would know someone who knows someone. My last interview was based on a tip from a friend that I knew, I was in Torino in the morning, she was here.
I have done so far three interviews. I have one more lined up. I've got homework. I'm waiting for them to get back to me on that. But not much. I've been looking at the papers, asking friends, but there is not a lot of noise right now in advertising. It's a dead season.
There is no security or safety net. The government does not intervene and assist you financially. We don't have an unemployment benefits system here in Lebanon. So basically it's -- you're on your own.
MEDINA: Today I'm touching base with a head-hunter to see if he has any jobs available for me. Talked to her yesterday and I don't think that's going to be the case, but it's always good to be proactive in my situation, and to talk with as many people as I can to see if they can help me out. So that's what I will do today, talk to a recruiter and see if we get any luck.
I'm really happy about the interview, because even though she didn't have any opportunities at the moment for me, it's good to touch base in person with the recruiter, with the head-hunter, and maybe something will come up in the next month or so.
So what I'll do is teach him tennis for about an hour or so. I'm focusing right now on foreign (ph) (INAUDIBLE), because they are the ones who actually can pay for the hour, and also it's a good way to make a network here in Barcelona, because usually the guys who play tennis are the ones that might be able to get me -- to find a job.
So I'm trying to play it two ways here and make some money.
QUEST: "JobQuest," are you a victim, out of work, down on your luck? Of course we want to hear from you. There are a variety of ways you can take part in "JobQuest," on Facebook, "Quest Means Business" is the search title that you look for, "Quest Means Business."
I'm on Twitter, @RichardQuest. And of course, our e-mail address is very straightforward, that is email@example.com. So various ways which we will, of course, continue to follow our "JobQuesters" in the weeks ahead.
There are three more balloons in the bucket waiting to be handed out. Whether it's going to be Pfizer, United Technologies, DuPont earnings, we have more earnings to get to grips with in just a moment.
QUEST MEANS BUSINESS, good evening.
QUEST: Good evening, I'm Richard Quest, QUEST MEANS BUSINESS. This is CNN. Well, we're going to Wall Street. Stocks are on a bit of a pullback from Monday's gains. Weaker-than-expected housing numbers came in from the U.S. economy. And that very much has turned the tide of opinion. But, there has, of course, been a raft of numbers on earnings front.
Stephanie Elam is at the New York Stock Exchange and joins us.
Stephanie, you are new to the Q25, with balloons, this year.
STEPHANIE ELAM, CNN FINANCIAL CORRESPONDENT: I am.
QUEST: Yes, well, quite.
We know the market is down because of the housing numbers. I want to talk about earnings season. Particularly, let's begin with United Technologies. United Technologies, from my reading, a core company in the market, but had a not particularly good results. What was your understanding?
ELAM: Yes, when you take a look at a company like United Technologies, Richard, they saw their profit fall 17 percent and a huge part of the issue for them, people are just not looking for a lot of air conditioning. They're not looking for a lot of elevators. A lot of building stopped, that hurt them as a business. And so, I think it's pretty clear to say, when you look at United Technologies that this is an easy one to say that they would go for the red balloons.
QUEST: Yes, but was there -- I didn't -- what was interesting with UT is, I didn't see anything in the forward -- they narrowed their guidance. And I didn't see anything suggesting that actually next quarter, or actually next year, will be that much better.
ELAM: Yeah, no, there is nothing to give us that idea of where they will be going. I think that at this point they are still waiting to sit this one out and see which way things are going to go for them. Because if people aren't building, obviously, you need buildings to put in your elevators. You know, Otis Elevators have to go someplace. That's going to be an issue for them. But they're looking like they are still feeling a lot of pain at this point.
QUEST: All right. So, a red balloon, we all agree on that one.
What about Dupont? A bellwether in the chemicals industry. A company we look quite sharply at. They did excellent on the cost cutting. They have had some deals out there that have made some sense. But still there was just something about Dupont that I wasn't wild about.
ELAM: Yes, when you take a look at Dupont, and they did have a slightly better quarter here, and they came in with a little bit more than 10 percent jump in profits. But the problem here is when you look at a company like Dupont and see that they're doing everything through cost cutting that's not going to get Wall Street excited.
They want see that you are generating revenue by actually selling more, by actually doing more to get the product moving on your part. Not because you are finding ways to trim this unit here, or this division here, or maybe getting rid of some of your employees. So because of that, I think that's part of the reason why you can say Dupont still should be going for a red balloon as well.
QUEST: The red tube is filling up quite handsomely, Pfizer.
QUEST: We talked about Pfizer. Now we liked Pfizer, not only because of the Wyeth deal, but also because it is addressing it's pipeline issue. It saw revenue growth. On this side of the Atlantic, we felt Pfizer got a green. What did you feel?
ELAM: This one caused a little bit of debate here for me and my producer, Jenny. We were talking about it because overall, if you look at it, you can say there is an argument for both sides. There is an argument for it being in the red column, and for being in the green column. You see that they had the profits increase more than 25 percent, but again, it was due to cost cutting. Cost cutting is not a great way to see revenue growing. It doesn't lead to anything new moving forward. So, that would argue that it should go into the red.
But at the same they just wrapped up that merger of acquiring Wyeth. They're doing merge and acquisitions. There are so many companies aren't even able to do that. And they were able to do that and make this one become part of their business. So, when I look at the merger activity it shows that they should probably go into the green category here. Because they did have the profits increase and they're doing M&A. We know that Wall Street loves it when there is that activity.
QUEST: And there you get a green. As we look at the moment, the reds are now starting to seriously outweigh the greens. That's the whole point of this. We can get a gut feeling. Are you surprised earning season is not going very well?
ELAM: No, I'm not surprised. I think, you know, we are overall -- we are optimistic beings, I think, humans. I think we want to see that things are getting better out there, that the worst of the recession is behind us. I think most people will tell you, yes, it is behind -- the worst of it is behind us. But there is still a lot of pain out there to be felt.
And if you look at these numbers you can see that the companies are not expecting to be right back on their feet right away. The housing numbers speak to that as well. When you look at the permits, the building permits, that number going in the wrong direction here. That number shows us that building projects in the future are not going to be there and that's part of the issue, too. So, I think it is going to take a little bit longer here.
QUEST: Stephanie, many thanks to you. Stephanie Elam, who is in New York.
Let me recap where we stand on this. You have about five greens, you've about one, two, three, four, five, six, seven -- nine reds. Still got a long way, though, with the Q25, but clearly, the reds are now eking out the lead, which tells us something about earnings season.
Remember, our balloons are -- this whole idea is to give you and idea of which way earnings season is going. It gives you that tangible feel that the numbers just don't manage to get to.
Magna is facing a roadblock as it tries to take over the European division of General Motors. Workers at Opel's Saragossa plant in Spain, are going on strike. They're worried that the Canadian car parts maker is going to axe thousands of jobs. It's seems as if the Europe -- the Spanish and British divisions that will bear the brunt. And that's got the European Union worried, as Al Goodman reports, from Madrid.
AL GOODMAN, CNN INTERNATIONAL CORRESPONDENT (on camera): The pressure is increasing on Magna International, the presumed new owner of Opel. Unions at the big Opel plant in Saragossa, Spain, voted on Tuesday to go on strike for four days, two of them next week, and two the following week.
(voice over): They're angry at Magna's plan for their factory, which makes three Opel models, the Corsa, small car, the Combo, delivery truck, and the Meriva, minivan.
A union leader, Juan Jose Arceiz, told CNN it would be the first strike directly against Opel, at the Spanish factory in 16 years. Unions are worried about Magna's apparent plan to lay off 1,300 of the factories 7,000 workers. And they are upset that Magna hasn't said how it would guarantee the production at the plant in the future, on both of its main assembly lines.
This Spanish factory is one of the most efficient in all of Opel; capable of turning out 2,100 vehicles in a day. Spain's industry minister has been trying to guarantees from Magna, but so far, without success.
(on camera): The concern here, and also in Belgium, is that Magna may be favoring the German headquarters of Opel at the expense of the outlaying factories in Europe. And that complaint has even reached the European Commission.
Al Goodman, CNN, Madrid.
QUEST: Now, when we come back, we take courage in both hands. Nice work if you can get it. The mayor of Las Vegas is with me. Mr. Mayor, we'll talk to you, in just a moment. We'll quit while the goings ahead.
QUEST: Now there are many of our viewers who would happily leave me to just standing on this side of the studio for the rest of this interview, but I'm afraid, come with me. There are serious matters that we have to get to grips with and it all relates to the gaming industry.
In the city that blossomed in the desert, and captured the imagination of people all over the world, Las Vegas, is big business. Billions of dollars at the gaming tables, welcoming tens of millions of visitors a year. The good times, though, have been very difficult for the city itself. And indeed raises the question, what Vegas is doing about it. The numbers, unemployment is more than 13 percent. That compares to just around 10 percent in the national U.S.
House prices are also suffering. Down more than 31 percent. The biggest drop in any of America's largest 20 cities. The reason is obvious. Massive boon, sun seekers, enters massive bust.
Same story at the gaming tables. Gaming revenues on the Las Vegas strip is down more than 13 percent. According to officials in Las Vegas, gambling revenues have fallen only once since 1970 and that was after 911.
The question is what is the city going to do about it? In town, is the mayor of Las Vegas, Oscar Goodman, as part of a new flight from London to Las Vegas.
Mr. Mayor, I've painted a fairly gloomy picture.
MAYOR OSCAR GOODMAN, LAS VEGAS: I don't see it that way, to be quite frank.
QUEST: I figured you wouldn't.
GOODMAN: The statistics are, as you say, you can't argue with the statistics. But the boom line really is we have something that is unique. We have the best entertainment in the world, the best food, the best shopping, the greatest hotels and there is a spirit of optimism in this city, because City Center, which is going to be an $8.5 billion project that will be opening up before the end of this year.
QUEST: A lot of those projects were started before the recession began?
GOODMAN: That's true.
QUEST: And therefore they were in the ground and therefore -- but I'm just wondering -- you have been hit with this double, triple whammy. House prices down, MICE, meetings and convention business down, and sort of people not wanting to go and gamble. How do you address that as a merriment city?
GOODMAN: Well, what we do is we press forward. We're developing things in the city that we never dreamed of in the past. We have a brain institute, Lou Ruvo Brain Institute, where we have partnered with the Cleveland Clinic and to create a whole new diversification of our economy there, which is very, very special. We're building public buildings, like a performing arts center. We're going forward.
But at the same time the private sector are stepping up. A couple of projects have been put on stall, but the bottom line is a lot more could have been put on stall, but they got the money in order to build them, and they're going to be completed, many of them, before the end of the year and they are going to employ tens of thousands of people. I see us coming back a lot faster than anybody would give us credit for.
QUEST: Now, that -- now come on, I have to be blunt with you Mr. Mayor.
GOODMAN: What other way to talk?
QUEST: Let's talk.
GOODMAN: All right.
QUEST: Let's just put it to it.
GOODMAN: I'm a straight shooter, too.
QUEST: All right. Mr. Mayor, why should I believe you?
GOODMAN: Because I don't lie. I am the happiest mayor in the universe for a reason. And that is, I represent the people of Las Vegas. It's a phenomenal community. We are very resilient. In the past we always came out of the recession faster than anybody else.
This one is different. This is not our fault. This is a recession that is worldwide and that's why we're being affected they the folks who come into Las Vegas, our tourism rate is maybe 5 percent off of last year. Not that bad. But they're not spending money, because -- I don't believe they have confidence in their economy. So, therefore, they're not spending money in our economy.
QUEST: Are you worried, that as we come out of this recession that more that government, the U.S federal government, cut backs, eventually, we're going to go back into it again?
GOODMAN: No, I don't see that. I hear that we've bottomed out. That's what they're telling me as the mayor.
QUEST: Are you seeing that in your numbers, of occupancy, or rate, of all these sort of --?
GOODMAN: Yes, we're coming back. Now until we get the consumer confidence rate up there, we're still going to have our difficulties. And don't feel sorry for us about as far as these foreclosures, because basically, those are speculators. And as you pointed out in the beginning that which goes up the fastest, comes down the fastest. And the folks who are trying to accomplish what I call the American dream of owning a home, they still keep their homes. I have four children living there. They have beautiful homes, they're paying for them.
QUEST: Mr. Mayor, finally, what does it say about a country, the gambling rate, I believe is almost higher than the savings rate?
GOODMAN: That's a good thing for Las Vegas.
QUEST: Look at that smile!
GOODMAN: Of course.
QUEST: Are you a winner?
GOODMAN: I'm a winner. And I have something for you.
QUEST: Oh, yes.
GOODMAN: Here we go.
QUEST: All right.
GOODMAN: You'll love this. Don't be scared.
QUEST: Well, those two.
GOODMAN: No, you don't get them. Believe me.
QUEST: I was about to say.
GOODMAN: Here's a Good Luck Bear Chip for you.
QUEST: I was about to say. Here's a good luck chip, from the happiest mayor, in the greatest city in world.
Mr. Mayor, I wish you well.
GOODMAN: Thank you.
QUEST: Many thanks for that.
Now, let's just see. I've got the chip.
GOODMAN: Watch where you put it.
QUEST: Do you mind, Mr. Mayor?
GOODMAN: I do.
QUEST: I think at this point it is time for us to turn our attention to the weather forecast.
Ladies, the mayor has given me a chip. There we are.
Guillermo, I do need your assistance, at this particular point. The weather forecast, please.
QUEST: South Korea's Hyundai Group is a leader in its country, a major investor in neighboring North Korea, and that has given it access beyond the borders of the business world. Kristie Lou Stout, in Seoul, spent some time with Hyundai's powerful chairwoman.
KRISTIE LOU STOUT, CNN INTERNATIONAL CORRESPONDENT (voice over): When Jeong-Eun Hyun left for this business trip the world's media followed. That's because she wasn't headed for New York or Beijing, but Pyongyang. As a chairwoman of South Korea's Hyundai Group she manages massive operations in finance, manufacturing, and transport, and in North Korea. Subsidiary Hyundai Assan has led efforts to build economic ties between the North and South, so Hyun is not only managing a multi-national through a recession but also through global tensions over the North's nuclear program.
She traveled to North Korea in August to secure the release of a Hyundai worker who was detained on accusations he insulted the government. While there she spent more than four hours with the state's reclusive leader, Kim Jung-Il, who is said to be recovering from a possible stroke.
JEONG-EUN HYUN, CHAIRWOMAN, HYUNDAI GROUP (through translator): When I first saw him, I thought he had lost a lot of weight, but once we started talking his voice was strong and he talked a lot about things that had happened in the past. It seems like he still had a good memory and had no issues with carrying out his work. He seemed to be in good health.
STOUT (on camera): Is Kim Jong-Il a tough business negotiator?
HYUN (through translator): He seemed to be very honest and straightforward when he speaks. So, I believe if direct talks with the leader Kim Jong-Il are possible, a lot of good results will come out of it.
I personally think that if President Obama and Kim Jong-Il meet, things can be worked out quite easily.
STOUT: Hyundai Group is involved in two major projects in North Korea. The Kaesong Industrial Park, jointly run by the North and South; and tourism business centered around Mount Kumgang. The company has invested a total of $272 million, U.S. dollars in North Korea. But progress has stalled over the last year amid escalating political tensions.
HYUN (through translator): Kim Jong-Il said he hoped the North and South Korean governments can talk things through, so that many South Korean companies can enter the North. The North Koreans have the natural resources and the South Koreans know how to sell things. So, if both sides work together he expects the North and South can prosper.
LOUSTOUT: Now the Kaesong Industrial Complex has North Korean workers. So what is it like to manage them? Do they have the skills? Do they understand the technology?
HYUN (through translator): North Korean employees work very hard. And I heard that the women especially work hard. So all the factories want to take in the female workers. In the beginning, because the workers hadn't used things like sewing machines before, I heard they would come to work an hour early to practice.
LOUSTOUT: Hyundai's chairwoman admits tension surrounding North Korea's nuclear program have complicated negotiations between the two governments and made expanding business relations a challenge. Still, she is committed to doing business in North Korea, and endeavor which has deep roots within her family.
Started by her father-in-law, famed Hyundai founder Chung Ju-Yung, who was born in North Korea. Her husband took over the business and then committed suicide after allegations he secretly funneled money from the South to North Korean governments, allegations he had denied.
HYUN (through translator): I feel like it is my duty to continue this business, to ensure his death does not go to waist.
Kristie Lou Stout, CNN, Seoul.
QUEST: CNN's "Eye on South Korea" continues all this week, both on air, and online. Tomorrow, Kristie heads to KAIST University known as the MIT of South Korea, where she'll meet the latest generation, short for humanoid robots, the HUVO (ph). We'll have that.
And now, I'll have "The Profitable Moment," in a moment.
QUEST: Finally, to wrap it up, the Q25 as you can see at the moment, the reds clearly out numbering the greens on the balloons, as we added in, for example, Apple, United Technologies, Dupont, Pfizer, a whole raft of them, but clearly the earnings reports not coming in as well as expected.
The Dow Jones industrials, in New York, at this hour: 10,022, down nearly 70 points, just over half a percent. That is a result of housing numbers, housing permits, housing starts, not as good as might have been expected. All in all, a disgruntled day seems to be the way of the market.
And as we finish tonight, "The Profitable Moment." We started, with the Apple juggernaut, which just rumbles on. Sparkling results on the back of I-Phones and Macs. It is all shown what a company can do if it has the right products that catch on.
Let me make it clear. I'm not an Apple artists, I don't use and I- Phone, and a Mac is something I keep for a rainy day. My I-Pod was bought in Singapore seven years ago and soldiers majestically on. You can't argue with success, and frankly, it is very simple. Whether because they are cool or commercial, Apple has learned the trick, gained the knack of making products that people want to buy. And for that a company that has been counted out more than once, that is an achievement.
This week, the whole thing really gets interesting, when Microsoft launches Windows 7. I just love these battles. They prove once and for all that competition is the customers' best friend. May the best OS, win.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in London. On vacation for the next week. Whenever you're up to in the days ahead, I hope it is profitable. Christiane is next, after the headlines, which come to us from the I-Desk and Isha Sesay.