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Quest Means Business
Apple Poaches Burberry CEO; Burberry's Brand Strategy; Ahrendts' Burberry Legacy; European Markets Up; US Markets Down; US Downgrade Possible; Senate Deal Sidelined, House to Vote on Budget Deal; Effects of Shutdown; US Shutdown Closes US Military Cemeteries in France; Destination: Ambition
Aired October 15, 2013 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: The closing bell is ringing on Wall Street, the talks drag on, and it's a drag for the Dow at the closing bell because today is, as you can see, October the 15th, and it's a Tuesday.
Wall Street trading has come to an end, and Burberry's CEO checks out and joins Apple.
A debt plan is dropped. The US Republican Party's in disarray.
And new routes for growth. Eurostar's chief exec says Europe is picking up speed.
I'm Richard Quest. I mean business.
Good evening. Our top story tonight is Apple's raid on the world of fashion as the Burberry chief exec prepares to join the Apple board. Of course, we can't ignore the events in Washington, where everything remains deadlocked, and as we hurtle towards the debt ceiling deadline, the House and the Senate each have their own competing plans.
We'll talk about all of that in just a moment or two, but as we start our program, these are the two details I just want you to bear in mind: the US government has been shut for 15 days and there are two days to go before the debt ceiling is breached.
But we figured that you'd had enough of debt ceiling misery, mayhem, and mischief, so tonight, Burberry's chief exec, Angela Ahrendts, is turning in her trench coat and heading to Apple as she'll become head of retail and online stores. That gives her the job of overseeing strategy, expansion, and operations.
Ahrendts is known for transforming Burberry. It was a tired, troubled brand. It's a fashion powerhouse for the digital age today. And she also cracked China. As Jim Boulden explains, that's one of the trends Apple wants from Ahrendts.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): She has been the face of Burberry for nearly a decade. She was the highest-paid CEO of any top British publicly-traded company last year. And Angela Ahrendts has been given credit for the steep rise in Burberry's value as she reset the old British brand into a super luxury must-have with a strong digital platform.
BOULDEN (on camera): This is Burberry's new flagship store on London's Regent Street. A big part of Ahrendts' plan was to build these massive luxury-branded stores throughout the world's biggest cities instead of relying on sales from department stores.
BOULDEN (voice-over): Now, Ahrendts will metaphorically move up the street to another big brand with big stores in the world's biggest cities: Apple.
BOULDEN (on camera): Ahrendts will take over as the head of Apple's retail stores and online stores. The hope is she can bring some of the Burberry magic to Apple, especially in China.
BOULDEN (voice-over): Apple is an also-ran in the fast-growing Chinese market.
DAVID BUIK, MARKET ANALYST: She'll have her manicured fingernails dirty with the staff. She'll be great with them. She'll know and they'll discuss what looks right, is that the right color? Is this the right size? Are we giving the troops what they really want on the shelves? Are we going to have them queuing out of the shop in Beijing, Manilla, London, Paris? That's what she's all about.
BOULDEN: Ahrendts spearheaded Burberry's turnaround with chief creative officer Christopher Bailey. He will keep that role and take over as CEO next year. They have been a tag-team since 2006.
ANGELA AHRENDTS, CEO, BURBERRY: Even if the economy doesn't turn around, everyone's businesses should appear stronger and better.
BOULDEN: With Ahrendts leaving, Burberry shares fell more than 7.5 percent in London trading.
ISHAQ SIDDIQI, ETX CAPITAL: I think it, indeed, is an overreaction. I'd say it's more so profit-taking than it is a reflection on Mr. Bailey taking the helm here.
BOULDEN: Now, Ahrendts is taking on a new challenge: answering to Apple CEO Tim Cook. But arguably, she will be more in the spotlight for one of the world's biggest brands as it tries to rebrand front of house.
Jim Boulden, CNN, London.
(END VIDEOTAPE)
QUEST: Now, Jim Boulden referred to the flagship store on Regent Street in London, which just opened a few months ago. Well, Angela took me on a tour of that new Burberry flagship store and showed me, basically, her philosophy about developing any kind of brand. And she talked about using Apple technology in her stores.
(BEGIN VIDEO CLIP)
AHRENDTS: Honestly, it's not rocket science. I think that if anyone -- anyone just mirrors their -- or monitors their own behavior, right? You don't think -- you just think you want something. You don't think about what device -- you don't think -- maybe you think I'm going to do it online, or I'm going to do it offline.
And so all we're trying to do is keep the brand so it keeps pace with as fast as consumer behavior is changing. So, we have 10,000 iPads in every sales associate's arms, in every store. We have had for the last two years.
That drives a third of our digital business online because every store cannot hold the full assortment that Burberry.com can.
QUEST: And you have to be careful that people don't come in here and find the goods and then buy it cheaper elsewhere if they could, because you protect your brand.
(LAUGHTER)
AHRENDTS: Hopefully they can't, but there's -- with us, honestly, it's all about engagement, it's about entertainment. That's really what a great brand, be it luxury or otherwise, does today. It's about adding -- having a lifetime consumer value.
So, whether it's online, whether it's offline, we just think the experience should be exactly the same. And I don't care if that's quick pay out, I don't care if that's click to call, click to chat, versus a sales associate on the floor.
It's got to be one experience, because a cut -- you've got to see the same thing. It's why whatever we put on the landing page, you will see in our store windows exactly the same week.
(END VIDEO CLIP)
QUEST: Moira Forbes joins me. She's the president and publisher of "Forbes Women." You were saying to me just before we were going on air, what were you saying?
MOIRA FORBES, PRESIDENT AND PUBLISHER, "FORBES WOMEN": I said she's one of my favorite CEOs, although now, she's no longer CEO, but taking a decidedly more powerful role in global business.
QUEST: Why was she one of your favorites? What is it that she has?
FORBES: I sat down with Angela about a year ago and talked about her strategy for taking a beleaguered British 150-year-old brand and how you put innovation at the center, and she went back to the basics. She's one of the most authentic leaders who understands the importance of a mission and a vision and communicating them.
QUEST: But you say she went back to the basics, but the interesting part is, she took the basics and translated the basics into the digital age.
FORBES: And that's going at the heart of a brand. She understood and appreciated the power of Burberry, but she realized to engage customers and to fulfill that mission, she had to engage them in new ways. So, she put innovation at the center.
QUEST: So, what does she do at Apple? Because she's no longer the chief exec, and even though she answers only to Tim Cook, ultimately, she's moving into many different fiefdoms in a world that she's not been in.
FORBES: Many different fiefdoms, and while it's a world that she hasn't been in, the tech world, that actually works to her favor. Again, when you look at the challenges of Burberry, and when she took over in 2006, many of the similar challenges to Apple: a diluted brand, challenges in emerging markets, and also a brand where creative should be at the center and not at odds with business.
She has a huge proven track record at Burberry, tripled the business in her tenure, but also equally important, she's in the key emerging market, China, only 5 percent of Apple penetration in the SmartPhone market there.
QUEST: So --
FORBES: Huge. Huge opportunity.
QUEST: So, when she gets to Cupertino in California, what's the first thing she does? What's her role going to be? Because the former head of retail at Apple went on to JC Penney and -- well, let's not dwell on it.
FORBES: Let's not -- in two years, not a huge strategy. But the former heads of retail were mass market, big box --
QUEST: Right.
FORBES: -- leaders.
QUEST: Right.
FORBES: What she's going to do, and what she did at Burberry, she said she's going to go in and listen. First start off by listening. Second, create and embed a culture where employees and customers are at the forefront. Again, sounds basic. Easier said than done.
Remember, the retail strategy has been beleaguered for two years at a brand like Apple. How can that be?
QUEST: I can honestly say I don't think I've had too many interviewees in this chair opposite me who've been quite so enthusiastic about a story like this.
FORBES: Well, I saw her last weekend, two weekends ago, and before she made the announcement, and I was reminded why a passionate leader is a power behind a brand. And Apple needs her, and it's a big statement to the marketplace, and she's an outsider and she'll do big things.
QUEST: All right. Good to see you on the program.
FORBES: Good to see you. Thank you.
QUEST: Many thanks for coming in. Well, she's needed by the brand and, indeed, investors in Burberry showed exactly the evidence. They are not pleased that their chief exec is going. The stock, let me remind you, fell 7.6 percent, 1465 at the close, the biggest percentage decline since September last year where, of course, there was a bit of hiccup over some comments over China's sales.
As for the broader markets, despite Burberry's big fall, London's FTSE advanced two thirds of a percent. The rest of Europe followed suit, climbing on hopes of an imminent deal in Washington.
So to the New York market. Zain Asher is at the New York Stock Exchange. Now, as the day -- as the day came to an end, the market -- it didn't quite turn turtle, but it certainly took a down note.
(LAUGHTER)
ZAIN ASHER, CNN BUSINESSES CORRESPONDENT: Yes, absolutely, Richard. We began, certainly, flipping faster going into the final hour, hour and a half of trading because it became clearer to investors that we were going to end the day without a deal. So, I think tomorrow is certainly going to be the moment of truth.
But when you go downstairs and you talk to traders, they're frustrated about he debt ceiling deadline for sure, but what they're really frustrated about as well is that they know that any deal that we do get is going to be short-term. And so the big question is, of course, how on earth are businesses that depend on government contracts --
QUEST: Right.
ASHER: -- like Lockheed Martin, for example, and other technologies supposed to make hiring decisions --
QUEST: Right.
ASHER: -- when they know they're going to come up against another deadline.
QUEST: I -- this is an impossible question, but I'm going to throw it at you anyway. We look back at that graph of the Dow. You're right, Zain, the Dow -- the selling gathered speed --
ASHER: Yes.
QUEST: -- and what everybody's really looking at is when the market breaks and when we start to get the first crack of nerve in both equities and in bonds.
ASHER: Well, when you talk to people, they're saying that if we don't see any movement tonight, if there are no positive headlines for any movement tonight on any deal or any plan, then you wake up tomorrow and you look at futures, you look at what's going to happen when the market opens, they're saying they anticipate that tomorrow we are going to see the market come under some pressure.
But obviously, we have absolutely no idea how the market is going to respond. If you asked me last week, I would've said that we would've seen more losses this week than we have seen.
QUEST: Right.
ASHER: But it is certainly an impossible question. We will be watching closely, of course, Richard.
QUEST: Zain, well thank you for that. Zain Asher at the New York Stock Exchange. Across the entire range, of course, of CNN International coverage in business, we will be following it closely, the markets, when they open in Asia tonight, Europe tomorrow, and of course back into the United States.
Congress has less than two days to run out of money. A live, beautiful, spectacular vision coming to us live from Washington of the capitol. Could the US be hours away from a credit downgrade? We'll discuss that after the break. This is QUEST MEANS BUSINESS, it is a Tuesday, good evening.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Two numbers that, of course, are of great concern. The government shutdown is in day 15 and Congress has less than 2 days to raise the debt ceiling. It means the United States is within 48 hours of running out of money.
The top Senate Democrat, Harry Reid, has raised the specter of a possible downgrade on US debt. That's the word that everyone's talking about because he told the US Senate a credit rating cut could be only hours away.
(BEGIN VIDEO CLIP)
SEN. HARRY REID (D), MAJORITY LEADER: Mr. President, the debt is here. The deadline is looming. Rating agencies are talking about downgrading us as early as tonight. Again.
(END VIDEO CLIP)
QUEST: Now, with friends like Harry Reid talking about downgrades, who needs enemies? Brianna Keilar is live in Washington for us. So, he's used the "D" word, and I don't mean "debt" or "despair," but "downgrade." What's the White House saying?
BRIANNA KEILAR, CNN SENIOR WHITE HOUSE CORRESPONDENT: They're really not talking about this. The White House press secretary, Richard, Jay Carney, he was asked about this and he said that he wouldn't talk about these kinds of things from the podium. That's not really unusual for him to kind of punt over to the Treasury Department and talk about this.
I will tell you, even they are not really saying anything, and you don't have a lot of government figures who are really sounding this kind of alarm that we heard Harry Reid say that.
Now also, I should point out that in Harry Reid's prepared remarks, that was not actually in it. So that was kind of an off-the-cuff, an alarm that he was raising. We're waiting to see if maybe we start hearing that from other folks, but as of yet, we don't.
What we do know at this point is that Senate negotiations, where there was so much hope, the two top Democrats and Republicans were in discussions, those have kind of been sidelined at this point, that included the short-term extension that you just heard Zain describing, of funding the government and increasing the debt ceiling with a couple little Obamacare changes.
The House has put forward a plan earlier today that included roughly the same thing with a few more Obamacare changes. At this point, though, we don't really know if there is going to -- exactly how they are going to proceed.
It does appear that they are, perhaps, looking for a vote tonight, that House speaker John Boehner is looking for a vote tonight, and I'm told by a Republican aide they are looking to get all of their votes from Republicans. That is something that he was having with, very clearly, earlier today. So, I think there's something kind of up in the air about what the outcome of this possible vote will be, Richard.
QUEST: Whichever way this goes, it's fiendishly complicated, isn't it? The sort of construct that they're trying to put together?
KEILAR: It is, but I also think that -- I think it is complicated where they're trying to figure out a way to thread the needle to get enough people in the House and to get enough folks in the Senate because the makeup of these two bodies are very different.
But it also seems to be an actually rather simple debate going on about, I think, kind of the role of government, the size of government, government spending.
QUEST: Right.
KEILAR: Really, President Obama in general and whether I think you have some folks who certainly do just kind of object to his vision of government, and it sort of does boil down to this very big disagreement over that.
QUEST: Brianna Keilar putting it beautifully, succinctly, and into straightforward terms. Many thanks for joining us from the White House tonight.
Now, the effects of the US government shutdown, well, on one level, of course, they're clear to see. There are buildings closed, employees are not getting paid, and in many cases, the National Parks are all but abandoned.
That's the most obvious side, but there are some other ones as well. How about the vegetables rotting in the White House garden? Apparently the squirrels are eating the plants and there are weeds everywhere because Michelle Obama's garden is no longer being tended by the gardeners.
And then, you've got plane deliveries that have been halted. US Airways couldn't pick up its Airbus 330 because there were no FAA agents to serve the private planes. Aviation workers are idle, planes are grounded in Toulouse. Boeing also is not being able to deliver the big 777s on time.
And then you've got, as was reported this morning in "The New York Times," a big chill in Antarctic research. Funding for the research at the desolate post ran out today in Antarctica. There were hopes to spark up the program again, and yet, the research season should be prepared now and may well be wasted.
So, gardens, planes, Antarctic, empty nests for crab fishermen. The government isn't giving out permits or setting fishing rules, and that's a big loss for fishermen, especially as the Asian holiday market season's underway and the Alaska fishermen simply have to wait.
Now, if all of those at one level, to some extent, are the lighter side. On the beaches of Normandy in France, US military cemeteries are closed. CNN's Jim Bittermann now reports on the distress and disappointment of those who wish to pay their respects to those who gave all.
(BEGIN VIDEOTAPE)
JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): For the first time in two weeks at the US military cemetery in Suresnes, France, there was mowing going on. The government shutdown, which closed two dozen military cemeteries around the world, was still in effect, but shutdown or no shutdown, the superintendent here figured he could delay the grounds maintenance no longer, even though technically he's off the clock.
ANGELO MUNSEL, SURESNES CEMETERY SUPERINTENDENT: We take care and pride in our headstones and on the grounds. We want to do this for all sorts of men and women are buried here. These people sacrificed their lives for our country, OK? The least we can do is take care of them.
BITTERMANN: In normal times, the cemeteries, which are operated by the US Battle Monuments Commission and stretch from Normandy to the Philippines, attract hundreds of thousands of visitors each year. Relatives and friends of the fallen plan their trips to pay homage long in advance.
But in recent days, if they didn't see the brief notice on the Commission's website or hear about the shutdown ahead of time, they were in for a disappointment. At the big military cemetery in Normandy near Omaha Beach, emotions over the past two weeks have run high.
CAT HENDERSON, VISITOR: We traveled all the way here to see --
(CRYING)
HENDERSON: -- this cemetery, and we get this. I am never voting for Republicans again, ever.
BITTERMANN: And it is not just Americans who have been put out by the closings.
STEVE WOOLLEY, ENGLISH TOURIST: this is a problem between the different parties. Why should it affect a cemetery?
BITTERMANN: Sverker Weissglas from Sweden drove his ailing father here to visit the D-Day beaches and cemetery, one of his last wishes, which Weissglas now thinks may not be fulfilled.
SVERKER WEISSGLAS, VISITOR FROM SWEDEN: If there's time, it might be a possibility, but I doubt it.
BITTERMANN (on camera): A deal in Washington, according to the superintendent here, would allow him to pretty much immediately open these gates. But the shutdown felt around the world has already taken not only an economic toll, but an emotional one far outside America's borders.
Jim Bittermann, CNN, Suresnes, France.
(END VIDEOTAPE)
QUEST: In a moment after the break, from Paris to London and beyond, Eurostar's chief executive tells me the routes that he's targeting in the future. QUEST MEANS BUSINESS.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Now, Eurostar says sales and passenger numbers are growing and growth is accelerating, and the train company is well on its way to new destinations. Join me at the super screen and you'll see what I mean.
This is the way Eurostar operates so far and some of the bright spots along the main routes. Now, Eurostar currently has, of course, as you'll be well aware, absolute dominance on routes into Europe so far. It has developed from Paris and Brussels further routes -- let's give it a nice big sunny route -- all the way down to the sun.
And in the future, as the business travel market is gaining momentum, sales are up strongly with third quarter year-on-year has a strong result. It is a bellwether in many ways for the health of the UK economy, so says analysts and the company.
But as for the future and where Eurostar is going to grow, and this is the big development, because Eurostar is hoping over the next couple of years to expand its reach and working out how far the train company can go.
And if the statistics are anything to go by, there is a suggestion that pretty much anything that is four hours from London by train, that seems to be the magic number, four hours by train. I discussed the existing routes, the new routes, and the deadline with the chief executive of Eurostar, Nicolas Petrovic, and I asked him his principal goal in the years ahead.
(BEGIN VIDEOTAPE)
NICOLAS PETROVIC, CEO, EUROSTAR: So, we've got two objectives. The first one is really to invest a lot in our customer service so that we increase the loyalty of our current customers and bring more customers to our core, so that's the first one. And to do that, we're investing a lot in our hauling storage, in our new trains, and a number of other investments.
And the second priority is to grow to other destinations beyond our core destinations, so that's why we've been announcing the past few weeks new destinations to Amsterdam and Holland in general, but also soon some new destinations to Lyon and Provence in the south of France directly from London.
QUEST: We've talked before, Nicolas, you and myself, about what you believe is the extremity of the Eurostar network, and it seems to be between four and five hours. Is that fair?
PETROVIC: If I take the example of the route to Amsterdam in Holland, we would be stopping on the way in Antwerp or Rotterdam, and Amsterdam is four hours journey time from London, so that's really exactly in our reach. So, that's a very good effort for us.
QUEST: And will you, in the Amsterdam case, will you pick up passengers on the way, so to speak, or is it you have to start with the ones that you've got and you can't gain any more en route?
PETROVIC: No, no, we would expect to pick up passengers, especially on the Brussels to Amsterdam leg, because it's two big capitals, and of course we would expect to pick up some passengers there. But the bulk of the market is London-Amsterdam, which is one of the biggest air markets in Europe.
QUEST: So, what's taking you so long to do it? 2016, as I see the days -- why aren't you just getting on with it? Get the trains moving?
PETROVIC: So, first we'll take delivery of our new trains, which are necessary to go to Holland, and we'll take delivery of them in late 2015, and then we have to go through a number of safety homogenization and safety certifications and a bit of regulatory conformities, so that's why we would start service only at the end of 2016. I wish I could grow faster, but no way we can do it faster.
QUEST: So, you've looked, obviously, at other routes. After -- and I realize you -- you haven't even got Amsterdam starting, and I'm already asking you what else you're looking at, where else you're going to run?
You've got the route to -- you've got your ski routes, you've got your sun routes, you've now got Amsterdam on the agenda. Well, if I know you, Nicolas, you're looking at the next one after that. Where's it going to be?
(LAUGHTER)
PETROVIC: Yes, you're right, we're already looking at the next one, and maybe the one after, actually. There are still two big air markets which could be of interest to us, but we haven't got a solution yet, but it's true that the London-to-Germany market is a very interesting one, it's a big air market and there is a appetite of customers, passengers, to have a rail alternative. So, that's one.
And of course, it's how to get more passengers connecting from the north of England towards our services to go on the continent. So, that's the two areas where we are looking at. So -- but we haven't got a material solution yet.
(END VIDEOTAPE)
QUEST: Chief executive of Eurostar, Nicolas Petrovic, talking to me earlier.
Read all about it: BlackBerry makes a plea for loyalty in a very old- fashioned way: a full-page advert in a newspaper.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There is more "Quest Means Business" in just a moment. This is CNN, and on this network the news always comes first. There's been a 7.1 magnitude earthquake which has killed at least 67 people and injured more than 164 in Central Philippines. The quake struck in the early hours. The Philippines News Agency blames most of the deaths on falling rubble. An alleged Al Qaeda operative appeared in U.S. Federal Court today. Abu Anas al Libi pleaded not guilty to charges connected with the 1998 U.S. Embassy bombings in East Africa. He was captured by U.S. commandos in Libya earlier this month. The Afghan President Hamid Karzai says an attack at a Mosque near the capital of Kabul today shows that Taliban have no respect for Islam. The governor of Logar Province was killed during a speech to mark the religious holiday of Eid al-Adha. Iran has begun fresh talks with six world powers over its nuclear program today, and both sides remain unusually albeit cautiously optimistic. These are the first such talks with Iran since President Rouhani's election. They're expected to focus on Iran's enrichment capabilities, inspections and transparency. For a company that sells some of the most modern devices, BlackBerry used an extremely old-fashioned way to tell the world that it is not dead yet. I'm referring to the full-page advertisement in newspapers like "The Wall Street Journal" and others around the world today. It was a detailed description from BlackBerry of why they say there's still value. And Samuel Burke read the advert and has been pointing out some of the best parts.
SAMUEL BURKE, BUSINESS CORRESPONDENT: Well, some of it had the strength, exactly what you'd expect from BlackBerrry -- "We have substantial cash on hand and no debt." It's true, they have about $2.6 billion are hand, but just a quarter before, Richard, they had $3.1 billion on hand. That means they're burning through $500 million for at least in the last quarter, and some analysts expect that to continue.
QUEST: Now, in this statement, and we're basically going through this statement line by line or paragraph by paragraph, pointing out the various points that need to be made.
BURKE: The other point kind of left me scratching my head, Richard. Best in class productivity tool -- they're talking about the BlackBerry 10 there, but the BlackBerry 10 has caused them really nothing but headaches. They had to let go of 4,500 people after the BlackBerry 10 flopped (inaudible) clearly -
QUEST: But generally (inaudible) they say 'we have the best range of devices for you.'
BURKE: But then why aren't people buying them? They had to take a $1 billion write-down because of this product -- the Z10 which I have right here in my hand, doesn't have a keyboard, they have one that does have a keyboard. It has caused them nothing but problems and poor sales.
QUEST: Well, but -- OK, so now we have the BlackBerry Messenger launched for Android and iPhone. The claim is in the statement.
BURKE: So here they are talking about this -- talking about this great tool that's supposed to come out. Richard, it's a failed launch. It was supposed to come out three ago. They did release it, and it had so many problems that they had to pull it off the market. You know that I also work for "CNN en Espanol", but those viewers in Latin America, Richard, they tell me they've been dying for this application. They say they're working around the clock -
QUEST: But they say -- they say they have more software engineers and more resources.
BURKE: And they say in their press statement that they're working 'round the clock to get this out, but it is until now a failed launch. They launched it, it did not work, we're still waiting for it.
QUEST: All right, well I think we can agree that in their statement BlackBerry is not for everyone.
BURKE: Well that, we can definitely agree on. They said, 'It's OK, we know that -- BlackBerry is not for everyone.' Well, they couldn't have gotten that more correct. 2.7 percent of the Smartphone market share is what they have right now in the world. Richard, this is a company that in 2004 that had 51 percent of the Smartphone market shares -- 51 percent.
QUEST: So, take the statement overall -- what do you make of it?
BURKE: It's true, they have a lot of cash on hand. Everything else, I don't know if I would have highlighted some of the issues that they're going through in this letter -- the failed launch of the BlackBerry Messenger, which was once their crown jewel, highlighting that BlackBerry's not for everybody -- the Z10, they spent a lot of money, paid people like Alicia Keys who kept on using her iPhone to Tweet.
QUEST: You're a very cruel man, Mr. Burke, very cruel. But maybe there's some truth to what he said -- right. We'll move on. While we've been on air, there have been results. Silicon Valley should make an Intel report, it's better than expected earnings -- just a smidgeon better than expected earnings. Third-quarter net income came in at $2.9 billion -- barely changed, revenue flat $13 and 1/2 billion, earnings per share 58 cents ahead of what the market had been looking for. Let's take a close look behind the numbers. The Chief Financial -- the CFO, Stacy Smith joins us. Stacy, good to see you, sir. Thank you for joining us with these results. Before we talk Intel, you would not be surprised that I need to ask you about government shutdown and debt and the worries of a major corporation like Intel of what's happening in Washington.
STACY SMITH, CHIEF FINANCIAL OFFICER OF INTEL: Richard, it's good to see you again too, by the way. Um, yes, I think what's happening in Washington is irresponsible and dangerous. Anything that puts to question the fact that the U.S. would pay its debt is not a good thing. So far I think the market reaction has been pretty muted. Hopefully this gets resolved fast.
QUEST: When top executives like you use words like 'dangerous' and 'irresponsible,' and yet seemingly Washington isn't listening -- what do you make of it?
SMITH: You know, I just think there's other agendas at play, and, you know, again, so far in our results -- we haven't seen an impact from this. It looks like consumer sentiment has stayed high. We were able to achieve our guidance in the quarter, but it needs to be resolved and there needs to be just no question that the U.S. is good on its debt.
QUEST: Let's talk about the results. Now, looking at them -- it's hard to get a grasp at this point when you've got slowdowns in Europe, or you've got problems in Asia, and you have -- so I wonder what your results telling us about economies and about the tech industry at the moment.
SMITH: Well, I think it's usual to maybe dive a bit under the covers on the Q3 results. What we saw was that the enterprise generally was strong for us, and in particular the data center was strong. And I think what's driving that is this trend of you just have all of these devices, computing, connecting to the internet, driving a build-out of the cloud infrastructure. And that business for us was an all-time record. It was almost $3 billion of revenue, and it was up 12 percent year on year. And we actually expect that growth rate to extend into the fourth quarter and maybe be up a bit more in Q4.
QUEST: Right.
SMITH: The other side of our business -- the client side.-I think our execution is good. We bought 40 new products to the marketplace which really improved the breadth of our product line. What we're seeing there is that the U.S., Western Europe, kind of appear to have bottomed on the consumer PC market segment.
QUEST: Right.
SMITH: We still see weakness generally in consumer and in particular in emerging market.
QUEST: And this change that's taking place -- tablets and mobile devices and away from PCs, it's fundamental, it's long-lasting and it ain't going to be reversed.
SMITH: Yes, no question. As I said, we brought out 40 new products, and so the one piece I guess I would disagree with is we think there's a broad range for devices that compute. We've been very focused over the years in the PC segment. We've got great products there. We see that segment evolving to be two in ones and convertibles and detachables, but we also see that there's this broad range of devices like tablets, the internet of things, phones, and we're extending our product line such that we have great products in those --
QUEST: Right.
SMITH: -- segments of the market. We now offer the broad market of things that compute. You can get Intel Inside in devices that are $99 and up across operating systems, from Windows to Chrome to Android. So it's that extension of our product line that I think really sets us (out).
QUEST: And we'll talk more about this at (inaudible) next time. Thank you very much for coming on so soon after the results and talking to us on "Quest Means Business" tonight. Much appreciated.
SMITH: Great to see you again.
Male: (Inaudible)
QUEST: Now, coming up, why following your doctor's orders can be a crucial decision for your career.
(COMMERCIAL BREAK)
QUEST: Stress and exhaustion have taken their toll on Hector Sands. He's Britain's former banking regulator who's now Head of Compliance of Barclays. The bank says he's been diagnosed with the twin ailments and will take a leave of absence. A similar story to that of Antonio Horta- Osorio who was brought in to run Lloyds in 2011, six months later suffering from sleep deprivation and exhaustion. Antonio was ordered to take time off. He's since returned to oversee the bank's successful recovery. Jeff Gardere is a practicing psychologist who joins me to talk about this. Jeff, this is really interesting, isn't it?
JEFF GARDERE, PSYCHOLOGIST: yes.
QUEST: High-powered -- I mean -- someone has to stand to run the FSA in some of the most difficult times of regulatory control -
GARDERE: Sure.
QUEST: -- in the U.K.
GARDERE: Sure.
QUEST: What gives here?
GARDERE: Well, I think this is a situation -- I think it's quite remarkable because normally you don't show that sort of what they call a weakness -- having the exhaustion, having the anxiety. And here, you're right, FSA five years through some of their toughest times. It folded and became another regulatory sort of agency. But they're saying, hey, listen, after those tough five years, after what's been going on at Barclays, we want him to take a break.
QUEST: But isn't this a good thing -- that companies are opening -- it takes the stigma out of --
GARDERE: That's right.
QUEST: -- depression, anxiety, stress and all these other things that people are too afraid to say --
GARDERE: That's right.
QUEST: -- I can't cope.
GARDERE: That's right. So if Sir Hector can do that as the big gouda, as the big cheese -- if he can do that, then the message to the other workers under him is that if you are exhausted, if you find yourself unable to cope or burnt out, we will give you some time so you could pull yourself together. And it says that you are a valuable commodity. We are not letting you go, we want you to rest so you can come back even stronger.
QUEST: I think probably -- if you talk about burnout -- I think I've probably come close on burnout a couple of occasions over 20 odd years, and it's not a -- it's a truly awful sort of syndrome, isn't it?
GARDERE: Oh, absolutely, because what you're looking at is the fact that you just can't cope anymore. A lot of folks -- and we know that you're a high-powered, you know, very fast-paced individual -- those A-type personalities, even though they're very gifted intellectually and can do amazing things, are the ones who burn out even quicker, and therefore need to rest.
QUEST: But companies are uniquely incompetent dealing with it traditionally.
GARDERE: That's right, because here they have this racecar, they're running it, running it, running it, and they don't maintain it. And if the person doesn't maintain themselves, then they're no longer effective.
QUEST: I've got to talk with Hector Sands, and we wish him well, of course.
GARDERE: Yes.
QUEST: But I need to talk to you about the market -- bring up the Dow Jones Industrials. The Dow is down today, but the Dow is pretty much holding its own. What are they? Are they in denial about what's about to happen? Do they know something we don't? Give me the psychologist's view on the market in this crisis.
GARDERE: Well, they're seeing the incompetence in Washington by itself. They don't want to add onto that picture, they don't want to make it any worse. They're trying to keep the bottom from dropping out because they know that something calamitous may happen. But at this point, as you know, it's not just about whether we raise the debt ceiling, it's the perception. Not just within America -- but around the world.
QUEST: But are the markets in denial about what might happen, do you think?
GARDERE: I don't think they're in denial -- I think they're hoping against hope that they don't --
QUEST: Right.
GARDERE: -- stay in this state. Because even if they do raise the debt limit in another day or two, the damage has already been done. The perception is that we've got major issues in the United States.
QUEST: Is there a good psychological phrase we could use for them?
GARDERE: Um, they need some good catharsis, and as Freud would say, 'Nincompoops.'
QUEST: Thank you.
GARDERE: Don't be put off by the debt drama here in Washington. After a message for America's top tourist salesman, the Brand USA after the break.
(COMMERCIAL BREAK)
QUEST: Can't beat a good trip Now, selling the American dream -- that's how the head of Brand USA, the body that promotes tourism to the United States, describes his job. And you'd be surprised to discover though that with all these iconic tourist attractions, his job is not always an easy one. And I'm not talking about the current inconvenience of the government shutdown. What magnificent opportunities and vistas there are in the United States. But for selling USA, well join me at the Destination Board and you'll see some of the problems they've got. This is one of the key obstacles travelers face. Waiting time at the airport just simply to get into the United States. These are September's average waiting numbers from some of the biggest airports in the U.S. This is the average time to get into the country as seen by the authorities.
Now I know from bitter experience how frustrating this can be, so when the chief exec of Brand USA joined me a little earlier on the balcony, I asked Christopher Thompson what he thinks is the number one discouraging factor for travelers to the U.S.
(BEGIN VIDEOCLIP)
CHRISTOPHER THOMPSON, CEO, BRAND USA: That's people not realizing that the United States is open for business, it is welcoming, is a destination that wants to invite the world to come. You know, with President Obama -- the passage of the Travel Promotion Act which created us back in 2010 and the President calling for a national traveling tourism strategy, that has raised tourism to a high level within the federal government, and now we've increased -- shortened wait times in visa processing in China and Brazil and all the major areas where there was concern before. So a lot of those hurdles which were viewed before which relates to their ability to even come here, have been overcome by the commitment of this -- the public side of our public partnership to make the actual ability to come and then the welcoming exercise that much better.
QUEST: What are you selling here?
THOMPSON: We're actually selling the American dream. We're actually selling that aspirational aspect of -- before there were destinations people learned about the United States through movies and music, and now sports is a platform that they learn from so -
QUEST: You have got some of the best assets in the world to market.
THOMPSON: I'm very fortunate.
QUEST: You're more than fortunate, with respect.
THOMPSON: Yes, sir. So --
QUEST: The question is, what do you have to do when it's so well known?
THOMPSON: It's no longer a given that people are going to come here. And so we have to make sure that our assets -- all of our assets -- particularly the well-known assets -- we hold high enough and frequent enough so that people, when they're at their computer, when they're on the phone or wherever they are to make that decision on intense travel, they're going to make the decision to come to the United States. So we're a demand driver to keep our destination as a whole at the very top of mind, and then once we load that funnel, all the way down that funnel -- whether it's the destinations or it's the brands -- have the ability to take their fair share of it.
QUEST: I know you will say you don't mind where they come from as long as they come.
THOMPSON: Yes, yes.
QUEST: But China is huge and frankly if you look at the numbers -- the potential for China is off the charts.
THOMPSON: The amazing thing about China is right now we get about 1.7 million visitors from China. By 2018, we're projecting that we're going to have $5 million visitors from China, which'll actually make it our number one overseas long-haul market.
QUEST: It's damaging for Brand USA as a concept that you have this shutdown. The biggest single story around the world from the United States at the moment is that the fiscal and government shows down.
THOMPSON: I'd actually say it's not damaging. It proves the opportunity -- it improves the worth of the opportunity for Brand USA to tell the story about what there to see and do in the United States, which does include the iconic national parks and the things that the federal government owns, but it also includes everything beyond that. And you look at just the treasurers even on the state level -- with parks of their own. And you look at other things beyond those things -- it's --- there's just so much here to see and do that it's -
QUEST: It doesn't help your cause when there are pictures being shown of museums closed and battles over the Statue of Liberty having to be opened and paid for by New York rather than the government and all these sort of things. You must admit, it doesn't help.
THOMPSON: Well, you know, it's -- it is a short-terms issue that we have to deal with, but in the end, because of the strength of the brand, the strength of all the opportunities that there are to see and do here, then we're not concerned about it have a long-term impact.
(END VIDEOCLIP)
QUEST: That's the head of Brand USA. While we've been on air, it's been announced Fitch Ratings Agency -- we were talking about the ratings agency earlier, and you remember that Harry Reid in the Senate has said that he believed that the rating agency was about to take some action -- he may well have been referring about the Fitch Rating Agency -- has put the U.S. triple A on a ratings watch negative. They say they'll decide by the end of the first quarter in '14 what to do about it. But Fitch says the timing wouldn't necessarily reflect the developments, it talks about the budget battle and it says "U.S. authorities have not raised the federal debt ceiling in a timely manner before the Treasury exhausts extraordinary measures." So, the Fitch Rating Agency, the first of the two, still have triple A's saying that the U.S. is now on a ratings watch negative for the next six months or so. (Inaudible) weather forecast. Jenny Harrison is at the World Weather Center. Good evening, Jenny.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Good evening, or afternoon to you, Richard. Yes, some very nice sunshine I noticed there when you were out on the balcony in New York this afternoon. Some very nice weather continuing all this week. Can't say quite the same about conditions in Europe, particularly the Central Mediterranean -- some more warnings in place there, some more of the strong thunderstorms in the next couple of days. And generally it is a very unsettled picture as you can see. The rain's been streaming in across much of the west. One or two thunderstorms (inaudible) these high elevations. Not much in the way of snow for the next few days. It's a little bit milder, quite windy as well with this next area of low pressure. It's coming seemingly across towards the southeast and then as you can see, another system will soon replace it into the northwest and more showers with some (clearer cells) in between, but as I say, Wednesday into Thursday, this is where the warnings will be - - more of that heavy rain and strong winds to go with that rain as well from time to time. It does mean as well we've got some fairly lengthy delays to be reported Wednesday at the airport. Now, mostly because of the cloud, London Gatwick and Heathrow about 45 minutes, beginning to really build up in the afternoon hours. And then Dublin as well -- same reason -- the cloud -- but in fact the delays likely to be even longer on Wednesday Glasgow as well, as you can see there. So, be prepared for all of that. And as I say, this is generally a rather unsettled picture -- it's a very large area of low pressure working its way in from the Atlantic, bringing the rain across the northwest, and then you can see that next system eventually working its way towards the Black Sea. That's rather slow in moving, as you can see, so really bringing quite a bit of rain as well into the picture. Temperatures not too bad but definitely feeling like autumn now. Look at that -- just 10 Celsius in Vienna, 50 Celsius, 55 (inaudible) in Albany, 23 in Rome and 26 Celsius in Madrid. And that's all we have time for, but we're going to keep you well posted on the progression of this. This is Typhoon Wipha which is heading across Japan making landfall Wednesday morning, local time, Richard.
QUEST: Thank you for that. Jenny Harrison at the World Weather Center. You will follow that over the hours ahead as we watch those typhoons. When we come back, a "Profitable Moment" and some considerations about what we just heard from Fitch.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment" -- a live picture from the U.S. Senate where they are continuing to talk. Well, the talk may go on, but on this program tonight, you heard the Chief Financial Officer, the CFO of Intel describe the budget shenanigans as irresponsible and dangerous. A psychologist said the markets are nincompoops and possibly in denial, and in the last 20 minutes or so, you have heard that Fitch, the ratings agency, has put the United States on a negative watch for future rating triple A. The chickens are starting to come home to roost and there are just two days to go before of course the U.S. is set to run out of money. What happens over the next 48 hours will be crucial. Whether or not a deal can be put together even if it kicks the can down the road, to use that old, miserable cliche, that battered can has been kicked before. But it saved the market so far. It seems likely though, ultimately, it will only be the markets and the reaction in the markets that brings everybody to their fences. And that's "Quest Means Business" for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable. I'll see you tomorrow.
END
