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Quest Means Business
Big Pharma Deals; Pharmaceutical Shares Gain; US Markets Gain on Better-Than-Expected Earnings Reports; European Markets Up; Video Streaming Services Defend Legality; Airbnb in Court; Search for Flight MH370; Decoding Flight MH370 Data
Aired April 22, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
NINA DOS SANTOS, HOST: Big deals boost the market as the closing bell rings on Wall Street. Hello, it's Tuesday, April the 22nd.
A deal spread for big pharma today. Novartis leads the spending charge.
The captain, the crew, and now the entire company are under scrutiny as the death toll rises in the South Korean ferry disaster.
Also on the show, Everest in crisis. The son of one of the first men at the top says that it's time for a change.
Hello, I'm Nina Dos Santos, and this is QUEST MEANS BUSINESS.
Good evening. Well, pharmaceutical mega deals, it seems, are back in fashion, with multibillion-dollar transactions that are set to reshape the entire industry. The first is a swap between the Swiss drugs giant, Novartis, and the UK-based GlaxoSmithKline.
Taking a look at the figures, as you can see, they're actually, literally enormous. Novartis will be paying $14.5 billion for Glaxo's total oncology unit, and in return, GSK will pay, for its part, more than $5 billion for most of Novartis's vaccines business.
In a separate transaction, Novartis also plans to sell its animal health venture to the US-based firm Eli Lilly, this for a price tag, as you can see over there, of $5.4 billion.
Now, the second deal to be announced today involved Valeant Pharmaceuticals and the activist investor Bill Ackman making a bid for Allergan, this is the maker of Botox. Well, that could be worth around about $46 billion just for its part.
But it's not the biggest one on the table here. Finally, "The Sunday Times" has also reported that Pfizer had a proposed $100 billion takeover bid for AstraZeneca. Their talks reportedly ended without a deal being struck. Analysts still say that another offer is possible.
Well either way, these big mergers come as the big drugs makers are peering over what's called the so-called patent cliff. The companies are struggling to come up with new best-selling drugs to replace existing products whose patents are either expiring now or set to expire very, very soon.
Jim Boulden joins us now, live in our London studio with more on the implications of what this means, but also some interesting conversations that you've had with the bosses of these two companies, Jim.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Yes, well, we'll start with GSK and Novartis, because this is the one deal that we know for sure is happening. And what was really interesting to me was that I asked both of them why not a full merger? Why did you go down this road? Was it regulatory issues?
And what both CEOs told me, especially with Andrew Witty, who we'll start with, he said, basically, we don't want to buy what we don't want. We just want to concentrate on certain areas, and for GSK, who's all about vaccines. Take a listen.
(BEGIN VIDEOTAPE)
ANDREW WITTY, CEO, GLAXOSMITHKLINE: People describe this as a complex deal. Actually, strategically, it's not very complex.
(LAUGHTER)
WITTY: It's multilevel, but it's not very complex.
BOULDEN: Yes, OK.
WITTY: The strategic insights really are around build strength or add strength to where you're already a leader. Create something special in the consumer space. And by doing that, we allow two big companies to make big, strategic steps forward simultaneously, which is pretty unusual.
BOULDEN: And for you, that was vaccines. You've become a lot bigger in vaccines.
WITTY: Well, we've become bigger and vaccines, and by virtue of the fact that we control the consumer business, we also think that really builds that business for us. Remember, we'll operationally control pretty much everything to do with that business. Novartis retains certain minority rights, but the day-to-day control of that business is with GSK.
So for us, it really strengthens our consumer presence and our vaccine presence. And it allowed us to find a home for our up-and-coming oncology business, at a really tremendous valuation. So, $16 billion valuation for that business means that our shareholders have really achieved a significant reward for the research we've done in the oncology space.
BOULDEN: We've seen a lot of consolidation, obviously, in pharmaceuticals. You've decided that this wasn't the time to do consolidation. But do you expect there to be a lot more? Is this something that could lead with Novartis to more deals?
WITTY: Well, I don't know. I think every deal is different. And certainly today, we've seen lots of speculation about different sorts of deals --
BOULDEN: Yes.
WITTY: -- on both sides of the Atlantic. So, it seems to be that this is a -- potentially a busy and interesting time. I've always said I'm not very keen on doing the traditional big merger. Why?
Because by doing those mergers, of course you can bring into your company some of the things you want, but you always end up with things you don't want. And that drives distraction and risk and the like.
What's very nice about the deal we've announced today with Novartis is we're only trading on the assets we both want to trade on. So, I'm sure I have things he's not interested in, he certainly has things I wasn't interested in.
BOULDEN: Yes.
WITTY: So, why make all our lives so complex? These companies are big, they're strong companies, we have a clear strategy. What we've been able to do is to find where that complementary fit is and make this transaction happen.
(END VIDEOTAPE)
BOULDEN: Now, talking from Switzerland, Joseph Jimenez of Novartis also told me why he decided that the best way to go was for them to concentrate on cancer drugs and to get rid of most of their vaccines. Here it is.
(BEGIN VIDEOTAPE)
JOSEPH JIMENEZ, CEO, NOVARTIS: It really started with a portfolio review that we started a year ago, and I looked at what do we expect in the health care industry over the next ten years? And it's very clear that with the aging population, there is going to be an increase in heath care spending that will be significant.
Yet, there is also cost pressure. So, governments around the world are trying to figure out how they can lower their total costs. So, to be able to win in an environment like that, I believe that we have to be leading in each one of the sectors that we compete in.
So, that's really why we have today announced the three different sectors, and oncology plays a role because we're already number two in oncology. So, this is essentially doubling down on where we're already strong, because the importance of that scale, that global scale, and that global innovation power. So, that was one of the motivating factors.
BOULDEN: Let me ask you the same question I asked Andrew Witty at GSK: why not a full merger? What was the reason for this kind of -- not complicated, but certainly major moves without also thinking why don't we just have a global merger?
JIMENEZ: Well, both companies -- so, Andrew and I both look at our portfolios and we think, how can we optimize our own portfolios for the coming health care industry dynamics? And I think if you look at GSK, they have a very different portfolio, and a very different objective in terms of what they're trying to accomplish.
So, this transaction enabled both companies to optimize their portfolio. And I think the funny thing is that everybody told us that it couldn't be done. They said, look, swaps or exchanges of assets across company are too complex, that you'll never be able to agree on valuation. It's hard enough to agree on valuation just for one asset, but to try to do three will be next to impossible.
But Andrew and I both worked together, we looked at the importance of optimizing our current portfolio, and you had that situation where we --
(END VIDEOTAPE)
BOULDEN: Now, Nina, both men insisted to me that regulatory issues were not the reason they didn't look at a full merger, but I do wonder if regulators would have allowed, for instance, a GSK to merge with a Novartis. That would have been a huge pill, I think, for regulators to swallow.
DOS SANTOS: A bitter pill to swallow, certainly.
(LAUGHTER)
DOS SANTOS: It's really interesting what they're doing here, though, Jim --
BOULDEN: Yes.
DOS SANTOS: -- because they're effectively rewriting the entire pharmaceutical industry, getting together and saying, well look, guys, you can have vaccines, we'll take oncology, somebody else can have the animal health unit. That will have huge ramifications for just reshaping this entire industry ten years from now when, of course, new drugs will be on the market.
BOULDEN: It used to be, of course, that you wanted to be a little bit of everything, and you wanted to have a good percentage in each market. But what Andrew Witty said was basically, the only way to do that if you're behind in one of the markets is to actually buy somebody else and actually continue to build on.
And they decided instead to focus, laser focus, on those issues, those areas, those diseases they think they can do particularly well in. So, that's why this swap happened.
And of course, as you heard Jimenez say from Novartis, most people thought you couldn't do it, but they think -- I think about 15 weeks they were talking to each other. They think they've come up with a solution of how to have each company do what they think they can do best.
DOS SANTOS: Yes. Two big companies involved, and of course, another unit going to Eli Lilly.
BOULDEN: Yes.
DOS SANTOS: So it is fiendishly complicated. It's not the only piece of pharma M&A on the table, either, and that's what I'm going to come to now. Thanks so much for that, Jim Boulden there, bringing us those two voices from the key players in the industry who agreed that deal today.
Well, as you'd expect, pharma shares ended the day on something of an upbeat now. Glaxo, for its part, jumping more than 5 percent in the London trading session. Novartis rising 2 percent in Zurich. Well, Allergan, which is the maker of Botox, was the biggest percentage gainer, surging more than 15 percent, as you can see, by its part at the close of trade.
Well, speaking of shares, US markets ended the day higher as well. Zain Asher is at the New York Stock Exchange with all the action. Zain?
ZAIN ASHER, CNN BUSINESS CORRESPONDENT: Nina, yes, so we're looking at basically the sixth straight day of gains on the S&P 500, which is basically the longest winning run we've had since October.
But it is really all about earnings right now, we're about 30 percent of the way through this earnings season, so we're getting positive reports from the likes of Comcast, Netflix yesterday really boosting sentiment.
Now, almost 70 percent of companies that have reported earnings so far have actually beaten on expectations. And it's partly because the forecasts have been so low, so you're getting lots of positive surprises.
But I know you were just talking about those big pharma deals. Valeant basically getting Bill Ackerman to -- the green light to buy Allergan. And Valeant shares actually rose more than 7 percent. Now, you've got to remember that Valeant was one of those biotech companies that were hit hard back in March, so there is some excitement about this.
But in terms of economic data, just quickly, we did get existing home sales this morning. They fell in March because of the extreme weather and higher prices. But the decline was less than Wall Street was expecting, so all of that coming together to send the markets higher. Nina?
DOS SANTOS: All right, thanks so much for that, Zain Asher, there, live at the New York Stock Exchange with all today's action.
European stock markets, for their part, also ended on an upbeat note on Tuesday, too, boosted by unexpectedly strong readings on eurozone consumer price confidence. But also, as you'd imagine, M&A, especially in this part of the world, having its hand, too, in the action.
Well, shares of Philips fell by 5 percent after the firm announced a 14 percent drop in its profits for the first quarter, as you can see. The biggest gainer of the day was the Xetra DAX over there in Frankfurt.
Now, when we come back, a streaming start-up is up against major broadcasters in a US courtroom. The decision could impact the way you and I watch TV, so do stay tuned.
(COMMERCIAL BREAK)
DOS SANTOS: Hello and welcome back, you're watching QUEST MEANS BUSINESS. Well, two companies that have reinvented the accepted way of doing things are now defending themselves in court today.
First is the home rental site, Airbnb, here. New York state's attorney general says that the vast majority of rentals on this site, the ones that it facilitates in New York City, are in fact illegal. Well, the court decision could set a precedent for how the site operates right around the world.
But also in courtroom was this firm, Aereo, the start-up video streaming service, is facing some of the United States' biggest broadcasters. The case brings up crucial questions about copyright law. The outcome could have far-reaching implications not just for this company, for TV and technology firms as a whole.
And ultimately, it could impact how viewers, you and I, watch TV daily. Senior media correspondent Brian Stelter was at the Supreme Court in Washington and filed this.
(BEGIN VIDEOTAPE)
BRIAN STELTER, CNN SENIOR MEDIA CORRESPONDENT: Now it's time for the nine justices of the Supreme Court to rule on whether Aereo is legal or not. On Tuesday, the justices heard oral arguments in this case, which has been bubbling up for two years, ever since Aereo came onto the market in New York City, offering customers a new way to watch over-the-airwaves television stations via the internet.
Aereo charges $8 a month, and it disrupts the existing ecosystem for television in the United Sates because stations, like the local stations in New York City, have gotten used to receiving retransmission fees from cable and satellite companies, that want to rebroadcast their content.
Well, Aereo works around that system. It has its own array of tiny antennas that allow customers to watch TV without having to pay for cable or satellite, and thus without having to pay for those retransmission fees.
All of the broadcasters say this is a blatant copyright violation. And here on Tuesday, we heard a vigorous debate about what Aereo really is. The broadcasters say it's a gimmick that should be, essentially, ruled to be illegal and made extinct. Aereo says this is not about copyright at all. They say what they're doing is perfectly legal because of the way they've set up their array of antennas.
Here in court, Aereo's attorney argued they are just an equipment supplier. They just provide the same kind of technology that you can buy at Radio Shack, but then they hook it up on the internet so that you can watch it from anywhere.
The broadcasters' attorney, on the other hand, argue that it is much more than that, that it is really a pirate cable-like system that is stealing their signals without permission and then providing them to customers and charging for it.
Most of the questions from the justices revolved around a couple of key points. One is about the idea of public performance. Aereo says what they're doing is a private performance. But the broadcasters say under the copyright law, what Aereo does is a public performance of their copyrighted content.
There were also lots of questions about how this case would affect the cloud computing industry. There are lots of start-ups, not just Aereo, that revolve around remote storage, the idea that you might have a piece of media that's stored on the internet instead of on your own computer. There was clear concern from the justices about whether an overly-broad ruling would hurt lots of other companies that also involve cloud computing.
Both sides came out here to the Supreme Court steps after the hearing to speak about what they thought happened.
PAUL CLEMENT, COUNSEL FOR BROADCAST NETWORKS: They're obviously concerned about the consequences both for the broadcast industry and for other technologies, but I think they also understand that there is a fundamental difference between a service that provides content in the first instance, and something that provide simply essentially a storage service.
DAVID FREDERICK, COUNSEL FOR AEREO: We're cautiously optimistic based on the way the hearing went today that the court understood that when a person watching over-the-air broadcast television in his or her home is engaging in a private performance and not a public performance that would implicate the copyright act.
STELTER: The justices will rule at some point in the next two months. And until then, Aereo will remain in limbo.
(END VIDEOTAPE)
DOS SANTOS: We should say that Time-Warner, the parent company of CNN, has filed papers with the court in this lawsuit on the side of the broadcasters. Although it's not a plaintiff in the case itself, it does say that action is needed to, quote, "set this vital area of copyright law back on course."
Well, CNN Money's technology correspondent, Laurie Segall, joins us now, live from New York. She's been following all these disruptive technologies, as they're called, and particularly the Airbnb case in special detail. Laurie?
LAURIE SEGALL, CNN MONEY TECH CORRESPONDENT: Airbnb had its day in court as well. It's so interesting to see all these small start-ups who have turned into these huge companies with the major potential to disrupt the industry have their day in court.
And what happened was, the New York City attorney general said New York members of Airbnb are illegally renting out their apartments. And there was a study that came out that found that 12 percent of hosts make up 30 percent of New York City listings. Meaning a lot of folks were renting out multiple listings, which is illegal under New York state law.
So, they went and they asked Airbnb for quite a bit of information on their New York City members. Airbnb refused, they said that's overreaching, and so they had their day in court.
And what Airbnb has said is, we're adding a lot of money to the New York City economy. We're adding 6,000 jobs, over $700 million. And if we could change the law and actually charge for taxes, we could add as much as $21 million in tax revenue, but New York City state laws say right now, a company like Airbnb just can't do that.
So, what we're really seeing here, Nina, is everything's coming to a head because Airbnb is exploding. I remember covering this company when they were just a handful of guys, and I interviewed the founder, Brian Chesky. And to stay afloat -- they were almost broke -- they sold cereal boxes at the Democratic National Convention.
Now, we fast-forward. They've got a $10 billion valuation, and they are taking on every major industry -- many major industries, and really we're beginning to see a lot of this stuff come to a head.
DOS SANTOS: Laurie, one of the big issues here -- in fact, the big issue -- is basically that these disruptive technologies are changing the way people consume information, consume services and goods, and the law really can't keep up with it, can it?
SEGALL: It's this interesting time, because we're seeing regulation really bump heads with Silicon Valley, to a certain degree. And a lot of folks in Silicon Valley say, hey, you can't keep up with what we're doing. The laws need to change.
And what companies like Airbnb and Uber, which is another one that's really disrupting major industries, they're having to go into different states, different countries, and they're having to argue that these pre- existing laws need to change, that their antiquated.
And what's really tough, Nina, is they're up against these giants. They're up against major industries where it's not really in their interest to see their whole entire industry disrupted. So, they're really fighting this fight.
But I will say this, at this point, they've grown. Airbnb just reportedly closed a $400 million round of funding. They're a huge company, now. Uber has got over a $1 billion valuation. And they've got the resources, and they've also got very vocal users, and they are willing to fight this.
And it's very much a tech disruption is coming, and it will likely happen, but there's going to be a lot of people fighting in court, and there's going to be a lot of conflict of interest at this point.
DOS SANTOS: All right. CNN Money's Laurie Segall, thanks so much for that, there.
SEGALL: Thank you.
DOS SANTOS: Bringing us the ramifications of these cases and also the details, too.
Now, Malaysian and Australian officials are hammering out new guidelines in the search for the missing Flight MH370. We'll get the latest from Richard Quest, live in Kuala Lumpur, right after this break.
(COMMERCIAL BREAK)
DOS SANTOS: The Malaysian and Australian governments are working on new guidelines to govern the investigation into the missing Malaysia Airlines plane. The proposal details how debris and any human remains would be handled. They also discussed how to widen the search if current efforts to find the plane fail.
Richard Quest joins us now, live from Kuala Lumpur. Richard, I suppose these are sort of the legal gory details that you don't want to have to get nailed down, but they have to, and now is as good a time as any?
RICHARD QUEST, CNN INTERNATIONAL: Yes, I think what happens invariably in these situations is in the heat of the crisis, when the plane first went missing, you literally do what you can with the assets that you have, and you don't, to quote the old phrase, don't worry about the money. You don't worry about who's doing what, you just get on with it.
But as the days turn into weeks and the weeks turn into months, and you have to regroup and rethink the whole operation, so you do get the opportunity to put into place legal structures. And that's exactly what Malaysia and Australia are now doing.
It's worth noting that these two countries are very close allies at various levels, from economics to military to political. So, it shouldn't be in any way controversial. But, Nina, the issues they're looking at, firstly, widening the search. How are they going to go forward? What assets will be needed? And crucially, who will pay the bill?
Secondly, what happens to any debris that's found? Who has custody? The chain of custody, where is it held? How will it be repatriated to Malaysia?
And finally, of course, and most important of all in this, any human remains. Because there, Nina, you have issues of whether families even want any human remains, if they are identifiable, to be brought to the surface. I remember that was an issue in 447.
DOS SANTOS: Yes, that's an excellent point. Obviously, there are so many countries involved in this search, so many different nationalities on that plane. And many people who were on the plane were Chinese, as well. So, it also brings the government of China into this equation. This is fiendishly complicated stuff, isn't it?
QUEST: It was fiendishly complicated from the day the search began. I was looking back at the notes yesterday. At one stage, you're talking about 26 countries, dozens of assets of planes and ships. In many cases, if not exactly from enemies, certainly from regional rivals, you actually had Chinese spy planes landing in China parked next to American search planes.
So, the ability, I think, of not only the Malaysians, but the Australians to put together these search coalitions and to hold them together and to make progress is not to be sneezed at.
Now they have to go to the next stage, because if the Blue Fin hasn't found anything and you're talking about a long-term, expensive search with other assets being brought in from the private sector that have to be paid for -- at the moment, many of the assets are government-owned ships, search equipment, employees, soldiers, sailors, and the like.
But the moment you're paying real hard cash out of the bank to other companies, somebody has to foot that bill. It's a hard reality. And they're going to have to work out who that person -- which that country is going to be.
DOS SANTOS: All right, Richard Quest, live in Kuala Lumpur. Thanks so much for that. Now, if you think that the technology involved in this search is impressive -- remember what Richard was saying about the so- called Blue Fin 21 probe scouring the waters there in the South Indian Ocean -- take a look at what's in store if the flight data recorders are actually found.
Because only a handful of countries anywhere on this planet have the expertise that is needed to open the black boxes. Michael Holmes went to meet the Australian investigators who may one day unlock the final moments of Flight 370.
(BEGIN VIDEOTAPE)
MICHAEL HOLMES, CNN INTERNATIONAL CORRESPONDENT (voice-over): In a nondescript government building in Australia's capital, Canberra, the secrets of Malaysia Flight 370 might one day be unlocked.
HOLMES (on camera): What's this room, Neil?
NEIL CAMPBELL, AUSTRALIAN TRANSPORT SAFETY BUREAU: Well, this is our audio laboratory. It's a specially-designed screened room, so it's shielded.
HOLMES: From electronics and --
CAMPBELL: That's right.
HOLMES: -- audio and --
CAMPBELL: Outside signals. And as well, it's got very good soundproofing.
HOLMES (voice-over): Inside the Australian Transport Safety Bureau laboratory, where Neil Campbell and his team forensically examine data recorders not just from planes, but also trains, even ships.
HOLMES (on camera): Now, the reality is, there are very few countries in the world, just a handful of them, who have the technical know-how to work out what's inside one of these things. And this lab is one of those places.
HOLMES (voice-over): Boxes from other investigations, torn apart, burned, damaged in many ways, suggest a tough assignment. But here, they say the story of what happened is usually found.
CAMPBELL: A lot of our work is with undamaged recorders, and it's very easy to download them, much as you would a USB memory stick.
HOLMES (on camera): But even with really damaged ones, your success rating getting the information off is good.
CAMPBELL: Yes. We've always been able to recover the information from the recorders we've received.
HOLMES (voice-over): He is a measured, cautious man, prerequisites for a job that involves not just knowledge, but patience -- lots of patience.
CAMPBELL: From the flight data recorder, we obtain a raw data file.
HOLMES (on camera): Just ones and zeroes.
CAMPBELL: Which contains just ones and zeroes.
HOLMES (voice-over): The boxes contain a wealth of information, up to 2,000 separate pieces from the data recorder alone, high technology built into a waterproof, fireproof, shockproof shell. At the end of this complex chain of information and analysis can be this, an animated representation of a tragedy. This one from a 2010 training flight, two dead after a simulated engine failure went wrong.
CAMPBELL: A lot of the symmetry, which couldn't be controlled, and the aircraft ended up impacting the train, unfortunately.
HOLMES (on camera): And you're able to recreate this thing from the black boxes?
CAMPBELL: That's right. This is based on flight data recorder information.
HOLMES (voice-over): The size of the boxes is deceptive in some ways. The vast majority of it containing technology that supports the brain buried deep within. Surprisingly small, but containing everything Neil Campbell needs on a handful of computer chips.
HOLMES (on camera): In a box this big, that's what you need?
CAMPBELL: Yes. That's the crucial bit.
HOLMES (voice-over): But they have to be found first. Malaysia not a country with the technical ability to decipher the boxes, nothing has been decided, but it is highly possible that if they're found, they will end up here, where Neil Campbell and his team say they're ready to attempt to unlock a mystery like no other.
Michael Holmes, CNN, Canberra, Australia.
(END VIDEOTAPE)
DOS SANTOS: As the death toll in the South Korean ferry disaster mounts, the company itself behind the Sewol ferry now faces more questions. Authorities say that the first distress call came from passengers and not the crew. We'll take you to South Korea next.
(COMMERCIAL BREAK)
DOS SANTOS: Hello, welcome back, I'm Nina dos Santos with the news headlines this hour. Ukraine's acting president Oleksandr Turchynov is calling for restoring the military operation against pro-Russia separatists in the nation's east. Turchynov made the announcement after the apparent discovery of the bodies of the deputy city councilman and another man on Tuesday in a restive (ph) area.
Divers in South Korea have reached the cafeteria of the sunken ferry. It's believed a large amount of passengers had gathered there before the ship sank. Officials meanwhile continue the grim task of recovering bodies. The say 121 people are confirmed dead, with 181 still missing. In the United States, another step in the battle over affirmative action. The U.S. Supreme Court has upheld a law in the state of Michigan which bars public colleges from granting preferential treatment in admissions on the basis of race or sex.
And Manchester United has fired the manager David Moyes after just ten months in the top job. The team's most recent season was lackluster, they failed to make the European Champions League for the first time in around about 20 years and he had to go.
A South Korean coast guard today said that the first distress call from the ferry that sank last week came from a passenger and not the crew The revelation adds to questions about the conduct of the crew, nine of who are now facing criminal charges. Nic Robertson is in Jindo.
(BEGIN VIDEOCLIP)
NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: More bodies, more solemn, sad processions to waiting ambulances. The pace of police boats bringing ashore the grim cost of this tragedy is picking up, many of the victims wearing life vests. For just a few families, the arrival of each police boat brings the waiting closer to an end. For so many more, the uncertainty continues. The company which operated the ferry posted a public apology on their website, saying in part, "We prostrate ourselves before the victims' families and beg for forgiveness. We apologize to all the people who are grieving for the loss of their loved ones." The search for survivors in these waters is dangerous. Divers must first swim down over 100 feet following guide ropes to reach the ship. Aboard the vessel, low visibility and debris make it nearly impossible to navigate.
Rescuers focus their search on the third and fourth levels inside lounge and cabin areas where they believe many of the students are located. So far, nine crew members in all have been arrested, including these four who appeared in court on Tuesday outside the court answering question about the sinking. One crew member saying after the ship began to list, they were trying to stabilize it and stopping capsizing. Another says the captain issued a distress signal, then tried to deploy the lifeboats but they couldn't reach them. The captain, who has defended his actions, faces possible life in prison if convicted of the charges against him. Nic Robertson, CNN Jindo, South Korea.
(END VIDEOCLIP)
DOS SANTOS: Let's get more from Kyung Lah who is actually on a boat just off of the coast of Jindo which is right near the search area. Kyung, obviously these revelations of perhaps a passenger having to raise the alarm rather than the crew, again, will just provoke immense anger one would have thought.
KYUNG LAH, NATIONAL CORRESPONDENT FOR CNN BASED IN LOS ANGELES: Absolutely, because how could they not have called right away? That's immediately what these parents are going to think. How is it that they called the wrong tower first? There's so many questions now as we learn more about how the evacuation or lack thereof actually unfolded. While all of this is happening, the search is still continuing. You can see right behind me, this is just before daybreak. There's still flares being dropped from an overhead plane lighting up the soon-to-be bright sky. What you're seeing at the horizon are a bunch of lights -- this bank of lights - - come -- that are floating here -- to try to help the divers and the rescue teams see where they're going. And if you look straight ahead a little further down, you'll see this barge. That barge is right above where the sunken ferry is.
We're quite close. And what the divers are trying to do is use guideline to get inside the ferry. We understand that they have been able to get into the cafeteria, they are -- basically it's so difficult, you know, what they're doing is they're going into the windows -- in through the windows -- and then they're feeling around with their hands to see if they can actually feel any bodies. So this is difficult, painstaking work. A lot of the divers that we've spoken to, Nina, are having a very difficult time because all they're bringing home right now are bodies, and in many cases, these are bodies of teenagers -- 14, 15 and 16-year-old children. Nina.
DOS SANTOS: Yes, dangerous and very, very distressing work for sure. Kyung, we now have still 181 people missing. This is a major operation, and as you said, it's just bringing back more and more difficult scenes for people to swallow. What is the atmosphere like there in South Korea amid as I was saying before those calls for action and also who's to blame?
LAH: It's very difficult to know at this point who is to blame, because the investigation is still unfolding. We can tell you that there have been more crew members arrested today -- two more were taken into custody. There is a lot of scrutiny on the crew and how this was all handled. But as far as a cause of this, this is still being investigated. So who to blame -- that's a very big question right now. There is a lot of rage. Not just here in Jindo where you can hear the grief of the parents as they identify their children. You also can feel it in the entire country. This is a national tragedy. People are extremely upset, especially because you think about who is involved here -- young people. And in Korea, young people are the treasure of the family. This is an extraordinary loss to this country.
DOS SANTOS: As you said, Kyung, there are so many questions that remain unanswered may need to also not just look at the repercussions of this but also what's going to happen from here on to change the safety record for ferry companies in a country like South Korea. What is the reaction from the company? We know that they've apologized profusely, but what more are we learning here about this firm?
LAH: We don't know too much more. We know that they are the owner of this ferry, that they have had their offices raided, that police are starting to comb through whether or not there were any safety violations. We know that the boat originally came from Japan. It was retrofitted so there are a lot of questions of whether or not it was retrofitted appropriately to handle as many passengers as it did. It was a much lower passenger count in Japan. The passenger capacity jumped up significantly here in Korea. So there are a lot of questions about whether or not this ferry company actually handled it appropriately.
DOS SANTOS: All right. Kyung Lah, there, thanks so much for that. Kyung Lah just off of the coast of Jindo, and as you can see, on back to rather dramatic scene there with the rescue or at least the search operation at this point underway behind her. Now, there's calls for the mountain -- for Mount Everest -- to be shut down for the climbing season following a deadly avalanche. In a moment's time, we speak to the son of one of the first climbers to ever scale the summit of Everest. Please stay with us.
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DOS SANTOS: The deadly avalanche on Mount Everest is threatening the peak's busiest climbing season just days before it's meant to actually begin. So far, 13 people have been confirmed dead. Three still remain missing at this hour, feared dead, in Friday's avalanche. It's the single deadliest accident to have occurred on the mountain, and at least one organization has now abandoned its expeditions all together for this year. Others are deciding whether to follow suit.
Few people know Mount Everest like this man -- Jamling Tenzing Norgay. He's the son of Tenzing Norgay who is the man, who alongside Edmund Hillary became the first climbers to summit -- to reach Everest's then (ph) summit. Jamling has been a Sherpa all of his life, and in his book called "Touching My Father's Soul," he spoke about the surge in demand from foreign climbers and the great risks that the Sherpas take to accompany them on their voyages. He wrote this quote, "-- the more I witnessed the garish displays of ego and individualism in some of the foreign teams, the more" -- he goes on to say -- "I felt they were inviting misfortune for themselves."
Earlier I spoke to Jamling via Skype from Darjeeling in India about what he thought about the course to cancel the climbing season. This is what he had to say.
(BEGIN VIDEOCLIP)
JAMLING TENZING NORGAY, MOUNT EVEREST SHERPA: Well shutting down the mountain you know is some of the opinion of the Sherpas -- some of the Sherpas -- and as perform (ph) a form of respect for the Sherpas that have died last week on the mountain. And but I thinks it's the decision of the Sherpas -- the 300-odd Sherpas -- that are still upon the mountain and the teammates and the government to come to a understanding as to whether they will continue to climb this season or not.
And I think they had a lot of demands sent to the government and I hope they're able to sort it out and work it out, and I think the demands are very reasonable. I think the Sherpas want, you know, their wages/salaries -- better salaries, insurance coverage is very little right now, they want, you know, more insurance coverages. And basically, you know, when a Sherpa is climbing up there, they're the sole bread earners of the families, so when they're gone, then there's nobody to support the family. And taking care of the children's education, taking care of the widows -- I think these are all steps that needed to be taken a long time ago, and I'm glad it has finally come up.
DOS SANTOS: So effectively you would say that this crisis has been a long-time in the making, especially considering that we've had many more people and people with less experience than your father climbing Everest, and indeed your father was the first of two people to reach its summit all those years ago.
NORGAY: You know I think, you know, when you look at it, you know, mountaineering or climbing not only Everest by mountaineering in general, is about teamwork. You know, when my father climbed with Hillary, the whole team -- the Western climbers and the Sherpas -- together worked together in setting the rules and sharing the supplies together. These days it's all, you know, everything is done by the Sherpas. The overnight mountaineers come, you know, they want to climb Everest take it off the list. And that poses a great risk on the particular person and in case something happened to him, then, you know, it threatens the lives of the other Sherpas who helping out this guy down the mountain.
DOS SANTOS: So if your father was one of the first people to scale Everest, what do you think he would've made of the situation we're seeing today?
NORGAY:
I don't think he would've been very happy, you know, to see the way the mountain has changed today -- with the climbing, you know? You know, back then, these people -- my father, Hillary and all these guys -- they climbed for the passion and the love, you know? And they were the explorers, they were the pioneers who paved the way for us. And today we have, you know, people who are not even mountaineers, you know, who should not even be there on the mountain. I don't think he would be very, very happy or pleased with this situation today.
(END VIDEOCLIP)
DOS SANTOS: All right, that was Jamling Norgay there whose father was one of the first two people to manage to reach the summit of Everest. Let's go over to Jenny Harrison at the CNN's National Weather Center for a recap of the weather. What's up, Jenny?
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Hey there, Nina. Well I can say two words I think when it comes to Europe -- warm and wet. That is what we've been seeing. It's been very unsettled, but no particularly strong thunderstorms. Some heavy rain coming down within some of the showers, but as I say also as well as this unsettled picture, it has been very warm as well. In the last few hours, look at this. We've had heavy rain in Romania and also in the Czech Republic. In just two hours, 37millimeters of rain, in three hours 44. And to give you an idea, this is pretty close to the monthly average.
There's a huge amount of rain in a short space of time. There was also hail of 1 centimeter in diameter that was also reported. And that will continue really through Thursday. Not so much that sort of event of rain coming down in a short period of time, but just generally very unsettled. These widely scattered showers across much of central southeastern areas of Europe, and at the same time, another system coming in from the northwest. But at the same time as well it remains very warm - - temperatures well above the average. But just don't expect to see some very nice sort of long, unbroken sunshine, because there's not a lot of that around.
But look at the temperatures -- because it was a very warm day again on Tuesday -- 22 in Warsaw compared to the average of 14, 20 in Berlin and in fact in Berlin it has been warm for really several weeks now and there's not a lot of change in the next few days. Colder air being ushered back in just briefly into Eastern Europe, and a slight cool-off across the northwest. But over the next three days, Berlin, basically at 21 degrees Celsius, again against that average of 14. In Warsaw, 23 on Wednesday, then it does begin to dip down closer to the average and it drops down on Friday as you can see there in Budapest. A bit of a change finally those showers across also taking away that warm air.
Now, winds have been pretty strong at times across much of central Europe and, again, some fairly gusty winds expected through Denmark in the next couple of days. Winds have eased though in Germany, but at one point the winds were fantastic for this -- yes. I've never seen kites quite as big as this. They are just spectacular. This is in northern Germany, just off the coast. And you can see this is obviously happening over the last couple of days. And more of that possibly, but see the winds have come down a bit now.
Temperature-wise on Wednesday, 22 in Kiev so again well above the average, 19 in Paris and just 17 Celsius in London. But, again, that's not bad for this time of year.
Meanwhile, the United States -- again, a bit of a long, protracted winter for many, but in the last few hours, more showers have been gathering across much of the East, a warning out across the West for some strong thunderstorms. But it does mean is that because we really haven't had that sudden warm, moist air in the South and the cold air coming in behind, tornado season is off to a very, very slow start -- 93 tornados so far this year. No, that is the pink line that is literally the minimum as you can see here. The maximum is this red line, and at one point back in - - what year was that? -- back in whichever year it was -- doesn't say on here -- there was actually over 500 tornados that had happened at this point in the year. So, as I say, very, very quiet year. We just haven't had these very strong thunderstorms, and certainly normally in April it really does peak, and then it really peaks in May. So really picks up in April -- it hasn't done that -- and then by May, we have close to 300 tornados. So, as we go through Wednesday into Thursday, there's actually a slight warning across the Central Plains. As you can see, more rain, possibly some large hail and some strong winds. No real threat of tornados. That doesn't come until the weekend. We've got a front sweeping through the middle of the week. That will bring the rain and scattered thunderstorms. This is what is in store for the weekend -- very, very warm moist air again in place because it's begun to warm up finally, the cold air coming in from the Northwest and then this weekend expect to see some of those very strong thunderstorms developing. As I said, there'll be plenty of warnings as we go Saturday into Sunday as all of that is in place.
And afterward we can see the next 48 hours. Once that line of showers moves through across the East, things are fairly quiet, then it begins to ramp up at the end of this 48-hour period. In the meantime, no real delays expected at any of the major airports, and when it comes to your temperatures, you can see here on Wednesday, 24 in Atlanta, 31 in Dallas. There's that warm air beginning to really bubble up from the South -- 13 Celsius across in Seattle. Nina, back to you.
DOS SANTOS: All right, Jenny, thanks so much for that. Jenny Harrison at the CNN Weather Center. Now, kicked out after less than a full season. David Moyes gets the boot from Manchester United just ten months after taking over as manager. Full details after this.
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DOS SANTOS: The rumors were confirmed when we saw this particular tweet -- "Manchester United announces that David Moyes has now left the club." With that, the team announced its manager was out after just ten months in the job. Moyes was contracted for a total of six years. In the world of the English Premier League, being sacked or exiting by mutual consent as I suppose you'd call it -- politely -- doesn't necessarily put you on a blacklist. Rather, it's something of a special club. Well, in -- last year, what we've seen is Tottenham Hotspur, West Ham, Sunderland, Fulham and Cardiff all there at the top also saying goodbye to their road managers. A former director of England's Football Association says that Moyes was living in the shadow of his predecessor, Sir Alex Ferguson.
(BEGIN VIDEOCLIP)
DAVID DAVIES, FORMER DIRECTOR, FOOTBALL ASSOCIATION: The reality is that Alec (ph) Ferguson had unparalleled success as a manager over some 26 years with Manchester United. That record stands. That has not gone away. Did he get it right in terms of his successor? It would appear not. But for me, and for most Manchester United supporters I suspect, Ferguson's record will live forever.
(END VIDEOCLIP)
DOS SANTOS: Alex Thomas is at Trafford for us now and joins us live. Alex, I suppose many people would say, well Sir Alex was just such a hard act to follow that nobody would have stood a chance.
ALEX THOMAS, SPORTS CORRESPONDENT AND ANCHOR WITH CNN INTERNATIONAL IN LONDON: Yes, in the same way, Nina, as any company struggles after a very successful CEO has parted the company. Because although Manchester United has a chief executive -- and by the way they appointed a new one at the same time as manager David Moyes last summer which, in my opinion, certainly explains some of the reasons why Moyes failed -- but maybe more on that in a second. In the same way as any great leader leaves any organization, there is always a huge hole to fill afterwards. And you don't always get a succession of great leaders. You get one in a lifetime like Sir Alex Ferguson. He really was one of the most successful manager in this club's history, and indeed the whole of British football. So, very hard for the next person to come in and replicate that success despite all the talk of a structure being in place, to guarantee a legacy, to guarantee continued success. There are so many statues and memorabilia here at the Theatre of Dreams -- the nickname for Old Trafford Manchester United Stadium, Nina -- talking about the success on the pitch. But here were big gaps sometimes between some of those era -- eras -- of triumph, and of course the Manchester United owners have acted quickly now in the hope to stop United slipping back into the wilderness years, the way all cycles go in all companies and all sorts of industries.
DOS SANTOS: Just really briefly, Alex, where do we go from here? Because they can't afford to get it wrong for the next person.
THOMAS: No, they can't because they're supposed to be pouring hundreds of millions of dollars into a team rebuilding exercise during the off season with a chance a window opens. We know Ryan Giggs, the Manchester United player, is going to take temporary charge. If he does well, there could be a clamor for him to take over, but with no managerial experience, it would be even more of a risk than it would be with David Moyes. Louis van Gaal, the Dutch coach, is the current bookmakers' favorite but he has to take Holland to the World Cup first, and that's going to take his time. So, no hugely obvious successor, but United needs to act decisively if they're going to avoid the mistakes of the past, Nina.
DOS SANTOS: All right, then, Alex Thomas there. Thanks so much for that outside au traffic (ph) for us tonight. In a moment's time, an Earth Day initiative from Apple or perhaps a thinly-veiled dig at a rival company. We'll reveal all after this.
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DOS SANTOS: Welcome back. Apple has taken a thinly-veiled swipe at Samsung in a newspaper advertisement promoting its Earth Day initiatives. Now, the tech giant took out this full-page ad in British newspapers, and in it, Apple announced that it's launching a free recycling program in its stores to coincide with Earth Day. And this is the key bit here, it says quote, "There are some ideas that we want everybody to copy." Well the headline seemingly is a reference to Apple's ongoing patent dispute with Samsung. The Korean firm accuses its rival for a number (ph) of infringing on its intellectual property. Apple of course reports its earnings on Wednesday after the closing bell, so it's something we most certainly will cover on "Quest Means Business." There you have it. There are some ideas we want every company to copy because the world would be a better place if we recycled more.
And a final reminder of how stocks ended this Tuesday session -- a 65 point gain for the Dow Jones Industrial average and some of the European markets also ending the day on a bit of an upbeat note on Tuesday. All this boosted by not just enormous pharmaceutical deals but also especially in Europe an unexpectedly strong reading on Eurozone consumer confidence after all the years of downbeat confidence for this region -- finally it has been rising. And shares of one consumer electronics firm based in the U.S. owed (ph) Fitz (ph) fell by 5 percent. That was after the company announced a 14 percent drop in its profits for the first quarter meant big farmer big deals being back in fashion it was really the order of the day, and that's why the Dow really fired ahead at the close of trade. And that's it for this edition of "Quest Means Business." Thanks for joining me. I'm Nina dos Santos in London. Thanks for watching. (Inaudible).
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