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Quest Means Business
Greek PM Vows to Renegotiate Bailout; Apple Posts Record Profit; Icahn Says Apple Shares Undervalued; Facebook Beats Expectations
Aired January 28, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
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POPPY HARLOW, CNN HOST (voice-over): The U.S. markets take a late nose dive. Another day of deep losses on Wall Street. It is Wednesday, the
28th of January.
Tonight, Greek markets plummet as the new government rolls out its radical economic plan and solid as a rock the Fed gives a glowing report of the
U.S. economy.
And in the time it had took me to read just that, Apple sold 150 iPhones.
We'll ask Carl Icahn what the company should do with its enormous pile of cash.
I'm Poppy Harlow and this is QUEST MEANS BUSINESS.
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HARLOW: Good evening, everyone, welcome to the program.
Stocks plunge and bond yields spike, Greek investors run for cover as the new anti- austerity government shows it certainly means business. In his
first cabinet meeting, Greece's new prime minister announces privatization plans will be halted immediately and the government is not backing down
from talks over restructuring its debt.
He made it very clear they are not messing around.
(BEGIN VIDEO CLIP)
ALEXIS TSIPRAS, GREEK PRIME MINISTER (through translator): We did not come here to take over institutions and to enjoy the trappings of power. We
have come to radically change the way in which politics and governance is carried out in this country.
(END VIDEO CLIP)
HARLOW: Investors voted with their feet; the Greek stock market fell 9 percent today alone to its lowest level in two years. Investors worry that
Greece will break its commitment to international lenders and force the country out of the Eurozone.
Banks, by far the worst hit, Alpha Bank, Piraeus Bank, National Bank of Greece, all falling more than 25 percent on the day.
The sense of urgency in the markets reflecting the looming deadlines for the Greek government to get its new economic plan working. Some key dates
to keep in mind here, first, this Friday, finance minister Yanis Varoufakis met his -- meets, rather, his Eurozone counterparts for the first time.
Speaking today, he played down the possibility of a showdown, saying, quote, "There won't be a duel between Greece and Europe."
Also ahead, February 12th, Prime Minister Alexis Tsipras attends the European Union leaders' summit. Germany and others have insisted that
Greece must play by the rules.
And at the end of February, the 28th of February, the deadline hits to extend Greece's 240 billion euro bailout, some economists warn the
government will run out of money without additional funds.
And on July 20th, Greece has to pay back $4 billion owed to the ECB. Yanis Varoufakis says that he does not expect the new -- next few months, rather,
to be easy.
(BEGIN VIDEO CLIP)
YANIS VAROUFAKIS, GREEK FINANCE MINISTER: (through translator): A new relationship of trust and honesty is being created between our country and
Europe. The negotiations will not be easy. They never are in the European Union. How could it be, especially in a European Union that is struggling
to find its steps after a world economic crisis in 2008, of which the European Union was not designed for.
(END VIDEO CLIP)
HARLOW: All right. Let's talk about Greece's economic future. Vicky Pryce is the chief economic adviser at the Center for Economics and Business
Research. She's also the author of "Greekonomics," and she joins us live from London this evening.
Thank you for being with us, Vicky, we appreciate it.
(INAUDIBLE).
HARLOW: So let me get your take, first of all, midday today, S&P putting Greece on credit watch negative.
Your reaction?
VICKY PRYCE, CHIEF ECONOMIC ADVISER, CEBR: I think it was quite expected that this would happen. The extent of the fall, of course, on -- in the
stock markets has taken people a bit by surprise because, after all, they should have been able to forecast what was going to be going on. Because
in reality, there's going to be a period of negotiation and one does not know at all how the Europeans are going to react and who is going to blink
first and be prepared to have a compromise.
The result has been almost chaos, I would say.
HARLOW: And you did write -- I was reading some of your recent columns on this. You noted that the new prime minister, Alexis Tsipras, has to walk a
very fine line in these negotiations and not demand every demand that his party would like to see. But in the first official day we've already seen
a number of very bold moves and statements in terms of privatization, in terms of the fact that he's going to ask for a significant amount of debt
forgiveness.
Do you fear that he's not walking that line appropriately?
PRYCE: Well, it depends what he really wants to achieve at the end, because of course he's promised a lot of things to the population and they
all expect him to do something.
But the majority of Greeks believe that he may be able to get something back for Greece. But certainly not everything he has promised. So
expectations are not that high to begin with. So that's one thing we need to bear in mind.
On the other hand, he is indeed talking about doing all sorts of things, such as raising minimum wage, retiring people who've been sacked from the
public sector. So there are things that he simply cannot afford to do at present. And the market is worrying about the possibility of default at
the end of the day, even though the government has said that they don't really want default.
HARLOW: Greece's new finance minister saying on CNN earlier this week not to worry, saying that private creditors will not see a haircut as in 2012.
2012 is recent memory. This is not something that is quickly forgotten.
Do you believe that?
PRYCE: The reality is that private creditors only really account for about 15 percent of the debt that Greece owes. The majority of the creditors are
public creditors. They're the International Monetary Fund; they're the European Central Bank. It's the European Union. Really, it's countries in
those -- in Europe that own the debt.
So the haircut, if it comes, isn't really going to be affecting hugely private sector holders who know of the risks. It really needs to be done
with public institutions and governments. And I think that's going to be a very interesting type of a negotiation to have, because of course, it will
mean that it's taxpayers that have to pay at the end rather than individual private investors.
HARLOW: I do want your take on something else that he did, say the new Greek finance minister earlier this week. He said basically the new
government in Greece, what they'd like to do and what they think is reasonable to do is to tie up the rate of repayment and the rate of nominal
GDP growth, saying, look that is only fair and that's what the market can sustain and bear.
Do you think that that is a viable plan?
PRYCE: I think that does make sense. The reality is that the Greek debt is unsustainable. So some sort of compromise is going to have to be
reached. And the problem of course now is that some 4 percent of the actual interest payments that Greece has to make account for about 4
percent of GDP, which is very large. Which really means that Greece is forced to have a primary surplus of that height. What it means is
austerity, really, continuing, while this debt is being serviced.
So the size of the debt is an issue. It needs to be reduced and one way of doing it, of course, is also to look at lengthening maturities, lowering
interest rates. So getting the Europeans to understand that unless some things do happen, then Greece may well end up defaulting.
HARLOW: Vicky Pryce, great to have you on the program this evening. Thank you.
A mixed session for European stocks on Wednesday, concerns about Greece offset gains in the technology sector, Arm Holdings (ph), a chip designer
for Apple, rose nearly 2 percent in London after Apple's stellar quarter just knocked it out of the park.
For most of the day, it was looking good here in the U.S. for our markets. It did not end well, though. Let's go straight to Alison Kosik. She joins
me here in New York.
So markets were up initially on the Fed decision at 2:00 pm and then just plummeted at the close.
Why?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Yes, it was a sudden turn, certainly a little unexpected considering you look at the Fed and how
upbeat the Fed is about the U.S. economy.
But I think what you're seeing is investors taking a step back and saying, Fed members, what kind of glasses are you looking at when you look at this
economy because you're seeing investors really focus on earnings this season because they're looking at the stronger dollar, eating into profits.
You're looking at oil prices plunging. That is hurting companies. That service oil companies. So you're seeing --
(CROSSTALK)
KOSIK: -- exactly. You're seeing even U.S. Steel saying that its equipment not being used. And Boeing, which had a pretty good earnings
report, even concerned about those falling oil prices, concerned about the demand for its fuel efficient aircraft.
So you're seeing a lot of these companies being hit in their earnings. That's what the focus is there. As far as the Fed goes, the Fed came out
and said, look, we're going to be patient and when we raise interest rates --
(CROSSTALK)
HARLOW: And you use that keyword again.
KOSIK: -- patience, yes. But the problem is at least at the way investors see it is, is the economy even ready for this at this point? When you see
so much tumult going on, especially not just here in the U.S., but in Europe and in Japan and in China as well.
HARLOW: And then you have the double-edged sword of the stronger dollar, right, and companies like Microsoft, Procter & Gamble, warning that it
could really affect sales long-term.
KOSIK: Exactly. And you're seeing that have that's -- the reason you saw that plunge yesterday. And, again, it's the reason today.
HARLOW: All right. Alison, good to be with you. Thanks so much.
Coming up next, Apple has posted the biggest profit, not just in Apple's history, in corporate history, folks. I'll explain how they pulled it off
and one of Apple's biggest investors, Carl Icahn, will tell us what he wants the company to do next.
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HARLOW: Well, a really big phone, I guess it means really big profits. Apple's earnings report is one for the record books, thanks to its super-
sized iPhone 6. The company sold 74.5 million iPhones in the last quarter alone. That is more than nine every second. Although sales helped Apple
post the biggest profit in corporate history, racking in $18 billion in that three-month period, sales are up nearly 30 percent from the same time
last year. Apple took nearly $75 billion over the three months when you look at revenue as a whole. That is more than Microsoft, IBM and Procter &
Gamble all put together.
Also Apple is holding onto a ton of its cash. It has $178 billion in reserve. That is enough to buy Disney, Visa or Amazon and Netflix
outright. Just think about that.
Samuel Burke takes a look at the man whose vision for Apple has paid off in a very big way, CEO Tim Cook.
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SAMUEL BURKE, CNN CORRESPONDENT (voice-over): Call Tim Cook the $18 billion man. Apple's historic quarterly profit removes any concern
investors had about his vision for the company's future.
UNIDENTIFIED MALE: If there were any fears that Tim Cook couldn't be the next Steve Jobs, I think that was allayed this past quarter.
BURKE (voice-over): Last week, Apple announced that Cook's pay more than doubled last year to over $9 million. Today, it's looking like money well
spent.
Thanks to the staggering popularity of the larger iPhone 6 and 6 Plus, Apple sold an astounding 74.5 million iPhones in the past quarter, compare
that with the entire TV industry, which sold fewer than 60 million sets in that same period.
In Europe, Apple sales soared 20 percent. In the Americas, they rose 23 percent. The big triumph was in Greater China, where sales spiked 70
percent topping $16 billion.
UNIDENTIFIED MALE: When you look at Xiaomi, Huawei, Lenovo, a lot of these Chinese phones are very popular there. But they're also heavily discounted
by the smartphone makers. Apple doesn't discount its phone in China. So the fact that it's selling so well means that there are Chinese buyers that
are going out and are interested in buying an American brand. That's huge.
BURKE (voice-over): It's not all Cook this quarter. Apple's executive in charge of retail, Angela Errant (ph), has been key to Apple's strategy.
She's gone all out to revamp stores in China.
RANA FOROOHAR, ASST. MANAGING EDITOR, "TIME": We're seeing more iPhone sales now in China than in the U.S. I mean, this is the market everybody
wants to be in and I think that she's been very savvy about cracking that market, particularly the Chinese youth market.
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BURKE (voice-over): The drawback of blockbuster iPhone sales? Apple may have a hard time keeping up that growth in future quarters. The big hope
now is for the Apple Watch, out in April. It's Apple's first new product category since Cook became CEO and it could give a new boost to Apple sales
soon.
FOROOHAR: That's going to again play to the female consumer. It's going to play in Asia where blending tech and fashion is so popular. So I think
it's probably going to be a big hit.
BURKE (voice-over): And a new payment system, Apple Pay, could also begin contributing to earnings in a big way.
Tim Cook just might have more spectacular quarters left in him yet -- Samuel Burke, CNN, New York.
(END VIDEOTAPE)
HARLOW: Samuel, thank you for that, the $18 billion man as they're calling Tim Cook right now.
Joining me now to discuss, Shelly Palmer is the managing director of Landmark Ventures' Digital Media Group.
It is extraordinary, not only the best quarter for Apple, the best quarter for any company in history.
What do you make of the numbers?
SHELLY PALMER, MANAGING DIRECTOR, DIGITAL MEDIA GROUP: I assume they're accurate and they are astounding. They are absolutely outrageous.
Look, these guys were counted out a year ago. Everybody who wants to claim credit for thinking Apple was awesome, they were saying Apple needs a
bigger phone; Samsung's going to kick their butts. Everybody was making a lot of comments last year about how Apple was over.
Obviously Apple's not over. But as you and I have discussed previously, a bet on Apple right now is a bet on the iPhone.
HARLOW: Right. So what does it mean if you're sitting back looking at this, do I get into Apple right now? If you're at it long-term, what does
it mean to be an investor in Apple or to get in right now?
PALMER: Right now, you're getting in at when you -- the getting in is great. It can only go one way, right? No, it can go two ways. It really
can go two ways. Today's a euphoric, outstanding day. Nothing can be taken away. I cannot add or detract. The numbers speak for themselves and
they are truly magnificent.
But at the end of the day, you have to sit back and say, if a bet on Apple's a bet for the iPhone, is the Apple Watch really going to get it
done? Is Apple Pay really going to get it done?
HARLOW: And Tim Cook had said this is the year of Apple Pay. But I just wonder, I mean, look, there's competitors like Starbucks and their mobile
numbers are out of the ballpark. Right, you've got competitors out there in pay. I wonder if this is the year of Apple Pay, if it is going to be as
ubiquitous as they're hoping.
And do you put all your eggs in one basket with the phone?
PALMER: I don't put all my eggs in one basket, but I'll tell you what Apple has done so brilliantly. Their strategy, their retail strategy, they
have clearly demonstrated they're looking for the most affluent customers, those who aspire to be the most affluent and they are giving people a
reason to believe they are. And advertisers will love this. And people tend to want to spend more for the product.
(CROSSTALK)
HARLOW: -- and in China, it is paying off, just that luxury component of it. I heard a astonishing statistic that the average person all in
globally pays $600 for their iPhone versus $200 for, say a Microsoft phone. That is extraordinary that they have been able to get the magnitude and
that price point.
PALMER: There's a psychology of marketing. There is an aspirational desire that we all have. Apple is so good at making you feel good about
spending that money. It's almost remarkable. But remember, Xiaomi is in China. They're shipping a lot of phones.
HARLOW: -- a great quarter, too.
PALMER: An amazing quarter --
HARLOW: (INAUDIBLE).
PALMER: And millions of reservations for their phones. They are going to be a force to be reckoned with, especially in China. But today is Apple's
day and there's no other way to describe it, $18 billion is not just a tech quarter, it's the quarter of the -- it's the profit quarter of -- in
history. So there you go.
HARLOW: -- they keep piling up that cash and our next guest is going to talk about what he would like to see them do with that cash.
Thank you so much, Shelly. Good to have you on the program this evening.
Apple shares finish more than 5 percent higher on Wall Street today, despite the market tanking. The stock has gained around 80 percent over
the past three years.
Activist investor Carl Icahn says it has plenty of room to grow from here, nothing but up. Icahn has called on Apple to use its cash to buy back more
of its stock. He is one of the company's biggest investors. He holds shares worth about $6 billion at today's price. In 2013, the stock surged
after Icahn announced on Twitter he was increasing his stake in the company. He also certainly has the ear of Tim Cook.
Mr. Icahn, thank you for joining me.
CARL ICAHN, APPLE INVESTOR: Thank you for joining me.
HARLOW: Good to have you on the program. Let me ask you this. You said earlier today after seeing these numbers, Apple's performance is amazing.
You call it still at these levels one of the best buys in the last couple of decades.
Decades, really?
ICAHN: Yes. Well, I've been around a long time, I guess. And what I do believe is that you see these no-brainers occasionally, you know, every
decade you see a no-brainer, one I consider to be invest all your money if you can. I'm not telling you that you should take great risk if you're an
older person or you need it to live on.
But Apple is in a category almost by itself. I mean, I go back to the old days with Xerox and Polaroid and what's amazing to me is that if you have a
company like that, normally it's appreciated by the investor and you're getting 40-50 times earnings.
And this company, what's amazing is it goes at nine times earnings, I think because Apple's not understood. I think that you have a lot of analysts
that missed the boat on it. And the excuse is, well, it's a hardware company. Now I just heard the last minute or two they had me on the phone
and I was listening to the discussion about Apple. And while I agree that it's an amazing company and it's Apple's day, I don't agree that it's a
two-way street. And this is unusual for me to say because usually I'm pretty conservative.
And I keep everything hedged. On a day like today, we have a huge S&P short against the market because I am getting concerned about the market.
But when it comes to Apple, the reason I don't think it's a two-way street, I think Apple has just too much going for it. And the price is so cheap.
HARLOW: Let me ask --
ICAHN: Yes, go ahead.
HARLOW: I just want to ask you, Mr. Icahn, Carl, the price point you put in that letter to Tim Cook, Apple's chief executive in October, a price
point calling for $203 a share. I'm wondering if you're revising that higher now.
ICAHN: Yes, I am. I think with the results that they have, I do think it's higher. I'm not going to put a price on it at this moment in time.
You know, we don't recommend stocks. We don't tell people what they should buy. But you know, to my Twitter followers every once in a while, if I
have a comment to make and I think this company is cheap, but I don't tell them to buy it.
So I want to make that clear but I do think that Apple will achieve its multiple for a number of reasons, will get a much higher multiple. First
of all, it's almost -- it's almost ridiculous that you have the S&P going at 18 times earnings and Apple, if you subtract the cash, going to nine
times. So that's one thing.
I think -- and maybe I didn't explain it properly but I did speak about the fact that there's sort of a virtual short squeeze going on here, in my
opinion. This is an area I sort of understand as an old arbitrageur.
But it's not a short in the sense of being short. But I do think it's even bigger than that because I think there are a lot of these fund managers at
some -- that just really never understood Apple and they are in competition with the index funds.
And they don't want to be seen and won't want to be seen lacking Apple. And I think they will be a driving force and probably are already and
buying the stock. But that alone is not a reason.
HARLOW: So, Carl, let me ask you this. You're calling -- you've been calling on Apple, even when it had a few billion dollars less than it does
sitting in the piggy bank to do more in terms of buying back shares. Now you've got a cash pile of $178 billion.
Why do you want them to buy back more shares instead of, say, invest more in R&D, increase their dividend?
I mean, look, if you look at (INAUDIBLE) Tim Cook could respond and say we're running the company pretty well.
ICAHN: Yes, but look, I don't mean this to be critical of what you just said, but here's -- they're not mutually exclusive. In other words, you
have so much money here that it's almost an absurdity to say you should not buy back the stock because you should invest more in R&D. They're going to
invest everything they want to invest in R&D. They have $178 billion and making free cash flow of $60 billion. They don't invest close to that in
R&D. It's -- and by the way, they do more R&D than any company on the planet right now.
So when you're making $60 billion, you have $178 billion, I know that was a criticism of what I said at one time. You don't have -- it's not a one or
the other.
(CROSSTALK)
HARLOW: Fair point. Let me ask you about China. In terms of China, just explosive for Apple on the luxury front, the ability to market so
successfully there, the deal with China Mobile. But clearly there are still some concerns about China growth in the long term. And you've got
some strengthening competitors there. You've said before Google really was Apple's only real competitor.
What about Xiaomi for example, putting out better quality phones to try to compete here with Apple?
Are you worried about that at all?
ICAHN: No, because you don't -- Apple has a bit of an oligopoly here. And Apple has the name; it has the brand at this moment in time. But my major
point is, or a very important point is it's what you pay for companies. It's what you go buy a diamond and then you say, well, you know, if I'm
buying it at one of these stores on 57th Street and I'm paying so much for carat, you say, well, are you worried about the diamond market perhaps.
But when you're buying it, the diamond at one-quarter of the price it should be selling at, you should be buying it anyway and saying what the
hell. So if it does go down -- now I'm not talking and I don't (INAUDIBLE) but I'm not telling anybody to go rush in because it may go up tomorrow; it
may go down tomorrow or next week and next month.
But the reason we talk about these no-brainers, I remember once we did at Nabisco and Reynolds Tobacco way back in the '90s, and Nabisco was being
given away at $1 a share and we made a fortune on it. And we weren't worried about will they sell more of their cookies or whatever they were
selling. I forgot which one of their biscuits. And people were saying, oh, they're missing out on one product or something.
That is not the concern. The concern -- the question really is and the point I'm making as a numbers guy there's that it's just selling way too
cheaply for what it is. And the fact is, well, maybe they won't sell some phones in China. And maybe the watch won't be as great as it is.
Now if they are great and they sell more phones, which I think they will, it'll go much higher.
But it's so cheap that the risk/reward is an absurdity and that's what we talk about and the reason I really get on is I keep getting calls on Apple
so I figured I might as well say it on TV, write it, but I'm not going to keep doing this. It's not what I do.
But --
HARLOW: We do -- and we appreciate you saying it on TV. I do wish you would give me your new price target if you'd like to. But as you mull that
over, I do want to ask you this.
You said you're concerned about the markets. What is concerning you most right now?
ICAHN: Well, just that the market is up a great deal. It's come up a great deal. And I really don't understand frankly why companies should
sell at 18 or 17. The S&P sells at 17 times earnings. I'm an old school guy. Believe it or not, I'm conservative. And when I talk like this about
Apple, it's very rare that I talk about anything without saying, well, you got to worry and you got to think about which way it can go.
But look at this market, at 18 times earnings, I've been saying it for a while, you've got to be concerned why is it 17 times earnings when, by the
way, if you just saw revisions on growth next year, a lot of smart analysts that do this for a living are saying they don't see much growth.
So why are you paying 17 times earnings for a company that you are fighting a very strong dollar? When you're fighting a very strong dollar, you're
making a lot of money from sales abroad. That's a very big concern. And you know, while oil sounds good and it's -- and I don't see that oil is
going to increase -- it's sort of inelastic. And it's in many ways.
So I don't think -- but I'll say something else about it. I don't see that the consumers are running out to buy that extra car or extra vacation
because I think a lot of the middle class is and consumers, the middle America are concerned. They're very concerned. And therefore, that's why
I'm a little concerned myself.
HARLOW: And look, you've got companies like Caterpillar, Microsoft, Procter & Gamble, big, big -- IBM, Johnson & Johnson, big blue chips all
warning what that double-edged sword of the high dollar means in terms of forward looking growth.
ICAHN: And now you got the Fed saying today that they're steering the course of that -- they are going to raise rates because they're worried
about you know when inflation comes, it's very hard to turn it back and I don't blame the Fed for doing it, but I think that's sort of a big of a
negative, I would think.
HARLOW: Carl --
ICAHN: -- not here to say short the market. I'm here to say that to me is just anybody's guess almost.
(CROSSTALK)
ICAHN: I'm just here to say that when I see something like this, I mean if you ask me for a no-brainer, and I'll let you go and let you get out of
here. But if you ask about a no-brainer is, I think the high yield market is what the interest rate there, that -- those are going to (INAUDIBLE) at
the spread between that, that and Treasuries and a narrow --
(CROSSTALK)
ICAHN: -- I believe. So that's the -- is sort of a no-brainer because risk-reward ratio.
HARLOW: Carl Icahn, we have to go. Sorry, sir, we appreciate your time --
ICAHN: I'll let you go. Goodbye.
HARLOW: -- this afternoon. Good to be on with you, clearly a boon for Apple there from investor Carl Icahn, thank you.
Coming up next, we've got earnings from Facebook just out after the bell.
How did they do? We'll break down the numbers in just a moment.
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HARLOW: And welcome back to QUEST MEANS BUSINESS.
Facebook's results are out. The social network has beaten expectations, the strong quarter stock, though, not really moving much.
Let's bring in CNNMoney digital correspondent Paul La Monica.
What do you make of the numbers, specifically mobile?
PAUL LA MONICA, CNN CORRESPONDENT: Mobile revenue continues to be just an amazing success story for the company. Remember when they went public,
everyone criticized them for not having a mobile strategy. Now mobile ad revenue 69 percent of overall ad sales. So they clearly understand mobile.
You've got Instagram now. You've got WhatsApp. Obviously this is a mobile first company.
HARLOW: I'm interested in a), what Zuckerberg had to say or the few words that he chose to use in the statement as he doesn't usually disclose a ton,
and also WhatsApp - I mean, they paid some $18 billion for it. Is there any concern or question mark about the strategy there?
LA MONICA: Yes, with regards to WhatsApp I think investors are hoping for a little bit more clarity about how they're going to make money off of it,
what the advertising revenue potential could be there. I mean a lot of people thought that when they bought Instagram for about $1 billion that
they overpaid, and Instagram has turned out to be a wildly-successful -
HARLOW: Right.
LA MONICA: -- buy for them, you know, some estimates saying that, you know, Instagram could be, you know, worth multiple times that now. But
obviously WhatsApp, you know, they have a little bit more of a global presence, so I think that's why people are excited. Then Zuckerberg - his
quote in the earnings release - it's short and succinct. You can fit it nicely in a status update or a tweet. There's a rival of his, you know,
pretty much just saying that they accomplished a lot in 2014 and they're looking to do more this year. So, you know, we have to wait for the
conference call to see, you know, if they give us any more guidance -
HARLOW: Right.
LA MONICA: -- and details about where they're going next.
HARLOW: We get that conference call in about half an hour's time. Paul La Monica, good to be with you. Thank --
LA MONICA: Thank you.
HARLOW: -- you so much. Coming up after a quick break, the U.S. Fed is watching international events when considering when to raise interest rates
more on their decision - after the break.
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HARLOW: Welcome back, I'm Poppy Harlow in New York. In the next half an hour, we will hear form the CEO of the world's newly-crowned busiest
international airport. Also, Israel's former president tells our Richard Quest how companies can fight poverty and terror in the Middle East.
Before that though, this is CNN and on this network the news always comes first.
Jordan says indirect negotiations with ISIS are underway but it still has not received proof that a Jordanian pilot being held captive is indeed
alive. If it does receive that proof, they'll - Jordan is offering to free a female convicted terrorist from prison in exchange for Maaz al-
Kassasbeh's release. The Jordanian foreign minister telling CNN Japanese hostage Kenji Goto would also be part of that deal.
Israel is promising a fierce response after an Hezbollah attack killed two Israeli soldiers today. Missiles hit an Israeli military convoy on the
border with Lebanon. Israel fired back, shelling Hezbollah targets. A U.N. peacekeeper from Spain was killed in those clashes.
The Greek stock market fell more than 9 percent today alone after the new government defied the terms of its bailout. The new Greek Prime Minister
Alexis Tsipras is hoping privatization plans which had been made as part of the country's deal with international creditors. He also said he would
renegotiate the terms of the massive bailout. Apple's earnings report is one for the record books. The company made $18
billion profit in just three months. Profits were propelled by sales of the tens of millions of the new iPhones 6. One of Apple's biggest
investors, Carl Icahn, told me moments ago on the program the company should buy back more of its shares.
(BEGIN VIDEOCLIP)
CARL ICAHN, BUSINESS MAN: You have so much money here that it's almost an absurdity to say you should not buy back the stock but you should invest
more in R&D. They could all invest everything they want to invest in R&D, they have $178 billion and make a free cash flow of $60 billion -
HARLOW: Right.
ICAHN: -- they don't invest most of that in R&D if - and by the way, they do more R&D than any company on the planet.
(END VIDEOCLIP)
HARLOW: Well the U.S. Federal Reserve admitted it is keeping an eye on overseas events as it decides when to raise interest rates here in this
country. Rates were left unchanged at Wednesday's FOMC meeting. The Fed cited, quote, "solid growth in the U.S. economy" and particularly
improvement in the U.S. job market. Still though the central bank said it will remain patient - that's a very key word - and will not rush to boost
interest rates. The Fed also stated that it will take international developments clearly into account. Robert Shapiro is chairman of Sonecon,
a Washington, D.C.-based economic and security consulting firm. He is also former U.S. undersecretary of Commerce for Economic Affairs. Good to be
with you, sir. Appreciate you coming in.
ROBERT SHAPIRO, CHAIRMAN, SONECON: It's a pleasure to be here, Poppy.
HARLOW: Let me ask you this - a few key things the Fed in its statement saying economic activity has been expanding at a solid page - solid pace -
really giving a boost to the job market. Also dropping though the considerable time from its language. And we heard - we heard bond king
Bill Gross saying today he thinks that the Fed will raise rates by 25 basis points this year. Do you agree that we're getting that indication?
SHAPIRO: Yes, I think we are getting that indication. The question is do they do it in November or do they do it in August? There's a timing issue.
Look, the Fed - this is the first Fed in generations that takes its dual mandate seriously - both full employment as well as price stability. The
fact is we're not really at full employment now -
HARLOW: Right.
SHAPIRO: -- and in addition actually the concern with inflation - inflation has been undershooting the Fed's target consistently, it will
probably continue to do so, perhaps to an even larger degree because of the sharp drop in energy prices.
HARLOW: Right.
SHAPIRO: So the Fed is under no pressure to raise rates any time soon.
HARLOW: I'm glad you brought up energy prices, sir, because the Fed said again in this statement, continuing to stress it thinks the decline in
energy prices is temporary.
SHAPIRO: Yes.
HARLOW: I was just out in North Dakota, you know, oil country and a lot of them don't think this decline is temporary. A lot of them are really
worried that we're going to see oil below $50 for a prolonged period of time.
SHAPIRO: Well, the Fed is just looking at history. You know, we've had these sharp drops in '85/'86 and '98/'99 and in 2008, and they tend to last
for one to three years. And I think that's really the timeframe that the Fed is thinking about. They're not thinking about a recovery any sooner
than that. The fact is, it was caused by supply and demand dynamics -
HARLOW: Yes.
SHAPIRO: -- and those dynamics have to realign in order to drive prices up - that is, you would have to see the results of lower investment in the
more costly ways of extracting oil - that is from shale, from tar sands, from deep water exploration. We're just beginning to see the reduction in
those investments. The result of that will take certainly a year and perhaps longer.
HARLOW: Robert Shapiro. I wish we had a lot more time with you, sir. I appreciate the insight. Thank you.
SHAPIRO: Any time, Poppy.
HARLOW: Good to have you on the program. In Athens, the new government has promised to renegotiate Greece's debt conditions and reverse austerity
policies. Remember - Greece has already restructured its debt so the key to the country's economic future lies with its neighbors - more than half
of Greek debt are owned by other Eurozone countries. We're talking about 60 percent - 10 percent to the IMF and 7 percent to central banks. With
Greek stocks getting battered and the S&P placing Greece on credit watch negative, I spoke to Michalos - Constantine Michalos, -- the president of
the Greek Chamber of Commerce and Industry. I asked him if you were sitting at the helm of a Greek business, what are thinking right now?
(BEGIN VIDEOCLIP)
CONSTANTINE MICHALOS, PRESIDENT, GREEK CHAMBER OF COMMERCE AND INDUSTRY: I'm extremely fearful of what might be coming in the next few because the
Greek business community has been in almost complete stagnation throughout this pre-electoral period. And we were hoping that as soon as we have a
new government, that we would be able to make steps forward, renegotiate to a certain extent with our European partners and that these austerity
measures that everyone agrees - even the IMF has agreed - that the mixture of economic policy that has been applied to Greece was incorrect and finds
the correct formula so that we can enhance growth and make steps forward. However, with the situation that has unfolded today, it is very difficult
to make projections -
HARLOW: Yes.
MICHALOS: -- for the days ahead of us.
HARLOW: One thing that Tsipras is also saying is that he's planning to reinstate some of the public sector employees who were laid off - those
that he and his team deem were not justifiably - not justifiably - laid off. And I wonder if you think that this is going to have any sort of
significant impact on private business. Private businesses may have gained as a result of some of those public sector job cuts.
MICHALOS: The major problem at the moment in Greece is the level of unemployment. The private sector is that one that's taken the brunt of
this crisis over the last five years. We have the negative European record at 27 percent unemployment, 1.3 million of my Greek fellow citizens are out
of a job at the moment. And the worst is that the young generation - those who are aged between 18 to 30 -- are six out of 10 out of a job. So, it is
a prime concern that we find the necessary policies that need to be applied so that we begin to reduce this horrific level of unemployment. And I
think that any steps must be directed towards the private sector because in addition to the unemployment levels, we have had 235,000 businesses closing
up, locking up -
HARLOW: Yes.
MICHALOS: -- over the last three and a half years. It's totally unacceptable, austerity must come to an end and we have to actually begin
to think in a manner of growth, not of austerity.
HARLOW: Does Greece manage to stay within the Eurozone, sir?
MICHALOS: Ninety-two percent of Greeks citizens are in favor of the euro and of the Eurozone. We have sacrificed as a nation a great deal to become
members of the European Union, and even more to become members of the Eurozone. And I think that with goodwill on every side that we will remain
within the Eurozone.
(END VIDEOCLIP)
HARLOW: Our thanks to him for coming on the program. Coming up next, London Heathrow no longer the busiest airport for international travel.
We'll tell you which hub has taken the top spot after the next break.
(COMMERCIAL BREAK)
HARLOW: All right, time for today's "Business Traveller" update. If you traveled through the Dubai Airport in the last year, you contributed to
aviation history. Dubai has overtaken London Heathrow as the world's busiest airport for international travel. The Dubai Airport CEO Paul
Griffiths says he expects passenger growth to of course continue this year. He spoke to our emerging markets editor John Defterios.
(BEGIN VIDEOCLIP)
PAUL GRIFFITHS, CEO, DUBAI AIRPORT: Well I think it's a milestone on the journey, we're not to the destination. We've just marked a particularly
grand statements (ph) here by achieving this number one milestone for international passenger traffic. So, you know, on one hand I'm really
grateful to all the team that have helped deliver this, but we're on to the next thing already.
JOHN DEFTERIOS, CNN'S "EMERGING MARKETS" EDITOR: One thing that stood out from the numbers last year is a growth of just over 6 percent vis-a-vis
2013 which was 15 percent. What is the new normal in a sense going forward for passenger growth?
GRIFFITHS: Well I expect we'll get to high single digits if not double digits. In fact for 2015, we think we'll get somewhere close to 79
million, exceeding the 70.4 that we achieved in 2014. And with this - the 80-day runway closure in 2014, we were quite pleasantly surprised when we
were able to close 2014 with that number one spot secure.
DEFTERIOS: So you're at a capacity of 75 million passengers at Dubai International with two runways. When will Dubai World Central - the
airport that most people don't know about with five runways - start carrying the burden would you say?
GRIFFITHS: We have to look at that new site as being the future. Now, that project is $32 billion. As you say, it will be five runways when
fully complete, and by 2050, we expect the capacity of that airport to be 240 million people, which clearly is an incredible number. The initial
design capacity is around 120 million. We're hoping to have that operational by the middle of the 2020s, so that we can start to move some
major portions of the traffic from Dubai International to DWC.
DEFTERIOS: You're a fair bit behind Hartsfield in Atlanta and Beijing International, but do you have them in your sights realistically?
GRIFFITHS: I think we'll get there, and I think we'll probably get there by about 2020. The actual numbers for Hartsfield I think at the moment are
around 93 million. Beijing has a capacity of 104. We'll be hard-pressed on this site, but once DWC gets into its stride, I'm absolutely convinced
by the mid-2020s, Dubai will be the heart of aviation globally, whether for international or domestic air traffic.
DEFTERIOS: I notice that Istanbul's coming aggressively in the market and pricing with Turkish Airways, but also building this very large airport.
Is that your regional competitor to come?
GRIFFITHS: Dubai and actually other airports in the region like Abu Dhabi, Dohar and Istanbul are all looking to become intercontinental hubs. And so
I really think with small moves of market share from the world aviation market, there's plenty of traffic to go 'round.
(END VIDEOCLIP)
HARLOW: Shimon Peres says religious leaders are willing and able to do more when it comes to fighting religious extremism. We will hear directly
from the former Israeli president right after this break.
(COMMERCIAL BREAK)
HARLOW: Israel is holding emergency security meetings today after a Hezbollah attack killed two Israeli soldiers. Anti-tank missiles hit an
Israeli military convoy on Shebaa Farms. It is a disputed area near the Israeli-occupied Golan Heights. Israeli Prime Minister Benjamin Netanyahu
says those responsible will pay the full price. Hezbollah had vowed revenge for a recent Israeli strike on Syria that killed six Hezbollah
fighters and an Iranian general. Israel fired back after today's attack, shelling Hezbollah targets in Southern Lebanon. Former Israeli President
Shimon Peres says religious leaders must do more to combat terrorism. He met with Pope Francis to propose a unified response to religious extremism.
And as he told our Richard Quest in Davos, it is just one piece of a very broad effort.
(BEGIN VIDEOCLIP)
SHIMON PERES, FORMER ISRAELI PRESIDENT: I think the fact that the Muslims in their hearts - in their hearts and in their judgment - know that when
they have to ask them self which is the greatest danger - the State of Israel or the terror that comes from their own land? Terror is destroying
their up will (ph), not Israel. And they must face their own (ph). Particularly when the terrorists are using the using the name of the
(God/good) (ph) and I think we are going to see their - they did a suffrage to stand up and saying cutting the head is not a request of the God/good
(ph).
QUEST: Many leaders of religions have said that, but you don't believe they've gone far enough, do you?
PERES: I believe the terrorists were vocal and the response was silent, almost non-existent. The contenter (ph) said you know, what impresses me
about the terrorists is not their brutality only, but their vocality. They speak as though they're going to save the world and others are keeping
quiet and silent.
QUEST: What makes you think that these youngsters will listen? I mean, these people are in many ways are the epitome of pure evil. So why would
they listen to religious leaders?
PERES: Because nobody answer them until now, you know? Their people -- the terrorists -- have their voice heard without hearing another voice and
this should be also accompanied (ph) with fighting. Poverty with teaching science - it's not just one egg. I think for example the global companies
should participate in fighting the terror - not by taking rifles and going to shoot, but addressing the poverty which is under the pointages (ph) of
terror.
QUEST: Religious leaders need to do more.
PERES: They have to do more, they are ready to do more, they respond to the call of the Pope. It is unbelievable and it will be developed not as
an organization - I'm afraid of administrations, but as a voice, as a commitment, as a message.
QUEST: In Israel, the election that's going to take place in March, it's a turning point. I mean, the people always talk about elections - you've
been through more elections than anybody I would expect in your 90 years -- but this one perhaps is more significant than many others. Would you
agree?
PERES: Yes. QUEST: Tell me why.
PERES: Because there are two camps. One camp is for two state - a two - state solution -- and I do believe without the two-state solution, we cannot have peace and we cannot have a Jewish and democratic state. For us
it's crucial. Now to be democratic is not just publish a declaration that it's the time for democracy. You must have a legal majority. In democracy
you can't - don't -- you will not just declare. Official to claim a democrat and they don't have a majority, so they drawk (ph). So we have to
keep our majority, we cannot keep our majority unless we should have a different division of the land and the - and the people. So for us it's
crucial, it's also for their ops (ph). They too - if they want to find a solution, they will build a place by more extreme sites, and then I think
Abu Mazen, the head of Varzein (ph) is a man that definitely is against the hope (ph) and definitely is for peace. And if they lose, the alternative
will be terrible.
QUEST: I ask you this every time I meet you and you never give me an answer - when are you going to retire?
PERES: Why should I retire? I don't understand. Look, I said it already, I can repeat. If you want to keep alive and be young, you have from time
to time to count all the achievements you have had in your life, but more importantly, to count the dreams you have in your brain. If you have more
dreams than achievements, you are young. If you think there are more achievements than dreams, you are retired.
(BEGIN VIDEOCLIP)
HARLOW: Wow. Words of wisdom there from former Israeli President Shimon Peres with our Richard Quest. Back in a moment to discuss big gains for
Apple and huge losses in Greece. The recap of a wild day on the stock market when we come back.
(COMMERCIAL BREAK)
HARLOW: Apple's record earnings are propelling its shares higher, Apple stock ending the day up nearly 6 percent despite a down market here in the
U.S. The company reported the biggest quarterly profit in corporate history -- $18 billion. Customers bought 74 and 1/2 million iPhones over
that three-month period. That is more than nine iPhones per second. And speaking to me just a short time ago on the program, activist investor Carl
Icahn said the company should buy back more of its stock.
(BEGIN VIDEOCLIP)
CARL ICAHN, BUSINESS MAN: You have so much money here that it's almost an absurdity to say you should not buy back the stock but you should invest
more in R&D. They could all invest everything they want to invest in R&D, they have $178 billion and make a free cash flow of $60 billion -
HARLOW: Right.
ICAHN: -- they don't invest most of that in R&D if - and by the way, they do more R&D than any company on the planet.
(END VIDEOCLIP)
HARLOW: U.S. stocks fell after the Fed's statement this afternoon. The Dow surrendered all gains, losing 195 points on the day. Stocks were
battered in Greece. The Athens market fell 9 percent to its lowest level in two years. Since the election results, the index has fallen 15 percent
in just three sessions. And that is "Quest Means Business." I'm Poppy Harlow in New York. Thanks so much for joining me. We'll see you
tomorrow.
END
