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Quest Means Business
Trump, Kim in Vietnam for Second Summit; Pakistan Threatens Response to Indian Airstrikes; Sentencing Hearing to Begin for Cardinal Pell; U.S. Appeals Court Backs AT&T Acquisition of Time Warner; Huawei Chairman Defends Product Security; Arm CEO Defends Partnership with Huawei; Two Big Stocks Hold Back Dow Gains; Macy's Restructures to Cut 100 Top Jobs; Top Brewers Fall Out After Super Bowl Ad Campaign. Aired 3-4p ET
Aired February 26, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: We are an hour away from the close of business on wall street and look how the market trended, down at
the beginning, but it really has been quite a bit of, not quite a resurgence and a rally, but to come up 41 points from being down. So the
market is looking reasonably cheerful.
And if you look at the way the board breaks down, travel is up 1%, Cat down 2%. Not huge moves in the middle. But the thrust is most definitely
higher and these are the reasons why.
The pound is rising. Theresa May plans a vote on delaying Brexit. We will try to understand exactly what it is she means. Jerome Powell sticks to
the script as he testifies before Congress. We'll look between the lines and Tesla shares take a dip. Elon Musk keeps wrestling with the
regulators.
We're live in the world's financial capital, New York City. It is Tuesday, it's the 26th of February. I'm Richard Quest. I mean business.
Good evening. Nearly two years after Theresa May officially set Britain's E.U. departure in motion, the wheels appear to be coming off her Brexit
plans. The March 29th deadline now looks in serious jeopardy after the Prime Minister bowed to pressure from within her own party to present a
plan to postpone the date.
Now, it all works like this. Firstly, if MPs reject her deal -- they already have once before, remember -- Mrs. May says she will offer them a
choice between a hard Brexit and extending the deadline to leave, the so- called Article 50.
And she warned lawmakers that a lengthy delay would be fraught with problems.
(BEGIN VIDEO CLIP)
THERESA MAY, BRITISH PRIME MINISTER: Let me be clear, I do not want to see Article 50 extended. Our absolute focus should be working to get a deal
and leaving on the 29th of March. An extension beyond the end of June would mean the U.K. taking part in the European Parliament elections. What
kind of a message would that send to the more than 17 million people who voted to leave the E.U. nearly three years ago now?
(END VIDEO CLIP)
QUEST: As the crucial date approaches, Theresa May's list of options have now really shrunk quite dramatically. For the first time, we have a
timetable on when we can start ruling things in and out and the course of Brexit comes down to three key dates.
We are going to hold these. Okay, March the 12th. This is the vote on Theresa May's plan. MPs will give their final verdict. Remember, they
previously rejected it, but she will now claim there have extra things given by Europe, guarantees against the backstop. So March the 12th, the
vote on her plan. If, of course, it's passed then we carry on. If it's defeated, the next day, there's a vote on whether or not to leave the E.U.
with a no-deal. This will be crucial. Do you go with no-deal?
Now, as night follows day, and evening follows afternoon, so if this one loses, you go to here. If this one loses, then you get a second chance
with this question of extending Article 50 and postponing Brexit because as Bianca Nobilo hopefully correct me if I'm wrong, if Bianca, if you don't
have her plan, and if you don't have a no-deal Brexit, then the only thing left is to postpone.
BIANCA NOBILO, CORRESPONDENT, CNN: Yes. However, if that postponement vote doesn't pass for some reason -- now, we know there's a majority in the
House to avoid a no-deal, we don't know what would happen on the issue of an extension. Presumably, it will go through.
But if it didn't, there's a bit of a question mark because as we both know, it's in the statute books that Britain is leaving on the 29th of March.
So if Parliament rejects all three options, presumably, that is the course of action that would go ahead.
QUEST: Right, the deal that she has put forward is unlikely to pass. Do we agree on that?
NOBILO: What's changed with today, the fact that the Prime Minister has now officially stated for the first time that she would countenance an
extension under some circumstances, whether or not that spooks Brexiteers enough to think if we don't back the Prime Minister's deal when it comes to
us in Parliament, we could risk no Brexit at all.
[15:05:06]
NOBILO: Because most people think a delay is tantamount to a denial of Brexit in the long run. So it will depend on that. It's how scared does
this make the Brexiteers, they are losing grip on their project.
QUEST: Right, but do they have enough votes to overturn all the others who didn't vote for it last time, who basically see either from Labour with
Jeremy Corbyn and a people's vote or with an ultimately, no, a suspension or delay I should say of Article 50? Are there the Brexiteer votes?
NOBILO: Well the sands of Brexit are always shifting, and what's so confusing about today is now, it's become an even murkier picture. Because
a week ago, you may have thought yes, potentially she could get the votes because the votes might not just come from the Conservative Party, they
could come from Brexiteers on the Labour benches and also, there's concern about the issue of a second referendum.
So even MPs that voted "remain" are unwilling for that outcome to happen as well. So right now, everything is still shifting and it remains to be
seen.
QUEST: Right, I hate to take you further into the weeds, but down we shall go. Can we agree that there's probably a majority against a no-deal
Brexit?
NOBILO: We can because the House of Commons has actually demonstrated that on every occasion it's been given.
QUEST: Right. So, if we assume then that the middle vote is going to win, then that puts enormous pressure on the first vote and the third.
NOBILO: Yes. There is so much riding on the Attorney General Jeffrey Cox's visit to Brussels this week. This is really the Prime Minister's
final opportunity to secure those legal assurances on the backstop because we know there are two things at the moment, that there's a majority in
Parliament for avoiding no deal and getting those legal assurances on the backstop.
So this is really the crunch moment. What he comes back with will determine whether or not there will be enough support for May's deal to
pass.
QUEST: Very quickly, is it likely then that Europeans will have realized the significance of this moment and this is the moment to give Theresa May
something if they are going to give her anything, briefly?
NOBILO: Hard to say because a lot of MPs today were angry because they thought Theresa May has given away her last negotiating strength by saying
that essentially is going to rule out a no-deal on the 29th of March. So what incentive does the E.U. have to give what she's asking for at this
point, so I would say, probably not.
QUEST: Oh, thank you. All right, Bianca, thank you. Now, currency traders seem to be rejoicing about at the prospect of a delayed Brexit.
The pound jumped to its highest level in months after Theresa May's Common speech earlier today.
The pound, as you see the numbers there $1.3270. The swing in currency seems to have weighed down on U.K. stocks. London's FTSE was the only
major market to finish in the red. You get the idea the way that market goes. It's so related to Brexit and so related to what's happening with
the pound.
And we've just heard here at CNN, the Dutch government wants to take a 12% stake in Air France KLM. The aim to eventually equal the stake held by the
French government. The Dutch have been increasingly concerned about the balance of power within Air France KLM.
And now, the Dutch Finance Minister says Amsterdam wants to increase its influence in the carriers business. Bu it is not clear where the 12% will
come from, since obviously, new shares would be diluted to existing shareholders.
A bumpy session for the Dow. It is trying to push forward, but it is doing not a bad job, it's put on a bit of weight, but not much. We are in the
last hour and the big attraction today for investors is Jerome Powell.
The Fed Chief has been telling U.S. Senators on Capitol Hill that overseas growth is a worry and the U.S. economy is sending conflicting signals.
(BEGIN VIDEO CLIP)
JEROME POWELL, CHAIRMAN, FEDERAL RESERVE: The FOMC determined that the cumulative effects of these developments along with ongoing government
policy uncertainty warranted taking a patient approach with regard to future policy changes.
That gives us the ability to be patient with monetary policy and that's what we're going to do.
With our policy rate in the range of neutral, with muted inflation pressures and with some of the down side risks that we've talked about,
this is a good time to be patient.
(END VIDEO CLIP)
QUEST: They love the word "patient." Every time you turn around, the Fed says, "patience" as if it's a virtue at least for central bankers.
Rana is with us. Rana Foroohar is the Associate Editor at the "Financial Times" and CNN's global economic analyst. Good to see you.
RANA FOROOHAR, ASSOCIATE EDITOR, FINANCIAL TIMES: Lovely to see you.
QUEST: What did he say? I mean, the minutes made it clear the way they are not split, but they are undecided. We had, of course, the Vice Chair
on this program, Richard Clarida saying, again, they can afford to wait.
[15:10:09]
FOROOHAR: Yes. Well, "patient" I mean, you are not going to see rate hikes, I don't believe in the coming year. I think the big question is
will you see rate cuts at some point and that gets to what's going on in the overseas market.
So now, as you said, we're seeing weakness in China. We are seeing weakness in Europe. The Fed Chair talked about the volatility in the
financial markets itself, which actually goes to an interesting point. A lot of people think that if you see a market crash now, it's actually going
to have a big effect on the real economy because people have so much wealth and stocks at the moment.
QUEST: Okay, so this is also tied in though with the balance sheet question.
FOROOHAR: Yes.
QUEST: And without getting us too deep in the weeds, the issue of course is whether or not firstly, there is an implicit monetary and inherent
monetary tightening in letting the balance sheet run down, but also the issue of management of the run down.
FOROOHAR: Yes. Right and management is interesting, because one of the things that the Fed has been trying to do really carefully in the last few
years, Janet Yellen started this, was to communicate where rates are going.
And we thought that we were entering a period in which we were going to see slow but steady hikes, right? A few months ago, we would have been talking
about that. Now we're seeing a halt, patience generally means you are not going to see a rate hike in the next few quarters. Will you see cuts? And
then does that undermine the Fed's credibility and create uncertainty in the markets?
QUEST: The trade war such as it has created uncertainty. Brexit has created an element of uncertainty. The slowdown in China is the largest
uncertainty. But the U.S. economy, let's be fair, is even with a slowdown is still going to grow quite fast.
FOROOHAR: It is kind of miraculous. Not fast, but healthy. We're late stage in the cycle. Cycles generally last ten years. We're into the tenth
year of a recovery. Weakening overseas growth. Most S&P 500 companies get the majority of their growth from overseas.
But there's a couple of things. You still have a little juice with tax cuts. That's going to pewter out this year. You have companies doing an
enormous amount of share buybacks that artificially pushes up the price of the shares. What the political situation is going to be in the U.S. is
going to be interesting. As you see, the Democratic candidates start to funnel through and we see, okay, are we going to be talking about 70%
wealth tax in a mainstream political election? That's a big question.
QUEST: Good to see you.
FOROOHAR: Nice to see you.
QUEST: Thank you very much. Appreciate it. Thank you. As we continue tonight, Elon Musk has started a new spat with regulators. A major Tesla
investor says it's time to take away Musk's phone. And CNN's parent, AT&T defeats another effort by the U.S. government to unravel its purchase of
Time Warner. It's all after the break.
(COMMERCIAL BREAK)
[15:15:00]
QUEST: There's a really simple moral in the world of business, don't pick a fight with a regulator who can remove you as Chief Executive. And that
is an advice that Elon Musk of Tesla simply is not taking.
As with past spats, it all starts with a tweet. Now, this is the tweet that's got the latest row going. "Tesla made zero cars in 2011, but will
make around 500,000 in 2019." So two problems. First, Musk's tweets are supposed to be vetted. Second, he's off roughly by 100,000 vehicles. This
is the correction, "Meant to say annualized production rate at the end of 2019 probably around 500,000, i.e. 10K cars a week. Deliveries for the
year still estimated to be about 400K. So you have a missing 100,000 cars.
That is not enough for the SEC which has asked a judge to hold Musk in contempt. So Musk has now escalated by simply saying, "Something is broken
with SEC oversight."
This is obviously a little unwise if they have power as we saw last year to get rid of him. We want you to join the conversation in this. Your phones
at cnn.com/join. Tonight, we're asking is Elon Musk going too far on Twitter. Is it too far to make a statement which you then have to correct
and which you then promptly insult the regulator? cnn.com/join and you'll see your results quite simply there. It is a yes or no. We don't often do
yes or no's because we think that's a gimme to you.
So show me I am right or wrong. Give me a gimme. Yes or a no. Musk tweets are costing investors. Ross Gerber is one of them. He is head of
Gerber Kawasaki and he says take away Musk's phone. Good to see you, sir. Thank you for being with us. What is so wrong with Elon Musk and his use
of Twitter?
ROSS GERBER, HEAD, GERBER KAWASAKI: Well, nothing really in theory because he has generated a huge audience. He does wonderful marketing for his
companies in general on Twitter. So, you know, he's very effective on Twitter in building the brand and so on and so forth.
The problem is, is that oftentimes he's tweeted sort of, I would say the wrong things or the wrong time and then he used Twitter almost like a bully
pulpit like with this issue with the SEC which I think is just not really smart.
QUEST: All right. So, does it make a difference when he tweets 50oK, 500,000 cars in 2019? I mean, viewers will be watching and are naturally
saying "Oh, people know he's just giving a rough figure." Or are investors like you looking carefully and saying, "Hang on a second, on an EBITDA
basis, an EPS, therefore, it means, this, that or the other, therefore ergo, the result is." Are people looking at what he says that closely?
GERBER: Yes, and I think you're hitting it right on the head. When I saw the tweet because I do monitor Twitter for investment information and when
I saw the tweet from Elon, my numbers are a little less than 400,000 and I was like, "What's he talking about?" But because I know the number so
well, I knew that it was probably just a misstatement which was then retracted or, I would say retweeted differently.
But I think the problem is that the SEC put in place a system that he's supposed to be following to avoid what I think is an innocent mistake, but
still like why are you even messing around, you know?
QUEST: Right, but how can you vet and monitor someone's tweets on the basis that well they may tweet on the toilet.
GERBER: Right. Well I think it's more like -- because I'm a big person on Twitter, too. I've run into my own problems on a few occasions myself. I
try to be aware as possible of my staff, my customers and clients and, you know, do the right thing. I think the issue is, he can tweet about SpaceX
all day long and boring company or where he is eating dinner, but when he starts talking about Tesla, that's the problem.
And he is interacting with a lot of customers and shareholders online and these conversations are not really conversations.
QUEST: Okay, let's just go away from this. Perhaps, I'm rightly or wrongly, I often feel Musk is treated unfairly in the sense that, you know
where I'm going, I mean, that statement alone ...
[15:20:05]
QUEST: ... it made zero cars in 2011 and 400,000 this year. That is a remarkable achievement.
GERBER: It is and that is why I'm a shareholder. That's why these things are really annoying to me because it's distracting from the enormous
success. I mean, just a year ago I was --
QUEST: Whoa, Ross, 50% and 50%. We've never had this before in our vote. Fifty percent says Elon Musk is going too far on Twitter. So if you had to
vote, which way would you have voted?
GERBER: Well, you know, I think he's gone too far on the Tesla side with the SEC. I think he's gone too far. I don't see the point of fighting
with the SEC. You know, I just don't get it. I deal with the SEC with my job and, you know, I work very hard to make them happy and, you know, there
are good people there that I've dealt with personally. And you know, I just don't understand the logic.
QUEST: Good to see you, sir. Come back again, please and help us talk about and understand what's happening in markets and in money. Thank you,
sir.
GERBER: Thank you.
QUEST: Meanwhile, the Chairman of Daimler says the company can stay ahead of rivals like Tesla. This company has just unveiled plans to team up with
BMW where they will launch a new billion dollar ride-sharing service. Samuel Burke spoke to him at Mobile World Congress in Barcelona.
(BEGIN VIDEO CLIP)
DIETER ZETSCHE, CHAIRMAN, DAIMLER: We started there with car sharing more than ten years ago. We were the first. Actually, we started that. And
today, we're having all together 16 million customers which is less significantly less than Uber has for instance, but in Europe we are number
one. So we feel very strong about our future.
SAMUEL BURKE, BUSINESS AND TECHNOLOGY CORRESPONDENT, CNN: Are your relieved that this trade deadline has been extended on China?
ZETSCHE: Of course. Of course. We all hope that ultimately there will be a consensus agreement. This certainly would be good for the global markets
and we're all in favor.
BURKE: When it comes to what may happen between the U.S. and the E.U., some analysts are saying that your company could be though it the tune of 2
billion euros. What are you doing to plan for that?
ZETSCHE: Well, actually, we don't plan for the worse case, but we try to help not letting it happen. So we are in very constructive discussions
with the administration. I think we have made good progress. And of course, we don't know the final outcome but, I'm optimistic that we'll come
to a mutual agreement.
BURKE: Well, you say you're not planning for the worst case scenario, but do you really have that much faith in E.U. negotiators?
ZETSCHE: I, first of all, didn't say that. I am sure something wouldn't happen. I said, we, and I am talking about our company and the other
German car companies, in direct consultations with the U.S. administration and we are, first of all, presenting what we are doing in the United States
today.
We have 26,000 people employed by Daimler in the United States. We are the sixth largest exporter in the car industry. And secondly, we're discussing
what we could do on top, and in the sense of jobs and investment and so far, again, the discussions are constructive and we hoping for a good
outcome.
BURKE: But you must have some type of contingency plan in case that happens, no?
ZETSCHE: Well, of course, we are a flexible company. And of course, we have seen in the past situations where tariffs were changed, and for
instance, China most recently. Then of course, we know how to act.
(END VIDEO CLIP)
QUEST: The Daimler Chairman, Dieter Zetsche there, an outspoken critic of Brexit. He and other business leaders might be relieved to hear Theresa
May will offer MPs a chance to postpone Britain's E.U. exit date. Joining me from London is Tom Newton Dunn, political editor at "The Sun" newspaper.
Tom, Tom, Tom what on earth? I mean, is this the day when the whole Brexit issue took a very sharp turn and it's now possible it won't happen?
TOM NEWTON DUNN, POLITICAL EDITOR, "THE SUN": If only it was even that simple, I'm afraid, Richard. I was sitting normally here thinking, how on
earth do you explain this to an educated American audience like your own in simple terms. We are so deep into the weeds of Brexit. We need to see us
walking out. It's very, very hard. I think today was the day that it became or I should say Theresa May admitted that Brexit wasn't going to
happen, almost certainly wasn't going to happen on March the 29th in the way she had always said it would.
I think that has been obvious to almost everyone for weeks, if not months simply because there is still no agreement between the House of Commons as
in the majority of MPs and the E.U. and while that lasts, there can be no exit successfully.
So really it was only a matter of time before some of the more pro-remain MPs stepped in and said, "Right, we're not going to put up with this any
longer."
[15:25:02]
NEWTON DUNN: "We are not going to take the risk of a no-deal Brexit. We're going demand you extend," and we'll have it the day with Theresa May
basically have a gun put to her head and agreed.
QUEST: Right, so the 12th is her plan. The 13th will be a no-deal vote, which probably will, you know, will get passed that there should be a no-
deal taken off the table. Then you get the, should you extend with Article 50. But if you extend, what are you extending for?
NEWTON DUNN: Well that, I have to say, is in your cursory fashion, excellent question. And that clearly hasn't been decided because -- and I
think probably that is why the government is reluctant to do this.
If you extend, you are having to say we can't agree this, so, therefore, let's go do that to see if we can agree. Now the E.U. made it very, very
clear and in fact, so has the Prime Minister that the last roll of dice in terms of improving their deal is being played out now. Whatever the deal
is will be put to the House of Common on the 12th of March and there can and will be no further changes to it.
So there really is absolutely no point in kicking this whole thing down the road for a couple more months to see if you can polish it just a little bit
harder. What there would be a point in extending Article 50 for is to come up with a new deal. Negotiate something different, so a softer Brexit, a
Customs Union or EA membership something like that.
Now the Prime Minister has said she won't do any of that, so your question still is extremely pregnant and is still hanging there.
QUEST: Of course, none of this would have happened if, for instance, Article 50 didn't preclude a negotiation on the future relationship because
if you could have a future relationship negotiation now, you would have been able to put in place everything that would flow from it.
NEWTON DUNN: That's absolutely right. That's absolutely the British government's narrative all along except the British government agreed very
early on in the process within months of triggering an Article 50 that they would agree to the E.U. sequencing that the divorce agreement would have to
be sorted out first and then the trade deal would be done only after we leave.
That gave the E.U. a massive advantage because we want the trade deal, they want the divorce agreement. It's too late to go back and replay that,
although, funny that you mentioned it. One idea kicking around in Brussels which has I think zero chance at the moment of taking off in London is to
extend Article 50 by about two years, 21 months which was going be the transition period so that you can see what's coming, we agree the trade
deal before we leave so there's no need for the supporting article which is upsetting everybody.
QUEST: In word, tonight, are things clearer or not?
NEWTON DUNN: No, not in the slightest. What things are tonight is longer, more painful and more tedious. You know, Richard, if you were ever kind
enough to have me back on, we'll be having more conversations like this, not less but certainly nothing has changed in terms that there's no -- we
are closer to any resolution at all.
QUEST: Tom, it's not an "if," it's a when. Thank you. Good to see you, sir. Thank you.
NEWTON DUNN: Thank you.
QUEST: CNN's parent company, AT&T has been given the news it's waited for. We are going to tell you about how an Appeals Court has decided that the
judge did not err when he allowed the merger with Time Warner to go ahead. We'll talk about our own company after the break.
(COMMERCIAL BREAK)
[15:30:00]
[15:30:00] RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest, a lot more of QUEST MEANS BUSINESS in a moment. The chief executive
of Arm Holdings tells us what it's like working with Huawei. And it's violent brawl between the world's biggest brewers.
You'll hear from the vice president of MillerCoors on exactly why they're withdrawing or not as the case may be on the advertising branding campaign.
Before that, this is CNN and here, the facts always comes first.
President Trump banding North Korean leader Kim Jong-un, and now both in Vietnam ahead of their second summit meeting. They'll have dinner together
on Wednesday before formal talks begin on Thursday. The U.S. is hoping to get Kim, Chairman Kim to give up his nuclear weapons. But President Trump
says there's no rush.
Tensions are escalating between neighboring countries India and Pakistan after India launched an air strike into Pakistani-controlled territory
early on Tuesday. Though India said their target was a terrorist training camp. Pakistan's armed forces spokesman says no infrastructure was hit,
and he warns Pakistan is preparing its own response.
The sentencing hearing for Cardinal George Pell begins hours from now in Melbourne. The cardinal is the highest ranking member for Catholic Church
to be convicted of child sex abuse. He is almost certain to face serious amount of prison time. His lawyers have appealed against the conviction.
A U.S. appeals court has backed AT&T's acquisition of Time Warner. The parent company of this network and the people who pay my wages. Donald
Trump's Justice Department wanted to overturn a previous ruling that's allowed the merger to go ahead.
Hadas Gold joins me from London. It was your -- it pays your wages as well, Hadas. So, the -- it was a unanimous decision of the Appeals Court.
They basically said that the district judge had been entirely correct. Now, the only issue is whether AT&T is going to go for a full en banc on
Supreme Court?
HADAS GOLD, CNN BUSINESS REPORTER: Yes, Richard, it was another rebuke for the Justice Department not as spicy as that one from Judge Richard Leon
from last Summer when that first ruling came down, but still of rebuke for this case which a lot of anti-trust experts were surprised that the Justice
Department even brought forward in the first place.
So, it wasn't necessarily a surprise that the Appellate Court held this up. But you're right that the journey does not end here for this case. It is
possible that the Justice Department will ask all of the appellate judges who sit in this circuit court to listen to this case, that's called an En
Banc Hearing.
They could also then even take it up to the Supreme Court. They could ask the Supreme Court to take this on. And there's a hunger for this sort of
anti-trust case to be heard at the Supreme Court because a case like this has not been heard in decades, and they want a new ruling on this.
But there's no guarantee the Supreme Court will take it on. And so far, all the judges in this case have ruled in sort of the very traditional
anti-trust way that anti-trust law has been going for the past few years.
QUEST: All right --
GOLD: The question is what the Justice Department will do next. They haven't said yet.
QUEST: And when they do, you'll be back to tell us about it and interpret it. Thank you, Hadas Gold in London.
[15:35:00] The chairman of Huawei is telling his peers there's no reason to fear his company's products. There was a keynote speech at Mobile World
Congress where Guo Ping insisted Huawei does not put back doors in its equipment.
(BEGIN VIDEO CLIP)
GUO PING, CHAIRMAN, HUAWEI: Beijing is nothing without security. Let me say this as clear as possible. Huawei has not and will never put in back
doors and we will never allow anyone to do so in our equipment.
(END VIDEO CLIP)
QUEST: It seems simple enough, but trouble for Huawei could mean more business for competitors like Cisco, that company's CEO tells CNN he wants
to compete on his own merits.
(BEGIN VIDEO CLIP)
CHUCK ROBBINS, CHIEF EXECUTIVE OFFICER, CISCO: Let every customer around the world and every government around the world has to make their own
conclusions around the security and the trust of whatever partners they're bringing in, including us.
What we believe is that we want to win based on our innovation, at the end of the day, that's it. We want to win because we innovate more
effectively, we build better technology, we partner better, we bring security, we bring trust, and we're going to help our customers actually
achieve what it is they're trying to achieve.
I don't want to get in a position where I have to win or I am winning because of geopolitical pressure.
(END VIDEO CLIP)
QUEST: The trouble for Huawei also means troubles for its partners. The CEO of Arm says he will continue to work with the company. Samuel Burke
has been speaking to Arm's Chief Executive. Samuel is with me. Now, it sounds to me as if everything was all about Huawei at Barcelona.
SAMUEL BURKE, CNN BUSINESS & TECHNOLOGY CORRESPONDENT: Incredibly fascinating when you think about the fact. Just a few years ago, I was
here and hardly anybody really wanted to talk to Huawei. It was just another Chinese phone maker. Now, it seems that this is the only company
that people are talking about.
Richard, I'm trying to go to the brightest people that I know in the various industries that I report on and get their opinions about Huawei and
get their information about Huawei. These are the companies that work closely with the Chinese company.
And across the board, Richard, I hear the same thing that these companies have faith in Huawei, they know them, they've worked with them closely.
One of the few criticisms that I've heard really has more to do with the subsidies that they feel Huawei brings with it when it goes to a country,
maybe financing from Chinese banks which helps make this much more palatable for countries to take on.
So when I spoke to the Arm CEO, I asked about a lot of things from Brexit to 5G, both of course, we started with Huawei and his partnership with that
company.
(BEGIN VIDEO CLIP)
SIMON SEGARS, CHIEF EXECUTIVE OFFICER, ARM HOLDINGS: Our relationship there is with the chip design team within Huawei, we provide silicon. And
there's a world-class SIM that bring engineering team. We've had a relationship with them for a long time. We're producing chips for their
handsets and innovating quite strongly.
I mean, obviously, we are, you know, completely subject to any export control from either the U.K. or the U.S., so you know, respecting that is
job number one. You don't want to be on the wrong side of that. But you know, as we see here right now, we're continuing to work with HiSilicon
with all our partners in China and the rest of the world and watching the situation very closely.
BURKE: Do you have security concerns about Huawei any different from any other security concerns that you've had with any other company with your
partner?
SEGARS: Not really. You know, we -- as I said, we're thinking about the future, thinking about innovating, we want to work closely with partners
who -- you know, really want to drive to the next level as quickly as possible. And HiSilicon is very aggressive team in delivering capabilities
for the next generation.
BURKE: What part of Arm is changing the fastest because of 5G?
SEGARS: Oh, we see 5G as a big opportunity. It is kind of the back bone of connectivity of the future. And so, as we've been thinking about 5G
for a long time. We're thinking about all aspects, we're thinking about the devices that will be connected to 5G networks, their handsets, IOT
devices, self-driving cars.
Whole lot of things will be connected over cellular networks that we weren't in the past. And we were so thinking about the infrastructure 5G
itself. From where our R&D has been focused over the years is creating the computing platforms, the processing, and all these different aspects of 5G
are going to meet.
BURKE: So give us some real world examples of that.
SEGARS: Well, let me think about IOT. We're thinking about, you know --
BURKE: Internet of things --
SEGARS: Billions -- internet of things, right, billions of or essentially trillions of connected devices. There could be anything from a light bulb
to a car to some sensor in a field somewhere working out when a crop needs to get water. Traditionally, you know, devices like that were at best
connected over Wi-Fi networks.
With 5G, you've got the capability to connect those over a cellular network. And there's all sorts of benefits that come from the ability to
manage the connectivity more easily, get better security -- 5G is a real enabler for IOT in a way that 4G wasn't.
BURKE: At this late stage in the Brexit game, possibly late stage, how is Arm preparing for Brexit?
[15:40:00] SEGARS: Well, we've been thinking about it for a long time. I mean, for us, given that we don't ship physical goods, the kind of trade
issues are less impactful to us. So really, for us, it's always being about access to talent. Like everyone, we're looking at the next sort of,
it is 22 days and kind of like holding our breath to see exactly what's going to happen.
We're not seeing a slowdown in the number of people from across Europe applying to come and work for Arm. I keep checking in with my team and we
see a very active pipeline, so which is great. That tells you that, you know, there's optimism that, you know, sanity will prevail and also that
we're offering a very attractive proposition to people who want to come and do, you know, really interesting technology jobs in the U.K.
(END VIDEO CLIP)
BURKE: Richard, Arm is one of many British companies that has actually profited off the plunging pound, but it's interesting, Mr. Segar's, like so
many of the CEOs I talked to is dismissive of that profit, saying that what they really care about is being able to bring people from the continent.
And even though, he said that he hasn't seen the numbers go down, what they worry about is bringing in that engineering talent after Brexit if Brexit
ever happens. And keep in mind that --
QUEST: All right --
BURKE: These are high-paying jobs for these people coming to the U.K.
QUEST: Samuel Burke in Barcelona, thank you. Department stores are under pressure. Macy's is taking action, I'll talk to the former strategy leader
at Amazon Logistics, about what is actually taking place in retail and who might actually be the winners besides Amazon.
(COMMERCIAL BREAK)
QUEST: The Dow's gains are falling away, but I want to look at two particular stocks in the Dow that you see here right at the bottom. You've
got Home Depot which is off 1 percent on weaker-than-expected earnings. And Wal-Mart which is also lower.
The only one, I mean, slight small gains for Walgreen's, but even that doesn't match the losses of the other two. And Macy's is cutting more jobs
even though its earnings largely met expectations. It begs the question what's happening in retailing?
Brittain Ladd is the founder of Six-Page Consulting and joins me now. Macy's has come -- has laid off staff, comes up with a strategy, and if I
look back over the last 8, 12 to 18 months, there have been moments when Macy's stock has absolutely rallied 8 percent, 9 percent, 10 percent, and
other days when it's almost collapsed. So what's going on?
[15:45:00] BRITTAIN LADD, FOUNDER, SIX-PAGE CONSULTING: Well, you know, it's really interesting. What's going on with Macy's specifically is that
Wall Street, retail analysts, they're wanting more. So Macy's comes out, they announce a few programs, they have some earnings estimates that are --
that are pretty well.
But they're not really doing a good job of honestly marketing this is who we are, we know who our customers are and this is our strategy. And I
think that's absolutely hurting them.
QUEST: All right, then you've got companies like Dollar General and the dollar stock stores which seem to rally the moment there's a talk down of
slow down in the economy or things like they're getting tough. But it's difficult to know whether the future growth is with those sort of stocks.
LADD: Well, the future growth really is not with those stocks unless, of course, the economy continues to worsen. And so really when it comes to
retail, the thing that I say to people is pick your winners. And there are a few companies out there that absolutely no matter what happens are going
to be stalwarts. You want to look at Wal-Mart and absolutely you want to look at Amazon and then Target.
QUEST: So, with Wal-Mart, the numbers we saw showed a resurgence in traditional sales, but more importantly it was online sales. Is it your
belief that Wal-Mart now has its act together and will be more successful?
LADD: I believe that Mark Lowry and Doug McMillan are absolutely the most powerful team in retail today in terms of the executive level. I think
those two gentlemen absolutely have turned Wal-Mart around. Mark Lowry is someone I highly respect. Doug McMillan, I respect.
And what you have to look at is where are they going? Online absolutely. But they're going after Amazon. They are leveraging their stores, they're
leveraging grocery. I think Wal-Mart is a fabulous company, they're a fabulous story.
QUEST: The market has not shown the same enthusiasm. We're showing a graph now, yes, it sort of bounced back from the November lows. But if you
look at it over the year, I mean, frankly, you know, we've gone from 92.90 in February of last year to 96, 98 now, it's not moved.
LADD: Correct. And I don't expect it to move right away. Here is what people don't really understand about Wal-Mart. Wal-Mart is in a
transformation. They're rolling out same-day delivery to more and more of their stores. Within about two years, you'll have same-day delivery of
groceries in every Wal-Mart store.
Wal-Mart is leveraging their assets, 90 percent of the American public live within 10 miles of a Wal-Mart store. Wal-Mart is leveraging full truck-
load quantities to buy fruits and vegetables, and they will be passing those savings along.
QUEST: Right --
LADD: So don't judge Wal-Mart what they're doing today, let's judge them in three years, and in three years, I think people are going to be really
amazed at what Wal-Mart is able to do. Having said that, let us not forget at any time, Amazon can make another acquisition and if they do, I believe
Target is on the list.
QUEST: It's fascinating, have you -- please, come back more often and help us understand the --
LADD: Absolutely --
QUEST: The changing phase of retail in America, because what happens here often follows on in the rest of the world. Good to see you, sir, thank
you.
LADD: As we continue on tonight on QUEST MEANS BUSINESS, it's the battle of the beers. I'll be dusting off the barman skills, now, I used to pull -
- I used to be able to help pull a pint when I was a student. I've worked in a pub or two. I'll show you what it's like after the break.
[15:50:00] (COMMERCIAL BREAK)
QUEST: Last orders at the bar, time for a last one. Wall mark(ph) of the QUEST MEANS BUSINESS public house where we have in a very limited range
tonight, we have Bud Light, we have Miller Light, and we have Coors Light. And their parent companies of course, are Anheuser-Busch and Miller Molson.
Coors, which along with Heineken and Constellation brands -- excuse me, recently planned on forming a campaign to improve overall beer sales.
And for good reason because beer sales last year dropped to 45 percent of all alcohol sales last year. It was down from 56 percent in 1999. I
promise you, this won't have too bad a head on it and it will certainly be drinkable by half of the camera operators in this studio.
Now, to help battle against the traditional ones in the craft brewers and spirits, now it looks like an alliance is just about dead on arrival
because in this year's Super Bowl, any idea of cooperation to promote beer went out of the window with Bud's adverts.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: We received your corn syrup by mistake.
UNIDENTIFIED MALE: That's not our corn syrup, we received our shipment this morning.
UNIDENTIFIED MALE: You're joking.
UNIDENTIFIED MALE: Try to Coors Light Castle, they also use corn syrup.
(END VIDEO CLIP)
QUEST: Now, MillerCoors is adamant it won't participate alongside its competitors. And joining me is Adam Collins; the Vice President of
Communications of MillerCoors in Chicago. Good to see you, sir, thank you for taking time.
Are you just being miffed, are you just being a bit pissed off what Bud did and what was perhaps a little bit of witty dig at the competition?
ADAM COLLINS, VICE PRESIDENT OF COMMUNICATIONS OF MILLERCOORS: Oh, Richard, thank you for having me on, I really appreciate the opportunity.
You know, I think your point is right. It's a bizarre set of circumstances that we find ourselves in here today. You would like to think that every
brewer would support a campaign designed to lift the beer industry.
But really, that's not the case when you look at Anheuser-Busch. They took the number one beer industry in the country and used it to attack the
number two and three beer brands in the country, using ingredients that are commonly used across the --
QUEST: Right --
COLLINS: Beer industry. So from our point of view, it doesn't make sense to waste time and waste money on a beer --
QUEST: Well --
COLLINS: Industry health campaign when that industry leader is attacking ingredients used across the industry.
QUEST: Well, what they were doing is using the quoted -- but I mean, corn syrup as the example which might or might not be. Let's not get into the
debate over how widely used it is. But the campaign involved is to promote all beers. So surely, the campaign stands or is valid even if one decides
to have a little bit of a dig at the other.
COLLINS: Well, we believe in the concept, but it's awful hard to have that kind of conversation when the industry leader is beating up an ingredient
that is used pretty widely across the industry. In fact, it's actually used in a number of Anheuser-Busch brands themselves.
QUEST: On -- and on this question of the campaign, do you expect it to go ahead? I mean, you've said that you're not going to (INAUDIBLE) for the
time being. Do you expect that some form of detente will exist between Milwaukee and yourselves?
COLLINS: Well, you know, I think that's a question for Anheuser-Busch, really, right? I mean, for us, it's an all or nothing proposition. Like I
said, you can't have this campaign go forward --
QUEST: Right --
COLLINS: When the industry leader is --
QUEST: Right --
COLLINS: Beating up something that's used by the industry. But what I can tell you, other results that we've seen so far. Bud Light sales are down
in the two weeks of data we've seen from Nielsen so far and they're falling faster than Coors Light and Miller Light actually headed in a pretty good
direction.
[15:55:00] We have seen retailers who we know are telling Anheuser-Busch that they don't want this fight in their stores because ultimately not good
for the entire beer category. We've seen farmers --
QUEST: Right --
COLLINS: Who have grown from frustrated, we have seen Anheuser-Busch's struggle to keep their stories straight about their campaign --
QUEST: So, let's just talk finally about why beer has -- you heard the number, it's down 45 percent versus 56 percent a few years ago. What are
the -- what is the best way forward to put beer on the front foot?
COLLINS: I think it's about making beer relevant again. When you think about it, what's so disappointing about Bud Light and Anheuser-Busch's take
in this -- in this ad campaign is that beer is something that brings people together historically, and I think that it is something that continues to
bring people together. And so --
QUEST: Right --
COLLINS: From our view, what we'd like to do is to make our brands and to make beer relevant --
QUEST: Right --
COLLINS: In consumers lives again.
QUEST: And we're very grateful that you came to talk to us tonight. If I have any more sips, I'll be lucky if I can say good-bye to you, thank you
very much, sir. As they --
COLLINS: Awesome, thank you, cheers.
QUEST: As they -- oh, yes, indeed, at all, we rather go have another one, cheers. And as they say in pubs all over Britain, time, gentlemen, please,
profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. So the Brexit --
(SPEAKING IN FOREIGN LANGUAGE)
Is upon us. Three votes in the week after next which will go quite simply. Firstly, Theresa May's final plan unlikely to pass. Secondly, to take no
deal Brexit off the table, probably will pass.
But then you've got the prospect if that passes, then you have to have an idea of article 50 being extended. What does this mean? Well, it's the
closest we've come to seeing both sides accepting some form of version that means no Brexit in the future either by extending because at the end of the
day, if you extend article 50, to what purpose?
What is the end goal? I'm guessing that nobody knows and we've continued with this situation where if you ask what's going to happen, the only
answer one can give is I have absolutely no idea. Not very satisfactory, really. And that is QUEST MEANS BUSINESS for tonight, I am Richard Quest
back in New York.
Whatever you're up to in the hours ahead, I hope it is profitable. The Dow is down, the bell is ringing --
(BELL RINGING)
END
END
