Return to Transcripts main page
QUEST MEANS BUSINESS
Ubisoft`s Profits Down; Greek Financial Problems
Aired February 10, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN ANCHOR: Public anger boils over, thousands on strike in Greece, over deficit cutting measures.
An exit strategy: Ben Bernanke outlines his way and his plan to stimulate the economy.
And after the credit crunch, an oil crunch. Sir Richard Branson tells this program, we are hurtling towards the next crisis.
We have the music, we have the news. I`m Richard Quest. I mean business.
Schools, courts, airports, they were deserted in Greece today as picket lines and the streets of the capital were thronged with demonstrators. Hundreds of thousands of civil servants walked out in protest on a program of swinging (ph) cuts, wages and recruitment frozen and a retirement age that is being raised. It is all part of the program from a government desperate to stop Greece being dragged over a cliff by the weight of its debt and the problems of its economy.
The Greek prime minister is in France. Shaking hands today with the French prime minister, he also met with President Nicolas Sarkozy. He`s been telling French reporters that in Greece they`ll do whatever it takes to slash the country`s budget deficit.
(BEGIN VIDEO CLIP)
GEORGE PAPANDREOU, PRIME MINISTER OF GREECE: The last few days I have taken extra measures, specific measures, to make sure that this program is even further more guaranteed. And when I say guaranteed, I want to repeat what I have said, that we are ready to take any necessary measure in order to make sure that the goal of cutting our deficit by 4 percent in 2010, to the percentage of 8.7 of our GDP, will be-we are ready to take any measures in order to make this sure and guaranteed that we reach this goal.
(END VIDEO CLIP)
QUEST: Now, Greece is expected to dominate tomorrow`s meeting of EU leaders in Brussels. The official line is that there will be no bailout. The rumor mill is churning wildly, the report that some EU states are preparing to intervene providing, of course, they get necessary promises from the Greek authorities.
Back home in Greece, as we mentioned, there have been demonstrations and strikes, and this is just the beginning. Nicole Itano is on the line now, from Athens.
We`ll talk more about what comes next, but tell me how bad things were today?
NICOLE ITANO, CNN INTERNATIONAL CORRESPONDENT: Well, as you said, Richard, the public servants strike today managed to shut the airports, schools, and most public offices. And there were thousands of public workers and their supporters who came out into the streets to protest the austerity plan, specifically their main complaints were proposed cuts in pay, particularly a 10 percent in bonuses, which doesn`t sound like very much, but for many workers that is a huge percentage-or a huge part of their take home pay every month.
They are also angry about proposed increases in the retirement age. But really, the rallying cry, heard again and again, from people on the streets, was that they do not believe that they are the ones who caused the crisis, they think it is the rich, the bankers, who caused the crisis, and it is the rich and the bankers who should pay, not them.
QUEST: Right, but Nicole, they must understand, surely that even if it-whoever caused the crisis, everybody is not in that crisis and they`ve all got to get out of it and that is going to mean cutbacks and the sort of measure the Greek government is taking. Or am I just being naive?
ITANO: Well, I think part of the problem is there is a deep mistrust between ordinary citizens and the state. And a lot of the people that I spoke to don`t actually believe that the crisis is as bad or as serious as the government and the markets, and the international media, seems to be saying. They seem to think that the government does have more money than it is saying, or that that money has been stolen by the elite.
ITANO: What I did hear from people who were saying, well, we will do our part, but only if the government cracks down on wealthy tax evaders and increases taxes on business. And this may be-
QUEST: OK. Now-
ITANO: This maybe naive but it is certainly something you hear again and again from the Greek public.
QUEST: Now, Nicole, we have heard repeatedly from both the finance minister of Greece, and indeed, just tonight, as you will have heard, from the prime minister, that they are going to stick by their plans come what may. We know there are other demonstrations and strikes in the works. Back home in Greece, what is the next crunch moment?
ITANO: Right, I think we are waiting to see. And I think that is very much the attitude right now. Certainly the unions are hoping that anger at the austerity measures will grow, that there will be an increasing number of strikes and an increasing amount of public objections to these austerity measures in the coming weeks. Tomorrow, for example, we are going to see a taxi strike, in protest of fuel hikes.
But not that that will happen, because if you look at polls of the Greek public, about 64 percent of the public does acknowledge that there is a problem and does support the Greek prime ministers proposals. So, it is really unclear right now, whether there will be that escalation that unions are hoping for. I think that is really what the government is waiting to see. But governments in general here have a very bad track record of standing up to unions.
QUEST: Nicole, many thanks indeed. Nicole Itano joining us from Athens. And Nicole will obviously be following these matters for us in the days ahead.
Markets, now, they rose on the speculation that the European Union is about to step in and help Greece. There has been a sense of nervousness that was also through the trading floors. Ben Bernanke had suggested that some of the Fed stimulus might start to be unwound. He was talking about the differential between the discount rate and the Fed funds rate. We`ll have a report on that in a moment.
Even though Mr. Bernanke was in Washington and snowbound, the markets were very much focusing on what was happening in Greece. And these are the sort of numbers. Now, we had a very, very sharp performance, ICAP, the inter dealer broker, rose some 10.5 percent. ICAP was hammered last week over allegations of improper behavior by management and also some warnings on profits and results. That was up 10 percent as that had a good brokerage note.
The London FTSE rose nearly 0.4 of a percent. Insurers were good, as indeed were the banks. On the Xetra DAX you would expect to see the banks doing well. Commerze up 2. Interestingly, Lufthansa was also a gainer in Frankfurt.
And one thing we have seen over the last 24 to 48 hours is several airlines, United in the United States, for one, suggesting that things are getting better. The traffic numbers are starting to come back. Even BA`s results last week weren`t as bad as they thought.
So, Lufthansa, a contributor to the good on the Xetra DAX. And the CAC currant similarly, as you might expect, following the trend, Soc Gen up 4 percent, with BNP Paribas, up 3 percent.
A lot of relief in European markets that the Greece question may be, just maybe, about-to be solved.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Maybe.
Jim Boulden, who follows and has been following this closely for us tonight.
BOULDEN: You know, they have been loving the little words that have been coming out of Germany for the last couple of days. Now we have the Greek prime minister, it is what the market seemed to have wanted. They wanted some idea that there would be help coming to Greece. But everybody is disagreeing on what kind of help there could be. Nobody wants to use the word, the bailout". So they are talking about a guaranteed loan. They are talking about a firewall. They are talking about something to calm the markets and give Greece some time to actually implement this plan.
QUEST: But whatever they do, if they do some sort of bailout, however, we want to call it, ultimately the larger countries will have to provide money or stand by agreements or some form or arrangements.
BOULDEN: I think that is it. Standby, guaranteed loans. You can guarantee something without actually having to put money from taxpayers in Germany into the pockets of taxpayers in Greece. Because that doesn`t seem to be very popular.
QUEST: Don`t we have one problem, though, and that is the very counting of numbers in Greece. The statistics are dodgy or believed to be dodgy.
BOULDEN: Well, that is how we got into this. You know, heard earlier from Nicole, said they are blaming the bankers for all of this. This isn`t about the recession. This is about budget deficits that have been built up for years, while the euro was very strong and they could raise money very cheaply because they were on this very strong euro, on this very strong run. And now that the euro has weakened, and we went through the recession, you know, the emperor`s clothes, it is proven the emperor doesn`t have clothes.
QUEST: Tonight Christine Lagarde says that they will be announcing something in Brussels, tomorrow. It is worth us taking a moment to listen to what the French finance minister did say. She has been a very trenchant (ph) believer that Greece will be sorted out within the European Union, but also of course, that it has to be a monitored plan by other EU members. This is what Christine Lagarde said a short while ago.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, FINANCE MINISTER, FRANCE: I wouldn`t use the word bailout. Bailout has to do with, you know, a very, uh, deteriorated situation. And I don`t think that is the case for Greece. Greece is a member of the Euro Zone. Greece is part of us. We share the same currency. And clearly, it is now, at the moment, under attack. And particularly the CDS of Greece is under attack.
There is clearly speculation at work, which is very unpleasant. But it is not something that we are willing to just let happen, because it would not be good for our joint currency. So, certainly we are all working together and France is actively participating in this working session. Decisions will be made tomorrow at the European Council, and I think everybody has to be patient. And we all have to wait until tomorrow, until we have a proper confirmation of what it has decided.
(END VIDEO CLIP)
BOULDEN: That`s very clear.
BOULDEN: There will be a statement tomorrow. That is what markets want to hear.
QUEST: There will be a statement tomorrow. Don`t worry about it. But I think, importantly there, people keep asking why is Greece so important? It is only 2.5 percent of the EU GDP. But she says it, it is a common currency.
BOULDEN: Yes, they are in the currency. They have got a terrible problem. They know that strikes and all the political pressure that will be on the government to back down, as we heard Nicole say, they tend to back down. And what will Spain and Portugal do after that? What will the U.K. do with their budget deficit, which is actually, in some measurements, worse than Greece`s?
QUEST: Excellent. Jim, tomorrow night, hopefully, we will talk more about this and hopefully you will get to grips the size of budget deficits.
BOULDEN: We`ll try.
QUEST: We will have more from Christine Lagarde, the French finance minister, in that interview a little later in the program. You are up to date, though, with the main business and economic news. You know how the markets have traded, you know where we stand. Now you need the news headlines. And for that, Max Foster is at the CNN News Desk.
QUEST: When we return on QUEST MEANS BUSINESS, we tighten the taps. At least, that is what Ben Bernanke might have been doing as he laid out a blue print for reigning in some of the massive lending to the banks. Of course, it is when the time is right and the time is next.
QUEST: Welcome back.
The world is on the brink of an energy drought, so say a group of business leaders and academics, who have warned that we face an oil crunch within the next five years. If you take a look at the price of oil since 1920, now of course, you adjust it for the value in money. The big peaks here are oil shocks. The last one was as recent as 2008, which oil came close to $150 a barrel.
Apparently, there can be a lot more like that. A British group, and public group has published what it says is we are close to the point where we are pumping as much oil as it is possible to pump out, at least at the moment with current technology. Output will be all downhill from here on in. It is called peak oil.
The task force behind that study is including business chiefs such as Sir Richard Branson. CNN`s Jim Boulden asked Sir Richard why he was involved in peak oil.
SIR RICHARD BRANSON, FOUNDER, VIRGIN GROUP: We agreed to help fund an independent report to see exactly when the demand for oil would exceed supply. And we were worried and we were literally frightened when the report got published, which indicated that five years from now, that exactly that scenario would take place. And once that scenario takes place, fuel prices could literally go through the roof. But unlike the credit crunch, we have a five-year warning.
BOULDEN: We`ve been hearing about peak oil since the `70s, though. So, I mean, there are a number of people who say it is going to happen, a number of people who say it isn`t going to happen. What is different about this report?
BRANSON: Well, reports can be wrong. But you know, this has been a very studious report, I think, with very good experts on it. And most reserves we know about. I mean the one reserve that is kept secret is the Saudi Arabia reserve. And I think the people who have done the peak oil report have had to do a little detective work there.
But, anyway, the indications are that with China growing at-you know, with 10 percent growth, with India growing at 8 percent growth, that we are going to have a situation where demand exceeds supply.
BOULDEN: Are you calling for more drilling to get more supply or are calling for less demand? In other words for more energy efficiency, etc cetera?
BRANSON: We need to look at nuclear. We need to look at gas. We need to move all our cars to, you know, battery-operated cars, or clean energy cars of any kind. You know, we need to insulate all our buildings whether it is houses or office blocks.
BOULDEN: But as an airline man you are worried about your costs skyrocketing in five years?
BRANSON: It is not transportation that is going to be affected oil skyrocketing. It is going to be clothing, it is going to be food, it is going to carpets, it is going, you know, every single, you know, aspect of our lives will be affected by high oil prices.
And-but there is something we can do about it. And-
BOULDEN: What is that you want done, then? Specifically?
BRANSON: What I`d like to do immediately is to see governments setting up a task force with industry. And that task force should be tasked to get on top of the problem. The world is now too reliant on oil. And unless we actually start conserving oil we are going to find the situation where demand exceeds supply and the moment demand exceeds supply prices go through the roof. Because if there is a country that is just not getting its supply, you know, they`ll start bidding the price up. And when that happens we enter into another ghastly recession, which could make 1929-not quite look like a piece of cake, but-but it could be worse than 1929.
QUEST: Sir Richard Branson.
Now, Ben Bernanke has reassured U.S. Congress that he sees interest rates staying low for quite a while. By merely talking about a time when the Fed will start winding up its tightening policy, Bernanke managed to send a shiver through Wall Street. The Dow Jones industrials took-after having an interesting couple of sessions. Stephanie Elam has been looking at the Fed chairman`s comments and Stephanie joins me now.
It was a technical comment, really, wasn`t it? He talked about how he was going to -they were going to reintroduce the differential between the Fed funds overnight rate and the discount rate, and all, because that is back to normality. But the markets didn`t really like it?
STEPHANIE ELAM, CNN FINANCIAL CORRESPONDENT: I think there are a couple of things that-well, I think there are a couple of things that are playing into right now, Richard. And I think the main thing here is you`ve got this massive snow storm, that is affecting the markets. But you also have to take into account that people were waiting to see exactly what he would say here.
So, we do know that if you take a look at the Fed funds rate it has been near zero since December of 2008. And the main concern was inflation. The Fed has pumped billions of dollars into the U.S. financial system, essentially printing money. So what happens when there is too much money in the system? It is an analogy here, but think of it this way. It is as if they took a garden hose, watered the lawn until puddle started to form and now they are taking a sponge and trying to soak up some of that excess water.
So, earlier today Chairman Bernanke outlined a couple of different sponges that the central bank will be using. For one, it is going to raise the interest rate that it pays to member banks for lending its excess reserves back to the Fed. As a result, that interest rate, which is currently at a quarter of a percent, could overtake the Fed funds rate as the number targeted for policy decisions.
The Fed funds rate is the one that gets all the attention every six weeks, right? That is the key lending rate that has gone unchanged since December of `08. And the Fed also plans to start offering what is called reverse purchasing agreements. And these are deals to take all the mortgages, Treasury bonds, and debt that it bought up to help ease the crisis and sell them to a third party with the understanding that the original owner will buy them back. Of course, none of this is going to happen immediately and Bernanke said the Fed will likely start rolling out these projects this spring and will start with the Fed raising that interest rate it pays to banks.
Wall Street and Congress have, obviously, been pressuring the chairman and saying, hey, lay out a plan. Let us know what your strategy is going to be. And to that point, in fact, the chairman was scheduled to testify and deliver the statement himself at Congress today, but because of the massive snow storm that you were just talking about, it was postponed, but they still released his statement anyway, Richard.
QUEST: You know, I started to get worried when we start talking, you and I, about reverse repo agreements. But then I never figured we would be talking about quantity of easing in such depth.
And one other thing, I mean, all these measure being taken, they are a strategy and they are the exit strategy towards more normal times. But they are always followed by the words, "when the time is right." Is the time right?
ELAM: Right. And I think that is what people are concerned and I think a lot of people are taking lessons from what happened in `29. In 1929, they say some of the issues were had a recession shortly thereafter that, because some of this stimulus was removed too quickly. So this becomes that sort of jump rope game of when is the right time to jump in. Some people saying we are getting close, other people are saying you still have a really stiff economy right now. It is not really smoothly as we would like it to be so some people are saying it would be too soon to do it right now. But again, the chairman is saying he is not planning on doing it right now as it is anyway.
QUEST: Have you built a snowman yet, with all that snow in New York?
ELAM: No, I have not. Although, I think I looked like a snowman on my in today. I looked very crazy on my way in.
QUEST: Tomorrow we want pictures, please, Stephanie. Pictures of you in the snow.
QUEST: Many thanks.
ELAM: Funny, I should have said the exact same thing. I don`t know. You guys will put them on the air. I`m not going to do that.
QUEST: Yes, yes, that`s right. All right. Many thanks, Stephanie Elam, in New York.
One of the reasons why this next number is not as important as it might be is because of the awful snow in New York at the moment. Down just 10 points, the Dow Jones, virtually unchanged. That is the way the session has looked for most of the day. It is partly Bernanke, it is partly Greece. My hunch and gut feeling tells me it is a lot to do with the fact that people stayed at home from Wall Street.
In a moment, going green in more ways than one. Renewable energy giant posts strong profits. The shares take a nosedive.
QUEST: Here`s the solution, this could get your hopes up. The Danish company, Vestas, it is the world`s largest maker of wind turbines for power generation. It says profits rose to a record in 2009, up 13 percent, nearly $800 million. If only that were all the news. It also cut its sales forecast for 2010. It is talking of winning lots of new orders in the coming year. The expectation of growth of wind power has been reined in over the past couple of years.
The chief executive of Vestas, Ditlev Engel, joins me now.
Thank you, first of all. An interesting set of results, isn`t it?
DITLEV ENGEL, PRESIDENT & CEO, VESTAS: Thank you.
QUEST: Because on the one hand, the immediate performance is OK, good.
QUEST: The outlook less good.
ENGEL: Yes. I think we have to remember that is in 2010 we see the impact on our industry from the financial crisis. And profits were up 28 percent compared to last year, a record year in earnings and so on. And energy is about the long-term not just about 2010, so.
QUEST: But the cap-ex that has to go to buy your expensive power turbines?
QUEST: Do you get any-are you confident that companies are looking at putting plans in place?
ENGEL: Let`s remember that the largest to install capacity of electricity in 2009 in Europe came from wind. And with the 100 billion pounds of projects that are being put up in the U.K. for offshore installation is clearly showing that it is being taken in now as an energy source, on par with oil and gas.
QUEST: Now, you would say that, they would say.
ENGEL: It is true.
QUEST: But there is a huge difference between the amount of production from oil and gas and wind turbines in the sustainable energies.
ENGEL: Yes, but I saw your small feature, a little earlier, on Richard Branson.
ENGEL: And I think the key issue is not what you pay for energy today and I think that also was his point. What the key issue is what you are going to pay for energy tomorrow. And wind is for free. And it is abundant and it means all about energy security.
QUEST: But it only becomes relevant when peak oil hits that peak, that it becomes profitable for the expensive infrastructure of wind.
ENGEL: Yes. That is true. But on the other hand we also have to remember that this is not a question of whether do not make an energy transformation? Yes, we have to make an energy transformation because the sources that we know of are going to run out. So it is not a question of, should we do it, just because of the money. It is a question, we have to do it. And if you look at all the forecasts, I fully concur with what Richard Branson said, the price of oil is going to go up significantly. So, it is just looking into the forecast for international energy, we know this is going to happen.
QUEST: As you look at the world at the moment, and where you are trading at the moment, which parts of the world are you most concerned about?
ENGEL: I would say we would have, in 2009, I think the U.S. has significantly impacted by the financial crisis, but the good news is we are actually starting to see the U.S. picking significantly up again when it comes to installation of our type of energy. And actually, today we just announced a big large order in the U.S., which was the first time for a while. So, we were concerned about the U.S. in the past, but not so much anymore.
QUEST: And Europe remains? I mean, we see what is happening, I know it is long-term and I am aware that in talking to you, we constantly battle between, me wanting to know what your numbers are and you saying to me it is a 20-year horizon.
But you have Greece in crisis, Spain with debt. What--
ENGEL: Yes, yes. Everybody consumes (ph) energy and they will consume as much more. We have a target for Vestas, which is called triple 15, which means we want to have revenue of 15 billion euros, with and EBITDA of 15 (UNINTELLIGIBLE) by 2015, which is only 5 years away. So it is not just about what is happening in this month, or the coming months, it is about what is happening in the coming years. And that is what we work towards.
QUEST: All right. Tell you what, your 15 in `15.
ENGEL: See you then.
QUEST: If you make it in `15?
QUEST: Do I get a 15 bottles of champagne?
ENGEL: You do.
QUEST: That`s the sort of deal. Thank you, Ditlev. Many thanks indeed.
Now, right. I promise you outright, I`ll share them out with you. How about that? I can`t drink them (UNINTELLIGIBLE).
When we come back, in a moment, Greece`s massive debt program, on Thursday is the day when EU leaders will thrash it out. We`ll get the view from Paris, more of Christine Lagarde, the French finance minister. This is CNN.
QUEST: Good evening.
I`m Richard Quest, QUEST MEANS BUSINESS.
This is CNN.
We`re thinking that these hard times are moving back and Greece, of course, is high on the agenda. The Euro Zone ministers are to meet in Brussels over the next 24 hours. There is one major issue -- how, of course, to deal with the increasing contagion that comes from Greece to Spain to Portugal and beyond.
The ministers have already declared that there will be an agreement and an announcement is expected. Whether they call it a bailout is the big issue.
And Jim Bittermann, our correspondent, is now live from Paris -- Jim.
JIM BITTERMANN, CNN CORRESPONDENT: Richard, in fact, the French foreign minister -- rather, financial minister, Christine Lagarde, said she wouldn`t call it a bailout because that implies that something dire is going to happen and that there`s nothing dire going to happen, that they will figure a way through this. She has been on the phone. One of the reasons why I was late getting back with the story, Richard, was that she was on the phone right up to the time that we did the interview with her fellow financial ministers across the Euro Zone trying to figure out what they want to do.
She says that there`s clearly speculation going on against the euro and she said she`s not very happy about that.
She also said that the euro is extremely important to Europe and that the European members are pulling together like never before to defend it, important, she said, for political reasons, as well as financial ones.
Here`s the way she put it.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, FRENCH FOREIGN MINISTER: Our common good -- a currency is a common good. It`s a public good. And it`s one that we have in common. Sixteen member states are part of the -- part of the -- of this -- this common currency. It`s -- it`s critical. It`s very important. It has protected us. It has made us stronger. It has certainly reinforced the level of trade that was conducted amongst ourselves and it`s a key component.
(END VIDEO CLIP)
BITTERMANN: She wasn`t going to give anything away, Richard, in terms of what is going to happen tomorrow morning, telegraphing any move that may be made by the leaders at the summit. So we`ll have to just wait until then to see exactly what they`ve worked out. But clearly they`ve got something in mind for tomorrow morning -- Richard.
QUEST: You see, something in mind is really -- the markets are now feeling marginally more soothed. But the issue remains, Jim, whether or not the -- the failure of Greece to live up to promises will be the key sticking point in the meeting tomorrow.
BITTERMANN: Well, that said, I mean the Greeks have made a lot of promises about how they`re going to restrain spending, which is the big issue there, and also, perhaps, collect more taxes. But the -- the big thing is to restrain the -- the spending. That`s an issue not only for Greece, but all over the Euro Zone and including France.
Just yesterday, the Cour des Comptes, who`s sort of the financial watchdog here in France, came up with the idea that France, if it keeps going down the path it`s on, could be in a very serious situation in about three years down the line -- in fact, the same situation as Greece, with a 100 -- a 100 percent debt compared to GDP.
BITTERMANN: So -- so, in fact, I mean there`s a lot of the countries are headed in the same direction and I think that`s -- that`s the reason that everyone is so concerned in making sure that something happens here, that they don`t have a house of cards developing, starting with Greece.
QUEST: Now, since we`ve got the I-List (ph) in France this week, in Paris, Jim, it`s worth us just taking an extra question or two to you to delve into the Greek -- to the French psyche about this.
If -- if French money or French guarantees are required to prop up Greece, or, indeed, any other euro country, what would the French people think about it?
Is this le grand plan or un big disaster?
BITTERMANN: Well, I don`t have a story on that subject, Richard, but I`ve got to tell you, I don`t think they`d be very happy about it. There`s a lot of things that make them unhappy already about the way that the financial situation -- the situation in the country is developing. And I have a feeling that if it came to lending money to Greece to -- if not bail them out, at least come to their assistance, I`m not so sure the French taxpayer would be very positive of that.
QUEST: Many thanks, indeed.
Jim Bittermann, who`s got his finger on the pulse, whatever he may claim.
All right, many thanks, indeed, Jim.
Now, it hasn`t been all fun and games for the French video game publisher Ubisoft. When we come back after the break, the company`s chief executive tells me why the company hasn`t been racking up a better score. But a new game is on the horizon.
QUEST: Now, welcome back.
This could be a worldwide first -- a news story that says Avatar was actually a flop. Well, of course the movie -- ha-ha-ha. The movie made more than $2 billion at the box office. I`m talking about the video game based on the movie.
A French games company is blaming poor Avatar sales for a dip in its profits. The company is called Ubisoft. It saw a slip in its sales of 2.7 percent, to $680 million for the first nine months of the year. Sales are down 22 percent.
Now, Ubisoft expects sales to decline further in Q4 and (INAUDIBLE) a full operating loss of around $70 million. The company has undergone something of a restructuring. It focuses on those big franchise blockbuster movies that they can then turn into game, for example, Avatar, which it says sales were below expectations.
The game version helped drag it down. Ubisoft won the deal for the movie two years ago, after a yearlong competition. But somehow, of course, Avatar, as such, wasn`t enough to bring back the numbers for Ubisoft.
Is Ubisoft versus Avatar -- Avatar?
I spoke to the exclusive, Yves Guillemot, from Paris a little earlier and asked him how he would define -- bearing in mind what he`s just seen, how does he define the changes taking place in gaming.
YVES GUILLEMOT, CEO, UBISOFT: The market changed a lot thanks to the crisis. We went from a market that was growing at 25 percent to a market that went down 10 percent. So that`s had an effect in all the industries - - in all the companies that -- that were in the industry. But we think this year, the market will be stable and it will grow afterward.
QUEST: Is the market -- did it take a tumble simply because there wasn`t the product or there wasn`t the cash -- consumers just didn`t have the cash to pay for it?
Because a lot of people say that a lot of the games that were coming out simply weren`t very exciting.
GUILLEMOT: In fact, you had a -- first -- the first aspect came from the cash. We made a survey at the end of the -- of last year. And when we -- when we asked people, they said that before they wanted to buy five games before the end of the year and then they only wanted to buy three. So they actually reduced the amount of money they were spending on games last year.
QUEST: If we take a look at the what you at Ubisoft have done, you have very much shifted the strategic direction of the company at the moment -- the sort of games, the sort of projects that you`re producing, the type of franchises.
How would you describe that change?
GUILLEMOT: In fact, it`s a change that already happened 12 months ago. It`s -- it`s linked to the fact that most of the games now are -- the level of quality of the games has increased. And so we need more -- more creative people to create better games.
So we had to concentrate more of our energy to those games, to come with less games but actually better games.
QUEST: But within that idea of better games, does that mean more challenging games?
Does it mean technologically more advanced, more bang for the buck?
Or does it actually mean a game that is more difficult?
GUILLEMOT: Oh, no. It`s not a game that is more difficult. It`s a game that is offering more challenges to our consumers, more diversity and more dense -- I would say, more challenge and -- and also the ability to either play offline or play online and play with your friends. And that the game can be long enough so that you can play for a long time.
(END VIDEO TAPE)
QUEST: Now, that gentleman there is the chief executive -- the one you`ve just been hearing from is the chief executive of Ubisoft, of course, a software games company.
Well, this week we`re hearing from not just from chief executives and politicians like you`ve heard already, but the people around the globe who are taking part in the One Young World symposium. And, of course, these are the people who could turn out to be the world leaders and the chief executives of the future.
For instance, Malaysia`s delegate is Michael Teoh.
Here`s a taste of his vision.
(BEGIN VIDEO CLIP)
MICHAEL TEOH, ONE YOUNG WORLD PARTICIPANT: I believe being an empowered global citizen means you have access to information, to knowledge and to networks of people among countries around the world and you understand that with a little influence, the little power that you have, you can make a difference in the world.
(END VIDEO CLIP)
QUEST: Oh. I thought I was passionate about some things.
You are passionate about a little bit of power that you can make a difference.
TEOH: Yes, I believe all youth leaders can make a difference in the world today, actually.
QUEST: Oh, come on.
TEOH: Yes. Yes. With the power of social media, basically, a lot of things can be done by the youth.
QUEST: Hang on. You`ve just said the word, social media.
TEOH: Social media?
QUEST: Social media.
What -- what is it about social media that people are using and can use to make a difference?
TEOH: Basically, social media, from where I`m coming from, championing causes around the world, promoting youth movements, people can use social media to rally support. Platforms like Facebook, Twitter and YouTube, as you can see -- you saw the video just now, where you could actually push a video out on what we call free media now and let it spread virally and crowd source for support -- get the numbers in to really push out the certain cause or to promote something that you truly champion.
QUEST: You`re passionate about it.
TEOH: Yes, I`m passionate about it.
QUEST: But there`s so many causes...
QUEST: -- and there are so many people...
TEOH: All right.
QUEST: -- shoving so many things...
QUEST: How do you raise your head above the parapet and get noticed?
TEOH: Well, that`s interesting, because I believe it depends on the leader, because what happens is, in social media, what we believe is following. So when a leader has charisma, when a leader believes in whatever he champions and he gets the message across, either through Facebook messages, groups, YouTube videos, he gains a following.
And through that following, he builds traction and through traction, actions happen.
QUEST: Right. Now you did this, didn`t you, in Malaysia?
TEOH: I did this.
QUEST: What did you do?
TEOH: Well, basically what happened, it was a gift from Malaysian youth for One Young World where we have connected with 500 young leaders...
TEOH: -- who has a collective membership of 36,000 youths in one week. We got their voices, collected their opinions and ideas for change from Malaysia for our world, presented it to a booklet that we have shared it with Global Council. It`s like Sir Bob Geldof, Kofi Annan, Archbishop Desmond Tutu. And it really happened.
QUEST: What change do you most want to see?
TEOH: That`s an interesting question. The change I would personally like to see is youths being acknowledged by government, authorities, businesses and the traditional media. Because I believe in the world that we live in today...
QUEST: Hang on. Hang on.
QUEST: Acknowledged for what?
Acknowledged for what?
QUEST: What do you want to be acknowledged for?
TEOH: Acknowledged for our voices, because, you see, what happened is that the world that we will be living in tomorrow is the world that we youth leaders will grow into. And today, instead of government, businesses and agencies listening only to themselves, I believe it`s good to listen to the grassroots that is spearheaded by the youths so...
QUEST: You don`t pay taxes.
TEOH: OK. Yes.
QUEST: You don`t have a...
TEOH: Well, well...
QUEST: -- in many cases, have a vote.
TEOH: Well, we do pay taxes sometimes.
TEOH: Yes. OK. No, but...
TEOH: But you see, that`s -- that`s the thing right now, because young people, collectively, are not really comfortable or are not happy with whatever is going on in the world and they`re coming out with Facebook groups, YouTube and Twitter to crowd source this following.
And I`ll just share with you, in Malaysia alone, an average Facebook group would have around 1,000 to 5,000 members championed by a person or a committee. That would prove that they are somewhat influential, in a way.
If you blast out a message, it would get to thousands of people in that way, yes.
QUEST: Do you worry that real messages...
QUEST: -- get lost in the dross of people sending pies and all this nonsense on Facebook and -- and all the games and all -- and all the other things?
I mean do you use social media for those, as well?
TEOH: Yes, we do. But here`s the thing that person may experience that young leaders or -- who are Facebook -- are social media users are not stupid. They could actually see and they can differentiate what is spam. And they can actually notice...
TEOH: -- when you`re not connecting with them.
QUEST: When are you going back to Malaysia?
TEOH: I`m going back on the 20th of February.
QUEST: Excellent. Well, no, not excellent. I mean excellent just...
TEOH: It`s a pleasure. It`s a pleasure to be here.
QUEST: In the sense that you can join us via broadband, hopefully, on this program regularly...
QUEST: And you claim that your voice isn`t being heard.
QUEST: Your voice is going to be heard on this program.
TEOH: Young leaders -- young leaders...
QUEST: All right.
TEOH: -- (INAUDIBLE) around the world.
QUEST: Listen, who`s right?
Is Michael right or am I right?
Should their voices be heard?
QUEST: They don`t pay taxes.
All right, so they`ve got some consumer spending.
TEOH: No, but -- well, no, actually, because I feel that we are walking into a world where we youth leaders would have a responsible...
QUEST: All right.
TEOH: We`re responsible.
QUEST: Who`s right?
Here`s our -- here`s my Facebook page. It is at questmeansbusiness. And, of course, you can tell us who you think won that particular battle.
And, also, our Twitter address @richardquest. That`s where you can join us on that one.
QUEST MEANS BUSINESS.
Come on, get -- I need more -- I need more members than Michael`s got on his pages.
All right, Jenny Harrison is at the World Weather Center -- Jenny, I`m not even going to ask you who you`re supporting on this, because you`re just going to (INAUDIBLE)...
JENNY HARRISON, CNN METEOROLOGIST: See, I wasn`t. I was going to say I`m not going to take sides on this particular issue. No, no. I am just going to listen to both sides of the argument and make my mind up a little bit later.
QUEST: Right. Right.
How bad -- how bad is this snow in the Northeast of the United States?
I`m hearing a lot of fuss.
Is it real?
HARRISON: It is real, actually, Richard. Yes, I can tell you, D.C. has had an awful lot so far. In fact, let me have a look and show you a picture of the satellite, the radar, because this shows you all the service (INAUDIBLE). Now so far, in the last two hours, D.C. has already had 23 centimeters of snow. Baltimore has actually had 30 centimeters. In some areas there`s been 48 centimeters. They`re getting over half a meter of snow. And, of course, it is still coming. This whole storm system is not really going to be done until Thursday morning, probably.
Now, there are warnings, of course, in place -- very widespread. You can see what a large reaching storm this is. Now the red areas, of course, these are all the blizzard warnings.
Now, the area they`re seeing the really, really strong winds, and, in fact, the blizzard warnings are extending all the way from East and West Virginia along the Delaware coast, you can see right up toward Long Island.
Meanwhile, the winter storm warnings obviously extending further than that, because the blizzard warnings also encompass the winds. And, in fact, if you`re not sure exactly what a blizzard is, well, it is very clearly defined -- three hours or more of wind at speeds greater than 56 kilometers an hour. Those are sustained winds, of course, with the wind blowing the snow. It will reduce the visibility. And so, again, it has to reduce it to less than 400 meters. So that gives you an idea of what we`re talking about.
Now, this is why we`re seeing this storm system. So there`s actually two which have been combined. The moisture is being pumped in off the ocean. The very, very cold air, of course, is wrapped around that and we are seeing these huge amounts of snow.
Now, it`s almost like a repeat of last weekend, except this storm system is going to head further up toward the Northeast, so heading on toward New York, which actually managed to escape last weekend. And from last weekend, look at the amounts of snow that have actually been recorded -- Baltimore, Washington and also Wilmington.
So you can see here that already some of those records which were set back in `96 have actually been broken.
So why is it all happening?
Well, El Nino. That`s going on right now. And we`ve got these very warm waters and it`s pumping in all this moisture from the southwest. We`ve got all these systems of low pressure coming in. That`s one of the reasons we`ve seen the mudslides in California. And so basically, we`ve got all this moisture, all these low pressure systems.
The jet stream, as well. There`s almost like another jet stream across the South. And so the two combined is why we have been seeing these -- storm system after storm system in the last few weeks.
Now, this is how much snow we can expect on top of those totals I said to you a while ago. So Philadelphia already had, what, 22 centimeters. We could see another 18 centimeters. New York has already had 13. We could be seeing another 15 centimeters of snow.
So you get the general idea. But the good news is, is that really, today is going to be the last and the worst day. And thereafter, it really is a very clear picture. So here we go through the next 24 hours and then, really, as we head off into Thursday and Friday, it should be a whole lot better.
And, Richard, when it comes to the airports, many of the flights are canceled, many of the terminals are still open and operating. But there`s just no planes.
QUEST: Well, that makes a great improvement, doesn`t it?
There we are. It wouldn`t look -- we wouldn`t want to let the planes get in the way of running a good airport.
HARRISON: No. That`s quite right. Yes. I agree.
QUEST: All right. See you tomorrow.
QUEST: Jenny Harrison at the World Weather Center.
She`ll have more snow, no doubt, by then.
I`ll be back in just a moment.
QUEST MEANS BUSINESS.
QUEST: We`re thinking of bringing in a new daily feature on QUEST MEANS BUSINESS, the roll call of the day`s car recalls. Today, it would start Toyota -- Honda. A Freudian slip. Honda -- it is recalling 437,000 cars, most of them in the U.S. and Canada. Honda says vehicles made in the 2001 and 2002 model years, including the Accord, the Civic and Odyssey, have a potentially fatal air bag problem. The bag can deploy with too much force and that would shoot metal fragments into the car. That`s a polite way, I suspect, of saying shoot them into the passengers, too.
Honda says it knows of 12 such incidents, including one in which a driver was killed.
Do you see what I mean?
The company recall -- already recalled more than a half a million cars over the same defect. There`s over one million worldwide have now been called in.
It wouldn`t be a recall update if Toyota wasn`t involved. Toyota says it is fixing recalled cars at the rate of 50,000 a day and that 220,000 have now been repaired. The vice president, Bob Carter, was speaking at the Chicago Auto Show. He`s trying to swing the focus around to the road ahead.
(BEGIN VIDEO CLIP)
BOB CARTER, V.P. TOYOTA GROUP: We are completely focused on fixing vehicles and working with our dealers 24-7 to handle as quickly and as effectively as possible. At the same time, we believe it`s new vehicles like the all new Sienna and this redesigned that will help us further convince consumers that there is nothing more important to Toyota than the safety and reliability of our vehicles.
(END VIDEO CLIP)
QUEST: Now, Toyota said it plans to add 7,300 Camrys to the growing list of vehicles it`s recalled in the U.S. The company says the Camry has a defect that could result in leaking brake fluid.
More recalls all the time.
I`ll have a Profitable Moment for you in just a moment.
We`ll consider Greece, bailouts and whether it`s actually going to take place.
QUEST: Tonight`s brief Profitable Moment -- the issue of Greece and its economic problems are likely to boil over in the next few days. European leaders will get to grips with the crisis. They have to decide how far they can legally go to help a fellow European country.
There are legal issues left, right and center. Tonight, of course, they were almost saying they will come up with some statement of support. Whether you call it a bailout, a measure of confidence or simply a standby deal, it doesn`t really make any difference.
A final thought from Gregory K. Who`s in Athens. He says: "I`m Greek and I drive a Toyota. How worse can it be?"
And that`s QUEST MEANS BUSINESS for tonight.
I`m Richard Quest in London.
Whatever you`re up to in the hours ahead, I hope it`s profitable.
"AMANPOUR" is after your news headlines.