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QUEST MEANS BUSINESS

Interview With Prime Minister of Latvia; Microsoft Unveils New Product

Aired February 15, 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, ANCHOR: The pursuit of happiness, mobile phone networks unite to challenge the king of the apps. Pushing the reset button, Microsoft's chief executive tells this program, he is reinventing mobile software.

And applying for membership, Latvian prime minister tells me, he is a Euro fab. I'm Richard Quest. We start a new week where I mean business.

Good evening. It is the ultimate wireless network. It's designed to take on one of the titans of the tech world. It is, of course, Apple. Today, two dozen mobile phone operators joined forces and planned to launch a service called the Wholesale Applications Community, the WAC.

It would act like an electronic warehouse offering customers little nuggets of computerized wizardry known as Apps. Now the App, I'm sure most of you are familiar especially if you have one of there, which is of course, the Apply iPhone or indeed one of these the Palm III. An App maybe something that helps find your way around a strange city.

In some cases, it helps you tune up a guitar or just offers you one minute of amusement. In my case, I play a silly game that involves helicopters. Some people would go as far as to say they are what they are smart they are. What makes a Smart phone smart? And they could be worth a great deal of money.

The Apps have, of course, for a long time been very much stuck in the area of the phone in which they are involved, but that is all about to change. For instance, this new announcement from telecoms in Barcelona, 24 operators including some of the biggest, AT&T, China Mobile, Orange, Orascom, Vodafone, Verizon, supported by handset manufacturers like Samsung, Sony and LG Electronics.

You will notice, I did not mention one particular apparatus, Apple. Apple is not yet part of this apparatus, but the Appy Days -- this is why Apps are so important. Customers combined have 3 billion worldwide. In the fast growing Apps market, research estimates it's going to be worth around $6 billion a year in the totality.

The Apps are what makes the Smart phone smart. Remember we talked about that earlier. So the question is how to make sure that the App can work across different handsets or at least make sure that it's not just restricted to one. For instance, Apple's Apps are very much just one handset one App and that's all it manages to work.

Now, Apple dominates at the moment the market for Apps. As you all be aware, there are around 130,000 Apps. They're available at the App store. All this Apps tailored made for iPhones as (inaudible) as I was just saying they don't run on any other hardware.

So they are absolutely unique to the iPhone. Apple takes 30 percent cut on every App that is sold not surprisingly it does the company extremely well. There have been around 3 billion downloads to date and they are an entire range of them.

Techies have a phrase for it. There's an App for that and what perhaps is even more infuriating, if you're not an iPhone user, you don't have access to those Apps. And at the moment, the App catalogues for other phones is still extremely limited indeed.

Jim Boulden now reports from the telecoms conference in Barcelona.

(BEGIN VIDEOTAPE)

JIM BOULDEN (voice-over): Maureen Scott is reading to her six-year- old after school in London.

MAUREEN SCOTT: Building your house, an elderly carpenter was ready to retire.

BOULDEN: But she's not using a book or a kindle, this short story is on her iPhone.

SCOTT: There hasn't been a market state for these short stories. It's the perfect length of content and we're going to be able to monetize these short stories for authors.

BOULDEN: A short story application or App is one of the many to be added to the Apple App store and they've launching it at this week's Barcelona Mobile Phone Conference. Of course, authors aren't the ones looking to make money through mobiles which are seen after all as a key way to monetize contents.

SCOTT: In a mobile space, users are accustomed to paying for content. They're not expecting free and so that - that's completely different than the internet.

BOULDEN: But the elephant in the room is Apple, the one company that isn't in Barcelona at this event. Apple controlled more than 99 percent of App sales last year according to Tech Research Firm Garthner.

With predictions that the App business could reach nearly $30 billion annually by 2013, the likes of Google, Microsoft, and Blackberry want more Apps developed through their offerings.

MICHAEL O'HARA, GSM ASSOCIATION: What you're seeing is everyone competing for the hearts and minds of developers. So we are running in an event in Barcelona. We have developer conferences going on including companies like Google, Sony Ericson and Motorola.

BOULDEN: But Barcelona is far from just about content. It's the hardware and software behind the wireless market that draws thousands of people here each year. From universal phone chargers to mobile operating systems declaims of unbreakable mobile devices, and what makes all of these work wireless broadband.

The faster the network, the more apps and other content users will be enticed to pay for. So expect the latest technologies seen here in Barcelona to end up in the hands of consumers back in London and around the globe. Jim Boulden, CNN, Barcelona.

(END VIDEOTAPE)

QUEST: And that's wifi or the web access of course comes at a price. Maggie Reardon is a news reporter for CNET. I asked her what she makes of the new WAC or Wholesale Applications Community.

MAGGIE REARDON, NEWS REPORTER, CNET: Well, I do think it's sort of an admission by all these folks that they need to do something to get into the application space. Apple is definitely winning the day right now and none of these other folks have been able to get in on their own. And I think that, you know, they see a huge opportunity sort of slipping through their fingers right now.

QUEST: So how it's going to work though, of course, is we don't know whether there will be multiple - whether you just submit your application once and it's - we don't know what actually happens, do we?

REARDON: From what they announced today, well, this is going to be more of a wholesale type thing so I don't think that all these partners are going to develop one (inaudible ) store. It will probably be that they try to come up with some common standards for developing application stores. And therefore, different handset developer or handset makers or even carriers will have the opportunity to have their own branded stores.

But it's interesting because I've been to some carriers in the U.S. Sprint for example, which I think is - I can't remember if they're part of this group or not. But they have said it, they're really open to all kinds of stores. So they want to have their branded store, but they want to be able to allow their consumers to get to other stores like the android market or the Blackberry store, or they have even partnered with this little company called Getchar (ph), which is actually one of the biggest App stores out there so it's interesting.

QUEST: For those of us that are not part of Apple iPhone users and have other phones, we look a bit like children at Christmas. Looking through the window, I mean, you know, the App stores or the App catalogue from where we are. So the importance of the App cannot be overstated, can it?

REARDON: No, and you know what's interesting though is that mobile applications have existed for a really long time like almost as long as mobile phones. It's just they haven't - the stores where you download this stuff haven't been done very well. It's difficult for people to - on their handsets get access to the applications and it's difficult to sift through all the different Apps.

So what Apple actually did was they just made it very easy and as a result, developers have flocked to it and consumers are loving it and eating it up because the applications are easy to get to. They're easy to download so I think that what you're seeing is everybody else trying to replicate that model.

QUEST: Maggie, this is an almost impossible question so you do get the right to take the fifth amendments of this one.

REARDON: OK.

QUEST: Do you see any phone handset on the market at the moment that stands any chance of being a half decent rival to the iPhone in numbers?

REARDON: In numbers? I think there's a lot of opportunity. You know, I'm not single out one particular phone, but I think that, you know, the iPhone was a breakthrough device. But you've seen lots of advancements and android software, and some of the things that (inaudible) has been doing.

And now you know, Microsoft just announced its new Windows Mobile 7, which looked pretty cool today when I saw demo so I mean, I think that, you know, Apple sort of raise the bar and everybody is coming to play. And I think what that means for consumers is there's going to be a lot more choices, a lot more cool phones out there.

And it won't be just the iPhone, there's going to be a lot of choices the people will have. So if they don't live in a place where they can get access to the iPhone, they shouldn't worry because I think that there is going to be enough competition.

QUEST: (Inaudible) in talking about Microsoft and Windows Mobile 7. Well, Microsoft is trying to take a bigger share of the lucrative trade in software for mobile phones with its new operating system called Windows Mobile 7. The chief executive, Steve Ballmer says, he knows it's a challenging market but he's ready for it.

(BEGIN VIDEO CLIP)

STEVE BALLMER, CEO, MICROSOFT: We have a very strong market share and it's a very dynamic market and we have to be dynamic ourselves.

(END VIDEO CLIP)

QUEST: Steve Ballmer of Microsoft. Later in the program, you can hear the whole interview or the last part of it on "Quest Means Business." The up-to-date with the business headlines and now the news headlines. Fionnuala Sweeney is at the CNN News desk.

FIONNUALA SWEENEY, CNN CORRESPONDENT: Investigators are scrambling to find the cause of a deadly train crash in Belgium. At least 18 people were killed and dozens injured when two commuter trains slammed into each other during morning rush hour.

The accident took place in Haal (ph), about 15 kilometers southwest of Brussels. Authorities are looking into reports that one of the trains may have run on a stop signal.

As the pope meets Irish bishops to discuss the child abuse scandal, victims of abuse are calling on the Vatican to conduct its own investigation and punish the guilty. A report last November said the Catholic church in Ireland tried to cover up child abuse by priests between 1975 and 2004. One of the Irish Bishop says the authority of his church has been damaged.

On day three of the biggest assaults since the war began. U.S. and Afghan officials are reporting progress in the assaults from the Taliban stronghold of Marjah. But it hasn't all gone smoothly for the allies, on Sunday, a dozen Afghan civilians were accidentally killed in a coalition rocket attack.

Tough words for Iran. The U.S. Secretary of State says she thinks the country is turning into "military dictatorship." Hillary Clinton is calling for tougher sanctions against Iran. She denied the U.S. plans to attack Tehran and said Washington wants a dialogue.

Almost one week on from the latest protest inside Iran chilling new details are emerging. CNN's Reza Seyah reports from what one protester has said to have injured in the hands of authorities, and we'll have details on that on World One at 8:30 p.m. London time.

Richard, back to you in the studio.

QUEST: We thank you for that, Fionnuala Sweeney. I don't care to belong to any club that would help me as a member. That was Groucho Marx, but you won't catch my next guest cracking the same joke. Being a member of the Euro Club might not be as prestigious as it once was. There is still a queue of countries waiting to get in, and when we return, the Prime Minister of Latvia explains why he's one of them.

(COMMERCIAL BREAK)

QUEST: Welcome back. Right now, euro zone finance ministers are discussing the chances of Greece resolving its debt crisis all on its own, and it looks to be a tall order. Greece has overspent heavily. Last year's budget deficit is thought to have equaled 12.7 percent of GDP and worryingly, we don't even know if that figure is correct.

Official stats in Greece are not exactly a byword for accuracy. The EU budget deficit target is 3 percent. Greece is aiming to whittle down its deficits 8.7 this year alone. It will require real crackdown on spending. The plans have already provoke strikes in the public sector, but it cutbacks really hits hard.

The European Union has backed the program and promised vague terms that Athens will get support if needed. Ministers know that if Greece cannot deliver, it may need more concrete help. We're not likely to hear what that form will take this Monday. Ministers could wait until Greece delivers a progress report to the ECB and the IMF and that's due to be in mid-March.

The situation facing Greece has a recent parallel on the EU's northern fringe. Latvia is going through its own painful adjustment after flirting with financial meltdown. The Baltic state is not part of the Euro Zone, but it does hope to join in 2014, and that's the date for adopting the common currency.

Fourteen months ago, Latvia needed a $10 billion bail out from the EU and IMF and others as its biggest bank collapsed. Property bubble burst, and basically the country faces some of the worst austerity measures ever seen within the European Union.

The government followed with spending cuts to rebalance the finances. It shows what an austerity program really looks like. The EU's highest unemployment rate at 22 percent is at Latvia. The worst recession in Europe, GDP fell 18 percent last year. That's what austerity is all about, and deeply falling incomes of Latvians.

On Friday, the prime minister of Latvia's neighbor Estonia told this program his country still wants to join despite the uncertainty. Today, I spoke to the prime minister of Latvia and I asked him if it would not be better to stay outside of the euro zone, while you could de-value or effectively de-value like the U.K.

VALDIS DOMBROVSKIS, PRIME MINISTER, LATVIA: Certainly being not in Euro Zone theoretically it is an option, but as I said it's our decision, which is also agreed with IMF and European Commission not to go through this way. But rather to go through the fiscal consolidation and internal devaluation (ph), and that's a policy we are pursuing. And according to the last month's European Commission's data we had done sufficient effort in our fiscal consolidation and our economic stabilization program is on track.

QUEST: The problem of course is that you're doing a fiscal consolidation at the worst possible time, and you're cutting back. You're reducing your budget deficit. You're getting your economic house in order, but that of course deepens an existing recession and merely arguably makes things worse.

DOMBROVSKIS: Well, certainly, this is a part of the problem. However, it should have been done during the boom times and we should have made a balanced budget and even a surplus budget. But yet we had a double digit economic growth and still a budget deficit. So in a sense, we were pursuing (inaudible) fiscal policy during the time of boom. So currently there is not much of a choice and to continue with (inaudible) fiscal policy and do fiscal tightening during the recession. Because, anyway, with our result current adjustment, this fiscal consolidation and budget balance problem is still there and still needs to be solved.

QUEST: Prime Minister, when do you realistically expect Latvia to leave recession and to return to something approaching growth.

DOMBROVSKIS: Well, according to our stabilization program, it's second half of this year.

QUEST: And with that in mind, are you and are your people still committed to your membership or do you believe that this might have to now be put off into some date in the future.

DOMBROVSKIS: Well, certainly, we are still committed to Euro membership according to our stabilization program. We expect to reach master criteria including budget deficit below 3 percent of GDP in 2012, which means that we can join Euro as of January 1, 2014.

QUEST: But does a difference, as you know, between meeting the exact criteria of (inaudible) and actually having true convergence of economies?

DOMBROVSKIS: Well, but that's what mother criteria are exactly meant for to actually evaluate the convergence of the economies. Of course, Greece case in this situation is different case because they have just provided false data about their budgetary statistics. Because if or should European Commission or ECB knows the real data before, I think things would never go so far as they are now.

QUEST: Finally, Prime Minister, is the whole European ideal, the Euro Zone, is it still popular within Latvia, bearing in mind that in many ways, the commission, the IMF, the ECB, the theme is being the organizations that are bringing out the fiscal austerity that your people are suffering.

DOMBROVSKIS: Well, euro idea is certainly still popular as our currency is anyway pegged to Euro. So currently we have all the disadvantages so to say of the peg, while not having the advantages of having the Euro instead of our little national currency. So certainly the idea of joining euro is still popular.

(END VIDEOTAPE)

QUEST: The prime minister of Latvia. European stock markets started the week on a modestly positive note. Shares went down the ground. They lost on Friday. Nothing dramatic. Gains of half a percent on Europe's big index. British Airways is one of the big gainers in London after its anti trust immunity plans for the North Atlantic put a major step forward.

The U.S. authorities have given a conditional ruling that will allow BA American and other airlines to collaborate more closely on trans Atlantic route. The decision is a blow for biggest U.K. rival in the trans Atlantic market. Virgin Atlantic's Chief Executive, Steve Ridgway, say it would mean less choice for passengers.

(BEGIN VIDEO CLIP)

STEVE RIDGWAY, CEO, VIRGIN ATLANTIC: You can't mount full competition against two airlines coming together like this. They're going to coordinate their schedules. They're going to coordinate pricing. They`re going to coordinate selling. Virgin Atlantic (inaudible) 20 as we look as if we got a reason (inaudible) that we got 3 percent of the slots. These two airlines will control almost 50 percent of the slots (inaudible) the most valuable ones in terms of particularly early morning arrivals.

So I think we're (inaudible) the regulates because we are out there to protect the interest of consumers can come back with four pairs of slots to remedy this. The things (inaudible) and then the final kicking if you like was the fact that we have to lease these slots so we're not having to pay, to remedy the competitive issue.

(END VIDEO CLIP)

QUEST: That's Steve Ridgway of Virgin Atlantic, and incidentally, Sir Richard Branson said later in the day that if Virgin had been a publicly traded company, its share price would have collapsed today at the same time as BA's share price rose 5 percent.

When we return in just a moment, is the Euro too big to fail? The question on tonight's Amanpour Christiane examines Europe's financial rose. The Greek Prime Minister, George Papandreou weighs on the debt crisis in his country. Amanpour 2000, 2100 in central Europe.

In just a moment, it's about the global titans China is closing in on Japan. Two neighboring, running and neck.

(COMMERCIAL BREAK)

QUEST: Japan is clinging onto its ranking as the world's largest economy. There's not much in it. GDP grew more than expected in the last quarter of 2009 with an annualized rate of 4.6 percent. Arrival in demand overseas gave Japanese exporters a boost alleviating the fares of Japan slipping back into recession.

But consumer prices are falling and longstanding deflation is ever present. All very different in China, the world's third largest economy, is coming ever closer to passing Japan. Those are the numbers on growth front. In dollar terms, Japan's nominal GDP was $5.2 trillion.

China closed the gap last year as economy expanded sharply. Staying in Asia, markets ended lower Monday than trading. Many of them were closed including Hong Kong, China, Taiwan and South Korea. They were celebrating, of course, the year of the tiger. I can actually have the way in which I could have to happy New Year in Chinese and it's probably best if I don't.

But the sentiments are there whether or not the words are forthcoming. They were celebrating in Tokyo where the Nikkei close down three quarters of a percent, maybe they were celebrating too much even after an official estimate showed the economy growing more than expected at the end of last year.

Japan has built its economy on high tech and quality. China is the workshop of the world producing massive number of cheap commodities. Kyung Lah in Tokyo and John Vause in Beijing teamed up for head to head comparison.

(BEGIN VIDEOTAPE)

KYUNG LAH, CNN CORRESPONDENT: The presidential election, resigning a governorship and a national book tour, (inaudible), rimless glasses now ubiquitous with Sarah Palin's image, and the Japanese designer of the eyeglasses would expect nothing less. Made in Japan means made to last. That's why these titanium frames and others have been snagged by celebrities around the world.

Expertly designed, hand crafted. If you want a pair of these, it will cost about $500.

JOHN VAUSE, SENIOR INTERNATIONAL CORRESPONDENT: With $500, I can buy hand pairs of glasses here at the famous (inaudible) street market in Beijing. The brand on the frames says Hugo Boss, they're not really. Total price including lenses $43.

LAH: If there is anything that Japan is known for, it is the automobile. Reliable and well designed that's the mantra of the Japanese automakers. Japan is the birthplace of Toyota, Honda, Nissan, and Mitsubishi. It was and continues to be the engine of Japan's economy. This mid-range SUV by Honda cost $35,000.

VAUSE: A similar car in China will cost less than half that. This is the Tigo (ph). It's slightly considered to be a knock off of the Toyota Rav 4 while it doesn't have the safety features or the reliability of the Rav. This particularly model can be yours, drive it out of the showroom today for less than $14,000.

LAH: Electronics, the gizmos and the gadgets are also what keeps Japan's economy going. The world's cutting edge electronic are designed right here in Japan. Now this 52 inch flat screen retails for about $3700. It's quite pricey but you're paying for quality. If this is what the world want, it needs to pay for it.

VAUSE: This brand is called Chao Wung. It's all Chinese made and incredibly cheap. Right now, this 50 inch flat screen is on special, it will cost you just over $700. But one reason why prices are so low, last year almost 100 million television sets were made in China.

(END VIDEOTAPE)

QUEST: John Vause and Kyung Lah with the battle of (inaudible) that's fascinating, I haven't seen that before and it was fascinating to see the discrepancy of the prices put in such fashion.

When we return in a moment, Microsoft has unveiled its attempt to take on the iPhone. After a break, a peak through the window of the company's latest operating system with the power of your hand.

(COMMERCIAL BREAK)

QUEST: Good evening. I'm Richard Quest, "Quest Means Business." This is CNN.

Call it an unprecedented alliance in the corporate world of mobile phones. Twenty four of the world's biggest operators are getting together to take on Apple. They are creating an open platform where people can download Apps, applications. They are the useful little bits of technology that helps Smart phones do smart things.

At the moment, Apple truly dominates the market perhaps. You can only run Apple Apps on an iPhone. The Wholesale Applications Community, the WAC as I am calling it aims to change all of that. How WAC is going to do if it is not very clear, but opening up the world of Apps with 3 billion customers up for grabs, the market worth $6 billion this year.

Microsoft is very keen to get a piece of the App action and to do this, it has launched its new operating system for Smart phones. It's called Windows Mobile 7. Microsoft is trying to reassert itself in the market after being pushed aside by Apple, Research in Motion, RIMM's Blackberry and Google with Android. CNN's Jim Boulden who's in Barcelona got a preview of Microsoft's latest offering.

(BEGIN VIDEOTAPE)

BOULDEN: So a lot of the rumors were would it have Xbox Live? Would it have a zoom interface? Would it have the pulling down from Facebook? And it has all of those?

JP WOLLERSHEIM, PRODUCT MANAGER, MICROSOFT: Yes, that is correct and so I'll show you those today.

We'll start with Xbox Live, so here, the one thing that we've done is we've integrated Xbox Live into phone. And so you can see all the different games that you want to play. This is collection once you download it from the internet or put in your PC.

And there's also some information that you'd want to see about your games and you know some insider tricks about how to play the games. This is your Avatar and so my kids actually spent tons of time customizing their Avatar.

And there's like lots of people love being able to do things with your Avatar and it also shows how many points you have on Xbox Live. But here's where it gets really interesting. So you and I could be playing a game and I could be here in Barcelona, you could be back in London.

And through the power of the internet, we could play turn by turn based games. So that `s the Xbox Live experience, and here I'll show the Zune experience. So we have brought Zune to the phone and it's like what you would think. Essentially anything with a play button could be played here.

So all of your music, all of your videos, video podcast, and podcast, FM radio or radio. Wifi sync is interesting for a couple of reasons. One is, let's say I've subscribed to a specific channel. So my kids like Taylor Swift.

BOULDEN: OK.

WOLLERSHEIM: And so they have - there's some technology called Smart DJ so they Taylor Swift coming and music that's like her that comes over the phone and any time this phone comes into my wireless at home, new music will come over to the phone.

And so that is actually exposed not here but in the new section so anything that's new, it just comes over wirelessly. You don't have to connect it anymore. It just shows up there. Where Wifi Synch also works really well is on the camera so when I take pictures on the camera.

They'll automatically be synch back to my PC so now I can just be wondering around my house taking pictures and I don't have to worry about plugging it in because it is automatically synched back to my PC.

(END VIDEOTAPE)

QUEST: It's fascinating stuff. All these new technologies and certainly we have to keep up to date. Jim Boulden sat down with the Chief Exec of Microsoft, Steve Ballmer started off by telling more and more about what Microsoft's new operating system can do.

(BEGIN VIDEOTAPE)

STEVE BALLMER, CEO, MICROSOFT: So we've anchored around the thing we called Life Tile (ph), which are going to reflect the world going around you that you might be interested in. So you don't always have to go get an application started for the things that are interesting to you, to pin you and notify you.

We build this concept we called hubs that kind of in a task oriented way that integrates what's going on in applications, in services in the cloud, in the web to bring together for you your entire experience around that person or a piece of entertainment or whatever.

BOULDEN: Lot of rumors of whether it would include live Xbox? Whether it would include Zune, of course, it includes both of those. So this is critical for Microsoft. You're trying to bring everything together and give it to people wirelessly.

BALLMER: Well, we're trying to give people what they want in a mobile device. So yes, it's a Windows phone, start right there. (inaudible). We've integrated in a way that's sensible to that device office productivity. We've integrated - there's a Bing search button on every phone, and of course, Zune for video, entertainment, music, and Xbox and Xbox live for gaming. We're trying to bring all of that together in this experience.

BOULDEN: A few years ago, Microsoft had about a quarter of this space and now it's down below, the last time it's below 10 percent. So this is a major attempt on your part to get back on the game, is that fair?

BALLMER: Yes, we have a very strong market share and it's a very dynamic market, and we have to be dynamic ourselves if you will. And this Windows Mobile 7 series, I think will really ratchet up not just our software, but it really enables a whole new level of innovation among star harbor partners who will actually deliver the real Windows phones.

BOULDEN: We haven't heard yet who the partners are? We don't know what networks you're going to be on? When is it roll off? Give us some of that.

BALLMER: We will be in the market for the Christmas season in 2010. We're announcing now because you'll start to hear and see from application developers, from guys who will build phones like LG, like Samsung, like HDC and many others. Operators like AT&T, and Orange and many others who will be provided Windows Phone Devices on their networks.

So now is the time. We've taken a very different point of view. You pick a Windows Phone 7 Series, you're not going to think it looks like any Smart phone on the market and we think a lot of people are going to like it and that's our opportunity.

Our key goal now for the next basically 12 months is to make sure we execute super well with what we have. We have started talking to our partners about alternate foreign factors that allow our hardware partners to hit a variety of different price points including some lower price points than we have today.

BOULDEN: Yes, because we want to know about price for a while, but you could price yourself out of this market couldn't you?

BALLMER: I don't worry that we price ourselves out of the market, but the truth of the matter is Smart phone today is still relatively small category -

BOULDEN: Sure.

BALLMER: That will be over a billion phone sold and Smart phones might be 20 percent and in order to really connect with a higher percentage of the market, we're going to have to be part of letting people build Smart phones at much lower prices than anybody's building them today.

QUEST: Steve Ballmer, the Chief Executive of Microsoft, and if you are with me earlier in the program when I talked about what I use my Smart phone for? What a really good App can do? Let me show one of the best things. How about this one? This is the best thing, a helicopter game. I could spend hours playing this and you know something. I never - hey - never - I'm doing well. Look at that, one more go - all right, leave at that.

When we come back in just a moment, Middle Eastern investors have got billion of dollars invested in U.S. America spends billion on fuel from the region and quite a part importance in security terms. Lots of the few parties to talk about it, one of the top men, U.S. Treasury visits the Gulf. Talk to CNN's Stan Graft in a moment.

(COMMERCIAL BREAK)

QUEST: Welcome back, the U.S. Treasury says the recent volatility in the stock market is a reminder, economic recovery remains fragile. The Deputy Treasury Secretary Neal Wolin was speaking in Saudi Arabia during a tour of that's taken (ph) in Afghanistan, Pakistan, Kuwait and others. CNN's Stan Grant spoke to him in Abu Dhabi and started by getting thoughts on the debt crisis that's now engulfing Greece.

(BEGIN VIDEOTAPE)

NEAL WOLIN, U.S. DEPUTY TREASURY SECRETARY: We confident, Stan, that the Greek government working together with the Europeans will manage through this issue effectively and I think that will also be true with whatever other issues arise elsewhere in Europe. I think they will work these things through.

STAN GRANT: You're also having your own issues in the United States. There has been an uptake in growth in recent times, but are you confident that you can sustain growth to a level high enough to (inaudible) into this 10 percent unemployment that is causing so many problems in the U.S. right now.

WOLIN: Well, Stan, we are pleased that we have seen some growth in the fourth quarter in the United States and we expected that growth will continue. But as you note, we have a challenging situation on the job side in the United States economy.

We think that slowly but surely we will begin to see the expansion of employment and certainly our president, President Obama, is very focused on creating a set of programs that will target in particular the small business sector where an awful lot of our job creation is centered. Tax incentives for small banks in our country to extend credit to small businesses in ways that we think will generate jobs. It will take a while but we will stay at it.

GRANT: The big question of course is whether you can sustain that growth and some are saying that is not likely or that impact on consumer confidence. Consumers are such an enormous part of the U.S. economy. (Inaudible) in this vicious cycle, unemployment, low consumer confidence, not enough growth.

WOLIN: We see for 2010 a growth in the area of 2-1/2 to 3 percent that's what the consensus of the private sector forecasters is. We think that with the stimulus that we have put on, the fiscal stimulus, which continues on through 2010 through the third counter quarter that we will continue to grow.

We have some challenges but we think we are on a good path, a total recovery that the indicators suggest that and we will keep at making sure that this is a recovery that is sustainable and it carries us out through 2010 and beyond.

GRANT: Here's the problem though, (inaudible) looking what the administration is doing and saying that the administration is to blame. Some hold the Obama administration to blame for the recession itself. Confidence has fallen. There's not enough trust in President Obama to manage the economy and his popularity has fallen. What does that do to the administration's nerve and its ability to see through what is needed? The hard choice is detonated to bring about a turn around.

WOLIN: Stan, let me remind you that when President Obama took office a year ago that the U.S. economy was shedding about three quarters of million jobs a month. We've come an awfully long way from that. We also contracted in the fourth quarter of 2008 substantially.

We are growing now in the economy. We're not creating enough jobs for us to be satisfied. We're going to need to keep at that, but I think we've come a long way. Largely because of the tough decisions that the Obama administration and President Obama have taken with respect to physical stimulus, with respect to stabilizing our financial sector.

I think those programs are really starting to take effect. We are in awfully better place today than we were a year ago, but we still have work to do. There are still challenges as you say with respect to unemployment situation, but we will continue to focus on those and we believe that we are on the right path.

QUEST: The U.S. deputy treasury secretary talking to Stan Grant. Now, in the fullness of mentioning who made the helicopter game and you just saw me playing it. People go mojo jungle. It's App developers so of course, we can be correct.

On top of that, Jenny Harrison is at the World Weather Center, and I suspect, Jenny, (inaudible) yourself.

JENNY HARRISON: I've got more important things to do than sit there playing with some stupid game, but yes -

QUEST: Yes, you're jealous. You also better make a phone call.

HARRISON: I'm going to have to find that game and beat you. I'm sure there's a scoring system. I'm going to learn how to do that. I'm going to beat you.

But anyway, let's (inaudible) about weather conditions. Perfect time today, perfect weather conditions so (inaudible) practicing your game, we've got that very cold air (inaudible) right now, minus 2 in Berlin, minus 5 in (Unique), Paris. You are down freezing (inaudible) the wind, and of course, it takes the temperatures even further.

The temperatures are going to continue to deep down in the overnight hours. It's a fairly murky picture across Europe. It's a little bit of sunshine and towards the west today, but some very (inaudible) conditions in Spain. A mix of rain and snow, two areas of low pressure. You can see one in eastern Europe and that one in the southwest.

But both systems actually giving rise to the threats of some severe thunderstorms, strong winds and heavy amounts of rain. In fact, we could be seeing about 5 to 8 cm in southern areas of Portugal and Spain. It does not look too bad here on (inaudible) over the next couple of days and we will see some dry moments, but not great sunshine I'm afraid in the forecast.

More snowfalls generally a little bit light. We're getting to that time of the year, but I say that we've got some heavy amounts that's pushing into the south east of France and again, Spain seeing quite a bit of snow as well over the next couple of days.

Now when it comes to airport delays, longer delays developing Tuesday afternoon and (inaudible) brisk wind but lots of green (inaudible) Copenhagen realizes they have some longer delays in the evening hours and their Madrid as I say we've got that snow across central Spain and that will continue to (inaudible) and probably adds a few worth trouble headaches at the same time.

Temperatures on Tuesday, minus 1 in Berlin somewhat managing to get above freezing, minus 3 in (inaudible) but fairly mild in the south, 15 degrees in Athens and of course, it's some mild air and the temperatures have been a problem in the Olympic so far.

Now these are the current conditions in Whistler. So up to the top, there's the altitude. It is only minus 1. We've got 2 degrees in Whistler as per conditions (inaudible) in the forecast. Tuesday looks the best day this week for the snow. I'm going to take a short break here (inaudible) going to practice his helicopter game and I'm about to go and do the same. Stay with us.

(COMMERCIAL BREAK)

QUEST: Earlier in the show, we showed you how China's economy is hot on Japan's hills. Emily Chang now here's the tour of the one of the city's benefiting from the Chinese economic boom.

(BEGIN VIDEOTAPE)

EMILY CHANG: It looks like an average Chinese city, but beneath the dense smog, Wuhan is anything but (inaudible) with bikes, cars, ships and ten million potential customers. Old buildings are coming down, new skyscrapers rising up in China's latest boom town.

JIM MCGREGOR, CHINA ANALYST: Wuhan is the Chicago of China because it's a crossroad in the middle of the country that has river access. It's got all the railroads through there so it's really a hub.

CHANG: And it's home to China's new $17 billion high speed railway line. We are now riding on the fastest train in the world. This train is hurdling at almost 400 kilometers per hour from Wuhan to Wangjo. Cutting down a 10-1/2 hour ride to just 3 hours.

The railway brings visitors from across south China. Visitors, the government hopes will fill mega malls springing up across the city.

ZHANG YUYUAN, WUHAN INTL. PLAZA SHOPPING CENTER: Lots of our customers used to buy luxury goods abroad or in Hong Kong. Now they can buy them right here.

CHANG: Foreign investment is flowing here too. Janie Corum heads the Central China Chapter of the American Chamber of Commerce and recently opened Wuhan's first independent American restaurant.

JANIE CORUM, AMERICAN CHAMBER OF COMMERCE, CHINA: The potential is endless here and I think it's a great place to invest and a great place to be as an American.

CHANG: The Japanese are also moving in. As Honda closes factories in Japan, it's building them in the largest car market in the world.

This is one of four Honda plants in China and the company is opening a fifth, down the street gearing up for accelerating demand across the country.

JIA TAO, HONDA FACTORY WORKER: The company cares about our welfare and even gives us retirement benefits.

CHANG: More factories mean more jobs and consumers with money to spend, but in some cases, ambitious development is outpacing consumption. Millions of square meters of new construction stand vacant. Some fancy malls are struggling to attract business with local markets busy as usual.

My life hasn't changed much, said this market vendor. Everyday I get up early and go home late to make a living.

It's the mark of a city growing so fast not every one can keep up, a city in overdrive, working hard to become to heartbeat of the nation. Emily Chan, CNN, Wuhan.

(END VIDEOTAPE)

QUEST: In Hong Kong, they pushed the boat out with the (inaudible) display to usher in the year of the tiger. Thousands of people crowded the streets of Victoria Harbor. They enjoyed the financial - the show. The financial markets stay closed and will again on Tuesday.

If you need to know how to say happy New Year in Cantonese, it's Kung Hei Fat Choi and in the Mandarin (inaudible). Pauline Chiou in Hong Kong has been looking what the markets expect from the New Year.

PAULINE CHIOU: The year of the golden tiger only comes around every 60 years so will your investments be golden as well? Will the tiger come bounding out and give the market some energy? Let's take a look at the predictions of the feng shui index. Put together by CLSA Brokerage.

Of course, this depends on whether or not you believe in feng shui. Here's what it predicts about Hong Kong's Hang Seng index. Like the tiger, the south market will be strong but volatile. There will be a major deep in the early months and June may be a good time to look for stock bargains some consultants say.

This year's dominant elements are metal and wood, which CLSA says conflicts with each other but both sectors are expected to do well.

FRANCIS CHEUNG, CLSA INVESTMENT: In terms of metal sector or the metal element, that's actually really good for gold, precious metals, steel machinery, silver or non (inaudible) items. Wood, that's generally associated with (inaudible), paper, and pharmaceuticals.

CHIOU: Cheung also thinks gold will hover around $1100 an ounce and possibly break the $2000 mark. The element of water will have a bumpy ride. That sector includes transportation stocks like shipping, autos, and airlines. Many Chinese also place a lot of stock in what their personal fortune teller say.

We caught with Raymond Lo who has a different take.

If I'm an investor, what investment should I stay away from?

RAYMOND LO, FORTUNE TELLER: Wood and metal. Wood is like fashion textile and consumer products. Metal industry is like car, banking and machineries and high tech.

CHIOU: As you can see there are differing opinions. The feng shui index is tongue in cheek and not exact science. Just look at the predictions from last year and how the Hang Seng really perform so judge for yourself.

As we begin the year of the tiger, we'll soon find out if the tiger comes out roaring with the bull or the bear. Pauline Chiou, CNN, Hong Kong.

(END VIDEOTAPE)

QUEST: And indeed I was born in the year of the tiger so Kung Hei Fat Choi (inaudible) and a profitable moment in a moment.

(COMMERCIAL BREAK)

QUEST: Tonight's profitable moment, never underestimate the ability of business to suddenly discover the spirit of cooperation in the jaws of defeat. The decision by the mobile operators to come together for the WAC, Wholesale Application Community is a stunning admission that Apple has won the game.

The failure of other phones to get an attraction in their App stores and catalogues or whatever you like while the App store roars on in all peak volumes. Don't for one moment think that they'd be doing this and they believe they could take on Apple on their own.

With the length of time, it took that four manufacturers to agree on a common charger still a couple of years away, it just shows you, they only agree when they have to. Even though it's not clear what the App new arrangement means or how it will work, I welcome this move.

Anything that gives more choice of Apps, whatever the phone we bought, well, in this age, that is the progress and that is "Quest Means Business" for this Monday program. I'm Richard Quest in London. Thank you for joining me and hope you'll be with us throughout the course of the week. Whatever you're up to in the hours ahead, I hope it's profitable.

Amanpour is next after the news headlines.

END