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QUEST MEANS BUSINESS

Rupert Murdoch on Defensive; US Fed Policy Stays the Course; World Currencies Flat; From Bass Strings to Purse Strings

Aired April 25, 2012 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, HOST: Playing down his political pull. The most powerful man in media, Rupert Murdoch, faced a rare public scrutiny.

It's the dreaded double dip. Britain's back in recession.

And an appetite for instruction. Former Guns N' Roses bassist Duff McKagan wants to show young musicians, manage your money.

(BEGIN VIDEO CLIP)

DUFF MCKAGAN, CO-FOUNDER, MERIDIAN ROCK CAPITAL MANAGEMENT: If you're a millionaire, there comes a point where you're just -- you're too embarrassed to ask.

(END VIDEO CLIP)

QUEST: I'm Richard Quest. We'll manage the money for the next hour, because I mean business.

Good evening. Dogged by scandal and still defiant. Rupert Murdoch says he doesn't believe in hacking, that he's never asked a prime minister for anything, and that his supposed power is nothing but a media invention.

He was, of course, being questioned by a British inquiry into media ethics, and the head of News Corp issued firm and repeated denials in everything from phone-hacking to political cronyism. Join me in the library and you will see exactly what he said.

It was the story of the day, Rupert Murdoch saying he did not believe in phone-hacking. It was, of course, hacking that it was the catalyst for the scandal around the Murdoch tabloid newspapers. But Murdoch called phone-hacking to get stories bad journalism. And in any case, there was a strong argument, he put forward, that celebrities needed scrutiny.

(BEGIN VIDEO CLIP)

RUPERT MURDOCH, CHAIRMAN AND CEO, NEWS CORPORATION: I don't believe in using hacking, I don't believe in using private -- detectives or whatever. I think they're just a lazy way of reporters not doing their job.

But I think it is fair -- when people I hold up as great -- or have themselves held up as iconic figures or great actors, that -- they be looked at.

(END VIDEO CLIP)

QUEST: The big question, of course, of the day besides hacking, that of political influence. Rupert Murdoch downplayed his influence, saying he'd never asked a prime minister for anything, specifically denying a quid pro quo with Tony Blair.

On the question of Margaret Thatcher, saying that during the heated disputes in the 1980s, he'd never asked her for favors. It was when Gordon Brown got raised that the issue became who had declared war on who.

(BEGIN VIDEO CLIP)

MURDOCH: He said, "Well, your -- your company has made -- declared war on my government and we have no alternative but to make war on your company."

And I said, "I'm sorry about that, Gordon. Thank you for calling." End of subject.

(END VIDEO CLIP)

QUEST: Now, we must tell you tonight, Gordon Brown denies that that conversation took place and he says this controversy over relationship with the government rumbles on.

And that side of it, of course, the whole influence question of BSkyB goes to Jeremey Hunt, the British culture secretary who, today, denied the specific allegation put forward by James Murdoch that Hunt had given indications over how he was going to rule on -- in his quasi-judicial role on the BSkyB bid. Jeremey Hunt calls it "laughable" and meanwhile, one of Hunt's senior aids has resigned tonight.

All in all, you're getting the picture, it was a messy day for the British government when it comes to dealings with Murdoch, and the prime minister, David Cameron, admitted as much, that all politicians had got too close.

(BEGIN VIDEO CLIP)

DAVID CAMERON, PRIME MINISTER OF BRITAIN: And I think on all sides of the House, there's a bit of a need for a hand on heart. We all did too much cozying up to Rupert Murdoch, I think we'd agree. On that basis, I'm sure that Lord Leveson will make some important recommendations.

(END VIDEO CLIP)

QUEST: Our Senior International Correspondent Dan Rivers has been following this story, and Dan joins me now. Dan, the Murdoch performance today, it wasn't as -- it wasn't contrite, like we saw with the parliamentary select committee. But at the same time, it was pretty impressive.

DAN RIVERS, CNN SENIOR INTERNATIONAL CORRESPONDENT: It was pretty robust, wasn't it? Yes, there was certainly no foam pies or drama that we had before the select committee or him saying it was the humblest day of his life. He's much more in control, robust, at times hesitant, but we're told that's just how he is, even in private. And he is, after all, a man of 81, as well.

In certain parts, he just didn't seem to have a grip on the facts. Remember, he insisted that Labour had won the election in 1992 when, in fact, it was the Conservatives, a point he was corrected on.

On other areas, though, he did seem fully in command of his brief, very dismissive of the idea that he somehow had this kind of sinister political influence over successive prime ministers, dismissive of the idea that he had an aura that people were scared of, and pretty candid, really, in a lot of points about the fact that he didn't have much subtlety about him, he said at one point.

QUEST: Another thing he described himself, which makes his views known. Dan Rivers, who was -- oh, you'll be there tomorrow, won't you, Dan?

RIVERS: I will.

QUEST: Are you going to be there for round two?

RIVERS: Pies or no pies.

QUEST: Yes. Good. Come to us -- back to us tomorrow night. Now, Peter Jukes is with me, the author of "Bad Press: The Fall of the House of Murdoch." Peter, good to see you.

We look at what Murdoch said today. He was defiant. But in many ways, it's almost as if he said he had nothing to apologize for. That's just Murdoch and that's the way it is.

PETER JUKES, AUTHOR, "BAD PRESS: THE FALL OF THE HOUSE OF MURDOCH": Amazing, the defense with him in James over their corporate policy, and it's all seeming very successful. One has to look at some contradictions in his evidence.

There's one very clear bit where he said, "I didn't time the BSky bid -- didn't even know -- time it around the election." James said yes, they -- it was all timed around the election.

And one has to wonder when we're talking about his not having influence on politics that a mile away in Westminster, this bombshell of these e-mail which he'd released -- Rupert had released on his evidence the day before -- is causing huge repercussions for the government. There's a slight anomaly there: "I don't have a political influence," and he's clearly had one.

QUEST: Yes, but we know he has a political influence.

JUKES: Right.

QUEST: Is he basically saying, though, "Look, I can't help it if other politicians -- " Well, the evidence I have basically says politicians like to get close to newspaper publishers. So, why blame him for that?

JUKES: Oh, absolutely. And previously, we talked about going through the back door, that quite amusing anecdote, he went through the back door of Number 10 several occasions because it's nearer his apartment.

The problem is for him, and obviously for politicians, that back door entrance is no longer available. That was the root. It's now out in the daylight.

QUEST: I hesitate to put it in blunt, boxing, sporting terms. Who won today?

JUKES: Well, we know who lost. James Hunt lost. Most -- Jeremey Hunt, sorry, that's the racing driver -- Jeremey Hunt has lost. He's still undergoing great scrutiny about his contacts with News Corp going back before he took over the bid.

And he and Cameron -- he's a close ally of Cameron, so it's worrying times, still, for the government, which is the vulnerable one, here. In the long run, I must say, though, though he did a great self-defense, it does look a bit brutal for News Corp, issuing those e-mails. And I'm not sure the long-term image of News Corp, at least that Britain is going to be a good one.

QUEST: OK. Why would it matter? Let's face it. He's got the "Sun," he's got the "Times," got the "Sunday Times." He's got now the "Sun on Sunday." He's still got his 39 percent of BSkyB. In the fullness of time, the wheel turns back.

JUKES: OK, his newspaper revenues from the UK only 1 percent. BSkyB was huge. It's one of the biggest acquisitions they ever made. If they are ruled not fit and proper people to have that share holding, that will matter to News Corp.

QUEST: And from politicians' position tonight, stay away as far as you can from Rupert Murdoch.

JUKES: Now a toxic brand --

QUEST: Toxic brand.

JUKES: -- for politicians.

QUEST: Anything to expect tomorrow.

JUKES: We could have some more revelations about Cameron. That could be quite interesting, Rebekah Brooks and these meetings. He's gone on soft on Cameron. He's already done the damage with those e-mails. But we'll wait and see.

QUEST: It's fascinating -- finally, it is fascinating, isn't it? That even in despair and in deep trouble, Rupert Murdoch still manages to cause havoc and chaos in the British political system. And he's 81.

JUKES: And you've got to blame the politicians for that as much as him.

QUEST: Right. Many thanks.

(RINGS BELL)

QUEST: Thank you for that. When we come back in a moment, the UK economy slips back into recession. It wasn't a good day for the British government and David Cameron. Having to explain why you can tighten your belt and gain economic weight at the same time. Why is a double-dip in the UK so serious? We'll have that after the break. QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

QUEST: The UK is back in recession. Numbers from the official statistics agency confirm the economy contracted for the second straight quarter. Output fell in Q1 and Q4 last year. And this is the way it looks.

Now that, of course, is the recession, and a pretty horrific time. That is the main recession of 2008 and 2009 with its -- well, five quarters of negative. But then you get this bouncing up. Now, this should have been stronger growth but, of course, it shows the weakness of the recovery.

And right at the end, if you go right into there, you can see that one and that one. Both of them show that is the official double-dip recession. It's the first double-dip since the 70s, and economists had expected that one to actually be a small rise. It's been driven by falling construction, fuel costs, anti-austerity.

The UK finance minister, the chancellor, George Osborne, has defended his austerity as it double-dipped is on the card.

(BEGIN VIDEO CLIP)

GEORGE OSBORNE, UK FINANCE MINISTER: Well, it's very disappointing news, and it is a very tough economic situation. When you're recovering from these enormous debts that Britain built up in the good years, that's not made any easier by the fact that much of Europe is in recession or heading into recession.

And we've got to go on dealing with those debts, making our businesses more competitive so that they can create jobs, helping young people get into work, and making sure that we don't deliberately add to borrowing, don't deliberately spend more and make a difficult situation even worse.

(END VIDEO CLIP)

QUEST: In Brussels, the ECB president Mario Draghi stressed Europe's belt-tightening measures are essential, even though they're a source of pain. The president said a growth compact was necessary to complement Europe's fiscal compact. A growth compact would ensure that those countries who were undergoing austerity did not continually see negative growth.

He says reforms should foster entrepreneurialism, activities, start- ups, and job creations. But he also said it's crucial that banks strengthen their balance sheets, retraining earnings and bonus payments if necessary.

The ECB president asked government to be more ambitious in their reforms, pointing out that imbalances between euro states is not the job of the Central Bank.

(BEGIN VIDEO CLIP)

MARIO DRAGHI, PRESIDENT, EUROPEAN CENTRAL BANK: The monetary policy stance of the ECB has to be focused on the entire euro area. It cannot address divergences among individual euro-area countries. That is the task of governments. They must undertake determined policy actions to address major weaknesses in the fiscal, financial, and structural domains.

(END VIDEO CLIP)

QUEST: Now, the Federal Reserve is sticking to its own plans to boost the economy, not pulling any more policy levers. Officials have said they will keep short-term rates in the zero bound until at least the late 2014. That, of course, we've known.

They expect moderate economic growth, which will pick up gradually, and they acknowledge the recent rise in inflation, saying they think it is going to be temporary. So, this is a really complicated mess at the moment.

Ben Bernanke is giving his press conference at the moment. It's a live press conference. The danger of going in and listen to it is we'll hit the wrong moment, and he's probably just repeating the statement that they always give at this particular point. If he says something different as the statement, we will, of course, bring it to you.

John Cochrane is the professor of finance at the University of Chicago Booth School of Business. Austerity isn't working in Europe, and the US should note. The professor joins me now from Chicago.

All right. So, austerity, you believe, isn't working, Professor, but one is -- one is apt to say, what's a better policy when the market is beating up on the bonds or the sovereigns?

JOHN COCHRANE, CHICAGO BOOTH SCHOOL OF BUSINESS: Well, austerity is kind of a buzz word. We should get away from these buzz words and talk about the actual policies. A lot of austerity is raising taxes in ways that loudly say, "Don't start a business here, don't hire somebody here." That part doesn't sound like a very good idea.

Another part of austerity is talking about structural reforms in entrepreneurship but not really doing anything about it today. Well, that would help a lot, get the growth going again.

And the third part is cutting spending, but not really the kind -- it's temporary spending, it's things that can easily be reversed that really aren't curing Europe's debt-spending problem.

QUEST: You would agree that whatever problems Europe is facing with large deficits that have to be addressed structurally, the US post- election, whether it's this year, later this year, or next year, or the year after, is going to face the same issues.

COCHRANE: Oh, you bet. We cannot keep borrowing and spending forever. The source of our economic problems is not that the governments that already are spending over half of GDP need to spend more.

QUEST: So, in that scenario, as you face an election, what policies do you want to see? And at this point, it would be helpful if you do declare any specific political interest.

COCHRANE: No, I'm not going to declare any political interest. The problem with elections in the US is we can't talk sensibly about anything. The kind of policies we need -- we have a garden that isn't growing, and there's talk about spreading one kind of fertilizer on it or another. We need to weed the garden.

Get rid of the taxes that are causing people not to want to hire or start businesses, clean up our ridiculous tax code, get rid of the nanny regulators who are causing troubles for anybody who wants to do anything serious. That's what we need, that's what you need. Very hard to run an election campaign on that sort of thing.

QUEST: OK. But then what do you do about the disadvantaged? What do you do about those who require Medicare, Medicaid, social services, unemployment benefit? Now is perhaps the automatic stabilizers not the time to be cutting those as well, though, is it?

COCHRANE: Most of what the US government spends, and the UK government, is not helping people who are genuinely disadvantaged. Most of it is money going through a mill from rich people to other rich people. There's plenty of room to cut all sorts of government spending while at the same time taking care of people who genuinely need the help.

QUEST: OK, so would you fundamentally say you are against or in favor of, say, the Buffet tax? An idea of a minimum rate of tax that if you are, frankly, rich, you are not going to be able to go beneath. Because honesty and fairness demands it.

COCHRANE: I'm an economist. I want taxes to engender growth. And that's the most important thing possible. The Buffet tax is a political ruse. It doesn't really mean much anyway.

Rich people -- if a rich person in the US, a wealthy person, earns another dollar, the government takes a lot of that away. Not just federal income taxes. We have local taxes, state taxes, estate taxes, sales taxes, all the other stuff. Most calculations say that the wealthy actually, on average in the US, pay a great deal of taxes.

But this is a sideshow. The important thing is to clean up the silliness in our tax code, which is what's stopping people from starting businesses.

QUEST: OK. Finally, back to austerity versus growth, and I want to use your garden analogy of weeding. My producer put it rather elegantly earlier to me. She said, isn't really the problem that you want to cut the grass but at the same time get it to grow? And isn't that really the problem with economies at the moment, with this austerity and growth?

COCHRANE: Well, we want to cut the grass, but the grass in Europe, especially, is full of weeds. So some big program isn't the answer. The problem -- most of southern Europe, there's big restrictions on who you can fire. Well, it's no surprise, nobody wants to hire anybody.

Think for yourself about why you don't want to start a business in Greece. It's not because the Greek government isn't borrowing and spending enough. It's because of all the weeds in the garden of trying to actually run a business there. That's what Europe needs to fix.

QUEST: Professor, many thanks, indeed. Stay and listen to our Currency Conundrum question. We thank you for joining us tonight. Here's a central bank theme in tonight's Currency Conundrum. Here in London, the Bank of England is known as the Old Lady of Threadneedle Street.

The question, if you'll pardon the pun, is who coined that nickname? The Old Lady of Threadneedle Street. Was it the cartoonist James Gillray, the playwright and member of Parliament Richard Brinsley Sheridan, or Pitt the Younger. I have absolutely no idea. No Googling.

OK, the currencies tonight. It's been a quiet day for the Old Lady's currencies. The pound, the euro, and the Swiss franc are flat as a pancake against the dollar. No change on either currency. A pound buys you $1.61. The rates to the break.

(COMMERCIAL BREAK)

QUEST: He was in one of the biggest rock bands of the 20th century. Now, the former Guns N' Roses member Duff McKagan is turning his bass- plucking fingers to asset management.

(BEGIN VIDEO CLIP)

(MUSIC - "WELCOME TO THE JUNGLE" BY GUNS N' ROSES)

(END VIDEO CLIP)

QUEST: It was hits like these that made him a millionaire by the time he was 30, but McKagan found himself lost in a financial jungle with an appetite for instruction.

(BEGIN VIDEO CLIP)

(MUSIC - "PARADISE CITY" BY GUNS N' ROSES)

(END VIDEO CLIP)

QUEST: Take me down to Paradise City where the cash is green and returns are pretty. That's more of what the Duff man was after when he had his financial wakeup call in 1994. He went first to college, then business school. He studied finance, and has now founded Meridian Rock, a wealth- management firm for rock stars.

Switching from hard rock to Meridian Rock is the career change of a lifetime. The Duff man himself joined me and told me why he made the twist.

(RINGS BELL)

(BEGIN VIDEOTAPE)

MCKAGAN: I went to business school because I -- there was no real sector in the financial services that was serving me. I didn't -- I couldn't communicate with advisors, I didn't know what they were talking about.

And that, with me, being 30 or 31 years old, dealing in a business, entertainment business, where trust is something that's -- hard-earned. I just didn't trust anybody. And so, I went to school and sort of figured things out for myself.

QUEST: Most people know how much money they've got in their wallets and maybe in the bank. And yet, musicians seem to be remarkably financially inept. Why is that so, do you think?

MCKAGAN: Well, I think with anybody, if you're young, if you're 21, 22, 23 years old and if you're to make a bunch of money all at once, which is really the case with most musicians, sports figures, you get a hit record or you get a lump sum advance.

And if you come from -- I'm an artist who grew up in a family of eight kids, middle class at best. You have no experience with money, and you suddenly get a million dollars or a half a million dollars or two million dollars or more, you're just in a foreign territory.

QUEST: And when you went through the process of learning about finance, financial planning, what was the biggest lesson do you think you learned?

MCKAGAN: Well, I think it's really about your spending habits. You can get into some really -- crazy spending habits if you're getting a bunch of money and you think it's going to come in.

No manager of an artist is going to tell you your career is limited. They're not going to tell you, in other words, save this money, it could be your last hit record. Because an artist who's 22 or 23 or 25 is going to go find another manager who'd going to tell them their career is going to last forever. So, I think it's getting into healthy spending habits. Creating wealth preservation.

QUEST: The core question to you is, how are you going to do it differently? How does Meridian Rock negate the problems that you've talked about that other agencies and financial planners do when dealing with highly-strung musicians?

MCKAGAN: The first thing we're going to offer is the education bit. With our clients, I'm -- I instinctively know my constituency better than anybody else. I think Meridian Rock, that's where we stand apart.

And offering education in plain English to our clients. Filling in the gaps that they're too embarrassed to ask. You're embarrassed to ask -- if you're a millionaire, there comes a point where you're just -- you're too embarrassed to ask.

QUEST: Right.

MCKAGAN: What's in my mortgage? What is a mortgage? What's a bond? What's a stock?

QUEST: And to the young musician who says, "Hey, Duff man, look, just take the money, deal with it. You know what you're doing, man. I don't care. Bit of bonds, bit of gold, bit of this, bit of that, I'll read it all in the mags, I'll read it all in those funny colored papers." What would say back to them?

MCKAGAN: Yes.

QUEST: Would you just take the money and do it for them, or would you make sure they sit down and learn a bit about it?

MCKAGAN: I would definitely suggest we go for a coffee -- and let's talk about it. And I've done that already. And I think it's really valuable that we just have a talk as a couple guys. And let's talk about money, let's talk about how old you are.

And again, when you're in your 20s or early 30s, you think it's sort of going to last forever. And I'm a father of two girls, and they go to school here in LA, and I'm married. And there's a lot -- life does go on. I'm 48 years old. Guess what? I made it past 30 and life is -- you have to pace yourself financially.

QUEST: You're 48, you're two years younger than me. When I look forward, now, I just want to have enough that I'm not going to be poor when I'm old. Isn't that really what it's all about?

MCKAGAN: Yes.

QUEST: Isn't that really, Duff, what it's all about?

MCKAGAN: I think I probably muse on that once a day. Yes. You don't want to be broke and old.

(END VIDEOTAPE)

QUEST: Duff McKagan with his millions. And when we come back, where you might want to put some of those millions. The reds and the greens, the apples and the caterpillars. We're not talking agriculture. It's the earnings, and it is Q25. QUEST MEANS BUSINESS, back in a moment.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, more QUEST MEANS BUSINESS in a moment. This is CNN. And on this network, the news always comes first.

The Syrian opposition activists say troops have killed at least 40 people on Wednesday, including three children. Video posted online appears to show tanks rolling through Hama province. Activists say the regime is targeting residents who meet with U.N. observers once those observers leave the area.

South Sudan's president is abandoning a visit to China to tend to crises at home. Tensions between South Sudan and Sudan itself recently escalated into border clashes. The African Union has issued a Thursday deadline for the two sides to end the fighting and get back to negotiations.

News Corporation chairman Rupert Murdoch has downplayed his influence on British politics, telling a U.K. inquiry into press standards he's, quote, "never asked the prime minister for anything." He was responding to claims News Corp got inside information from the U.K. culture minister about his company's bid for full ownership of BSkyB.

The British economy has slipped back into recession for the second time since the global financial crisis began. Output fell in the first quarter of this year following a decline in the last three months of 2011.

Mitt Romney has moved closer to becoming the Republican nominee, winning the five latest primary contests. And now sources tell CNN Newt Gingrich will officially end his bid to be the nominee and formally express his support for Romney next week.

(MUSIC PLAYING)

QUEST: The Q25 and how the market is responding to the earning numbers we are getting. U.S. stocks are heading higher this session and strong corporate results are once again doing their bit to give you an extra insight into this earnings season, the Q25, we are here.

And Maggie Lake is with us in New York. Good evening, Maggie. Before we get to it, we've got a lot of companies to put in tonight. But let's just look at the overview and the overview as you can see, quite clearly, pretty much even steven, with just a little gain on the green.

It is a straightforward green, Maggie Lake, for Apple, which on our criteria, has four of the five automatic greens. The only one it failed was quarter-over-quarter earnings growth, and we don't really too much about that one.

MAGGIE LAKE, CNN CORRESPONDENT: Yes, it is an automatic green. I will just mention, Richard, as you put that in there, that there is a little bit of concern over whether they can maintain that kind of momentum, but certainly hard to argue with the numbers this quarter.

QUEST: All right. In goes that particular green, very hard to argue with the numbers.

Caterpillar is another interesting one. It is an automatic green. You can find on the website the rules for doing this, by the way. If there are (inaudible) five criteria, if you get four or five in one direction, you get that particular color automatically.

So Caterpillar, this is extraordinary, a five out of five on growth, revenue, QOQ, analyst estimates and outlook. But, Maggie, even you -- I mean, give me a break, Maggie, you've found a fly in the ointment.

LAKE: Well, I'm not the only one, Richard. Caterpillar shares are down over 5 percent right now. Listen, it was a good quarter, but if you're looking ahead, a little bit of a concern -- this is a company that really rode the strength of emerging markets, China and Brazil. They saw softening there.

That could be trouble in the future. I'm just going to give you this one statistic. Excavator sales in China down 51 percent compared to March last year. So watch that space.

QUEST: We'll just stay with Caterpillar, but it's beautifully balanced as these other economies are slowing down, so the U.S. is picking up, which maybe not picks up all the slack from China and Brazil, but that's the balance of it.

LAKE: Well, it's true and they also, they've been investing in mining, moving away from just home and building and infrastructure, investing in mining operations, and that's paying off well as well.

So, yes, it is a green. I'm just saying there's -- there might be trouble ahead.

QUEST: All right. Boeing gets an automatic green, four out of five for the U.S. plane maker. I did a bit of analysis on this one. The reason 737 Max orders selling well, 787 deliveries have now started, military sales are looking buoyant and the company is believed to have got ahead of itself in the way it is delivering results at the moment, Maggie.

LAKE: Yes, Richard, this is good -- and investors love the fact that a lot of the stream is coming from the commercial airline business, a little bit more steady, I think, than the ups and downs of defense. But I -- you know better than anybody, I think the question is can they -- can they make it profitable? They've got a lot of back orders. The pipeline looks good.

But can they get the planes out the door profitably? That's going to be the challenge. But certainly this is a good-looking quarter. It's a green.

QUEST: OK, we look out -- we had a debate, because on Delta Airlines today, it was time for a debate. Now with Delta, it got three out of five, and I voted strongly for a red.

LAKE: Yes, and Richard, it's hard to argue with you with airlines, that's for sure. The only thing that we saw at Delta that maybe would make you consider a green is that it's doing a good job diversifying its business. So as the U.S. and Europe which -- let's face it, looks slow for the foreseeable future, they're bulking in Latin America, you know, getting engaged in partnership, doing more investment in Brazil.

So that's got to be good. But I guess not good enough for you.

QUEST: And also Delta's results were influenced by a fuel hedge gain, and there were other one-off factors, which if you strip out, were not nearly as impressive.

Finally, for a second, let's just on this side of the Atlantic, the German business software firm SAP had strong first quarter numbers, Maggie, net profits rose by 10 percent to nearly $590 million, strong sales in Asia made up for the weakness in the West, and the company expects double-digit revenue growth this year. When we look at it, it's four out of four, so it is, again, Maggie, for Delta, it is a green -- a full green.

Before we give it the green, just before we came on air, I spoke to Jim Hagemann Snabe, one of SAP's chief execs, and I asked him what the important message was of these results.

(BEGIN VIDEO CLIP)

JIM HAGEMANN SNABE, CO-CEO, SAP: Well, fundamentally we chose an innovation-based strategy and we now have nine consecutive quarters of double-digit growth as a result.

QUEST: Expenses were up and number of employees were up. Are you keeping a handle on costs?

SNABE: Yes, we've actually now, for two years in a row, every quarter, been working on systematically improving the efficiency and speed of SAP. I truly believe that you're seeing now in the tech industry a separation between the innovators and the consolidators.

Apple is a good example of an innovator. And what you really need to be the innovator is you need to run faster than competition, innovate faster, bring your products faster to market. And we've doing that now, quarter after quarter, for nine quarters.

(END VIDEO CLIP)

QUEST: And is the green -- Maggie, all this strung together, we're looking at the greens are now getting ahead of themselves -- of the red, not by a huge amount, what lesson can we say on this, extrapolate from what we're seeing there?

LAKE: You know, it's interesting, Richard. I think the companies are delivering. It's a little surprising, given all the concerns we have about the global economy, isn't it? But as you said, when we were talking before, they're shifting, where they're seeing their strengths, they're moving ahead and taking market share.

I also think it has something to do with the expectations were so low going into this earnings season. I read somewhere for the U.S. and the S&P 500, it was for earnings growth of just 1 percent for the quarter just two weeks ago. Now that's already ratcheted up to 6 percent. So clearly the analysts were a little too pessimistic going into this.

QUEST: All right. Maggie Lake, with the Q -- helping me with the Q25, we'll have more tomorrow from this as we move forward, to see exactly how the progression goes along.

Now after the break, a preview of Boeing's latest plane, the Dreamliner. And hear why delivering it has been a bit of a nightmare.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

QUEST: Our business traveler update and Boeing's new 787 Dreamliner being flown by ANA. Well, the aircraft is also now on its world tour, visiting those countries and those airlines that are due to take delivery of it in the coming months.

I had a preview of the Dreamliner. It's the first major airliner to be made mainly of composite materials. It weighs less than a standard plane. Boeing claims it's going to be quieter and greener and travelers using the Dreamliner will have fewer problems with jet lag, because the atmosphere is kept closer to ground level.

Now (inaudible) hoping it will be a great success, and they've had to wait three years for it's been delayed by then several years, finally entered service three years late.

I spoke to Boeing's vice president for development of the plane, Dan Mooney.

(BEGIN VIDEO CLIP)

DAN MOONEY, VICE PRESIDENT, BOEING: Well, some of the -- some of the -- some of the reports that you've heard have been more around the shimming, making sure that we have -- we have all the shimming done correctly. We haven't had any structural issues.

But they -- some of those shimming, the gaps haven't been a requirement. So we've had to go back and reshim those where we found gaps. But we've corrected that in the production system.

QUEST: Do you think that if you look now at the large-scale manufacturing -- aircraft manufacturing, that whether it's the 380 or the Dreamliners that have (inaudible) just phenomenally difficult to get right, to build, to bring in on time and on budget?

MOONEY: Well, you know, the way that we -- the production system for the 787, it is a very different than anything that we've done before, not just with making it out of composites, but how we -- the parts that we manufacture, we manufacture the barrels in one piece. We install the systems at the suppliers. So that has been a big, big job to put that in place.

(END VIDEO CLIP)

QUEST: Now the plane, the Dreamliner was at London Heathrow. And today, BAA, owners of Heathrow, gave results and announced the numbers traveling through the world's busiest single international airport.

Heathrow have 15.7 million passengers in the first quarter of this year, a rise of 4.4 percent on last year, which is continues to cement Heathrow's position as the world's number one international airport.

One other note tonight, Boeing has delivered its first 747-8 intercontinental plane -- there it is -- to Lufthansa. But the plane has been stretched, jumbo jet, Lufthansa is expected to put it into operation in a few weeks, (inaudible) that the Dulles new route.

We will be trying it out and showing you what it is like, once it's in operation. Will, indeed, Lufthansa's new business class (inaudible), which we showed you on our business traveler update.

Jenny Harrison is at the World Weather Center for us this evening.

Good evening, ma'am.

JENNY HARRISON, CNN METEOROLOGIST: Evening to you, Richard, and I've got some great pictures to show you in a minute. I'm not going to get to them straightaway, and I have to say --

QUEST: No --

HARRISON: No, I hope to goodness you have better weather on this Dreamliner trip you're going to take, my goodness.

Let me talk about what's been going on, Richard, because I was saying yesterday, these winds are going to be picking up. The rain is coming in. All of that has been happening. It'll continue to happen across much of western Europe. This is the system responsible, some really strong winds, but also some very heavy amounts of rain.

Once again, really impacting the U.K., (inaudible) into the low countries, also northern areas of Spain. But the amount of rain that's been coming down, phenomenal, it has to be said. (Inaudible) Ireland 98 millimeters more than the total for the month of April, the average total obviously, Plymouth, 54 millimeters (inaudible) and also across in France (inaudible) 39 millimeters.

So this is some pretty heavy rain, and it is going to stay in the forecast for the next sort of 24-36 hours. But look at the winds again, well over 100 kilometers now, pretty much here the highest winds in the northwest as far as but also northern Spain has had some pretty high winds. Look at what those winds did. Now these are winds that are about 85 kilometers, now some gusts. Just watch.

Wow. That is one pretty hard landing. You can just see how the wind has just almost twisted the aircraft as it was coming in to land.

Watch this, another plane, trying to land. Just centimeters, and then, no, it couldn't. And my goodness, that was one really, really rapid ascent (inaudible) about this in the control room this morning. (Inaudible) but this is what happens when you have winds gusting to 85 (inaudible) really hard landing, wow, 85 kilometers an hour. What we've got to look forward to in the future, come back to me and I'll tell you.

The winds right now, not as strong as they were, but certainly in those coastal areas are being buffeted, and the winds have been on the increase across the north and the west of the U.K. This is the system. It is a pretty large system, far-reaching across much of northwest Europe for the next, certainly, 24 hours, and then it is kind of moving on its way eastward, as you can see there.

But (inaudible) heavy rain and those strong winds with it. But there are some warnings in place for that system there, but also one across the east of Europe. So we could have some thunderstorms and maybe some damaging hail there as well.

And then so not surprising, those strong winds in the forecast, look at Thursday, be prepared for yet more delays at all the major airports in the most part because of those strong winds and you can see why, can't you, when you see what happened there. So again, Paris and Marseille, but hopefully they shouldn't be quite as strong as they were today, Richard. So I'm wishing you --

(CROSSTALK)

QUEST: Hang on, that second plane, was that -- so that was actually landing? That wasn't on a takeoff run? That was (inaudible) landed and then went back up again?

HARRISON: All those images are supposed to be coming down. But there's another one that actually (inaudible), it wasn't as low down as that one. There's -- I think if you'd run the video a bit longer, but yes, no, they were all, you know, coming in to land, I mean, just phenomenal, Richard. I mean, look how close -- he was almost touching the tarmac, wasn't he?

QUEST: No, he's on it. He's on it. Well, fascinating.

HARRISON: I know.

QUEST: All right, Jenny. I'll bet you'd have lost your lunch if you'd been on that plane.

Many thanks.

HARRISON: You know what, I quite liked it, but that's me. I'm a bit odd.

(LAUGHTER)

QUEST: Jenny Harrison at the World Weather Center.

When we come back in a moment, Ericsson has first quarter earnings. The chief executive gives us an insight because it's all about teleconference (inaudible) in a moment.

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(COMMERCIAL BREAK)

QUEST: British Telecom's company Ericsson has seen its first quarter profits more than double. They rose to $1.1 billion, but most of that came from the sale of its 50 percent stake in the mobile handset maker, Sony Ericsson, from which they have divested themselves.

The picture was less healthy elsewhere, even in a growing market. Sales fell by 4 percent.

The chief exec, Hans Vestberg, joined me, and I asked him if you take out the one-off sales, a new look at the global scenario, the results were decidedly mixed.

(BEGIN VIDEO CLIP)

HANS VESTBERG, CEO, ERICSSON: That's correct. We have a little bit of mixed picture, and we saw already in the second half of 2011 that we got a change in our mix. We do much more coverage projects, rolling out 3G and we're rolling out 4G in a world which a much higher proposition of hardware compared to when we had a much more capacity upgrades, which are much more softer.

At the same time, our service base, this is growing very nicely, with 18 percent growth in our service base, this, which of course, our impact growth margins, they are have by nature lower gross margin. But by end of both nine, they are contributing pretty much.

QUEST: OK. But then why should we be optimistic about the future for Ericsson if you bear in mind in some cases lower margins, in other cases rollout versus upgrading? Where is the cause for optimism?

VESTBERG: Well, I think that what see is of course that are the underlying factors long-term in this industry are very good. I mean, you and I are using our smartphones more. The networks are using more mobile data.

Ericsson is the world leader in building mobile growth by networks together with our service portfolio. So, of course, we're well positioned with that. Last year we grew our mobile network business with 18 percent. This year we start a little lower number, and that was always a reflection that last year was a year where we saw quite a lot of investments.

On the other hand, our service business is now growing. It was not growing in the beginning of last year.

QUEST: Finally, it doesn't matter which way we cut this cake, really, does it? You are in the number one business for the future, everyone of us, you know, is getting more smartphones into our pockets, whether it's a phone or a tablet or whatever.

So I suppose, to put it crudely, you're going to have to work pretty hard to screw it up.

VESTBERG: I think it's a competitive market, but obviously we're well position. We're twice the size. We're number two in our industry. We're in a comfortable infrastructure, 11/2 time bigger in our service business, and of course, it's a lot about scale.

So you can invest in the research and development, and we invest on 3 billion euro a year in research and development to see that we get the latest technology out. So you and I can use our smartphones, our tablets in a much smarter way. And that we're providing to operators.

So, of course, we believe that long-term I.T. and telecommunication has a vital role for our society, and that's where Ericsson is well positioned.

(END VIDEO CLIP)

QUEST: The chief executive of Ericsson.

After the break, a "Profitable Moment."

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(COMMERCIAL BREAK)

QUEST: Tonight's "Profitable Moment," the recession club celebrates or commiserates a new member tonight. And all it took was a 0.2 percent contraction. And with that, the United Kingdom fell into the dreaded double dip, because of course, at the end of last year, it was down 0.3 of a percent.

Now the U.K.'s not the only one in Europe, of course, in very difficult times. They join countries like Italy, Spain and the Netherlands. But Britain is supposed to be the poster child for austerity. Its commitment to tackling its debt has been unwavering. The fact it can slip back into recession in this fashion will be a serious concern.

Britain is literally bouncing along the bottom, and even the media circus around Rupert Murdoch couldn't protect David Cameron from the heat of the House of Commons.

How can the U.K. grow when the greatest cuts they still need to be felt? When it comes to austerity, we'll know there's no deviation from the Cameron script. But as the recession enters act two, the performance of the PM will face more scrutiny.

And that's mean QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, I do hope it's profitable.

(MUSIC PLAYING)

QUEST: And these are the headlines. The News Corp chairman and chief executive Rupert Murdoch says he "never asked the prime minister for anything." He was grilled about his ties to the British government during an inquiry into journalistic ethics in London.

An aide to U.K. Culture Minister Jeremy Hunt resigned on Wednesday, saying his communication with Murdoch went beyond what Hunt had authorized.

A Syrian opposition group says government troops killed at least 40 people on Wednesday. Activists told us minutes ago that at least 12 of the victims died during raids in the city of Hama. Video posted online appears to show tanks rolling through Hama province.

South Sudan's president is heading home early from China. The African Union and the U.N. are threatening to intervene in a conflict between South Sudan and Sudan, if peace talks do not resume.

A former front-runner in the U.S. Republican presidential race will reportedly end his campaign soon. Newt Gingrich is expected to officially drop out as his final campaign event next week. We are told Gingrich will then formally endorse Mitt Romney to be the Republican nominee.

Those are the news stories we're watching for you on CNN. Now live from New York, "AMANPOUR".

END