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NYSE Agrees to $8 Billion Takeover; Advertisers Cash in on Doomsday Fears

Aired December 20, 2012 - 14:00:00   ET


RICHARD QUEST, CNN HOST: Big board, big deal -- the New York Stock Exchange has agreed to an $8 billion takeover.

Doomsday or boomsday? Advertisers cash in on the end of the world.

And it's a market trader with a sole. How to concoct (ph) and it's a YouTube sensation. He will be here live in the studio, because I'm Richard Quest and I mean business.


QUEST: Good evening. The big board has a buyer. Intercontinental Exchange, better known as ICE, I-C-E, is buying the owner of the New York Stock Exchange, the NYSE Euronext. And the price is going to be a massive $8.2 billion deal. ICE says it creates -- the deal creates a premier global exchange operator, a premier global exchange operator.

Now you may not have heard of the company, but it runs commodities derivatives markets. It actually has a larger market value than the New York Stock Exchange itself; even take into account European operations, including stock exchanges in Paris, Lisbon, Brussels, of course a life in Amsterdam.

(Inaudible) ICE says it plans to spin off those parts of the business in a European IPO if it gets the go-ahead it will keep hold of the NYSE life as the European derivatives exchange based in London. The accretization (ph) opens up a new continent of opportunities. The company said it is committed to keeping the iconic New York Stock Exchange brand alive, including the trading floor.

Now you'll remember the big board, the New York Stock Exchange, had a disastrous merger attempt with Deutsche Borse, which all ended in tears, acrimony and a great deal of compensation.

Alison Kosik is on the New York Stock Exchange floor.

Alison, the first question, do they welcome this deal? And for a screen-based exchange, will that floor survive?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Well, first of all, you know, what we're hearing is don't expect to see huge changes here on the trading floor. I mean, you're still going to see the trash on the floor. You're still going to see the food on the floor -- there's a little red pepper there on the floor. You're still going to see all this stuff.

You're still going to see everybody kind of standing around as they have, but and still doing work as they have been. It's -- it was interesting, as I spoke with one of the senior members of the trading floor -- he's been here a while and I said, what do you think? What do you think of this?

And he said, ah, you know. He's kind of indifferent about it. He said what's really sad, though, is how the New York Stock Exchange has had to sort of shop itself around over the past couple of years in order to survive.

But you know, this is kind of where the industry has headed. You know, you've seen stock, stock trading kind of overshadowed by derivatives and options and (inaudible) most people see this as actually a good thing, because you know the NYSE is an iconic brand. So it's a way to sort of leverage the NYSE with something new, with the commodities that we -- that you talked about.

QUEST: Right, but -- I mean, this Atlanta-based company -- and we've got to be careful; Atlanta-based companies, you know, they eventually take over the world.

The Atlanta-based company --


QUEST: -- has very much derivatives, commodities, screen-based -- now I know the floor that you're standing on is a mere shadow of its former self. It's a representation of a much deeper, more liquid market. But at the end of the day, the big board is the (inaudible) that everybody knows about.

KOSIK: Right. And you are still going to see the advent of computer trading continue to flourish. But I don't think you're going to see the floor go away. Once again, this is an iconic and historic place. It holds a lot of symbolism. You're not going to see the New York Stock Exchange floor go away.

QUEST: Alison, I want to look at the U.S. GDP number that we got today. We got the final reading on Q3. The U.S. economy grew at an annual rate of 3.1 percent, more than double the rate of -- as you can see, from the previous quarter. And the final number was considerably better than the initial estimate and the revision, which was around 2 percent.

What do we attribute -- what -- why should it go to 1.3 and then rocket up to 3.1 in Q3?

KOSIK: And, by the way, part of the reason you're seeing it rocket a little higher is homes. Home prices are -- or home sales, rather, home sales have really been -- had a banner year. We actually had a home sales report today showing that they rose at the fastest pace in three years in November.

So this actually could wind up being the best year for housing compared to, you know, if you compare it to even before the recession. So you're seeing strength in housing. Consumer spending is up. But here's the caveat. If the fiscal cliff, if we go over the fiscal cliff, you're going to see the economy back-pedal.

And that's also why you're not seeing a big rally today, because you look at the GDP number, that's a pretty good number considering, 3.1 percent. But we're really not seeing that reflected on the big board simply because there are those fears that we could go over the fiscal cliff. And if that happens, you could see the U.S. economy move backwards, especially when you look at GDP, Richard.

QUEST: Alison Kosik, who will now get the vacuum cleaner out and do a bit of sweeping up (inaudible) the floor of the New York Stock Exchange.

Thank you very much, Alison.

One thing before we move onto the fiscal cliff, just remember that in the United States, unlike, say, the U.K. or even in large parts of Euroland, the number that you see is always 3.1 quarterly number on an annualized basis.

So that's always it always -- the U.S. GDP numbers always look so high compared to the lower numbers that you will see in Europe; these are on an annualized basis. They don't -- they don't do the Q-on-Q number.

Plan B to avoid the U.S. fiscal cliff is to go before a vote in Congress in just a few hours' time, and there really isn't a moment to lose.

President Obama's promised to veto the short-term fix from the Speaker, John Boehner, and the cliff is getting ever closer.

There are only 12 days left to go to reach a deal and neither side is looking to abandon their stance, their entrenched position.

Mr. Obama's press security said the Republicans, in having this vote, a Plan B vote, were wasting their time.


JAY CARNEY, WHITE HOUSE PRESS SECRETARY: Unfortunately, the Speaker's response to that proposal thus far has been to walk away from it and to pursue what he called Plan B. Plan B, which is the only thing the House of Representatives, the Republicans in the House are focused on right now, is a multi-day exercise in futility.

JOHN BOEHNER, SPEAKER OF THE HOUSE: And for weeks, the White House said that if I moved on rates that they would make substantial concessions, from spending cuts and entitlement reform. I did my part. They've done nothing.


QUEST: And so with 12 days to go, you can see there's virtually no movement and deadlock.

After a break, a set of mixed forecasts. One for season improvement in the global economy, the other's a little more pessimistic. We will be live in the land of the ancient Mayans with the latest on Doomsday in a moment.



QUEST: The investment house, Schroder's, is feeling good about 2013. The asset manager says we are on a rocky path to normalization and it is positive about the prospects for global equities. Now Schroder's talks more about this.

The longer-term investor must be prepared for a growth-saturated world, performance driven by innovation and sustainable growth. It requires a change in mindset. All this week, of course, we are taking the global forecast for next year of the various big banks and we are putting them to use so you know what they are thinking about.

Virginie Maisonneuve is Schroder's head of international equities. I asked her earlier whether this outlook means things are getting better.


VIRGINIE MAISONNEUVE, HEAD OF INTERNATIONAL EQUITIES, SCHRODER'S: It's not that things are getting better; it's that things are not deteriorating any more. And if you look at -- if you want deficits for (inaudible) Europe, you might go for Greece for -30 percent of GDP to -20 percent, which is still very bad, but it's not deteriorating any more.

So except if we have, as you said, a big mess-up from politicians or a big shock to the global economy, I think Europe is going to be OK.

QUEST: You don't see the fiscal cliff as being the dreadful -- I mean it's a dreadful possibility, but you don't see it coming to fruition?

MAISONNEUVE: I actually think there's a quite large possibility that we go over the cliff and that we have sequestration for a couple of days, a few days. That might force, if you want, politicians from both parties to come to a clean table and said, OK. We've done a lot of work; we've come a long way. But actually there's a few things we still need to do.

And I think that might happen.

QUEST: Is it time, almost possibly, perhaps, to rebalance to more normal portfolio performance back into equities?

MAISONNEUVE: The real thing about 2013 is the possibility of reconnecting, fixing common equities through a more normal relationship, a more fundamental relationship.

And as you've pointed out, it's been biased very much in favor of fixed income, because of the fear and, if you want, a rate cut that we have, not that we are at zero interest rates, have been for a while, but they are signs with conditional, if you want, monetary policy to contemplate an increase in rate --

QUEST: Ah, ah, let me jump in here.

Are you -- you're not suggesting that in any of the major markets -- or maybe you are suggesting -- we actually see a rate rise in '13?

MAISONNEUVE: Not in '13, but I don't think it's going to '15. I think it's going to be before that. And I think the anticipation of that might very well -- during 2013, bring attention to what I think is an overvalued bond market.


QUEST: Rate rises. When will they come?

Economic forecasts are quite irrelevant. If you believe the world is coming to an end this Friday. The last page of the Mayan calendar has some prepare for the apocalypse. It has to be -- that has to be said -- some are waiting for the apocalypse and others have spotted a marketing opportunity, like Jell-O and this plan to appease the angry gods.



UNIDENTIFIED MALE: Jell-O Pudding, the funnest sacrifice ever.

UNIDENTIFIED MALE: Call me loco, but I think this is going to work.

UNIDENTIFIED MALE: Fingers crossed; we'll see you on the 22nd.


QUEST: Chevrolet's cashing in on the end of the world. Here's their ad from earlier this year.




QUEST: And on the way to the work, this morning the free newspaper, "The Metro," had this chocolate ad. The -- "A Mayan Prediction" -- and of course, the chocolate is might. "The End."

Now CNN's Nick Parker is at the ancient Mayan city of Chichen Itza with what is now Mexico and joins me now.

All right. Let's just -- I'm going to be a bit contrarian here, Nick. They are not suggesting the end of the world per se, but are all going to Doomsday. But they are suggesting a major event. Is anybody giving guidance on what that major event might be?

NICK PARKER, CNN CORRESPONDENT: No, not in so many words. I think the end of the calendar has always been a highly significant date in the sort of Mayan cycle of years.

There's one piece of evidence that suggests that a deity may return to the world once the 13 factor (ph) expires, which would be tomorrow. But no. In terms of direct guidance about what's actually going to happen, there's a very, very widespread series of interpretations. You could ask anybody behind me, and they'd probably tell you something different. So no, nothing's set in stone.

QUEST: Right. And are the tourists -- I mean, I've seen reports; some say there's a lot of cashing in. I've seen other reports say there's not as many as they'd hoped. I've seen others say that some people are being fleeced. What's the truth of the commerce for the end of the world?

PARKER: Well, Richard, the truth is it has been a massive success. About a year ago, the Mexican tourism board saw that there was a great deal of speculation about what was actually going to happen at the end of the Mayan calendar.

And they launched -- I believe you have the video -- they launched what you may describe as a teaser campaign, which basically featured a lot of thunderous kind of audio and bits to black. And it looked just like a Hollywood trailer. And if you watch that next to, for instance, the trailer for the Hollywood disaster movie, "2012," the two of them look very, very similar, sort of, you know, striking similarities between them.

So that was one way that they went about trying to generate more interest. So far, the tourism industry says that they've attracted more than 62 million tourists here in the last year alone to southeast Mexico. And they estimate they've generated $15 billion.

QUEST: Nick Parker -- Nick, if I -- if anybody there predicts what the market might do in 2013, do tweet me, @RichardQuest, and we'll share it with our kind viewers. That is, of course, after he's made his small fortune himself -- Nick Parker with -- Nick Parker, who is with the end of the world and if the end does happen, we won't see him again.

A Doomsday-related "Currency Conundrum" for you. The Belize central bank is celebrating the end of the world as predicted by the Mayans with two commemorative coins. But where were they minted? Mexico, the United States, and the U.K.? We'll have the answer later in the program.

The currency is for you tonight; the yen's falling. It's hovering down at around 20-month low against the dollar. The euro and the pound are pairing gains. These are the rates. Now time for the break.


QUEST: Now it may look like something that's fallen out of an old VHS tape player, but don't be fooled. This little bit of circuitry and chip-o-rama is actually a fully equipped computer manned by Adam (ph), one of our producers.

Now, never mind. Here, this is a $35 Raspberry Pi. There's a cheaper $25 model without built-in networking features, $35, $25, just open something so we can see what it does.

It has many features -- well, tonight, in "Make, Create, Innovate," Nick Glass found out why this recipe for the Raspberry Pi with its cheap computer was cooked up in the first place.



NICK GLASS, CNN CORRESPONDENT: This is the world's oldest working digital computer. It dates from 1951. But as we all know, computers are now rather smaller. This one, no more than the size of your average credit card, this, they tell us, is the smallest and cheapest personal computer in the world.

GLASS (voice-over): Meet Dr. Eben Upton, the man behind the Raspberry Pi.

EBEN UPTON, THE RASPBERRY PI FOUNDATION: Everything that I do in my daily life is derived from having had a computer in my bedroom as a child.

GLASS (voice-over): Upton developed the Raspberry Pi while in charge of computer science admissions at Cambridge University. He was disappointed that numbers were dwindling.

UPTON: Really, Raspberry Pi's an attempt to kind of reboot some of that 1980s computer industry zeal that had been responsible for giving us this string of very talented students.

GLASS (voice-over): Upton's aim was to make a computer so cheap and so small it was accessible to all children in schools. After six years in development, and many prototypes, Upton and his team finally made one for just $25. The end product launched in February 2012, was made possible by the tiny chip in the tropical landscape.

UPTON: One of the things that allows us to hit our very low price point is that we have a very high level of integration, you know, there's just not that much stuff on the board. All of the main features are integrated into this chip in the middle here.

GLASS (voice-over): It's equipped with all the components you'd expect from a regular computer, connect to the Internet, plug in a mouse and keyboard, use a word processor, play DVDs and games. The possibilities abound.

Upton got into computer programming in the late '80s when it was still taught at school. He wants to bring those skills back using the Raspberry Pi at primary schools like this one.

UPTON: (Inaudible).

GLASS (voice-over): The children take to it quite quickly. Programming the computer themselves in Python, the language of Raspberry Pi.

UNIDENTIFIED MALE: It's quite fun.

UNIDENTIFIED MALE: I'm interested in a nice way to get (inaudible) Python.




UPTON: One of the biggest reactions we got from these children was because they could actually see it. So seeing something that they normally only see if they drop their mobile phone on the floor and smash it. They really love that. It's been a really positive response.

GLASS (voice-over): To Upton, the educational benefits are obvious.

UPTON: Almost everything that you can do with a Raspberry Pi you can do with a conventional PC, but you would be doing it at 10 times the cost.

GLASS (voice-over): The Raspberry Pi was intended just for use by school kids in Cambridge. No one had any idea that it might appeal to a much, much wider market.

UPTON: (Inaudible) hundreds and our dreams, our wildest dreams were we were thinking about making 10,000 of these. The response, when we sold 100,000 of these on the first day, was kind of, you know, it was -- it was a surprise to us, even though we'd had a few hints that there might be a surprise in terms of demand. This year has just been one surprise after another for us.

GLASS (voice-over): Sales are now expected to hit the 1 million mark within its first year.

UPTON: We're starting to see people at work being buying $200 or $300 industrial computers. But they're saying, well, hang on a second. You know, why am I buying this when I can just buy one of these?

GLASS (voice-over): With big industry showing interest, the Raspberry Pi looks at the spread internationally.

UPTON: For another really interesting one that I had no idea of and should have anticipated was of course in the developing world, that these make very good entry-level productivity computers for the developing world. So it's fun to see some interest there as well.

GLASS (voice-over): To meet growing demand, most production now takes place in the Sony factory in South Wales, currently making 18,000 Raspberry Pis a week. And with a million sales to date, seems that everybody wants a slice of Raspberry Pi.


QUEST: A fascinating story, the true "Make, Create, Innovate."

He was a crucial player in one of the biggest financial scandals in history. This man's about to go to prison -- maybe. And if his face doesn't ring a bell, the name certainly will. You'll hear the name after the 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.


QUEST (voice-over): The U.S. senator who many think will be the next secretary of state says mistakes were made leading up to the deadly attack on the U.S. consulate in Benghazi in Libya.

John Kerry was speaking at a Senate hearing which followed the release of a blistering report about the attack. A top State Department official has resigned and three more have been suspended.

Palestinians in Damascus are fleeing Syria by the thousands after intense fighting in their district of the capital. The U.N. says around 100,000 of them have now fled the Yarmouk refugee camp. Syrian rebels moved in last week and appear to be gaining a foothold in the center of the city.

Three more young victims from last week's shooting rampage in Connecticut are being laid to rest today, along with a 30-year-old teacher. Altogether, 22 funerals are being held this week for the victims of the massacre at Sandy Hook Elementary School.

There's said to be a showdown today in Congress over America's fiscal cliff. The House Speaker, John Boehner, will call for a vote on his plan that would extend tax cuts for Americans making less than $1 million a year. Barack Obama, the president, says he'll veto that. He's insisting on a lower threshold for the cuts.



QUEST: Bernie Madoff's brother is about to find out if he's going to prison for the next 10 years. He'll be sentenced in around two hours over his role in his brother's Ponzi scheme. Of course, it's rather appropriate that this sentencing is taking place now. It was at this time of the year when the original facts about Madoff's Ponzi scheme and the billions of dollars that he swindled came to light.

Richard Roth is in New York for us this evening.

Do we have -- I assume it's some sort of pre-agreement or some sort of grand bargain. So what are we expecting?

RICHARD ROTH, CNN CORRESPONDENT: Well, there may be some emotion from the victims of the Madoff Ponzi scheme, the largest ever in the world, but the drama may have seeped out once the prosecutors agreed on a 10-year prison sentence for Peter Madoff.

The FBI, U.S. attorney's office, saying they felt they were happy with that deal worked out several months ago.

Now Peter Madoff, many people don't know, Peter Madoff never really pled guilty to any direct involvement in that Ponzi scheme over $65 billion dollars. What Peter Madoff has pled guilty to is failure to file taxes, conspiracy, different aspects of what happened.

He was very close to his brother. Some say they were always like 12 steps from each other. He was the chief compliance officer of Bernie Madoff's financial company. So he was the one who was supposed to know what was going on.

QUEST: Richard, this is -- I mean, Madoff always said he did it on his own. And we now know from this case and from other cases that the net has widened. Do the authorities believe they've fully got to the bottom of who was involved and how many people were involved?

ROTH: Well, they're still talking to people. Thirteen defendants, I believe, including Peter have been charged. Eight or so, I think, now with this case, have pled guilty; still five cases out there. And of course, there's perhaps information to be gathered during the questioning of these people.

But it's been years now. Ruth Madoff, the long-time wife of Bernie Madoff, living in Florida, never charged; two sons of Bernie Madoff, one committed suicide two years ago, the other not charged; both Peter Madoff says he was shocked like everyone when this Ponzi scheme was unveiled, denied any involvement in it, the sons and the wife also, Richard.

QUEST: Richard Roth, who is in New York, and let us know when the judge has finally passed the sentence? Probably will be 10 years, if that's what it looked like he agreed to. Richard's in New York.

Blizzard conditions across the United States. There are major travel disruptions, cold weather in Europe. Dangerously cold weather -- we shouldn't be surprised. It is December.

Jennifer Delgado is at the World Weather Center.

JENNIFER DELGADO, AMS METEOROLOGIST: Hi, Richard. You know, we shouldn't be surprised, but we are kind of surprised to see all these blizzard warnings in place across parts of the U.S. We're still seeing those in four states.

And we have video to show you in case you haven't seen a blizzard in a while. You're looking at snow blowing around and the visibility here is not bad in comparison to some locations. This is in Beaver Dam, Wisconsin, with some of these locations we're talking wind gusts up to about 90 kph. And this is a view of Lambeau Field, the big, famous football stadium out of Wisconsin.

Now as we take you over to our graphic, many of these areas have seen, we're talking a meter and a half of snowfall. Now we're still looking at bad weather out there, blizzard warnings still in place, anywhere you're seeing in red.

And not to mention how the winter storm warnings and advisories that are still spread out through parts of the Great Lakes, Ohio Valley, even to parts of the East. Now as we go through today, we are going to see more of that snow coming down as well as rain. We've even had a report of severe weather down in parts of -- tornadoes reports of a tornado still that hasn't been confirmed.

But looking at the radar right now, notice here's the freeze line just to the northwest of Chicago. That means more of this snow is going to be moving through parts of the Great Lakes and Ohio Valley. We're talking still some locations could see another foot of snowfall. Now how is that going to affect Chicago?

Well, we do know, Richard, now that we're hearing that Southwest Airlines is canceling flights into and out of Midway Airport. No word yet on O'Hare. I don't know a lot more of those are going to be happening because with those winds being so gusty, the planes just can't take off or land safely in that.

As we track this for you into Friday, we're going to be talking about the storm system through Saturday as it moves right to the north. We're going to be dealing with these very strong winds. And then on Friday, East Coast traveling in the morning as well as for the afternoon, it's going to be hampered by severe storms, I should say some heavier downpours as well, some stronger storms moving through.

Right now, we do have a ground stop for Memphis and then for Chicago/O'Hare, good delays of two hours or more. And again, those are certainly going to increase as we go through the next 24 hours. As we look at some more of expected delays for Thursday, we're talking Kansas City, strong winds in both LaGuardia as well as JFK (inaudible) be looking at delays due to rain, especially through tomorrow.

Now through parts of Europe, we have some rain, very heavy rain moving through the U.K. as well as snow moving through parts of Germany. Now look what's happening, still more snow coming down through parts of Turkey.

Let's go to the video very quickly. The snow, as I said, of course, ushering in much colder air and that's, in fact, not out of Turkey. I don't believe that's out of Turkey, because -- that's out of Iowa. The Turkey snow is not as bad as that.

But, Richard, that's a blizzard right there that you just saw.

QUEST: Well, it proves the point, snow does look all very similar, and it really is only a question of how much of it arrives at any given moment.


DELGADO: How much is blowing, yes.

QUEST: How much is blowing. It all looks the same.

When we -- Jennifer, have a good one. Thank you.

Now when we come back, the world may not end -- or it may end tomorrow. (Inaudible) still unveiling a profit. We'll take you to a village in France that's cashing in on the cashing out of the potential of the world. QUEST MEANS BUSINESS.





QUEST (voice-over): The answer to today's "Currency Conundrum," the Belize central bank is celebrating the end of the world as predicted by the Mayans with two commemorative coins -- I beg your pardon -- where were they minted? The answer is C. They were both struck by the British Royal Mint.


QUEST: Some places in the world are said to be spared from the fabled apocalypse and it's already presenting a few opportunities. Among them is the French village of Bugarach, from where our correspondent, perhaps hopeful for the future, Jim Bittermann visited.


JIM BITTERMANN, CNN CORRESPONDENT (voice-over): The peak of Bugarach has always been an asset to the people who live at its base, for the urban myth connecting it to the Mayan calendar and the end of the Earth has certainly given a boost to the local economy. Or at least hopes for the local economy. Since apocalypse believers claim the mountain will protect the village on Doomsday.

It's not just the stones from the mountain selling for 3 euros each , or the Bugarach alien wine for 5 euros a bottle or the water for 15.

It's also the local property owners who have been putting their houses and land up for sale, asking double previous sale prices, although the mayor, who is against the profiteering, says the optimistic sellers are not finding buyers.

JEAN-PIERRE DELORD, MAYOR OF BUGARACH (through translator): Because of that publicity over the past two years with regard to the end of the world on the 21st, they thought people would be coming here to buy land to protect themselves from doomsday. So they have multiplied the sale prices of their homes at least by two. But nothing has been sold.

BITTERMANN (voice-over): What the end of the world myth has led to, the mayor says, is the theft of the city's sign: three have been stolen. And replacing them, says he, costs a lot of money!

Still the village of less than 200 people stands to make something off its fame.

Already journalists are flocking to the town and guest houses and campgrounds are booked up.

With all the media attention, few want to talk in specific terms about the money being made, but the rumor around town is that a guest house has rented its rooms for 1,500 euros for the week and that campsites are going for as high as 350 euros each.

Still, it seems like a bit of an exaggeration since some, like Susan Harrison, are letting people camp on their land free.

SUSAN HARRISON, BUGARACH RESIDENT: There are going to be many people. There are lots of media coming and lots of police coming, so they'll provide business in the little shop, at least. And this is the Chambre Deutz (ph). That's already booked up for the -- for the end of the world.

BITTERMANN: What are you expecting on the day?

HARRISON: Yes . For me, normally winter is very boring here, and for me it's entertaining. I like meeting people anyway, so I'm open to it all.

BITTERMANN (voice-over): And this tiny village lost in the foothills of the Pyrenees Mountains is likely to see it all as the date for the end of the Earth approaches.

The only local restaurant is putting up a tent to accommodate the expected overflow crowds. Clearly some think that there is money to be made from the end of the Earth and are at least a little confident they'll be around to spend it even after doomsday -- Jim Bittermann, CNN, Bugarach, France.


QUEST: Now if you type one pound fish, I promise you, if you type one pound fish into Google or any other browser, you'll get Muhammad Shahid Nazir.


MUHAMMAD SHAHID NAZIR, FISHMONGER AND SINGER: Come on, ladies; come on, ladies. One pound fish, come on ladies, come on ladies, one pound fish.

QUEST (voice-over): (Inaudible) him singing at his fish stall in (inaudible) has more than 3 million hits. He arrived from Pakistan just over a year ago to the U.K. And now he's swapped his market stall for a recording studio and this is what went. Tomorrow night you'll meet him on this program. This is how the song sounds.

NAZIR: Come on, ladies; come on, ladies. One pound fish. Have another look, one pound fish. Have a, have a look, one pound fish, it's very, very good, one pound fish, very, very cheap, one pound fish. Six four five for one pound fish. Six four five for one pound fish, very, very good.

QUEST (voice-over): Do not blame me if you can't get that off your brain for the next 24 hours. And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable.




QUEST: From Basel in Switzerland, this is MARKETPLACE EUROPE. I'm Richard Quest. A landlocked country that is not part of the Eurozone but most definitely at the heart of European business. We are here this week to visit two companies and see how they are faring.

Firstly, Isa Soares visits the chocolate maker Lindt over in Zurich.

Then here in Basel, I visit the pharmaceutical giant Roche to discover how the company's developing new markets.

UNIDENTIFIED MALE: I keep saying to our people, if we don't come up with new medicines in 10 years we can switch off the lights here.

QUEST: The crisis in the Eurozone has taken its toll on the Swiss economy. Not surprising when you think that 60 percent of the country's exports goes to the European Union. One of those sweetest exports is chocolate. They love the stuff here. If it can be turned into chocolate, they will make it.

It all raises the question whether the chocolate industry is weathering the storm or -- pardon the phrase -- feeling the heat.

Do they have the nuts and the bolts for the battle? Isa Soares now reports.



ISA SOARES, CNN CORRESPONDENT (voice-over): For over 165 years, Lindt has been refining the art of chocolate making, something I know very little of.

SOARES: I'm going to be a bit generous.


SOARES: (Inaudible) like a chocolate.

SOARES (voice-over): As my first chocolate bear begins to take shape --

SOARES: How's that?

SOARES (voice-over): -- it's easy to see why this company's success has been so sweet.

The Swiss chocolatier made over $52 million in operating profit this year. But the European crisis has created some bitter challenges.

ERNST TANNER, CHAIRMAN AND CEO, LINDT & SPRUNGLI: The markets are not growing as fast as they used to. When we set our sales target growth for growth between 6 percent and 8 percent, the markets were growing basically between 3 percent and 4 percent. Now some of the markets aren't growing at all. And some are even declining. So that's really the challenge that we have.

SOARES (voice-over): Despite the difficulties, Lindt still has complete control of the whole production process. With every (inaudible) playing its part. Here they are Lindt's quality control.

UNIDENTIFIED FEMALE: We just try whatever we like. We don't have a kind of a closed system, where it's a hands-off kind of a thing. So people really have their favorites. So every day, every second day, they'll pick up one of their favorites. And it's really good feedback for us, you know, employees to hear anything about type of quality that they feel is different or that they like better.

So it's a good thing. We encourage that.

SOARES (voice-over): This do-it-yourself strategy means that Lindt can focus on churning out more chocolate. During our visit, Easter eggs were already on the production line.

UNIDENTIFIED FEMALE: Easter creeps up on you before you know it and just we have (inaudible) bit of intensive work on this product, we want it to really be exact.

SOARES (voice-over): Despite strong sales this year, Lindt has lost an alarming 9.5 percent from its top line in 2011 and a strong Swiss franc continues to eat into profits.

UNIDENTIFIED MALE: We have grown from approximately 800 million 20 years ago to 21/2 billion last year. But those 21/2 billion would be more than 4 billion at the exchange rates that we had 20 years ago. But the Swiss franc has become so strong that when we consolidate the local figures, even though we grow between 6 percent and 8 percent, sometimes it's Swiss franc that's a declining sales.

SOARES (voice-over): Lindt is combating the currency situation which it has no control over, but targeted expansion in the U.S., China, Russia and South America, it has also opened some 200 shops, boutiques and coffee shops. The reason behind it: to promote the brand.

UNIDENTIFIED MALE: In emerging markets, where the -- where we have two situations, first, the chocolate consumption is relatively low and the Lindt brand is unknown. And with the boutique, we can really best demonstrate values, our quality, our breadth of products and this is really a (inaudible) with which we have established our brand in the States.

SOARES (voice-over): The market, though, is growing as is my bear.

SOARES: We've got the final touch.

SOARES (voice-over): My amateur attempt is in sharp contrast to Lindt's recipe for success. Stick to what you know, and in time, it should bear fruit.


QUEST: Isa Soares, enjoying the Swiss chocolate. And afterwards, you can burn off some calories running up and down the stairs here at the magnificent 16th century town hall in Basel.

When we come back after the break, we'll meet the chief executive of one of the world's biggest drug companies, which is based right here, the CEO of Roche in a moment.




QUEST: Welcome back to MARKETPLACE EUROPE in Basel, in Switzerland, where they seem to know how to enjoy life.

It's not surprising that also in the region is two of the world's largest pharmaceutical companies, one of which is Roche.


QUEST (voice-over): Founded in 1896, Roche Group is a health care company that focuses on diagnostics and pharmaceuticals. The company invests heavily in research and development. It's the world's largest provider of cancer drugs, with 15 manufacturing sites all across the world, Roche employs 80,000 people. The annual sales are $45 billion.

DR. SEVERIN SCHWAN, CEO, ROCHE GROUP: We focus on innovation and that means for us truly differentiate medicines. Medicines which prolong life, medicines which improve the quality of life and as such we are also less expose to the pricing pressure; we are less exposed to the austerity measures we see in Europe.

So if it's really getting crunch time, then payors allocate additional dollar to the solutions which brings the best incremental value.

QUEST: So even though they are more expensive, you're saying that payors are prepared to pay the extra money, even in difficult times?

SCHWAN: Provide that the value is there. So what we have to demonstrate is that these medicines actually mean that patients live longer. And if this is the case, then payors are prepared to (inaudible) innovation.

QUEST: The concept of personalized medicine is -- at a time of constrained health care budgets, inevitably, personalized medicine is more expensive.

SCHWAN: What is actually the exciting part from a health care cost point of view is that you also save a lot of cost. I give you a very concrete example.

We have a medicine which helps against breast cancer. Now this medicine only works for about 20 percent of the women who respond to that specific medicine. They can immediately see if you do not give this medicine to all women, but only to 20 percent of the women, those women who really respond, theretofore you save the all the ways which the medicines to start with.

But what is much more important is medicines only account for about 10 percent of health care budgets. So what you also save is all the infrastructure behind it.

QUEST: Five to 10 years' time, where will this company be?

SCHWAN: I will still see us very much focused on pharma and diagnostics. We will see more and more interaction and collaboration across the two divisions. I keep saying to our people, if we don't come up with new medicines, in 10 years, we can switch off the lights here.

QUEST: You've come up with this ingenious reinsurance scheme in China, with another Swiss company, which is almost Machiavellian in its -- in its cleverness to try and get the Chinese to be able to have the money, to be able to buy your own -- get your own drugs.

SCHWAN: The Chinese, they have today already a kind of natural insurance system. And it works in the way that the family will put the money together if somebody in the family falls sick. And what we thought is let's take this to the next level and introduce insurance schemes on the broader base to improve (inaudible) medicines. And actually, it's developing very nicely.

QUEST: Oh, come on; you're being modest. It's ingenious.

SCHWAN: It is.

QUEST: I mean, you've found a way -- although not out of your own pocket -- or you don't benefit directly from the policies, but you have found a way to fund your future customers.

SCHWAN: Yes, but it's not so different to what we know in the developed countries. What we do is we bring our expertise to insurance companies so that they can model the policies to cover such diseases, because for insurance companies, it's extremely important to model the probability that, for example, you get cancer and then we can bring in a lot of know-how. And as such, we can -- we can help to establish such schemes.

QUEST: And the question you must be asked most of all -- and I'm going to ask it, so forgive me -- will we ever develop a single drug that will cure or kill cancer?

SCHWAN: I'm very confident with the progress we're seeing in science that for more and more types of cancer we will -- we will eventually turn this -- at least into chronic disease, perhaps not into a cure, but perhaps into a chronic disease.


QUEST: The chief executive of Roche on the future of medicine. Chocolate and pharmaceuticals, all in one program. And that's MARKETPLACE EUROPE for this week. I'm Richard Quest. Now on the River Rhine in Basel. Whatever market you're in, I hope it's profitable. I'll see you next week.