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QUEST MEANS BUSINESS
Dell's a Done Deal; Stocks Rebound; Obama Budget Plan; Obama Lobbies Business Leaders on Immigration Reform; US Government Sues Standard and Poor's; UK Approves Marriage for Same-Sex Couples; French President Calls for Euro Exchange Rate Target; Euro's Six-Month Rally; European Markets Up; Euro Gaining, Pound Down; Dreamliner Drama; Remaking Seoul
Aired February 5, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: The Dell deal is done. The PC maker goes private. It's one of history's biggest leveraged buyouts.
Slating the ratings. It's the people versus S&P as the United States launches a lawsuit.
And the IAG chief, Willie Walsh, explains why disappointment in the Dreamliner may be a good thing.
I'm Richard Quest, I may be --
QUEST: -- a bit chesty tonight, but don't worry, I still mean business.
Good evening. Don't get too close to the television tonight. Still battling a bit of a cold. But we start with one of the largest leveraged buyouts in history. Dell, a former giant of the computer industry and a pioneer of the mail-order PC, that PC which you assembled and you chose the categories and then bought and it was delivered, is going private.
It's a deal worth more than $24 billion, put together by the company's founder, Michael Dell, and a private equity firm he's involved with, Silver Lake, and Microsoft, who chucked in $2 billion onto the table.
Shareholders, of course, have the final say on whether they're going to sell out and take the firm private. As for Michael Dell, who started off washing dishes in a Chinese restaurant, he made buying computers by post a form of art.
It didn't always go well. Look. At age 19, Dell sold hand-built computers from his dorm room at the University of Texas. He priced his turbo PC at $795, seriously undercutting IBM's more expensive models.
Expansion was rapid. The first Dell laptop went on sale in 89, and by the turn of the century, Dell was the top computer systems provider worldwide. The momentum slowed mid-decade after Dell resigned as the CEO. Continual wars when expectations were missed, rivals caught up, and PCs shrank into tablets and phones.
Michael Dell returned to the job in 2007 and began moving the company into storage, Cloud computing, and Maggie -- and software. Maggie Lake is in New York and joins us. Maggie, so, it's an interesting and complex deal, $24 billion, $2 billion from this person, that person. But what's behind it?
MAGGIE LAKE, CNN INTERNATIONAL BUSINESS CORRESPONDENT: Richard, this is really a man who wants to get away from the pressures as a public company of quarter on quarter having to deliver to shareholders who, frankly -- we hear this from business executives -- have a very short-term perspective. They need to reposition the company for the longer-term.
They had to do something drastic. They've lost about a third of their value, and a lot of it has been rapid, and they're not the only ones caught out. There has been a very quick shift from PCs -- away from PCs to tablet computers.
And analysts that we spoke to today said this is probably their best shot at survival. Have a listen.
(BEGIN VIDEO CLIP)
SHELLY PALMER, AUTHOER, "DIGITAL WISDOM": The strategy of taking the company private makes all the sense in the world, because you just are not going to be able to deal with publicly-traded issues if you want to be as agile as they're going to need to be in order to compete with Samsung and Apple and the rest of the people who are deeply ahead of -- really deeply invested in the post-PC world and way, way, way ahead of Dell.
(END VIDEO CLIP)
LAKE: And that's one of the points, Richard. These things are changing so quickly, you need to be able to move with speed. A lot of people still like Michael Dell. He remains the chairman. They think he's got a smart team around him, but it's going to be a tough climb.
Not everyone likes it, though, especially if you're not a fan of Michael Dell. Maybe you feel like you need a complete change. And interestingly, this is quite rich, HP publicly taking a real swipe at Dell's decision. Listen to what they had to say.
"Dell has a very tough road ahead," they said in a statement. "The company faces an extended period of uncertainty and transition that will not be good for its customers. Come on over to us." Of course, HP facing some of the very same problems.
And also Richard, really quick, some people don't like the fact that Microsoft's involved. Will they start to meddle now that they've tossed in their loose change under the pillow of $2 billion. Some concern about that as well.
QUEST: If we have a look again at that HP statement, Maggie, I think the HP statement as we see it there defines chutzpah in the true definition of the word.
QUEST: I mean, "Dell has a very tough road ahead. The company faces an extended period of uncertainty." That's the definition of chutzpah.
Let's move on to talk about, though, this quarterly reporting business. Look, Dell's been around the quarterly reporting for decades. Why all of a sudden -- that goes with the territory of a public company.
LAKE: It goes with the territory if you are a public company that is growing rapidly in a line of business that investors know well. You'd have some people argue, though, Richard, that the nature of public investing, in that it used to be held by mutual funds, we call them "long only guys," they do have a longer perspective.
There's so much pressure now with the markets underperforming, hedge funds underperforming, that the investors we think of who own public shares have changed a little bit.
And I've heard many executives complain to me that you cannot build for the future, especially if you're going against the Chinese and other people who can afford to lose money in the short-term to win the war, it's very hard to compete on that level with the pressures coming from shareholders on that quarterly basis.
We've seen companies stop giving guidance, and we've heard other ones say, "I'm not managing it for you, I'm managing for the long-term." We've heard it from Facebook, we hear it from Amazon.
LAKE: There is a lot of push back, but Dell obviously in a critical juncture that he really feels like he needs to sort of be out of the spotlight and have the ability to move quickly with his board and not go to the shareholders all the time.
QUEST: We'll watch it --
LAKE: Not clear if it's going to work but that's the thinking.
QUEST: We'll watch it very closely. It's an interesting development from a major company, which is why we're leading with it tonight. Maggie Lake in New York, thank you.
QUEST: To the markets, and -- ah! Look at that! We've been bouncing around like a beach ball all session. We're over 14,000 again. It's been over a few times during the course of the session.
It doesn't seem to want to hold the level, and even while we're talking, you might see it drop back under 13,999, but it is -- oh, no, it's actually going the other way, a gain of nearly 0.75 to 1 percent, 14,000 on the Dow is where we are heading.
And all of this comes at the same time as President Barack Obama has pitched a short-term budget fix to Congress. This is part of the attempt to stop the automatic sequestration, the spending cuts that will come into force on March the 1st. Mr. Obama said the offers he's made during last year's budget talks are still there, that is, if the Republicans want them.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The proposals that I've put forward during the fiscal cliff negotiations in discussions with Speaker Boehner and others, are still very much on the table. I just want to repeat, the deals that I put forward, the balanced approach of spending cuts and entitlement reform and tax reform that I put forward, are still on the table.
(END VIDEO CLIP)
QUEST: So, those reforms were on the table, but the president clearly has his work cut out for him and spent the day lobbying the heads of several stop businesses on the matter of immigration reform.
The president met with the CEOs of Yahoo, Goldman Sachs, Motorola, Coca-Cola. There were others -- United Airlines was at the White House. The president hoping to convince them of the economic benefit of his immigration reform proposals.
Standard and Poor's stands accused of scheming to defraud investors by rating mortgage-backed securities too highly. The US government says S&P knowingly inflated, misrepresented -- these are the words they're using -- and understating. It's causing investors to lose billions of dollars.
QUEST: The attorney general, Eric Holder, that's the attorney general of the United States, said, "Put simply, this alleged conduct is egregious." The acting associate attorney general rubbish claims that S&P ratings were not affected by concerns about profit.
(BEGIN VIDEO CLIP)
TONY WEST, ACTING US ASSOCIATE ATTORNEY GENERAL: The evidence that we have uncovered tells a very different story. We allege that from at least 2004 to 2007, S&P lied about its objectivity and independence. They said one thing, yet they did another.
(END VIDEO CLIP)
QUEST: Now, not surprisingly, Standard and Poor's has dismissed the action, or at least dismissed what's been said about them. S&P says, "A DOJ lawsuit will be entirely without factual or legal merit. S&P deeply regrets that our CDO ratings failed to fully anticipate the rapidly deteriorating situation or conditions in the US market during that tumultuous time."
Alison is in New York. Alison Kosik, look. I -- I suppose one of the things that's slightly puzzling since the DOJ's gone after may other actors involved is why it's taken them so long to get around to the ratings agencies when they were described as essential cogs in the financial destruction by a congressional panel?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Well, the very nature of the government is bureaucracy. Maybe that's part of it. Everything takes forever when it comes to anything to do with the US government, at least that's what many believe.
There is a little bit of irony in this, Richard, think about it. The very credit agency that downgraded the government's credit rating is now being sued by the government. Hm. And economist Peter Morici is going so far to say that this smacks of political retribution. That makes you think right there.
But yes, the US government now heralding this as a huge deal, going after S&P with this lawsuit, saying that basically S&P turning the other way led to the financial crisis. The government says the ratings agency was dishonest about the risks of the investments because it wanted to do more business from the banks.
S&P says, you know what? This suit is without merit, and that you know what, government? It related -- it relied, rather, on the same data available to the US government when it rated these securities, so there is a lot of this back-and-forth going on.
And what's interesting is, you think about when S&P went ahead and downgraded the US credit rating about a year and a half ago, the S&P was really the king of the hill. Well, not today, after this announcement.
QUEST: But here's the point: in those cases where either the New York attorney general or the US attorney has sued the banks -- and we've had quite a few of them, of course one of the banks that JPMorgan bought has been sued and they've had to pay -- we see time and again e-mails and notes and meetings that evince, if you like, malfeasance, not just incompetence. Are we expecting to see this in this case? Are we expecting to see more evidence?
KOSIK: You never know. This is just day one of this saga. Because at the same time, you think about the government didn't do its job in predicting the subprime mortgage crisis, either.
So, this is going to be an interesting story to keep an eye on for both sides because it's going to be interesting to see what proof the government does have in this lawsuit. So, yes, those e-mails could surface, the ones that we can only imagine are out there.
QUEST: We'll be watching them. Alison, don't touch anything. The market's over 14,000.
QUEST: Let's leave things -- that's right. Hands --
KOSIK: Encore performance --
QUEST: Keep your hands right there!
KOSIK: It could be an encore performance to Friday.
QUEST: Well -- encore. Depends if you're long or you're short. Over 14,000, 14,003. Alison Kosik is in New York tonight.
QUEST: The euro rally continues. When we come back, what's driving it? And Francois Hollande is questioning whether the euro's gains is affecting Europe. After the break.
QUEST: Now, British lawmakers -- news just in to bring to your attention. British lawmakers have just passed the first stage in introducing gay marriage into the United Kingdom by a vote or 400 to 175. It's a draft law which would legalize same-sex marriage from next year.
It's several stages away from becoming law, but it has exposed rifts within the Conservative party. Have more details on that in our news at the bottom of the hour, but the UK has approved gay marriage, or at least the first stages towards that, that vote taking place in Westminster.
Francois Hollande says Europe needs an exchange rate policy to tackle currency fluctuations. The French president says having the value dictated by the mood of the market jeopardizes efforts to restore competitiveness.
(BEGIN VIDEO CLIP)
FRANCOIS HOLLANDE, PRESIDENT OF FRANCE (through translator): We need to think about the role in the world of our currency, the euro. We cannot allow it to fluctuate as the markets see fit.
Monetary area must have an exchange rate policy, because otherwise it will have forced upon it rates that simply do not correspond to the reality of its economy.
(END VIDEO CLIP)
QUEST: Now, that not corresponding to reality, you can see quite clearly if you join me at the CNN super screen, where we see the sort of resurgence and rally in the euro over the last few months. It's been a six-months rally against the dollar, gaining 12.5 percent since the middle of July.
Let's have a look and see exactly. So, we have, first of all, July what took place. That -- now, in July, we had Mario Draghi with his "whatever it takes" statement, which of course really moved things forward. And that was the beginning of the euro's rally.
Then, you move a bit further to September, the German court approved the ESM. That was crucial. If the German constitutional court had rejected it, the ESM would have been toast, history, and gone forever. But it wasn't and it isn't and it's now the backbone of the bailout fund.
We have a blip in November because it gives more time for Greece. And there are serious questions, at this point, about Grexit. Grexit comes back on the agenda and the issues is there.
So, we -- take it from me, because we've done the numbers -- if you do a gain from July up until the current one, it's a gain of about 7 percent for the euro against the dollar, it's similarly against the pound. The euro's on a march.
Kiran Kowshik is the currency strategist from BNP Paribas. From his trading floor, he told me what he thinks is driving this very strong rally.
KIRAN KOWSHIK, CURRENCY STRATEGIST, BNP PARIBAS: What's really driving that, Richard, is this improved confidence in eurozone financial markets and in debt markets in particular. And I think essentially, this has been driven by an improved perception of the policy coordination system in the eurozone.
Now, remember 2011, there was no policy coordination system in between governments in the eurozone in terms of fiscal reform, and on the other hand, with the European Central Bank. But since this unveiling of this --
KOWSHIK: -- OMT program last year, we think that's really changed.
QUEST: So, the --
KOWSHIK: That's the key --
QUEST: -- the low levels that we were seeing in June or July of last year --
QUEST: -- were unrealistically low, and at these --
QUEST: -- current rates, 32, 33, are you saying we're not doing particularly well, but we are back to a more normal rate?
KOWSHIK: Yes, I would say that. In fact, if you look at some of our fair valuation models here at BNP Paribas, what it tells us is, from a longterm perspective, the fair value for a euro dollar is pretty much where it is right now, so it's around $1.32. So, we're not particularly overvalued here.
QUEST: The euro as a currency, are we now back to a situation where you are comfortable with its current level, or would you expect it to climb or fall?
KOWSHIK: What I would say is, for instance, we look for continued move high in euro, so we're looking for euro dollar going about $1.40 in the second half of this year. But I guess at these levels, I think for the next one to two weeks, the increased political uncertainty in Spain in particular could see the euro come off a little bit.
Remember, it's gone up about 4 to 5 big figures in the last week of February, so I would expect a little bit of profit-taking there. But I think investors are on the sidelines trying to wait to buy that dip, so I think it does go higher eventually.
QUEST: The old buy on the dips. Well, you might be well be seeing "buy on the dips" when it comes to the stock markets. If you don't know what buy on the dips means, it's whenever the market takes a little bit of a crater, people move in because they perceive that there's value to be had by getting in at that point.
Well, Europe's major stock indices managed to claw back some of the ground lost on Monday. It is a sea of green. Best gains of the day was in Milan and Spain. Spain roared up 2.2 percent. Banking shares rebounded from Monday's heavy losses. Santander was up 3 percent. RBS and UniCredit up more than 2.5 percent, but you're getting an idea at the way the markets were.
On the currency, we've done equities, we've done currencies, and now a Conundrum for you.
QUEST: Excuse me. There are five major currencies in the world, which have unique symbols to represent them. Very simply, name them.
The euro's gaining more than half a percent against the dollar, sterling's down by a similar amount, and the yen showing a sharper fall. Those are the rates --
QUEST: -- this is the break.
QUEST: US regulators are considering a request by Boeing to allow test flights of the 787 passenger jets grounded nearly three weeks ago. You'll be aware, of course, of the battery concerns, the lithium ion batteries.
Willie Walsh is the chief executive of IAG, the parent company of British Airways and Iberia. At the Business Travel Show in London, he told Ayesha Durgahee that he's disappointed with the Dreamliner's problems, and all-in-all, that's probably a good thing.
WILLIE WALSH, CEO, IAG: It's disappointing. I think everybody's disappointed. And that's actually a great positive, but you can see how much the industry is looking forward to this aircraft. I think it will be a fantastic success. I've great confidence in Boeing and working with the regulators, I believe they will identify the root cause and resolve it.
We're in the fortunate position in that the first deliveries were designed as replacement aircraft, and we have the existing aircraft in our fleet, which can continue in our fleet, so we're not facing an immediate problem.
I would've loved to have had this aircraft in my fleet two, three years ago, because it's so much more efficient, and with fuel still up near $115 a barrel, $120 a barrel, the more efficient the aircraft is, the better for everybody.
AYESHA DURGAHEE, CNN INTERNATIONAL CORRESPONDENT (voice-over): Walsh was the keynote speaker at this year's Business Travel Show here in London.
WALSH: And with no aviation policy, which many other countries regard as a huge error on the part of the government here, because they see aviation as an engine for growth, we've got to get on and do things for ourselves.
DURGAHEE: He also announced that British Airways and three rival UK airlines are calling for air passenger duties to be scrapped.
WALSH: That's the surprising thing about it. When you can get four airlines that do hate one another --
WALSH: -- beat one another up every day of the week, that we can find common ground. It's the only bit of common ground that we have. And I think there is a message in that so, we seriously believe that this tax is doing a lot of damage to the UK economy.
The treasury will say, well look at the the revenue we're raising. But our argument is that that revenue is being offset by damage to the economy, and our belief is if you scrap the tax -- this is supported by the report that we commissioned -- you will see a boost to economic activity and job creation, and that clearly has to be seen as a positive issue in the current environment.
DURGAHEE (on camera): And is it frustrating for you to see that maybe lessons haven't been learned from other countries, like the Netherlands?
WALSH: Yes. We keep pointing to the experience of the Netherlands, where they introduced the tax in 2008 and scrapped it after the first year, when they recognized that it was damaging their economy. It's about three times more damage in terms of economic hit to the economy than it was in terms of revenue raised.
I'm not saying that the figures would be exactly the same here in the UK, but I think the principle applies, and that's why we've been encouraging the chancellor and the treasury to review this. And we believe that if there's serious examination of the issue, this tax will be scrapped.
DURGAHEE: Because then people will just go somewhere else.
WALSH: Well, that's what's happening. Growth is going to other countries and other economies, and in an environment where you're screaming out for growth opportunities, to have a tax that is actually discouraging growth -- and not just discouraging growth, but actually destroying some of the economic value that you have -- you have to really look at these things seriously.
And it's a difficult challenge for the chancellor, but he's got a lot of difficult challenges, and his performance to date has not been very encouraging. Growth in the UK has been anemic at best, and we're talking about a triple dip recession. That is shocking, and we need to do something about that.
QUEST: Willie Walsh, the chief executive of IAG, owners of British Airways and Iberia.
We stay with travel after the break. Egypt tourism minister not surprisingly says his job is challenging. Boiling civil unrest, a sliding currency -- that's an understatement. We'll hear from the minister after the break. QUEST MEANS BUSINESS, good evening.
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just one moment. This is CNN, and on this network, the news always comes first.
British MPs have backed a plan to legalize gay marriage. The vote passed a short while ago by 400 votes to 175. The issue has divided the Conservative party. It was supported by its leader, the prime minister, David Cameron. Civil partnerships have been legal in the UK since 2004.
Bulgaria says the Lebanese militant group, Hezbollah, is linked to a deadly bus bombing last year in which five Israeli tourists and the Bulgarian driver were killed. Interior minister says an investigation has proven Hezbollah operatives carrying Australian and Canadian passports launched the attack.
Mexican authorities have vowed to find the group of gunmen who broke into a building, tied up a group of men and then raped six Spanish women who were with them. It happened on Monday night near the resort of Acapulco, where the victims were on holiday.
Japan is accusing the Chinese navy of using radar to gather location information about its vessels in the South China Sea. China has rejected the accusations, saying it was just patrolling its waters near a set of islands that both countries claim as theirs.
QUEST: Barack Obama has called for Congress to take up his budget proposals. What does it actually mean? Dan Lothian is at the White House for us this evening.
Dan, I looked at what the president -- I was just looking for my notes there. I looked at what the president said. He wants a smaller stopgap budget to avoid the sequestration.
Dan, forgive me; this sounds like kicking the can down the road.
DAN LOTHIAN, CNN CORRESPONDENT: That's exactly what many critics are saying, you know, let's just back up for those who might not be totally on top of what's going on here.
Back in 2011, the White House and lawmakers agreed to find significant deficit reduction over 10 years. They said the deadline of March 1st. And if they did not find these significant reductions, then what would kick in would be massive domestic and military cuts to the tune of $1.2 trillion.
There's a lot of concern here at the White House that that really could reverse a lot of the progress that we have seen on the economic front, the president spelling out that there's some good movement, that there's positive trajectory in terms of the economy, and that this could be a major setback, not only for the economy, but for many Americans who are just starting to recover or still struggling. And so that's why the president wants this temporary fix in place in order to prevent those steep cuts.
But you know, what's interesting is that the president himself has been a critic of these sort of small fixes, saying that this is not what the American people elected lawmakers to do, is to take these, you know, small steps along the way, that there needs to be sort of this big, complete balanced plan.
He still wants that, but believes that it's necessary to take these small steps in order to prevent some of these difficult consequences against the economy.
QUEST: All right. All right, but hang on. We came into 2013, having just survived the fiscal cliff debacle. We got rid of the debt ceiling by shoving that several months away. We -- if they do this, they get rid of sequestration. At some point, at which point do you think it will be? The Republicans are going to draw that line in the sand, Dan.
LOTHIAN: You know, it's difficult for me to say exactly what that point is. But you are correct. I mean, when you start making these small steps, the question becomes at any point down the road, will they be able to get anything done on a grand scale?
The president talks about that; you hear Republicans even talk about that. But what keeps happening are these sort of baby steps in order to prevent sort of the next fiscal cliff or the next, you know, big, massive cuts that would impact Americans. And so, you know, I think it's hanging out there as to, you know, what will be that line in the sand that Republicans will draw.
But it is disconcerting for a lot of Americans that lawmakers and the president himself keep talking about, you know, getting down to business, making some long-term solutions here. But what they see are just sort of incremental steps being taken.
QUEST: Dan Lothian at the White House for us tonight, we thank you, Dan.
Mahmoud Ahmadinejad has been the first Iranian president to visit Egypt since the Islamic revolution in 1979. He was welcomed by his Egyptian counterpart, President Mohammed Morsi. Relations between the regional powers have improved since Mr. Morsi was elected in June.
Mr. Ahmadinejad will attend the summit of the Organization of Islamic Cooperation, and that begins tomorrow on Wednesday.
Now if relations have improved between Egypt and Iran, that's just about the only thing perhaps that has improved. When your country is gripped by civil unrest, drawing in the tourists has become difficult. These are the images that confront potential visitors. And when you consider that, it becomes a mammoth task.
Now it shouldn't necessarily always be that way. In 2010, Egypt had a bumpy year, 14.5 million tourists. It dropped to just under 10 million after the uprising in 2011. The political unrest is also taking a heavy toll on the economy, particularly the Egyptian pound, fallen 13 percent against the dollar since Hosni Mubarak went.
The country's foreign exchange reserves, halved to 15 billion.
So if that is, if you like, the downside of what's happening, Egypt's tourism minister says much of the country is operating as normal, and he's confident the rest will soon unite. I spoke to the minister earlier today, and I asked him, well, bearing in mind on the -- what's on the plate, why is he so optimistic?
(BEGIN VIDEO CLIP)
HISHAM ZAAZOU, EGYPTIAN TOURISM MINISTER: Egypt is in a transition period. You can expect these things. It happened to other countries. We're divided now; it seems like we're a divided society. But we're going to get together down the road. Inevitably, Egypt will come together. The Egyptians will come together to move forward. That's for sure.
QUEST: Where would you expect that political consensus to come from, the Muslim Brotherhood?
QUEST: The --
ZAAZOU: Salvation --
QUEST: -- Salvation -- where -- what part is going to lead out on this?
ZAAZOU: I think we'd be coming up parliamentary elections. I think there will be a new government to be formed. I think by then there will be a lot of political talks, heated ones, probably, to come together to form a government that reflects both Egypts.
QUEST: In this scenario, we have demonstrations in Tahrir Square. Now it might be limited. And see many demonstrations outside the palace. But you're the tourism minister. I cannot think of a more difficult task.
ZAAZOU: It is --
ZAAZOU: -- challenging.
QUEST: Challenging, bitter word, challenging.
QUEST: How are you convincing people who don't know that, frankly, most of Egypt is still safe to visit?
ZAAZOU: Well, probably having 11.5 million visitors last year, 2012, is in itself a reason to give to the world that people are still coming to Egypt to visit. And it's sound, safe to come.
Now let me tell you that, Richard, not because of one square kilometer in downtown Cairo, you compress the 1 million square kilometers of Egypt into it, I think it's not fair.
And my job is to tell that to the world. If you just move not even 600-800 miles down to the Red Sea, let's say, just move across the Bridge of Qasr al-Nil, from Tahrir Square to the other side in Zamalek, for instance, and you've been there in that place, and life is just absolutely normal.
QUEST: What will you do to get that message out, besides coming and talking to me, because it is a very difficult message to get out, no question about it.
QUEST: People, when they spend their hard-earned money on a holiday, they want to know they're going to have a good time.
ZAAZOU: There's this famous statement or proverb that says a picture is worth a thousand words.
So I'm going to put webcams in our touristic sites, in Hurghada, in Sharm, in Luxor and Aswan, and have live streams from Egypt with people enjoying their time there, basking in the sun on a beach, sitting in the veranda of a Nile cruise or something of that sort, and enjoying it peacefully, enjoying it; everything is all right there.
Putting these live streams, saying, Luxor now, Hurghada now, Sharm el Sheikh now, to the world, I think this can do a lot.
QUEST: You're going to do that?
ZAAZOU: I'll do that. I think this will give more credibility wise sitting here in front of you, Richard, saying, listen, please do come to Egypt; it's safe. When they see it, they'll come.
(END VIDEO CLIP)
QUEST: Oh, I don't know, sitting here, have a good chat on QUEST MEANS BUSINESS. That'll bring in the tourists one way or another.
Well, when those webcams are up, we will show you the pictures of Hurghada and all the other places Sharm now, as the minister said.
And when we return after this break, UBS is making its top bankers pay for the sins of the past: fines, scandals and people disappointed in bonuses. (Inaudible) QUEST MEANS BUSINESS.
QUEST (voice-over): The answer to tonight's "Currency Conundrum," the top five currencies with their own unique symbols are: the dollar, the euro, the yen, the pound and the rupee. You can see on this screen there, those are the top five. You only won if you got all five; got four, you don't get anything.
(END VIDEO CLIP)
QUEST: UBS is reporting a $2 billion quarterly loss in the wake of the LIBOR scandal. Q4 profits were hit by that $1.5 billion fine to U.S. and U.K. regulators. (Inaudible) fixing the interbank rate, restructuring costs took their toll. In October, the bank announced it was getting 10,000 jobs. So that's the result from UBS. But we see where they come from.
Now after earnings like that, it's not surprising UBS is making cutbacks. And it's not the only ones. Here's the cash machine, and you might be sort of putting stuff in rather than taking it out. But the top tiered cash bonuses are now capped at UBS, at one point $1 million. That's half the previous amount. The idea is to increase accountability and reduce rate.
Barclays is now working out the costs of its misselling of insurance and has set aside a further $1.6 billion for what's called PPI. That was protection insurance -- and for interest rate swap insurance. (Inaudible).
And here's the other thing: not only is it putting that aside, it's warned that there may be more to come. Not surprising that the new CEO isn't taking a bonus and the group finance director announces he's off in the middle of the year.
RBS, owned by the British government, the British people, nationalized and a decision is expected on LIBOR fines this week. The rumor is the fines will come from the bonus part. Here's the interesting thing, though. There's a great row in Britain if British taxpayers through RBS end up paying money to the U.S. government. It just shows the way in which this could all work out.
Jim Boulden is here. What a -- what a motley rogues' list that makes.
JIM BOULDEN, CNN CORRESPONDENT: I think what it is is that banks, especially in the 4th quarter, again, trying to clear everything out, you know, they pay for their sins, as you say, put all the bad word out, put all the bad news out, get a lot of the losses out of the way, especially with UBS.
But the restructuring is going on, both at UBS and Barclays are absolutely in the midst of restructuring with new leadership and they're trying to clear out all the deadwood.
QUEST: The -- it's the size and the scale of this thing. It --
BOULDEN: It's not over. It's not over.
QUEST: But, (inaudible), so the car industry does this. And we know what's happening in the European car industry. But it doesn't have the systemic -- and not in the car industry or the airline industry, no other industry has had that sort of --
BOULDEN: It's morality, isn't it? The issue now is the banks are trying to clean up and say that we're more moral. And saying that we have changed our ways and they were blamed for (inaudible) crisis.
Obviously, car dealers and car manufacturers aren't. And as we were talking earlier, Axel Weber, the chairman of UBS, was talking about this at Davos. And let's hear what he has to say about the changes at his bank.
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These issues we're dealing with are industry issues. Barclays and UBS have been the first to deal with them and to reach global settlements. But the whole industry is under pressure and under regulatory surveillance and need to get on top of that.
What I can be reassuring you of is we're a very -- we have a bifocal view on how we want to change UBS. The first one is you need to get your strategy right and work UBS base (ph) in the long run. We changed the strategy. We focus on our wealth management business and we're reducing the size, the complexity and we're changing the client focus in the investment bank.
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BOULDEN: So part of this change, Richard, really, with the bonus structures, these top executives could still and probably will still get these very high bonuses. But if things go bad, if the tier 1 capital is called, if the ratio of the money that's put aside for the worst times falls below 7 percent, the bonuses, because they're in bonds, can be clawed back.
So even a couple of years from now, if these bonus -- if something goes wrong at UBS, the bonuses can easily come back and be used instead of taxpayers' money to help the bank.
QUEST: Lord Lawson, speaking to the "Financial Times," former U.K. chancellor, said last week that it was not necessary, particularly in the case of RBS, to pay such large bonuses for fairly average people. I think he was one who famously called -- he called journalists "teenage scribblers," not analysts.
But I mean, he -- you know, this is what it's really all about. Do these people merit the sort of rewards that they are getting?
BOULDEN: Yes, it's based upon the profits and the business you bring into the bank, no matter how you do it, i.e. LIBOR, if that's how your bonus is structured, then it's worth having because then you've done something to bring in extra money to the bank.
But the point is, as we know from the economic crisis, is that they were doing things untoward or illegal or things that later looked very bad, should they have been given bonuses --
QUEST: I do wonder, Jim, when it's ever going to come to an end. You and I have been covering this banking thing now for five or six years.
BOULDEN: I think your point about RBS is very interesting, isn't it? It could be money going from U.K. taxpayers to the U.S. government, because of something that happened five years ago. In the Japanese unit of RBS or a part of the bank that they bought later during the economic crisis, it's very messy.
When do we stop picking on the banks, is I think is what you're asking. When do we say these banks are systemic; they're important to the economy. And at some point they need to be able to grow --
QUEST: I hear Jamie Dimon --
BOULDEN: I -- do we want banks to grow?
QUEST: -- drinking that Kool-Aid?
BOULDEN: It's a point that needs to be made.
QUEST: By you?
BOULDEN: Well, or Jamie Dimon. We both get the same bonus.
QUEST: Sorry, that's not funny. Because if it's true, it would be tragic.
Coming up, on QMB -- I'll be the first you can blame -- it's home to corporate giants. But the city of Seoul needs a creative spirit, according to its mayor. When we come back, the solution in Seoul.
QUEST: The mayor of Seoul is attempting a social revolution to bring out the creative side in a city that's put itself on the map through manufacturing and technology. Park Won-soon says the city, that is home to giants such as Samsung and Hyundai, should be more than the cell of its corporations. When in Seoul, I visited the mayor.
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QUEST (voice-over): This is the new city hall in Seoul. Six months into its operational life and full of promise.
QUEST: You're in charge. What do you want the city to do?
PARK WON-SOON, MAYOR OF SEOUL: Recently, I'm trying to make citizens happier and, you know, (inaudible) their own goals.
QUEST: It's impossible in local government. It's impossible --
PARK: Yes, of course, of course, especially Korea is very highly centralized country. But I think investors we need reform. We are spared two floors of basement to the citizens ,cooling its citizens.
QUEST: So this is citizens' hall, not city hall?
QUEST: South Korea in the last 10-20 years has absolutely become one of the leading economies in the world. Seoul is now one of the leading capitals in the world. That gives you a great responsibility, doesn't it?
PARK: As you mentioned, we accomplished a great, you know, miraculous development in economic sense. But I think, you know, we should be more creative. We should focus on, you know, creative industry and basically, you know, arts and culture.
QUEST: This is not very popular in a country that makes electronics, motorcars and is a manufacturing industry country.
PARK: But I should -- I think we should be more than that.
QUEST (voice-over): The mayor is turning citizens' hall into a living symbol of his ambitions.
QUEST: This is fascinating. I want to reach out and touch it. What is it?
PARK: You can do it. I can --
PARK: -- very, very dangerous.
QUEST: What is it?
PARK: It's made by the one Korean artist. I call it symbolizing the harmony and the peace.
QUEST: Are you going to run again?
PARK: Yes, I think so. I'm planning, because three years is too short to make my (inaudible) sustainable.
QUEST: So you are planning to run again?
QUEST (voice-over): It's an optimistic note for an optimistic mayor, who's only just begun.
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QUEST: Anyone who says that was "Gangnam Style," need not bother to come back again tomorrow.
Jenny Harrison is at the World Weather Center.
The one thing that really surprised me -- and I should have known this before I went to Seoul -- is just how cold it is.
JENNY HARRISON, CNN METEOROLOGIST: Yes, no, I know, you're right.
QUEST: I don't know why. I don't know why I thought it would be otherwise.
HARRISON: I know what you mean. I think it's, you know, biting winds across that region, which in fact, given that you've just mentioned, of course, we've seen the whole piece there about South Korea, let's look at some of these pictures coming out of Japan, because again, my goodness, they look jolly cold here when this all began.
This is the Snow Festival. It takes place every year, an annual festival. And you can see these incredible ice sculptures, about 216 of them, some of them 25 meters wide, 15 meters high. But I said, look at the weather, bitterly cold. The snow is coming down. And it began on the 5th of February. It'll last until the 11th.
And actually, Richard, here's something that you might find very interesting. It's -- was actually originally set up in 1950 by the high school students. So that's a little bit before your time, but 1950. It's been going since then, of course, now it's become this massive event, 2 million people actually visit every year.
So yes, lots going on there in Japan. A good way of enjoying the snow. And of course, at nighttime, now, (inaudible) lovely. But let me tell you, there's plenty of snow across much of Europe. It's been streaming in in the last few hours.
Monday, my goodness, what a day again across the U.K., 8 centimeters of snow up in Scotland. London, a wind gust of 60 kph, but it was stronger than that in the northwest at 119. Now all of this rain, this snow, this sleet, it is moving pretty quickly on some very strong northwesterly winds, right now, the winds are sustained in Plymouth, 55 kph. That's means easily some gusts at about 65 or 70.
And this just shows in the next 48 hours, look at the numbers, they are actually going to begin to go down as the system comes through. Then, of course, it's sweeping across into western Europe. But very, very strong winds in the next couple of days. This is all being pushed very rapidly across Europe because those winds coming in from the northwest, you can see here, a bit of easing off.
But at that point, very strong in particular through the western Med. So very cold at the same time. So the snow that's coming down, there's a lot of it, very widespread. It is going to stay on the ground here, gives you an idea that's sort of the amounts we're talking about, maybe 5.5 cm in Stuttgart, about a centimeter in Berlin.
So all of that could cause some problems. The cold air's going to plummet southwards. So still, very much in the throes of winter, Richard.
QUEST: Which considering it's February, perhaps is not a surprise, but certainly I could do with a couple of remedies for my cold (inaudible).
HARRISON: Oh, you've always got something wrong, you poor old chap. (Inaudible).
QUEST: Thanks very much, Jenny Harrison, charitable and sympathetic as always.
A "Profitable Moment" is after the break.
QUEST: Tonight's profitable -- very "Profitable Moment" -- Michael Dell is to wrest back full control of the company he founded when he was just 19. Going private and no doubt in suitable seclusion, he will assess what he will do with it.
Behind the doctor's curtain, he will reshape and remove, rejig, reconstruct and almost certainly restructure his own beloved creation for a new millennium. What a sad indictment of the quarterly grind, the system of airing's one (sic) linen in public and having it put under the microscope by analysts and investors and pernicious pundits on programs like this.
The quarterly reporting is often seen as being the biggest problem. Unfortunately, most CEOs don't have access to the billions of dollars necessary to draw a veil over their company every time they want to do something. Luckily, for Michael Dell, he has that cash. Now he's going to use it.
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.
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QUEST (voice-over): The headlines at this hour: British MPs have backed a plan to legalize gay marriage. The bill passed by 400 votes to 175. It faces a vote in the House of Lords before it becomes law. The issue has divided the Conservative Party and is supported by its leader, the prime minister, David Cameron.
Bulgaria says the Lebanese militant group, Hezbollah, is linked to a deadly bus bombing last year. Five Israeli tourists and the Bulgarian driver were killed. The interior minister says an investigation proved Hezbollah operatives carrying an Australian and Canadian passports launched the attack.
Mexican authorities have vowed to find the group of gunmen who broke into a building, tied up a group of men and then raped six Spanish women who were with them. It happened on Monday night near the resort town of Acapulco, where the victims were on holiday.
For the first time in more than three decades, an Iranian president is visiting Egypt. Mahmoud Ahmadinejad arrived in Cairo for a summit of the Organization of Islamic Cooperation. The leaders there are expected to urge Syrian President Bashar al-Assad to hold talks with the country's opposition.
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QUEST: You are up to date with the news headlines. Now we go live to New York and "AMANPOUR".