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North Korea Nuclear Threats Condemned; Navigating the Rhetoric; PC Sales Slump; Computer History; RIP to PC? PC-Maker Shares Tumble; US Stocks at Record Levels; European Markets Mostly in the Black; Dollar Down; Make, Create, Innovate: Silent Hinges

Aired April 11, 2013 - 14:00   ET


NINA DOS SANTOS, HOST: Firm, united, and calm. G8 foreign ministers meet North Korean threats with condemnation.

Hitting the brakes on the bitcoin bubble. Trading in the online currency is now suspended.

And why we're dropping the desktop. Why the PC is falling out of favor these days.

I'm Nina Dos Santos in for Richard Quest, and this is QUEST MEANS BUSINESS.

Good evening. G8 foreign ministers have condemned North Korea's nuclear threats, quote, "in the strongest possible terms." The foreign ministers are currently meeting in London today ahead of the wider G8 summit set to take place in Ireland later this year.

The rising tensions in the Korean peninsula are high up on the agenda as a stream of warlike rhetoric continues to pour forth from Pyongyang. State media there has been quoting a government agency as saying, quote, "war could break out at any moment."

While Washington is waiting for the North to test weapons, a US official tells CNN that the regime has now raised at least one missile into an upright firing position yesterday before lowering it again today. The official says it's a Musudan missile, that's the same type as you can see here in this military parade.

The UK foreign secretary William Hague says that leaders are remaining calm, though, in the face of North Korea's ongoing saber-rattling.


WILLIAM HAGUE, UK FOREIGN SECRETARY: Of course it is true that we are all conducting ourselves in such a way as to -- not to -- respond in a -- to what I've previously described at the weekend as paranoid rhetoric in a way that feeds that rhetoric. But we responded in what I also said at the weekend would be a firm and united and calm way.


DOS SANTOS: Fred Pleitgen has been following the developments at the G8 meeting, where ministers have vowed to impose new sanctions if North Korea continues its nuclear program.


FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: At their meeting in London, the G8 foreign ministers slammed North Korea for the ongoing tensions on the peninsula. They say that the rhetoric that was coming out of Pyongyang is very concerning, and they also said that this is something that would further isolate the Democratic People's Republic of Korea.

Now, they also slammed North Korea more generally for the nuclear proliferation that is happening there, for the nuclear tests as well as, of course, the missile tests, one of which North Korea says it could conduct at any point in time. They said that if something like that happens again, the nuclear test or a missile test, it would lead to further measures.

When questioned about this, the UK's foreign secretary, William Hague, who was hosting this meeting, said that they mean sanctions. This could lead to additional sanctions against North Korea. So, a very staunch warning.

And one of the interesting things about all this was the unanimity with which everything was reached. One of the things that we heard from inside the negotiations that were taking place here in London is that all parties were onboard in condemning North Korea in the strongest possible way.

The Russians, also who sometimes have been a little weaker on the North Korea issue, also fully onboard with this, Moscow making clear in the past couple days that it also views the situation in North Korea as one that is very serious and also very disconcerting to them as well.

So, certainly a very strong message that the G8 foreign ministers sent in Pyongyang's direction and one that was very, very united.

Fred Pleitgen, CNN, London.


DOS SANTOS: Nicholas Burns served as US undersecretary of state for political affairs from 2005 to 2008. He's now a professor of diplomacy and international politics at Harvard University, and he joins us now, live from Cambridge, Massachusetts in the United States. Great to have you on the show, Nicholas Burns.

What should we read into the ramped-up rhetoric here coming out Pyongyang, and also, the rebuffs coming out of Washington. Help us navigate what you actually expect this to turn into.

NICHOLAS BURNS, FORMER UNDERSECRETARY OF STATE FOR POLITICAL AFFAIRS: Well, Nina, I think that Foreign Secretary Hague -- you just showed footage of him -- got it right when he said we're looking at paranoid rhetoric, and I think paranoid actions by the North Korean leadership.

They're focused on the fact that their leader, the 30-year-old Kim Jong-un, is untested, he's inexperienced, he needs to prove himself in his own system with his own military. They're also coming up to the centennial of the birth of the founder of North Korea, Kim Jong-un's grandfather, Kim Il-sung, who created North Korea out of the ashes of the second World War.

And the North Koreans have tended to use these anniversaries to demonstrate their military technology and military strength, and so I do expect -- I think most people expect -- that there'll be some kind of missile launch in the next several days designed to get the attention of the international community and demonstrate their power.

It's not working. North Korea's been rebuked by country after country, and as you just reported, even the Russians have now joined in a very tough statement today by the G8 foreign ministers.

DOS SANTOS: Yes, let's read into that statement there. William Hague seemed to indicate that we could be looking at sanctions, if indeed we did see an escalation of the North Korean nuclear program. What kind of effect would those sanctions have, though?

BURNS: I think that the answers that we have internationally are quite limited, because most countries have complete sanctions on North Korea. There's more, I guess, that the international community can do to express disappointment.

But North Korea is a closed country. It's closed itself off from the rest of the world. It trades with very few countries. It's mainly reliant on China.

So, I think if we're looking for answers as to how to redress the problems and keep North Korea from becoming what it currently is, a troublesome country making bellicose and outrageous threats against its neighbors, it's really up to China to demonstrate action.

China was not part of that G8 group that met today, but China is a member of the G20 and a very important country, obviously. I think what China does will go a long way to determining -- the international effectiveness in responding to North Korea.

DOS SANTOS: But do you really think that China will step up to the stage here? Because obviously, China is the main trading partner, as you were just saying, for North Korea. If you take a look at the imports, the goods that North Korea's been importing, largely fuel, they're very reliant on the Chinese for fuel, that has been rising.

But China's not exporting more to North Korea these days. In fact, its relationship is changing and declining with North Korea.

BURNS: Well, China does provide fuel and does provide food aid to North Korea, and both are critical to the survival of the North Korean regime. But I think that certainly China appears to be conflicted here. China doesn't appear to favor what North Korea's doing, and yet China does not want to promote a situation where there's an influx -- inflow of refugees from North Korea into China itself.

And China does not want to see a unified Korean peninsula under a democratic government in Seoul. Once the North Korean regime implodes at some point, which it surely will. So, China is protesting these measures, but not doing enough to exercise effective intervention.

And I think we're seeing a real test of Chinese leadership here. I don't think the Chinese government is passing that test right now.

DOS SANTOS: What about the US response, here? How would you gauge President Obama's response to the kind of bellicose noises that have been coming out of Pyongyang over the last year?

BURNS: Nina, I think you've seen a unified response from the United States, the Republic of Korea -- South Korea -- and Japan. Both -- all three have been very firm. You've seen US/South Korean military exercises last week. And a reminder that the United States has a defense treaty with South Korea.

And at the same time, it's been a very calm response. President Obama, I don't think, has mentioned Kim Jong-un by name. President Obama is not out front giving press conferences. They're trying to low-key -- make a low-key response to this crisis.

You saw some conciliatory statements, low-key statements out of the South Korean government today. That's the right response, to show firmness, and yet also not say anything that would provoke this very unstable young leadership in North Korea.

DOS SANTOS: After 27 years in US foreign service, would you say we will see a war emerging in this region?

BURNS: I don't think it's likely at all. We've seen this kind of behavior from Kim Jong-un's father, Kim Jong-il. It seems to be a pattern in how the North Korean's believe they can get the attention of the rest of the international community.

I do think, Nina, they have damaged themselves in a very substantial way. Over the last two weeks, they've been so irresponsible in threatening war against multiple countries, I think the world is fed up with them. So, I don't think this is really going to work.

But neither do I think that the North Korean leadership is going to try to start a war with South Korea or the United States, because that's very much against their interests, and their primary interest is to preserve this ruling family and preserve the Communist system. I don't think they'd endanger that by trying to incite a war.

DOS SANTOS: Nicholas Burns, former US undersecretary of state for 2005 and 2008, thank you so much for joining us here on QUEST MEANS BUSINESS this evening.

Straight ahead on the show, farewell to the floppy disc. Turning back the clock on the PC world. We'll find out why sales of those PCs have been dropping.


DOS SANTOS: Hello, welcome back. Well, guess what? We're falling out of love with the personal computer. PC sales have actually, according to the latest report released on the subject, slumped by a record amount. Let's have a look at the figures that were released.

PC shipments, as you can see on the chart behind me, have been falling for a couple of quarters, now, but get a look at that. They fell 14 percent worldwide last quarter. That's the worst quarterly decline that we've actually seen since records began all the way back in 1994.

The industry blames poor sales of super-thin ultra books as well as, remember, that Windows 8 operating system that was recently launched and got rather mixed reviews.

We've turned towards tablets, haven't we, over the last few years? And as you can see there, well, things like the iPad -- let me just show you how much the hardware's actually changed over the last quarter of a century.

This trusty item here is actually the little Macintosh SE from all the way back in 1988. It has a 20 megabyte hard drive. But by comparison, this much lighter and cumbersome item over there, the iPad, actually has 128 gigabytes. That's about 6,000 times the memory that this 1988 model actually had. And remember that that was above its time, a rather avant- garde all the way back in the late 80s.

Let's go back 40 years and also relive some of the more amusing ad campaigns spurred by the computer industry. Here we have an attractive young man with an Apple II all the way back in 1977, as you can see.

While his wife is doing the washing up and proudly looking on, he of course is perhaps not checking his e-mails, because e-mail wasn't around in those days, but he's certainly doing something rather high-tech with graphs in the background.

This was a popular games machine, which actually plugged into your color television set. The programs were actually stored on a cassette tape. It had, of course, no hard drive, so when you switched the thing off, you lost everything you were working on.

It originally sold for a rather pricey $1300, and that's around about $5,000 in today's money. It just goes to show how coveted and expensive these items were.

Fast-forward into the 1980s, and here is the author Isaac Asimov pointing out a 1981 Radio Shack TRS-80. As you can see, he's quoted as saying, "I may never use a typewriter again." Well, he couldn't have been more right, could he?

Because this particular item was actually more of a business machine especially good for word processing. The retail price, again, was another shocker: $2,687. In today's money, that is a whopping $6,700.

And then, in the 90s is when things really took off with the IBM PC and the whole plethora of clones that that generated. This, as you can see, is one that actually had -- get this -- a CD-ROM hard drive. That was something -- CD-ROM drive aside from the big hard drive. That was actually a big innovative addition to the PC.

Well, you can also see prices started collapsing as many more of these came to the markets and the technology became more accessible for the average person. This was $2,000, this particular item. In today's money, that equates to around about $3,000.

But of course, it's still much, much more expensive than your average tablet, because you can get one of those for around about $75 or less.

Let's digest how things have changed over the industry over the last 20 or 30 years. I'm joined by Ivan Nikkhoo who runs a venture capital firm that deals in particular with technology companies . Great to have you on QUEST MEANS BUSINESS, Ivan.


DOS SANTOS: One of the interesting things that we've seen, obviously, as we've moved from these great big, gargantuan computers to very mobile devices, is a whole side industry of applications. And that's where people like you come in.

NIKKHOO: Well, if you look at the context of -- there are three big developments. Number one, more and more people like to consume data on apps, not only in a mobile way, but in a personalized and curated way. In other words, I want to consume what I want, the data on the apps, where I am, when I am, and specific to me.

And number two, the erosion of pricing on the tablets means that it is more and more affordable for larger masses to get it.

And number three, and probably the most important, now you have the universal applications that are available for mobile devices at a point where it is at critical mass, and everybody uses them. The developer communities really providing applications for the mobile devices in a way that is absolutely usable for not only consumers, but the enterprise as well.

DOS SANTOS: So, there's one operating system that everybody can use, and different companies can code towards, if you like.

NIKKHOO: Well, there's more than one. Obviously, the two dominant ones being Android and, of course, Apple's. But the implications are probably somewhat more important, and it's reflected by the valuation of the companies that you see in the market.

First and foremost, I don't believe that this is a standalone trend. I think the trends will continue. And the erosion of the price of the tablets will apply more and more pressure on the PC manufacturers. I think we're going to see that it's going to hurt more and more in absence of a strategy to provide something in the mobile sector.

The other one is the opportunities in the mobile sector are absolutely enormous. If you look at the valuation of companies that are providing for the mobile industry, whether it's mobile advertising, mobile monetization of -- video or anything else that goes with it, versus the same companies that do it on the online business, the evaluation parameters are absolutely different.

DOS SANTOS: Yes, and there's tons of those companies. Ever so briefly, do you think we're going to see the death of the PC by the end of, say, this decade? The death knell's been ringing for some time.

NIKKHOO: I doubt that very much because the enterprise is very used to using the same model for some time to come. And do you remember we've been talking about the death of PC for a very long time. I doubt that very much.

I think the usage of it will differ. I think the type of PCs we will use will differ. And they'll become somewhat more application-centric for what we want. They have to be significantly more agile. But no.

DOS SANTOS: OK, Ivan Nikkhoo, thank you very much for coming on QUEST MEANS BUSINESS --

NIKKHOO: It's a pleasure, thank you

DOS SANTOS: -- this evening. Great to get your insight. And obviously, what's been going on there in the PC markets certainly hurt some of those US technology companies. Here to tell us about that and how the US markets fared in today's session is Alison Kosik at the New York Stock Exchange. Alison?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Hi, Nina. We're watching Hewlett-Packard, shares of Microsoft, Intel. They are the biggest losers on the Dow by a long shot. Shares of Hewlett-Packard down more than 7 percent, Microsoft losing more than 5 percent, Intel down almost 3 percent.

And to add insult to injury, shares of Microsoft were downgraded to sell by Goldman Sachs today. Shareholders in these companies are deciding to take their money out. They're viewing this trend as something that probably won't be reversed, and you see all that red for the PC-makers.

But guess who's holding their own? Apple. Apple shares only down slightly right now. And while the company is North America's third-biggest supplier of PCs, it's also played a big part in disrupting that market by providing us with all those handheld devices we use instead of computers.

As for the broader market, we are watching the Dow and the S&P continue to trade at all-time highs. A couple of months ago, traders we talked to weren't expecting these major indices to hit these kinds of records until the summer. In fact, it happened almost immediately after we had those conversations with those traders.

So now, even some of the more cautious people are expecting the rally to continue because there's really no resistance level to the upside. Of course, much of this is Fed-supported because of the millions -- the billions of dollars of stimulus coming into the market each month. And because of that, one analyst references the current market environment as, quote, "the land of make-believe." Nina?


DOS SANTOS: Gosh, that's an interesting one for a midweek point, isn't it? Thank you very much.

KOSIK: It is.

DOS SANTOS: Alison Kosik there telling us about those new record highs that the markets are striking Stateside.

Well, let's have a look at how the markets are doing here in Europe, because they ended the session in the black, just about. Let's look at the closing numbers here. The Cypriot General index, though, being the exception, I should point out. That one falling around about a fifth of one percent, as you can see, the laggard on the chart, there, in the bottom line.

A spokesman for the Cypriot government says that the bailout costs for that island have now jumped to around about from $22 billion to around about $30 billion, and he says that the situation has worsened significantly since December when the previous government made its initial calculations. Some of the news on Cyprus also taking the euphoria out of the markets in the eurozone as well.

But still, we saw the FTSE 100 and other markets around reach in closing just shy of the 1 percent plus mark on the day.

Let's move on from equities to currencies. It's time for today's Currency Conundrum out there. The Irish Central Bank is offering a refund for commemorative James Joyce coins that they issued yesterday because they made a mistake on them.

Our question today is what is the error that they made? Is it A, a spelling mistake? Could it have been B, a misquote? Or C, the image on the coin isn't actually that of James Joyce? We'll have the answer for you later on in the program.

The dollar is currently down against both the pound and the euro. It's hovering around about a six-week low against the single currency in particular, as you can see. The level of 1.3123. It's gaining ground, though, yet again against the Japanese yen, pushing further towards the four-year high.


DOS SANTOS: Silence is almost something of a commodity in itself, isn't it? We pay for noise-canceling headphones, triple-glazed windows, and weekends away in the quite countryside for just a little bit of peace and quite.

Well, Blum -- or BLUMOTION technology, to give it its full name -- is one company that's selling the sound of silence with closing automatic hinges like these. In this week's Make, Create, Innovate, we take a look at how its BLUMOTION technology makes those clattering cupboard doors something of the past.


NICK GLASS, CNN INTERNATIONAL CORRESPONDENT: This is how it was in a 20th century kitchen.


GLASS: All those units you struggle to open and shut. All that banging and slamming. All that changed when a 21st century hinge came along.

GLASS (voice-over): And this is how it is in a modern kitchen. All smooth, sleek, slow-motion, and almost silent, thanks to Claus Hammerle and the team at the hinge company, Blum.

CLAUS HAMMERLE, BLUM: BLUMOTION is a dampening system which can make it happen that you can close a door in the kitchen without noise and with a special BLUMOTION.

GLASS: BLUMOTION was invented in 2001, the revolutionary hinge with a dampening or soft-closing mechanism. A plastic rod or piston absorbs the force of the closing door or cupboard, allowing it to close slowly and silently.

HAMMERLE: Here we have the first generation of BLUMOTION dampening systems. It's a small, fluid dampening system which can be placed in the furniture on the other side of the hinge. And if the door pushes this stick down there, there's a force, a braking force, that stops the door and lets it close. That was a revolution.

GLASS: And the latest versions of the hinge, like everything else these days, are shrinking in size.

GLASS (on camera): The whole mechanism's much smaller now.

HAMMERLE: This is an ordinary space you use for a hinge system, and here in the hinge pulse, you have the dampening system, which works like the big one.

GLASS: And it just -- slowly, slowly shuts. Silently.

GLASS (voice-over): Hammerle is the current hinge guy at Blum. He's part of a team of 70 or so researching and developing devices for kitchen units.

GLASS (on camera): When someone at a party says what do you do for a living, what do you say?

HAMMERLE: I'm an engineer, and that's boring enough.


GLASS (voice-over): At Blum, the kitchen is seen increasingly as the center of most homes rather than the living room, and for Hammerle, the feel is just as important as the look.

HAMMERLE: It's like if you close a door of a car, it's different you close a B&B or a Mercedes or some cheaper car. It's also in the kitchen. So, you have a special motion.

GLASS: Blum produces these dampeners and hinges here in their millions at the rate of one every second. Turnover last year was more than $1.2 billion, and BLUMOTION has become the industry standard for all kinds of soft-closing systems worldwide.

Researching and developing new kitchen ideas is key for Blum. A big priority is ensuring their hinges are still user-friendly the older you get.

GLASS (on camera): I'm wearing a so-called age suit, a heavily weighted one, supposed to simulate what it's like to be 70 to 75 years old with stiff joints, arthritis, and poorer vision. They want to show people as they get older that they absolutely need BLUMOTION in their kitchens to make life easier.

GLASS (voice-over): Hammerle and his team are constantly striving to open new doors for business. Judging by their success, it's clear that in the hinge business, you can't afford to rest, well, on your hinges.


DOS SANTOS: All hinges on new technology, doesn't it? Well, after the break, the online currency the bitcoin rolls into trouble. The Tokyo Exchange puts trading on hold. We'll tell you why in just a moment's time.


NINA DOS SANTOS, CNN HOST: Hello and welcome back. I'm Nina dos Santos. Let's take a quick check of the main news headlines today on CNN.


DOS SANTOS (voice-over): U.S. intelligence sources say that North Korea has now lowered a Musudan missile that had been raised (inaudible). They say that they're puzzled as to why the missile was originally elevated but not fired. (Inaudible) foreign ministers meeting in London today have condemned North Korea's threat in, quote, "the strongest possible terms."

Palestinian prime minister Salam Fayyad has offered his resignation according to a Palestinian source. The move follows longstanding internal policy disputes between Fayyad and the Palestinian president, Mahmoud Abbas. Mr. Abbas is expected to accept the resignation when he returns to Ramallah later today.

Human Rights Watch says that there's mounting evidence that the Syrian air force has been deliberately targeting civilians. A new report says that the air force targeted bakeries and hospitals in violation of international law. The group interviewed more than 140 witnesses and victims in Syria to gather the evidence.

The U.S. Senate is debating tougher gun control laws. Democratic Harry Reid formally opened the discussions on a package of legislation proposed by the President Barack Obama earlier today. It comes after a filibuster by Republicans failed. The debate is expected to last weeks.



DOS SANTOS: Trading in the online currency the Bitcoin has been suspended on one exchange following a dramatic fall in its value. Bitcoins have something of a wild ride of late, but now it seems as though while in the midst of a cooling-off period. Maggie Lake is in New York to explain exactly what's happening.

Take it away, Maggie. I don't get this one at all.


MAGGIE LAKE, CNN CORRESPONDENT: Yes, good luck to me, right? Listen, like a lot of things about this digital currency, it's not exactly clear what's going on. But to the best of our knowledge, one of the main exchanges where this is traded, online exchange Mt. Gox has suspended trade.

They say they have not been -- on their website, they put a message up, not been a victim of a denial of service attack, which has happened in the past.

But instead what they say is so many new people wanted to open accounts in the last few days that it basically made an impact on their system and it started to lag. It just was overwhelmed, frankly. So in order to sort of catch up, they want to shut it down for a little bit.

The problem is that this is coming right after there's been some very big moves in the trade. Take a look at this chart, Nina. Talk about volatility, we look at charts all the time on different financial instruments. It's rare you see something like this.

This digital currency, which has been around for four years, back in 2011 traded at $9. At the start of this year, it was only $20. The speculation in this, the activity in this picked up so much it hit a high of $266 earlier this week, crashed down yesterday, again, without much understanding as to why, about 30 percent and of course now it's not trading right at all.

Again, Mt. Gox saying that -- and they are just one exchange, but they are a large one. They do about 80 percent. They're saying they're a victim of the success of this digital currency, which it seems to be on everybody's radar, and that they're just catching up. But a lot of people who watched it very concerned about it.

It is unregulated, not controlled by any government, any banks. There are very little protections. And they say this is the perfect example of why individuals should stay away from it. So you've still got two sides there. It's going to start resuming trade at about 2:00 am, we think.

DOS SANTOS: It doesn't say much for the confidence people have in their own currencies around the world, Maggie, does it? And also do we expect speculators have been playing a role in that kind of spike we've been looking at on the chart?

LAKE: Absolutely to both, Nina. And you do bring up a good point. Part of what has sort of pumped this into the headlines and on the radar are some of the situation in Cyprus, where traditional banks were closed; people couldn't get out their money and so people began, again, talking about this alternative currency.

But I'll tell you, I was out talking to people yesterday about it, seeing how it would work in the real world. And they tell me, especially the people watching it with a bit of concern, tell me that the move up in this started happening before the situation in Cyprus.

And part of it is because people who are very experienced speculators started figuring out how to work the system. It is a peer-to-peer system; it exists only in computers, again, through these exchanges. Part of it is related to computing power. They've figured out how to work it. They've figured out how to play it.

And they've been riding the speculation and making real money off of it. From my understanding from these sources, there are sort of day traders, experienced day traders out there, some laid off traders, people who are used to trading in emerging market currencies, exotic currencies, who understand illiquid trading.

So you know, read this as professionals, even if they're not employed by a bank. Also maybe some small hedge funds, not big ones who are worried about attracting any more attention, but you know, really small ones around the world.

So they are savvy people, people who may be early adopters themselves, who are using it, which is fine; there's nothing illegal about that. It's just that you want to be really careful if you're using your own money, seeing the headlines about the big rise and thinking about getting in on this, Nina.

DOS SANTOS: Sounds like the Bitcoin's got a little bit of a problem, doesn't it?

Thanks ever so much for that, Maggie Lake there in New York, helping to break things down for us.

Well, after the break, help yourself, snacks, duty free, (inaudible) tickets, the new gadget which allows you to go shopping at the airport when you're 30,000 feet up in the air. You'll want to stay tuned for that.



DOS SANTOS: Hello and welcome back. Let's get the answer to today's "Currency Conundrum" for you out there. Earlier in the show, you may remember we asked you why the Irish central bank is offering refunds for a commemorative James Joyce coin that they issued yesterday.

And the answer is B. The author was actually misquoted on that coin - - ouch! An extra "that" had been added to the line from "Ulysses," "Signatures and all things I am here to read."

The Irish central bank says that while the error is regrettable, the coin, quote, "is an artistic representation of the author and text and not intended" -- excuse me -- quote, "as a literal representation."

Let's move along and talk about travel here because inflight service is about to get on another extra dimension. On Cathay Pacific flights soon you'll be able to order everything from tidbits to tickets direct from your very seat on the plane. You'll even be able to buy duty-free at the airport and pick it up when you actually land so you won't have to lug it from one place to the next.

All of this is thanks to a technology from (inaudible) in payment processing software from Guestlogix. Brett Proud is the president and CEO of Guestlogix. He joins us now live on the set in London to explain this.

This is really interesting, actually, and it's interesting to note that you're going to be starting out to roll this out soon at Cathay Pacific. It'll have various implications for passengers and for airlines as well, notably fuel, because they won't have to carry all this extra duty-free and their cabin crew won't have to walk it up and down the aisle.

BRETT PROUD, PRESIDENT/CEO, GUESTLOGIX: That's for sure true. You know, from the standpoint of the passenger experience, I think that people have become used to something that is the same for everybody.

And we're finally starting to see airlines grasp this concept of mass personalization so that when you come on board, you'll be able to, if you want to buy a movie, you can buy a movie; if you want to bring your own book on board to read, you can read. You can have your own experience.

Up until now, pretty much we all had the same experience on board. So that from a passenger standpoint, I think that's the most important thing. From a standpoint of fuel and duty-free and everything that's happening there, for sure the airlines are wanting more and more not to bring those goods on board.

DOS SANTOS: Yes, because they don't want to have to wheel excess stock up and down the aisle. And let's be honest, for any of us who travel, they don't get many takers for those items.

PROUD: Well, most of the time they don't get many takers because when the trolley comes, we're sleeping. So what we're trying to do now by putting the duty-free offerings on the seat back screen is that we're trying to say that, quote, "the store is open" for the whole flight. So the duty-free store is actually open for your seven, eight, nine hours that you're flying as opposed --


DOS SANTOS: -- specific window.

PROUD: -- when the trolley comes by -- and, again, most of us are sleeping when it goes by.

DOS SANTOS: How difficult was it to get people like Cathay Pacific on board?

And how many other airlines, do you think, are going to take this technology on board?

PROUD: Well, I think that it took us -- it took us probably about a year to get -- to get Cathay on board. But most airlines today are now -- there's a big, big focus overall ancillary (ph) revenues, right? And one of the most important focuses for those ancillary (ph) revenues is on board.

So it's a combination for the airlines of trying to drive more ancillary (ph) revenues. But at the same time, trying to enhance the passenger experience. That's really the sweet spot for airlines today --


DOS SANTOS: (Inaudible) wish you the best of luck. Thank you very much, Brett Proud there, the president of Guestlogix (inaudible) rolling that out to Cathay Pacific.

Now let's go over to very own Jenny Harrison at the CNN International Weather Center for an update on the weather.

But before I get to that, I understand that you actually are a big fan of shopping on (inaudible).

JENNY HARRISON, CNN METEOROLOGIST: I know. I know you're so surprised when I told you that. I love it. (Inaudible) that captive audience. I love -- and I've got a real weakness for the jewelry, you see. That's what it is, Nina. I'm sitting there; you're bored. You want something to do and I just -- I do. I shop. I love it. So we will see.

Listen, Nina, I have got some pretty good news. I think you're going to be pleasantly surprised at what I'm about to tell you and show you, because look at this: this Thursday -- I feel as if we need a drum roll and a fanfare -- look at these temperatures, double figures, not only that look at them compared to the average.

We have finally got there, yes. The temperatures have reached the average for this time of year. It means that winter has, I think, come to an end, certainly for these cities. So there we have it, 34 days it was in London with those temperatures below the average, 33 in Berlin, 32 in Warsaw. The streak is finally over.

So maybe spring really is on the way. The rain is certainly on the way. It's been very heavy across parts of France in the last few hours. Also western and southern regions of the U.K., still have a little sleet in there, dare I say it, across northern sections of the U.K. And this is what I mean by that heavy rain across central and southern areas of France.

So this is pretty much the scenario as we continue through the next few days. More of those showers because the jet stream has been further to the north; we've got these systems coming in off the Atlantic. But it's all of this which is coming in with this much milder air.

So this is a picture over the next couple of days. It'll take us through the end of the week and the start of the weekend. You have still got the snow across Scandinavia. It still feels pretty chilly out there for you.

But overall, it is a much improved picture, in fact, still is a little bit of sleet, too, in the next 24 hours across northern sections of the U.K. So there the temperatures as we head into the weekend and 20 Celsius in Athens, just a smidge of that 70 degree Fahrenheit mark.

Now meanwhile in the U.S., we've seen some very unpleasant weather across the south. We're following these severe storms, red boxes popping up all the time. We've got these tornado watches. We have had tornadoes on the ground. So this is what we're watching. We're in for a pretty unpleasant 24 hours as I say, Nina.

DOS SANTOS: OK, Jenny Harrison, thanks ever so much for that full roundup of the weather forecast.

And that's it for this edition of QUEST MEANS BUSINESS. Thanks for joining me. I'm Nina dos Santos in London. MARKETPLACE EUROPE continues on CNN.




RICHARD QUEST, CNN HOST: On the River Thames in London, this is MARKETPLACE EUROPE. I'm Richard Quest. Spring may have sprung, but the Eurozone crisis rumbles on. There are fears that Cyprus' bailout may be in trouble and Portugal may need more assistance. On this program, we have the tale of two countries from Portugal within the Eurozone and from Turkey looking to join the E.U.


QUEST (voice-over): Coming up, how Portugal's footwear industry is making big strides into export markets.

And Turkey's deputy prime minister tells me the European Union needs his country as a member.

ALI BABACAN, DEPUTY PRIME MINISTER, TURKEY: We believe that the European Union should be more of a global entity and Turkey will contribute its position as a real global actor.


QUEST: "A national emergency" is how Portugal's prime minister described the economic situation facing his country after the court threw out part of the government's austerity plan. It was a glaring example of how the Eurozone crisis rumbles on.


QUEST (voice-over): Portugal's constitutional court ruled the planned cuts in wages and pensions for public employees were discriminatory because they didn't apply to all income earners and therefore they were unconstitutional.

The court also overturned a tax on unemployment and sickness benefits. The result for the Portuguese government: it now has to find new ways to raise around 1.3 billion euros to avoid a second bailout from Brussels to cut the deficit.


QUEST: Even though large parts of the economy are in desperate straits, there are sections that are glimmers of light and some say hope. For instance, the shoe industry, as Isa Soares now reports, in the face of a deepening recession, the shoe industry's doing rather well.


ISA SOARES, CNN CORRESPONDENT (voice-over): Sketching out a future a step at a time, these are the simple blueprints of an industry on a new footing, you might say. Here in Guimares in northern Portugal, great strides are being made by an industry that relies on selling overseas. Exports here are increasing around 6 percent a year.

ALFREDO MOREIRA, CEO, PORTUGUESE FWEAR AND MANUFACTURERS ASSOCIATION: Portuguese footwear industry is very well known for a long time by its resilience. But it also very well known by the dynamism of its entrepreneurs, by the fact that there is a very traditional industry in Portugal with a lot of know-how, both for entrepreneurs and workers.

And it is mostly placed on the external markets. So the domestic -- Portuguese domestic market, it's not very important for the Portuguese footwear industry.

SOARES (voice-over): And if they're not selling at home, they need to sell them abroad. The shoes, says the CEO of Fly London, are the glue that's holding this industry and this fragmented Portuguese economy together.

SOARES: How have your exports fared in the last few years?

FORTUNATO FREDERICO, CEO, FLY LONDON (through translator): We export around 30 and a bit million euros. What we've lost in the domestic market, we've made up with our exports.

SOARES: To get a better sense of Fly London's export market, take a look at these shipments. This one's going to Croatia, Denmark, Italy and the U.K. Some of the key markets for this Portuguese brand which exports 97 percent of all its products.

SOARES (voice-over): Getting here has involved some painful restructure and investments in new technology. And it's this, says Fortunato Frederico, which have helped spur the company's strategy.

FREDERICO (through translator): We're constantly worried about innovation. For that reason, we're creating here a circuit by which we receive the order online; the order then waits in the queue. The shoe enters the production line; it runs through sewing and assembly and in 24 hours, it will be dispatched to that client.

SOARES (voice-over): The shoes may be coming off the line in Portugal. The names, however, are distinctively un-Portuguese, like Fly London, Mack James, Softwaves, Camport, all brands that have an Anglo-Saxon ring to them, helping them to stand out in a competitive market.

MOREIRA: The markets are open. The economy's come to Italy globalize. The competition is very tough. And so we have to think and the companies have to think in a globalized way.

And the better way they have to do it is to create trademarks, branding that is well understood by everybody from U.S.A., in Europe, in Japan, in Russia and so on. And we think that this kind of names, Anglo- Saxon names, are the brands and names that answers better to that -- to that problem.

SOARES (voice-over): A strategy which has already helped bring Portugal closer to its Italian rivals. So what's in a name? For this brand, it matters little how it sounds as long as it sells.


QUEST: Isa Soares putting her best foot forward.

After the break, Turkey still wants to join the European Union. The deputy prime minister tells me why.




QUEST: Welcome back to MARKETPLACE EUROPE on the River Thames.

Turkey first applied to join the European Union in the 1980s. She became a candidate country in the 1990s and negotiations began in the '00s.

However the application is fraught with economic and political difficulties and the general view is Turkey won't be a member for many years to come, which, considering the problems of the Eurozone and the E.U., you might very well ask why Turkey wants to join in the first place, a question for the country's deputy prime minister.



BABACAN: The Eurozone is very, very important to keep intact. It's a very important project and they should not let this project fail. And how to do is having a strong monetary policy but then associated with strong fiscal and banking policies as a whole.

QUEST: Everyone agrees with you on that. It's the sense of urgency that might be lacking.

BABACAN: Our banking system has been doing very, very well; our capital (inaudible) is now 18 percent for the whole banking system because we have done our tough reforms timely. We have put very strict regulation, very strict (inaudible) mechanism for our banks.

And every single bank has been restructured, recapitalized, 2004, '05, '06 were very important years for us for our banking reforms. The fact that we have done those reforms timely is now protecting our banking system.

QUEST: Every time anybody thinks about Turkey and the European Union, you get asked all the time, and it's this: why do you want to join? Why would you want to tie yourself to a seemingly if not exactly sinking ship, why not just go for a free trade agreement, an FTA, an EEA, some form of single market? Why do you want the lot?

BABACAN: Well, since 1996, we are already in customs union with the E.U. So for industrial goods, trading within Turkey and the E.U. members, there are no quotas, no custom duties (inaudible). We are already an open market both ways. Why we want to be in the E.U. has actually two set of reasons.

One set of reasons, from our country specific purposes, and the second set of purposes because of the (inaudible) outlook when Turkey actually becomes a member of the E.U.

Now for our own purposes, why we want it, mostly because of the values and the ideals that the E.U. embraces and that the E.U. promotes (inaudible) are the very same values and ideals which we also subscribe to.

We are a country which has gone through a historical democratization (ph) process. But the fact that what has happened in Turkey is now becoming a source of inspiration for many, many countries, because we were able to demonstrate that Islam and democracy can function together.

So a country which has its population 99 percent as their faith in Islam can also be a country which are subscribing to the universal values of E.U. And for our domestic reform processes and for our domestic political reforms, especially E.U. has functioned as a very important external anchor, because we can measure GDP.

We can measure unemployment. But it is not easy to measure democracy. It's not easy to measure fundamental rights, freedoms. E.U. criteria, norms, standards although maybe some of members are not implanting (ph) themselves, we don't care.

The fact that those standards are good standards, the fact that we are moving towards that standards helps Turkey. So it helps our domestic (inaudible). For the economic criteria, you are right. Probably being we are already overperforming on the economic criteria.

But then for the second set of reasons, for geopolitical outlook of the E.U., we believe that European Union should be more of a global entity and Turkey will contribute its position as a real global actor, not a European project, but more of a global project, with more diversity, with more representation power. And Turkey will only add power and representation for the European Union.

QUEST: I'd love to ask you which members you thought weren't following the standards, but I suspect you're not going to tell me.

BABACAN: As a former foreign minister, I have to be careful on naming and shaming.


QUEST: Thank you very much.

BABACAN: Thank you, Richard. Thank you.


QUEST: Ali Babacan, the deputy prime minister of Turkey.

And that's MARKETPLACE EUROPE for this week. I'm Richard Quest on the River Thames. Whatever market you're in, I hope it's profitable. And I'll see you next week.