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QUEST MEANS BUSINESS
Microsoft's Big Reboot; US Markets Get Bernanke Bump; Global Stocks Rise; Asiana Crew Return Home; A Pilot's Perspective on SFO Crash; Dollar Flat; Make, Create, Innovate: Levis Turn 100
Aired July 11, 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: It's a case of control alt delete and then repeat. Microsoft's reboot brings the biggest changes yet.
A Bernanke bounce. US stocks head for all-time highs.
And it's a case of by royal command. The queen's chosen companies, and they're gathering at the palace.
I'm Richard Quest. It's a Thursday and, of course, I mean business.
Good evening. Microsoft, the world's number two tech firm by value, has announced it's carrying out a demolition job on itself. It's promising to smash down its old structure of separate product silos and build what it's called One Microsoft. If you join me at the super screen, you'll see what's involved in this major Microsoft reboot.
The Microsoft leaders are making a major change. There are three main elements in this control alt delete. It concerns management, strategy, and products. Let's start with the management.
There's a major reshuffle underway. Some members of staff are leaving, some top management are leaving. They intend to say -- they say they will end overlaps within various structures and they are dissolving the eight product divisions into four.
Now, as for those product divisions, you've got operating service apps, clouds, devices, this is a -- the whole idea, the fundamental idea is to turn Microsoft into a devices and services provider so that whatever gadget you are using, whether it's apps, the hardware, the online services, the cloud, the operating system, should all work seamlessly together.
But at the core of all of this -- because these would be like all the nuts and the bolts that'll make it happen -- at the core is this strategy, what they are calling One Microsoft, according to a very long memo by the CEO Steve Ballmer. It's supposed to encourage collaboration rather than competition. One Microsoft, it's what it used to be called.
Now, Microsoft used to be the world's largest or biggest tech company. If you look at the share prices, the way it's gone in recent years, we have this very, very sharp fall, and then a recovery back up there again which, frankly, if you draw the line across, now shows that the share prices almost just at the best point that it's been at, $36, for -- since 2005. That, of course, is the recession, the Great Recession.
And at various points along this, we have Windows 8 coming along, and then we have the problems with Windows 8, we have Surface coming along.
But then, if you take a look at the -- Microsoft versus Apple share price, you'll see a very interesting -- look at that. So, Microsoft -- again, a much sharper rise in price. Microsoft has had its own rise in price over the years, but nothing compared to that.
Let's put it into perspective. Shelly Palmer is with me live in New York. We'll talk about the share prices in just a moment. What do you make of this strategic change? Does it smack of strategy or panic?
SHELLY PALMER, AUTHOR, "DIGITAL WISDOM, THOUGHT LEADERSHIP FOR A CONNECTED WORLD": No, it smacks of strategy. There's not a lot of panic here. Look, Microsoft isn't a company. Microsoft is another government, and the problem is it's been governed the way it was assembled, little pieces at a time, and it just grew into an unmanageable behemoth.
Everyone has known for a very long time that the governance needed to be changed, and the question is, would Steve Ballmer be a strong enough executive to think it all the way through and actually do it. And the answer is obviously yes.
QUEST: Well, no. I'm going to take issue with you on that, because Ballmer has been there for a very long time, now, as chief executive. So, tell me, Shelly -- I mean, I'm looking at the graph now. Product, strategy, management. What is it about this that you like?
PALMER: What I like about this is that the world is becoming more and more connected, and people have thought about, oh, I need a mobile strategy or I need a devices strategy, and that's just incorrect.
You need a connected world strategy, and you need to build your governance in your corporation so that you actually can be large and flexible, which is really tough to do if you're Microsoft.
So, these guys had an awful lot of work to do. And it's easy to Monday morning quarterback and it's easy as a pundit to sit here and say, oh, you can make these moves.
Look, if you're inside of Microsoft, like so many of my friends are, you actually have been governed for years in this very strange way where once a year you get to kill the people in your organization that you think are too weak --
QUEST: OK --
PALMER: -- and the strong ones are -- get to survive. So, it's actually governed in a bonus pool with reviews like that.
QUEST: But --
PALMER: Changing out some of this stuff is --
QUEST: Ah --
PALMER: -- critically important to making this work.
QUEST: OK, but this phrase -- let's get right in there -- this phrase, One Microsoft, now I have worked for several organizations that have always ended up putting the One before it. One this, One that, One Shelly Palmer, One the other. It's a great idea.
The question is, whether or not the execution in this is sufficient for a company that is perceived to be on the back foot. Windows 8. Surface tablet. Cloud computing. Failure of mobile strategy.
PALMER: So, I will say the following: Microsoft's MO from the beginning has been to take a second-best, second-rate product and make it the most popular in the world and most profitable.
Word was not better than Word Perfect when it came out. It was a second-rate product that became the most popular in the world.
Excel was not better than Quattro Pro. They bought it and they made it the best in the world. All -- Outlook is actually terrible, it's the most popular in the world.
These guys, you don't count them out. I don't care for Windows 8 very much on a particular PC, like in a non-touch screen environment, but Windows Phone 8 is going to have its moment. Do not count these guys out.
This idea of One Microsoft is actually a -- I think a self-fulfilling prophecy. Actually, the way I look at it, Richard, is you have to have a goal, right? So, if your goal is to have One Microsoft, a flexible company that's busy making the best services and devices in the world sort of work symbiotically together, I think you need to have a goal.
And that's as much as a prayer for them -- and I'm saying that in a -- it's a hope and a prayer for them -- we want to have One Microsoft.
I've got to tell you, that's a very big organization with a lot of nooks and crannies. There's all kinds of fiefdoms, and the idea that they were able to go this far -- and this is pretty magnificently far -- let's see if it works. I would -- I'm a big supporter of the idea. I may be a lone wolf out here. I think this is smart.
QUEST: All right.
PALMER: I think it's absolutely necessary. Because otherwise, Richard, you would've had to break the company up. It could not have continued the way it was. So, I think this is the right thing at the right time.
QUEST: Well, since the US government didn't manage to do it, I suspect -- the anti-trust case -- I suspect Steve Ballmer was not about to take his own sledgehammer to it. Good to see you, Shelly. Shelly Palmer is in New York.
Now, taking a look at Microsoft's stock, the organization -- or the reorganization has met with the approval of shareholders. The stock is up some 2 percent, it's at $35.42, which as you saw earlier from the graph, is about -- it's almost at the best for some three or four, five years.
US stocks are flirting with record highs. The Dow rallied at the open after Chairman Ben Bernanke suggested the US central bank would keep stimulus measures in place for the foreseeable future. Alison Kosik is at the New York Stock Exchange.
Alison, that record high of 15,409 was on May the 28th. Now, here's the point: if you look at those Fed minutes yesterday, you could basically interpret them either which way or backwards. You could take the half wanting to taper and finish, or you could take the Bernanke comments.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Right. And then, you could also take the comments that Ben Bernanke made last night when he was at an economic conference here in New York, and sometimes all it takes is for a positive word or two from Bernanke and the bulls get going.
And that's why you see the bulls going today, because last night at this meeting, he said that the stimulus policy will remain highly accommodative. That's the wonky way of saying something investors want to hear. It means the Fed spigot of $85 billion a month in stimulus would keep flowing and continue to prop up the market.
So, you've got Bernanke coming out even after the minutes, sort of putting the exclamation point on what he meant a month ago, Richard.
QUEST: What I found interesting about the minutes when I had a chance to digest them properly over the last 24 hours is at the meeting, they actually basically told him to make his tapering comment at the press conference. I know that nothing's ever natural at these things, but they actually said -- suggested the chairman makes a comment at the press conference.
But you still are left with half the group there believing in tapering and believing in ending QE sooner rather than later.
KOSIK: Right. Well, I mean, what you -- effectively see going on here is just a really healthy discussion going on at the Fed between all the members on what to do. But based on what Bernanke is saying, if the data ain't there, that stimulus is going to keep coming, and there probably won't be a change in it.
So, all of the analysts coming out, like Goldman Sachs saying, oh, September, you're going to see the change. Maybe that's not the case, with Bernanke saying wait a minute, we're going to remain highly accommodative here, Richard.
QUEST: As we get to the sum when we get more data, you and I will have a -- we'll have a -- we'll put our -- we'll nail our colors to the mast, Ms. Kosik, about --
KOSIK: And right now -- and right now, the data just isn't there. The jobs report last week, it was pretty good, but when you looked at the data in its totality --
QUEST: Well --
KOSIK: -- it just ain't there, you have to agree.
QUEST: Middle of August, we're going to both of us nail our colors to the mast as to when we think tapering will begin.
QUEST: Alison Kosik is in New York. It's been a strong day for stocks around the world on the back of the Bernanke comments. The Shanghai main index had its best session in seven months on hope Beijing may soon act, liquidity and growth up 3.2 percent.
Japan, of course, was up just a quarter of -- or just nearly half percent higher after the country's central bank said it would continue its record stimulus efforts. To Europe.
QUEST: Shares hit a five-week high. Germany led the region. The DAX closed up more than 1 percent.
This is QUEST MEANS BUSINESS. In a moment, six crew members of Asiana 214 are back in South Korea. The investigation continues, and we'll talk more about that after the break.
QUEST: Six flight attendants who were onboard the Asiana plane which crash-landed in San Francisco are now back in South Korea. It was an emotional homecoming for the crew of Flight 214. Six of their colleagues remain in hospitals in California. Two people died in the crash, 305 others survived, and scores of whom were injured.
The investigation continues. It is focusing, of course, on the pilots and how they did the approach into San Francisco Airport. It is also taking a closer look at the delay or the apparent delay in ordering the evacuation of the aircraft.
Without rampant speculation, Patrick Smith is a veteran airline pilot and the author of "Cockpit Confidential," and I put it to him that it wasn't just one factor. Whenever you have a crash or any form of aviation incident, it is always a series -- a chain of events, which eventually lead to the accident.
PATRICK SMITH, VETERAN AIRLINE PILOT AND AUTHOR, "COCKPIT CONFIDENTIAL": Most air crashes are not caused by a single mistake, a single malfunction, a single anything. It's a combination of factors.
Now, what happened here, the crew seems to have found itself in the throes of an unstable approach. They were too slow, too low, and did not initiate the missed approach, go-around maneuver in time.
Why they didn't do that is the million-dollar question, and we're hearing a lot of extenuating circumstance sort of things, the challenges of the San Francisco airport, the fact they were flying a so-called visual approach, the fact that the aircraft's auto-throttle system reportedly either was switched off inadvertently or had failed for some reason, and they didn't notice that.
These things are not by themselves a smoking gun. None of those things alone will cause the airplane to do what it did and land short of the runway.
QUEST: Right. All accidents -- or many accidents, now, seem to head towards CRM, crew resource management. In these exceptionally complicated machines, how the cockpit crew interact with each other has become much more relevant than ever before. And I think of Air France 447 as one example. We can think of Colgan as another. And this, I'm thinking, could head in that same direction.
SMITH: It could. And it seems to be at this point trending that way. But we need to be careful. You know as well as I do, Richard, that about the worst thing that we can do here at this juncture is speculate too broadly about what happened.
Because it's very early, and everybody wants answers, everybody wants an explanation, but we can't necessarily provide one yet, because about the worst thing that you can do is by speculating -- air crashes, the earliest theories, the earliest presumptions almost always turn out to be if not completely wrong then very incomplete.
So, let's let the NTSB do its thing. The NTSB is excellent at investigating accidents, and eventually, we will have the answers.
QUEST: Right. Do you think the NTSB is giving away too much in its daily briefings?
SMITH: Part of the problem, though, honestly, is not what they're saying, but the way the media is interpreting what they're saying and the way they're then presenting that information to the public. A lot of it is misrepresented, exaggerated, not fully understood, and that's par for the course when it comes to coverage of aviation incidents.
QUEST: Patrick Smith, talking to me earlier.
A Currency Conundrum for you, now. Several top Indian jewelers say they won't sell any gold coins and bars for the next six months. Why would Indian jewelers not sell gold bars? Because of a surge in counterfeits? A protest against rising costs? Or to help the government?
The dollar is flat against the pound, it's up against the euro, and flat against the yen. Those are the rates --
QUEST: -- this is the break.
QUEST: Tonight on Make, Create, Innovate, as Microsoft works on freshening up its business model, we're looking at Levi Strauss, a company which has undergone a huge transformation of its own.
From the maker of utilitarian clothes to the purveyor of fashionable threads, Levis did involve doing a bit of laundry along the way, for those of you who remember that advert, and the firm is still looking youthful after 140 years. It only goes to prove, as Nick Glass explains.
NICK GLASS, CNN INTERNATIONAL CORRESPONDENT: It all began with a tiny series of copper rivets hammered into blue denim to make a durable pair of trousers for gold miners. Now, of course, we pretty much all own a pair of blue jeans. Levi Strauss is celebrating 140 years of its signature brand.
JONATHAN KIRBY, DESIGNER, LEVI'S MENSWEAR: Levis has been a part of history since 1973. It constantly reinvents itself and stays at the forefront of youth culture. I believe it's a brand that continues to innovate and evolve for its generation.
GLASS (voice-over): Jonathan Kirby is obsessed with jeans. He has a personal collection of more than 200 pairs. Levis has its own archive, blue jeans so old and treasured that they have to be handled with gloves.
LYN DOWNEY, LEVIS HISTORIAN: The oldest pair of jeans in the world is right here in front of you. It is from about 1879, and considering that Levi Strauss and Company invented the blue jean 140 years ago, 1873, this is representing what the very first blue jeans looked like for the California gold miners and those early cowboys and everybody.
GLASS: They began as practical, durable work wear, modestly priced at $1 a pair, about a third of a gold miner's daily wage.
GLASS (on camera): This is the safe?
DOWNEY: This the safe.
GLASS (voice-over): Another vintage pair comes out of the safe in the Levis archive. The brand gets its name from Levi Strauss, the Jewish entrepreneur from Germany who settled in San Francisco in the 1850s.
But he idea for riveted blue jeans wasn't his. It was his business partners, a tailor called Jacob Davis. Davis was also an immigrant, but from Latvia.
GLASS (on camera): We know the name of Levi Strauss, it's well known. Isn't Jacob Davis left out of the story?
DOWNEY: Jacob Davis is never left out of the story, as far as I'm concerned, because it was his simple innovation in his little tailoring shop in Reno, Nevada, that began the process of creating the first blue jean. He couldn't have mass-manufactured, mass-marketed that product. He needed a visionary partner, and that visionary partner was Levi Strauss.
Levi Strauss himself -- we have this beautiful piece from about 1888.
GLASS (voice-over): Both men were respectable middle-class businessmen. It's fair to assume that neither of them ever wore blue jeans. They weren't panning for gold. Equally, neither man could have ever imagined what would happen.
Kirby works with a team of designers. In an intensely competitive market, they have to constantly fresh the brand. One of the latest lines is water-repellant, super stretch, and anti-microbial.
For decades, Levis were the jean of choice for working class America. Manual workers were attracted by their low cost and durability. Now, the jeans with the revolutionary rivet cover the legs of everyone from off-duty bankers to tech entrepreneurs.
GLASS (on camera): I came to the great Bay of San Francisco looking for Levi Strauss. To my surprise, I also found Jacob Davis. Both men were immigrants, both came to live the American dream. And you could argue they helped reinforce the very idea of it by creating the blue jean.
QUEST: When we come back, GlaxoSmithKline stands accused of skullduggery in China. It strongly denies the claims. We'll bring you more in a moment.
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, the news always comes first.
New images are showing the size and scope of flooding after torrential rain in China's Szechuan province. State media reports 18 people have been killed in a landslide. More than 100 are missing. Search and rescue efforts are continuing.
The former Bosnian-Serb general, Radovan Karadzic, who once again faces genocide charge, one that he was acquitted of last year. A UN-backed tribunal has decided to reinstate the charge related to ethnic cleansing during the 1990s Balkan wars.
Supporters of the deposed Egyptian president, Mohamed Morsy, are gathering in their thousands in Cairo's Nasr City district. The Muslim Brotherhood has called for a rally against what they're calling the bloody coup on Friday. Violent unrest earlier this week left more than 50 people dead.
A Russian court has convicted the late investment fund attorney Sergei Magnitsky of tax evasion in an unprecedented posthumous trial. Magnitsky died in jail in 2009 after accusing Russian officials of defrauding the state of $230 million. The circumstances of his death remain in dispute.
Closing arguments have began in the trial that has gripped the United States. George Zimmerman, the volunteer neighborhood night watchman, is accused of killing an unarmed African-American teenager. The judge has just ruled that a lower murder charge on manslaughter -- a lower murder charge will not be considered, but the jury may consider manslaughter.
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QUEST: Beijing is making accusations against Britain's biggest drug manufacturer tonight. China says GlaxoSmithKline orchestrated widespread bribery and corruption to artificially raise the price of pharmaceuticals.
Now without naming any names, China's ministry of public securities accused companies' employees of bribing doctors. Hospital and government officials in China's biggest cities. Falsifying tax forms (inaudible) payment of bribes. China says it's obtained some GSK executives who have apparently confessed.
Now in response, the company delivered a strong rebuff, saying bribery and corruption has no place in their business. Its official statement says we continuously monitor our business to ensure they meet our strict compliance procedures. We have done this in China and found no evidence of bribery and corruption of doctors or government officials.
Jim Boulden, this is a tale of skullduggery.
JIM BOULDEN, CNN CORRESPONDENT: Correct. And it's been going on for a while. This is not new today. What's new today for GlaxoSmithKline is getting the details of what the accusations are. This has been rumbling for a couple of months now.
QUEST: What's behind it? Come on, what's behind it?
BOULDEN: The theory being or the accusation being that the local employees were giving perks and cash to doctors and administrators in hospitals in order to use this GSK drugs. And so the idea is incentives to choose their drugs sometimes according to the Chinese officials for unnecessary reasons as well.
In other words, when the patient didn't even need some drugs.
QUEST: Right, but this is China. And so we now have to ask is there a political angle? Is there a strategic angle? Is there -- is there something behind this that we're not hearing?
BOULDEN: Well, I understand what you're saying. But you remember Dorio Tinto (ph), some of their employees were put into prison in 2010, Dorio Tinto (ph) first backed their employees and then admitted themselves that the evidence was there.
QUEST: Right. But there was a suggestion at the time that this might also be somehow to do with -- I mean, ultimately not proven. But it was -- there was a suggestion at the time this might be because of commodity prices or because of the relationship with Australia or --
BOULDEN: We know that there's negotiations between Europe and China right now, trade negotiations going on.
So people have made that claim. But China has been arresting a lot of its own officials, its own local mayors, it's arresting public officials that it has put on trial as well. So this is part of that because obviously the evidence that they say they have found already shows the bribery accusations.
QUEST: GSK, we have done this in China. We ensure strict compliance procedures and found no evidence of bribery and corruption of doctors or government officials.
BOULDEN: Yes. So they say that they have their own strong monitoring programs in place. Of course, GSK has been accused of this before. They also say, though, if there is any evidence that is provided to us, we will act swiftly on it.
So it's certainly not over.
QUEST: Until it's over.
QUEST: Which it's not over.
BOULDEN: Not for a long time, I don't think.
QUEST: Thank you, Jim.
QUEST: Now a group of passengers have launched legal action against Airbus over that British Airways emergency landing at London's Heathrow in May.
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QUEST (voice-over): The flight was forced to make an emergency landing after an engine caught fire. Now you remember the cowling doors were left unlatched. The passengers are suing the aircraft manufacturer and the company which designed the engines for emotional distress.
Not entirely certain where that one's going other than the fact that they'll probably claim that the doors should have been able to -- plane ought to be flying without doors that would open. It's the cowling engine's doors. We'll follow that one for you.
When we come back, products fit for a queen. We'll take a closer look at the companies supplying Britain's royal household with the finest goods in the land.
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QUEST (voice-over): The answer to the "Conundrum" today, why Indian jewelers say they won't sell any gold coins and bars for the next six months, the answer is to help the government in theory cut unnecessary imports. India has to import most of its gold and the gap in the current account deficit is now at a record, partly because of the craze for investing in gold bars.
(END VIDEO CLIP)
QUEST: They are big-name companies. There are blue chip companies and then there are the companies with the so-called royal warrant. It's an honor bestowed upon businesses who regularly supply goods to the royal household and today those companies showcase their many wares in the gardens of Buckingham Palace, which is where Queen Elizabeth is hosting the Coronation Festival.
One of the things about having a royal warrant by appointment to Her Majesty the Queen suppliers or purveyors of preserves or windows or household detergents or, in the case of Bentleys, fine motorcars.
Max Foster was at the festival and spoke to the sales and marketing director of Bentley, a part of any special limousine.
MAX FOSTER, CNN HOST: Well, Kevin, so many people recognize this extraordinary vehicle for most state occasions and this is a car that you hand built for the Queen, right?
KEVIN ROSE, SALES AND MARKETING DIRECTOR, BENTLEY: It was literally hand built for purpose.
FOSTER: There's nothing else like this.
ROSE: There is no other car like this. We've never made another one; we never will make another one.
FOSTER: And you can see from the shape of the roof it's unique. And what's the idea behind that?
ROSE: Well, it's got an unusual proportion in terms of the roofline. Obviously, it's much longer than a normal car. And the glazing forms are much higher proportion of the profile.
And that's so it has good visibility and very easy access because obviously members of the Royal Family probably want to get in the car with a hat and this kind of thing. So they can't have a situation where they need to put the hat on and off and this sort of thing. So it has to have very, very easy access and very high visibility.
FOSTER: Well, designing any car is a huge process. I have just to think there's some investment that goes into that. But it's worth it for you, right? Is that a marketing . ?
ROSE: It's a wonderful recognition that we can make a car like this for this very, very specific purpose and very, very specific need. So for us, it's a marvelous thing to do, despite the effort, the research, everything that we had to put into it. The end result is fantastic, for us in terms of exposure.
FOSTER: Are you able in any way to measure the impact it has? Or how do you use the impact?
ROSE: We don't specifically take it as a marketing tool. It's there. It's something -- I believe the whole family enjoys using. It's very, very well known. We don't have to say any more about it. So --
FOSTER: (Inaudible) people see it and they come to you saying, well, (inaudible) have the same one.
ROSE: They can't have the same one, no. But we do offer highly bespoke cars. So somebody comes along and says, yes, I would like this, but maybe a little bit longer, wider, this particular interior, we can do all those things.
FOSTER: Can I ask you how involved personally is the Queen in this process, particularly (inaudible) should say that she wanted a particular thing?
ROSE: Well, we deal obviously with her representatives on this. But we know very well the sort of things that she wants and needs after quite a long experience dealing with the whole family.
QUEST: Interestingly, that Bentley was given to the Queen in 2002 for the Golden Jubilee and then in 2010, I remember it well, the thing broke down and the Queen had to get a lift in one of her police cars to get home. But otherwise, it's a beast of a car. It's not quite just the beast that the president travels in, but it's a fairly substantial vehicle. It's a motor vehicle.
Tom Sater, we don't call them cars when it's a Bentley; it's a motor vehicle.
TOM SATER, AMS METEOROLOGIST: Exactly. Yes, if you have one, that is convertible you're enjoying the sunshine even more. It's going to stay with you, Richard. Get ready. We do have a heat health alert just in time for your weekend. You thought it was warm during Wimbledon, the men's final? It's going to feel a little bit warmer with the humidity building as well.
Some relief in Europe, in the form of some thunderstorms trying to develop, provide a drop in a temperature by a degree or so, needed rainfall in parts of Spain where still the number's approaching the 40-degree mark.
But nothing well organized. A little spin, a little area of low pressure, dropping from the north and towards central Poland, it is going to provide, you know, temperatures near average. Richard, I hope your stay in Paris was delightful as many of the tourists and residents enjoying the sunshine as well.
High pressure the dominant factor here as you across our current numbers, 18 in Vienna quite nice, Bucharest 25, Kiev 22. We still have the heat in some areas of southern France, to Spain, to Portugal. And I think we're going to find as the high pressure starts to build this ridge of high pressure, you see London expected 27 on Friday. We're going to see the humidity increase as well.
So look for a high. Let's say Saturday of 30 degrees may feel even a little bit warmer when you factor in the humidity. But the numbers as mentioned still well above average in parts of Portugal and Spain. We've seen a week's worth now of temperatures right around 40, even low 40s as their numbers continue to be 5-10 degrees above average. But a lot of sunshine.
The other news really is the largest storm we have on our planet and it has its eyes on Taipei. Most likely the airport will shut down sometime Friday evening local time and continue to be shut down into Saturday morning. It is not expected at this time to reach super typhoon status, very good.
The other area of concern was a tropical storm in the Caribbean, now just a tropical wave. But our big concern -- look at the eye and look how it moves in to the high terrain in Taiwan and then about Saturday afternoon, 2:00 or 3:00 pm local time, it moves into Fujian province. This is going to affect 90 million people.
And the amount of rainfall could be quite heavy in the high terrain at Taiwan, maybe 300-350 isolated 400 millimeters. We already have a good 12- meter wave heights. So again, warnings in effect for Taiwan.
We're going to watch this system, Richard, as it moves into China as well. They've had their fair share of problems with the heavy rainfall well to the west. This system's going to cause more coastal problems and probably feed more rainfall for them in the next several days to come. So we'll be watching that. Get ready for the heat. It's coming your way.
QUEST: I look forward to it in a certain sort of way, providing it's not too hot that it becomes dangerous. Tom Sater at the World Weather Center.
Soon we'll all be able to scale one of the world's most famous mountains and we won't even have to leave to go home. Look at that, I'd better get out of the way. Now and move right back. The team behind Google Street View is attempting to map out path to the summit of Japan's Mt. Fuji. Diana Magnay joined them on the journey and sent this dispatch.
DIANA MAGNAY, CNN CORRESPONDENT: So we're about an hour away from the summit of Mt. Fuji. It's up there. You can see it. It's within reach, 3,776 meters of it. We're here at 3,450 meters, Base Station 8.5 where we're going to be spending the night. And that's not because we're being lazy. It's because we are due to meet up with Google Street View trekkers, who we were due to do this whole journey with.
They had technical problems quite near the start, which means that their camera has had to be rebooted. They assure us now that it's all back on track and that they're fine. But they are meandering up this meeting which is taken out about 70 hours to get up at a leisurely pace. Fuji is the world's most climbed mountain. It's something that even I, with not an incredible level of fitness, have been able to do without much problem.
You just need a good pair of hiking boots and good mountain gear, because it does -- the weather does change pretty fast. But we've been incredibly lucky. We've had great weather. Fuji, of course, is this volcano, an active volcano still, beloved by the Japanese.
Last month declared a UNESCO World Heritage site, not because of its amazing natural beauty but actually because of its cultural contribution to our planet, because of the inspiration that it's been to artists and poets throughout the centuries.
We will be up there very early tomorrow morning, so please tune in when we -- and hopefully Google Street View, too, manage to make it up to the top of Fuji -- Diana Magnay, CNN, on Mt. Fuji, Japan.
QUEST: 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.
NINA DOS SANTOS, CNN HOST: From Regent Street in the center of London, hello and welcome to MARKETPLACE EUROPE. I'm Nina dos Santos.
Across the E.U., retail sales rose by half of 1 percent last year, whereas here in the U.K., they increased by nearly 3 percent in just the last month alone. And that's means that its shoppers like these that are helping to tread the path forward towards an economic recovery.
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DOS SANTOS (voice-over): Coming up, the baby boom for the British economy. Isa Soares heads to a pottery in Stoke-on-Trent, which hopes to increase its sales with a new royal baby range.
And Richard Quest sits down with the CEO of the advertising giant, WPP.
SIR MARTIN SORRELL, CEO, WPP: Corporate says, you know, it's sitting on, what, $2 trillion, $3 trillion of net cash. We've got very strong balance sheets, record results, not delivered by top-line growth, which is where we come in, but delivered by bottom line growth, driven by cost reduction.
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DOS SANTOS: We may have to wait a few more days or weeks perhaps even before we know the name that the Duke and Duchess of Cambridge have chosen for their child.
But already it seems the economy here is experiencing something of a baby boost because the Centre for Retail Research estimates some $376 million worth of retail sales are likely to be cashed in in July and August. Here's Isa Soares with more on the magic touch that the monarchy appears to have for memorabilia.
ISA SOARES, CNN CORRESPONDENT (voice-over): Putting the finishing touches on a British tradition, designer Milly Green (ph) is already upping production of the royal baby items, 8,000 mugs, plates and cups are currently being produced here. Once the baby's born, that could top 60,000 a day. This royal event is her royal opportunity.
MILLY GREEN, DESIGNER: Already the response to the royal baby has been unbelievable before it's even been born. And I think that is just a demonstration of how the British public but globally people see William and Kate as ambassadors of the U.K.
SOARES (voice-over): It took less than 45 minutes to create the design. And unlike those celebrating the birth of Prince William, these are slightly more modern.
GREEN: I wanted it to be a design that was lighthearted, down to Earth, that had a little bit of humor of the British humor. So we've got the dog, Lupe (ph). We've got a little pram, HRH.
SOARES: That's their dog.
GREEN: That's their dog. The Queen's corgi with her little crown on.
SOARES (voice-over): The crockery, together with the other items, are expected to give the British economy a badly-needed jolt. According to the Centre for Retail Research, the royal baby's expected to generate almost $380 million for the economy.
That includes more than $129 million spent on festivities, nearly $120 million on souvenirs and toys and more than $113 million on books, DVDs and other media related to the royal birth.
JOSHUA BAMFIELD, DIRECTOR, CENTRE FOR RETAIL RESEARCH: We feel that now the economy's starting to improve anyway, people will want to ensure that as the royal family are going to be up market in their purchases, that they will want their baby in the local area to be up market as well, to be as good as the Cambridges.
And so we're expecting an increase in average spending on baby products this year because of that.
SOARES (voice-over): Alongside these traditional mugs, plates and egg cups are a range of less conventional items.
SOARES: At the Royal Collection Shop, you can buy a (inaudible) sleep suit. (Inaudible). How about these rather humorous bibs, these very posh royal biscuits? And if you fancy it, there's also a potty for your prince and princess with royal theme music.
SOARES (voice-over): Online, there's an even wider selection, from lush to tacky, from cushions to baby (inaudible). (Inaudible) covers to royal baby books and you'll even find Gucci's on sale at Prince Charles' Highgrove estate.
BAMFIELD: In the U.K., there's, I think, been a tradition of very high quality merchandise to commemorate royal events as well as a lot of tat (ph). And I think people like tat (ph). And in some ways tat (ph) is not only cheap and cheerful and so on, but you know, if it's broke it's broke and that's the end of it.
So I think people buy plenty of tat (ph) as well as some high quality stuff that they'll be able to (inaudible) give onto their descendants (inaudible) this celebrates this royal baby.
SOARES (voice-over): But before that makes you feel slightly (inaudible), well, there are always some royal baby sick bags.
DOS SANTOS: Isa Soares there on why the royal baby has some makers of memorabilia literally dancing with joy.
Well, it's time to take a quick break now. But when we come back, Richard Quest sits down with the CEO of WPP, the world's largest advertising company.
DOS SANTOS: Hello and welcome back to MARKETPLACE EUROPE from the Piccadilly Lights, one of Europe's most iconic advertising locations. Well, brands like Coca-Cola have been a permanent fixture on this billboard since all the way back in the 1950s. This is vital global exposure that firms hope will translate into increased sales and revenues.
One company at the forefront of advertising communications and marketing is WPP. Richard Quest sat down with its CEO, Sir Martin Sorrell, and began by asking him about business contracts signed and what's in the pipeline.
SORRELL: We've done extremely well on new business, major wins in the United States, like Gillette, (inaudible) global, like Nestle, like Bacardi, I mean, a couple of other things that happened over the weekend that will be announced shortly.
So we've done very well. But the underlying tone, Richard, I mean it -- corporate says, you know, it's sitting on, what, $2 trillion, $3 trillion of net cash. We've got very strong balance sheets, record results, not delivered by top-line growth, which is where we come in, but delivered by bottom line growth driven by cost reduction.
So the whole balance of finance and procurement as opposed to marketing changed after, I would argue, after Lehman in 2008. It's been that way for about 20 years as inflation at the retail level has not been significant.
QUEST: Do you see any change as a result of the Eurozone crisis seeming to abate?
SORRELL: The difference between this year and last year is we don't have the events this year. And what's replaced it has been a little bit (inaudible) as good as it was last year or as bad as it was last year. It's because it (inaudible) a little bit better because China had soft landing, U.S. deficit and debt, all those fears have been reduced.
QUEST: More recently Draghi has now come out and said the ECB said last week that they will keep interest rates low (inaudible) --
SORRELL: (Inaudible) on the same day.
SORRELL: By accident we are assured.
QUEST: Do you believe that?
SORRELL: Well, it could be. I mean, it could be. But I think they have --
QUEST: (Inaudible) CEO?
SORRELL: Well, it did, actually. It made me feel better about -- I mean, because the suggestion of tapering, which was attributed to Bernanke a few weeks ago, made people nervous. I mean, they became (inaudible) -- I sat down with the Goldman (inaudible), the one who's replacing Jim McNeil (ph) and Peter Oppenheimer a few weeks ago.
And he feels better about worldwide GDP next year. He feels 4 percent next year as opposed to, say, 3 percent real. With inflation this year 2 percent makes a total of 5 percent. Next year maybe ameliorated a bit, 1.5 percent. So 5 percent nominal plays 5.5 percent this year -- next year -- so what we see is probably a little bit more confidence.
QUEST: Are you determined to annoy your shareholders again over your --
SORRELL: I have nothing to do with annoying the shareholders.
SORRELL: Look, look, be quite serious about it. We have a compensation committee of people who think seriously and long about the issues that face our industry, not just me but face our people as well in terms of competitive compensation.
So clearly -- and this is not in my hands, Richard. This is in the hands of the -- as I say, of the board and the compensation. It clearly -- the consultation process that they went through has made progress.
What this year has shown is that when the compensation committee and the board and the chairman of the compensation committee, Jeffrey Rosen, engaged with the institutions in a constructive dialogue, it did -- it did gain traction, gained ground.
QUEST: Do you see investors in WPP as investing in a Sorrell enterprise in the same way --
SORRELL: (Inaudible) Sorrell enterprise.
QUEST: Let me finish.
SORRELL: (Inaudible) 1.5 percent (inaudible) Sorrell enterprise.
QUEST: Let me finish -- in the same way that people have often talked about if you invested in the old News Corp or -- as it's now been split -- if you invested, you knew you were investing in Murdoch and the way Murdoch would run his company.
If you chose to invest in WPP, you'll be investing in a company that you knew Martin Sorrell was running.
SORRELL: Well, the analogy is a specious one to some extent -- I find it a flattering one. But it's a specious one because Rupert and his family own 40 percent of the votes of the company. I don't -- I mean, I own 1.5 percent of (inaudible). Happens to be one of the largest shareholdings in the company. But let's put that to one side.
And as I wrote in the "Financial Times," I am an -- a shareholder, not the shareholder. And that's the important distinction. But I do happen to believe that individuals are important in business. I mean, you interview people who lead companies or, like me, attempt to lead companies.
And I think businesses are determined to -- whether we like it or not, to some extent -- or maybe to a larger extent than people are willing to admit by individuals and the decisions they make and being a founder of WPP. My attitude is always going to be different to whoever else might succeed me running WPP or what. It would be totally different.
And probably they -- whoever he or she is, they will (inaudible). But the point is my attitude is different. It is highly personal because we started the business from scratch 28 years ago with two people in one room.
And what I wanted to do was not only start something but run something. And I was always intrigued with issues of scale or challenges of scale. I didn't want -- you know, people, they're -- some people are good at starting things and not running them. Some people are good at running things but not starting them. I wanted to do both.
DOS SANTOS: Sir Martin Sorrell there, the CEO of WPP, bringing this week's MARKETPLACE EUROPE to a close. Join us again next week if you can. But in the meantime, thanks for watching and goodbye.