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QUEST MEANS BUSINESS

New Microsoft CEO; Microsoft's Market Might; Ballmer Versus Nadella; Big Changes at Microsoft; US Stocks Up; Global Markets; Target Hack; BP Profit Falls; London Tube Strike; Underground Farming in the Tube

Aired February 4, 2014 - 16:00   ET

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


(NEW YORK STOCK EXCHANGE CLOSING BELL)

RICHARD QUEST, HOST: They brought in the heavy-duty cleaning equipment to close the Dow Jones Industrials. It seems to have worked, because the Dow is actually up. Hit the hammer. The Dow is up on Tuesday, February the 4th.

Now, our story tonight: he joined the company to change the world, so he said. Now his job is to change the company. Yes, Microsoft has finally announced its new CEO.

Stop the bleeding. US stocks have bounced back from their manic Monday. Not a terrific Tuesday.

And Target in the firing line. Executives get a grilling from Congress on the huge data breach.

It's a busy day. I'm Richard Quest, and of course, I mean business.

Good evening. Microsoft today announced major changes at the very top of the company. They took their time, but now they've said that Satya Nadella will be the new chief executive. A 22-year veteran of Microsoft has most recently led its Cloud and Enterprise division. A short time ago, Nadella said in a webcast he wants a greater focus on digital at Microsoft.

(BEGIN VIDEO CLIP)

SATYA NADELLA, CEO, MICROSOFT: We are living in this mobile first Cloud first world every day making progress. And so, the question for us is how do we thrive in that world? What new innovation can we bring?

And if you look at it, for sure the co-evolution of hardware and software is going to define a lot of what's going to happen. Today, we have a particular definition of mobile, which is perhaps skewed to saying, oh, it's just a mobile phone.

But you take that and say the industrial internet, or the internet of everything. Everything is going to be connected to our Cloud and data. And so, that's the world that we are building for.

(END VIDEO CLIP)

QUEST: The world they're building for. And if you look at the power that Microsoft currently enjoys in the sort of areas it's moved, you get a good idea. The company reported record revenue of more than $24 billion last quarter. That is a formidable amount of money.

And to those who say that Microsoft is over and done with and all bust up, just look at the market might. You have, of course, the powerful Windows, with more than three quarters of the software operating market. Windows revenue was up 6 percent in the last quarter.

You've got Skype, which they bought. Users spent 2 billion minutes Skyping each other last year. You have the Xbox console. It lost a lot of money to start with, but now, in Q4 of last year, they sold 1.2 million of the latest.

You've got Nokia, which they're just completing the purchase. And you've got Sky Drive, its new inter -- its new Cloud system for consumers and business, with more than a million members. You get an idea of the power of Microsoft.

Nadella will replace the outgoing chief, Steve Ballmer. It was a six- month search to find the man who will take over all of this and more. Jim Boulden now compares the two men, Boulden and -- Ballmer and Nadella, and their very different management styles.

(BEGIN VIDEOTAPE)

BILL GATES, FOUNDER, MICROSOFT: We thank the members of the press.

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): Bill Gates, Steve Ballmer, now Satya Nadella. Forty-six-year-old Nadella is an engineer born in India. He's worked for Microsoft for more than 20 years, overseeing corporate software, and now the Cloud, running the backbone for most of the company's offerings. He's seen very much as an inside guy.

HUSSEIN KANJI, HOXTON VENTURES: It's a very insider-oriented culture, so I think it makes a lot of sense to take someone from internal to the company and promote them up. It would be hard for an outsider to navigate the organization that is Microsoft today.

BOULDEN: A few outsiders were said to be high on the list: Alan Mulally, formerly of Boeing now of Ford. He's seen as someone who can transform large firms in need of re-engineering. Stephen Elop, a Microsoft guy who left to run Nokia and now was coming back as Microsoft bought Nokia's handset division. Hans Vestberg, the young Swedish CEO of Ericsson, a big player in telecom networks.

DAVID GOLDMAN, CNN TECHNOLOGY EDITOR: If Microsoft is becoming more of a corporate company, and they're starting to favor Cloud computing and server software sales, well, Nadella is an obvious choice.

BOULDEN: His big challenge, sales of Microsoft operating system, Windows, have been eroding right along with PC sales. But in truth, the company is already transforming itself, as Nadella himself explained in a promotional video.

<16:05:00>

NADELLA: You have to go from being a software company to being the services company that's running this 24-by-7 operation on a global scale, in fact, supporting most of Microsoft's own first body services, from Skype to Bing to Office 365 and now even Xbox One.

(MAN SCREAMING)

BOULDEN: And Nadella could not be more different from his predecessor, Steve Ballmer. Loud, emotional, a marketing guy, Ballmer is credited with keeping Microsoft's software dominant and criticized for not taking Microsoft successfully into search and crucially, mobile.

(MAN SCREAMING)

KANJI: This is a company that has been -- has spent a lot of money on the entertainment side, spent a lot of money on the search side, and spent a lot of money on the mobile side, none of which really have yielded results for the company or for shareholders.

BOULDEN: And many of those shareholders were apparently looking for an outsider to come in and, well, shake things up. Nadella is unlikely to do that, but is also unlikely to need to jump around the stage to motivate the Microsoft faithful.

Jim Boulden, CNN, London.

(END VIDEOTAPE)

QUEST: And this is exactly how the share price fared, maybe because Nadella's name was so widely leaked in the last couple of days, but the share price was off just a third of a percent. The shares holding at 36.34. So, somewhat unfazed by that which took place.

Nadella, when he takes over, will have familiar faces advising him, but there has been a boardroom reshuffle. This is the current boardroom of Microsoft. If you go in, you'll see. You've got Bill Gates as chairman, you've got Steve Ballmer as chief exec, and you've got John Thompson as the independent board member.

Now, shuffle the board and you'll see this is what it looks like now. John Thompson moves up to become chairman. Steve Ballmer doesn't take any major executive role, he just becomes a director as such. Bill Gates no longer chairman. He is now a technology advisor. And Satya Nadella, of course, is the chief executive. That's the way it looks now.

Gates has gone from chairman and chief exec to chairman to technology advisor. He still has a vast number of shares in the company, and this was his thoughts and Nadella.

(BEGIN VIDEO CLIP)

GATES: I'm thrilled that Satya asked me to step up, substantially increasing the time that I spend at the company. I'll have over a third of my time available to meet with product groups, and it'll be fun to define this next round of products working together. So, there's a lot of opportunity in front of us, and it's exciting that we've got a strong leader to take us there.

(END VIDEO CLIP)

QUEST: Bill Gates. And if you wanted to really understand the power of this company to not only dominate the story, but dominate the way it was told, of course, Microsoft provided all the sound bites and all the information and all the interviews themselves today. So far, the executives haven't been put up for interview.

Alex Gounares is the founder and chief exec of Concurix, a Cloud computer start-up, joins me now. When he was at Microsoft, he served as a technology advisor to Bill Gates, the same job which Gates will now do for Satya Nadella. Alex joins me from Seattle. Ho hum, but a very different man. How would you grade the decision and the result?

ALEX GOUNARES, CEO, CONCRUIX: Am I on?

QUEST: Yes.

GOUNARES: I think it was a great choice. And thank you for having me on, Richard. It's great to be on the show. So, Satya is a very inspiring leader, he's very charismatic, very empathetic. He's the kind of guy when you go meet with him, you walk away feeling great. He really helps inspire you to do a lot of work -- a lot of your best work.

As you pointed out, he's very, very different than both Bill and Steve, so it's a -- it'll be quite a change, I think, from a temperament perspective --

QUEST: Right.

GOUNARES: -- inside the company.

QUEST: The markets had thought and the markets had been wondering whether or not they should have gone for an outsider. Now, you were an insider and you know, Alex, that they always say the culture would make it very difficult for an outsider to make big change. Is that the case?

GOUNARES: I think it would be difficult for an outsider to make a lot of change. But it's a very, very large company with a lot of complexity. It's one of the few companies in the world with almost a dozen billion- dollar business lines. So, there's a lot to get your head around when you're working in the company.

QUEST: Right.

GOUNARES: But that said, it's -- this change concept is a -- it's something that you have to approach, I think, with a little more thoughtfulness.

(CROSSTALK0

QUEST: Right, but --

GOUNARES: Microsoft had --

QUEST: Let me just jump in here, because what I need to understand from you is what do you perceive as Nadella's number one task? You don't become chief exec of Microsoft and say more of the same and similar. So what's his number one task?

<16:10:10>

GOUNARES: I would say getting back to innovation and exciting products. They certainly have a lot of products that are sold. They had record revenue, as you pointed out.

But in just about every business line they're in, from databases to operating systems to office productivity, there are a number of competitors out there that arguably have much more innovative, exciting products that are really capturing the imagination of customers. And so, they really, really have to get back and --

QUEST: Right.

GOUNARES: -- unleash the talent of the smart people that are there and build some great products that people are talking about, buzzing about, and really want to get.

QUEST: You see, that's the problem, isn't it? Microsoft is a bit like the big old giant that, yes, it's very nice to have in the garage and it'll get you out on a Sunday outing, and it's the sort of motorcar that will do the job on an average Tuesday in October. But you want something exciting for a sports run on a Sunday afternoon, and they haven't got that yet, have they?

GOUNARES: Exactly. Yes, I do think they need to build some Ferraris, if you will, and make them affordable to everybody.

QUEST: Right. Thank you very much, Alex. Good to see you. Thank you for joining us from Seattle.

GOUNARES: My pleasure.

QUEST: Thank you. Good to see you. Now, the US markets have recovered some of the ground that they've been losing. Alison Kosik is at the New York Stock Exchange. I'm guessing, Alison -- all right, I'm not stealing your thunder in all of this --

(LAUGHTER)

QUEST: -- but I think today is one of those days when people ask you why did the market go up, you say because it didn't go down.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Yes, there really was no one reason or any reason why the market went up. It was the normal push and pull that you see happen in the market when you see this sell-off, the kind of sell-off that happened yesterday, the more than 300-point sell-off.

Overall, though, analysts say, look, the direction of this correction is still coming, that that is the thought. The Dow's getting closer to it, the S&P 500 a little bit further away, but it really shouldn't be a surprise if there does wind up being some sort of correction or maybe a pullback, whatever you want to call it.

You look at job growth, it isn't great. The Fed's ending its stimulus. This is sort of the thought process that's happening these days. Richard?

QUEST: Alison Kosik at the Stock Exchange. We thank you for that. Interesting that Microsoft didn't really react at all to the news of the new CEO. Alison, thank you.

The markets around the world, now, and how they've been trading. European markets was mainly down after Asia. It was Asia where the business we need to talk about in a moment. Xetra DAX off a half. But in the Asia markets, the Nikkei hit a four-month low after Monday's weak US manufacturing data, so the market there in Tokyo off 4 percent.

It is quarter past 4:00 in the morning in Tokyo at the moment, or it's about that, 5:00 in the morning in Tokyo, so they've got a few hours before they start trading, and they will take their impetus, or you will take impetus if you're watching us in Tokyo at this time of night, from what you saw in New York, the market up 76.

In a moment, after the break, Target's chief financial officer explains how hackers got away with millions of credit card details. This is QUEST MEANS BUSINESS.

(RINGS BELL)

(COMMERCIAL BREAK)

<16:15:10>

QUEST: We're learning more about how hackers stole the personal details of millions of US Target customers. It was a breach that happened late last year, and the hackers found a way to access card terminals in the company's United States stores.

Forty million credit card and debit card records were stolen, along with the addresses and phone numbers of tens of millions more Target customers. Speaking in front of a Senate committee in Washington, the Target chief financial officer, John Mulligan, said the culprits penetrated several layers of security.

(BEGIN VIDEO CLIP)

JOHN MULLIGAN, CFO, TARGET CORPORATION: I want to say how deeply sorry we are for the impact this incident has had on our guests, your constituents. We know this breach has shaken their confidence in Target, and we are determined to work very hard to earn it back.

(END VIDEO CLIP)

QUEST: Target said it's pushing ahead with security system changes in the wake of the hacking, and not least of which, perhaps, the potential introduction of chip and PIN, credit cards used pretty much everywhere else in the world except the United States.

CNN's Joe Johns joins me from Washington. One of the things I found interesting, Joe, looking at the testimony, was that they basically -- many people have thought that Target almost gave the information away, the equivalent the key's under the mat, take what you need.

(LAUGHTER)

QUEST: But what we learned today was they do have very sophisticated security systems.

JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT: That's absolutely the take-away. What we learned today told us a lot about the Target attack. For one thing, Target had actually spent millions upon millions of dollars on data security, but it was the US Department of Justice that notified the company, initially, of suspicious activity involving payment cards.

That notification came on December 12th. The company says it took two days for Target to confirm, with the help of independent experts, that criminals had infiltrated their system by installing malware on their point-of-sale network, specifically the card and cash registers.

On that day, they removed all the malware. They thought they had fixed the problem. Then on December 18th, they had to disable more malware on 25 additional registers they'd overlooked, and it wasn't until December 19th, seven days, a full week after DOJ had alerted them to the problem, they made the announcement to the world the system had been breached.

How did it happen? For one thing, an intruder stole a vender's credentials to access the system and install the malware on the registers, Richard.

QUEST: So here -- and then I also -- at Neiman Marcus was also giving testimony today.

JOHNS: Absolutely.

QUEST: And even when Neiman Marcus -- that's another US department store -- even when Neiman Marcus knew the malware was there and found the malware, it still took them four days or several days to discover what it was doing.

Did the senators -- were they angry? Did they seem frustrated, or were they just -- this is something that has to be dealt with?

JOHNS: I got the feeling that it -- this is something to be dealt with, a fact of life, if you will. Just remarkable in the United States that we're still using magnetic strip information while the UK has been using the chip with great success at reducing fraud.

There's an ongoing lobbying war between powerful interests, retailers on one side, banks on the other, each arguing the other's more culpable --

QUEST: Right.

JOHNS: -- and should bear the brunt of bringing in the new technology. The sentiment expressed today was that the bankers and retailers have to share the costs, which could reach billions of dollars, and switching --

QUEST: Right.

JOHNS: -- obviously, could be costly, Richard.

QUEST: Don't worry, John, when I come to Washington -- Joe, when I come to Washington, Joe, I will be buying you with my chip and PIN --

(LAUGHTER)

QUEST: -- and we'll leave your hacked credit card in --

JOHNS: Absolutely.

QUEST: -- in your wallet. Joe Johns joining me from Washington.

BP's chief exec says the company's investment in Rosneft was one of its best ever. The Russian firm contributed more than a billion dollars to BP's bottom line in Q4. As you can see, it's a small -- it's a very substantial, I beg your pardon -- part of the whole.

Profits were 28 percent down on the same period last year. The firm blames weakness in US refining business. BP also topped off its fund to pay the costs from the Macondo oil spill in the Gulf of Mexico. It's now $42.7 billion. The chief exec, Bob Dudley, told Jim Boulden that the drop in profits was not a surprise.

(BEGIN VIDEOTAPE)

BOB DUDLEY, CEO, BP: Well, I think, Jim, the numbers came in right about at our expectations. We're a smaller company, we'd just completed the divestment over the last couple of years of nearly $40 billion of assets, so you would expect our numbers to come down.

But underlying production growth up 3 percent, lots of good things have happened. Not a surprise quarter for us, on track.

<16:20:00>

BOULDEN: You've taken a charge of $42 billion for the oil spill in the Gulf of Mexico. Do you think it's going to go higher? Because at some point, we thought it wouldn't even be that much money.

DUDLEY: Well, we have provisioned $42 billion for the spill, for the clean-up, and the follow-up with economic claims and fines. I think that's a really large number. The first two phases of the trial have been held, and there's no indication yet of any rulings to come.

We put aside quite a bit of money to settle things for business economic loss claims, BEL claims. We've challenged some of that in courts.

BOULDEN: Yes.

DUDLEY: We've been successful in terms of requiring people to at least match revenues and expenses, so that's good. And we still have some further claims around paying people who have -- appear to have nothing to do and no cause with the spill.

BOULDEN: It seems that BP's a bit more bold in the US, now, being able to say some claims aren't true. Do you feel you have more confidence now in the US to do that?

DUDLEY: I think it's a point of principle. We've made some very generous settlements to reimburse people impacted by the spill.

And when that net starts widening and widening and widening, and more and more people are not impacted by the spill, and there's more percentages of those going to plaintiffs' attorneys, you do reach a point where you have to shine a light on it. And we have been doing that aggressively.

BOULDEN: You've announced some $8 billion in share buybacks. Will you be doing more buybacks, or are you already doing more buybacks?

DUDLEY: That's right. We've sold $38 billion worth of assets, and part of -- in addition to that, we sold our interest at TNK-BP, an original investment of $8 billion in that, with $12 billion of cash coming back. We own 19 percent of Rosneft, now.

BOULDEN: Of course, the world is now focused on Russia because of the Winter Olympics in Sochi. And you look at BP-TNK, it was fraught with difficulties. Are you worried about your investment in Rosneft and BP going forward in Russia? It's a very, very tough market because of politics.

DUDLEY: But it was a great investment.

BOULDEN: OK.

DUDLEY: And people need to realize that. It was probably one of the best investments BP's ever made. That gave us the confidence to invest back into Rosneft, so we own that 19 percent share, a seat on the board.

I think we're going to be doing projects with them. Russia is one of the great oil-producing nations of the world. It's no more difficult than other companies -- countries -- where we operate.

(LAUGHTER)

BOULDEN: What about the politics side, though? It is getting very difficult there now.

DUDLEY: Well, the politics in other countries are difficult for us as well. I struggle with some of the things that I see happening with the plaintiffs' attorneys in Louisiana. You can't say anything is -- everywhere is smooth sailing anywhere.

(END VIDEOTAPE)

QUEST: Bob Dudley, the chief executive of BP. And honestly, I can't think of any other company that's put aside $40-odd billion for anything, certainly not in the cost of one particular incident. Think about that, $42 billion. It's the GDP of a small country.

Still coming up on QUEST MEANS BUSINESS, a Michelin-star chef takes city farming to a whole new level. We're deep beneath the streets of London in a moment.

(RINGS BELL)

(COMMERCIAL BREAK)

QUEST: Now, as we speak, large parts of the London Underground, the Tube, are coming to a standstill. Many Tube workers are joining a 48-hour strike over plans to cut ticket offices, the number of offices. This is the famous Tube map in London. The Tube network is running normally at the moment, or just about normally.

Here is how the Underground is expected to operate as it goes into there. There we go. And you can see large parts -- now, you may think -- you may think that not much change.

<16:25:00>

But I promise you that that bit here, the Central Line, parts of the Victoria Line, and the Piccadilly Line, all this -- parts of the Circle -- and the Circle of the Metropolitan Line, they are all major parts, which will disappear as the strike gets underway.

There'll be no service on the Central, the Jubilee, the Piccadilly, no Circle service. And stations like Bond Street, Sloane Square, and Westminster will be closed.

What it does mean, of course, is that the strike should mean a bit of peace of the plants. Which plants, you may be asking. Well, if you take a look at the Tube map, as Isa Soares found out, a farming venture is taking root deep beneath the Tube.

(BEGIN VIDEOTAPE)

ISA SOARES, CNN INTERNATIONAL CORRESPONDENT (voice-over): It's another gray morning in South London, and as commuters make their way to work, something deep below ground is growing.

SOARES (on camera): But little do they know that 33 meters below their seat in a World War II bunker, a unique horticultural endeavor is underway.

SOARES (voice-over): Here in the dark, damp, rusty tunnels of London, with a constant temperature of 16 degrees, an innovative farming experiment is raising shoots.

RICHARD BALLARD, FOUNDER: Having a stable environment, we can create a perfect environment for the plants. So -- and we can grow to a certain time from 7 days to 21 days, and we produce a crop and deliver directly into the market, which is just half a kilometer down the road.

SOARES: The project is being backed by Michelin-starred chef Michel Roux, Jr. He tells me this is modern farming in Britain, underground and no need for a trowel.

SOARES (on camera): Are these herbs?

MICHEL ROUX, JR., MICHELIN CHEF: No, these are pea shoots and --

SOARES: Are there pea shoots as well?

ROUX: These are fully mature, so they have -- you bite into them, and they have that wonderful pea taste, if you want to have a little.

SOARES: Mm.

ROUX: And they look great. They really do look great.

SOARES: Mm! Where do you get the water from?

ROUX: The water is -- the water, at the moment, is just filtered water that we're using, but we're hoping -- we're hoping that we should be able to collect rainwater and filter that and various other -- various other things that will help us to be as organic as we can. And it's good for the environment.

SOARES: And so much rain at the moment, you're not short of water, I can tell you that much.

(LAUGHTER)

SOARES (voice-over): For the time being, they have one tunnel with 2.5 acres of space. They're growing garlic chives, pea shoots, Thai basil, among other products, with the potential, of course, to expand.

And with London's above-ground property prices through the roof, this underground business has growth potential.

STEVE DRING, FOUNDER: Commercially, it's a lot cheaper to grow in this environment than building a farm sort of outside of London. It's about eight times cheaper when you look at the cost in terms of the pools of rent that you would have to pay for that kind of space.

SOARES (on camera): While they're hoping this unique venture will whet the appetites of investors, they need to raise roughly a million pounds in 60 days in a crowd-funding campaign to get food on plates by late summer.

Isa Soares, CNN, underground in London.

(END VIDEOTAPE)

QUEST (singing): Happy birthday to you. (speaking) Still to come, Facebook turns 10 years old. Is it a toddler or is it nearly about to become a teenager? We'll take a look at how far the social network has come and where it's going. It might even be a mature pensioner.

(RINGS BELL)

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment. This is CNN, and on this network, the news always comes first. Pakistan's first attempt to hold talks with the Taliban has been put on hold. The Taliban negotiating team turned up for the meeting in Islamabad. They say the government negotiators did not. The prime minister Nawaz Sharif has made talks with the Taliban a priority in the hopes of securing a truce.

At least 12 people have been killed in Ukraine after a train and a mini-bus collided at a railway crossing. Five more people were injured in the accident which happened in the village of Vyry, close to the Ukraine border with Russia. The Russian president Vladimir Putin is in Sochi as we near the start of the Winter Olympics. Mr. Putin met with top officials from the IOC and visited a leopard rehab center. Meanwhile, Olympic security remains a concern as spokes from the Austrian Olympic Committee said they received a letter directly threatening two of their athletes.

The World Health Organization is predicting a spike in cancer cases. It says 22 million cases will be diagnosed annually by 2030. It's a 57 percent increase of the current rate. Report says more emphases need to be placed on prevention.

It was ten years ago on this day in 2004. It was a famous Harvard dorm room - dormitory - and it was there that a psychology student called Mark Zuckerberg was working on an extracurricular project. That room might have looked something like this. Your typical student dorm, replete with extras. Now, from this room came the first incarnation. It was known Thefacebook. Maybe he was listening to the radio when he invented it, he may have heard "Hey Ya!" by OutKast. It was the U.S. number one on the day Facebook started. In ten years, it's gone from a pet project to having a market cap of $140/$157 billion. One in six people worldwide now use Facebook. It's roughly one and a quarter billion regular monthly users, and it all started in a dorm room at Harvard. Laurie Segall joins us know from San Francisco. Then years from incubator to toddler, I want to say to maturity, but there will be people who say Facebook is far from mature yet. What do you think?

LAURIE SEGALL, CNNMONEY: Well first of all, I can't believe OutKast's "Hey Ya!" came out ten years ago --

QUEST: (LAUGHTER).

SEGALL: -- my God. But you know it's really unbelievable to think that it's been ten years since Facebook grew. I mean, and you look at them - they went from a small startup to a public company, and they had a lot of growing pains. You know, I was actually at the Menlo camp - Menlo Park Campus yesterday and I was speaking to Chris Cox who's the vice president of product at Facebook. And he - and, Richard - if I could describe him to you in any way, he's the guy that's the visionary behind a lot of the things you're using when you go to Facebook - a lot of those products. And he - we - walked together and he was sharing with me some of the war stories, because when you have startup that gets as big as Facebook has gotten, there are a lot of war stories, and he also told me what's ahead. Check it out.

(END VIDEOCLIP)

CHRIS COX, V.P., PRODUCT, FACEBOOK: The question was is this something that could work outside of college?

SEGALL: Right.

COX: And everybody said, no, it's probably not going to work outside of college.

SEGALL: In honor of Facebook's ten-year anniversary, we decided to take a walk down memory lane. You have some little stories where you just thought, 'Oh my God, I can't believe we got through that'?

<16:34:55>

COX: I mean the news feed launch was pretty crazy. I spent - with a bunch of people, we worked really hard on making news feed. It took us almost a year to build. And we were pretty naive around how it would be received. Obviously, people were like, 'whoa, this is a lot of change.'

SEGALL: Yes.

COX: And there was like a protest organizing outside, so we had to like go out the back entrance.

SEGALL: You had to go out the back?

COX: Yes.

SEGALL: OK.

COX: And, it was just one of those things I look back on right now and it's just hard to believe.

SEGALL: Since then, there've been a lot of landmarks that are hard to believe. Six billion likes per day, 7.8 trillion messages sent using Facebook and 1.2 billion monthly active users. Far cry from the early days.

MEREDITH CHIN, FACEBOOK EMPLOYEE SINCE 2006: There were no chairs, no tables, they had to find like a beanbag chair and the kid interviewing me who is now a good friend - but he had bare feet on.

SEGALL: (LAUGHTER).

CHIN: And like it was just - I was like, 'what am I getting myself into?'

SEGALL: Over the past ten years, Facebook moved from this small office to here and here and now to this sprawling campus here in Menlo Park. When we talk about the future of Facebook, the word we just keep hearing is mobile.

COX: Yes.

SEGALL: When did you guys know mobile was going to be so big, and what is the future look like when it comes to mobile and Facebook?

COX: It really happened a couple of years ago. We sort of instituted all of these rules in the company, like whenever we show our products to each other, we need to start with a mobile version.

SEGALL: But the future of Facebook might look a little different Alongside the traditional app on your phone, you might start seeing a variety of apps created by the company.

COX: We already have Facebook, we have Instagram, Messenger, we just announced Paper which is an immersive way of looking at your news feed.

SEGALL: Paper, Facebook's latest app, rates your news feed based on your interests. But a challenge for the company will be continuing to grow at such a rapid pace. They're starting to saturate the internet-connected world.

COX: When you just look out over the next three years, there's going to be lot more people with their first computer and their first phone and their first access to the internet. And one of the things we're really excited about is making the access to the internet in general a lot more affordable.

SEGALL: It'll a challenge and not Facebook's only challenge. The company now competes with an onslaught of apps like Snapchat and Twitter. What do you look forward to for the company?

CHIN: I think it's next billion.

(END VIDEOCLIP)

SEGALL: Richard, you know, the next billion is not going to be easy, and I should say I also spoke to Chris Cox -

QUEST: Right.

SEGALL: -- about artificial intelligence. You know, what are they going to do with that? Because a lot of different companies are investing in that and he said they have a small team right now working on it, and he said Facebook has a lot of - and I say, quote, "Cool and interesting data" that they're playing with. So we'll see what that looks like. And I also said, Richard -

QUEST: Right.

SEGALL: -- what keeps you up at night? You know, he's now a millionaire, he's been there for eight years and he said - you might be surprised what he said - "Staying scrappy" - in saying you know Facebook has this move fast and break things kind of motto and he wants to do that even though the company's now public, they've got over 6,000 employees. Richard.

QUEST: Laurie Segall in San Francisco. Thank you for joining us with that part of the story. It'll never catch on. At ten years old, Facebook already has more than a few gray hairs. The average Facebook user in the United States is 41 years old. Around four years ago, my next guest said Facebook had five years left before things started going downhill. I'm not going to hold you completely to that, Jeffrey Cole, who joins me now, but you still think that there are some underlying issues with it?

JEFFREY COLE, CENTER FOR THE DIGITAL FUTURE, USC ANNENBERG: I sure do, although let's give a happy birthday greeting to Mark Zuckerberg. If I were Mark, I would be both a proud and nervous parent. But is -

QUEST: Nervous?

COLE: Nervous.

QUEST: Nervous, why?

COLE: Nervous because they can't stay scrappy. They're a victim of their own success. We've seen it happen with Friendster which probably nobody remembers, we've seen it with Myspace, we've seen -

QUEST: But they imploded faster. The difference between Friendster and Myspace and Facebook - Facebook has scale.

COLE: It has immense - 1.2 billion users. We think it's going to go to 1.5 at least. Keep in mind that's 1-2 out of 7 billion people on the planet, 1.3 billion the Chinese (inaudible) -

QUEST: So what happened - so what happens - does it just sort of dwindle and fade or does it just not grow?

COLE: We think it'll grow to 1.5, 1.6 - it remains forever as the place you go to communicate with your mother and father - the phone directory to the planet. But Zuckerberg already realizes if he wants to stay scrappy and grow, he's going to have to open his checkbook. He opened it for a billion for Instagram, he offered $3 billion for Snapchat.

QUEST: Was it a good buy, Instagram ?

COLE: Probably. Too early to - if nothing else it took it away from being a competitor. Snap - but I think he's going to have open his checkbook every year, every year and a half - it's not a one-time buy.

QUEST: But that's - but that's the right way. If you accept that there's always going to be somebody else out there -- because there's more of them than you - that's going to come up with the next best thing -

<16:44:00>

COLE: There's lots of dorm rooms at Harvard and other schools.

QUEST: If there's lots of dorm rooms in Harvard, and you - and you know - unless he's a one-hit wonder, now he can actually buy the next best thing.

COLE: He sure can and just as General Motors did over a generation, just as Microsoft has - he's now the big guy. He's not -

QUEST: Right.

COLE: -- the scrappy guy anymore. He's got the checkbook.

QUEST: So let's pull some strands together here because our lead story tonight was Microsoft, Bill Gates, Satya Nadella now the new CEO.

COLE: Bill Gates, another dorm room at Harvard 30 years earlier.

QUEST: Absolutely. So, what do we learn from this? Microsoft's got scale and is now -- a guest on this program this evening said it needs to get fizz, it needs to get something that's fun that people like about it. So, pull us to Facebook and Microsoft together.

COLE: What we really learn is it's hard to move on and change when your existing business is thriving. It's hard to make the necessary change and - now, Microsoft had something that Facebook also has - CEO that knew he was going to be there for a long time as opposed to somebody who's going to be gone in two years. But, I mean, it's turning on your existing business. They've done that with mobile (Inaudible) -

QUEST: Right.

COLE: -- and it realizing that it's not going to be a golden goose forever and ever. And you have to change.

QUEST: Good to see you. Thank you very much indeed for joining us.

COLE: Thanks.

QUEST: Now, Wednesday we'll see another significant milestone for social media when Twitter releases its first-ever quarterly earnings report. So, we've had Microsoft, we've had Facebook and now Twitter. Samuel Burke takes a look at Twitter's history through its most followed users.

(BEGIN VIDEOCLIP)

KATY PERRY, SINGER: I got the eye of the tiger, a fighter, dancing through the fire . ..

SAMUEL BURKE, BUSINESS CORRESPONDENT: Katy Perry's the reigning queen of Twitter with more than 50 million followers, and just like her hit single "Roar," Twitter's idea was a roaring success. Despite a rough January, shares are up over 40 percent since their November debut.

JUSTIN BIEBER, SINGER: Nobody else . . .

BURKE: Bad boy Justin Bieber is right behind with 49 million followers. Love is all that matters to Bieber, but for Twitter, all that matters is mobile. Twitter has only 2 percent of mobile ad revenue according to eMarketer. Its purchase of ads from MoPub could boost that revenue significantly.

Barack Obama, number three with over 41 million followers. Like the U.S. president, foreign affairs are high on Twitter's to-do list. About 77 percent of users are outside of the U.S., but they make up only 26 percent of revenue.

LADY GAGA, SINGER: I live for the Applause, Applause, Applause, I live for the Applause-plause, Live for the Applause-plause . . .

BURKE: Number four, Lady Gaga who lives for the applause - high profile audience-driven events like the Super Bowl and the Oscars - attract millions to this site for more and more information. According to "Forbes," Twitter's second (screen) could help TV and TV could help Twitter.

Number five, Google-owned YouTube. Google remains the company to beat in mobile says eMarketer. Google has more than 50 percent of the global ad market. Twitter and Facebook don't even come close.

TAYLOR SWIFT, SINGER: We are never, ever, ever getting back together . . .

BURKE: Taylor Swift sings "we are never getting back together," and after the dismal performance of Twitter's music app, Twitter and music may never get back together - ever, ever.

Britney Spears at number seven had a hit with "Oops, I Did it Again."

BRITNEY SPEARS, SINGER: Oops!...I did it again, I played with your heart, got lost in the game . . .

BURKE: And Twitter keeps doing it again and again, as in losing money. Analysts expect a loss of about two cents a share this week with no sign of profit.

RIHANNA, SINGER: My umbrella ella ella eh eh eh.

BURKE: But like Rihanna, Twitter has a huge fan base under its umbrella. More than 230 million monthly active users. Analysts forecast user growth to go up about 6 percent this quarter.

Number nine, Facebook's purchase of photo app Instagram is paying off, but Twitter's video app, Vine, is an up and comer. Big name brands are already experimenting with mini movies as ads on the platform.

BURKE: And finally, Justin Timberlake at number ten. Twitter is a public company now and must answer to all those important suit and ties.

JUSTIN TIMBERLAKE, SINGER: And as long as I got my suit and tie, I'ma leave it all on the floor tonight . . .

BURKE: Wall Street is expecting revenue of about $218 million. Investors hope Twitter is 'N Sync. Samuel Burke, CNN.

(END VIDEOCLIP)

<16:52:00>

QUEST: Very clever. Very well done. Still to come on "Quest Means Business" tonight, Lloyds Banking Group takes the lead on getting more women into senior roles. We'll tell you about the chief exec's ambitious pledge in just a moment. This is "Quest Means Business."

(COMMERCIAL BREAK)

QUEST: The chief executive of Lloyds Banking Group wants to give more of the top jobs to women. Antonio Horta-Osorio has pledged that by 2020, 40 percent of the senior roles will be held by women. He said Lloyds wants to do better representing his customer base. Now the challenges some women face in the workplace - they were made apparent in a court ruling. JPMorgan Chase ordered to $1 and 1/2 million over sexual harassment claims.

And the pay of General Motors' first female chief exec has become a source of controversy for the carmaker. Critics say Mary Barra earns $100,000 less than her male predecessor. GM's critics are not taking into account Barra's long-term bonus which will be disclosed later this year. Also they say the $100,000 was because the former chief exec was also chairman and got an extra pay packet. Something tells me that there's something in the numbers. Heidi Hartmann is the president of the Institute for Women's Policy Research. She joins me now from CNN Washington. Heidi, good to see you. The idea that this - I thought we were beyond this question of same pay for women for the same job.

HEIDI HARTMANN, PRESIDENT, INSTITUTE FOR WOMEN'S POLICY RESEARCH: It would be very nice if we were. Good to be with you today. I'd like to think we were. I run a think tank and we've been studying these issues for 25 years. And we think it's about time for them to be over too. It's an ambitious plan that Lloyds has announced and I hope they know how to do it.

QUEST: Right. Now, the whole question of how they going to do it because it's not unique to want to actually raise the number of women in the workplace or in the senior roles of management. But as I heard in Davos last week, on this program, (funny) enough - from one of our experts, getting women to the chief exec is one thing - that's not the really difficult bit. It's that middle to upper rank of management that the tough part happens. Would you agree there?

HARTMANN: Well, I think generally what I see is a ladder with the most people at the bottom, the next most in the middle and then very few making it to the top. Now, it may be that for a one-star position like let's take Marissa Myer - you know, you can put that one woman at the top, and then you're right, she may not have a good complement beneath her. But in an ordinary firm, there would be people at every level.

QUEST: Now, Heidi, I'm going to be controversial here, so I know you'll forgive me. But the one complaint I often hear from women in the office is that women when they get to the top, are woman's worst friend for helping others, understanding things like maternity issues, understanding issues like equal pay, and it all works on the basis of 'I got here, you can too.'

<16:54:00>

HARTMANN: (LAUGHTER). Well that sounds like a stereotype perpetuated by men.

QUEST: (LAUGHTER).

HARTMANN: There's actually research on this.

QUEST: Ah!

HARTMANN: I was just looking at a study and I've seen many studies like this, but the most recent study covered data through 2002 - 2004 actually I think - from U.S. corporations and it showed that where there was a woman chair of the board or a woman CEO, women were paid better and more women were into senior management. So one thing Lloyds could do is make sure they do have a lot of women in top senior management and those women will actually pull up women from beneath and bring them up into the higher echelons. So, I think that actually women are women's friends in the workplace. Another study I've seen -

QUEST: (LAUGHTER).

HARTMANN: -- even men - even men feel they are paid fairly by women bosses.

QUEST: Heidi, I think that is called putting me firmly in my place.

HARTMANN: (LAUGHTER).

QUEST: But thank you very - listen, come back again please -

HARTMANN: I will.

QUEST: -- We need to dole out these issues more on the program.

HARTMANN: Will do.

QUEST: Thank you very much. Heidi Hartmann, --

HARTMANN: Thank you.

QUEST: -- the president for the Institute of Women's Policy Research. Well, New York gets ready for another blast of ice. It's far from alone. Countries across the world including Iran have had harsh conditions with which to deal. We'll have an update on the weather forecast - the world weather forecast in a moment. (Inaudible) get out of here in one piece. "Quest Means Business." (RINGS BELL).

(COMMERCIAL BREAK)

QUEST: If Heidi Hartmann didn't put me in my place on the question of equal pay and equal rights for women in the workplace, our next person -

JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: (LAUGHTER).

QUEST: Oh, listen to that chuckle.

HARRISON: (LAUGHTER).

QUEST: Listen to the chuckle.

HARRISON: Yeah.

QUEST: She's (inaudible). Jenny Harrison at the World Weather Center. I tell you, Ms. Harrison, it's parky out there. Parky - parky (inaudible) - yes and of course a little bit - a little bit white too, Richard, isn't it. Now, there is of course some more snow in the forecast, but let me show you first what's been happening the last few hours. Now of course you know about the system that came through in the last 24 hours. Look at it, it's winding itself at rather nicely, even some thunderstorms in the South - that mild air. The pink is that really nasty ice and then the white of course is the snow that's coming down further to the North. This is pretty much the pictures we continue on into the middle day of the week - that area of low pressure working its way eastward as the rain and the mild air, then the ice, then the snow. And these are showing you the accumulations, but not just that - it's also showing you another system which is coming to repeat the pattern after we head into the weekend. It's a few days out to be particularly accurate as to exactly where the snow will be and how much is going to come down.

But I can tell you for the next few hours, as you can see, all these areas here - estimated about 100 million people are under some sort of winter weather advisory - obviously be it for heavy snow or just icy roads. This is the amount of snow still expected to come down. In fact, this (inaudible) gone up it changes quite a lot as the new models update. Fifteen centimeters in the next 48 hours to New York, 25 centimeters to Albany further to the north. And as I say, ice - very nasty indeed. You could get mixture actually of all of that into New York. And you can see the amounts here and you can see how much that actually relates back to.

Now I'm taking you across to Europe. We've had some huge amounts of snow through the Italian and Austrian Alps. Also across into areas of Iran. But at the moment, I really do want to talk to you about this - this next system bringing yet more very heavy and persistent rain across much of western Europe, the U.K., also France, also now pushing into Portugal and Spain.

<05:00.4>

HARRISON: But very, very high and dangerous surf and waves, and over the weekend when we saw the flooding, that was really because it was coinciding with the high tides. Just to give you an idea - I showed you this a couple of days ago, but it has been so very wet throughout just the month of January - the first month of the year - and you can see how much rainfall above the average. The southwest of Europe - of the U.K. - has seen five times the usual amount of the wettest year - I should say really - in January.

And have a look at these pictures because Prince Charles actually made a trek to actually go and visit the people in the Somerset levels. This is one area really badly affected. A lot of this area is actually is actually below sea level. Some villages here that've been actually cut off now for over a month, and the only way to get to them is like this - and that's what he did. He went there, bit of a (inaudible), but really just to talk to people from the town and find out how they've been dealing with it or how they hadn't been dealing with it, and of course he's also pledged about $81,000 from his charity to help the people there with the moneys they needed.

This is the next system that's coming through. The rain will be heavy, it will be persistent. We've got some very strong winds as well at the same time. And just to end, I was saying to you about the amount of snow in the northeast over the next seven days - this is the amount of rain as we head through into Sunday that could still come down, maybe another 75 millimeters in (inaudible). So, not good news I'm afraid, Richard. It doesn't matter where you go, there's some sort of very unpleasant weather there for you.

QUEST: Jenny Harrison at the World Weather Center. Jenny, we thank you for that - (inaudible). We'll have a "Profitable Moment" after the break.

(COMMERCIAL BREAK)

QUEST: Tonight's "Profitable Moment." Satya Nadella is the new chief exec of Microsoft and born in 1967 - that means he's five years younger than me. I don't know why I find that disturbing, but I do. And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up in the hours ahead, (RINGS BELL), I hope it's profitable. I'll see you tomorrow.

END