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QUEST MEANS BUSINESS

Tech Giants to Release Earnings Any Minute; PayPal Shares Sink After eBay Split; French Growth Continues Amid Macron Reforms; Air France- KLM Sees New Spirit in Macron's France. Aired 4-5p ET

Aired February 1, 2018 - 16:00   ET

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


[16:00:00] RICHARD QUEST, CNN HOST: Closing bell ringing on Wall Street, no records. The Dow barely changed. Technology stocks are down, the banks

have lost ground. We have a round going on in tech stocks and hit the gavel. Trading is over. It is Thursday. It's the first of February.

Tonight, A is for Apple, Alphabet, Amazon, all three reporting results in this hour. PayPal's stock falls as eBay says good-bye. We have the PayPal

chief operating officer on this program. And the Macron revolution continues, how deep, how far and how much more to go. We'll hear from the

finance minister and the Air France chief executive.

With the Eiffel Tower sparkling away, I'm Richard Quest live in Paris where, of course, I mean business.

And a very good evening and a warm welcome on a cold night to Paris. On tonight's QUEST MEANS BUSINESS, we're going to hear some of France's top

leaders who'll give their views on what's happening in this country's economy. You'll hear from the economy minister, Bruno Le Maire. You'll

hear from the Air France CEO, the former finance minister, and now European economics Commissioner, Pierre Moscovici. And Jean-Claude Trichet, the

former head of the Bank of France and the president of the ECB. He will be here to give me an assessment on France's position and we'll be talking

Brexit.

The markets have just closed in Europe -- Wall Street, I beg your pardon. Europe closed many hours ago and Europe was down because Europe had seen

the misery of the open on Wall Street where the Dow was off some triple digits. The Dow on Wall Street, well it was a topsy-turvy sort of day.

The Dow did go positive and it was little changed when all was said and done. But were going to get the world's tech companies and the biggest

reporting during the course of the next hour.

So, Amazon and Google -- or Alphabet as it's known -- they will report any minute now. Apple comes at half past the hour and will have full analysis

of that. And then on the FANG stocks, Facebook, that stock hit an all-time high even though users are spending less there.

So, the way to put it, and the way to think of it although stocks are down, Amazon's off 3.5 percent today. Alibaba is off some 6 percent today. Both

these stocks are up many dozen digits over the course of the year. Our correspondences who are covering, Amazon is Clare Sebastian, Alphabet,

Paul, La Monica, Samuel is with Facebook and Clare is looking at PayPal. Let's start with you, Samuel, if you're with me. Samuel, Facebook reported

earlier. Lower results in the sense that people not staying so long with Facebook, but the stock, at an all-time high.

SAMUEL BURKE, CNNTECH, TECHNOLOGY AND BUSINESS CORRESPONDENT: Good evening, Richard. It's now the story about the resiliency of Facebook's

stock. The initial numbers sent the stock down five percent last night. It recovered two percent. It went all of the way up above two percent,

rather. And now it had a good day, not up a huge amount, but up. And if we would have said that Facebook would be up after delivering reports that

say people are spending less time on there. Less users in the United States. We all would have been baffled by that. But That's Exactly What

Happened today.

[16:05:00] Revenue is strong, and people were really OK with what Mark Zuckerberg said that this is all part of the big plan.

QUEST: All right.

All right. So, we've got Clare watching Amazon. Paul watching Alphabet. Do we have any sign of results Clare and Paul from either of those yet?

They're supposed to report at exactly the top of the hour.

CLARE SEBASTIAN, CNNMONEY CORRESPONDENT: Yes. We've got Amazon, Richard.

QUEST: Go ahead.

SEBASTIAN: Amazon, so, it looks like they've done pretty well, Richard. It looks like they'll beat their fourth quarter sales. I'm just reading

are up 38 percent to 60.5 billion. That's very much at the upper end of estimates and the shares are coming back up in after-hours trading. Now

this of course, don't forget, the fourth quarter, this is the holiday quarter. So, were getting all the holiday sales in there. And it was also

the first full quarter of reporting since Amazon bought Whole Foods. So, they're expected to get a bump from that as well. So, we'll get into those

numbers to you, Richard, in a minute.

PAUL R. LA MONICA, CNNMONEY CORRESPONDENT: We have Alphabet if you want --

QUEST: Because the stock was off 3. 5 percent during the course -- oh, go ahead. Tell me what Alphabet's done? That's Google, Paul La Monica.

LA MONICA: Yes. Alphabet missed on earnings. They did beat on revenue, but I think investors are a little bit concerned about the earnings miss.

At first blush, Google stock or Alphabet, as they call themselves now, down 5 percent after hours.

QUEST: These stocks have been creamed to some extent. I mean, Alibaba was off 6.5 percent because it had a poor Christmas quarter. At the same time,

now it looks as though Alphabet has done similarly, not good. But Clare, back to you. You're going further into the details of Amazon and you say

that stock is coming back, having been off 3.5 percent during the course of the day.

SEBASTIAN: Yes. Certainly, seems to be coming back, Richard. And what they said here is there are a lot of hopes pinned on this quarter.

Retailers like Amazon, not that there really are any retailers out there like Amazon tend to do a large proportion of their sales in the fourth

quarter. Having said that, what investors are going to be looking is any sign of more fiscal discipline from Amazon. It is a notoriously big

spending company whether or not they'll be reining back a little bit.

They been spending on everything from brick and mortar retail, to original content. So, that is one thing people will be looking for. The other

thing we'll be waiting for on the earnings call, Richard, is any comment about the second headquarters, HQ2. That battle that has pitted some of

America's biggest cities against each other. There's going to be a lot of interest in what they have to say about that.

QUEST: And Paul La Monica, I mean, Alphabet or Google will also be looking not only to see the amount of ad churn and to see the underlying numbers in

terms of positioning. But also, how much Google, Alphabet is burning on these other pet projects that have so far yet to bring in any money.

LA MONICA: Exactly. That's been a concern for investors. It's the reason why Alphabet restructured a little while ago when Ruth Porat came in as CFO

from Morgan Stanley. If you remember, Google used to be just Google. They changed to Alphabet in order to set up a structure where you can look more

cleanly at how Google and YouTube were doing versus the quote, unquote other bets. Things like Nest and all of the other more futuristic types of

businesses that they are investing in. You know, the driverless cars as well. So, I think there are legitimate worries that even though Google

dominates online search, is it spending too much money on things that may never pan out and generate a lot of revenue and profits.

QUEST: All right. Clare, we'll come back to you in a moment for PayPal.

First to Samuel Burke who is going to pull the strands together of what we've heard. Samuel, as our senior tech guy, you are hearing these results

from all these different companies and we've still got Apple to come. Now look, Apple's share price down on the year so far or at least not

performing anywhere near as strongly. What are you expecting from Apple?

BURKE: All we want to know is does X mark the spot? Even more important than the 80 million iPhones they're expected to have sold in the past next

quarter, is the guidance for next quarter. Are they really cutting production from 40 million to 20 iPhones, tens as we've heard from some

analysts? So, it's all about looking forward, or do they have quarters where they come out and surprise all of us and keep on chugging forward?

QUEST: Samuel Burke with Apple. You'll be back with us later. Clare Sebastian, we'll have more from you from PayPal. Paul La Monica who has

been watching Alphabet. Thank you, one and all for delving into those result as the market came to a close.

[16:10:00] Now on to UPS, the United Parcel Service, the company announced that it was buying more 747 jumbo jets, which is a good reason why the

company says it's delivering more parcels. Despite beating profit forecasts, the shares fell quite sharply and that was over logistical

snafus that happened over the Christmas period. The chief executive though joined me earlier from Atlanta, and he said he was optimistic for the year

ahead.

(BEGIN VIDEOTAPE)

DAVID ABNEY, CHAIRMAN AND CEO, UPS: It's known that we did have some difficulty around cyber week. It came in at 20 percent volume increase.

We thought it was going to be about nine. But we were able to get that situated. We had a strong peak from that regard and next year we are

planning on really adding capacity both from a plane perspective and a building perspective. And so, were very positive about next year.

QUEST: David, I love talking to you about UPS for the simple reason you are the heart of a traditional economy and the new economy. Because you

deliver the goods that people buy online. So, if I ask you for a barometer of economic growth, what are you seeing in terms of the wider economy?

ABNEY: We are positive about the economy right now. The tax reform, no doubt, has made a difference in the U.S. You can feel it. You can see it.

We're really appreciative to the administration and the Congress for making that happen. But that's going to stimulate the economy. When that

happens, it's going to create more packages which is going to result in more jobs. And as you talked about this new economy, e-commerce is the

fastest growing part of our business. In fact, it was 50 percent of our business this past year, and it will continue to grow even further. And

that's what's causing us to make many of the investments we're making.

(END VIDEOTAPE)

QUEST: There's the CEO of UPS. Now the largest, by the way, purchase of the 747 in a decade. When we come back, an old friend -- well a good

friend, Jean-Claude Trichet, will be with us. Well, he's already here, as you can see. We are going to be talking about the French economy, a bit of

Brexit and why you are always the eternal optimist. We are here in Paris tonight. After this.

(COMMERCIAL BREAK)

[16:15:00] QUEST: It's appropriate to be in Paris tonight with the latest manufacturing numbers showing that France and the eurozone are enjoying

some of the strongest growth anywhere in the world at the moment. It's growth that's outpacing the United States, but still, of course, the ECB is

continuing to spend large amounts of money. The top leaders are back.

(BEGIN VIDEOTAPE)

EMMANUELLE MACRON, FRENCH PRESIDENT: My first message is that France is back. France's back at the core of Europe.

BRUNO LE MAIRE, FRENCH ECONOMY MINISTER: We want to be able to conquer new world. To be able to export our products all over the world. But we are

also keen on developing more solidarity in France, in Europe and in the rest of the world. That's the French model.

PIERRE MOSCOVICI, EU ECONOMICS COMMISSIONER: Europe today is not a part of the problem. It's a part of the solution, with the fact that we are the

continent where we see foresee as well, economic efficiency and social justice and open economy.

MACRON: Because we will never have any French successes, without European successes.

LE MAIRE: Much more remains to come. And there will be some new surprises coming from France.

QUEST: Oh?

LE MAIRE Yes.

(END VIDEOTAPE)

QUEST: Now Europe's economics commissioner, Pierre Moscovici, says that this growth can continue, but now is the time to actually start making some

fundamental reforms. One of which would include introducing a European finance minister. I spoke to him last week in Davos when Pierre Moscovici

said European politicians deserved much of the credit for the strong growth now being experienced.

(BEGIN VIDEOTAPE)

MOSCOVICI: I think that we, the commission, the governments together, we have also built the tools to have sounder public finances. To have a

banking union, to protect our financial system, to create a capacity of confidence, we need to do more. And what the next step for me is to deepen

EU economic and monetary union, with a euro with better governance, more democracy stabilization function. But I think that we are now not only in

a better shape for every day's economy, but also structurally, much, much stronger.

QUEST: Does the futures necessitate -- to use that phrase ever closely union -- does that necessitate a deepening towards a more federal style. I

know that's an electrifying word within Europe, but that's what it looks like if you deepen.

MOSCOVICI: I'm not going to play with electricity. That's always difficult. I'm not a child anymore, but it's risky. So, I'm not going to

use that word because I know that it creates energy all over the place and frankly, we're not moving to a federal state. I would talk about

integration, deepening. I will talk about democracy. We need to have accountability. We need to have somewhere a kind of government for the

eurozone, a minister for the eurozone, a minister of finance. My successor must be that minister, and at the same time preserving the group. We must

have a control from the people through the parliament. We've got parliamentary elections at the European level. And we must have something

which looks like a budget. This is not federal --

QUEST: I spot eurocracy here. If you have a president of the Eurogroup, national finance ministers, minister of finance for the Eurogroup -- or

maybe those to become the same job. I spot something that grows and grows and grows.

MOSCOVICI: That's not bureaucracy and that's democracy, if you look at foreign affairs, my colleague, Federica Mogherini, she's not the finance

minister of the -- foreign affairs minister of the union. But she chairs the counsel. She's the voice of the union outside and I think we need it

precisely the same for Europe. That's not something that is more complex, more bureaucratic, it's more simple.

(END VIDEOTAPE)

QUEST: Joining me now to put all of this into perspective, Jean-Claude Trichet. Good to see you, sir, as always.

JEAN-CLAUDE TRICHET, FORMER ECB PRESIDENT: It's a pleasure.

QUEST: And thank you for coming out on a cold night.

TRICHET: Indeed.

QUEST: Let's just start -- the strength of the French economy with the reforms of Emmanuelle Macron. How much more still has to be done in this

country?

TRICHET: I mean the reforms are only starting. And the President has five years to embark on all the reforms he called. The mandate of the people is

there, and he has a majority for the five years. So, my intuition is that it started very well. I think it will continued to go well. But we need a

lot of reform. So, this is no time for complacency.

QUEST: No time for complacency. But so far, the actual work, the unions, the unrest, we haven't seen that yet.

[16:20:00] TRICHET: No. No. Certainly not. And it was very wise from the President and the government to start and to frontload immediately the

first reform, which were politically difficult. And as you said, where implemented. But a lot more remains to be done. It was in the program of

the president and all of the signals that are given are that it will continue. And it is necessary, of course, because it's the movement of

France, really, we have a lot of hard work to do in many domains.

QUEST: The position that France will play in the eurozone, now that the eurozone is back to good growth -- look during the crisis, you were there.

TRICHET: Yes.

QUEST: You were there.

TRICHET: Indeed. Responding to your questions.

QUEST: Exactly. But you must be relieved that at last you're seeing the sort of growth in the Eurozone. Even though the ECB is still printing

money.

TRICHET: No, of course, I am very happy to see that in '16 and '17, we grew a little bit more rapidly than the U.S. Which was not expected, I have

to say, by many observers. But of course, we have to catch up and we have -- again, a developed Europe but also the hard work to do. Still I have to

say that it is very encouraging to see that now growth is there.

QUEST: How much of that growth is just catchup growth and how much is predicated on the ECB? In other words, is it sustainable?

TRICHET: I think it is really sustainable and I can prove it. Because we are posting a current account surplus of around 3.5 percent of the GDP.

So, it means that we have room for maneuvering. We could grow a little faster, but of course, what is necessary is for all of the Eunoia to embark

on structural reform. France has a lot of homework to do, but the Eunoia as a whole has also homework to do.

QUEST: Christine Lagarde talks about repair the roof while the sun is shining. It's not going to get much sunnier than it is now. So, if you're

not doing it now you're in trouble.

TRICHET: No. At the global level it is absolutely clear that we will have a wake-up call at a certain moment. Because indebtedness continues to

grow. The debt outstanding at the global level is threatening, frankly speaking. So, it is really time to do what Christine said. I think is

absolutely necessary, particularly, I have to say, in France and in the Eunoia as a whole, but also, in the U.S. Also, in the U.S.

QUEST: How worried are you about Brexit?

TRICHET: I think that now we are proving, really that Brexit is bad for the U.K., it's very clear. It's proved in the -- I would say all of the

studies that have been done and published recently. And it's also clear when you look at the growth of the U.K. So, I am sorry for the U.K. I keep

a slight hope that at a certain moment like Tony Blair was suggesting they could go back. We will see.

QUEST: This idea that the U.K. shouldn't have a special deal. There was no Canada arrangement until Canada. There was no Norway until Norway or

Switzerland. So why can't just the U.K. have a Canada plus-plus.

TRICHET: I mean, it's up to the 27. You have the interest of the U.K. and the interest of the 27. It's a negotiation. The U.K. decided and now

you've been totally wrongly to up for not participating in the single market. It's up to the U.K. They were not obliged to do that even after

the referendum. We cannot help the U.K. to have a better presentation of this case, our case. But I mean, we will see. We will have a deal in any

case. That makes no doubt, of course.

QUEST: You know Alan Greenspan, of course.

TRICHET: Yes, of course, for many years.

QUEST: Alan Greenspan says it's a stock market bubble. Is he right?

TRICHET: I certainly share that view. We will have correction on markets, not only the stock market, but also the bond market. And it is clear that

at a global level we continue to practice over indebtedness at the same pace that before the crisis. So, there are all reason to be cautious and

to do the work and to embark on the active reform that are absolutely necessary at the world level. At the world level.

QUEST: It is wonderful to see you in person and be here in Paris.

TRICHET: It was a pleasure.

QUEST: Thank you so much.

All the best. Jean-Claude Trichet joining me.

To the European markets that we were talking about there, whilst the record rate of growth continues, stock markets here are having a difficult week.

For the third day in a row, most of the major indices are lower, with many investors moving from stocks to bonds.

[16:25:00] Nacure and Dasholt (ph) are up after earning. Damon (ph) fell following a gloomy forecast. I'm joined by Ludovic Subran, head of the

macroeconomic at Allianz. Good to see you, sir.

Good to see you.

QUEST: Let me ask you, you just heard Jean-Claude Trichet say, believes it's a bubble. Do you think that it's a bubble?

No.

QUEST: You don't?

LUDOVIC SUBRAN, HEAD OF MACROECONOMIC RESEARCH, ALLIANZ: No, I think valuation are stretched. But I think investors are looking at new

companies. We're a bit like in '99 where you look at the company -- in the telecom industry you used to look at the number of subscribers. And you

said this is the community that you value and companies like Snapchat, Facebook, all these companies that have very high valuations. I think

they're looking at something else. So, yes, there would be correction. I think Jean-Claude is right. He is right, he is very Darwinian. You know,

they survival of the fittest. But I think it's not a bubble. The fundamentals are actually good. These companies are changing the world.

So, that's why the stock market is actually pricing in, I think.

QUEST: European growth at 2.6, 2.7. What do you expect it to top out at? And how long can it last at this sort of rate?

SUBRAN: You know, that's the second consecutive year that we're growing faster than the U.S.

QUEST: Why are you --?

SUBRAN: We are very proud of that.

QUEST: You are proud of it, but that's got to be seen in context. But it took you eight years longer to get there and billions they're still

printing.

SUBRAN: Sure. So, you're asking me how long more? I think we have two years more. Actually, we have 18 months as a window of opportunity for

institutional director in Europe if we really want to keep the momentum. So, it's two years and we really have to do a lot. I think Jean Claude

said it, you know, the reform agenda is very, very heavy and very hectic, but you know, I think we're getting there. The confidence, the idea that

we can move the needle a little bit on changing the story for the capital markets is great for the European stock markets.

QUEST: So, let's look at France.

SUBRAN: Yes.

QUEST: Come on, we hear the reforms -- we hear the reform are under way. They've already got through the legislature. There's more to come. When

are you going to start seeing the effects of that other than a confidence boost of what is clearly here?

SUBRAN: I think some of the reforms, which is the labor market reform that the President started kicking his mandate with. We will only see the

result on the markets in one and a half years. Some of the other reforms which has the decrease on the taxation of capital gains, I think you

already start to see the reform and we're bridging part of the investment gap. The latest numbers for France 1.9 percent growth is actually driven

by investment and it is also because physicality, taxation is changing.

QUEST: But how much of it is real and how much of it is confidence at the moment? And particularly when you look at the way Macron has positioning

himself with the United States. This relationship -- he doesn't want -- he talks about wanting a federal Europe, or more federalism, not really.

SUBRAN: There is confidence. There are the exceptionally good financing conditions. And then there is indeed the reforms. I think it's a third, a

third, a third. I think the ECB is still contributing a third to the growth momentum that's in Europe. I think confidence is definitely, you

know, has changed dramatically at least one-third, and one-third is actually the reforms. I mean when you have a president that gives

purchasing power back to the people, so they can consume because their tax wage is lower, I think that's changing.

QUEST: So, you think France is back?

SUBRAN: I think France is back. I am sure France is back.

QUEST: You are sure?

SUBRAN: I am sure. Thank you.

QUEST: I'll be glad that you're here to talk about it tonight. Thank you very much, indeed.

As we continue tonight live from Paris, always good to have a robust discussion in the French capital. We're going to have the results from

Apple. We've already had Amazon. We have had Alphabet. When we come back will have Apple.

[16:30:00] (COMMERCIAL BREAK)

QUEST: Hello. I'm Richard Quest, there is more QUEST MEANS BUSINESS in just a moment. PayPal's chief operating officer will be joining us to talk

about how losing eBay will affect the company. And the Air France chief executive joins me as well. We are going to be talking about the reforms

necessary and whether Air France needs more to make the airline competitive in the future. And, of course, the French spirit under Emmanuel Macron.

As we continue tonight, this is CNN, and on this network the facts always come first.

A senior administration official says the White House will probably tell Congress on Friday that President Trump is OK with a highly controversial

memo and it will probably be released without any redactions. A source familiar to the president says accommodations have been made in response to

intelligence community concerns.

The Syrian government says it didn't give the Turkish military consent to carry out operations in the north and considers it an occupying force. The

statement from the Syrian foreign ministry says the aggression will be dealt with accordingly. Turkey says it's targeting terrorist

organizations.

A constitutional crisis is brewing in Kenya. The Kenyan high court has ordered an end to the government shutdown of the three largest television

broadcasters until a court hearing on February 14th. The government shut down the networks after they moved to broadcast the mock swearing in of an

opposition leader Raila Odinga as the self-declaring people's president.

In South Africa, Cape Town has implemented new water restrictions on Thursday as the city prepares for the day that the taps may run dry. The

residents are now being asked to curb the amount of water they use each day to only 50 liters as the city's reservoirs face drought conditions.

Officials say water could run out by mid-April.

Sport's highest tribunal is lifting bans on 28 Russian athletes accused of doping during the 2014 winter games. The ruling means the athletes may be

able to compete in the upcoming Olympics in South Korea. Sochi results are also reinstated.

QUEST MEANS BUSINESS live from Paris. Apple shares are falling as in after-hours trading as the company releases results. Samuel Burke is in

London with that -- Samuel.

BURKE: The stock down just about 1 percent right now, Richard. On the surface it looks like everything is OK. Earnings per share beating

expectations, revenue beating expectations, but the only number that matters with Apple is the iPhone. And what we see here, we are expecting

about 80 million iPhones sold. They only sold 77.3 million and even more important is the guidance going forward, analysts were expecting guidance

of about 65 million iPhone in the next quarter. And it's only looking like 60 right now. So clearly, there's not as much demand for the phone as we

expected. One interesting number I'm seeing, Apple is saying that the iPhone X and the iPhone 10 was the best-selling iPhone of the iPhone's

every week for the past months. So, they're trying to say that the iPhone 10 has done well, but clearly, a little bit below what people were thinking

though. Not that bad just down about a percent, Apple right now.

[16:35:00] QUEST: Now, Samuel, help us understand you talked about the number. They were expected to sell 80 million, 77 million. I agree the

guidance is a much greater percentage, but that 3 million iPhone difference, you say that's significant.

BURKE: That's significant because we always say Apple is the iPhone company. So, they've either got to meet or beat expectations. They're not

doing that here. And I think the iPhone 10 has a lot of flaws going into this. Number one, people were just confused. Do I buy the iPhone 8, the

8s or do I buy the 10, which number is which? The $1,000 price point even though people on average were already spending more than $1,000 on the

iPhones to get the bigger ones before the 10. And then you had the lack of the home button. So, I think all these three factors came together and why

we see them barely missing their targets on the iPhone.

QUEST: Just to put it in perspective, Apple has many other projects. If you look at the MacBooks and all of the other things, they don't seem to

feature much when we talk about Apple now as a company at all.

BURKE: Because the iPhone makes up for so much of their revenue and their profit. But to your point, Richard, the ones that we don't talk about the

most, they're the least sexy are what are doing very well for them. If you look at the other services, you have in your phone. Apple Pay for

instance, other streaming services you might get through Apple where they get a cut each time if you've got your Spotify account through Apple.

Those are doing incredibly well and we're seeing that again in this quarterly report. Not the sexiest, but they're always there to pump in

money even when the iPhone doesn't do that well.

QUEST: And they keep pumping in money because those subscriptions come in month after month, item for item just about, and Samuel Burke, thank you.

PayPal, the shares were down 8 percent after eBay said it was replacing PayPal with a Dutch rival. Joining me is Bill Ready, the PayPal chief

operating officer joins me from San Francisco. I understand, Bill, and thank you for joining us. I understand, obviously --

BILL READY, CHIEF OPERATING OFFICER, PAYPAL: Thank you for having me.

QUEST: -- PayPal is more than eBay, but -- but the effect of eBay shifting allegiances is quite dramatic on your stock price today?

READY: Yes, there's a lot of misunderstanding around this. The important thing to understand as a consumer, if you go on eBay and you're buying

something, and you choose to pay with PayPal, we actually extended that relationship with eBay by another five years. And so, the way that the

vast majority of people pay on eBay which is through PayPal through hitting the PayPal checkout button. We've extended that for several years. And

really just if you're a consumer and you go in and type in a card, a credit card, that processing is going to go to somebody else and that's a much

smaller part of the business. It tends to be a loss leader. And the reason you've seen PayPal grow so much faster than the rest of the market

is that in a mobile world people don't want to type in a credit card. They want to use things like PayPal one touch that gives them a great, seamless

buying experience. So, that part of the business we actually re-upped with eBay and that was important for us and important for them. And then typing

in a card through that experience, that's loss leader type product that's going someplace else, but we were quite happy to extend the vast majority

of that business which is people paying with PayPal on eBay.

QUEST: I guess the view is that in the long-term eBay and PayPal may go their separate ways, albeit in five years' time in 2023. I suppose what

the market is looking at is how you're going to grow different, non-eBay areas of your business.

READY: It's a great point and actually when we spun out of eBay two and a half years ago the premise for that was really that we would be able to

serve the rest of the e-commerce market more fully as an independent company. And in fact, you've seen our business accelerate in the two and a

half years since that. We grew it over 30 percent. Our volume grew over 30 percent in Q4. Much faster than the rate of the rest of the e-commerce

industries who are taking share tremendously by serving the rest of the e- commerce industry really well.

And we are re-upping our relationship with eBay and that part of our business has only grown at 4 percent historically. So, that's the lower

growth part of the business. But we've also become unshackled in our ability to serve the rest of the e-commerce marketplace having done deals

with Facebook, Google, Apple. Alibaba, that part of the business becomes unshackled and that's the much higher growth part of our business.

[16:40:00] QUEST: So, let's talk about the competition, and all of these other competitors that are now moving into the e-commerce payment system.

And to say nothing about, of course, -- I mean, all right, somewhere in the future, cryptocurrency, whether it be bitcoin or whatever it might be.

This is a vibrant area where your competitors are going to become much more fierce.

READY: I mean, it's been a place of, you know, intense competition for a long time. And the interesting thing to see is that even in the face of

intensifying competition, we are outpacing the market and taking share tremendously. And the reason for that is the thing that makes PayPal

really unique is that we are able to go connect 200 million-plus consumers in 200 markets around the world with 18 million plus merchants and do so

seamlessly. And that's made us a great partner. Not only for major tech platforms like Facebook and Google and Apple and Alibaba and eBay, but it's

also made us a great partner to the financial industry, Visa and MasterCard and most major banks in the U.S. and around the world are partnering

closely with us as the leader in digital payments and a $450 billion plus in volume last year alone, we're clearly leading the way on that front.

QUEST: Bill, wonderful to see you. Thank you for joining us on QUEST MEANS BUSINESS tonight. We appreciate it.

READY: Good to see you as well. Thanks for having me.

QUEST: As we continue tonight after the break -- thank you. The air France chief executive joins me here -- we spoke to him earlier here in

Paris. Air France is making many changes. The issue is whether they're enough. After the break.

(COMMERCIAL BREAK)

QUEST: Welcome back, QUEST MEANS BUSINESS" live in the French capital. We are in France and we're in Paris because we're getting to grips with what's

happening in the French economy. Which is growing at its strongest pace in recent memory at the same time as the Eurozone is also showing record

growth. France is back, goes out the call and the new President Emmanuel Macron was joined by the French economy minister, Bruno Le Maire to discuss

exactly what reforms are underway. We spoke at Davos about how France is transforming itself.

(BEGIN VIDEOTAPE)

BRUNO LE MAIRE, FRENCH ECONOMY MINISTER: We have been successful in passing some very important reforms, deliver market reforms. Which is a

very important milestone in the mandate of Emmanuel Macron. The total of the whole of the French tax system that is also something very strong, but

much more is to come. We have next year a law to help the medium and small size enterprises to grow and to be able to create new eternal markets.

There will be a law on training. There will be a law also on the pension system. So much more remains to come, and there will be some new surprises

coming from France.

QUEST: Oh?

LE MAIRE: Yes.

QUEST: Tell us more about the surprises. I guess there wouldn't be a surprise if you told me about them.

LE MAIRE: The surprise would be the total determination of the French environment and the French President to really overhaul the French model.

QUEST: At what point does the normally very difficult unions start to get angrier and the protests get worse and the opposition grows?

LE MAIRE: You know, we are sticking to our words. We are just doing what we promised to do. And that's why the reaction for the time being, but I'm

cautious. There are limited reactions, just because we are doing what we promised to do, and I think that the politics based on promises and the

capacity of doing exactly what we said. That explains why the reactions in the street and why the reaction of the unions remains a limited one.

QUEST: And a final question. The French model that you talked about, the French model, how would you define the French model in the 21st century

under the Macron philosophy? The future? The legacy?

LE MAIRE: I think this is a balance between a spirit of request on one side and solidarity on the other side. And I think that's exactly the

French model. We want to be able to conquer a new world, to be able to export our products all over the world, but we are also keen on developing

more solidarity in France, in Europe and in the rest of the world. That's the French model.

(END VIDEOTAPE)

QUEST: The issue of French economic growth seen from the government's point of view, but then you've got how this translates to individual

companies, and perhaps none more significant or at least publicly obvious than Air France KLM. The national airline of France, that is traditionally

been very difficult to change. The Air France group, the Air France-KLM Group CEO joined me to discuss the changes that are being made and how they

now see France under Emmanuel Macron.

(BEGIN VIDEOTAPE)

JEAN-MARC JANAILLAC, CHAIRMAN AND CEO, AIR FRANCE-KLM: We need to adapt, and we need to make some major improvement in the competitiveness and

profitability of the airline. Ever since that, I am not sure that the areas where we are making more profit are the best areas to challenge

uncertain way of working within the groups and within the companies. So, I think that we have to do it every year in order to reach our goals.

QUEST: I want to talk about France, the new president with the new reforms, the legislature has passed them. They are working their way

through into the economy now. Would you say that there is a new spirit in France or is it too soon to say?

JANAILLAC: Think that the election of Emmanuel Macron created a kind of stir within France with the conviction that it was possible to move, it was

possible to create, and I think it gave especially for all of the new start-up companies and all this new digital economy as a sign of that

France was the model, innovative and the country that can change, which was not here.

QUEST: But its early days. There's still much to be done, and if you look for example, at his relationship with Donald Trump and the closer

relationship with the United States, do you feel things are changing here?

JANAILLAC: I think that the relationship with the USA, nothing has changed. I think there is a long-term friendship and that from time to

time we don't agree, but I think that the ground is very strong. And so, it's very important to have this kind of possibility to talk and not to

agree on the Paris agreement, for example, or some of the topics.

[16:50:00] And to steer this ability to work together.

QUEST: What does President Macron now need to do in this country? As somebody who has been in industry for many years, you've seen it. What

does the president now need to do? What's the next step?

JANAILLAC: I think the next step he need to do is to make reforms, to lower the cost of the social insurance for companies and also to reorganize

the state's region in order to allow us as a cost of the French administration?

QUEST: Can he do it? Can he do it, do you think?

JANAILLAC: I think he'll try, and it's up to him, but I think as for our friends, the next steps that are necessary is for France.

(END VIDEOTAPE)

QUEST: That's the Air France CEO talking to me earlier. We will have technology and how France is the new startup nation after the break.

(COMMERCIAL BREAK)

QUEST: He's known as the French Bill Gates. He has billions to spend on technology and when Jim Bittermann met Xavier Niel he found Xavier was

funding a whole new set of entrepreneurs.

(BEGIN VIDEOTAPE)

JIM BITTERMAN, CNN SENIOR EUROPEAN CORRESPONDENT (voice-over): You might not be able to immediately be able to spot one of France's richest

entrepreneurs in a crowd. But in high tech circles billionaire Xavier Neil, is not just famous, but adored. That's because his journey from

college dropout to global celebrity has not been just about enriching himself. In the past decade or so he's turned his attention toward helping

others along the path he followed.

XAVIER NIEL, TECH BILLIONAIRE: I try to help my country. I think France is an amazing place where, you know, the world entrepreneur is a French

word. And what really, I want to have in France now is more entrepreneurs, people who can create big companies.

BITTERMANN: Niel, for example, built and pays for this, a call 42, a computer coding school where 1,000 students follow studies for up to three

years entirely free. Anyone can apply no matter what their education or interest from artificial intelligence, to gaming.

(on camera): Ultimately, of course, many of the students downstairs would love to develop the skills to produce a game like this one, but it's a long

way from there to here.

(voice-over): But back down in the expansive computer rooms they call the beehives, James Aylor is one of those who wants to make the grade. A

former pizza delivery boy from Kansas, he says Niel's free school has entirely changed his life.

JAMES AYLOR, CODING STUDENT: Before 42 I didn't have very much going on for my life. I think biggest skill you would need is really just tenacity

and a lot of determination.

[16:55:00] BITTERMANN: There have been doubters.

(on camera): Niel started this school similar to a call 42 in California, but it met with limited success at the beginning because there was

skepticism about whether a free school without a degree program could be worth anything. But after a while the success of the students here

dispelled any doubts.

(voice-over): One former student, for example, is now working at the French presidential palace on cybersecurity. And president Macron himself

is one of Niel's biggest fans helping him launch another pet projection, Station F, f for France, station because there used to be a train station

here. Not any longer. It's now a transport hub for ideas. A thousand high tech startups are based here because of the low-cost office space and

the contact it can have with start-up incubators and technology giants.

Niel says France's youthful president is changing the country's image and reality in ways that perfectly match his own visions.

NIEL: The image of France has changed now. We need, and we want to do this thing because the small company of today are jobs of tomorrow.

BITTERMANN: 27-year-old Luca Bouyoux is the CEO of one of those Station F small companies and he joins in singing Niel's praises.

LUCA BOUYOUX, CEO, GABSEE: I think that he has a great story and he started from nowhere and now he's, like, giving to us, to have more chances

of succeeding and I think this is great.

BITTERMANN: Bouyoux and his team of two have raised $700,000 to work on their ideas for augmented reality apps. Apps with appeal to young people,

of course, but perhaps as well to senior citizen, who like France, are hoping to modernize their image. Jim Bittermann, CNN, Paris.

(END VIDEOTAPE)

QUEST: Jim Bittermann with the new entrepreneurs in France, and we'll have a Profitable Moment after the break. From Paris, gorgeous, cold.

(COMMERCIAL BREAK)

QUEST: Tonight's Profitable Moment from Paris. France is back, that is what you hear in this country and there is a certain truth in it. It would

be mealy-mouthed and miserable to say it's too soon to predict what's going to happen. The reality is Macron's got many of his policies through and

there are more on the way. And, yes, if you talked to the young and old alike, they do say that there's a new spirit in this country, perhaps a

renewed confidence and that certainly is showing through. Oh, it's probably too soon to say, but it's here. And that's QUEST MEANS BUSINESS

for tonight. I am Richard Quest in Paris. Whatever you are up to in the hours ahead, I hope it's profitable. I'll see you tomorrow.

END