Transcripts For BLOOMBERG The Pulse 20140507

European headquarters in london. We have all angles covered on the alibaba story. Alibaba makes it official. The Online Retail giant has filed to go public in the u. S. It will be the biggest Public Offering the world has ever seen. Ferro. Joined by jonathan lets start with you, john. We have this billion that they are talking about, but nobody believes that. As 20ould be as high billion. We are expecting a filing and here it is. The price of the shares, how big the offering will be. Around 250e volume, billion last year. That is more than ebay and amazon put together. How on earth do you value this company . We also know a little bit more about these billionaires involved. Huge personalities. Be the poster child for the hero of liberal arts. His parents were singers. He taught english. Business wasnto something new. He failed the teachers exam twice before he exceeded succeeded. There are some Big Companies involved here. Yahoo has a huge stake. Softbank, a huge stake in this business as well. All kinds of questions. We talk about the has to puts, jack ma down the microphone. The singing is just terrible. We are talking about amazon versus alibaba. Whether that is the correct comparison is a debate. I want to talk about the margins. You can talk about transaction volume. Revenue at alibaba is much lower than amazon. Much amazon makes. This is jeff bezos sacrificing shortterm gains for longterm gains. He makes less than one cent per dollar. Ali baba is making . 43 per dollar. These companies they might look similar, but are very different. That means something Going Forward. For me, it shows a strong personality who fears nothing. You. Will find it for karaoke. Fran loves it. What i find amazing is the sheer footprint this company has in china. It is colossal. It is a huge chunk of gdp. Two percent of gdp in 2012. It is 70 of package deliveries in china. That china is something we all want a slice of, but not many people understand. How do you evolve outside of china . How do you not love that . I think rob is with me on this one. He is not the only singing billionaire. Warren buffett plays the ukulele. He might be a little bit better than jack ma. Softbank, he will not sell his stake. Yahoo will probably sell some of its business. Can we believe him when he says that . Probably not. This is a guy who has made a career of getting in and out of deals. Yahoo got really lucky on this one. Encounter that he had with jack. Ahoo news the cash needs the cash. He is looking for the next wave. What happened yesterday with twitter, everybody turned around and said, we will not exit once the lockout ends. The timing is a really big issue. The nasdaq has lost 150 billion this year so far. How confident can you be that these guys will not exit Going Forward . It depends on whether he wants to play with a strategy. How much does he want to get involved . Much. Nk you so alibabacinating billionaire story. Slightly addictive. Siemens and tom. Ro we have the angles covered here, believe you me. Siemens has announced a review. The elephant in the room is what is happening with there is an Analyst Conference going on right now. They keep on coming back to that elephant. What do they want to get out of alstom . Some sort of onesided offer and wee heard about conveyed her interest that we would be willing to talk to shareholders. Line, joe kaeser wanted to be given the opportunity to have a look and that is what they are doing. Theyre not going to consider any type of threeway bid with the General Electric. He came under political pressure in germany when he went to russia after the annexation of crimea. To beela merkel said extremely annoyed about that. He is still on the intent of on the agenda for the st. Petersburg for him. Onthe amount of things going in our organization, the dedication and leadership it takes to get this sorted out in a meaningful and longterm way, this requires me to be here. He will have to cancel. Righto what i believe is and not what the mainstream says i should be. Think the point is, he is not going. Vladimir putin is going to be fairly lonely in st. Petersburg. Much, david so tweed. Lets turn to alstrom. Bring us up to speed with what we heard this morning. The seo of alstrom is speaking in a press conference. We are not in crisis but we do have the problem with Critical Mass. Are leaving they the door open for unsolicited offers. Leaving the door open for siemens to come with a binding offer. Ining access to siemens order to make this offer and there is no hostility against the german rival. Germany. S 9000 in obviously, the french government has been pretty vocal about the 17 billion bid for alstroms energy unit. I spoke with the french finance minister and he said it is not all about the money. It is not only about the money. The money question is for shareholders, not the state. The state does not have a preference. It is here to look at the different offers a two alstrom shareholders. Areour strategic interest preserved and how they can be improved. We are playing a role, just like any other state would. Another member of the french geernment suggested that could sell some of its trade unit to alstrom. The ceo says he sees little synergies. Thank you very much. Break. Take a back in a couple of minutes. About going against it. The french government is not here to counter any offer. It is here to check whether french Strategic Interests are respected. You have the jobs, decision centers, and what happens to production, especially in the energy business. It also in regards to French Public orders. He is talking about the french finance minister speaking to us about the takeover battle for alstrom alstrom. Our next guest joins us from outside houston headquarters. Lets talk about outside alstrom headquarters. We are watching ge, we are watching siemens. Do you think they have a serious run at this . Would that be the better solution . The ge story seems to be fading. I am very confident that the best solution is a deal with General Electric. You have many more synergy om and General Electric down with siemens. For new synergies, it is obvious that the best deal is with General Electric. Christopher, you have me a sense of what we heard. It seems he says, this is not the price, we want assurances that jobs are kept in france. Profit missed, they had provisions, writedowns. This seems to be a Company Ready for a takeover, whether it be ge or siemens. Should the french government really step aside . Government, it tries to put pressure on houston alstrom toeal make a deal. Alstrom is an economic difficulties for many years. Find a real partner, this partner seems to be General Electric, because it is a company that is in front of everybody and we can create new synergies. It will become a true energy business. Christopher, the french government is in trouble. Looking forhey are something to use to try to turn the story around. This fits. Do you not worry the french government is going to force through a siemens transaction . So. Do not think of course, the french government has a small share of alstom, but i do not think anyone in the government can influence alstom. It is a private company, dont forget it. Thank you so much. We are just getting some breaking figures. 6. 8 billion. Lets get the details. You. Cannot hear number one rule, switch on your mike. Hsbc coming in online. It is pretty much in line. That is just pretax. We want to talk about socgen as well. Africa,talk about south the country is going to the polls today. The anc is expected to be victorious. Welcome back. Live from Bloomberg Television and radio. Lets get some company news. Debeers will raise diamond prices by five percent every year. Engagement rings just got that much more expensive. Socgen is like the biggest foreign banks in russia inside of market uncertainty in taking the 500 25 Million Euros writedown. Alibaba makes it official. Couldline retail giant raise 20 billion making it the biggest Public Offering in the United States. Alibaba has been called the amazon of china. Online payments, music streaming, cloud computing, and ecommerce. How to get the most from its services. Alibaba . You use people say chinas largest ecommerce site is like amazon, paypal rolled into one. The original site is dedicated to connecting businesses with other businesses. So many of todays Consumer Products are built in china and what alibaba does is directly connected businesses around the world to those chinese manufacturers, creating relationships. Ats see lets say you are small american store. Go to the site and type in alarm clocks. There is no price tag, leaving you to haggle or bid. Either contact the supplier directly or bid with a payment. If they can, your payment lives in escrow account. There is usually a minimum order size. That leaves the profits higher and the shipping margins lower. Clearing those alarm clocks through u. S. Customs is entirely up to you. We will talk more about the ipo later on. Lets talk about what is happening in the market this morning. Glorious technicolor and stereo sound. 101 of broadcasting, switch your microphone on. Equities are finding it tough. Sales are falling, that could have implications for bad debt. Reduction, manufacturing under pressure, but there is only one issue for jobs there. Janet yellen has to say about the United States of america. Technology is interesting, it is getting slammed on the consumerist tight consumer side in the u. S. Twitter down 18 . If i had stock, i know what i would do. I am not a millionaire and i do not have stock. Big bold strategy day, we have heard from our counterpart in berlin about the first order. Oing higher delivering record profits for sainsbury, holding onto market position. Alstrom missed on their headline numbers. But see how the deal works out lets see how the deal works out. Money going into yen, it is coming out of equities. It is a little bit nervous ahead of what janet yellen has got to say. What is happening on. Delivering record profits for sainsbury the political stage between europe, the u. S. , and ukraine. Look at this. Eurosdollar. 1. 40, watches them scream. Draghi and for mario the ecb is that the market begins to lock and load. Or is the market already so long and so very long that it is overbought . See themaybe when you ecb stepped into action. By the way, i quite like the shirt despite the twitter debate. I do not know what you are talking about. A special french skier captured the perfect birds eye view of the swiss out. Swiss alps. Landing successfully. With the help of a wing suit and a parachute. 236 million, that is how much kristis collected from a recent auction of impressionist and modern art in new york. That would be my heart rate if i was jumping off that hell. Jumping off that hill. Welcome back. Live from bloombergs European Headquarters in london. The u. S. Is urging ukraine to proceed with its may 25 president ial election and reject russias calls to postpone the vote. John kerry threatened further sanctions against russia if it continues to sabotage the democratic process. The u. S. Is pressing the guilty pleas of the Parent Companies of banks under investigation, including credit suisse. It could include a penalty of more than 1 billion. The u. S. Is sending a team to nigeria to locate and rescue more than 200 girls captured by militants. Boko haram has claimed responsibility for the abductions. We spoke with nigerias finance minister. She said the rise in militancy stems from a lack of jobs. Focus of inclusive growth is theating jobs immediate problem we are facing. We have to look at the underlying factors. We need people to be engaged in this type of activity. How do we create jobs for our youth so they are not tempted to join these extremist groups . She is atned the World Economic forum. What is the situation, the security situation . There is a very strong contingents of Armed Security forces. Police are everywhere. A 510 kilometer radius around the hilton. There has been a of Security Issues on the ground. We have seen roadblocks checking every car, checking bags. We are seeing something torecedented in nigeria ensure security and the safety of the delegates arriving from countries of the next few days. The finance minister said the top priority is finding the abducted girls. Is she concerned about the perception . She is saying the best thing we could have done is continue with the World Economic forum. Security issues are endemic to the african continent. We keep on seeing Security Issues coming up and investors are very present in the likes of kenya and she does not believe it will deter investors from investing in nigeria. Topics,the important creating job opportunities. We hope it will not be overshadowed by security. She is saying this is a conversation that needs to be had if the continental drive itself forward. Creating sustainable and quality growth. Thank you very much. Lets stay in africa, South Africans take to the polls today. Jacob zuma is widely expected to win another term. We are live in johannesburg. What do they need to focus to revitalize the economy . I think the immediate priority for the Incoming Administration is going to be to try to bring some type of stability to the Labor Relations environment. Particularly in the mining industry. We have a three months left and three the moment months platinum strike at the moment. Millions of dollars on lost revenue for the mining workers. I think the resolution of the strike is going to be a keep drivers seat. Has spokennt himself about getting involved in some type of mediation to low end the strike and that is going to be lets talk about corruption is a massive issue for south africa right now. How credible is the economic plan . Investorxactly sentiment will hang on the policy clarity and certainty the administration can bring in the second term. Q2 that is implementation of the National Development key to that is the implementation of the National Development plan. Ringing the jobless rate down to 14 and creating a favorable business environment. There is some optimism that there will be implementation of this program in the second term. There are indications that the Current Deputy president of the anc is an influential businessman and he is likely to lead the government efforts and of wanting the program. Of leaving the program. Leading the program. Stay with us. We will get more on the South African elections. Attention fromur what is happening in south africa to what is happening in the car sector. Romeosor europeans, alfa for americans. Wants to increase sales by 60 . This is his third plan. The first two did not exactly come to fruition. What about this one . It is all about delivery. He talks a very good game. Analyst do not seem impressed with his ability to deliver this one. Itsplan is remarkable in scope and ambition. 7 million deliveries in four years. Vw is about 10 million. In terms of what they need to spend, 48 alien euros. They want to see revenue in 132 billion. That is up from under 2 billion 2 billion euros now. This does not depend on francines ability to get a drivers license. A want to double cheap deliveries. Jeephey want to double deliveries. Really coming up with 400,000 deliveries. They are not looking to europe for this growth. Listen to how he talked about that when he spoke in detroit. In 2010, i was hoping that europe would not go to hell. In the interim, you have managed to send europe to help. To hell. Maybe i was incredibly naive. Maybe i was taking some illegal material without realizing it. I was hoping that europe would stop bleeding. A you are more confident i am much more confident not relying on europe. The number for the plan for the fiat brand, 700,000 cars. Driving licenses are overrated. It is unclear whether or not the Market Reaction is because investors do not quite believe what the grand ambitions are. Y are disappointing disappointed in their quarterly earnings. Overall, the disappointed and this is the challenge for Fiat Chrysler automotive. Will they be able to convince investors to stay with this plan is to rock they will need cash for it. There are financial ways to get the cash without new stock offerings. They seem to need a lot of money to revitalize these brands. It is unclear where they will get that. The debt loads and the investment levels, it will make life interesting. We have a great guest coming up later on who has written a to the point note on the company. Up, carlsbergs russian hangover. We will look at the problems the brewer faces. Welcome back to the pulse. Carlsberg reported results today. Profits missed estimates. Brush is the brewers largest market. We are joined russia is the brewers largest market. Last time we spoke, we talked about the uncertainty you had surrounding russia and ukraine. How difficult could the situation get for you in russia and ukraine . It is always very difficult. It creates some uncertainty. We have changed our outlook for the russian markets. Could the situation get for you in russia and ukraine . It is always very difficult. Compared to what we had in february before the crimea situation happened. The change in the outlook for the beer category is driven by the more uncertain, more negative macro environment. Anng into the year, we had assumption to gdp in russia would be between 1. 5 increase in now we are assuming flat tdp for the year. Gdp for the year. We are saying the worst outlook for russia, we will be able to compensate so we can still deliver the same underlying performance as a business. Because of worse Currency Exchange rates, the russian it will be a low single digit increase. In terms of the weakening ruble. Do you have to raise prices to counter it . A gives an advantage to some of your competitors. You can only do so much on Consumer Price without risking significant negative impacts. Precautions to cover the increases. Then we have to take some to cover the general inflation in russia. It is very limited what we can cover in terms of exchange rates. You are a pretty big brewer in the ukraine as well. How are you monitoring the situation . What are you hearing from your guys on the ground . We are in very close contact with our colleagues and ukraine. And ukraine. In ukraine. At one level, it is business as usual. In terms of how we operate and very muchtribute, business as usual. There are places in certain cities where it is hard to get to. Overall, it is business as usual. We had to stop a couple of breweries for a few days in the early phase of the crisis. Closed a fewe brewers in the early stages. Very much what we do and how we ourtion is exactly people are quite nervous about the situation and what can happen. There is a lot of uncertainty in ukraine. From a market point of view, the First Quarter was not too bad. It is so difficult to understand the escalation of possible sanctions and retaliation from russia. Are you concerned . There is always risk the russian government will seize more assets. Are you sending money back home more quickly . Are you trying to repatriate the funds . I do notwant to want to speculate about sanctions. We try to do the best we can for the business and for the people in ukraine and the people in russia. On the Cash Management side, i think we have always had a good Cash Management system and ukraine and russia. Got full control of our russian business, we have been able to pay dividends. I see that continuing. Not a big change in how we manage cash today compared to the past. You do not want to speculate on sanctions. German companies are lobbying berlin to restrict sanctions on russia. Have you had any contact with the authorities . Would you be against further sanctions . I did not want to specifically discuss sanctions. Having big businesses and ukraine and in russia, of course, we are in close dialogue with the government on all sides. One very last question on the world cup. I know your exposure will be limited, but you are one of the sponsors. How much can that offset what were seeing in russia . We are sponsor of the European Championship for all, not the world cup. We are sponsoring the premier club in the u. K. We keep doing a lot around football. We will also do that for the world cup. When you have a big tournament global it is always a big tournament, it is always possible positive in terms of pure consumption. Beer consumption. We will leave it there, thank you very much for your time. The ceo of carlsberg. I made a mess of my history of art early on. Freeze, we speak to Renewable Energy Company Using cryogenics to produce electricity. Alibaba confirms what could be the biggest ipo ever. Our guest toed by talk about what this means for the tech landscape. Welcome back. Powering turbines with cryogenically frozen air. You transport energy. It is great for renewables and it is being integrated into ge power plants to increase efficiency. A lot to take in. A futuristic sounding procedure. We are talking to the guy who pioneered this. We have been on before and talked about the technology. You freeze air and you use the expansion of that to move energy around. Since we last spoke, a lot has happened. Talk to us about what has happened. The last time i was here, we were talking about our pilot land and we were ready for commercialization. That is starting to happen for us. We have received 8 Million Pounds from the government to build a commercial scale demonstration plant just north of manchester. 15would be five megawatt hours, enough to power 5000 homes for about three hours. That will serve as a shop window for a fullscale commercial demonstration of our technology. We continue to grind on and since the announcement of the government support, we have signed a commercialization cooperation deal with ge, which includes a license deal for them to use our technology across a narrow application to help improve the efficiency to their turbines. Ge is quite the company. They are bigger than us. How does it work with them . Howrvice all kinds of would it actually work . Ge, always on the lookout for new technology that can enhance their existing portfolio. They are an important part of our supply chain. They built turbines, compressors. The relationship started in the supply chain as they realized our technology could help them sell more turbines, started to talk about how we might cooperate together to develop the market. How big could get . Expansion,ink about how big could this business get . We are targeting to have sales and the several tens of millions going up to over 100 million. It is a small drop in the ocean for ge, but the heavy machinery is a big business for them. Nice to see you. We will see you again soon, we hope. Francine, over to you. The first word is up next. Iscond hour of the pulse coming up. Will go through the implications for you. And then we talk about south africa as it goes to the polls. Sale of the century. Alibaba confirms what could be the biggest ipo ever. Boss wont back down and the battle for alstom. South africa heads to the polls today. Johannesburgve in with the managing director of Goldman Sachs south africa very shortly. Good morning to our viewers in europe. A warm welcome to those waking up in the United States. This is the pulse. Live from london. The pulse making it official alibaba making it official. It could be the biggest Public Offering the world has ever seen. For more, we are joined by Jonathan Ferro and are bloomberg billionaires editor. This is all about valuation. Valuation, how many shares they will issue out what price. It could be as much as 20 billion. We know from people familiar with the matter that they could be looking to sell a 12 stake. This could be huge. Finally we get to talk about it. Everyone is having a go. Trying to get the best stat. I think you are doing pretty well. I am trying. These are pretty good stats. We are talking about two colorful billionaires. It is one of these fascinating stories. He saw his first computer in seattle when he became intrigued by the whole thing. He established a website. He backed his way into the billionaire status. He hit it right at the right time. The american and European Companies do not have traction in china. These guys who got there first have a huge advantage. A colorful personality who likes karaoke. But lets move on from that. If you missed the first hour, francine is very keen on jack mas singing. Jonathan is not. He does karaoke in silver and actually own set. Owns it. Rob is talking about china and how important it is a you have a company that has massive exposure on the ecommerce side. This could be a negative as well. They do not foresee how they can expand beyond china. How do they go global . This is not amazon. They are a facilitator. Fingers ine their everything. They are more like ebay because the get commission all transaction. On the revenue side, it is smaller than ebay, much smaller than amazon. It is the margins. Theyre making . 43 on the dollar. That is pretty impressive. We talked about one of the billionaires. Lets talk about softbank. A big stake in this business. He is saying he is not going to sell his stake in yahoo . How should we read softbanks intentions toward alibaba . Trying to anticipate is never a smart tactic. It is anybodys guess. His fortunes have dropped this year. The asian tech stocks have jumped and then cooled off really quickly. His is one as well. It is a question of where he sees the value of his money going. He is an opportunist. He has made it very clear that he strikes hard when he sees the opportunity. Thank you so much. It. Ove and the singing is fantastic. Not much singing involved in the siemens story. It is in the spotlight for the or alstom. Ding war fro siemens announces a strategy review. Alstom have to say . Will just hit on the strategy. It is quite huge what they are doing. They are eliminating for business sectors. Four business sectors. They will replace it with nine business units. At the same time, the huge Health Care Business is going to be hived off. It is going to be run as a separate company. Will it eventually be ipoed . , the Health Care Business is going to stay within as a core unit of siemens. Who knows in the future. The elephant in the room is alstom. They have been asked about it by the journalists. He keeps on coming up with the same answer. There was some sort of onesided offer which we heard about. We basically conveyed our interest. Look at it in the best interest of the shareholders. Siemens telling me that they got what they wanted, which was just to be able to get a look in on that bid to participate and then decide whether they want to go forward with it. One thing that he did tell me was that there would be no joint bid or threeway sharing of the assets with General Electric. He said he wants to keep things simple, that is what this entire strategy review is about to. The ceo was controversial when he went to russia after the annexation of crimea. I will give you a little taste of how controversial it was. I just had a passerby coming along here and he said to me, are you reporting on siemens . Isnt that the guy who went to moscow . Headlines. Reated a lot of people divided over the way he should have gone or should not have gone. The next event coming up is the st. Petersburg forum. He is still down to be speaking there on cities come on global cities, on may 22. I said, are you planning to go to st. Petersburg . The amount of things going on with our organization, the dedication and leadership it french matterhe sorted out in a meaningful and longterm i, this requires me to be here. It looks like a scheduling clash. I always make clear, i do what i believe is right. President barack obama United States have been asking chief executives of big Major Companies not to go. There are quite a lot of people canceling at the moment. It looks as though it could be a little bit lonely on the stage there for president vladimir putin. Little bit lonely. You are absolutely right. He always has an entourage. They be he will be less lonely. David tweed in front of siemens headquarters. Lets turn to alstom now. Bring us up to speed with what they had to say today. The message was pretty clear. Havenergy unit does not the Critical Mass to compete with ge or german rival siemens and other companies coming up in the emerging markets. Alstom did not close the door to siemens bid. He said it is ready to open the data room for siemens to come forward with an offer. He said he was not antigerman or antisiemens. The company employs 9000 in germany and 18,000 in france. It is already a french and german group. Beenrench government has vocal against the ge bid. They want guarantees to pretense protect french jobs. It is not only about the money. The money question is for shareholders, not the state. The state does not have a preference. It is here to look at the different offers made to alst om shareholders and how our Strategic Interests are preserved and how they can be improved. We are playing a role just like any other state would. French government wants three things. To protect french jobs. They want to keep the headquarters here in paris. They want to make sure that the Energy Interests and Frances Energy independence is preserved. One other suggestion from the government was to transfer some alstom. They would notat raise in the freight business, but he was ready to discuss some kind of swap with ge in terms of the signaling business. A lot of this political discussion is purely political to please the French Public and to show the economic patriotism. Thank you so much. Up, fiats road ahead. We will discuss the mission when we return. Will come back. You are watching welcome back. You are watching the pulse from london. Fiats newly unveiled growth plan. It wants to increase sales by 60 in four years. Hans nichols joins us. This is his third plan . One and two did not go to plan. He had some headwind. This is not entirely his fault. How heto his own words thinks this will be his last chance. I have been doing this for a while. This is not my first turnaround. It will be my last. We need to finish this program. We need to finish this damn thing. We started in 2004, fiat. We have traveled the distance. He clearly understands the challenge. Ofhas quite a scope ahead him, when you look at what he is trying to do. 7 million auto sales. That is up almost 60 . They will need a cash infusion for this. They want revenues to come in at 132 billion euros. These are remarkable ambitions. The market is not entirely certain if this will work out. The stock is trading at little but lower today. For this to work, they basically in europe,l jeeps america, and brazil. Alfa romeo needs to become the new audi. Remains quiteest skeptical of the big targets. Thank you so much, first of all. They are disappointed in terms of figures. You have doubts about the strategy. Is it flawed . The targets are just super ambitious. I think the change in strategy to go toward investing more money into the higher Premium Brands makes a huge amount of sense and was the only way forward for this company. My problem is where are we coming from . Debt on therrent Balance Sheet, how will we fund the investments we need to get to where we need to get to . That is what makes me skeptical. You talked about the fact that they have skills when it comes to powerpoint and they have managed to deliver those successfully. Give us a sense of scale of what we are talking about. This is a gear business. The level ofake on investment that will be required to deliver what they want to deliver. It is a very tough question. Our comparison was really with bmw. They have been building up their business from zero over 40 years. They have invested probably close on 200 billion euros in their european business. We are talking about out from alfa romeo recreating a fifth of bmw with a total investment of just 5 billion euros according to the plan. Compare that with where bmw is today and that makes no sense whatsoever. If you think about the dealer network, the Brand Recognition there is a great brand name here, but it is a very old brand name and it has been hugely underinvested for many decades. Investments needed are significantly greater than what the plan is at this stage. On valuations, this is a lot cheaper because they have gone through such a tough time. Is it fair to compare it with bmw . Bmw has been outperforming. It has had a head start. This is a ceo that is smart to rid he has the guts to do the changes that many others would not have done, especially in italy. Look, he is going the right way. The problem is simply that he does not have the money. That is the problem. Theyre both automotive investments. Has a tendencyny to lose money, one makes. European optimism is pretty extreme at this stage. If you look at the free cash outflows and the returns the company is making, it is difficult to conclude that the stock is good at this stage. What would you expect to be coming down the road as a credit analyst . Something from the presentation yesterday is that a ones forecasting billion improvement in net income by 2016. There also forecasting four billion increase in research and development. The cash flow will deteriorate sharply over the next two years before it starts to improve between 2016 and 2018. If i take the Free Cash Flow deterioration into account, the net debt could peak at 1516,000,000,000 euros against the plan of 10 billion euros. Do you think there will be a debt equity relationship change in the future . Is that we have taken the same view the current Balance Sheets are not Strong Enough to compete in the current automotive world. I really do not understand why fiat with the share Price Performance they have had is not raising more equity at this point. The current Balance Sheet will restrict the plan significantly. Thank you so much. Break, lets into talk about the currency markets. That stuck about new zealand. Lets talk about new zealand. The strength of the economy raises the alt of intervention. Odds of intervention. They have driven down the value of the currency. As you can see, that is the story. The kiwis are getting cut increasingly concerned about this. Wait and watch. The currency market is watching. Welcome back. You are watching the pulse. The u. S. Is seeking to ease it europes reliance on russian fuel in the coming years. Two liquefied natural gas projects will get the green light pretty soon. The u. S. Will be a substantial natural gas exporter for the end of the decade. , if youve you a scale take all seven projects and ask them what would that add up to if they were exporting today . That would be 96 billion cubic meters. That is a very large amount. It is nearly double what europes total imports are this year. He made those comments while attending the g7 in rome. Lets take a look at how european markets are faring. Manus cranny has more. Going for the fourth straight day in a row. China is underwhelming the market in terms of factory orders. Here in germany you also have factory orders dropping as well. It is a tough one for the european markets as the political stance between europe and the United States and ukraine early begins to take hold. You begin to understand some of the dynamics when you look at the paris markets. Writing down value of exposure toward russia. Down value of exposure toward russia. U. S. Equity futures indicate fairly flat at the moment. You can hardly call that very strong. Virtually unchanged on the s p 500. Janet yellen talks today about the strength of the u. S. Economy on the back of the jobs numbers and the recent data. What exactly is she going to say . Nasdaq is down. That is where the crux comes. Facebook, 18 . Yelp, 13 . A bit of a trend, or is it the beginning of another route in tech . Twitter holders, it is all to do with management or their allowance to divest themselves. Back to you. Thank you so much. If we were millionaires. Lets get to our pulse number. 236 million. We are back in two minutes. Welcome back to the pulse. Live from london. These are the Bloomberg Top headlines. The u. S. Is urging ukraine to proceed with its may 25 president ial election and reject russias call to postpone the vote. John kerry threatened further theyions against russia if continue to sabotage democratic process in ukraine. Turmoil in ukraine and russia is sitting carlsberg. The change in the outlook for the beer category is really driven by the more uncertain, more negative macro environment and consumer sentiment. Going into the year, we had an assumption that the gdp in increase. Ld be 1. 5 now we are assuming a flat gdp for the year and also reflected in bmi development, more negative. Team to. S. Is sending a nigeria to locate and rescue more than 200 girls kidnapped by militants. Claims responsibility for the abductions and have conducted several more raids in recent days. We spoke with the finance minister at the World Economic forum in abuja. She said the rising militancy stems from a lack of jobs. I feel that the World Economic forum is the subject of growth and creating jobs. That is linked to the media problem were facing. These are the factors that would lead people to be engaged in this kind of activity. How do we create jobs . Lets get back to one of our top stories. The future of alstom. They missed earnings. The energy unit is the center of a bidding war between General Electric and siemens to rid the spring in matt campbell. Siemens. Lets bring in matt campbell. I think these earnings do show a little bit where alstom is coming from. These deals would be the end of a company as it currently exists. Selling the Energy Division ii is sending three quarters of alstom out the door. ,n the board, they are saying it is time for radical surgery. I think it does help the case of the people saying these radical steps are needed, as opposed to the french government, which has been of the view that this is not a company that needs to be taking this kind of measure and is looking for alternatives. Does it means that the siemens bit has a better chance . I think that is a very good question. The rival bid to ge seems to have picked up a bit of momentum over the last couple days next to comments from the french president , to the effect that the french government is not happy with ges bid. They still have the inside track here. They have an agreement with alstom. Typically these things to not get railed except for a very good reason derailed except for a very good reason. Siemens does look like they are having a bit more luck. Beenun chief executive has talking up the possibility of doing something with alstom. Lets talk about the other big story. The pfizer bid for astrazeneca. The story here is that we are open for business. The government is getting more concerned about the pfizer deal, in particular. The u. K. Has a strong relationship with sweden. Thenance ministers finance ministers were closely. Astrazeneca is an english Swedish Company. It is now going to become an angle a Swedish Company owned by an american company, assuming this deal is created. David cameron has been driving a hard bargain with pfizer, looking for guarantees on jobs, on research. While the u. K. Does not have a mechanism whereby the still could be stopped, in the Pharma Industry it is hard to barrel through something in the face of government regulation. Cadburyell at craft and a couple years ago, that does not work with pharma. And you need every single anduct to be monitored approved, it is a bit of a risky strategy. None of this necessarily abides in sweden. Pfizer is buying astrazeneca looking to cut costs. The u. K. Says, youre not going to do it here. It may be some of a something of a zerosum game and sweden becomes the victim. There is concern in stockholm. Thank you for that. Tom keene joins us with a preview of surveillance. I know you will be looking at all angles on alibaba. We will. David kirkpatrick will join us. Lets call it the alibaba effect. Less about yahoo and more about what has been written overnight about what do you buy when you buy shares in alibaba. It is funneled through the cayman islands. There was a lot of debate about this. The New York Times had a terrific article overnight. We will focus on that. Yesterday, i had a conversation with someone you know, jeffrey gundlach. He is extremely cautious on housing. Today inlen speaks washington on bond yields. We are expecting a more dovish janet yellen. I think you put it nicely. Maybe she is more dovish. She has been back and forth recently. She has had a very subtle dialogue with investors about where the fed is going. I would look for some real ambiguity this morning. Thank you so much. Tom keene with surveillance in 24 minutes. The conversation surrounding alibaba. They have filed to go public in the United States. What am i buying if i buy this . You are buying access to a Shell Company that is in the cayman islands. Obviously, most of it is market and usage is in china, with an internet population of over one billion people. They have about 500 million active users on various products. It is a combination of what we are used to when we look at amazon, ebay, and even google. It is all of those wrapped up into one. It even has the payments business which are rolled off. It is owned in small part by u. S. Players. It is quite pervasive, all through the internet industry. We have a danger seen a selloff in tech. That is healthy for ali baba. Interesting is that it is so strong. Its revenues are so strong and its profits are so strong. Everythinge above that is happening above the noise and ether in the markets. What has happened with the selloff weve talked about her before, like a prophet, lack of revenue, some of these highly valued Internet Companies alibaba does not have these problems. It makes serious revenue. On the profit side, net income is 20 times that of amazon. It is much stronger as an actual company, as a commercial enterprise. Its Growth Opportunities are massive. What is the best metrics value . Revenue. The correlation between the two. You have the u. S. And global tech businesses that have massive revenues and might do through billion dollars per quarter and they just break even. Does not have the kind of dependency. It is profitable quarter after quarter. It will bring in 15 billion in cash. It will be able to invest further. It does not show any signs of stopping. The ceo is very colorful. Thisorried are you about and whether he could sell the stock . Think everybody is in this for the long haul. This is not an overnight success. Posttwitter, post facebook, this predates all of them. They are in it for the long haul. They are longterm focused. I think these personalities are very ego driven. They will not want to be seen as onehit wonders while running off to the next thing. Has talked about sustainability and Charitable Giving and the legacy. The business is focused in china at the moment. What happens when jack ma butts heads with jeff bezos . It will be exciting. Get me popcorn. Yahoo has owned 24 of the business. He has never been able to afraid to express his displeasure with what they have done. We will see turf wars when they start to invest more in u. S. Companies. Yft andinvested in l other businesses. He is not messing around. I think he wants to be on a global stage. I think you are right. Bring out the popcorn. I like that. You, eileen. We will take a break. Good morning. Welcome back. South africans going to the polls today. Ancill most likely see the stay in power. This is the party that has led the country since the end of apartheid. Lets go to south africa and talk more about the countrys future. We are joined by the managing director of Goldman Sachs south africa. Youquestion i have to ask is that given the problems your country faces, do south africa need a better opposition . So far has been a demonstration of the deep roots of the Ruling African National congress. The opposition is doing their best. It is a two horse race. Is a battle between the African National congress and the democratic alliance. Is now the fifth election into the new democracy. Votingafricans are still African National congress and 80 of everyone else are voting for the democratic alliance, it seems. I guess south africa needs is a new mindset, right . To tackle things such as corruption, the labor strikes. How confident are you that no matter who wins, that will be their main focus . Is the realization that for the country to go ahead these things need to be kept under control . Wood is very clear is we have a two speed society. We have a dynamic, nonracial middleclass that is rising. We have a large african core. That is what everyone will have to tackle. Im confident that people in the country understand that whether we can put an administration in place in the next five years it makes good on the promises being made is the milliondollar question. The appointment of the top leadership, both the general sense footsoldiers of the new administration, is going to be the newest sign of whether the new administration understands the need to step up and lift the game. Were looking at live pictures of South Africans going to the polls. The accesseuing for to those polling stations. They want to get in and cast their votes. This is a relatively new phenomenon. How well served are they by the politicians that potentially could be selecting . And i am talking about the individuals. The corruption story that has become pervasive throughout politics in south africa is something the world has woken up two. How well served are those people that are qe not said the polling station right now . Queuing outside the polling station right now . The one thing that is clear is that the movement to date in the polling has been very minimal. Individuals are going back time after time and voting fairly consistently with where they have been voting since democracy. Has a strong constitutional system, a strong free press, a strong judicial system. While the corruption is being , and i think the society is very alive to the fact that there is much more corruption than we would like to see in the is confidence that the overall constitutional framework is intact and that these acts of corruption are being exposed and the people are being punished. I think in the next five years that that tolerance is going to diminish and we are going to see much more aggressive actions by the population. You are seeing social protest in the community against Service Delivery failures and those sorts of isolated incidents. That is certainly on the rise. The temperature is rising. Up until now, the actual actions by the voting population has been pretty consistent and has not moved away from the administration today. To date. We have spoken about the two speed economy, the corruption. Andy cinko wage strike will be resolved . How do you think the wage strike will be revolvesolved . Growth is what we need. Ratennot target the growth with the level of labor unrest and the Division Within the labor movement. The strikes will be key to establishing labor stability and getting South Africans back to work in a much more productive, constructive way than we have been. Thank you very much indeed for your time. Thank you for your views. Thank you for rushing from the airport to come and talk to us. Coming up, and ipo of epic proportions. Alibaba confirms what could be the biggest share sale ever. We take a closer look at the chinese ecommerce giant next. Welcome back. Lets talk about the currency markets. It is like being in a war zone with a peashooter. The head of the central bank in new zealand said that last year. We will not go down kiwi will not go down. He talked about the fact that the currency is simply too strong. That has had some effect. Nevertheless, keep an eye on this one. The currency is strong versus the fundamentals. Alibaba has filed to go public in the u. S. They could raise as much as 20 billion the largest ipo the industry has ever seen. But stick a look at the ecommerce giant by the numbers. Lets take a look at the ecommerce giant by the numbers. The numbers are huge. Big, big numbers. I could get even bigger. What are we watching for the rest of the day . Those numbers are front and center. Jonathan ferro and hans nichols join us. Lets start with alibaba. Massive numbers. Estimated value, 160 billion. Billion dollars. More than visa. It could be the biggest ipo in u. S. History. Forke 2 of chinese gdp 2012. I probably have the best stat. It is the popularity of jack mas singing. You are obsessed. Janet yellen is also testifying today. 10 00 today. Jonathan ferroly looks at his job in london to be the chief fed reporter. Does she look at the dismal gdp number or does she look at the jobs number . What can she do to drive up the dollar . Hans nichols came for my job, you know that, right . Berlin. Why he is in you go berlin via the back door. I love how scores are settled here on air. [laughter] it is like, boom. This is a big deal for europe. It has been 12 months since ben bernanke turned around and said we may have tapering this year. Need is a hawkish janet yellen, believe it or not. Is that going to drive up the dollar and pushed on the euro . I dont know. Does she want to drive up the dollar . It is not in her interest to do that right now. Mario draghi is secretly hoping that will happen. I think with tom keene was saying earlier is pretty interesting. You have seen a commitment to say yes, i am committed to the labor market. Some of the other stuff can be quite confusing at times. If they are not on a preset course, why do they continue to do the same thing for months after months after months . Lets see them not do that. Im not convinced right now. Fed watcher. Criminologist. [laughter] Jonathan Ferro, hans nichols, thank you very much. They will be following this janet yellen testimony closely. Keep it right here on bloomberg tv, surveillance is up next. Alibaba on deck today. The fed on deck today. Follow us on twitter. We will see you tomorrow. Have a great afternoon. Quiet russians to elements, its an election. Alibaba is from china. Scarlet fu never throughout a College Textbook and now they are worth a small fortune. Bloombergg, this is surveillance, wednesday, may 7. Scarlet fu and adam johnson are joining me. I sold my textbook. What am i going to do with textbooks . Lets get to our brief. Overnight, german factory orders fell 2. 8 which was more than expected. In the u. S. , it 8 30 a. M. Labor costs and labor productivity. Worked and the hourly pay is not going up so you want to see productivity. Consumer credit is at 3 00 in earnings before the bell, two companies of note allergan an d sothebys. After the bell we