Transcripts For BLOOMBERG The Pulse 20150128

The company sold 34,000 phones an hour every hour for the quarter. Caroline hyde has more. The growth is absolutely immense. It is insane numbers. 18 billion. That is 200 million a day. I the time i finished speaking apple will have made half 1 million. This is a phenomenal company. They beat analyst estimates. They wanted record smashed amalie have smashed them. Look at these figures. Bigger than yemens entire gdp. Bigger than icelands annual economy. Adding up microsoft and google it is more than that. They are dominating the competition. In fact, in one quarter they managed to provide as much profit as General Motors makes in a year. The growth is so phenomenal. 18 billion is 30 more than last year. The new product, the innovation is shining through. Iphone 6, the bigger screens are winning out across not only android wooing over more people from android, but also asia. The bigger screens are amazing. Steve jobs, four years ago, said they would never sell. Who would buy a bigger phone . Now you see the reversal. What do they do to keep the momentum going . Yet more products. What is interesting is how they stopped cannibalizing the ipad. One area of deceleration we are seeing, 18 fall in sales for the ipad. The reason is, if youve got a 5. 5 inch phone why do you need an ipad on top of that . Therefore, you are seeing tablet sales fall. We are understanding they are going to be posting them. Also, they deal with ibm. Getting more Business People perhaps being lured to the tablet. Maybe they can rectify the situation. Another situation is the strength of the dollar. If youve got more than half of your sales outside the u. S. When you bring that home, less bang for your back. We are seeing apple recognizing that. They are trying to offset the issue. In russia, when we saw the ruble fall, they stopped online sales. Sales are going to be hit to the tune of about 5 next quarter because of the dollar strength. It is an issue, but i think the unveiling of the apple watch in april is going to give 2015 all the boost they need. How much do we know about the apple watch . About 300 for the most basic. I paid 55 pounds for an ipad case yesterday. Imagine if you start getting an apple watch. You will be paying thousands. This is where they can be so clever. They can lure in those who would usually buy a luxury watch. They are going to be happy to spend thousands on the rose gold apple watch. You therefore get to track your fitness at the same time. They are managing to have enough designs to basically lure anyone in. I was a critic. I thought there were going to reinvent the wheel something so different from what samsung had put out. It looks as though they will manage to woo with not only a 15pound apple case, but also managing to expand up. You can specify exactly what you want. This is for emerging markets or across the board . We are expecting the iwatch to have phenomenal success and appetite in the asian markets but also in the u. S. And europe. I think what is such a take away for me is how they are managing to win china. The emerging Market Growth 70 growth in sales in china. They are unleashing 25 more stores. Next quarter, weve got chinese new year. That is going to be another reason. Carl icahn says, it can be worth 1 trillion. Caroline, thank you so much. That brings us to our twitter question of the day. After apples record quarter was steve jobs wrong . When asked back in 2010, apple launched their own, jobs said no one is going to buy a big phone. That is one of the twitter questions of the day. We tried to answer it with caroline, because it is selling. This is what they had to learn the hard way. Samsung had these bigger screens. It was asia that really liked the bigger screens. It is eating into tablets, and that is where i think the question is interesting. Perhaps steve jobs was wrong, but it has deadened the ipad. The milliondollar question. Every line some amazing figures. Here is what else is on our radar. Russias earnings last year missed estimates. The company is forecasting that revenue and profit will increase in 2015. Rcohe is the worlds biggest seller of cancer drugs. Jpmorgans fx traders gained on the day of the Swiss National Bank Decision to scrap the franc ceiling. They also said citigroup, deutsche, and barclays suffered trading losses. The Chinese Government is accusing alibaba of lax oversight of merchants. The government says alibaba has a credibility crisis and is accusing alibaba of allowing merchants to operate without business licenses. Alibabas spokesman said the company could not immediately comment. We will have more later. Also coming up, greeces new government gets underway. Stay with us for more on what is on the agenda and why greeces first clash with europe may be on sanctions over russia. You can see live pictures of mr. Tsoipras meeting in athens. We have more coming your way on that story. Welcome back to the pulse. We are live on bloomberg tv and radio. Greeces new government gets to work as the Prime Minister alexis tsipras, convenes a meeting with the cabinet he unveiled yesterday. The first one may not be about the greek debt. For more on the governments first day in office, lets go to markets in athens. We are seeing live pictures. Mr. Severus mr. Tsipras addressing his cabinet at the moment. Tell us what we know about the members he has appointed. Tissipras was elected on a promise of radical change for greece. Every indication is that he is going to stay true to that word and take policy in a radically new direction. Hes addressing his government members so far as we speak. On the way into that meeting, a few minutes ago, the labor minister said that he was going to imminently, the government will increase minimum wage and reverse a lot of the policies on collective bargaining. The abolition of these rules that were brought about in the last years. This was one of their key campaign pledges. They are staying true to their word. Other similar statements weve heard from ministers to halt monetizations of several Key Companies like the state Electricity Company and airport. What we are seeing so far is pretty much what you might expect the governments of radical leftists with a sprinkling of ministers from the right wing independent groups would look like. Give us a sense the markets have reacted badly. I think there was a general sense that these radicals may have become much more pragmatic. Is there a sense that they are not going to become more pragmatic because of what weve heard so far . It is very early days. What we are seeing so far is a government that is showing that they want to govern on the basis on which they were elected it came out that they were going to form a coalition with the independent greeks, instead of the more centrist party. That was a bit of a snub. Also, would have disappointed a lot of people hoping there would be an immediate uturn as soon as tsipras was elected. Dont forget, he came very close to an overall majority. They clearly feel that they had a very strong mandate. It is early days, but certainly the signals that have come out of the government so far do not indicate a move toward the center. Marcus, thank you so much. As greeces cabinet meets to discuss its agenda, the new government has made its first moves on the international stage. The Coalition Said it opposed the eu Statement Issued tuesday that considers broader sanctions against russia. Lets bring in Ryan Chilcote. What is the main issue that greece is raising . There seem to be two issues. One is the greeks saying that they dont consent to the statement that came out on tuesday from the eu, that effectively laid the groundwork for possibly imposing new sanctions, expanding the blacklist of individuals subject to asset freezes and travel bans. The second issue that the greeks seem to have is that they said they were never consulted, that there was a procedural violation, and that clearly, they need to be part of any decision. The issue, as you know, when the eu makes decisions on Foreign Policy like russ and sanctions russian sanctions they need all 28 countries on board. If greece wanted to come that meeting tomorrow, they could stonewall this whole thing and prevent any more action against russia. Is this rhetoric on the greek side, because they are just trying to say, we need to talk business . Or is it rhetoric from the eu side . Are we expecting more action on thursday . That really comes down, i think, to the brandnew foreign minister for greece. He could keep this as rhetoric or he could follow up and say, we are not going to sign on to anything, to which you can imagine germany, france, some of the larger countries would say, sure. If you want to go rogue on us, thats fine. Dont expect any goodwill when it comes to debt negotiations. That might be a very difficult path to take. What we know about mr. Kotzias is that he has spoken out very much in favor of increasing greeces ties to russia. Both countries are orthodox christians. They have a common history. He has spoken against the hegemony of germany within the european space. He is a polar opposites with the president of the eu that put this statement out on tuesday when it comes to the stamps on russia. We have to see. It definitely sets the stage for some pretty interesting backdoor negotiations in brussels. Any signs that the sanctions are actually working . Some are saying that the sanctions arent stopping Vladimir Putin being stronger in ukraine. The sanctions have clearly been effective in weakening the economy and the ruble. Have they been effective in changing president clintons actions in ukraine . Most analysts will tell you, absolutely not. The phrase is that putin is playing all in when it comes to ukraine. The rhetoric against the west has increased. He has shown zero signs of changing course. Thank you very much, Ryan Chilcote with the latest on russia. Now, the new unknown, greece. For more on the renegotiations with the eu, lets welcome barclays chief european economist. We have a new government in greece and it is very difficult at this moment to figure out exactly what they want. They are radical, they mean business, but they may change once they see the machinations of the eu. The priority will be what no sanctions against russia . I think the story about russia is not really a priority. I think they are not used to the european process. They are may be surprised by the fact that there was a Statement Issued yesterday. On russia, we cannot say there is a single position in europe. There are many different views and there are some discussions. They try to come to a compromise. The new government has no experience about that. They need to learn about how European Affairs are working. When you put 28 people around the table, it takes time to get used to the process. Are you confident that they will get used to the process . You could also have someone that says, this is a process, i dont care. They will probably try to i wouldnt say change the process but they are going to be they are radical, so they are going to the radical in brussels as well. I dont think russia is a priority. The priority is the economy. With the announcement of the measures made yesterday about raising the minimum wage it is something more symbolic. We cannot get have a clear assessment about what is to be next and how they are going to start discussions with the eu members. It is too premature. At the same time, everyone is drawing lines. Germany is trying to say, this is a line you dont overstep. The french today being a little more open and saying, we cant write off debt, but we need to find a compromise. What is clear to you, that austerity is not working or they dont want more austerity . There has been a change toward austerity not only in greece but in other European Companies countries. There is a discussion about what will be the right stance. What is a good mix between fiscal canola nation, structural reforms, there is a debate on that. The ecb has been part of it. I was very impressed by the speech of mario draghi in jackson hole when he explained what was at stake and what could be done in terms of the different areas of economic policy. There is a debate about the right stance for Fiscal Consolidation. I think the french and the italians will play a very Important Role to be a mediator between greece and the northern countries who are more of the view that austerity should continue, whatever it might take. People say, investors and Market Participants say, we are in a much better place than we were two years ago. We have the ecb and now we have qe. But it feels a lot more dangerous. If there is a political contagion then we could be back to square one, asking ourselves if the eurozone will stay together. The contagion is still there. It is not the same as it was two or three years ago. Growth was still weak. There was the problem of financial stability. All that has been improved a lot. The recovery is starting. But we have the people voting. We have just discovered that we are a democracy. It is the people who decide. I think it is important to focus on the best way first of all to explain the reforms, to look at the priority i think Fiscal Consolidation is less of a priority. There has been some progress. Greece is running a balanced budget without interest. What is at stake now is the political situation, and of course, behind greece the next election. We have a radical party which is gaining support in the opinion polls. I think the spanish are looking at greece very cautiously. I was surprised to see in all the headlines of spanish newspapers they were about greece. Give us a sense very quickly of how worried you are. If you are in the markets, are you in a wait and see situation until we find out more about these guys . It is going to take a long time. The deadline is july with the repayment of debt to the ecb. It is going to take a lot of time. There will be lively discussions. I think they will find compromise. I dont think a debt writeoff is on the table, but there will be questions about debt restructuring, how to relieve the pressure. I think there will be discussions about fiscal policy what is going to be capped as priority. Maybe there will be less spending cuts and more tax increases. What is going to be more difficult is the discussion about social reforms. In what has been announced yesterday, the increase in minimum wage is something but it is going to take a long time. On the other hand, we have a better economic situation. Qe. So, but what is really crucial is the evolution of the political situation in the different countries. Thank you so much for now. We will be back. We will be talking about the fed. Coming up, sonys smartphone struggles. Lets get you some company news now. H m profits have topped analyst estimates as the company open stores in china and the u. S. The net income rose 760 million in the fourth quarter. Sony plans to eliminate another 1000 jobs in its smartphone operation according to people familiar with the situation. The japanese tech giant is cutting costs, in an attempt to return profits. The cuts will include operations in china. Oddities are set to lag behind credit markets over the next three months. Goldman sachs cut its nearterm outlook for Raw Materials to underweight, predicting losses of 10 . Coming up next we look at the swiss franc and [indiscernible] welcome back to the pulse live from bloombergs European Headquarters in london. Here are bloombergs top headlines. Rbs plans to dispose of toxic assets in the bad bank by the end of the year. This comes 12 months earlier than predicted. Rbs is the you ks biggest the u. K. s biggest government lender. The Monetary Authority of singapore said it will seek a slower pace of appreciation in the countrys dollar. The announcement sent the currency to its weakest level since 2010. It also cut its inflation forecast for 2015. Today, we hear from the u. S. Federal reserve. The fomc Committee Releases a statement at 7 00 p. M. Here in london. Economists say policymakers will keep their language pledging to the patient this year. For more on the fed, lets bring in barclays chief european economist. Thank you for sticking around. We talked about greece, the implications of qe, and russia. The fed, will it raise rates this year . This is a question that, when i was in davos, talking to experts, they were split down the middle. Maybe more people now saying it will come in 2015. [indiscernible] clearly, what has been happening all over the world cannot it will have some consequences. Even though the economy is doing well and it would make sense to start the hiking cycle, the fed has become more and more nervous. They could have some longterm impact on inflation. Also, because what we see today is the resumption of currency wars. We need to acknowledge that. Clearly, [indiscernible] this is interesting. A lot of people say that we are not really in a currency war. That the drop is mainly because of the growth strategy. So actually there hasnt been much point fingerpointing. What also the banks are trying to do is avoid deflation. We are in deflation because of oil prices. Inflation was very weak even before the falling oil prices. [inaudible] the currency is the best way to have an impact quickly. If you look at qe, it has been good for the trade. Gradually, you will have another channel. Qe will help the financing of the economy. In a sense, i understand that central bankers dont like to talk about currency wars, but this is where we are. Lets check quickly on the board. Have a look at eurodollar and what it has been doing over the last couple months. We are talking about inflation here in europe. We are talking about the price of oil. When you look at the price of oil, and the dangers of increasing Interest Rates too soon by the fed, would it be disastrous . If we had one currency around the world, one government policy around the world, it would be to ease at the moment. Is there a danger of actually if the fed gets the timing wrong, it jeopardizes the rest of the world . If the fed gets the timing wrong, it could destabilize financial markets. They would be careful, they would be patient, and that is what they will say this afternoon. I think they will probably like to buy insurance by delaying a little bit. The u. S. Economy is strong. It is not a very open economy. We will see, depending on their domestic demand. They would like to take a risk. It makes sense to start hiking this year but it will make sense also to wait a little more. The question is even more difficult to answer in the u. K. The u. K. Seems even more complicated. You have your political situation. This gives a little bit more turmoil from foreign investor sentiment. In the u. K. , you have many issues. The u. K. Is a more open economy and depends more on europe. The pound versus the euro is a problem. Secondly, we have an election coming up with a lot of uncertainty. I think uncertainty is bad because it is delaying investment. It could impact the economy temporarily. I think we still have a big question mark about the state of the labor market. I think for the bank of england, it is difficult to know whether a hike puts pressure on wages or not. There again, they will probably prefer to wait. Since you mentioned currency wars, what is your favorite currency for this year . It is difficult. Im not in currency strategy. In terms of appreciation the dollar. We have been waiting for it to appreciate for such a long time. Thank you so much, philippe gudin. Roches ceo says the impact of the swiss franc had an impact on derivatives in a bloomberg interview. It is difficult to predict where the currency is what end, but it is very dimimportant in our context that the u. S. Dollar plays a much bigger role than the euro. Lets bring in Bloomberg Intelligence for more. Great to have you on the program. How did roche do this morning . On the top line, they were better than analysts expected. On the earningspershare line they did miss. Half of that mess was due to a oneoff fee that they paid in the u. S. , to the u. S. Government. The other half, we feel, came from margin pressure. What about the swiss franc exposure . This is something that more and more companies are trying to figure out. However, roche didnt have that many details about their 2015 guidance. Theyve given guidance on a currency basis in terms of sales, etc. And also, in their press release , in their Company Presentation on the website that has given detail with regards to swiss franc moves, what they havent done is what most of the companies have done. Which is, this is what we expect sales to grow. The impact of currency if they were to remain at the levels they are today. Novartis did that very clearly yesterday. What about the pipeline . Nothing announced, but if we do a sidebyside comparison of the pipeline today with last year they seem to have been more trial started in the world of oncology, a key area for roche to make sure they are a leader in, given their importance in the cancer world. We have seen some new trials. Interesting. Coming up on the pulse china slams alibaba. What does that mean for jack mas company . When i started a business, i told my people, fall in love with the government, but dont marry them. [inaudible] i think it is a responsibility. Tell them how internet can help. Dallas alibaba founder jack ma speaking last week about his business relationship with the Chinese Government. Now the Chinese Government is accusing alibaba lax oversight of merchants. It is accusing ali baba of allowing merchants to operate without required business licenses. For more, we are joined by Brendan Scott from hong kong. What does the report say . The report makes an unusually Harsh Criticism of ali baba accuses them of allowing merchants of using merchants who are unregistered with the government, of lack of oversight of employees who took bribes from merchants, who were peddling fake and counterfeit goods on alibabas online marketplaces. What do you make of the timing of it . The timing is very interesting. It comes many months after a meeting between the agency, the Ecommerce Agency that drafted this report, met with alibaba officials to discuss these allegations. Yet it was held back. Specifically, the government said, until after the ipo of alibaba in new york in september, it had only released now, the day before alibaba is scheduled to release its first full quarter of earnings since that ipo. Yeah. What does it mean Going Forward . Is alibaba pushing back . Alibaba itself has not responded to the claims. The marketplace run by alibaba has given some sign that it is not going to take this lying down. It filed a complaint against the top internet regulation of official at the state administration for industry and commerce, and is defended its record of going after counterfeit goods. It has taken further steps to say that it will set up a task force to crack down on counterfeits on its site, but still pushing back against this and saying they were subject to unfair treatment by the agency. Lacks brendan, thank you so much for all that. Lets turn from alibaba topple the worlds most valuable company. A record 18 billion profit last quarter. Tim cook broke down the numbers. On average, we sold 34,000 iphones every hour every day of the quarter. The execution by our teams was spectacular. By the end of the quarter, our new iphones were available in 130 countries around the world, making this our most successful rollout ever. That was apple ceo tim cook talking about record iphone sales. For more, lets bring in caroline hyde. Give us a sense of how much this growth is about the bigger screens. The innovation, phenomenal. Tim cook called this spectacular. Investors seem to be agreeing. Investors say these numbers are phenomenal. 18 billion in profit. The most on record in terms of corporate history. They are making 200 million a day. By the time i finished speaking, they wrapped up another half million dollars. They are managing look at where it is compared to its competitors. It takes ibm an entire year to make what apple has made in one quarter. It takes hp 20 two quarters to make what apple has made. If you had what microsoft and google have for this quarter, apple still smashes both of them combined. Pretty phenomenal. It is the iphone 6 that came to the rescue. Bigger screens. Up to 5. 5 inch screens. Suddenly, you are getting the appetite from asia. Samsung led the way. They always had these bigger phones. Now, we are seeing sales up 70 in china. They are going to roll out far more stores. Only issue is, is that cannibalizing the ipad . Ipad sales saw a fallout. We saw 18 fall in ipad sales. Apple pay is going like wildfire. Yet, still to calm is the watch in april. Caroline, thank you. That brings us to the twitter question of the day. Was steve jobs wrong . When asked about bigger screens in 2010, jobs said no one is going to buy a big phone. Join the conversation and tweet us. Joining in the conversation on set is daniel gleason. Great to have you on the program. Apple has phenomenal figures, and this is all thanks to this bigger screen on the iphone 6. As caroline was pointing out, it is cannibalizing the ipad. There is a good amount of growth to be had for the iphone even within china. They have huge growth in china this quarter. Still a long way to go. Market figures put apple at less than 10 market share in china. We had growth in other emerging markets. In addition, there is the possibility that apple can move down market a little bit extend that price range, and put pressure cheaper, so a completely new phone. It doesnt have to be a very barebones phone. Apple has a huge profit margin that it can move around. It depends on what apples strategy is. The most important thing here is that apple is reporting consistent, strong profitability. That is something nobody else is able to do at the moment. Apple has a lot more leverage. Give me a sense of how excited you are about the iwatch. Is this really going to kickoff . Analysts say, it is going to be great, it is going to be a flop it is going to be great again. I think it has very strong prospects. People point to the fact that you have to have an iphone as some sort of limiting factor. What we saw with these results, 75 million iphones sold in one quarter, theres well over 300 million iphones active in the world today. If you think about those numbers, it is not a limiting factor. It is only going to be available to those people with an iphone, but that is a huge market. It is not the case of the early 2000s. This is completely different. I think the apple watch has a good chance of making a big impact in the near future. You seem to be very optimistic. That the iwatch will deliver, that they will grow. What is one thing that concerns you about apple . It seems like the company can do no wrong. Yet history tells us when profits are so big, there is going to be a point where it goes downhill. I think it is more of a something comes along d thrones the number one guys. Even this quarter, you see that apple is passing gnocchi a nokia for sheer volume of handsets despite the fact that nokia is selling 40 handsets. Four or five years ago, that would be unthinkable. It is not a case of, i know what is going to happen that is going to throw apple off eerie at off. Going back to your point, maybe they should be starting to sell cheaper phones. What do the Consumers Want . Everybody wants an iphone, but further down the line, is it cheaper handsets, less complicated handsets, bigger tablets . I think we are at the point now where the market is beginning to mature theres very little difference in the hardware between the brands. The growth of the iphones size to these bigger screens illuminates the biggest difference between the samsung devices and the apple devices. What you are going to see now and in the next few years is the brand, which apple is paramount in strength in, reducing those costs. Apple has the scale to be very competitive and locked down those components. Daniel, thank you so much for joining us. We are back in just a couple minutes. You can follow myself and guy on twitter. Guy is off today but hes available on twitter. We can talk apple alibaba, greece, and russia. Theres loads to talk about. Welcome back to the pulse live on bloomberg tv and radio. For those listening on Bloomberg Radio the first word is up next. For our viewers, a second hour of the pulse is coming up. We have the chairman of boys of london. We will be trying to get his temperature on where he sees consolidation in the sector. We will be talking to electrolux. This is a very interesting story. Electrolux makes a lot of goods. This gives us the barometer, where they see the World Economy going and the european economy going. The growth momentum. It will be interesting to see whether the ceo continues seeing it. We will also be talking about apples record growth. 18 billion. That is what they booked in the last quarter. We will ask investors and our expert panels about whether that is sustainable, whether they are excited about the iwatch, and the impact on their rivals. That leads up to the twitter question of the day. After apples record quarter was steve jobs wrong . When asked about bigger screens in 2010, jobs said no one is going to buy a bigger phone. Join us. The conversation continues on twitter. Im back in just a couple minutes. Apple reports a record net profit. Shady merchants. Alibabas lax oversight. Greases new cabinet gets to work greeces new cabinet gets to work. They may start with russian sanctions. Welcome to the pulse. Im francine lacqua. Apple smashed records with iphone sales. They sold over 34,000 phones per hour. Give us a sense of the growth which is absolutely phenomenal. Staggering numbers. 8 million per hour. It is quite phenomenal what the company is doing. When you compare it to the competitors, it is so much more profitable. Microsoft and google put together does not yet equal 18 billion. Apple is making more than the entire gdp of yemen and iceland. Staggering results. The growth is phenomenal. Sales are rushing through. Iphone 6 and iphone 6 plus. Unleashing these has brought in more and more people. Particularly during the holiday period. We are going into developing markets eating into android and samsung territory. Sales were up 17 in china. Also the new ways you can pay quite recently. Overall, they are seeing 2 3 of money in this way being taken by apple. I think many investors might agree that it will be worth 1 trillion at some point. Lets turn from apple to goods. It has been a big quarter for europes biggest appliance maker. Joining me is the president and ceo of the swedish appliance maker electrolux. Give us a sense of how bullish you are on europe. There is a lot of concern surrounding europe. Where do you see the most momentum . Actually, there is better momentum in western europe. Certainly, Southern Europe is stabilizing. We see strength in spain. Italy was good in the most recent quarter. The u. K. Is strong. Dramatic europe has been good. Germanic europe has been good. We see some strength in western europe. Positive numbers, albeit not robust. You have been restructuring your business for the past 10 years. What is next on the agenda . Are you looking to buy anything . We announced the intention to acquire General Electric appliances in september of this past year. That acquisition is under review with the regulators and we expect a decision and a positive decision and closure by mid2015. That will keep you busy. Is that going to take much of your time for 2015 . We have lots on the cards. Lots of good momentum around the world, including europe america, asia, north america. Lots of innovation and investment in new products. We are quite excited. We think we are wellpositioned for a good 2015. What is your feeling for the u. S. Market . The u. S. Housing market . Yes. It is Getting Better gradually. It is certainly not booming back to the level that it was back in 20,006. 2006. But that would obviously be not good if it was because that was a housing bubble. We see a recovering and that is a healthy thing. You seem pretty bullish on europe. You are looking more at western europe you mentioned the u. K. You mentioned stronger countries. Give me a sense of what makes up those positive signs. We talk a lot about political students earn political concern, we talk a lot about greece. I dont want to be too bullish. We are forecasting 1 to 2 growth in europe in total. It is nominal growth, but growth nonetheless. Compared to the last few years where europe was declining in appliance demand, that is a positive change. You recently introduced new products in china. How is business going there . For us we are growing. But to your point, we are small. The overall china market is declining. It declined in 2014. The chinese appliance market has been the finding. They declined 7 in q4. There is a lot of over build of apartments and housing in china that needs to be absorbed. Four appliances, that means relatively slow growth in the near future for appliances, that means relatively slow growth in the near future. In the shortterm there is probably a needed correction going on. Thank you so much for going for your time. Lets give way to another big interview. Lets welcome the chairman of lloyds of london. Great to have you on the program. Good morning. First of all, i want to leave your business aside. You talk to the most powerful men and women on earth. There is a sense that things are ok on the markets but there is a lot of black fog out there. Are we a little bit too complacent . Or do we just have no control over the biggest risks . It is a mixed picture worldwide on economics. The u. S. Is growing well. Even the u. K. Come a much smaller, showing signs of confidence even the u. K. Much smaller, showing signs of confidence. In the eu, we have a very different picture, very skewed. In the major growth countries, we are seeing somewhat of a slowdown. Though they are still operating at quite high rates. Even though china is lowering its growth forecast they are still a significant economy, an enormous economy. It is a mixed picture, but i think overlaying that is this huge overlay of recent rise in geophysical rates. Geofiscal risks. I feel that, for business, it is a world of enormous opportunity. Those very risks, as they are created by growing commercialism, industrialization are growing in normally enormously. When you say trebles troubles, is it cyber . Is it terrorism . The biggest opportunities for growth are in the growth countries, where they have high levels of under insurance. If you take some of the south american countries if you look at india, if you look at asia they have very high levels of under insurance. The politicians understand the importance to the economy of insurance, of businesstobusiness risk and so on. That is where i think the growth will come. To give you two numbers, in 2012, the cyber risk premiums were running at about 850 billion. The demand is ever increasing and the inquiries are ever increasing. The Insurance Industry is working very hard on developing a greater amount of cover capacity for those risks and developing the right products to discover to cover the right risks. Im still a bit perplexed on cyber. Do you think that a lot of companies are not prepared for cyberattacks . What needs to change . Is it just cases like sony that makes ceo realize and then come to you . I think the Insurance Industry is actually a very good commercial dynamic on cyber defense. There has been an economic drive or commercial drive for governments to improve their defenses. If they are taking the right steps, they are more likely to get covered at a competitive rate. If they are exposed, it is more difficult. My own feeling is always toward risk management. If theres a commercial reason to do it, you are more likely to get the right answer. You think you should be having more conversations on Cyber Attacks with ceos . There is no question. It would be number one or number two on most companys Companies Risk register. Most Companies Look at their wrist registers risk registers every board meeting. Will there be more consolidation this year in your industry . I think generally more confidence leads to more investment. If we talk outside the Insurance Industry we are seeing that in the United States and the u. K. With insurance, there is a particular driver here. This is a slightly complex story. Because of sustained low Interest Rates and that looking to be the case for the mediumterm, particularly following recent years you are seeing more and more capital being attracted into the insurance space because of the return and it is a return uncorrelated from other investment classes. You have more and more capital coming in in different ways. We call it alternative capital. It might be catastrophe bonds or insurance and securities. This is putting pressure on reinsurance. You are seeing medium and smaller players reinsurer or acquiring each other, giving themselves more scale and putting themselves into a stronger position. That will continue. That will continue. Give me a sense of your concerns for this year. You are seeing low bond yields and at the same time you are seeing more players in the industry. Do you welcome the competition . Lloyds is a market. We are not running a business. We are a market to enable Insurance Companies to flourish in the specialist insurance base. It is the high risk, business to Business Insurance game. One of our aims is to attract more carriers from the great countries onto the lloyd platform. In terms of what the challenge is there is always more and more competition. With low Interest Rates, the challenge is to make sure that underwriting discipline remains. I am clear that in 2014, when our figures are announced we will show another very good performance driven by good underwriting discipline, helped by a lack of major catastrophes. The challenge for 2015 is to maintain the discipline. Chances are at some point, we will have bigger catastrophes. We have to be ready for that and we are. Equally, we have to keep on widening the market lloyds is serving, particularly in those very countries. We have some other challenges. Technology is a huge driver. We have to make sure and we have huge efforts going in that the lloyds platform is more and more efficient and userfriendly. Do you think that the Insurance Business that you represent businesses that you represent our concerned about increasing competition . Everyone is more concerned about more and more competition. But that is a fact of life. We live with that. That is of the day job. You are absolutely right. Every industry and every Business Leader has to deal with disruption. I spent my life in the Banking Industry sometime in the retail industry. Some time in the retail industry. Disruption as part of the job. What kind of advice would you give to a Business Leader at the moment . In general. You are dealing with disruptors, you are dealing with a lot of unknowns. You are dealing with very low returns because of bond yields. It feels may be like too many people are too optimistic about the future. What would you say . What i would say, as a Business Leader myself, be brave and grasp of the challenges. Grasp the challenges. Dont wait for it to happen to you. Youve got to get on the front foot. Recognize what is happening in your industry and to your Business Models and react accordingly. Dont wait. How do you not wait . Better advice . Better Board Members . Strong management, strong boards, develop a strategy to deal with challenges which is what lloyds has done. Then you execute it and you keep that strategy under very careful review all the time. You have to be brave enough to adjusted. In three or four years things will have moved on and changed. Thank you so much. I like your advice to other Business Leaders. The lloyds of london chairman john nelson. We will hear more from the ceo of roche later in the program. Jpmorgans fx dealers gained. The Chinese Government is accusing alibaba of lax oversight of merchants. Alibabas spokesman said the company could not immediately comment. Coming up, greeces new government gets to work. Why greeces first clash with europe may not be over its debt. Greeces new government gets to work. The first clash with europe may not be about the greek debt. Lets go to athens. Tell us a little bit about what we know about the new members of the new cabinet. Tsipras was elected on a platform of radical change. They will stay good to that and there will be a change in direction. On a whole range of issues, from Foreign Policy to social policy to immigration to policing. In terms of things that directly relate to the bailout negotiations, we had, on the way into the Cabinet Meeting a report that the government will imminently increase the minimum wage. There have been a lot of changes to labor laws over the last few years. Collectivebargaining agreements will be reinstated. Other ministers have said that privatizations will be looked at. There is no softening of the town. Why have bankshares reacted so badly . Bank shares reacted so badly . There might have been an expectation among some about a softening of tone. A party was touted as much more centrist but instead formed a coalition with independent greeks. They were vehemently antibailout also. The noises dont indicate any moving toward the center now that they are in power. The noises continued in the same town as tone as struck during the electoral campaign. Thanks so much. The tsipras a post of the statement that considers broader sanctions against Russia Coalition opposed to the statement that considers broader sanctions against russia. It is pretty interesting. The first day that the greek government is sworn in in power and they are already choosing a fight with the European Union saying that they dont consent to the statement on tuesday out of the eu, calling for more sanctions leading to this meeting we are going to have tomorrow in brussels. They set proper procedure had been violated because they had been not been consulted even though they had only been in power for 1520 minutes. The point with the eu is that when it comes to things like imposing sanctions against russia, you have to have all 28 members on board. If greece is not going to be on board, then theoretically, they could make sure there are no new sanctions imposed against russia. Are they playing tough . Or is the eu just playing tough . The eu is in a difficult position. They have called this meeting. If they dont do anything, it will be seen as a sign of weakness and they are very concerned about appearing weak in this struggle with russia. The new foreign minister for greece will decide whether this is just a rhetorical position or whether they are going to use it in backroom negotiations to try to cut a deal elsewhere. Or whether this is a matter of principle and they really are against sanctions. In any case, the most we are looking at coming out of this meeting tomorrow in brussels is an expansion of the blacklist of individual subject individuals subject to travel bans and blacklists. Sanctions have they worked . They have certainly hurt the russian economy. I dont think anyone would argue with that. Have they changed the russian position in ukraine . The evidence appears to putin hardening his line. He feels like he lost all the report he had with Angela Merkel obama, francois hollande. The comments we are getting out of the kremlin and the violence in Eastern Ukraine is much more intense than a couple of months ago. Coming up, china slams alibaba. What does it mean for jack ma and his company . Welcome back to the pulse. Rbs will dispose of toxic assets this year. This comes 12 months earlier than projected. Singapores central bank has unexpectedly eased monetary policy. They said they will seek a slower pace of appreciation in the countrys dollar. They send currency to the weakest level since 2010. They also cut Inflation Forecasts for 2015. Prices may fall as much a 0. 5 . The fomc Committee Releases its policy statement today. Economists say policymakers will keep their language to be patient on the timing of an Interest Rate hike this year. Lets check in on the markets with jonathan ferro. In 29 minutes time, we get the growth forecast. There are figures to watch. The european map showing losses. We have losses in italy and spain. On the ftse, we are down. Forget what you are seeing here though, the big story is in greece. Greek stocks are getting crushed. The banks are taking the pain again. The banks are down by over 30 in the last three days. Tsipras the new Prime Minister, talking a very good game today. Lets see what the bond markets did. Im looking at 10 year bond yields. 80 basis points on the day. Back through 10 on the 10 year. Spanish and italian debt pulled back a little bit. I am not going to say this contagion is there, but there is a little bit of a pullback elsewhere in the bond market. Tsipras, the foreign minister getting a bit touchy about sanctions on russia not being in greeces interest. Greeces voice got a little bit louder. In fx, lets go straight to the dollar. Higher, higher, higher. Stronger, stronger stronger. This one is in focus as we count down to the fed. Thank you so much. In 25 minutes, it is surveillance with tom keene. What are you looking at . We are going to look at ukraine. Loan guarantees by the United States. We will look at that. Then we will look at a controversial deal on what nato should do with its future. We will also talk about the ad business and how it links into technology. We will look at the fantastic quarter of apple computer. I dont think enough has been said about the cash generation machine. It was truly a spectacular quarter for apple computer. Really interesting. There is a great alibaba story as well. Tom keene with surveillance in 25 minutes. The worlds most valuable Company Recorded a record 18 billion profit this quarter. Tim cook broke down the numbers. On average, we sold over 34,000 iphones every hour, 24 hours a day, every day of the quarter. The execution by our teams to achieve these results was spectacular. This was our fastest and most successful rollout ever. That was apple ceo tim cook talking about the companys record iphone sales. Lets bring in caroline hyde. The numbers are staggering. He said 34,000 phones sold per hour. 8 million per hour. 18 billion over the quarter. That is more than General Motors makes in an entire year. That is more than google and microsoft make in a quarter combined. Not only are these big numbers, it is big growth. 38 uptick in profit. 30 uptick in sales. What is helping so much as a flurry of new products. Investors had to be patient. Tim cook has provided. Therefore, stellar results. They are starting to eat away at android, at samsung in particular. This is where samsung always led the charge, bigger phones. All of a sudden, iphone comes along. Suddenly, china sales take up 17 tick up 17 . Clearly this is a company that is working in terms of hardware and is also innovative in terms of apple pay. Apparently, two dollars out of every three dollars are using apple instead of competitors in that form of payment. Ipad sales dipped. But they have a new version coming out. They have the watch coming out in april. They are fighting the dollar. They are rising prices in canada and the u. K. To combat that. There is also the iwatch. I am quite excited. Lets turn to yahoo a lot of talk about them. It is all about alibaba. It is. Alibaba is in the news a lot today. The problem is that they have a problem with their share price. Yahoo is saving investor cash because they are saving tax. They are spinning off a 40 billion stake in alibaba. They are spinning it off into a separate company. How are the going to sell that without having a huge tax hit . They are going to sell it off and give the separate company to the shareholders. Shareholders are going to get 97 of the proceeds. Shareholders are euphoric about this cash and about the minimizing of the tax burden overall. The next want to see a spinoff of yahoo japan. They next want to see a spinoff of yahoo japan. What is left . There is much more pressure on the ceo is what is left. Marissa mayer suddenly has to deliver a lot more. Exactly right. And a lot of investors are worried. She is only pulling in about 1 billion per quarter in terms of sales. That is less than a 10th of what you are seeing coming in over at apple. You have the First Quarter not living up to expectations. The numbers are not particularly overwhelming. In two years, she is not managing to promise as much as what people had hoped. She is promising acquisitions she is trying to luer back advertisers. Lure back advertisers. She has not done a great job of that. Some investors are sounding very conscious cautious about why you would hold yahoo stock once they spinoff the asia unit. China is accusing alibaba of lax oversight of merchants. The government said they have a credibility crisis and said the company allowed merchants to operate without business licenses. Last week, jack ma spoke in davos about his relationship with the Chinese Government. You should never allow a Government Organization to do ecommerce. I told my people and my team, be in love with the government, dont marry them. [laughter] respect them. A lot of people say this and that. I think it is the opportunity the responsibility, talking to them. Tell them how the internet can help. Coming up, inside the data centers of the future. How has the shift to the cloud impacted Companies Bottom line . That is coming up next. Welcome back to the pulse. Germanys secondlargest software company, software ag has posted results. The ceo is joining us on the phone. Thank you so much for joining us. Fourthquarter sales missed estimates. Give us a sense of the main challenges for your company in 2015. We are currently living in a world of high volatility. In all areas and all geographies. Therefore, it is key that you focus on value creation. This is exactly what we have done. We focus on profitable growth. Profitable growth yields. This is the key Going Forward. This is what the investors told us to. This is what we have done and this is what we have delivered. This is why our share price reacted favorably on the announcement. This is a great basis for 2015. We will continue this path for the investors and for the company. Do you feel a lot of pressure to deliver on mainframe and data center tools . No. We have shown that our core business is the mainframe business and it is very stable and very profitable. It is very high value to our customers. This is a business which will make us a lot Going Forward. It is an Excellent Foundation for our customers and our business as well. It seems that private equity firms in europe are looking at midsize software firms. Do you feel a target . Yes. I read that as well. There are talks with companies that have been bought and so on. We have bought companies in the last 10 years. We are on the consolidator side. We are buying companies. We are growing. Our major shareholder is the foundation. We are secure to hostile takeovers. We are in the driver seat in that respect. If you think there is more consolidation and you want to be part of that consolidation on the acquirer side are there targets you are looking at . Sure. In the Software Business mergers and acquisitions is a key driver. It helps us make Quantum Leaps in terms of customer base, products portfolio and resources and people that you get. It is absolutely impossible to develop new products in 6 years and hope to grow with them. Software companies do not have time. We have to the companies that already have it. We build on that. Are you buying disruptors . This is probably the most overused phrase or word in the news at the moment. But i just spoke to someone from the Insurance Business and he was telling me that a lot of ceos dont realize that their world is changing so fast. Do you feel that that could be leveled at certain peers that you have . Is this a criticism that is fair . Francine, you are right on the spot. The digitization is a disruptive trend. It is probably only comparable with the beginning of electricity 110 years ago. Every Company Must Become digital or it will go out of business. This disruptive change happening in any industry, in every industry is the key. To a debt to that, to become digital, is the name of the game Going Forward. This Digital Business platform where companies can become digital as fast as possible. What about the disruptors to your business . How concerned are you about them . We are a disruptor ourselves. In our three or four years, we have transformed our company to respond to the digital trend. The digital trend for us is that we have those app generating product Platforms Development platforms that we are offering big data realtime analytic converters. We have built up a Partner Ecosystem with partners. We have prepared ourselves in our portfolio to go to market with partnerships for the digital disruption. Thank you so much. A very interesting conversation. The ceo of software ag. Lets get you some company news. H ms profits have topped analyst estimates. The net income of europes secondbiggest clothing retail grossed 760 million in the fourth quarter. Sony is cutting costs in an intent to return to business profit. That will include cuts to china and sweden. Goldman sachs cut its nearterm outlook for Raw Materials. Coming up, the markets are waiting for the feds latest announcement today. We will get analysis from bloombergs market guru next. Welcome back to the pulse. Live on bloomberg tv and streaming on the ipad and bloomberg. Com. For a look at what we are watching for the rest of the day , we are joined by joe weisenthal. We have to tug greece, we have to talk the fed, we have to talk our new website. Greece is huge. You have a new cabinet. These guys mean business. They want to protect the greek citizens. They dont care about nice pleasantries with the eu. There was a helper expectation. Everyone knew that hope or expectation. Everyone knew that tsipras was fairly radical. He does not want to cave on his principles. The first thing he did was form a government with the independent greek party, which is quite right wing. They are both antagonistic toward europe and the bailout. This might be the bigger deal. Halting privatizations and wanting to raise the minimum wage. There is one thing to restructure the debt. It could do that. But that will be a hard pill to swallow in germany and elsewhere. Which is why we are seeing the banks crushed. These guys mean real business. They say, we want to renegotiate or else. Basically, there is this fear that they are not going to get a deal, they are going to get cut off, the money is going to rush out. Observers are going to say, you are not agreeing to any of the stipulations of the bailout in terms of economic reforms. That could be it for greece. It is possible that these are the early stages of negotiation. They want to come in looking like you are strong. The markets are freaking out. If you were a radical left greek politician just sworn into power, do you become a little bit pragmatic . Are they just talking because they want to play tough . Is it because they dont have any experience . Or do they actually want to shake the cage . It is probably a range of things. Tsipras is a radical left party. There is basically a large communist faction of the state this is why they have come to power. Even if they wanted to be pragmatic, you still have the core of the party that would be massively alienated if they were to play ball. Welcome to european politics. [laughter] we have to talk about the fed quickly. What are we expecting . I dont think people are expecting too much chat. There is still this expectation that rates will rise sometime in the middle of next year. The thing that has come out since the last fed meeting changes that. The economy is still growing. There has been a little bit more market volatility. There is no indication that something the fed wants to take care of that that is something the fed wants to take care of. Janet yellen does not see that its her job. You were of very late last night. We have a great new website. It is up for people to comment on it. I personally think it is great. We had the previously we previously had the bloomberg. Com and the businessweek. Com. That is consolidated now. The new website has beautiful photo galleries, a lot more being able to program, a gorgeous layout, features, stuff like that. It is just the beginning. This is not the end product. We will be doing a lot of developing on it. It should be a lot of fun. Tweet us comments. The cure ration of the articles is actually brilliant. There is a great article on russian sanctions and greece. You will be able to see what the big stories of the moment are much quicker. Thank you. I know that joe is going to continue being on here for the rest of the day. For now, we are going to hand it back to the u. S. This is bloomberg surveillance. Fierce fighting continues in ukraine with three killed today. Iphone sales destroy analysts best guesses. There will be no press conference. The fed considers 2016. Good morning, everyone. This is bloomberg surveillance. It is wednesday, january 28. I am tom keene i use apple. She is olivia sterns, she uses apple. Even Brendan Greeley uses apple. Though i have only a 5. [laughter] russia is under new pressure from World Leaders after fighting flares up in ukraine. Prorussian rebels launched a rocket attack in ukraine over the weekend. The violence in ukraine picked up again earlier this month after relative quiet. Greeces new government is questioning more sanctions on russia