Game. The place china, the weapon a cheaper smart phone. That and more tonight on nightly Business Report for wednesday, august 14th. Good evening everyone. Cisco with earnings that top estimates and solid revenues but this quarter is worrying investors. John chambers is warning its revenue will be below wall street expectations and lay off 5 of its work force, thats about 4,000 people. Shares fell as much as 9 in after hours trading. Jon fortt joins us from san jose, john . One of the things that John Chambers said on the call is that cisco is having fits reading the Economic Data and that summarizes the after hours action analysts questioned about what exactly cisco is doing. John chambers said the Global Growth and lack thereof shows inconsistency. The switching business looks good. The routing business except the edge looks bad. Certain geographies, northern europe, north america look good but japan, china dont look as good. What chambers said is cisco is commited to delivering on the Financial Model they put out around 61, 62 Gross Margins and growth overall in earnings faster than revenue in most quarters. That necessitates these cuts. There is lots of questions Going Forward about whether cisco will be able to grow most of the time in that five to seven percent revenue band John Chambers promised. Tomorrow a lot of investors will wonder how cisco is saying translates to other tech companies, which might be impacted by comments tonight . Suzy, i think youve got to consider what we saw from ibm. What we saw from oracle a few weeks ago having issues with revenue. Does this global uncertainty mean that demand overall is getting soft in certain markets, emerging markets where cisco sited real uncertainty. Some markets strong, some weak. I think that will be the question from cisco that then gets asked to a lot of other executives in the days ahead. Are you seeing the same uncertainty, is the revenue short fall an overall macro demand issue well see cropping up. Very quickly, was anybody looking for the company to lay off 5 of the work force, 4,000 workers, did anybody think the prospects were that waek in. Nobody that i talked to, tyler. The stock was up 25 bucks a share and the idea the turn around is complete. Not so much the case. Jon fortt, thank you very much. Macys shares skidded today after the chain reported lower than forecast earnings last quarter, and thats not all it cut the full year outlook saying Consumer Spending was slower than expected. Macys stock down 4. 5 . One of the Worst Performing Companies in the s p 500 index today. Some economist fear it may far shod doe more disappointing earnings at more big retailers. Courtney regan has the story for. Reporter the first time in 25 quarters, macys reported a miss. The Iconic Department store posting profit sales and guidance below wall streets expectations. Macys ceo terry said consumers continue to feel uncertain about spending on discretion narcotit youre seeing auto sales strong, housing rebounding, but small ticket purchases seem to be under pressure. Reporter since many expected macys to be one of the retail standouts this reporting season, there is further reason to be concerned that reports from walmart, kohls, j. C. Penney and others could be worse. Macys executives think the weak quarter is just a speed bump. Karen hoguet says its doing sily better so far in q 3. It feels like were on to a trend so far. Good news for what many believe say delayed back to school season. June and july were weaker and showed up in results and well see it in others over the next two weeks, but i think the reality is what that could mean forward looking is a stronger push for back to school in august and september. Reporter walmart reports Quarterly Results before the opening bell tomorrow. They often indicate the Financial Health and settlement of the lower income consumer. Analysts had been lowering expectations ahead of walmarts earnings as the consumer appears to be holding off on discretionary spending. The mass assortment of stapled goods will likely soften the blow, something kohls may not be as insulated from. Nordstrom is expected to post the strongest result of the retailers reporting thursdays. Many point to the resilience and confidence of the higher income consumer for more stable sales. Overall, Second Quarter results may come in weaker than many hoped, stronger sales could be ahead with the all important forth quarter on the horizon, retailers and investors are counting on it. For nightly Business Report, im courtney regan. Those disappointing earnings from macys pulled down averages today and more fed talk didnt help matters keeping investors focused on the timing and pace of a potential reduction in stimulus. And not even a nearly 2 rise in apple shares, which briefly traded above 500 today could lift the markets out of the red. The blue chip dow stocks recorded the worst day since the end of june falling 113 points. The nasdaq lower by 15, and the s p 500 ended down. The bond market, the yield on the tenyear treasury note slipped to 2. 71 . As susie mentioned, apple shares up again. They hit the highest level since late january, the best threeday run in more than three years after carl icahn tweeted he made a big investment in the stock he considers under valued. Oracle said he dont believe apple can retain the glory without steve jobs. Here is our guest. Welcome to you both. Max, i want to begin with you but before we do, why dont we run that sound byte from the interview the other day with mr. Ellisson. Listen in. Do you see apple with steve jobs, we saw apple without steve jobs. We saw apple with steve jobs. Now were going to see apple without steve jobs. So youre shorting apple . Im not shorting apple. I like tim cook. There are a lot of talented people over there but steve you are apple is going down without steve jobs. Thats what you said. Ill say it publicly. Hes irreplaceable. They wont be nearly so successful because he is gone. They are going down without steve jobs. Max, what do you think of that . Thanks for having me. There is ellisson speak and not totally shocking he has a larger than life big ego a founder at oracle and hes warmed his close friend and another founder larger than life steve jobs is not replaceable. I think everyone believes that. The question is is the Company Worth more than where its trading today . The answer is probably yes, but in the long term will they regain the share price or momentum or atop the smart phone industry and there i would cautiously if for Different Reasons agree with larry they wont go back to where they were two years ago. You think they can be good in the short term but not great the way they were . Yeah, i think thats probably where they are going because of the way the Technology Industry works. Not a story of one larger than life ceo. Tim, what do you think of what max is saying and Larry Ellisson said . Has apple lost the magic and why are you bullish . I think what the other guest has said is pretty fair. You know, apple without steve jobs may lose the visionary products coming down the pipeline six or seven years from now, but the product life cycles that apple has are usually five, six, seven years in development. I dont think weve quite looks like we lost mr. Leskos satellite. Max, are you still with us . I hope you are. Absolutely. All right. Lets come back to you and hope we can restore mr. Leskos signal there. Im guessing he wants a product called the ichan out of apple. Should i follow what hes doing . You seem to share his view that at least in the short term the stock is under valued. Your concerns are about the longterm value and questioning those bulls and boy, i bet you ichan is gone long before this that would like to see the stock go above 700, 800, maybe 900 bucks. Hes had an incredible carp rear and worth taking seriously what he has to say. Also, also worth remembering that carpall icahn is investing his legacy and position as carl icahn and what hes talking about in the moment. If youre a retail investor, be less concerned about taking care of carl, who is taking care of himself and be more concerned in the under lying investment. I think his thesis makes a certain sense but hes asking the company to do something he knows full well that it basically cant and definitely wont do and folks should factor that in, even though carl is widely respected and deservely so, as a sort of leader in the space. Max, a lot of people are counting on new products coming out of apple, most notably in september, a new iphone, if its not a wow factor, then what happens to apple stock after that . Look, i absolute agree with you. Its an excellent point. A ton of pressure on the new ipad thats coming and another iphone 5 s and more affordable version. Ill look at ils 7, the new mobile operating system running on newer divisions pretty quickly and the phone. We need to see two things hit. We need to see some kind of verbiage about products, perhaps a watch, something wearable and a public excited about the bold new look in ios 7 the new operating system that will look and feel different in the hands of the ipad and iphone user than ios 6, the previous operating system did because the design and the sort of theme is rad di altered. We hoped for a bull debate but the bull, tim lesko, we had a saturday light problem. Thank you very much. And later in the show well toe you about a major challenge facing apple, this one in china. One of the worlds key markets. First, the road to energy independence, how mexico may soon play a role in reducing u. S. Dependence on mideast oil and here is a look at how the International Markets closed today. Some encouraging news about the debt u. S. Consumers carry. The new York Federal Reserve bank reports americans trimmed their debt this year getting help from falling Mortgage Rates that allowed more borrowers to pay down home loans and other bills on time. Total Household Debt is now at its lowest level since 2006 even though student debt and auto loans rose last quarter, late rates on household date dropped to 7. 6 in the spring. The online textbook company is going to sell stocks to the public. They hope to raise 150 million in the initial public Stock Offering to pay off 21 million in outstanding debt and gain access to public equity markets. He also announce pd four new auditions to the bored including the ceo of shutter fly and a facebook executive. And we begin market focus with a company that went public today in vision healthcare, the biggest operator of u. S. Ambulance services rose. The Company Expects demand to grow for outsourced medical services as healthcare costs rise and population ages. Its the biggest to come to market since february. Closed today up 9 at 25. 15. Farmers bought track tomorrows and harvesters last quarter and helped deer run like one. The largest maker of agriculture equipment beat expectations and they said Fourth Quarter profits may fall below last years levels, and that freshened the stock that fell almost 2 to 82. 34. Shares on creed, the Energy Efficient lighting maker fell today. The company says sales of high margin products are expected to remain flat from the prior quarter. The longterm goal is to get customers to upgrade to led lighting. The stock down a whopping 22 today to close at 58. 83. A different story for broquae, profits more than doubled come parped to a year ago and says demand for the storage products is improving. Even though its revenue fell, the company did beat expectations thanks to higher margins and a settlement gain. The stock surged almost 16 to 7. 99. Radioshack is looking to refinance debt with lower cost loans, the struggling Electronics Store is trying to pay off current lenders including bank of america and wells fargo but not clear whether it can be accomplished. The stock rose more than 7 rather it yeah, rose about a fraction to 2. 77. And some sweet music is being played for stein way shareholders. The stock climbing today after the Musical Instrument said it would be taken private. The price tag is 160yearold company at 512 million. They cancelled the previous deal. The stock rose more than 7 to 41. 29. Prosecutors in new york city charged two former Jp Morgan Chase employees in connection with the massive 6 billiondollar trading loss orchestrated with the london whale. The two traders who were both based in london are accused of false flying records to conceal the size of the banks losses. Here is part of what the u. S. Attorney of Southern District of new york had to say about the charges he filed today, and the impact on investors. The defendants deliberately and repeatedly lied about assets on the books to cover up massive losses that mounted months after month ps at the beginning of 2012. Those lies misled investors, regulators, and the public and they constituted federal crimes. A tragic day for ups. A large ups cargo plane crashed and burst into flames killing the pilot and copilot this morning. Nobody on the ground was injured. No december streistress calls w the cause is under investigation. The political turmoil erupted into violent and deadly confrontations between military Police Officers and supporters of the ousted president Mohamed Morsi overnight. A nighttime curfew is imposed. The latest on the bloody protest now from cairo. Reporter after 11 hours of operations involving armored personnel, bulldozers and helicopters, police say they are in control of two squares that have been used for a major location for protests in support of Mohamed Morsi. They declared a state of emergency across the country for the next 0 d30 days and a night kur view. Anyone that violates it they say will be in prison. The use of force today come under sharp criticism including from the countrys interim vice president. The noble lawyer resigned in opposition on how the government has used force in what many people here are describing as a bloody massacre. For nightly Business Report, in cairo. Mexico recently announced it wants to overhaul the countrys restrictive energy laws reversing state owned Oil Production and would open to Foreign Oil Companies including american ones like exxon and chevron. Michelle is following the story so michelle 50 years its been done one way, no private company, sounds like a really big deal. Its incredibly significant. As you say, mexicoen oil is produced now by a government run monopoly, which is incredibly inefficient and they lack money now and know how to keep up with the pace what is going on with invasion in oil exploration. As a result, Oil Production used to be as much as 3. 5 Million Barrels per day and now down to 2. 5 Million Barrels per day and spending more money to get less oil. The government needs that revenue desperately so they have to do something to turn that around. So lets say western Companies Come in and invest and more oil comes out of mexico, does that mean that the price of oil in the United States and on the World Markets will come down, and that we will be less dependent on middle east earn oil . Presumably yes, if they start to increase production we have a triad, canada, the United States and mexico being producers and the United StatesGetting Energy from friendly countries. I would point out americans should know chevron, exxon will have another revenue stream and will help the mexican economy. Great to have a southern neighbor with a better economy and reduce illegal immigration, as well. This has to go through a political hurdle . Yes. What are the chances this gets blocked . Likely but difficult. You have to understand that oil in mexico is very personal to the mexican people. If you look back at what happened in 1938, mexicans piled into the streets and demanded that the socialist president nationize 17 different mostly american and british oil companies. They wanted them to do that and felt exploited. When they want the money to be paid back, and they were poor and handed in Musical Instrument. This is a long tradition. Big psychological change for the country. All right. Michelle thanks for coming by. And still ahead, well show you the cheap smart phone thats gaining a cultlike following in china and posing the latest threat to apple but first how commodities, treasuries and currencies performed today. Some new trends what kind of phones people are buying these days, they say global sales of smart phones ones that get email and a low access to the internet have over taken sales of dumb phones, the ones that make phone calls and send texts. In the Second Quarter of this year, worldwide sales of smart phones rose more than 46 from the same period in 2012. And 79 of all those smart phones run on googles android operating system. Googles dominance of the smart phone market is not good news for apple, which lost market share in the Second Quarter according to a recent report but android isnt apples only challenge. A Small Company youve likely never heard of is also gaining ground in one of the worlds most important markets, china. Reporter youve probably never heard of it but chances are apple has. The chinese smart phone maker is gaining a cultlike following in china rivaling the u. S. Tech giant, one reason the local media has dubbed the ceo the steve jobs of china. Our influence in the Chinese Market is similar to apples he says. Its the biggest market outside the u. S. Yet in the Second Quarter the American Company was over taken. They started sho me three years ago. The Company Created an ora of exclusivity around the phone releasing quantities that sale within minutes. While apple is secretive about the design, they ask customers to redesign and invent features. Our goals are simple he says, allow the customers interested in smart phones to make suggestions, work with us and let them enjoy the process. The phones dont have the thrills of an iphone but at 240, the third the price of an iphone here they are a descent substitute for many chinese. Apples products are popular here. With 300 million chinese using highend hand sets, most analyst say the next phase of growth will be a lowcost smart phone. Reporter they keep prices down by selling online and markets through word of mouth. Most chinese customers dont believe ads he says, they trust their friends. Sho me sold 7 million hand sets this year and double that this year, still behind the apple iphone sales here. They are starting to look beyond the border. I believe americans and europeans would like the products he said, a hint that maybe one day he will take on apple on its home turf for nightly Business Report in beijing. And finally tonight, where were you ten years ago tonight . If you were on the east coast of the United States, chances are you were likely in the dark. Today marks the tenyear anniversary of a massive east coast blackout caused by a storm in ohio that shut power to 50 Million People from michigan to new england, all the way down to the mid Atlantic Region and even up to parts of canada. Hopefully with cooler temperatures across much of the nation and less of a strain on the nations power grid, nothing like that will happen again tonight, tyler. I was in our offices at nightly Business Report and had to walk down 19 flights. I remember we had guests coming to down and no air conditioning and that was a problem. That was a problem. So we injected liquidity and stayed cool that way. We want to hear from you. Send us one stock you want the market monitor to discuss on friday. Log on nbr. Com and click on the link to submit your question and dont forget to include where youre from. Thats nightly Business Report for tonight. Im susie gharib. Thanks for watching. Im tyler mathisen. Have a great evening everybody. Well see you back here tomorrow, thursday night. Nightly Business Report has been brought to you by. Sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures, viking river cruises, exploring the world in comfort. [applause] [instrumental]