Titans of Tech Report Earnings This Hour; Top Journalist Suspended After Harassment Claims
RICHARD QUEST, CNN HOST: Closing bell ringing on Wall Street. No records on the Dow, the S&P. That bell doesn't sound very healthy today, but the market is up 70 on the Dow. And, well, I think we'll just say that was an OK gavel on a very busy day, as you'll discover. Today's overtrading, it is Thursday, it's October the 26th. It's judgment day for Silicon Valley. In the next few moments, Amazon, Google, Microsoft, all reporting earnings within the next few moments. Over in Spain, the stocks soared before Catalonia's president throws a new spanner into the works. And the Weinstein affect continues. More public figures are exposed as the sexual harassment scandals are now piling up. We'll discuss what this means in the workplace. I'm Richard Quest live in the world's financial capital, New York City, where the Dow Jones has gone through 23,400, and where of course, I mean business. Good evening. A huge day on Wall Street for earnings and companies and we are only just getting started. Around now, we're waiting for a trio of tech titans that will give us their latest quarterly report cards. Amazon, Alphabet -- that's Google, basically -- and Microsoft will always release earnings. And we've already had results from blue chips like Ford, American Airlines and many more. We're going to put it all into context for you. With me are these two. Paul La Monica, guru La Monica, and -- get back to it, you're meant to be watching the latest results.</s>PAUL LA MONICA, CNNMONEY CORRESPONDENT: It's a quartet actually, Richard. We forget poor Intel, which is only in the Dow. They're reporting as well.</s>QUEST: I look forward to hearing about it.</s>LA MONICA: All see if I can find that also.</s>QUEST: Then These two are watching for the results and the analysis when it comes on. Otherwise, I'm going to take you and introduce you to our brand-new earnings center. It is here that we're going to track the results and future from America's biggest companies. We're going to use Wall Street ultimate metric, share price, and how it responds in the 24 hours after reporting. It's the share price immediately after in the day that can capture investor's thinking in the quarter just ended and the outlook for the next three months. So, companies get a pop after the results, go to the top of the stairs. For example, 3m and United Healthcare, both of which have seen sure gains of 5 to 7 percent. If the market goes down on that particular share, as it did with Costco, Southwest, American, Citi, and AT&T, then we put them at the other end. So, with the trading day over, we' re going to add the companies that have reported so far this morning. And we must start with Twitter. Twitter with subscriber growth and the potential for profit by the end of the year, Twitter's share price is up nearly 20 percent on the day. An extraordinarily high number for Twitter. So, it goes actually there, because it's way above 3m, which had just 7 percent. Ford and UPS, largest parcel delivery service in the world. Ford, bellwether for industry. Both of these had good results, were impressed by the market, and both are up around 1 percent on the day's trading. Imax, the movie theaters, Imax, excellent results, huge potential in China. Imax shares are up 11 percent. We'll have the Imax chief executive Rich Gelfond who will be with me later on the program. What you see here is a gist. You get a feeling from the laggards and the lows, all the way through. And what it's telling me at this point is that this earnings season, under the bulls, has been better than we expected. Caterpillar, JetBlue, Imax, J&J, FCA, 3m, these, these are all the shares and we've still got many more to come. So, the Dow Jones Industrial and how the Dow traded. The Dow has finished up 71 points. That's a third of 1 percent. The S&P up just 3, just a tenth of a percent. The Nasdaq down. Down for the Nasdaq 7.12. No records on any of those markets or, indeed, on the Europe forces. We will wait to put these on the earnings center. On "QUEST EXPRESS," I asked two traders, whether the earnings that we' re seeing here can really sustain the rally that we're seeing in the market.</s>QUEST: Which part of this chart do you find most significant, other than the fact there's been a constant movement.</s>JONATHAN CORPINA, SENIOR MANAGING PARTNER, MERIDIAN EQUITY PARTNERS: Right, I like the -- you know, the April to June. That consolidation there. Yes, it moved higher. And we didn't see a real breakdown in the market. I think investor confidence is in this market and it seems like the muscle behind it, the potential behind it is still here.</s>QUEST: Yourself?</s>KEVIN QUIGG, CHIEF STRATEGIST, ACSI FUNDS: I think it was the summer of love. So, what I was looking for, traditionally you see in the summer, that the markets are going to --</s>QUEST: Go on, just draw --</s>QUIGG: -- take a bit of a pause. We had at there. Right around there is what I'm looking for. Because that prepared you for the growth were seen right now. That's where you set the table for what we're doing.</s>QUEST: So, if you're right on that, then we should be hoping after this rise, that we get a sort of a consolidation, to put some concrete into the market?</s>QUIGG: I think, people are yes, we're redefining consensus and that really speaks to what we're going to -- moving forward, where our floors is, where our base is, what we're looking for growth.</s>QUEST: The trading post and the earnings center. And now let's talk to Paul and Clare the see what the results are so far. All right, which one of you has got so far? Amazon has reported?</s>CLARE SEBASTIAN, CNNMONEY CORRESPONDENT: Amazon has reported.</s>QUEST: Tell me what Amazon -- what we're hearing from them.</s>SEBASTIAN: Sales are up 34 percent year on year, it was a beat. It was above the guidance they issued at the end of the last quarter. $43.7 billion in sales with a net income and profit 256 million. If you look at that --</s>QUEST: 256 million out of 43 billion.</s>SEBASTIAN: This is the model for Amazon. This is high sales and high expenditure. This is how they dominate. They spend money to do that. So, we see that in this quarter. Sales were -- the profit was actually slightly higher than we saw in the last quarter, that was 197 million. So, 256 million, I mean, in the world of Amazon, is not too bad, really.</s>QUEST: All right, so Amazon beet on its -- Paul?</s>LA MONICA: We are digging into Google and Microsoft. It looks like Google and Microsoft have both beat. I'm waiting to get the both companies to give you a little more detail.</s>QUEST: We'll get the actual details on that has as we move forward. While we wait for the minutiae on Microsoft, bearing in mind its new -- well it's not new -- it's successful strategy of cloud, AI, quantum computing and the like. Microsoft's chief executive told me he wants the company to rediscover what made it great. Remember, Satya Nadella has released a book about his attempt to change the company. He's worked at for most of his career. It's called "Hit Refresh." He'd been in Microsoft for decades, so nobody was closer to the company than Nadella. And that, it seems, is part of the problem for Microsoft, generally.</s>SATYA NADELLA, CEO, MICROSOFT: You know, I' m a consummate insider. I grew up at Microsoft, is how I look at it. And having grown up there, I felt that there was things that we got right and there were things that we got wrong. And it is important for us to learn from the things that we got right in the past, because I'm a product of the company that Bill and Steve built. And I wanted to rediscover. That's why I sort of talk about, even though there was this issue we had, but I wanted to rediscover what made us great in the first place. And get that back.</s>QUEST: Why do you think companies lose their way? Why do you think -- they've got thousands of people, any one of whom can say, actually, we're losing our way here. But you are suggesting that it is endemic, it is inevitable that you will lose your way.</s>NADELLA: Look, here's the thing that I write a lot about, which is, because that's -- even the purpose of trying to even reflect in -- this is not about -- while we achieved anything, or we've reached a destination, while in the fog of war of change, how does it feel? The thing that at least I've discovered or at least I recognize is this amazing virtual cycle one creates between the product or the concept that, first of all, made you successful. Your capability and your culture. Right? They reinforce each other. But accept the challenges. At some point, the product that initially drove your success runs out of gas. You need new capability. And your culture needs to cultivate it long before your conventional wisdom.</s>QUEST: Do you have to have a crisis to get to that point?</s>NADELLA: One of the greatest things I've learned in observing our own history of 43 years, right? And think about it. Microsoft has had existential competitors who are threatening us in the 80s, in the 90s, in the 2000s and now. They're all different. And yet we were the constant. Why did we and how did we achieve that? The only way we were able to achieve that is we were, in fact, able to hit refresh. Some we got it right, some we missed. But we were constantly pushing.</s>QUEST: But the size of the company now, as you try and hit refresh, you're now facing inertia, you're facing opposition, you're facing the sclerotic nature of any company.</s>NADELLA: Well, the job of leaders and the job of anyone in the company is to understand that systems challenge, which is to say, well, you know what? The thing that is successful today is not going to be the thing that's going to make us succeed tomorrow. And I'll be pushing on the status quo. And by the way, it's easy to say -- like you and I can sit here and talk about change as if it' s the easiest thing. And we know that it's the hardest thing for humans, as individuals and institutions or organizations are built of humans. So therefore, it's hard for us as organizations and societies, by the way.</s>QUEST: You have to write in the book about a lot of the personal stuff of your family. Most people, most CEOs run in the opposite direction. But you obviously talk about your children and the difficulties there. And you do so with a pride, obviously, of your family. But you don't shy away from it.</s>NADELLA: When does one learn about hitting refresh the most? It's life's experience. Where does one get the courage, even, to lead at work? It's through life's experience. And I felt that I needed to, in fact, do that uncomfortable thing of writing about my own personal life and the moments that have shaped me and who I am at work, and how I lead.</s>QUEST: You say in the book that you are betting the company on three things. Particularly AI, artificial intelligence, but also mixed reality and quantum computing. If you are wrong, history will not be kind.</s>NADELLA: In fact, I do right, which is anybody who sort of claims that we are going to forecast technology, don't trust them. So, it's not that -- I write these as three major technology trends. The real thing is, what does Microsoft do with these technology trends that's unique? But talking about these three trends, I absolutely believe the ultimate computing experience something that's going to be right in front of your eyes.</s>QUEST: Satya Nadella talking to me earlier last month. While we're waiting for the results, Paul La Monica, Clare Sebastian are tracking the developments. Microsoft. Let's talk, Paul, about Microsoft. $0.84 on earnings versus 72 expected. What do you make of the results from Microsoft?</s>LA MONICA: Microsoft's results are very strong and the cloud business that Satya Nadella loves continues to really show great strength. They say in their release that they're exceeding a $20 billion commercial cloud annual one rate. So, they think they're going to be eventually at $20 billion in annual sales just from the cloud. And here's what the thing is that really strikes me. The business line that this is a jargon-laden sentence here, but what they call productivity and business processes, that was up 28 percent. That's essentially office line of business is still extremely soft strong for Microsoft. And I think that's a testament to the fact that just pretty much everyone in corporate America still is using Word, Excel, et cetera. And then it winds up in the cloud.</s>QUEST: Good results for Microsoft.</s>LA MONICA: Yes, these are very good results.</s>QUEST: Do we have an after-hours share price on Microsoft at the moment? While you're looking for that one, Clare, you do have an after -- you do have a share price for Amazon after-hours.</s>SEBASTIAN: Yes, about a minute ago, it was up about 6 percent or so after- hours. Now this share price has been under a bit of pressure. It is up still around 30 percent on the year the last time I checked. But it was under pressure after the last earnings report which missed. So, is not immune to falls, Richard. But I want to point out as well that this was the first report that we had from Amazon since its acquisition of Whole Foods. That closed on the 28th of August, so about a month before the end of the quarter. And that added 1.3 billion to those sales, that 43 billion number.</s>QUEST: All right. So, you've done Amazon. We've done Alphabet. Never mind about intel -- sorry, we've done Microsoft.</s>LA MONICA: We're about to do alphabet.</s>QUEST: Tell me about alphabet. What can you tell me?</s>LA MONICA: 27.8 billion in quarterly revenues that's up 24 percent --</s>QUEST: Wait, so revenue's up 24 percent.</s>LA MONICA: Better than expected.</s>QUEST: Which is 9.5 -- $9.57 earnings-per-share as against $8.33 expected.</s>LA MONICA: Yes.</s>QUEST: So again, that has beaten.</s>LA MONICA: Definitely beaten. The profit -- the quarterly profit, $6.7 billion. That's what translated to the $9.57 a share. And with Alphabet, it continues to be search advertising. It continues to be YouTube. These are the core businesses. Even though Alphabet, obviously, is doing a lot more with their quote, unquote other bets, things that are a little bit far off in the future. It's just the simple click-based advertising that is really doing extremely well for them.</s>QUEST: We won't have a share price to put on there until tomorrow night, because it's the day after that will reflect in terms of these three in our new earnings center. Will put these on after in tomorrow. But Clare and Paul, as we come to an end here. No records on the markets. The Nasdaq was down, just on a frolic of its own. But 70 percent of S&P companies are beating expectations. In the market likes what its seeing.</s>LA MONICA: Yes, without question. I mean, whether or not this is because of the hope for more regulatory reforms in Washington, maybe some deregulation tax reform, I think that remains to be seen. I think for the most part, as we've discussed on this show many times, a lot of businesses our ignoring the turmoil in Washington. Consumers are still spending. And that's great news for corporate America.</s>SEBASTIAN: And I think there's still an appetite for these tech companies where you see such a major difference between the amount of sales that they're producing and the amount of profit. They're willing to take a leap of faith, particularly for a company like Amazon, that is just dominating in so many sectors, Richard. They're just not looking so much for that core kind of income number, as much as they are for what they're going to do in the future.</s>QUEST: Good to see you both. Thank you.</s>LA MONICA: Thank you.</s>QUEST: Much appreciated. We'll continue tonight on QUEST MEANS BUSINESS. We'll turn our attention from earnings to Catalonia's high-wire independence bid, which seems to have faltered for the moment. A last- ditch plan for regional elections has been called off and Madrid central government is still preparing to suspend autonomy in the matter of hours. Catalan lawmakers are planning their next move. Erin McLaughlin is in Barcelona after the break.