tv Street Signs CNBC October 26, 2016 4:00am-5:01am EDT
good morning. welcome. you're watching "street signs." i'm louisa bojesen. >> i'm carolin roth. these are your headlines. a catalyst pore change. novozymes shares sinking to the bottom of the market as they miss expectations and cut the full-year outlook. >> it is not really a spiral. there's no doubt ethanol production is coming up. and we're looking more positively on the q4 and also into 2017. gucci's comeback lifts kering shares to a 15-year high as third quarter group sales
jump 10% offsetting the broader slowdown in luxury. lloyds shares open sharply lower as the uk lender sets aside a further 1 billion pounds for mis-sold ppi claims, weighing on quarterly profits. investors turn sour on apple. shares sink after hours as the world's biggest company reports its biggest decline in annual revenues in over a decade but forecasts a return to growth next quarter. hi everybody. welcome. you're watching "street signs." welcome ba from heathrow. >> thank you very much. it was chilly, but finally a decision after 25 years of debate. >> now we wonder whether or not the cake sending will continue from the dutch. >> i saw a tweet overnight, heathrow, they sent back the cake.
>> good. as long as somebody eats. european equity markets are lower. you would have noted we saw a bit of a pull back state side, that followed through in asia and the session for us on the weaker than expected earnings from the states. a couple big ones. we'll talk more about apple later. other main european equity markets, looking at slightly mixed markets with the ftse mib bucking the trend a bit, up about 0.2%. in the rest of europe, the ftse 100 and the cac cac llower. selling coming in chemicals, retail and utility hanging on to slight gains. novozymes posted lower than expected third quarter operating profit of 370 million danish
krons. cnbc spoke to the ceo earlier and asked him about the downward revision. it is not really a spiral. there's no doubt that ethanol production is coming up. we are looking more positively at the q4 and also into 2017. >> look at the share price. shares in novozymes down almost 11%. >> big drop for this company. sticking with health, bayer's third quarterarnings beaten analyst expectations with ebita rising by 6%. they raised the full-year guidance for core cps. they expect the deal with monsanto to close by the end of 2017. brian mcgee is with us.
good morning. what do you make of bayer? >> i think they're performing incredibly well, particularly in the u.s. with some of the recent launches. unlike a lot of pharma companies, they, i think, have 30% of their pharma group revenue from relatively new products. those are under patent prote protection until the mid 2020s. they're getting ahead of that uptick curve beating analyst expectations, and that should allay some fears around servicing the debt they have on the acquisition of monsanto. >> that's a huge acquisition, do you think it still makes sense at this point? we have had a couple months to digest the news. investors taking to the news okay. will it shake up the industry? >> i think it split the investor community. i think it still makes sense. bayer is pushing on that lever of building three significant businesses globally. it's an exciting acquisition.
i hope it goes through. >> monsanto still below the afer price so there is skepticism out there when it comes to financing in the future. why do you think that is? >> it's tough to know. i think bayer put money on the table to guarantee this goes through. i think they see something special in the business that maybe the rest of us don't appreciate. >> there's been so much concern about bayer and the future of the healthcare business. people say with the monsanto bid bayer will be distracted from the thriving healthcare business. strong sales of drugs up 20%. do you think there is a risk that at this point with the merger bayer is too overdiversified? >> i don't know that i would agree. i think what they're doing is doubling down on r&d, so they increased r&d spending in the core pharmaceutical business
over the last year but also diversifying the group. it's polar in the pharma industry. you can be a pure play pharma or diversify, such as gsk has done, three global scale businesses. you mentioned gsk, what are you expecting? >> i'm not expecting anything significant news-wise. the business is returning to growth in its core currencied a justed way. brexit and the impact on the pound means they're seeing dollar revenues at a higher rate. top line numbers will look great. underlying performance as usual. >> what is their drug portfolio like? their best selling inhaling treatment has been falling in sales. will that make a difference? >> i think that went generic a number of years ago and that's been declining since.
i suppose the problem gsk faced was bringing to market a bundle of other products to replace those falling sales. their r&d pipeline has been producing in the background. they have a tendency not to shout about it, but they have respiratory assets in play that are more than matching that decline of advair. >> a lot of new developments at gsk. a new ceo coming in. do you expect impetus from her? a spinoff maybe of the consumer division? >> i wouldn't expect change from the group strategy. i expect we'll see a more marketing led organization focusing on real commercial delivery in the short-term. i see this as a commitment from the board going with an insider to push performance of the business. >> finally want to ask you about brexit. there's been so much focus, so much buying into the multinational stocks leisted in
the uk because of the pound. gsk, are they benefiting to the same extent as some basic resource stocks? >> i think not to the same extent but they are benefiting because of the revenues outside of the uk. it also creates a bunch of challenges for them. there's a degree of uncertainty. pharma is so highly unregulated . >> glaxo smithkline, i hear they're investing a lot in bio electronics at the moment. they did this joint venture with what used to be google life sciences. is this an weaarea -- is that t medicine of tomorrow? >> i think pharma r&d and life sciences is so risky you never know where the next thing is coming from. it's exciting to see collaborations with some big names and some less big names. they announced something about
next generation antibiotics with a small biotech that doesn't have a great profile and i already forgot the name. but it's incredibly exciting and offers great potential. >> brian mcgee, engagement manag manager, thank you very much. it's a whole new world. >> yeah. >> all technology. let's get on with earnings. renau renault has seen strong demand in europe. shares are up by 1.3%. rival peugeot saw revenue fall by 5%. new car sales dropping by 17% in china and 4% in europe. the second largest carmaker said
it saw overall car market growth of 6% in 2016 in line with other automakers and analysts. let's talk luxury. kering reporting a 10% jump in third quarter sales thanks to a turnaround in gucci which accounts for 60% of operating profit. they saw their first double digit revenue growth since 2012 after introducing a new leadership team which has successfully rebounded the brand. in yves saint laurent sales grew by 34%. speaking of luxury -- >> i'm surprised by this one. hugo boss looking to exit the luxury market and focus on men's clothing. mark langer said that the higher-end wasn't proving to be successful. this marks a u-turn from the
previous boss who put an emphases on up-market expansions, including women's wear. i didn't see that coming. >> if the strategy doesn't work, cut your losses. >> i like a well-dressed man. >> me, too. >> get in touch with the show, streetsigns@cnbc. >> tweet us at @carolincnbc. send pictures of pies over. we're talking about pies that the amsterdam ceo sent over to the heathrow ceo, every time there was a delay in the decision. now heathrow sent back the pie. that's what excited me on twitter yesterday. >> you can find me at @louisabojesen. coming up, ecb preside mario draghi has a word on warning warning on the side effects of
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hi everybody. welcome back. you're still watching "street signs." we've seen mixed results in asia for stocks exposed to apple. let's go out to pauline in singapore. good to see you. >> good morning to you. mixed results from the suppliers but also a decent recovery by the end of the session. let's start with the japanese suppliers, all were able to recover except foster electric which ended down. most of the suppliers opened the session in negative territory. japan display up 1.5%. as for the south korean suppliers, sx hinex up 4.5%,
that's largely because of q3 earnings that came out better than expected. they saw profits up 60%. so investors pleased with that. lg display, which makes the oled panels for the iphone able to end in positive territory. at one point in the session it was straddling the flat line. ending up a half percent. and hon hai down almost 0.12%. let's look at the broader markets in the asia pacific region. we saw negative momentum playing through. largely because of the weaker lead in from wall street. then we got apple's earnings after the bell. that weighed heavily on the suppliers at the beginning of the session especially in japan as well as in south korea with the kospi down 1%. also it weighed on the suppliers in taiwan.
a note about the asx 200, it ended down 1.5%. inflation data better than expected. that's information that the rba will be digesting as it sees inflation creeping up towards their 2% to 3% target, but still below that target and the full meeting is on tuesday taking that into account. back to you. >> thank you very much. moving on, uk prime minister theresa may warned a month before the brexit vote that businesses would flood out of the uk if britain were able to leave the european union. may told an audience of investment bankers at goldman sachs that she had grave concerns about leaving marking a stark contrast to her tone in public speech since becoming prime minister. the bank of england governor, mark carney, said he cannot ignore the substantial drop in sterling ahead of the uk rate decision that takes place next week. speaking to lawmakers, he said
the pound selloff would factor into the monetary policy decision. mario draghi voiced his concern around the long-term impact of ultra low rates. he highlighted of keeping the policy stimulus measure in place for too long. >> all this doesn't mean that very low interest rates are costless. we are aware of the other distortions that can result from them. indeed, we would prefer not to have to keep interest rates at such low levels for an excessively long time since the unwelcome side effects may accumulate over time. >> we're joined by roger jones, head of equities london and capital. welcome to the show. all of this is telling us in terms of what draghi is saying that we won't see an extension
in the current rate. >> i think the qe route they want to explore rather than further rate cuts. i think the problem with the rate cuts is the effect on banks. so they're stepping back from that and focusing on qe. >> one phenomenon in the markets is rising yellields, in part because of rising inflation expectations and what we witnessed is a rotation out of bond proxies. how long can that continue for? >> absolutely. we've seen it across the board. we've seen it in terms of bonds, yields hiking up in terms of the uk, u.s. and bund market as well. in terms of how long this will persist, we think this is tem r temperel effect. we have had temper tantrums in the past, but we need a low
growth and slow demand effectively. in terms of inflation, there's a temperal effect in inflation, that has moved up sharply. a lot of that is base effect from commodity prices, oil prices, core prices moving up sharply. what we're not seeing is sustained inflation. why i believe that not to be the case is wage inflation is limit. in terms of wage demands, the ability for labor markets to demand higher pay packages, that's not coming through. again, we probably see this base effect continuing on to q1 next year or become more extreme given where the oil price got to. after that it will be back to an environment of low inflation. in terms of the rotation seen from that, from bond proxies, we feel it's more an opportunity. we see this long, slow environment persisting for a number of years. i think investors have to get their mind around this
environment we're in. post financial crisis where we've seen a very low growth environment and a very new norm sort of environment. >> you are an equities man. you talk about this low growth, slow demand environment as many other people are talking about. >> yeah. >> when does that catch up with us to the extent of there being an impact on companies or reversal seen in the markets? >> yeah. absolutely. a lot of people have been positioned for that and had that view. there's a lot of cash parked on the slide lines. a lot of cash in the equity markets following january/february selloff, and then the rally back into the mid year. people have been sitting very much waiting for this equity correction to happen. it's not come. it's almost become a pin trade. we're seeing resistance, 7,000 in the ftse, about 350 in the euro stocks, so we're getting to
those levels where markets are struggling to break higher. there's no specific event for markets to move significantly lower. but i think we're at a point of vulnerab nenerability for that happen. >> thinking back over the years of good news being good news, bad news, bad news, it still seems we're in that resting phase of thinking that quantitative easing is good news for the markets. when will it switch to being bad news for the markets? >> i think that's right. it depends what comes back. as we see growth come back, that's a great environment for equity the. if it was genuine aggregate demand driving that growth that would be good. we did get into inflation, which many are fearful of. rates have go up due to inflationary pressures rather
than growth pressures, that would be concerning. >> let's get some investable ideas. where should your clients and investors be putting money? do you think there's room in cyclicals k s because of the se rotation? >> we are talking short-term there. people are still underweight these sectors and there's money being pushed into the sectors as people try and not miss out on the upside there. however, i think in terms of what we've seen the selloff in is where i would look for opportunities on a longer term basis, quality stocks at reasonable prices. the stocks that have sold off, people are fearful of evaluations of, that's not the case when you look at cash flow and relative valuations. so i think i would advice investors to go for quality at a reasonable price, then certain specific areas where the selloffs have been maybe too extreme. the real estate markets have pulled back a long way on a rate
tightening environment on concerns. and the sort of yields we're getting there becoming attractive. >> go for quality says roger jones head of equities london capital. thank you very much for your time. let's talk about banks. do you still get those annoying calls and text messages about ppi? >> yes. >> i do still. >> i go, like, do i yell at them? do i -- most of the times it's a recording, right? i got a call recently. i hit the roof. it's like call number 8000 -- >> about ppi? >> no, somebody saying you've had a car accident -- >> that happens all the time. >> i don't have a car. >> you just hang up right away. >> back to ppi because some of these banks are still struggling with it. lloyds third quarter profit has been hit by another 1 billion pound ppi charge. the group brushed off brexit concerns and reaffirmed earnings guidance. the uk government reduced the stake in the business having announced the start of the privatization of its near 10%
share of stake last month. >> santander beating expectat n expectations in the third quarter. strong performance in the brazilian business offset issues faced by the bank due to the volatility of sterling. net income interest fell by 2ers from a year earlier, that's a month after santander told investors it reduced its outlook due to poor profits in spain. shares of bmps were suspe suspended after they opened down more than 11%. they had a loss of 4.2 billion euros yesterday. the troubl
>> the idea situation is to have somebody who is a stable shareholder and give a contribution to the development of the bank. >> do you already have some contacts? >> our advisers have been approached in the last few weeks, but the decision was to start and open formal dialogue once a business plan had been approved. >> if you can give us a timetable of operational and capital increases, when will we see the implementation of this? >> the egm will be convened on the 24th of november. immediately afterwards, that can start followed by the capital exercise. the idea is to launch subject to market conditions before christmas. >> moving on, airbus posted profit and revenue that missed analysts expectations in the third quarter. core profit fell 21%, net income fell 90% as the planemaker boosted production and faced
supply chain issues with its a350 and a320 aircraft. the french firm did maintain guidance for the full year saying the commercial environment and orders remained healthy. shares up by 0.29%. heineken reporting better than expected third quarter beer volumes reiterating profit margin forecasts. they did warn of increased currency headwinds and adverse economic conditions in developing markets. russia was a weak spot where heineken saw double digit declines. ericsson named bjore ekholm its new ceo. the appointment comes a matter of weeks after the equipmentmaker issued a profit warning. it caused shares to plunge by 17% at the time in a single day. ericsson has been without a permanent ceo since july. theresa may's government is backing the expansion of heal
heathrow airport. the 18 billion pound infrastructure project faces a range of political and legal challenges before a bunch of legal decisions are made. some say they feel betrayed. there will be a whole lot of backlash over the next few years. >> it's a generous compensation package offered, 125% of market value and all stamp, duty, legal costs to move house. nevertheless people are losing their homes. you understand the fear and why so many conservative mps representing people in that part of west london have come out vehemently against the plan. >> such addres boris johnson. >> boris jonson, coming out on the side of air pollution and nice quality. he said this is the wrong decision for london and the uk. >> you spoke to the ceo of
heathrow what did he have to say in defense of that decision? >> i think since the airport commissioner review last july, between then and now we have had the brexit vote which has given a big additional impetus towards the need for this, or perceived need to show britain is open for business. this is the focus of t message that the transport secretary has been giving out. that's the message that the co said as well, heathrow is a destination and we are the right people to bring this forward. have a listen. >> health throw expansion has always been a vital cornerstone for the british economy. with brexit, it's even more important that we connect all regions and anything thats of the uk to all of the emerging markets of the world. exports is a good way of seeing what heathrow contributes. about 30% of all britain's exports outside the eu go by plane, passenger plane from heathrow. that's how vital we are.
so if you want to make sense of brexit, we need more capacity at the biggest airport, that's heathrow. so we need to build a vital hub capacity this country needs so britain can be the winner from brexit. >> we have also seen enthusiasm in haven't months from places where the plan previously didn't have support. that's partly because the plan has been revised and improved and felt more broadly across the uk. >> thank you very much. we need to take a quick break. check out world markets live. it's our blog, it runs throughout the entire uk trading day. we'll be back on the other side of the break with more "street signs."
welcome. you're watching "street signs." >> i'm carolin roth. >> i'm louisa bojesen. your headlines today. a catalyst for change. novozymes shares sinking to the bottom of the market as they miss expectations and cut the full-year outlook. >> it is not really a spiral. there's no doubt ethanol production is coming up. and we're looking more positively on the q4 and also into 2017. gucci's comeback lifts kering shares to a 15-year high as third quarter group sales jump 10% offsetting the broader slowdown in luxury. lloyds shares open sharply lower as the uk lender sets aside a further 1 billion pounds for mis-sold ppi claims, weighing on quarterly profits. investors turn sour on apple. shares sink after hours as the world's biggest company reports its biggest decline in annual
revenues in over a decade but forecasts a return to growth next quarter. good morning, everyone. yes, you're watching "street signs." let's give you a quick sneak preview of what we expect out of the u.s. markets. s&p 500 seen falling by 7.5%. dow jones could fall by 60. nasdaq set to lose 23 points, this after u.s. stokes wecks we lower yesterday. oil prices slipping. wti back below the 50 handle, brent just barely above the 50 line with leingering doubts on whether that opec deal with be clinched in europe. the dax off by 0.75% after it reached the highest levels of 2016 yesterday on the back of
better than expected numbers. a lot of earnings to contend with this morning. cac 40 off 0.75%. kering is outperforming some luxky namlu luxury names. basic resources, oil and gas once again on the down side. even though yesterday we did see that nice rally in basic resources. some sector rotation is what you're seeing today. in terms of the fx markets, pound/sterling stealing the limelight in yesterday's trading session. at one point down by 1.1% against the u.s. dollar. no one knew exactly why. some said it was comments from carney. we have a guest in the studio that we'll get to in a second and maybe he can enlighten us on what happened yesterday. euro/dollar at 1.0913. still a story of dollar strength with the dollar index just shy of a nine-month high. let's pick up on that point
on that sterling point. mark carney yesterday talking about how there are limits to the bank of england's ability to ignore the effect the slide on sterling is having on inflation and that they would take the pound's weakness into account at the bank of england's meeting next week. jordan rochester joins us. is this what caused the pound's drop yesterday? >> yesterday was an interesting session. this is not a g10 currency the way it used to be. so sterling is trading more like an emerge iing country currency. a lot of times in markets we try to pinpoint every flow of a reason. sometimes there's just more sellers and buyers. tends to be a less of a dynamic bid. i had to send an e-mail around saying we have no idea why it's falling. carney's comments yesterday were
interesting and how the markets reacted. so we had a bit of a yo-yo. 1% down 1% up. on the up, carney said they were not going to completely look through the sterling loss. it's academic he would say such a thing. so we're talking about the inflation being above the bank of england's target rate of 2%. inflation expectations are around 3.4%. the point is he's talking about the de-basing of inflation expectations. he doesn't want to be in a 1980s style high rate of inflation style. that's largely academic, we're not in that environment. the market reaction, this sterling post brexit is easy to knock it around. >> how do we know we're not in that environment? >> would have to have inflation expectations for the man on the street to be high. you would also have to have wage negotiations to have a possible edge on your employer to increase your wages. i don't think in this
environment post brexit you have a strong ability to say i demand a higher wage right now. >> i got we're in a new era for the pound/sterling. there's no buyers out there. no buying on the dip. how far are we in the selloff? >> probably two-thirds in. >> okay. >> so the work we've done builds on the fear of the institute model. we have a current account deficit of 5.7% gdp in the uk, largely funded by the kindness of strangers. we can perhaps say fdi inflows have slowed but we can start to say portfolio flows are slowing down the uk. the gild selloff is a big deal. what we saw in the last three months is a high yield curve, ten-year rates heading higher that would usually see a reserve currency in the world like sterling is head higher for investors would have a yield grab, not that environment.
sterling lower, that, for me, changed the dynamic. we were more constructive on sterling than most on the street because the actual reserve currency dynamic was still in play. that's changed now. we target 115, at the worst case. 120 is the short-term target. if there's so much worries about the current account deficit of 5.7% of gdp, with the falling sterling at some point that would close. that's something that my professor told me. will that happen? does the model work in real life? >> we have a difference in the uk. since china joined the wto, we had a huge goods imbalance. are you going to buy a british made iphone? >> probably not. >> so the consumer is still a hungry hippo right now. uk growth coming out tomorrow. if the consumer is still purchasing goods from abroad, the goods banks are firming deficits, and you need those
portfolio employees from investors which are not there. that's why sterling needs to keep falling and uk yields going higher. >> apart triggering of article 50, the actual triggering and happenings taking place what would lead to a short squeeze in sterling? >> if the court rules against. there's a high court case going on now. we have yet to hear the judgment. if the court rules heavily in favor of the government a vote is not needed, the market will react negatively, because they believe the hard line brexit stance will happen. if a vote is needed, you may see a squeeze. for me, hard brexit is inevitable right now. unless something politically changes we are headed to a hard brexit. >> thank you very much. jordan rochester. now, state side the republican presidential nominee, donald trump, will no longer hold high dollar fund-raisers for the gop for the remainder of his campaign. that's according to a report
from the "washington post." in an interview, trump's financial chairman confirmed the last event took place on the 19th of october in las vegas. the report suggests that trump's rift with the republican establishment has deepened at the crucial moment when the gop needs to finance the final get out the vote efforts. hillary clinton has maintained her edge in the latest national poll with 50% support of likely voters in a two-way race with trump. she leads by 6 points. campaigning in florida, she warned voters against complacency and encouraged supporters to partake in early voting. let's get out to tracie potts. >> reporter: first, florida is really a big focus here because of the early voting which interestingly is outpacing what we saw by quite a bit, outpacing what we saw in 2012 and there's
a slight edge for republicans coming out to vote early. it's a must-win state for hillary clinton. a must-win state for donald trump. he admits that. today, he's diverting from florida and coming to washington. he has a hotel opening today. then campaigning in north carolina, which is another must-win state for donald trump. that report in the "washington post" getting quite a bit of push back from inside the trump campaign. they say they have not abandoned fund-raising. the joint fund-raising that they do with the gop, which, by the way, sends a lot of money to other republicans running for congress here. that may be winding down. but they're still having individual events and doing fund-raising online. the problem for the party is when they raise money online, they don't give as much of it to those so-called down ballot candidates. >> i'm seeing reports that trump is putting a lot less efforts into building his cabinet and nominating people, researching
talents there. does that tell us he's essentially given up? well, it certainly says that he is more focused right now on trying to win. obviously that's something that can come later. tycally, you're right, at this time a lot of effort would be going into the next step. for donald trump, he's always had challenges with this. just a couple months ago we were reporting that a lot of insiders really were not helping or didn't want to be part of that process to come up with a trump cabinet. it's been an uphill battle for donald trump trying to deal with those people within the gop and within the republican party who would typically be doing some of that work behind the scenes. >> thank you very much. tracie potts joining us live from washington, d.c. via nbc news. now he's the man tasked with bringing investment to one of the most tumultuous regions in the middle east. he's head of the office of the quartet, the international body
founded back in 2002 to find the solutions to israel and palestine. a former mckenzie senior executive, he's bringing a fresh approach to peace building. i sat down with him for the latest on the cnbc conversation and asked whether a clinton or trump presidency would be better for bringing peace to palestine. >> i'm clear at the moment that donald trump is talking about making a decision to immediately move the embassy to jerusalem, and make that the acknowledged capital of israel. that is not particularly new news. it's unclear what his other policies would be. reading the manifesto, they do not talk about occupation at all. he would have to see what would happen. on the clinton side, bill and hillary clinton are intimate with the issues of israel, probably more so than almost any other group of people.
so i think they have a personal and in depth understanding of that. but it is unclear what people will do. probably the most important and keenly awaited time period is the period after the elections in the u.s. and before the current president steps down. historically that's a narrow window of flexibility for the president to make decisions that he believes are important and need to be sorted out for his legacy. this could be an action that he might take in that period. >> so what could he possibly do? >> the question is what can he do in those remaining weeks? if you put the test of what is a lasting legacy, one thing that i would argue is, well, simply recognize the two states. recognize palestine. we talk about the fact that where the two-state solution is
under threat, that's something the u.s. government could do. will it do that? unclear? also discussions about taking security council resolutions to the u.n. there could be a resolution around settlements. there was a previous resolution around settlements, that was vetoed only by the u.s. the president has been on the record as saying, well, if we reran that now, we would have to think seriously about whether we would veto it. we vetoed it last time because of the peace process underway. well, there is no peace process now. >> you can watch the full edition of the cnbc conversation with the head of mission of the office of the quartet, ki kito de boer tonight at 23:30 cet. we'll go for a quick break, but game over for nintendo. the video gamesmaker posts a stinging second quarter loss. we'll find out wha super mario
welcome back. you're still watching "street signs." shares of nintendo have been falling after the japanese video gamemaker posted disappointing first half results. an almost 5% drop. is it warranted? >> maybe so. the firm announced the latest earnings today and said it suffered a 30% fall in sales and an operating loss of $56 million during the six months through september the stronger yen also ate into profits leading to a $400 million loss. then anyone's net profit for the same period more than tripled from the year before to roughly $370 million.
but the surge in profit was due to the sale of a stake in the seattle mariners baseball team which it sold for $660 million, roughly ten times what it paid to acquire the stake. pokemon go, the smartphone game which became a global smash hit helped to sure up the bottom line. the firm said the game generated $115 million from shared profit with its affiliate. nintendo has seen few hit game titles for its wii-u console and hopes are on the new lat form, then anyone switch. which will hit markets next march. the firm reviewed its annual profit forecast slowing group sales 7% from the year before to $4.5 billion and an operating profit of roughly $290 million. both sighting a stronger yen and weaker sales. that's all from the nikkei. back to you. >> thank you very much.
not everyone is cheering a potential tie-up between at&t and time warner. netfl netflix's ceo spoke out against that. >> on the heels of netflix shares rising by 25% since the company reported earnings last year, i sat down with netflix's ceo reid hastings. he told me he's confident the company will be able to maintain its growth rate and even accelerate growth as netflix is embedded in more cable boxes. he dismissed concerns about growing competition. here's what he said when i asked him about whether he would oppose at&t's acquisition of time warner. >> it's hard to tell. it's very early. we didn't know anything about it. just sorting through it. for sure we want to make it so that it's required for at&t customers that hbo and netflix are treated the same. now that they own hbo, we think that any special treatment for
hbo data would be inappropriate. i think that's basic. >> is this is going to be a negative for net mrix in term ff more competition? >> could be a lot of that. there's a lot of at&t investment in content that could make things tougher, on the other hand it probably will be easier for us to recruit time warner executives. you have some puts and calls. you have been the subject of m&a speculation yourself. at what price would you sell netflix to apple? >> that's a question i wouldn't want to speculate on. >> what about disney? there's speculation that netflix would be a perfect fit for what disney is doing right now. >> there has, but all we focus on is how we do great shows and how we run our business. we stay out of discussions, we don't do banker meetings. we're very old school in that way. let's build the greatest service
on earth and it's done very well. >> you can find out more from my interview with reed hastings including what his favorite shows are on cnbc.com. back over to you. >> how you can get away with not doing bankers meetings? >> very happy, probably. shares in logitech hit eight-year highs after reporting a 14% boost to second quarter retail revenue. the strong figures were down to successful new product launches which the ceo said "demonstrated the power of our innovation engine." logitech confirmed the outlook for 8% to 10% retail growth in 2017 and 195 million to 295 million in non-gaap operating income. the big one, shares of apple have fallen nearly 3% in after hours trade after the company reported its first fall in annual revenues in over a decade. quarterly revenue just managed to beat estimates, while
earnings came in shy of forecasts. apple's cash pile continued to swell to a record of $237 billion. that was its own public company it would be the world's 14th largest, i like that stat. iphone unit sales continued their decline falling 5% from the previous year. we are joined by the founder and ceo of cm research. siris, how do you feel about these numbers? what seemed to spook investors in after-hours trade is the dim forecast when it comes to margins for the holiday quarter. >> i think the results are mixed. but i think on balance they're a bit negative. so, just from our perspective whesh, we had a buy on apple for four years. two month guys we switched to sell. we think there's a big gap between the next product cyc, and falling, maturing iphone
sales. that's critical in the results is all four business line products fell in sales. so the iphone, ipad, apple watch. they all fell in sales. iphone sales have fallen for three consecutive quarters. china fell by 30% as well. i think the results were disappointing. >> what is the problem with china? is it the one-off effect of china mobile? that only happens once? the popularity of the iphone 6? is it a victim of its own success? >> there's a number of points. first, it is a victim of its own success. china already represents in this quarter 19% of apple sales. that's a huge number. $8.8 billion. it was much more this time last year. and there's a maturing market. there's only so many people in china that can buy a $650 phone. there's local competition in china from vivo, china has a
protectionist policy and the national propaganda tends to encourage patriotism. so people may be buying own-branded phones or domestically created phones. and finally, you know, we think that in the next 12 to 18 monies apple is due for some kind of anti-competition probe from china. that's because china's probed all the big u.s. tech companies eventually, qualcomm, cisco, apple is the one left out. and there's no evidence for this, but the supporting evidence is building that apple could be discriminated against. >> the weakness seen in the profitability figure,that show that consumers out there are buying the cheaper iphone 6s versus 7? >> they have not told it's why profitability fell, the likely reason is what you said. the proofibility figure doesn't
worry me that much because it has not moved significantly. still 38% or thereabouts. that's an amazing number. what worries me is falling sales in all four hardware categories. >> you said you switched from a buy to a cell how long ago? >> about two months ago. >> what would it take for that to become a buy again? >> number one, a new product. so we need to -- so we need to find out what they're doing about the car, about tv, they missed the time warner acquisition. there were rumors they were interested in time warner a few months back it looks like at&t has got it now. but, you know, so, yes what would it take to switch to a buy? i think service revenues won't do it for me because service revenues, though they grew 24% are still 13% of revenues. so, you know, that's a small number when the rest of your revenues are generally falling. so i think a new product or much better than expected iphone
sales, which i don't expect. consensus is roughly right. >> or mass migration from android users? >> i doubt there will be a mass migration from android users. the samsung battery problems will affect others. >> in the states, markets open in 4 1/2 hours. the implied open is to the down side. weaker session on the close yesterday following disappointing results among others from apple. that's it for today. i'm louisa bojesen. >> i'm carolin roth. "worldwide exchange" is up next.
this is the new comfort food. and it starts with foster farms simply raised chicken. california grown with no antibiotics ever. let's get comfortable with our food again. good morning. earnings alert. apple shares under pressure as the tech giant reports its first annual revenue decline in 15 years. markets now. u.s. equity futures trading lower as investors focus on mixed earnings results. and play ball. the indians dominate game one of the world series. "worldwide exchange" begins right now. ♪ good morning. welcome to "worldwide exchange" on cnbc. i'm sara eisenment. >> i'm wilfred