tv Nightly Business Report PBS April 25, 2014 1:00am-1:31am PDT
hor . this is "nightly business report," with tyler mathisen and susie gharib. brought to you in part by. >> thestreet.com, featuring stephanie link who shares her investment strategies, stock pick picks, with action letter alerts plus, the management portfolio she manages with jim cramer. microsoft's next chapter? the company beats expectations after a run-up in the stock price, is the new ceo turning the market into a wall street darling once again? new rules, should the internet be free and equal for all or should some be allowed to pay to get their products to consumers faster? they're weighing in. and ready to pay as much as
$10 billion related to mortgages. is the bank ready to put the past behind it? all that and more tonight when "nightly business report" for thursday, april 24th. good evening, every, this was a big and busier day over earnings seasons, more than 60 of the companies on the s&p 500, including five members of the dow index reported their latest quarterly numbers. and then after the markets closed two of the biggest household names in technology came out with solid earnings, amazon and microsoft. we begin with microsoft, the software giant posted earnings of 5 cents more than analysts estimated, also reporting better than expected revenues with more than $20 billion in shares. shares rose as much as 2% in after-hours trading after rising to nearly $39.80. now, more on microsoft. so sheila, you looked at all the
numbers, what is the one big takeaway? >> well, i have one word for you, the cloud, all about the cloud for microsoft, really making a big push in the cloud computing. and under ceo nadella it seems to be paying off. so the zero cloud services, they had big gains of more than 100% sales growth. now, the problem was the sec information, for this quarter, that was somewhat mitigated thanks to upgrades. but this is an issue that is not going to go away. something the company has to deal with. but in the meantime, the cloud is saving microsoft. >> this cloud is where it is. don't go anywhere, we're having news on amazon. right now, josh lipton will tell us about nadella, the newly named ceo and how it is changing the corporation there and
exciting shareholders. >> investors have cheered the appointment of nadella, but can the ceo keep winning over wall street as he implements a new strategic vision for the software giant. since becoming the ceo on february 4th, microsoft stock is up about 8%, in contrast the nasdaq is flat over that same period. microsoft investors want change and nadella is delivering it. under steve bauman's leadership, the stock dropped more than 30%, his critics say he missed the three most important tech trends in the last decade, mobile, social and the cloud. nadella has stepped into the seat with a very different strategy and style, often sneakers, the message? this is a younger, hipper and more forward looking company. >> this is all part of the to have-down image that microsoft is trying to portray as they move to the cloud and try to
become yet again, more ideally, the new technology company. >> they are forcing microsoft to break away from the pc centric focus, microsoft announced an offers will be available for the ipad, users can now access xcel and word and power point. it can generate up to $5 billion a year for microsoft. nadella talks about mobile technology, tomorrow, microsoft will complete its acquisition of nokia, and hopes to boost its small share of the mobile operating market. and nadella is working hard for the cloud initiatives, a very small business right now but one that host enjoyed significant growth. >> while the optimism in the stock is related to nadella's cloud vision and stock, he will be the guy to make that leap. >> nadella still faces serious
challenges, navigating a pc market in sharp decline, integrating nokia and turning that business into a growth vehicle. but analysts have quickly changed their views on the old tech firm and nadella is giving microsoft a fresh face for the future. silicon valley, josh lipton. and now we turn to quarterly earnings for amazon.com, first quarter profits shot up earning 23 cents a share, right in line with wall street estimates. revenue rising to $20 billion, a slightly higher number than forecast. the stock jumped as much as 3% in after-hours trading, pulling back after climbing 4% in the regular session. sheila, the numbers were okay, i guess. but you hear from the ceo of amazon a new deal a week, right? so are we supposed to pay attention to the new deals or to
these quarterly numbers? >> yeah, it really boils down to whether or not you believe in his strategy or not. because let me tell you he is sticking to his guns, pouring money and cash into amazon's business, all coming at the expense of profits. in fact, the analyst says they're spending money like drunken sailors, now look, the idea is in growth, it is working, sales grew more than 20%, and all the deals he is doing, like streaming videos, tripled the number of views, now, we'll see how long they can keep going with it. because remember, amazon did project a negative operating income for the upcoming quarter. that is a little disappointing. >> all right, sheila, thank you very much. and choppy day of trading on wall street, with the markets ending the session and little changed following a mixed bag of earnings and a mixed bag on the economy. orders for long-lasting big ticket durables rosey-7#or the first time last year, and
unexpected job claimsñr hiked. and in moscow, they began military exercises near its border with ukraine. get this, the dow was unchanged. that is the first time that has happened since christmas eve of 2001. it must mean that santa claus is coming tomorrow. the nasdaq was up 231 points, the s&p, higher by three. and even though the dow was unchanged, the biggest was caterpillar, beating estimates for the first quarter, the gains come from cost-cutting and a rebound in sales to the construction industry. not surprisingly, ceo's doug helberman is upbeat. >> the good news is, the bright news with all the risk we see and the possibility of other risks coming in china, our business is building in china and all of our products and services are doing well over there. our dealers are investing.
we're expanding our model throughout the geography of china. so that is coming along pretty well. in fact, in china our sales first quarter this year over last year were up 30% over last year, across all of our businesses. >> caterpillar shares closed at $105.28, up 16% so far this year. and susie, another closely watched earnings report today, the net income at the dow component was up 7% led by sales in its health care equipment unit. but the numbers disappointed wall street and shares of 3 m fell a percent today. a big drop in profits at general motors, down 88%, mostly because it took a charge of more than $1 billion for the massive recall of cars with defective ignition switches. so how do things look at general motors? the company's chief financial officer is cautious. >> we're cautiously optimistic about the potential impact on sales.
in march, our retail sales were actually up and our retail share was up year over year, so far through the first 20 days of april we have seen improved sales versus march. so that is really a testament to the strengths of our new products. >> the equity analyst now joins us to talk more about gm. i guess it is a case of half full glass or half empty. he is talking about increased sales. but you know, profits are down, international operations, europe lost money, all of those recalls. how is gm really doing? >> actually, if you strip out all the information, the mask, the core part is actually not doing that badly. they had the charges that with the recall, and that really took away a lot of the profits of the main market which is northern california. the other main drive is china. that is also doing well. so you have the two main engines doing well. europe is actually on the way to
improving. but there are negatives such as in south america, there is weakness because of currency, political items, venezuela, argentina, and russia because of the political situation their market, a big market, is weakening. but if you look out now, they're investing and watching newer products with higher trends. it means the probability is better, with the disincentives. and we believe that the challenges for 2014 prepares us for 2015 where you will see improvement. >> has the stock been unfairly punished? >> well, i think there are a lot of concerns there. there are risks to the sales there are risks to the saleales. but a company like this can handle the recall, as long as it doesn't get better. you see toyota, it cost them. but they came back with some of their market share. ford actually had bigger recalls in the past and ford is doing very well. so right now the market is being
punish punished. but once we get past that there is good process. >> and how do you think mary barra is doing with the recall process? do we know how she plans to grow general motors or what her vision is? >> well, her job in my view is really to continue the progress that was there before she came. and that happens with the best vehicles, they swept the numbers, the dealership ranking s have been improving. the profits and prices have been going up in north america. the key market. what she has to do is continue that but she also has been thrown this challenge that she has to deal with, with her image. and i think what she is doing there, she is taking the opportunity to use the new gm to change how the company does business and allow them to do improvements in the production and manufacturing procedures that will help them down the
road. >> if you had one piece of advice to offer her, what would it be? >> i would say stick in there. focus on the long-term and you will do well. >> interesting, thank you so much. and still ahead, regulating internet traffic. who wins and who loses, and what does it mean for consumers every time you point and click? bank of america's reportedly in settlement talks with regulators to resolve lawsuits about risky mortgage-backed securities that the banks sold ahead of the financial crisis
that later went bad. kate kelly joins us now with more on the talk. >> you know, every headline we see are big dollar amounts, 9 million here or there, and the potential settlement. where are they at these talks? >> well, susie, i have to tell you this is almost like an appetizer compared to the main course that j.p. morgan paid back in november. you may recall they paid $13 billion back in november, a record-breaking settlement with the justice department. and various things were tied in that with other governments and state agencies, as well. and it looks like they may be looking to pay 10-plus billion, we don't know what the ultimate number will be, maybe not as high as that 13 but it is very high. and the banks are looking forward to putting this crisis behind them. it has been six years. >> ten billion here or there adding up to real money for the shareholders. hasn't the company paid big money to settle residential
claims? where did the money go? >> they paid billions, they bought countrywide financial which was a big sub-primer issue, so that created head winds for them. but you're right it added up to a great deal, they paid 6 billion to settle with fanny and freddy, and the attorney general. this would be a big hunk to put behind them, it would be the justice department, and probably various states as well and would resolve the outstanding issues. >> all right, we recorded their earnings so we can't go back and talk about that impact. but what do you hear from the ceo as well as other things that bank of america wants to do? >> well, they're definitely very eager to put the matters behind them. they want to be honest, in that case with first quarter earnings that meant that their cfo said look, this is hard to predict, we set aside $6 billion for legal payments and that notion
and clarity sent the stocks swarming. having said that i think investors feel relief to think that some of this may be settled and the stock has actually rallied. and shares of verizon were the biggest decliners in the dow today falling 2 and a half percent. and despite signing up a half million more wireless subscribers and netting $6 billion in profits last quarter. but amazon says they may turn off a whole lot more potential new subscribers by not offering big discounts and no-contract plans like rivals at&t and t-mobile. and verizon is one of the big internet service providers keeping watch on proposed rules out of washington over what is called net neutrality. regulating internet sites so that they are open to more. >> the federal communications commission proposing new internet rules that would allow
cable providers to charge companies a premium for access to their fastest internet pipeline pipelines. simply put, companies like netflix could pay providers like anniversa verizon and time warner cable for preferential treatment, getting their product to consumers more quickly. >> there will be a fast lane for consumers to be in. >> the proposed changes strike directly at the concept of a free and open internet where the idea that internet is an equal and level playing field to all companies regardless of size. fcc chairman tom wheeler says the rules will be designed to insure that access to the fast lanes would be commercially reasonable. the regulators have not yet defined what that means. >> this is not thrilling to me, right, the idea that other companies can pay to be in the fast lane, look, we deliver video and images and have long posted tons and tons of images, i don't know what commercially is, i look forward to
reasonable. >> analysts are assessing the impact the new rules could have. but some say winners and losers are already starting to emerge. >> i would say the consumer is going to be the winner. the cable companies would be the winner. >> cable companies where the new incentive would be to the build out even faster broad band, which could be a boon for new customers. >> new technologies would be available for them, because there is more profit. >> not everyone stands gain from this proposal. netflix which accounts for 30% of all internet traffic during peak hours could be pressured to forge more deals like the one with comcast. that has already increased the site-streaming speeds by 65%. but more deals will cost netflix, which announces prices for new subscribers just this week. netflixñr says the proposed approach is the fastest way to punish internet innovators. they build off the open internet
concepts already established in 2010. rules designed to protect the consumer from internet providers that were becoming increasingly powerful. but the latest proposal is not set in stone. the fcc still has to vote on the issue next month and allow a full public comment period. for nightly business report, i'm morgan brennan. we begin market focus with after-hour earnings from visa, the credit card company reported a 26% jump in profit. higher operating revenue and payments volume helped up the credit card company's bottom line. revenue came in just about where the street was expecting it to fall and shares did fall initially after the close, stock up slightly after regular trading to $209.40. expected quarterly profit. revenue came in lighter than estimates. the coffee chain raised its out look for the full year, stock ended to $71.09.
and aetna posting record first quarter results helped by a surge in profits from its commercial business and by adding new customers. the medical membership rose by half a million for the new subscrib subscribers, not only on the government health care exchanges, but aetna added clients in the corporate business. the insurer raised the forecast for the shares of aetna. and united continental said its first quarter loss widened and that sent shares way down into today's session. the airline saw the revenue fall, blaming flight cancellations from the harsh winter weather. the cancellations cost the company $200 million, it says, shares fell almost 10%, $41.53 to close. but american airlines flying high after reporting high first quarter profits they got a boost after the take-off plans at
and government safety proposing new rules regarding the sale and marketing of e-cigarettes, the first federal regulations for the increasingly popular alternative to smokes. >> reporter: those electronic cigarettes you see popping up everywhere lately have also gotten the attention of the fda. and now the federal agency says it wants to regulate e-cigarettes for the first time and to find out what is actually in the product. the e-cigarettes are battery powered devices that heat liquid nicotine into a vapor that users inhale. the supporters say they're not inhaling tar and tobacco products. >> if you're trying to be healthier and quit smoking this is a much healthier alternative than lighting up the cigarette. >> but the fda is worry bordied the fast-growing product. >> it is an unregulated aspect of the products, we believe the
fda should and can have a role in the operating of the e-cigarette and other tobacco products as well. and that is why we're moving forward today to try to make sure that we can extend our regulatory authority. >> and the fda points out the nicotine in the e-cigarettes are addictive. and the report shows that others are concerned about children will use the e-cigarettes before moving on tobacco. >> others report this is a $2 billion industry. the fda proposal today does not necessarily mandate any new changes but it does put the fda on the road to regulating this fast-growth new business. coming up a day after apple wowed the street with a big stocks blitz, buy-back and earnings is the stock now more attractive to investors. that story next.
four tech giants have agreed to settle allegations of conspireing not to poach each other's employees, no terms have been disclosed, but apple and adobe, among others, settling the lawsuits with over 6,000 plaintiffs over back door agreements not to start a stall war by hiring away one another's workers. wall street buzzing after the blow-out sales, planning to return more money to shareholders and split stock to make more shares available to investors. and that news sent shares skyrocketing more than 8% today. that is its second best trading day ever for apple.
dominic chu has more. >> reporter: apple wowed investors with not only a dazzling earnings report but also news of a boost to the quarterly dividend and increased plan for buying back shares and a 7 for 1 stock split. so the plan? not only to show that the company is friendly to shareholders but also to make those shares accessible to more potential shareholders. the stocks split doesn't change the overall value of the company or the fundamentals of the business. it does, however, lower the cost of each share. so the big questions are, will apple stock be more attractive to average investors and what if it were to ever make it into the dow jones industrial average? >> that would definitely bring us more integrity and back bone behind it? >> if they give you a good deal? >> yes, definitely, i think it is just going to get even
better. >> the stock split will allow more types of investors to buy in, and in theory that could help to boost the stock price, but stocks that split don't always end up out-performing. take a look at companies like google, and master card. each of those companies split the start of their stock since 2014, and each stock has under-performed the broader stock market. then, there is the underlying concern about apple's growth in the future. investors are weighing new products like new iphones, ipads and possibly new tv-related products. that could help to propel the stock back towards its past record highs. >> whether it can get back to its peak will depend on the type of innovation, we're expecting a larger iphone and something with apple tv. the unfortunate part is they're not first movers in these areas. they're becoming increasingly fast followers, and that has implications.
>> reporter: the latest set of moves solidfies, the move. can the company and tim cook ultimately get out of the shadow of the late legendary co-founder and former ceo steve jobs. for nightly business report. and that is "nightly business report" for us tonight. i'm susie gharib, thank you so much for watching. and i'm tyler mathisen. thanks from me, as well. have a great evening. we hope to see you back here tomorrow night.
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