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Bourse Bonanza; Smartphones Outpace PC's

Aired February 9, 2011 - 14:00:00   ET


RICHARD QUEST, HOST: London and Toronto, New York and Berlin -- it's a bourse bonanza on tonight's show. A wizard of a deal as U.K. banks agree to lend more. It must be magic. And a first in history. Smartphones have overtaken the PCs for sale.

I'm Richard Quest. We have an hour together, and I mean business.

Good evening. The masters of trading are making some major deals of their own. In two separate tie-ups, two European bourses are on the way to merging with two North American counterparts. Now, the matches will likely bring cost savings and newfound wealth. The size and scale and the fact that they both happened on the same day perhaps no coincidence.

If you join me over in the library, you'll see what I mean. Let's begin with the big one that came late in the afternoon. It was the trading empire of the New York Stock Exchange Euronext and the Deutsche Borse. Now, the two companies have put out a statement saying that they are in advanced talks, but of course, they're not saying whether any merger would finally come about. They've left that bit open.

The global trading empire will be huge, the largest in the world, $412 million in cost savings.

Earlier in the day, we'd actually got confirmation of the LSE, London Stock Exchange, and Toronto, Canada's, TMX Group. Now, what this would create, although not the largest by any means, the seventh or eighth in the world in terms of exchanges -- it would create one of the biggest platforms for trading in mining stocks. Commodity prices are rising, so a combination of TMX and LSE certainly makes extremely interesting listening, the bosses were keen to point out.


CHRIS GIBSON-SMITH, CHAIRMAN, LSE: It creates linkages between the financial markets in Canada, the U.K. and Europe which are going to be very significant at a national level and at the level of companies and investors. And out of the benefits that we'll see coming from those linkages, increase in liquidity, we expect to create significant value for our shareholders.

THOMAS KLOET, CEO, TMX GROUP: Our new partners give us instant access to new markets, technologies and products. And we, in turn, bring enormous expertise in multiple areas to our new group.


QUEST: So that's the London Stock Exchange and the TMX. Look at the way the share prices reacted -- very sharply. London was up 3, TMX up 3.5. They had been widely forecast. That was around, so not so surprising. But NYSE Euronext up 15 points, 3 percent. That is far more dramatic and is an indication of how well the secret was kept until we got the announcement very late in the afternoon that the two were talking.

Maggie Lake is in New York. Maggie, I've been looking at LSE-TMX all day. When this thing happened and we got the statement, absolutely, did you raise an eyebrow, too?

MAGGIE LAKE, CNN CORRESPONDENT: Yes, absolutely. I mean, it is extraordinary for both of these types of deals to be announced in the same day. I mean, the financial universe got a lot smaller really quickly. And you're right, Richard. They're in advanced talks. Obviously, started to leak out. That's why they came out with it. But they got really far along before anyone really had any idea this was going on. It's unusual to be surprised to this extent.

And you know, listen, you heard all the executives spinning it positively, you know, the LSE and Toronto talking about the mining platform. You've got the NYSE and Deutsche Borse talking about the emphasis on derivatives. It'll make it a big derivatives player, risk management player.

But the bottom line is, these are marriages of necessity. They're all doing this because they're losing market share. And I'm not talking about nibbling away. There are some stats out today that in the U.S. -- let's just focus on this one -- 80 percent -- 10 years ago, 80 percent of the volume went through the New York Stock Exchange and NASDAQ. Today that is down to around 27 percent, a quarter. That means 70 percent of the volume has moved off exchanges. It's on electronic trading platforms. It's on with the high-frequency trading.

So this has been a huge development that's happened rapidly, and the exchanges are clearly scrambling to make that happen.

One thing I want to point out, too, that's getting a lot of play over here for the NYSE deal is that they are being acquired. The Deutsche Borse shareholders would be the majority shareholders here, and it would be incorporated in the Netherlands. That's going to be an interesting factor to watch as it makes its way from Wall Street circles down to Washington, Richard.

QUEST: You raise a valid point. If that is the case, so New York Stock Exchange, the oldest, largest, the granddaddy, the big board, whatever we want to call it -- but if it's suddenly acquired by a German company and moves to the Netherlands, even though, Maggie, sensible minds will say these are global institutions, there's a macho-ism (ph) about that that might be hard to stomach.

LAKE: There's also a completely different group of people looking at it. You know, from the -- from the financial perspective, from shareholder perspectives from these exchanges, this looks like a smart move, something that needs to be done. It's cost savings. The exchanges will say that healthy public exchanges...

QUEST: Right.

LAKE: ... improve liquidity, create transparency. Lawmakers in Washington are going to be looking at what this means for national security, foreign ownership of a major institution in the U.S. They're going to be looking at jobs -- completely different clientele. Now, will they approve it? They might, but the dialogue -- this is going to be scrutinized very, very carefully, Richard.

QUEST: Maggie, finally, to the ordinary investor who's watching tonight, who may buy 300 shares of Barclays or 500 shares of Lufthansa, whatever, does it make any difference? Because their shares, their purchases are always done through brokers and they're always done through big systems.

LAKE: This is a really interesting question, and I think this is where it's going to move to. The exchanges again will say, Yes, it strengthens them, it makes them global, it increases transparency. There are a lot of people who are really concerned about the increase in electronic trading. And this consolidation, by the way, won't -- it'll slow that, but it won't stop it.

QUEST: Right.

LAKE: And that's very worrying for people. I mean, look at what happened with the "flash crash." And the traders on the exchange say that's what you really need to be worried about. This is good for Joe Public. You know, not sure about that, if it brings the prices down. That's where the debate is going to go to. This is only going to be a small piece of that story.

QUEST: Maggie Lake in New York, who no doubt in the days ahead will go look at the buttonwood tree, or wherever the buttonwood tree used to be down on Wall Street. That's where they initiated the New York Stock Exchange back, I believe, in 1792. Just thought I'd throw that in (INAUDIBLE) gratuitous information.


QUEST: Maggie, many thanks.

Now, today's double whammy is the latest in a long line of stock exchange tie-ups in the past few years. In April '07, it was the big board, the NYSE, that bought -- they bought the Amsterdam-based Euronext. Now, that was a deal that was worth $10.2 billion. And indeed, the company is called NYSE Euronext to this day.

Three months later, you go to the Midwest and Chicago, where the Merc acquired its local rival, the Board of Trade. That was $11.3 billion. So now you have the cash market in New York merging along with the futures markets and the derivatives markets in Chicago. It was, of course, the largest futures exchange when those two came together.

Another transatlantic tie-up in early '08, this time NASDAQ bought the Scandinavian exchange OMX. Now, that was only $3.7 billion. But you can start to see NASDAQ now getting tentacles into Europe, trying desperately to get as much ground as it could as quickly as possible

And finally, in Singapore at the moment, the Singapore exchange is trying to buy the Australian exchange, the AFX. It's $7.8 billion, and that's currently working its way through.

European stocks, despite all of this, gave ground. Investors were focusing on rising prices around the world. That's putting consumers under pressure. It makes it more likely that interest rates will rise.

So the London markets -- in London, policy makers at the Bank of England are getting together for their latest rate-setting meeting. The outcome comes on Thursday. On Tuesday, markets were closed at their highest level since the middle of 2008. There was perhaps a little bit of profit taking going on, too, as you can look at those numbers.

The prospect of interest rate rises is also helping to push the pound. The euro is also rising against the dollar. The dollar is up against the yen. Those are the trading net (ph) rates that you're seeing at the moment.

In New York at the moment, the Dow Jones Industrials, which is open, barely changes, down 24 points, 12,208. I'm thinking that 12,200 level is a little bit dodgy on this session, but at least the market is where it is, just off a fifth of 1 percent.

Wall Street watched (ph). America's top banker faced some of his toughest critics on Capitol Hill. The Fed chairman, Ben Bernanke, told the U.S. House Budget Committee that the United States needs, in his words, a credible program to cut the deficit. And talk about a tough room. Wednesday's appearance was Bernanke's first before the new Republican- controlled House, and the chief went on to echo comments he made last week to the National Press Club, particularly on the U.S. jobless numbers.


BEN BERNANKE, U.S. FEDERAL RESERVE CHAIRMAN: Notable declines in the unemployment rate in December and January, together with improvement in indicators of job openings and firms' hiring plans, do provide some grounds for optimism on the employment front. Even so, with output growth likely to be moderate for a while and with employers reportedly still reluctant to add to payrolls, it will be several years before the unemployment rate has returned to a more normal level. Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.


QUEST: Ben Bernanke on Capitol Hill.

Let's stay with bankers. This time, it was bankers in Britain, and they were having their arms twisted. It's hard to gauge where (ph) there (ph) was a carrot or the stick. Either way, the British government's trying to force them to lend more and take less with the other hand. In a moment.


QUEST: The British government is making banks lend more to people and pay themselves less. That's the theory. It's a project called Project Merlin, a deal designed to curb risk and raise responsibility. It's quite extraordinary what the government and the major four banks in the U.K. have actually come up to by way of agreement.

So on the cash side, they have agreed that they will lend, the banks, $305 billion this year, another $1.6 billion to a business growth fund. It includes $322 million to a big society (ph) bank. When you look at it, this was the core part that the government needed because the government is desperate to try and get British banks by hook or by crook to lend more money.


GEORGE OSBORNE, BRITISH FINANCE MINISTER: The banks will lend more money, especially to small businesses, pay more taxes, pay less bonuses, be more transparent about the bonuses they do pay, and make a greater contribution to our regional economy and society. In return, the government commits to the success of a strong, resilient, stable and globally competitive financial services sector in which U.K. banks can compete with the best banks in the world on a level playing field and in which London is a world center for finance. That is good for jobs and growth in our country.


QUEST: So what did the banks get in return for agreeing to go bigger on the lending? Well, basically, the British government has eased off on the whole bonus row. The British government have said that -- and the banks have agreed that they will not pay bonuses -- the bonus levels will be less this year than last year, and they've also agreed to make it more transparent. The big four will reveal the pay of the top five to seven executives.

Here's the British chancellor again.


OSBORNE: Most of us find the levels of pay in financial services to be completely out of kilter with what the rest of society would regard is fair or reasonable. We are determined to bring responsibility and constraint and to make sure that pay is properly taxed.

Today I can tell the house that the four major British banks have also agreed that total bonuses for their U.K.-based staff will be lower than last year and lower than they would have been without today's settlement.


QUEST: George Osborne there. Already, we've started to get some of the details from the various bankers on how much they are paid. For example, RBS Lloyd's have revealed their CEO bonuses. Stephen Hester, the chief exec of Royal Bank of Scotland, a bonus of $3.3 million. Now, of course, the significance with RBS is it is primarily owned by the government, and that means the British taxpayer.

When you take the totality of what was agreed with Project Merlin, you may wonder what was all the magic about? David Buik joined me earlier and put it into perspective.


DAVID BUIK, BGC PARTNERS: The only thing that we all know makes absolutely no sense at all is to say unequivocally that these banks will contribute 190 billion pounds worth of lending in 2011, up from 179 billion last year. You know, I know that is nonsense because you cannot commit a bank's funds to lending if we were to enter a very difficult period of austerity...

QUEST: Right.

BUIK: ... whereby high unemployment was there (ph). Why would you want to lend people who haven't got the ability to either repay that money or to service the debt?

QUEST: But you'd agree, David, it's a starting point, isn't it, that you get a comment from banks that they will lend more to help grease the wheels of the economy.

BUIK: If the occasion arises, Richard, absolutely right. But the fact is, the demand out there from big companies or medium-sized companies isn't really there yet. And the people who want the money are those whose credit-worthiness isn't perhaps quite as sound as others. And we've just been through a harrowing situation over the last three years. The banks have got themselves straight. We still don't know exactly what the terms of reference are as regards increased capital, which is fundamental to any bank's business. It needs to be told. We're faffing (ph) around, running all over the world, trying to get global agreement, which is impractical and doesn't make sense. And in the next breath, the chancellor, for political expediency, is saying, We want you to lend 190 billion pounds.

QUEST: So you don't -- you're not impressed, necessarily, by this deal, is what I'm hearing.

BUIK: What I'm -- what I would like to have heard is good faith. Didn't hear a lot of that in (ph) best endeavors to do that, and you would say, Well, the cynics around the world, which probably number 90 percent, won't be having it. But what I'm saying is that you have to have an element of best endeavors because we don't not know exactly what the economic or financial climate is going to be like in July or October or December of next year.

QUEST: Right.


QUEST: David Buik on the bank lending, a subject that will be on the agenda for leaders of the EU summit next month as they try to fix the eurozone's sovereign debt crisis, and of course, get the European economies moving.

The state of the European economy's become a controversial topic in countries like Finland. Recently, when I was in Helsinki, I spoke to the Finnish foreign minister, Alexander Stubb, about a few weeks ago. And I asked him if he thought European leaders were now ahead of the curve in the crisis.


ALEXANDER STUBB, FINNISH FOREIGN MINISTER: I'm actually quite comfortable. I mean, if think about it, the crisis started outside the eurozone. The big troublemakers were actually the United States, Iceland, Latvia and Hungary. And I would argue that because of the euro, because of the 18 countries that are in it, we're fairly well protected. Does that mean everything is OK? No. But I think the system is working fairly well. It's taking a lot of hits...

QUEST: How can you say it's working well when you've got two or three countries on the periphery, two have taken bail-outs, a third may have to take a bail-out, and the big question is, who's leading?

STUBB: The markets are leading. That's basically what's happening. And my argument is that without the euro, we'd be in much deeper trouble because we'd have a lot of countries devaluing their currencies. We'd have a lot of competition between currencies.

You know, Finland underwent a really problematic period in the early 1990s. We had bank crashes all over the place. We didn't need a bail-out, but we did get some help from the IMF. Now, you're getting some help from the IMF for various countries, but the system is holding up. And the reason that the countries -- the countries such as the U.K. or Sweden who are not in the euro -- are bailing our or helping the euro is because they know that they're going to run into trouble if they don't do it.

QUEST: Why are you not angry at the way in which certain countries have nearly driven our precious euro over the cliff?

STUBB: Of course I'm angry. It is absolutely clear. But the problem, I would argue, is that we don't have enough sticks to keep those countries under control. There was always a carrot. The carrot was, fulfill the three criteria of Maastricht to get into the euro. Everyone wanted to do that, and they did that. OK, some of them stubbed their fingers a little bit. But then what happened was that...

QUEST: Use the cheat word! They cheated!


STUBB: I'm a diplomat. I can't say that. Basically, what happened then, you created a stability pact, which was supposed to be the stick to keep public finances under control, and those countries didn't do it. OK. Is this only a problem for the euro? No. Could one, for example, say that the U.K. has been completely responsible with its public finances? Or could one argue, for instance, that those countries other in the European Union that have been outside the euro have been responsible with their public finances? No. For me, it's more remarkable that the euro's still standing and so strong.


QUEST: Alexander Stubb, the foreign minister of Finland.

When we come back in a moment: Make sure you don't call Heston Blumenthal a scientist!


HESTON BLUMENTHAL, CHEF: I failed my chemistry O level, so I learned through reading books and cooking.


QUEST: Heston turned a self-taught passion into a restaurant with three Michelin stars. It's "World at Work" off the record (ph).


QUEST: An appetite for success is essential in this particular industry. The world-renowned chef Heston Blumenthal is hungry for more. After all, this is the man who invented bacon and egg-flavored ice cream. And tonight, the self-taught perfectionist shows us why passion is paramount, particularly when you take on the "World at Work."


HESTON BLUMENTHAL, CHEF: In the early days, when I was the sole owner, people had heard about this strange bloke with the funny name out in the country doing weird food. (INAUDIBLE) scientist bloke (INAUDIBLE) does that funny stuff. And I'm not scientist.

I failed my chemistry O level, so I learned through reading books and cooking.

I'm essentially a big kid, so I just want to know why things -- why things happen. And I -- if someone shows me something, I will just go, Why? Why? Until somebody gives me the answer that's simplistic enough so somewhere in my head goes, Bing! And I go, Ha! That's brilliant!

To become a chef, you need to be -- you need to be (INAUDIBLE) person (INAUDIBLE) the hours are very, very long, so you absolutely have to understand the basics of classical French cooking, start from the bottom up, be inquisitive. I would say (INAUDIBLE) is one of the hardest jobs that you could do. If you do it -- if it gets under your skin (INAUDIBLE) then it's one of the best jobs in the world today.

So (INAUDIBLE) started to do this stuff, then people would sit in the restaurant (INAUDIBLE) some tables would pick up the menu, look at it, and basically go, We're leaving.

I would say the British public's awareness about where ingredients come from, wanting to know where they come from and openness to try new things has changed drastically. (INAUDIBLE) historians (INAUDIBLE) palace. They're amazing. And then you (INAUDIBLE) there is unbelievable wealth of gastronomy. But what it made me think was that actually, creativity was abound (ph). We think we go back in history and people weren't creative then, but they didn't have (INAUDIBLE) today's televisions (INAUDIBLE) iPads, iPhones, whatever. So the food at the top end was much more theatrical.

(INAUDIBLE) recipe where they put minced beef and veal, form it into a ball, onto a spit, turn it onto (ph) the fire and baste it with a (INAUDIBLE) savory custard. It looked like (INAUDIBLE) We changed it. We made a chicken liver parfait, really smooth mousse, into a ball, freeze it in nitrogen for a few seconds (INAUDIBLE) straight into a bowl of mandarin jelly (INAUDIBLE) gelatin. And it's a cold ball of parfait dipped into the mandarin juice. It's sexy (ph). You end up with basically what looks like a little mini-mandarin.

The techniques of the restaurant -- most of these, you can't do this at home. And the dishes are not made -- I think what a lot of people don't realize is in a kitchen like this, particularly (INAUDIBLE) the dishes are so involved that you might have five different sections of the kitchen making different parts of the dish and then coming together. They're like an orchestra. Nobody cooks anything from start to finish.

A few years ago, my maitre d' came upstairs and said, There's a woman downstairs who wants to say hello, this very elegant woman stood up and she went -- shake my hand and she went, How wonderful! If only my husband were alive to see this, a real Willy Wonka. And it was Felicity Dahl, Roald Dahl's widow. And for me, to be called Willy Wonka is fantastic.

I'm not a scientist. Give me Willy Wonka any day.


QUEST: Heston Blumenthal, his restaurant, The Fat Duck, is one of the most famous in the U.K., and his "World at Work."

And incidentally, the whole purpose of the "World at Work" is to celebrate the trick of the trade, how they actually do their job, along with the passion of the people who do it. The "World at Work" -- it's only on QUEST MEANS BUSINESS.

When we come back in just a moment, a little fact for you. The humble PC has been outsmarted. A sea change in the world of technology in a moment.


QUEST: Hello. I'm Richard Quest, QUEST MEANS BUSINESS. This is CNN, and here the news always comes first.

There's no let-up in Egypt's protest movement. Another massive crowd has filled Tahrir Square and the surrounding area. It's day 16 of the uprising. Protesters are taking offense at recent comments by the Egyptian vice president. Omar Suleiman says demands for President Mubarak's departure are insulting.

At least seven people were killed, nearly 70 wounded in three car bomb attacks in Iraq's northern city of Kirkuk. The coordinated attacks targeted Iraqi federal police and Kurdish security forces. And in Baghdad on Wednesday morning, two roadside bombs injured eight civilians.

An Italian judge has less than a week to decide if Italian prime minister, Silvio Berlusconi, will face a trial on charges he had sex with an underage prostitute and abused his power. Italian prosecutors flied the request for a trial earlier on Wednesday. The prime minister denies the accusations. He describes them as polat -- political mudslinging.

FARC rebels in Columbia have released one of their hostages. Councilman Marcos Baquero, seen here on the left, had been held captive for more than a year-and-a-half. He's reported now to be in the hands of the Red Cross. Four more hostages are expected to be freed by Sunday.

Now, for the first time, Smartphone sales have overtaken those of personal computers or the PC, as perhaps we know them better. It's all in the latest data and it's according to International Data Corp. A hundred and one million Smartphone devices were shipped in the last three months of 2010 -- 101 million.

Now, you've got to compare that to 92 million PCs were shipped in the same period. It was an 87 percent increase -- a jump for Smartphones on the same period last year.

Now, if you compare that 87 percent with PCs, they got just 3 percent of the game. And the reason for that, of course, is fairly obvious.


QUEST: This is a trend that is now well and truly established. And as more Smartphones come onto the market, well, that big clunker of a PC is starting to look pretty obsolete. Because I promise you, if I tried to do that with my PC on me back, well, we'd soon have a moment or two.

It was a very strong reminder of what's at stake in all of this when a memo was leaked. It was a memo written to the staff by Nokia's new chief executive, Stephen Elop. It was leaked. And he sums up Nokia's position in the bluntest language, comparing the problem to a burning platform. Elop said -- and these are his words -- "We have multiple points of scorching heat that are fueling a blaze around us."

He acknowledged the successes of rivals like Apple and Google's Android, who are gaining. Elop said the company currently lacked leadership and accountability. Serious words, indeed.

Let's talk about the Smartphone.

Jeffrey Cole is the director of the Annenberg School's Center for Digital Future at the University of Southern California.

He joins me now from New York.

Jeffrey, when we look at the -- the Smartphone, the PC, you're obviously not surprised the Smartphone has gained such traction.

JEFFREY COLE, UNIVERSITY OF SOUTHERN CALIFORNIA, DIRECTOR, CENTER FOR THE DIGITAL FUTURE: Not at all. I mean we've been watching now, for four years, everything move to mobile. The mobile phone replacing credit cards slowly, mobile phones replacing photographs and we're watching them there. We're watching everything move to mobile.

And we know, the work we do shows that only about 4 to 6 percent of people who own PCs need PCs. The only people who really need PCs are computer assisted designers, heavy duty writers, number crunchers. For most of us, PCs are things with big, lumbering operating systems...

QUEST: Right.

COLE: -- that take a long time to load. They can break down. They can be attacked by viruses. Almost everybody about mobile...


COLE: -- particularly Smartphones, works better.

QUEST: So if that is the case and this sea change continues, do -- does the industry know where this shakes out, where it ends up?

Because you've still got the Microsofts, the Dells. You've still got the Macs being built by the millions.

COLE: And -- and we're still, for a long time, I think, going to see that. But where this really shakes out is, as many Smartphones as there are, only a small percentage of the five billion mobile phones that are in people's hands.

So where this really shakes out is when those five billion have Smartphones. And Microsoft and Dell and others are looking for a role in the Smartphone world. Microsoft creates an operating system...

QUEST: Right.

COLE: -- for mobile phones. We'll see where they shake out.

QUEST: And when you -- for example, we have Nokia with this leaked e- mail, which I'm sure you saw, saying flames around the company. And you've got rumors -- there are rumors tonight that Nokia and Microsoft may be planning some sort of tie-up for some phones.

Does that signify desperation or vision?

COLE: It's a little bit of both. I think a little more desperation than vision. Nokia is still the best-selling mobile phone on the planet that can't seem to make any inroads into the Smartphone business. Microsoft still creates the system that drives all the PCs but can't make significant inroads into Smartphones. And we know the Smartphone world is dominated by Apple and the iPhone, by RIM and the BlackBerry and increasingly by Android, the Google operating system.

QUEST: So, finally, let me ask you, what is -- what do you use your PC for?

Do you even still have a PC that you find of any use?

COLE: I still have a PC. I still do -- I do a fair amount of writing, so I still use it for that. But I can tell you that I use an iPad, which I consider a mobile. And I think that iPad -- almost any time I have a choice, I reach for the iPad. It boots immediately and I like using apps rather than browsers...

QUEST: All right...

COLE: -- and I think that's the wave of the future.

QUEST: Jeffrey, lovely to speak to you, in New York.

Many thanks, indeed, for joining us.

Jeffrey Cole joining me there from New York.

We asked about this on the Tweeting today about whether you prefer Smartphones or do you prefer the PCs and most of you were on one side, assuming I can manage to work this technology.

Over in Jakarta, John says: "Portable and affordable is the way to go."

In Africa, Tom said: "I choose Smartphones due to electric power challenges. PCs use a lot of power. I'm able to charge my phone using solar."

Let's go to Germany: "I've replaced my work laptop with an iPad and an iPhone. Now I no longer have to carry around three-and-a-half kilograms," which, of course, is extremely useful if it's in your carryon luggage on an aircraft.

Finally, in the United States, Ryan opted for tablet in lieu of new laptop -- "ease of use, facility and portability."

Don't forget the e-mail address is

Now, if you've seen the movie "The Social Network" -- and it's all about the sorts of things we've been talking about -- you're familiar with the story. Tyler and Cameron Winklevoss have been locked in a legal battle with the Facebook co-founder, Mark Zuckerberg, who originally came up with the idea for the Web site. It's a question of who did come up with the original idea.

And the brothers discuss their legal challenge on "PIERS MORGAN TONIGHT".


CAMERON WINKLEVOSS, FACEBOOK LAWSUIT PLAINTIFF: Well, there's nothing normal about the way he conducted business. He broke the law and that's why he got ahead.

And, you know, you bring up a very good question. There's always that sort of debate, is it execution or is it the idea, is it a little bit of both?

In this case, we believe that the idea is -- is really the essential core component to this thing, because what basically the social network is a platform that is then built by 500 -- at this point, 500 million users.

So this idea that it's -- that Mark Zuckerberg executed it to -- to a greater degree is just false. We were in a partnership and then he used his skill set to basically self-deal in his own interests and take -- take the entire project from us.


QUEST: What else the twins have to say about the case -- find out. It is on "PIERS MORGAN TONIGHT" right after QUEST MEANS BUSINESS.

A leaked U.S. cable is stirring questions about Saudi Arabia's oil reserves.

Does the world's biggest crude exporter have enough to keep a lid on prices?

And how much oil do they actually have, in a moment?


QUEST: They're all smiles this evening at Vestas Wind Systems and not because of a solid outlook. The world's biggest wind turbine maker is predicting this year's revenues will rise to $9.5 billion. That's the forecast. It tops estimates. The Denmark-based company says it has weathered tough times.

Now, it's back on track as customers agreed to buy a record number -- well, you've go to sell a lot of them to actually get $9.5 billion.

Vestas' shares gained in Europe.

We want to take you behind the numbers now.

The company's chief executive, Ditlev Engel, is with me.

For $9.5 billion, how many of these things do you actually have to sort of sell for that?

DITLEV ENGEL, CEO, VESTAS WIND SYSTEMS: It depends who you are. But...


ENGEL: -- I think...

QUEST: You said it -- it would cost me a fortune last time.

ENGEL: Yes, it does. Will, one of these will probably cost you about three million euro apiece. So everything is up with the dollar. So we need to -- to get quite a number of them over the counter before we get there.

QUEST: Right. Last time when we spoke, 2010 had been a pretty dreadful year for you.

What's changed?

Because governments clearly haven't got money and they're not flush with cash.

ENGEL: That's true. I think, first and foremost, if you look at the -- the people understand more and more that we need to change the energy outlook. And just last year, I think if you look at the cost of the countries in the world, the E.U. paid more than 70 billion euros for energy; the United States more than $72 billion because of the increase in fossil fuel prices.

So I think, coming back to President Obama, when he said we need to look at the clean energy agenda, we need to do something else.

QUEST: Right. But there are questions about the efficiency of wind. There have been some reports that suggest these large turbines are neither as efficient nor as productive as we had, perhaps, thought.

ENGEL: That is absolutely not the case. We actually...

QUEST: But you'll note these reports are out there.

ENGEL: They're out there, but you have to look at the facts. The facts are, actually, that we just released today, for the first time ever, how much the turbines are actually producing. And we actually, in 2010, for the first time ever, actually find that this (INAUDIBLE) market on a 20 year basis actually demonstrating predictability is much better than people talk about.

QUEST: So why -- why should they -- let's face it, if we all want an -- a green future...


QUEST: -- and we all want to -- to improve of the outlook and to get rid of fossil fuels, why would there be these claims that wind turbines are not that productive?

ENGEL: I'll give you on suggestion. In 2010, the fossil fuel industry received more than $300 billion on a yearly basis in subsidies. So there are, of course, other agendas out there to saying maybe they're not so reliable.

But our agenda...

QUEST: Come on, so you're saying quite clearly here then -- let's -- let's not mince words, grown men. You're saying that it's the fossil fuels who are putting the boot in because it -- it serves their purpose?

ENGEL: I didn't say that. What I said was I think there are a lot of agendas that we need to look at because there's too much money at the table -- more than $300 billion a year.

So when people are saying, well, is renewable cost-effective, we at least have to start by redacting (ph) the 300 and -- more than $300 billion which goes to fossil fuels to get an even comparison.

QUEST: Have you given up your PC yet?

ENGEL: I haven't, I have to admit, but maybe I will one day.

QUEST: All right, thank you.

I'll take this. You don't need it. You probably -- you've got plenty of them.

Many thanks, indeed.

ENGEL: Thank you much.

Good to see you.

QUEST: Thank you very much.

Now, companies like Vestas are hoping that renewable energy can one day replace non-renewable sources like oil. And, indeed, we were talking on that very point in that interview.

That day might come sooner than we think if diplomatic cables that "The Guardian" newspaper obtained from WikiLeaks are anything to be believed.

The leaks raise questions about when the world's richest oil country, Saudi Arabia, when that oil will run out.

Join me over in the lobby and you'll see what I mean.

Now, the cables claim that the reserves have been overestimated by some 40 percent. It's in conversations between the U.S. diplomats and former heads of exploration at Saudi Aramco. The cable says possibly some Saudi reserves are not as -- in the words they're using -- bountiful as previously described. Crude reserves estimated by some dramatic amount, 300 or 400 billion barrels.

Now, these are the top five reserves -- proven reserves -- as they stand at the moment. Saudi Arabia at 264; Venezuela, 211; Iran; Iraq and Kuwait. Both Iran and Iraq have recently changed their numbers and actually upgraded the amount of proven reserves.

What we know, indeed, from OPEC, the Saudis clearly are still the number one. And even if this report is true, they would remain in that position.

Had all -- did all this have any effect on the crude market?

Not in the short-term. Even though Saudi is the largest producer, as you can see, virtually no spike today. There are other factors at play in the market.

So put all this together -- Saudi might not have as much oil as we first thought.

I spoke to "MARKETPLACE MIDDLE EAST'S" John Defterios about the claim.

And I had to ask him, well, if they haven't got as much as we think, how much do they have?


JOHN DEFTERIOS, CNN CORRESPONDENT: Well, let's put it this way, I think this debate on WikiLeaks and the cables puts some meat on the bone about this whole debate regarding peak oil -- when would Saudi Arabia, and OPEC, for that matter, hit peak production?

And this just raises that question yet again. But I think we should discern between potential reserves of better than 700 billion barrels and the proven reserves that you've talked about for Saudi Arabia, which is at 264. They're very different.

And this speculation is about the potential reserves in -- in the future.

QUEST: OK, potential reserves -- a 500 billion difference between proven and potential.

Where does the -- do the experts believe the truth might be, in between -- in that gap?

DEFTERIOS: From an industrial standpoint, everybody that lives with the proven reserves that you outlined. But I sat down with the former Saudi oil minister, Sheikh Yamani, back in October, around the 50th anniversary of OPEC. And I asked him a very blunt question -- is it high time to get independent analysis?

This is what he said.


SHEIKH AHMED ZAKI YAMANI, FORMER OPEC OIL MINISTER: We have to make a study by some people outside the -- the country or nation.

DEFTERIOS: So an independent study should be done of the OPEC reserves?

YAMANI: I think so.


YAMANI: I don't know whether they exaggerated or they did not. I want to need that -- I -- I need a neutral one.


DEFTERIOS: So that's fairly controversial.

Now, he's...

QUEST: That is a...

DEFTERIOS: -- in retirement, but he -- you know, he runs the Center for Global Energy Studies here in London. So he did raise the question mark, isn't it high time that we come together for independent analysis?

QUEST: If the Saudi reserves and the mere questioning of Saudi reserves creates almost turmoil in the market, doesn't it?

DEFTERIOS: Yes, but it's interesting, the -- the market didn't really react to this, Richard, because it was looking at the potential and not the proven reserves. Right now, within OPEC, they have accepted the fact that each of the national oil companies would produce their own numbers and report them to OPEC. They go back to 2009. Those are the numbers that you have. Again, around this 50th anniversary, I pointed that question to the secretary-general -- can we believe the fact that OPEC has better than a trillion barrels under the ground?

This was his response.


ABDULLAH AL BADRI, OPEC SECRETARY GENERAL: A trillion plus reserve is very, very accurate. We know the numbers. We put -- we put this number in our data. We distribute the numbers. And we are sure that the oil proven reserves is more than a trillion.

So you can count on this.


DEFTERIOS: So, you -- you're laughing a little bit.

QUEST: I'm laughing because it reminds me of the old joke, you know, a billion here, a billion there and pretty soon you're talking real money.

DEFTERIOS: Real money. And...

QUEST: And when we factor in this, let's look at the WikiLeaks e -- the e-mail itself. We've heard a lot of speculation with WikiLeaks. These are diplomats just talking about rumors and gossip that are in the market or that they are hearing locally.

Can we put that into this category?

DEFTERIOS: Well, I -- I would think that with regards to OPEC's future potential, the answer is yes, because some feel that these are guesstimates, not real proven reserves. And I think we can point to Iran and Iraq very recently in this argument. Iraq, in the autumn, raised their proven reserves -- proven reserves by 24 percent.

Not surprisingly, about three weeks later, Iran came out on the market and raised theirs by 9 percent, but just above Iraq. And that's why many are calling now for some independent analysis, because right out of the blue, around the 50th anniversary, two major producers raised their proven reserves -- not potential, but proven reserves into the market.

QUEST: Whatever Saudi Arabia has, according to John, he told me afterwards, they're not going to run out for at least the next 100 years.

Now, one of Formula One's biggest winners is making a move to attract new investors. You'll hear from the chairman of the Williams team tonight about the drive to stay independent.


QUEST: The drive for new investors -- one of the most successful Formula One racing teams has settled on a share price. Williams Grand Prix is gearing up for a new listing on the Frankfurt Exchange.

CNN's Jim Boulden caught up with the company's chief and wanted to know from Adam Parr why he's taking Williams from a company owned by a handful of people, with all the difficulty that comes along with being a publicly traded one.


ADAM PARR, CHAIRMAN, WILLIAMS GRAND PRIX HOLDINGS: As a sports team, there are two -- there are two energy models...


PARR: -- theoretically. One is you have a majority shareholder or owner of the team who -- who dominates it. Or maybe you go for a public energy (ph) model. And we decided that the best for us, in the longer- term, is the public entry model. It gives us a stable basis for the future.

BOULDEN: So we're talking about the next generation of owners of Williams...

PARR: Yes.

BOULDEN: -- because the first generation is moving on?

PARR: In some -- at some point in the future.


PARR: Exactly.

BOULDEN: And selling those shares for this, this is not going to be new shares.


BOULDEN: You're not diluting the existing structure?

PARR: No. We have never, as a team, asked our shareholders for money. We have always won -- run within our revenues, the revenues that we can generate. And that's a very important principle that we will be maintaining in the future.

BOULDEN: When you look at these cars, of course, it's all full of sponsorship. I always thought that's where Formula One, other than TV, of course...

PARR: Yes.

BOULDEN: -- got its money.

Does this mean you're going to be less reliant on the sponsors?

Is this because you're not getting as much sponsorship as you want?

Or is this something separate?

PARR: No we -- sponsorship is -- is fundamental to our revenue base. And we've got so -- which is to say we've got some fantastic partners. We have AT&T is our ties. We're partnered with Thomson Reuters, Ranstadt (ph) and Perevessa (ph) has just joined us this year. So we've got some -- some world class sponsors.

BOULDEN: Well, you had RBS, right?

PARR: Yes.

BOULDEN: But I mean banks have had problems.

And did you think maybe sponsorship isn't the long time -- isn't going to have the long time benefits that it's maybe had?

PARR: No, on the contrary...


PARR: -- I think it's going to (INAUDIBLE) and yes, it's true, we've, sadly, lost RBS at the end of last year. But there are, you know, UBS joined the sport last year and Santander sponsors two teams, world class banks who are relatively new into the sport. So I -- I've got no doubt that that will -- that will grow up again.

BOULDEN: Some of the more unkind rumors are that -- that Williams is a bit desperate for money.

PARR: Um-hmm.

BOULDEN: You don't agree with that?

PARR: Well, I don't agree with that because we've made profits in 2008, 2009, 2010. We have a fully contracted budget for 2011. And the vast majority of our budget for 2012, as well. So it is not about being desperate for money. We're a profitable business. And that's the only reason we can come to the market.

BOULDEN: And if someone buys shares in Williams, if they get enough shares, then they can join you in the...

PARR: Exactly.

BOULDEN: -- the paddock?

Is that...

PARR: We're going to create what are known an earners club.


PARR: A bit like owning a bit of a race horse. And you can get in behind the scenes and get into the garage and really experience Formula One in a way that you -- that money can't buy.

BOULDEN: But don't most people love this not for the money, obviously, but because of the sport. But you're trying to bridge both by making more money, bringing people in looking for a good investment.

Or do you think most people will do it because they want to have the...

PARR: No, I...

BOULDEN: -- experience of Formula One?

PARR: -- I hope and believe that people will invest because it's a good investment. And that's what I want them to focus on. If they love Formula One, that's a bonus to me. But investment is investment. And I'm a businessman by that pound (ph) and I think money and good business for the benefit of your shareholders is, you know, is one of the great joys in life and it's one of the great challenges.

When you combine that with a great sport that's also very difficult, you've got a wonderful combination.

BOULDEN: Realistically, where can Williams finish in 2011?

PARR: I believe -- we finished sixth last year, which was not good enough.


PARR: And I -- I'd like to see some privy (ph) on that by at least a couple of places.

BOULDEN: OK. So still very ambitious?

PARR: Yes. Absolutely.


PARR: We -- we live to race.


PARR: We want to win.


QUEST: Now, that has to be a mantra for anybody in that business -- we live to race, we want to win. Perhaps you could also take that into the business world.

It was a blustery Tuesday. And Wednesday didn't prove much relief in parts of Eastern Europe, too.

Pedram is at the World Weather Center.

And I'm not quite sure, because, on the one hand, Pedram, we're getting these blustery gales, but it could be that spring is just around the corner.

PEDRAM JAVAHERI, CNN METEOROLOGIST: Oh, I like the way you look at it, Richard. That's a positive man right there.

Yes, conditions, of course, have been blustery. It looks like things are going to begin to change for the better for the folks out there in Eastern Europe.

And look at this dome of clear skies. That's where high pressure is in place. And gorgeous conditions, really, one of those winter days across Milan, from there to Budapest, out toward, say, Vienna, looking at mostly sunny skies there for you on Thursday and clear skies to continue on into Friday, as a high pressure system is in place.

But some showers working their way across the northern portion of the United Kingdom into Ireland. And the winds, again, will begin to ease.

But again, on Wednesday, it was a different story. Romania coming in with wind gusts at 87 kilometers per hour. On Tuesday, we had winds about 110 or so kilometers per hour when they were gusting in Eastern Europe. And the winds a little quieter out toward Belarus at around 43 kilometers per hour.

But mainly the travel issues look like they're going to be minimal from areas around London out to Brussels. We're looking at generally a light breeze. And where you don't have a breeze around, say, Frankfurt into Munich, the fog begins to develop. That's really the main ingredient. If you don't have the -- the winds in place, you can't really mix the atmosphere up and the fog begins to settle right there in the lower levels.

And then you have some possible delays out of the Frankfurt over the next 24 or so hours. But the warm temperatures, again, encompassing much of the southern region of Europe. But notice some changes in the forecast, perhaps by the beginning of next week.

Not to burst your bubble, Richard, but it looks like some cooler temperatures are certainly possible Tuesday on into Wednesday and by the middle portion of next week, we do see some cold air that could push into the northern portion of the United Kingdom and, of course, the coldest air of the season remains locked in place across portions of Russia. And it looks like that pattern is going to continue.

So that's the weather pattern right now for much of Europe.

And the United States certainly a similar story, all the way out toward Dallas, Texas, where temps are as cold as minus five degrees Celsius.

And, quickly, Richard, how about a photograph?

This is a Mustang out there made by a iReporter in the state of Illinois.

How about that for creativity out there?

Their dream car, they made it happen.

QUEST: Excellent. Enough snow to go around for them and a dozen more.

Pedram, many thanks.

Now, two big stories that we've covered tonight, the banks and the Smartphones, are reflected in what the top people are Tweeting today, as our Tweets from the Top.

Let's have a look.

Mitch Joel, president of Twist Image, a digital landscape company, has Tweeted on the question: "It's official. More Smartphones sold than PCs. Still think it (AUDIO GAP) online strategy. A question for anybody who might have doubts about where they're going."

The British entrepreneur, Lord Sugar -- Lord Alan Sugar, has Tweeted: "Government gave banks shtick when they acted irresponsibly with bad debts. Now they're bashing them to lend. Banks can only lend to viable companies," a reference, of course, to their -- the lending requirements under the MERLIN Project.

Finally, the Google exclusive, Vic Gundotra, is weighing in on speculation that Nokia might manufacture Windows 7 handsets. This is just delicious. This is what Tweets from the Top is really all about. Google putting the boot in to Microsoft and to Nokia "Two turkeys do not make an eagle."

We will have a Profitable Moment in just a moment.

This is CNN.


QUEST: Tonight's Profitable Moment and it concerns our lead story about the banks and the bourses.

In the old days, there were the big stock exchanges through which all transactions passed. Over the past three decades, those exchanges have changed out of all recognition -- new, cheaper, screen-based trading platforms without the heavy costs and infrastructure. They have become the attractive way to deal.

The London Stock Exchange can trace its history back 300 years, to the coffee houses.

The New York market goes back nearly as far, when it was formed under the old Buttonwood tree by Wall Street. The traditional exchanges have been consolidating at a fast pace. But as today's announcements, both in Frankfurt, New York and London and Toronto show, not fast enough.

Today's announcements show that if these grand old organizations want to stay relevant, they need to adapt, because when it comes to buying or selling stocks and shares, there are plenty of others waiting for the business.

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest in London.

Whatever you're up to in the hours ahead, I hope it's profitable.

"PIERS MORGAN" is next and I'll have the headlines in a second.