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Apple Shareholders Get Dividend; Apple's War Chest; Why Apple Paying Out Now; Foxconn Claims Retracted; CDSs Take $2.5 Billion Hit on Greek Debt; Portugal Crisis; Oil Prices Threaten Recovery; European Markets Lethargic; Europe's Major Currencies Up Against Dollar; Future Cities: From Trabant to Tech in Berlin

Aired March 19, 2012 - 15:00   ET


RICHARD QUEST, HOST: It's rick pickings as Apple puts its war chest to work.

The price of a default. Insurers pay out to Greek creditors.

And elegant, graceful, and going strong. At 80, we visit this: the Grand Old Lady of Sydney. And I don't mean him.

I'm Richard Quest. I mean business.

Good evening. Apple is giving its shareholders a slice of the pie. For the first time in 17 years, the most valuable company in the world will pay out a dividend. Shareholders are getting $2.65 per share per quarter. It will cost Apple $10 billion a year. There's also a $10 billion share buyback that will account for those shares being issued to employees.


QUEST: Maggie Lake is in New York and joins me now. Maggie, so the core -- ha ha! -- question is why --


QUEST: Yes, that was quite good. That was completely unintended. Why now?

MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: Why not now? Why wasn't it sooner is what a lot of investors here are saying, Richard.

Listen, I think it was a combination of pressure of the amount that was piling up in that cash mountain, and the fact that, frankly, Steve Jobs has been gone for a while now, there is new leadership in position.

People felt like the board wanted to do this for a long while, and it was really the personality of Steve Jobs that was standing in the way, and no one was going to go against him. But now that Tim Cook is in place, he was a little bit more amenable to it.

And Tim Cook himself said, "Listen, we have enough money to continue to poor it into research and development, to make any kind of acquisitions we want, and still give this to you."

To put it in perspective, Richard, $45 billion is a heck of a lot of money. It's what Apple made in revenue just last quarter. This company is a cash machine, so they can just certainly, the feeling was, afford to give a little bit back to shareholders now.

And we should point out, as generous as that seems, the fact that they're finally giving a dividend --

QUEST: All right.

LAKE: -- it was a little bit light. A little bit lighter than some investors would have liked to have seen.

QUEST: All right, now. I'm going to take that point and show, as you can see, Maggie. You'd think it's very generous, what they may be doing, but as Maggie points out, let's just take the actual thing.

So, each one of these apples is $10 billion, and that's the war chest, that's what Apple currently has at the moment. So, as we go forward, here's $10 for shareholder dividends. One for you, four for the company. That's for the buy-back. That's another four for the company, and another in dividends.

And you start to see pretty quickly that it doesn't really matter how fast they give it a way, ultimately, Maggie, the war chest will just keep growing, even though shareholders may still get the odd apple or two.


LAKE: I could -- Richard, I think you've done a stint with a magician somewhere, that was pretty quick camera work. Listen, another interesting point that's been brought up is, OK, everybody wanted this, it's finally happened. What does this mean for Apple's share and who owns it?

A lot of attention on the fact that investors -- money managers on this side who run funds that have to have dividend-paying stocks only, have been sidelined, salivating, watching, wishing they could have a piece of the Apple action.

They are now pouring in the stock, they're able to buy it. All those ETFs, which have exploded, those dividend-paying funds also getting in on the action. Who might be selling? This money managers who have aggressive growth funds, traditionally would sell a tech company when they issue a dividend, thinking it's matured, it's not going to be a fast grower anymore. Maybe not in this case with Apple. It might be the exception.

QUEST: All right. Maggie Lake, who is in New York for us tonight with the apples.

Now, with all this money, even after this dividend buyback, Apple has vast resources, as you can see from the super screen. If you took the money, it could buy every share in Facebook's upcoming IPO and still have enough to buy Research in Motion afterwards, although there'd be some antitrust issues, one would have to agree.

It would also have more than Azerbaijan's annual GDP and 125 other countries, too. It could buy and order an entire fleet of US aircraft carriers and it could reinvest its own money in its own products by 104 million iPads. That's enough for ever elderly person and child in the United States.

Apple has gone from being one of the biggest hoarders to one of the largest dividend payers. Our good friend, Shelly Palmer, who always helps us understand what this means. Shelly, why has Apple done this now? Is it simply the weight of money going into the bank?

SHELLY PALMER, HOST, "DIGITAL LIVING": I think management's job, Richard, is to increase shareholder value, and they're doing this two ways. One, the dividend does actually allow other fund managers to buy into Apple. And more importantly, it makes the stock that much more attractive to a whole other class of buyer.

And secondly, they're going to buy back a bunch of stock to give the employees. Ultimately, the fiduciary responsibility of any board and any set of executives is to increase shareholder value, and they believe they're doing that.

QUEST: OK, SO -- But what has changed, Shelly, from -- the Steve Jobs, besides obviously the demands of Mr. Jobs himself, what has changed from the theory and rational that didn't pay dividends for 17 years to one that suddenly pays today?

PALMER: I think it's important that we pay respect to Steve Jobs for changing the world the way he did. But we also have to admit that Steve Jobs had some idiosyncrasies that were not a hundred percent rational when it comes to the doing of business.

And one of them was them was this immense hoarding of cash and his unwillingness to share the wealth and do certain kinds of things with the balance sheet and income statement that might have been better as a business for Apple.

In this case, Tim Cook is here, Steve Jobs has changed the world, may he rest in peace. This is a new Apple, as they like to say, or we like to say, they have a very deep bench. And again, their fiduciary responsibility is to the shareholders to increase the value of the company, which they are doing brilliantly.

QUEST: OK. Shelly, you may have seen our apple demonstration --

PALMER: I did.

QUEST: The real live apples with Apple. This really does make it clear, doesn't it, that no matter how much they are handing out in buybacks or in shareholder dividends, this war chest just keeps growing.

And assuming -- and I've got the numbers here for how many iPads, and 30-odd million iPhones, 15 million iPads. If it carries on at this rate, this just gets bigger.

PALMER: You know what's crazy, Richard? Ordinarily, what goes up must come down, and in this case, it doesn't seem like, unless they make an unbelievable mistake, that anything is going to go bad for Apple

Right now, the new iPad is going to sell very, very well. When they come out with the iPhone 5, whether that's in June or September or even later, they will not be able to make them fast enough.

Apple literally doesn't distribute every place in the world they could distribute, and there are many of my friends who believe that $600 a share is actually inexpensive for what Apple's capabilities are, where they may go.

So, if you look at Apple on balance, you're right. They're only giving a little bit back to the shareholders. But more importantly, they're doing the right thing, I think, as corporate citizens, and they're doing the right thing for the company.

And yes, their war chest is not going to get smaller. I can't believe Apple is not going to make an awful lot of money this year. There's a reason this company is the most valuable company on -- by market cap in the world.

And I don't see any way that this is going to change unless literally they have a gigantic failure. And you know what? They might be given one or two failures and get a pass on them. So, right now --

QUEST: All right.

PALMER: -- it is what it is, Richard. Strange but true.

QUEST: Shelly, we're glad you're here to make sense of it for us. Shelly Palmer joining us from New York.

The point Shelly was making, there, about Apple's success and the rate of growth -- here you are, it's 37 million iPhones, 15 million iPads in the last quarter, 5 million Macs, has put tremendous strains and stresses on their supply chain.

You'll know the Foxconn story, of course. Many of the Apple products are made at Foxconn in China. As we previously reported, the factories face criticism over its treatment of workers. Now, one of the very people who stirred the allegations is having to defend his own position.

Maggie is back with us in New York for this serious development and an interesting twist in the Apple tale.

LAKE: That's right, it is an interesting twist, Richard. And you're referring to an episode where Mike Daisey was featured talking about his one-man show focused on problems with working conditions at Apple factories.

It was featured on a show called -- a radio show called "This American Life." Well, the details that really brought Mike Daisey's story to life and resonated with audiences turns out to also be responsible for its unraveling.

Details of handicap -- interviews with handicap workers, 12-year-olds on factory floors, and plant guards with guns caused another journalist, who worked for another show called "The Marketplace," to sort of sit back and take notice and dig a little deeper. Here's what he found out.


ROB SCHMITZ, CHINA CORRESPONDENT, "MARKETPLACE": There were a lot of points in the monologue that just didn't really ring true to me as someone who's lived off and on in China for 15 years.

One of them that was -- he mentions guards at the gates of Foxconn holding guns. And if you've been to factories in China, and I've reported from several factories, you would never see security guards with guns. It's actually illegal for security guards to hold guns in China.


LAKE: Now, as a result of these revelations, Daisey admitted that part of the story was fabricated. "This American Life" and its host Ira Glass issued an apology, retracted their show -- spent a show talking about the retraction.

Daisey himself has a sort of interesting take on this. He apologized for the fact it was fabricated, but his was a little bit different. He said the mistake was that it was viewed through the lens of journalism and not theater, for which it was intended.

And he has a blog out today, and he goes a little bit further. I think we have a little quote from that, as well, saying that, "I apologize in this week's episode to anyone who felt betrayed. I stand by that apology, but understand, if you felt something that connected you with where your devices come from, that is not a lie. That's art. Human empathy, it's real, and even if you curse my name, I hope you'll recognize, continue reading, caring, and thinking."

And Richard, as you mentioned, it's a complicated story. There has been a lot of focus, especially on Foxconn, in the wake of the high number of suicides there. Apple itself is part of a fair labor association and involved in an audit of working practices at its suppliers.

So, this is a story that's going to continue, but certainly, this is an interesting twist and a complication. Richard?

QUEST: Maggie Lake is New York for us tonight. And of course, if you want to see any more details on what Maggie was talking about and CNN's coverage of Foxconn, it is available at

In a moment, we go beyond the Greek tragedy. HSBC's chief economist tells us what he thinks is the next threat to Western recovery.


QUEST: Sellers of CDSs, the credit default swaps, the insurance company, if you like, the insurances on bonds, will have to take a $2.5 billion hit on their Greek debt.

As you can see over in the library, here, the CDSs -- there was an auction today on Monday, in which they valued the existing bonds at 21.5 percent of face value. The market, this insurance, pays up the balance. So, basically, the bonds are worth just a fifth, and if you held insurance, the insurance will pay out the rest.

In Greece today, the finance minister Venizelos is to resign. He will lead the PASOK party into the next general election.

The interesting thing about the CDS issue today, this had been the great boogeyman. This had been the big fear that people had had about what would happen if there was a disorderly default. It happened today, and there wasn't even a whimper in the market.

Attention, instead, was far more on Portugal after PIMCO's chief, Mohamed El-Erian, expects a second bailout for Portugal. He says Europe will need a second Greece in Portugal. He told "Der Spiegel," the first bailout was insufficient.

And if this wasn't worrying enough, Brent Crude may have just slipped 34 cents today, but it's still $125 a barrel, and this, of course, is a serious issue. And the reason it is because HSBC's chief economist is Stephen King, and he says that oil could be the next Greece or the new Greece. Why?

STEPHEN KING, CHIEF ECNOMIST, HSBC: Very simply, because last year, beginning of last year, people were very optimistic about the global recovery, and oil prices went up, and the rise in the oil prices led to, basically, a significant slowdown in economic activity.

The same thing has happened this year. We had oil prices down at about $90 a barrel back in October, November of last year. They'd gone up quite significant, to $125. If they carry on rising, it really chokes off consumer spending.

QUEST: I read your report on this. It's very difficult, isn't it, to quantify the exact correlation between the price of oil and the detrimental effect it has as it rises on the economies?

KING: Very tricky. There are various threshold effects. I'm not quite sure exactly where they are. We're not talking about recession coming through. We're simply saying that the growth rate that is coming through currently, which is quite strong, may fade during the course of this year.

QUEST: What do you believe? We saw $125 a barrel. What do you believe is the pain threshold point?

KING: "For what?" is the key question I have. Because --

QUEST: To damage the -- could damage growth.

KING: Well, I think it already is damaging growth. We're --


QUEST: To seriously damage growth.

KING: Oh, if we don't have a recession, maybe $150, $160.

QUEST: Right.

KING: If we're at $125 or $130 thereabouts, it's enough to push headline inflation up, it's enough to squeeze people's real incomes, their real wages. It's enough, therefore, to cause consumption to slow during the course of this year.

So, there's a lot of hope currently about a strong recovery, particularly in the US, lots of expectations that perhaps the worst is over, that policy's finally working. But with rising oil prices, maybe the case of perhaps things will not be quite so good later this year.

QUEST: As we look at Europe, and we'll talk to you about the US in just a second. As we look at Europe, it's perhaps a little simplistic to say it's now a two-speed Europe. But it's a two-speed Europe.

KING: No, it's very accurate. I mean, the reality is, as --


QUEST: But does it matter that it's a two-speed Europe? Often in the United States, you'll have a two-speed US. You'll often have states growing and others that are not.

KING: I think it matters politically, because if you've got Germany doing extremely well continuously over a number of years, but at the same time Spain, Italy, Portugal are suffering with persistent recession and persistent austerity, how you make the numbers add up is very difficult.

The US faces a federal fiscal authority that can redistribute income. In Europe, there isn't one currently, so therefore, the politics that comes through, the strains and stresses of winners and losers within Europe is not a good thing.

QUEST: As we looked at -- QE3 or whatever QE in the United States, it's almost a non-starter, now, isn't it? Looking at the growth numbers we're seeing.

KING: Well, that was true of a year ago, with QE2, people said that QE2 couldn't possibly happen --


QUEST: Oh, but I think --

KING: -- by August, it did happen.

QUEST: -- we are seeing unemployment coming down, we're seeing retail sales going up. We are seeing an improvement.

KING: And you had exactly same last year. I'm serious about this, absolutely. If you go back to the beginning of --


QUEST: You're not going to let me get away with this.

KING: I'm not going to get you -- no. The beginning of last year, you had a very optimistic view about the US. The consensus expectations in the growth had really rebounded from the late months of 2010. Everyone was very optimistic, and QE2 was definitely ruled out.

And as 2011 progressed, it suddenly turned out we'd shifted from concerns about inflation or concerns about too strong a recovery to no recovery. And that's what we've got a risk for this year, as well.

QUEST: Which brings us full circle back to oil. Good to see you, Stephen. Many thanks --

KING: Thank you.

QUEST: -- for coming in.

If we take the markets and stocks, they started the week lethargic --


QUEST: -- was the way it was. Worthy of a bell. Major indices almost unchanged. The DAX and Paris CAC ended an eight rally. Volume was low. And when volume's low, you can always see exactly what happens.

No hands and no feet. When we come back, I take a spin around Berlin in a concept car, and I promise you, being in a car that drives itself in a major European city, and nobody is on the wheel, is a frightening experience.

Before that, a look at the foreign exchange markets. Europe's major currencies are gaining against the dollar. The euro is up nearly a half a percent. Sterling is up by around a third of a percent. The Japanese currency is holding steady, with a dollar buying just over 83 yen.


QUEST: Now, there's the oldest joke of them all. It is, of course, the Trabant. The car of Eastern Germany. And the old jokes: how would you double the value of a Trabant? Fill it up with petrol. Why do Trabants have heated rear windows? To keep your hands warm as you push the car down the road.

Jokes aside, many Germans -- in fact, many people in central and eastern Europe -- still have a soft spot for the classic car of East Berlin. It's a far cry from the Made in Germany, the high-tech concept car that is so sophisticated. And recently, as part of our Future Cities, I was in Berlin, and for the first time -- I've never seen it before -- I saw a car that drove itself.


QUEST (voice-over): This is the Trabant, that powerful symbol of Communist life. Better than a bike, it was durable and affordable motorized wheels. It was the pride of East Berlin.

QUEST (on camera): There are cars galore at the Trabi Safari. A booming little business in the heart of Berlin. A tour in one of these two-stroke Trabants is a good way to get a grip on the city.

UNIDENTIFIED MALE: It's the perfect man for this tour.

QUEST: Perfect, perfect.

Well, leg room wasn't exactly high on the agenda, was it?



QUEST: Yes, yes, yes. I'm old enough to remember the choke.


QUEST: Ready?


QUEST: Ah, the old days.


QUEST: I haven't driven a car where you've had to pull the choke in the start of the morning for years.

Which way's reverse?

QUEST (voice-over): This smoke-belching, oil-guzzling little car lacked the most basic of features, such as brake lights or turn signal. Yet, the Trabi was the pride of the country, close to people's hearts.

So, when the Berlin Wall fell, thousands of East Germans drove their Trabants across the border. It became a symbol of liberation.

Today, wheels of liberation has a different meaning: liberating the driver. Look! No hands! No feet! This computer-controlled car is driving itself, right now, negotiating its way through the heart of Berlin.

RAUL ROJAS, PROFESSOR, FREIE UNIVERSITAT BERLIN: We think that this can be the car of the future, it would be like a taxi. You don't even need to own a car, you don't have to park the car, you don't need a garage for the car.

The idea is to unclog the streets. You can move the complete city of Berlin combining public transportation with autonomous taxis.

QUEST: Made in Germany began life here, in a research laboratory of Berlin's Freie University. Professor Rojas and his team test the artificial intelligence technology with soccer-playing robots.

ROJAS: This is one of our -- earlier humanoids, and you can always see there is a camera. The camera captures the field, and then you have to process the information as humans do when they are seeing.

QUEST: A regular car is enhanced with sophisticated lasers, radar, video cameras, and a very sensitive GPS system. It can sync on its own.

ROJAS: The computer knows the traffic rules. It knows that it has to stop if the traffic light is red.

QUEST: What's incredible about this driverless car is that it's allowed out in public. It took years to persuade Berlin's authorities it was safe.

ROJAS: We are insured for 100 million euros.

QUEST (on camera): It's quarter to eight on a Sunday morning. Berlin is just waking up, and we are about to go for a drive.

UNIDENTIFIED MALE: OK. Pre-start. Now, I'm activating.

QUEST: How do you activate?

UNIDENTIFIED MALE: With a flashlight.


UNIDENTIFIED MALE: Yes. So, when I press this one, it's deactivated, or activated.

QUEST: Are you seriously saying this car is driving itself.

UNIDENTIFIED MALE: Yes, I don't do anything with my feet. Do you see my hands moving?

QUEST: Put your hands above -- on your head.

UNIDENTIFIED MALE: And it will recognize the traffic lights. See them here in the monitor?

QUEST (voice-over): It's a remarkable experience, to be in a car that knows how to steer, overtake, recognize, and respond to traffic situations. Possibly even quicker than you or me. A late change of traffic lights, and it stopped, thank goodness.

QUEST (on camera): My first driverless ride and --


QUEST: -- yes, I'm in one piece. Of course, there are other such projects in the world. What makes this one unique is the relationship between university, research institutes, and the city, which has allowed this driverless car to get on the road.

QUEST (voice-over): Whether it's Trabant or technology, Berlin knows it has the brain power and the imagination to put it on any future map.


QUEST: Now, ask anyone who lives in Queens and they'll tell you it's not easy being a New York Mets fan. And today, they, got more bad news to deal with. There might be good news for victims of Bernie Madoff. I will explain in a moment.


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. These are the main news headlines. This is CNN, and on this network, the news always comes first.

President Nicolas Sarkozy of France says that his country remains at the highest possible level of alert for terrorism as authorities are now linking Monday's shooting at a Jewish school in Toulouse with earlier attacks on soldiers in the same region.

A judicial spokesman says the same gun was used in all three cases, and that the method of attack was similar.

We're getting our first daylight images of the damage in the upscale area of Damascus, where troops and rebels clashed overnight. An opposition group says the fighting was the worst the capital had seen. We're told at least three people died. Activists say 27 others were killed elsewhere in Syria on Monday.

The American soldier accused of massacring 16 civilians in Afghanistan is expected to meet with his defense lawyer today. The U.S. Army is believed to be preparing charges for Staff Sgt. Robert Bales. He could face the death penalty in any military trial if convicted.

Bolton Wanderers player Fabrice Muamba remains in intensive care, although he is showing signs of improvement. Doctors say his heart is now beating without the help of medication. He's moving his arms and his legs. The long-term prognosis is still very unclear. He collapsed suddenly in the middle of a match on Saturday.

As you heard earlier in the program, Apple has announced it will offer shareholders a piece of the profits for the first time since 1995, as the company pays a quarterly dividend of $2.65 per share. The tech giant, which is currently the world's most valuable company, has been sitting on cash reserves of up to $100 billion.


QUEST: The New York Mets season has got off to a even worse start, and the season hasn't even started yet. The Major League Baseball team has agreed to pay $162 million to the trustees of Bernie Madoff's Ponzi scheme. It's a $1 million for every game they're due to play this season. Felicia Taylor is in New York.

It's an interesting and complicated case. But you know, boil it down to the brass tacks, as we say where I come from, and tell me, why are they paying this money?

FELICIA TAYLOR, ANCHOR, "WORLD BUSINESS TODAY": Well, because this is what they call risk aversion, Richard, because, frankly, if this had gone to trial, which would have begun today, it could have been a heck of a lot worse. So they could have been facing a penalty of up to $380 million. So $162 million, you know, is a considerable less than that.

QUEST: But for what -- what for? I mean, what did they do? It's a -- it's a -- it's a baseball team, I mean, they're not a bank. What did they do?

TAYLOR: This is -- this is the problem, is the argument would have been, before a jury, that they were willfully blind. In other words, hear no evil, see no evil, that they should have known because they're obviously savvy, wealthy business men, that they should have known that Madoff was running a Ponzi scheme, that the numbers didn't add up. So the argument would have been against them, that they were willfully blind and didn't acknowledge that there was a Ponzi scheme going.

The opposite argument, of course, though, is that they had no idea, from their perspective, that a Ponzi scheme was going on. They invested their money thinking that this was a legitimate business to be invested in.

So for them, they're not -- they're not saying that they -- they're not admitting, rather, that they've actually done anything wrong.

But they're willing to settle the case outside of a jury, because had it gone before deliberations, not only would have been highly publicized by the media, but a jury might well have sided with the victims as opposed to with the Wilpons. And Fred Wilpon today said that, frankly, this was a good result. Take a listen.


FRED WILPON, METS OWNER: We acted in good faith and we're very pleased that this settlement bears that out.


TAYLOR: Now they don't have to pay the money for three years. It drops all -- any related claims that they may have, and they can also apply it to their own $178 million that they personally have against the Madoff case.

So it's also good for the victims, because now $162 million goes into the kitty for Irving Picard, who is the trustee for the victims, that he's collecting the money. And the defense counsel had this to say with regard to that.


IRVING PICARD, TRUSTEE: The most important thing is that the victims now will receive the benefit of $162 million. Ultimately that's the goal of all the litigation brought by -- brought by the trustee, is to enhance the fund for the victim.


TAYLOR: So at the end of the day, this is a settlement that benefits the victims, and frankly, is the best scenario for the Wilpons as well -- Richard.

QUEST: Will this $162 million -- it's not for three years -- I'm guessing it's not even going to make dint -- a dent or even -- for the New York Mets.

TAYLOR: No, not really. I mean, the other things is, you know, they won't have to sell the team. If they had to pay the $386 million, that would have been on the table and a possibility for them to have to sell the team.

Now they don't have to. From the Wilpons' perspective, they can now refocus on baseball. It also takes away the attention from the major baseball league, which could have, you know, this was damaging to them, and they don't like that kind of nasty scenario around -- and they could have been kicked out as owners.

So for them, this is -- this is -- obviously, $162 million isn't anything to sneeze. But it's not that much, considering.

QUEST: Don't mention sneezing. I've got a cold today.

Listen, Felicia, before the week is over, you need to update us how much money Madoff has actually -- the trustee, Irving Picard, something you and I should talk about later in the week, how much money has actually been --


TAYLOR: -- has been collected.

QUEST: Yes, lovely. All right. Felicia Taylor is in New York for us tonight.

On Wall Street, the focus firmly on Apple this afternoon. There was some M&A activity as well.

Alison is at the New York Stock Exchange for us.

Afternoon, Alison. The Apple -- I mean, it completely dominated the corporate news agenda today, what Apple was doing and the ramifications. But there were other deals as well.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: OK, so besides Apple you're talking about -- UPS is also a big deal today as well, and I'm watching shares of UPS, which are up 3.5 percent. The company is expanding its global reach, Richard, with a deal to buy Dutch rival TNT Express for almost $7 billion.

It's buying TNT -- that is all about boosting operations in markets where UPS right now doesn't have a big presence. So what it's going to do, it strengthens UPS' position in Europe. It also gives more access to Brazil, to Australia, to the Mideast (sic), and of course, whenever there's a deal like this, people immediately wonder about job cuts. Now here's how the chairman of UPS answered that question.


SCOTT DAVIS, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, UPS: This is going to be a slow integration we talked about, four-year integration. It's going to take time. So I think nothing's going to happen very quickly.

UNIDENTIFIED MALE: But can those synergies be achieved without redundancies?

DAVIS: I think we'll have to evaluate that. It's too early to look at that. There could be redundancies, but that could be taken care of by attrition, as time goes on. If they were trying to do all this in one or two years, it would be more difficult. We're going to do it over a longer period of time.


KOSIK: So as the stock price goes up, and at 3.5 percent, it's clear that Wall Street is cheering this deal, and on this news, the JPMorgan analyst upgraded UPS stock, boosting its price target to $92 a share from $88.

This analyst called the deal a strategic positive for UPS, allowing the company to move from the number three spot in many European countries, to the number one or number two spot, while also boosting its small package network, Richard.

QUEST: You know, I had to have a chuckle, a little laugh as you said, boosting it from $88 or whatever it is to $92 a share. I mean, when you think about Apple, you know, $600 a share. Everybody's been talking about this dividend payoff, finally on the street. What do they make of it at the exchange?

KOSIK: Oh, they're cheering the news as well, just as they were for UPS. Apple shares up 2 percent, the stock trading at $597 apiece. Look, Wall Street figured something was going to happen here.

The dividend, the buyback, you know, it's sort of icing on the cake at this point, and it is kind of baby steps, because it is only $45 billion of it, $100 billion that Apple has. But you know, this is all about baby steps, and Apple just took the first little baby step to give back to the shareholder, Richard.

QUEST: We thank you for that, Alison Kosik, who is in New York for us.

Now, in a moment, the world's fifth largest economy and it is not a country. We'll look at the financial might of the digital sector, and why countries like the U.K. are leading the way.



QUEST: Now the -- by 2016, there will be 3 billion Internet users globally, almost half the world's population, according to this report, which is called the 4.2 trillion economy. It's a report from the Boston Consulting Group, and it says that the Internet accounted for more than 8 percent of the U.K.'s GDP in 2010.

The U.K. is the number one country in terms of the e-commerce Internet economy. It's the highest in the G-20, and it even beat economic contributions from construction and education sectors. Look at the numbers on an international level, and you'll see fascinating statistics. What I (inaudible) this morning, it really did open the eyes.

The online contribution to the global economy, the Internet accounts for 4.3 percent, on average, of GDP in developed G-20 countries. Now it's 3.6 percent in the developing, but that really doesn't necessarily tell you the whole picture. Some countries are like, for example, the U.K., doing extremely well, more than 12 percent at 8 percent. Others like Germany, Canada, not doing so well.

The -- across G-20, it brought in nearly $2.3 trillion and that amount of money in terms of e-commerce is set to nearly double by 2016. So what does it all mean in reality? If the Internet was its own economy, standing on its own, it would be the fifth largest, ahead of Germany and behind U.S., China and India. It makes an extraordinary development. But you know this already.

So the question has to be where does the Internet go next in terms of economic performance and economic meaning?

Paul Zwillenberg is the partner at the Boston Consulting Group. He's one of the people who wrote this report. And he told me, the Internet online economy is changing rapidly, and of course, if you don't invest in it, you'll get left behind.


PAUL ZWILLLENBERG, PARTNER, BOSTON CONSULTING GROUP: Tomorrow's Internet is going to be very different from today's Internet. It's going to be focused on the emerging markets. It's going to be mobile. Consumers are going to be using it much, much more than they use it today.

QUEST: But we know that, to some extent. We've seen that already. So what needs to be done for this thing to get to fruition?

ZWILLENBERG: What needs to be done to get it to fruition, first of all, is to give more people around the world access. Today, we still have a digital divide. We have people who don't have access to the Internet. We also need to make sure that our children are taught how to program so they can be productive members of society, productive members of the workforce going forward.

QUEST: If we look at the numbers on your survey, some of them -- the countries like Germany, for example, have very low penetrations as a percentage of GDP, Germany, Australia, Canada, these are developed countries that you would have expected to have high percentages of GDP, and they don't.

ZWILLENBERG: Well, they just haven't taken to the Internet like Britain has taken to the Internet. I mean, Britain is a nation of digital shoppers and digital shopkeepers. We've taken advantage of it to ship goods around the world, to go into global markets, as well as to shop online.

QUEST: But if you analyze the reasons why some countries have taken to it, like the U.K., South Korea and so, and those that haven't, what do you discover is the difference?

ZWILLENBERG: So there's several differences. First of all, Internet access and the quality of the infrastructure. Second of all, do they have some of the basics in place for e-commerce? Do people use credit cards? Does the government provide consumer protections on fraud? Do they have the logistics infrastructure to actually ship the stuff to your home?

QUEST: Do you get the feeling that policymakers understand that what is -- what is there and what needs to be done? Is this given the same priority as, say, roads, schools and hospitals? Because it seems to be as important to economies.

ZWILLENBERG: In some countries, policymakers absolutely get it. They're making the investments in infrastructure, in the legal framework and incentives to encourage businesses to go online and for consumers to use it.

In others, they look and ask, why are we not growing at the same rate as other countries, and we tell them, over and over again, the Internet. You've got a two-speed economy. The Internet and the rest of the economy. Make the investments, put the incentives in place, teach people how to use it, and your economy will grow.

QUEST: And you could arguably say the same thing about companies, small and medium, and large companies, that are not making the most of it.

ZWILLENBERG: It's a fact that small businesses who make extensive use of the Internet for marketing, for communicating with their customers, but also for working with their suppliers, managing their supply chains, grow faster around the world.

QUEST: So in that environment, finally, Paul, why would any company not do it? Either to -- is it through ignorance, stupidity or just haven't got their act together? I don't know what to do?

ZWILLENBERG: A lot of it has to do with teaching old dogs new tricks. The unfortunate -- the unfortunate rule is that you've got a lot of people in these businesses who've grown up doing things one way. The Internet changes everything. And they just can't come to grips with it.


QUEST: Lesson for the old dogs.

We've been asking if you spend money online, where you live and what you buy, following on from this report, which I find actually quite remarkable. Here are some of your responses from our Facebook page.

Debbie N. J. (ph) writes, "It's great for people like me, with disabilities who can't get out."

Sanjay Schwartz (ph) says, "If I could, I would never set foot in another store." That's a bit harsh, I think.

Harry Loomis (ph), a carpenter (ph), writes, "I live in Costa Rica, and buy online all the time, stuff that I can't get here. It's the only way to go."

And Mgondi Arthur (ph) in South Africa, "When I'm online, I end up buying things that aren't (inaudible). But I suppose, Mgondi (ph), I had to buy things (inaudible) go online or don't buy them. But maybe that's a bit obvious.

OK. The email address where you can send your thoughts is And the debate that you and I have away from the program, where we can talk about all sorts of things -- and promise you, I do read and answer it myself. The Twitter address is @richardquest. Join the program and be part of the conversation.

Coming up next, the Coat Hanger racks up 80 years. Sydney's icon celebrates with a precariously placed symphony orchestra.


QUEST: Happy birthday to you -- Sydney Harbour Bridge turned 80 today, the Grand Old Dame, as she's known, grows busier by the year. Thousands of cars, trains, bicycles and people cross every day, and thousands more climbed to the bridge's 134-meter summit just for fun. Look.


QUEST: Not long to the top, and there's still time to grids like eyed (ph). I am determined to catch this man out. What's the tonnage of the bridge?

UNIDENTIFIED MALE: 52,800 tons, Richard.

QUEST: I'll bet you he doesn't know how many rivets there are in the bridge.

UNIDENTIFIED MALE: Yes, I haven't counted them myself, but approximately 6 million there, I reckon, so.

QUEST: Now, well, carry on.

All right then. How many cars cross the bridge every day?

UNIDENTIFIED MALE: 290,000, roughly.

QUEST: You enjoying it?


QUEST: Oh, mother.

UNIDENTIFIED MALE: Just keep your eyes (inaudible).

QUEST: This is very narrow and it feels -- oh, (inaudible). Let's keep moving.

Finally, the top, the view, the sunset.


QUEST: It was worth every moment. When the Harbour Bridge first opened, you could ride across on a horse for thruppence. You're not sure how much the horse cost. Eighty years later, it costs you $3.50, and riding the horse across is illegal. Sydney's Symphony Orchestra was allowed to scale the summit today to celebrate its joint 80th birthday with the bridge they call the Coat Hanger.




LACHLAN KENNEDY, CNN REPORTER (voice-over): As the sun rose over Sydney, there was a concert the like of which this city has never seen, Symphony from the Summit, trombones and trumpets on top of the bridge as horns rang out across the world's most beautiful harbor.

Music to mark eight decades since this moment.

UNIDENTIFIED MALE: The Sydney Harbour Bridge was officially opened for business.

KENNEDY (voice-over): It was a celebration shared with the Sydney Symphony Orchestra, ringing in the same milestone.

KENNEDY: Imagine back 80 years ago, when this bridge first opened, what a preposterous idea that one day the public would be able to walk over it, even more absurd that today an orchestra would be playing on top of it.

KENNEDY (voice-over): The special audience included those whose life began on the bridge --

JOAN MCDONALD, BORN ON SYDNEY HARBOUR BRIDGE: My birth certificate actually says born in an ambulance on the Sydney Harbour Bridge.

KENNEDY (voice-over): -- and the descendants of Dr. John Bradfield, whose life work included designing it.

PHIL BRADFIELD, DESCENDANT OF BRIDGE DESIGNER: I think he would have been amazed to have seen and heard the brass. That just would have blown him away.

KENNEDY (voice-over): And not blowing away was a challenge. The Sydney Symphony has 100 musicians who perform more than 200 concerts a year, but none like this.

KENNEDY: How many concerts have you played on top of a bridge?

UNIDENTIFIED MALE: None, this is my first.

UNIDENTIFIED MALE: This is my first, too.

KENNEDY (voice-over): Strangely, "Happy Birthday" wasn't on the playlist, but "Chariots of Fire" felt perfect for morning peak hour. Lachlan Kennedy, (inaudible).


QUEST: What I want to know is where was the conductor? Probably on top of the flagpole.

Winter ends in just a few hours away in the Northern Hemisphere. I can't really decide whether it feels like it. One minute it does; next minute it doesn't. The sun shines and the cool breeze comes in. Jennifer's at the World Weather Center.

JENNIFER DELGADO, CNN METEOROLOGIST: Oh, you know, what I think it's going to stay warm out there for the next couple of days. You mentioned you have a cold and some good news to report, you're right.

Winter is coming to an end. The spring equinox is just hours a way, and that means we're taking back the heat from the Southern Hemisphere. That also means we're going to be dealing with longer days in the Northern Hemisphere, and of course, we're going to see those temperatures responding to that extra sunshine as well.

Now for this afternoon and for the next couple of days ahead, mild temperatures are in the forecast for parts of Europe. Really, we have a nice ridge of high pressure in place, and that's bringing the warmth to the south, as well as over towards the east.

We do have one little problem, but really just sitting right on top of spring, it's bringing a little bit cooler conditions there as well as some clouds and some light showers out there. But other than that, really nothing else to report bad weather-wise.

High temperatures for your Tuesday, and look at this, Richard, we're talking 14 for London, 12 in Glasgow, 13 in Paris and even towards areas including Bucharest, Rome, we're talking temperatures in the upper teens, in the 20s.

But Bucharest is going to be really the hot spot over the next couple of days. We're talking a high of 20 degrees on Wednesday, 20 degrees on Thursday, wall-to-wall sunshine out there, really not seeing any patterns that's going to be bringing any precipitation or cool off for London.

We're talking a high today of 14 degrees, or I should say for Tuesday, and then for Wednesday into Thursday, we are going to keep the weather pattern nice and mild. Now as we look across parts of the U.S., temperatures have been spectacular here.

We're expecting a high temperature of 28 degrees in Atlanta. I notice we're talking temperatures running 10 to 15 degrees above average. I want to leave you with some video, though, actually coming out of the U.S. state of Arizona. Richard, when you think of Arizona, what do you think of?

QUEST: Well, I've been to Arizona many times, and usually it's boiling hot and lying in air conditioning.

DELGADO: Exactly. No need for air conditioning through parts of Arizona right now. You see this snow out there? We're talking in some locations almost a meter of snowfall through parts of Arizona. So while it's almost spring, not there.

QUEST: Wow. We'll talk more about spring -- we'll see if spring has sprung, Jennifer, in a moment. Many thanks. When we come back, it's a profitable moment. (Inaudible).


QUEST: Tonight's "Profitable Moment," two stories we brought to you tonight are inextricably linked. On one hand, Apple, which is dishing out dividends, printing money like it's a central bank. And on the other hand, the new report which tells us just how fast the Internet's growing and how much difference it makes to a country's GDP.

New devices come onto the market, more people discover value in the Internet, whether you're a buyer or a seller. It creates more demand, faster devices and you're left with a truly virtuous cycle, one where there are decided winners and losers. Apple's a winner, the U.K.'s a winner. It's become the most Internet savvy company -- country.

Others, like Italy, Canada and even Germany have yet to harness the potential. It's fascinating to see this happening in front of our very eyes, year by year on economic growth. This is a revolution, and it's being televised on a tablet near you.

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. This is CNN.