Transcript: Thursday, September 18, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Susie Gharib.

Oracle`s co-founder and long-time CEO, Larry Ellison, is stepping down as
chief executive. Who is in and what`s next for the software giant?

comes who looks like the largest U.S. IPO ever, but there are pros and cons
on the way the company does business.

MATHISEN: Historic decision. Scotland heads to the polls to decide
whether to go it alone.

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
September 18th.

GHARIB: Good evening, everyone.

More historic closing highs today for the Dow and the S&P 500 index,
thanks to a strong rally on Wall Street.

But we begin tonight with stunning news about one of the world`s
richest men and most powerful chief executives, Larry Ellison. In a
surprise move, Oracle (NASDAQ:ORCL) co-founder and CEO Ellison announced
that he`s stepping down from the top spot at the software giant to become
executive of the board and chief technology officer in charge of software
and hardware engineering functions.

And stepping up as co-chief executive, company insiders and current
co-president, Safra Catz and Mark Hurd, who came to Oracle (NASDAQ:ORCL)
after being pushed out of Hewlett-Packard (NYSE:HPQ) CEO amid sex
harassment allegations a few years ago. The news came out after the
markets closed and shares of Oracle (NASDAQ:ORCL) initially fell on the

Jon Fortt joins us now with more on Ellison and what all these
management changes mean for Oracle (NASDAQ:ORCL).

Jon, you know, you`ve been covering all of this. What we do know
about Larry Ellison is that he`s been the only CEO of Oracle (NASDAQ:ORCL)
in all of these years since he founded it. He is a micro-manager. He
likes to be in control. And this announcement sounds like anything but.

What`s going on there?

still in control. I mean, here`s the guy who doesn`t necessarily go into
Oracle (NASDAQ:ORCL) every day, but he`s continued to have the engineers
report up to him. He`s kept his hands on all the decisions.

As executive chairman, he`s still going to be in charge at the board
level. Mark Hurd and Safra Catz, who are deputies under him, continued to
be under him, though they now technically report to the board.

So, things have changed, but they`re also the same at the same time.
And Larry Ellison, he looks good, but he`s not getting any younger. He`s
pushing I think around 70 years old. So, something like this have to
happen eventually.

MATHISEN: Why? And why now?

FORTT: Well, I think part of it probably is the age thing. Part of
it probably is orderly succession. I mean, we see Oracle (NASDAQ:ORCL) in
a time transition where they`re moving into the Cloud era. They`ve been
successful in the hardware business where a lot of people thought they
would fail. It has not grown as quickly as Oracle (NASDAQ:ORCL) hope, but
the margins, the profits are enormous. So, now, they`re taking on
challengers like Workday, like Salesforce, and they`re bringing up the
younger — not exactly spring chickens either — but younger deputies —

MATHISEN: Season executives. Is this an orderly — has this been
orderly? He didn`t signal this. Nobody signaled this.

FORTT: Well, Larry Ellison doesn`t necessarily play by the rules
you`d expect from everybody else. He still owns around 20 percent of
Oracle (NASDAQ:ORCL). So, he doesn`t have to play by everybody else`s
rules. But if you are watching the company, you know that one of these two
was probably eventually going to take over for Ellison. What surprises me
is that Safra Catz took the CEO title as well, because years ago, she said
she didn`t want to be CEO. Apparently now, it`s OK.

GHARIB: Right. I think one thing a lot of management experts are
going to be watching is whether this co-CEO structural work, it didn`t work
at Goldman, it didn`t work at Citi. Remember, Sandy Weill and John Reed,
it didn`t work. So, it would be interesting to see what happens here.

FORTT: Well, Larry is still in charge. So, as long as Larry is still
around, he`s going to keep things in line. You can be sure of that.

GHARIB: All right. Jon, thanks so much for coming by.

MATHISEN: Thank you, Jon.

All right. Helping lift the market today, all the buzz about
tomorrow`s initial public stock offering of Alibaba shares, reportedly
priced at $60 a share tonight. That is the top of the expected range and
would make Alibaba the largest U.S. IPO ever.

But what do investors need to know about the Chinese e-commerce giant?
What are the pros and cons of a company that has people half a world away
so excited they`re ready to invest billions?

Eunice Yoon has more from Beijing.


understand why the Chinese government wants Alibaba around, look no further
than the village of Beishan. Beishan is one of dozens of what are called
Taobao villages, farming communities transformed thanks to new job
opportunities created by the ecommerce giant`s shopping site, Taobao.

Lv Zhenghong used to sell bread, now he is an entrepreneur generating
$8 million in annual sales of camping gear. Lv started his online shop by
taking orders from nearby factories, from 100-square-foot from which he
shared with his brother.

LV ZHENHONG, ENTREPRENEUR (through translator): Some people from our
village would think how odd, these brothers are always working until very
late every day. What are they up to?

YOON: Then other villagers asked for his advice. Now, they can
afford cars and homes by selling goods to China`s increasingly wealthy

The Chinese government may praise Alibaba for helping villagers get
rich but international brands criticize it for backing businesses that rip
off American labels.

(on camera): So does Alibaba help counterfeiters reach a broader
market? We decided to look into it for ourselves. And what better way
than with their own brand.

(voice-over): We found a Shanghai vendor selling products our company
doesn`t authorize. The vendor told me he makes the goods in his factories
even though he doesn`t have legal authorization to use the logo.

UNIDENTIFIED MALE (through translator): We are not authorized. On
Taobao, there are very few people who are authorized unless they have
special franchise stores.

YOON: I asked if Alibaba has ever told him to stop?

UNIDENTIFIED MALE: No, no, if they want us to stop, they`ll let us

YOON: Alibaba declined to comment on our case, but in its recent SEC
filing, the firm said it`s taking down counterfeits and making it easier
for brands to report infringements.

Alibaba, a company poised for a long-time future in China but on a
path with unclear risks.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon, in Beijing.


GHARIB: So what happens when a company like Alibaba decides to go
public and begins raising money by selling shares. Here`s a look at how an
IPO comes together.


NARRATOR: The road to an initial public offering, IPO, unfolds over
months and includes banks, lawyers, accountants, BSCC and finally,

First step, the company finds a bank that will underwrite the deal and
ultimately sell the shares to the public. About six months before the
actual IPO, those bankers start writing up legal documents that begin to
outline the deal.

Three months or more before the IPO, lawyers and accountants are
decided upon. And bankers will begin to draft an S-1. It`s the legal
document required by the Securities and Exchange Commission that will tell
the world about the company. Things like what it plans to do with the
proceeds, the business model, the competition, corporate governance, risks
and compensation.

For the largest IPOs, the S-1 is made public immediately. But for
most IPOs, the S-1 is made public once it is approved by the SEC. Two to
three weeks before the IPO, the company launches a road show, basically a
tour to meet investors where it announces the number of shares being sold
and at what price range.

The goal? Create demand for the stock by showing off a strong plan
for growth that will make investors money.

One day, before the IPO, the bankers announce a final price and deal
size. On the next day, the stock finally goes public.

Now, the price is determined by investors on the open market.


GHARIB: And to read more about how an IPO gets done, go to our Web

MATHISEN: And for more now on today`s stock market rally, investors
were still feeling confident today after the Fed vowed yesterday to
maintain its record-low interest rates for at least a considerable time.
The stock jockeys got another boost after first time jobless claims tumbled
by 36,000 last weekend. With that, the Dow shot up 109 points, closing at
a new record highs, 17,266 was the close.

The NASDAQ was up 31 and S&P 500 up 10, closing at its own all time
high by the way of 2,011.

Well, Jeff Kleintop joins us now to talk more about the market. He is
the chief global investment strategist for Charles Schwab.

Jeff, good to have you here.

Simply put, why did stocks go up again today to more record highs?

think there`s one big record and that`s increasingly, it`s looking like the
Scots are going to vote no.

We see it in the pound today (INAUDIBLE). You can see it in — stocks
in Europe were up a full percent today, actually doubled what we did here
in the U.S., and U.K. bank stocks most expose. They were quite a bit up
1.3 percent.

So, I think this has been a big issue on the minds of investors,
separatists movements across the world, including Ukraine. Here`s one in
Scotland, diplomatic and not elementary, but nonetheless, a big issue
because of the uncertainty it can create.

GHARIB: Now, Jeff, here I thought you were going to say it had to do
with the Federal Reserve keeping interest rates in status quo, maybe
something about Alibaba. To what extent do those news events play into the
optimism on the street?

KLEINTOP: Well, they`re interesting in the context of the back draft.
Though I think Alibaba might be a one-stock story. Alibaba is a Chinese
Internet retailer. Take a look at what Chinese stocks have done over the
last week. It hasn`t really generated a lot of excitement with them, or
Internet retailers, they`re still suffering from relatively high
valuations. They have been slumping, as well.

So, the excitement about Alibaba, not spreading to the rest of the
market. I think that`s a one-stock story.

On the Fed, you know, the Fed really left everything status quo
yesterday with their message and the economic data continuing to reinforce
this idea that it is kind of a goldilocks environment, the economy is not
too hot, not too cold for the Fed to change their very go-slow approach at
withdrawing stimulus for this economy.

MATHISEN: You`re the global strategist now at Schwab. Which part of
the globe has the strongest stock prices over the next year?

KLEINTOP: I think the emerging markets actually look the best. And
particularly in Asia, you know, one thing we`re seeing here as we get close
to pre-announcement season is fear that we`ll see more like what we heard
from Oracle (NASDAQ:ORCL), whatever is happening at the top there, they
missed earnings expectations. And the slowdown in Europe and the slowdown
in China are having an effect on U.S. corporate prospects. But there are
many other emerging markets around the world that are seeing much ramping
up economic activity and ramping up profit growth and at very attractive

So, maybe we can see those markets begin to lead.

GHARIB: Jeff, what do you think is going to drive markets from here,
I mean, now that the Fed issue is sort of off the table? This IPO is going
to be done. I mean, what are investors going to be focusing on? Is it
going to be earnings or something else?

KLEINTOP: I think it is going to be earnings. I think that`s about –
– assuming the Scots vote no. If not, all bets are off.

But I think it will be earnings. Remember, this quarter was a bet of
a messy one, and you got a number of businesses shifting their approach and
dealing with some rising costs in a number of areas.

So, I do think as we go through the next couple of weeks that pre-
announcement season, as companies report, they may not be able to hit those
targets that they thought they could at the beginning of the quarter.
That`s going to be the big news stories. Look for a bit more volatility
perhaps in the weeks ahead. But no sign the bull market is over.

MATHISEN: All right, Jeff. Thanks very much. Jeff Kleintop of
Charles Schwab.

GHARIB: Some disappointing news about housing today. New home
construction tumbled more than 14 percent in August, far more than
expected, as builders put up fewer condos and apartment buildings. The
good news, construction of single family homes held steady and overall
figures for July were revised a bit higher.

More now, let`s turn to that vote in Scotland as Jeff was just talking
about, the polls are closed and officials are tallying up the vote to see
if a majority of Scotland`s people have decided whether to leave the United
Kingdom and become an independent nation.

Michelle Caruso-Cabrera has more on the historic vote from Edinburgh,


over): Scots woke up to a foggy morning as they headed to the polls.

UNIDENTIFIED MALE: Seven o`clock, we are now open for business.

CARUSO-CABRERA: Four-point-two million people registered to vote in
this referendum, nearly 97 percent of all eligible voters. Record-breaking
turnout of more than 80 percent is expected. There`s only one question on
the ballot: should Scotland become an independent country?

The “yes” vote definitely the passionate vote. Many of those voting
in favor of independence posed for pictures and brought children so they
could experience an event which could lead to momentous change.

our kids remember when we came to vote, because we`re voting yes and we
want to — you know, we hope it goes through, we want our kids to remember
this is part of something, you know, historic. And hopefully will change
everything for the better forever, really.

CARUSO-CABRERA: The no vote was about fear and potential negative
economic fallout from breaking away from the United Kingdom.

because I have a 9 month-old son. And it is his future that we`re playing
with here. And I kind of believe in the long-term, the U.K. is better than
some of its parts.

CARUSO-CABRERA: The no campaign slogan, it`s not worth the risk.

Many were thinking about their children, including Sir Tom Hunter, one
of Scotland`s richest men.

SIR TOM HUNTER, SCOTTISH BUSINESSMAN: This is the biggest decision I
will make in my lifetime and my kids` lifetime. And so, the stakes are

CARUSO-CABRERA: So, he`s been a frequent commentator on U.K.
television to explain that regardless of the outcome, the business
community must be at the table.

HUNTER: The point I want to make about business is, governments don`t
have money. Governments just spend money. The only way we can afford all
the things I believe in, free university education, free care for our
elderly, taking care of those who can`t take care of themselves, is if we
have a vibrant and flourishing business community.

CARUSO-CABRERA: Some key markets move up sharply on the belief the
Scots will vote not. The British pound rose to a two-week high and 11 of
12 Scottish stocks listed in London also close up, meaning the markets are
set up for volatility if they`re wrong.

tomorrow, the pound will probably fall substantially, and there could be
some discount applied to not just Scottish-based stocks but also British
ones relatively to where we are today.

CARUSO-CABRERA (on camera): As the Scots headed to vote today, many
likely saw newspapers like this one, begging them not to leave.

From London, “The Daily Mirror”, the Union Jack on the cover except
the Scottish blue missing, with the headline saying, “Don`t leave us this
way.” Tomorrow, we find out if the Scots listen.

For NIGHTLY BUSINESS REPORT, Michelle Caruso-Cabrera, Edinburgh,


MATHISEN: Still ahead, why Apple`s new privacy policy has some in the
national intelligence community concerned.


MATHISEN: Home Depot (NYSE:HD) tonight revealing just how big its
recent credit card breach really was. The do-it-yourself chain says data
on 56 million card-holders are at risk after hackers got access to the
retailer`s payment system sometime between April and just earlier this
month. Home Depot (NYSE:HD) also says it has been able to eliminate the
malware used in the breach.

GHARIB: There is a lot of excitement about the brand-new Apple
(NASDAQ:AAPL) iPhone 6 hitting stores tomorrow. But Apple`s new mobile
operating system comes with privacy protection that it says no one will be
able to access, not even law enforcement officials with a warrant. And
that`s a big worry for the intelligence community.

Eamon Javers is in Washington with more on all of this.

So, Eamon, what exactly did Apple (NASDAQ:AAPL) do that law
enforcement officials and intelligence agencies are so frustrated?

change here is that Apple (NASDAQ:AAPL) will no longer keep your password
on hand, so the encryption on the system will be impossible for Apple
(NASDAQ:AAPL) to break even if it wanted to. And that means that if law
enforcement goes to Apple (NASDAQ:AAPL) or the intelligence agencies go to
Apple (NASDAQ:AAPL) with request for information on a particular target of
their surveillance, Apple (NASDAQ:AAPL) will be unable to comply with that

That`s the kind of thing that`s got intelligence agencies here in
Washington very nervous about U.S. tech companies sort of moving away and
cooperating less frequently with the government. In fact, we had the
director of national intelligence, James Clapper, here today speaking
before a crowd. He said that this represents one of the biggest threats to
the U.S. intelligence community.

Take a listen.


environment also includes the recent factors that affect intelligence
community capabilities, what I have referred to on the Hill as the “perfect
storm”, that`s dogging and degrading our capabilities. The theft and leak
of NSA and IC documents and loss of collection as a result, the resulting
damaged relationships with foreign and corporate partners.


JAVERS: Now, when Clapper talks about corporate partners there, he is
not talking specifically about Apple (NASDAQ:AAPL) because the speech was
presumably written before the Apple (NASDAQ:AAPL) news. But he is talking
about the concern that intelligence agencies have, that they`re going to
get a lack of cooperation across the board going forward, guys.

MATHISEN: So, Eamon, is this really the caption on this, how Snowden
changed American business?

JAVERS: Yes, absolutely, the Snowden disclosures as you saw Clapper
say right there have really led a lot of American companies to reevaluate
what their cooperation is here with intelligence and whether it`s good for
their bottom lines or not, it raises sort of existential question about the
companies` responsibilities are here to law enforcement and to intelligence
and to the United States versus to their customers.

GHARIB: What is corporate America`s obligation to the country and to
their customers?

JAVERS: You know, there is a legal answer to that question, which is
that they have to follow the letter of the law and if they get a warrant
and they have the ability to turn over the information, they have to do

And then there`s sort of a moral and political and ideological answer
to the question that I`m not qualified to give you. But every company is
wrestling with this, in a lot of spheres. Also the tax inversion debate,
the questions about whether companies should have the freedom of speech,
should be able to participate in political campaigns. That`s the question
that`s being asked in a lot of areas.

GHARIB: And we know that everybody in the country is so worried about
their privacy and private information, as well. Thank you so much.

Eamon Javers reporting from Washington.

Walmart is gearing up for the holidays, announcing plans to hire
60,000 seasonal workers this year. That`s about 10 percent more than it
took on last year. Target (NYSE:TGT) plans on hiring 70,000 temporary
workers, the same as last year.

MATHISEN: Oracle (NASDAQ:ORCL) wasn`t the only company announcing CEO
changes today. And that`s where we begin tonight`s “Market Focus”.

Clorox (NYSE:CLX) has named Benno Dorer as its new CEO effective in
November. He is promising whiter whites. Its outgoing chief will become
executive chairman.

Also, JetBlue`s CEO is taking off. The airline`s president Robin
Hayes will take his place.

Shares of Clorox (NYSE:CLX) popped after hours. During the regular
trading day the stock was up just slightly. JetBlue followed suit also
spiking initially after the bell.

Well, Conagra`s profit more than tripled in the company`s first
quarter. While its earning were strong, revenue was basically in like with
estimates. But the food producer said lower costs and expenses helped
offset that. The company also told investors that cost-saving programs are
having the desired effect. Shares were up about 4 1/2 percent to $33.48.

And Rite Aid (NYSE:RAD) also posted strong results for its second
quarter. Earnings, they surged, beating expectations as pharmacy sales
helped drive revenue higher. But its guidance disappointed investors.
Rite Aid (NYSE:RAD) lowered its full-year earnings outlook since it expects
lower profits from generic drugs. Shares plummeted, down 18 1/2 percent
today to $5.41.

GHARIB: An analyst note weighed on shares of Sears (NASDAQ:SHLD) in
today`s session. A retail expert at Credit Suisse is calling for the
struggling department store to liquidate, saying, quote, “This is the end,”
for the chain. He also says keeping the chain up and running is taking
away more than $10 a share in value from shareholders each year. Shares
fell on that news more than 5 percent to $28.

Amazon (NASDAQ:AMZN) is refreshing its line of e-Readers. It unveiled
seven new devices ranging in price from about $80 to $380. They`ll begin
shipping those products next month. Shares rose slightly to $325.

And a dividend hike to tell you about. Kroger (NYSE:KR) is upping its
payout by 12 percent to about 18.5 cents a share. The company cited
improving consumer confidence. And that higher amount will be paid to
shareholders in December. The stock was up slightly to $52.49.

And coming up on the program, student loan debt isn`t just for the
young. The surprising demographics that`s drowning in debt at a time when
they should be looking to retirement. That`s next.


MATHISEN: Americans now a record $1.2 trillion in student loan debt.
And if that`s not bad enough, the crisis has taken on a new dimension.
People at or near retirement age hold more of that debt than ever before.

Scott Cohn has that story.


Between orientation and graduation, a traditional college student will rack
on average close to $30,000 in debt.

ROSEMARY ANDERSON, BORROWER: I mean, it`s expensive everywhere.

COHN: And there are people like Rosemary Anderson. She`s 57. She
owes $126,000, nearly half of it in interest.

ANDERSON: I will be working for it until I can`t work anymore. So,
retirement is not on my near horizon, even though age-wise, that time
closer to retirement that I`m not.

COHN: Going back to school in her 30s and going into debt seems to
make sense, even now. She doesn`t regret.

ANDERSON: I don`t feel like I should be ashamed of having gone to
college to try to better my circumstances or for having a better life for

COHN: But then she got sick, got divorce, got over her head in credit
card debt. She hasn`t been able to make a student loan payment for eight
years and the interest at 8 1/4 percent keeps filing up.

ANDERSON: The fear is always about that bottom line, which literally
grows daily. The interest grows daily.

COHN: Americans 65 and older owed less than $3 billion on student
loans in 2005. Today, it`s more than $18 billion and they`re more likely
than other age groups to be in default.

(on camera): Student loan debt can be crippling at any age. But
especially for older adults, who built up all kinds of other debts, have
fewer sources of income to pay it off. And under the law, if they fall
behind on their student loans, the government can take part of their social

(voice-over): Still colleges typically make no distinction between
older and younger borrowers. Now, they`re starting to rethink that.

JUSTIN DRAEGER: It`s important for colleges, universities, financial
aid administrators to be thinking about ways that they can experiment and
getting information to them, that will be effective in helping them manage
their loan debt as they leave school.

ANDERSON: I will be indebted for life.

COHN: But Rosemary Anderson, who testified before Congress on the
issue says better counseling for borrowers is just the start. Other
proposals include streamline repayment plans for seniors. More
controversial: allowing them to refinance or just lowering the interest

But for now, it`s clear: this crisis is no longer just for the young.

Scott Cohn, NIGHTLY BUSINESS REPORT, Santa Cruz, California.


GHARIB: “Fortune” magazine is out with its annual list of the 50 most
powerful women in business, and half of them are CEOs.

Starting with fifth place, Ellen Kullman, the chief executive of
DuPont. In fourth, Lockheed Martin (NYSE:LMT) CEO Marillyn Hewson. Long-
time Pepsi CEO Indra Nooyi is in third. And second place, Mary Barra, she
took over the steering wheel at General Motors (NYSE:GM) earlier this year.
And in the top spot for the third year in a row, IBM CEO Ginni Rometty.

MATHISEN: And finally tonight, we end the show with more on
tomorrow`s initial public stock offering by Alibaba. Wall Street may be
buzzing about the IPO. And Alibaba may indeed be a household name in China
but as you`ll see, here in the U.S., a lot of people are not looking
forward to its debut tomorrow. And many don`t even know what Alibaba is.


UNIDENTIFIED MALE: Alibaba? I have no idea.

UNIDENTIFIED MALE: Alibaba, I have no clue.

UNIDENTIFIED MALE: Alibaba was a character — an Arabian character.

UNIDENTIFIED MALE: Dating back to the 16th century–




UNIDENTIFIED FEMALE: Sort of a religious holiday or a person?


UNIDENTIFIED MALE:, a way to find all the products in

UNIDENTIFIED FEMALE: Alibaba is the Chinese version of Amazon


REPORTER: Alibaba.



MATHISEN: A religious holiday? That`s pretty good.

GHARIB: I think one out of all of them knew what it was.

MATHISEN: Knew what it was, a couple did.

GHARIB: You know in a few more days, everybody will know what it was.
That`s my prediction.

MATHISEN: Pretty much.

GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie
Gharib. Thanks so much for joining us.

MATHISEN: And I`m Tyler Mathisen. Thanks from me as well. Have a
great evening, everybody. We will see you back here tomorrow.

And we know what Alibaba is.


Nightly Business Report transcripts and video are available on-line post
broadcast at The program is transcribed by CQRC
Transcriptions, LLC. Updates may be posted at a later date. The views of
our guests and commentators are their own and do not necessarily represent
the views of Nightly Business Report, or CNBC, Inc. Information presented
on Nightly Business Report is not and should not be considered as
investment advice. (c) 2014 CNBC, Inc.

This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply