Transcript: Monday, October 6, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Susie Gharib, brought to you in part by —

(COMMERCIAL AD)

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Splitsville. Hewlett-
Packard (NYSE:HPQ) thinks two companies are better than one. But why is HP
splitting now? And what do investors think of the move?

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Taking the stand.
Paulson, Geithner, Bernanke, familiar faces from the financial crisis in
court this week defending their actions in the bailout of AIG. Today, it
was former Treasury Secretary Hank Paulson`s turn.

GRIFFETH: Turn of events. One of Apple`s suppliers surprised
investors this morning by filing for bankruptcy.

All that and more tonight on NIGHTLY BUSINESS REPORT for Monday,
October the 6th.

Good evening, everybody. I`m Bill Griffeth. Glad to be back. I`m in
for Tyler Mathisen tonight.

GHARIB: And I`m Susie Gharib. Good evening from me as well.

The buzz on Wall Street today was about the big breakup at Hewlett-
Packard (NYSE:HPQ). It`s the second technology giant in the past week
announcing plans to split the company in two after eBay (NASDAQ:EBAY). One
of the new Hewlett-Packard (NYSE:HPQ) companies will focus on its personal
computers and printers. The other on the fast growing corporate IT and
technology services, like data storage, servers and software. Investors
rushed in to buy HP stock, sending shares up nearly 5 percent.

Josh Lipton has more on the reasons behind the split and what`s ahead
for the two companies.

(BEGIN VIDEOTAPE)

MEG WHITMAN, HEWLETT-PACKARD CEO: Think Internet scale with billions
of users and devices.

JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Hewlett-Packard`s CEO Meg Whitman used to argue that the company`s business
lines worked, in her words, better together. Not any more.

Now the company is splitting in two. One company, which is going to
be called HP Inc., will be devoted to printers and personal computers. It
will be led by Dion Weisler, who`s an executive in that division.

Whitman will lead the other company which will be known as Hewlett
Enterprise. It`s dedicated to enterprise hardware, software and services.
Whitman says that the breakup creates two companies that can be more
focused and agile in a rapidly changing marketplace.

WHITMAN: Today is only possible because the turnaround has succeeded.
Think about what we have accomplished over the last three years, a rebuilt
balance sheet, an innovation pipeline that is significantly improved over
three years ago — I would argue best in class in the industry now — an
inspired workforce, a new leadership team, renewed confidence of our
partners, our costumers, frankly our shareholders as well.

But we have to gather ourselves as one HP, but now, we`re in position
to take advantage of what`s going on in the marketplace and position these
two companies for growth.

LIPTON: But there`s another reason Whitman might have acted now.
Re/code, the tech new site, says HP tried to sell its PC division but
rivals such as Lenovo and Dell (NASDAQ:DELL) weren`t interested.

Investors cheered the news today. The stock is now up some 70 percent
in just the past 12 months. Analysts who cover HP say the two companies
could also be attractive takeover targets.

BRIAN WHITE, CANTOR FITZGERALD MANAGING DIRECTOR: One of the things
we wrote about this morning in our note is separating these two companies
gives HP huge flexibility. EMC (NYSE:EMC) or someone else would never want
to take on the enterprise, you know, take on HP in total because you get
the PC business. Now as you separate these businesses, your options are
open. If someone wants to come in and buy your HP Enterprise, they can do
it. If somebody wanted to buy the HP PC, they can do it. They`re separate
businesses gives you flexibility.

LIPTON (on camera): But other financial analysts are skeptical. They
remind investors that HP`s business lines are challenged for growth and
face long-term headwinds. Whether this spin-off can address those concerns
and unlock value is the open question.

Josh Lipton, NIGHTLY BUSINESS REPORT, Silicon Valley.

(END VIDEOTAPE)

GRIFFETH: It didn`t get as much attention but not to be left out,
Liberty Interactive also announced plans to split into two separate
companies after a late Friday board meeting. One will consist of its
popular cable shopping channel QVC Group, the other will focus on e-
commerce. Shares of Liberty Interactive up more than 6 percent in today`s
trade.

GHARIB: Well, the Hewlett-Packard (NYSE:HPQ) split is putting
pressure on some other big companies to break up for the benefit of
shareholders.

Dominic Chu takes a look at which firms could be next to spin off a
division.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sometimes
investors think that bigger and more diverse companies are better off as
separate entities rather than joined together. And when they say better
off, they mean a higher stock price.

HUGH JOHNSON, HUGH JOHNSON ADVISORS CEO & CHMN: Companies do this
often because, you know, one part of their business, it might be part of
their business that they pioneered. It`s become over time less attractive,
is growing a little bit more slowly. And so, to try to avoid having that
part of their business continue to be sort of a drag on their more exciting
part of their business, they spin it off into two parts.

CHU: On the heels of the HP and eBay (NASDAQ:EBAY) separation
announcements, some investors are wondering who`s next.

RBC capital analyst Mark Sue is suggesting that computer networking
company Cisco (NASDAQ:CSCO) do a similar type of thing.

Food and Beverage giant PepsiCo has also been the target of an
activist investor Nelson Peltz who wants to separate its soda from its
snack food business. PepsiCo`s CEO Indra Nooyi has made it very clear that
the company is better off with both units under the same roof.

Then, there`s industrial giant General Electric (NYSE:GE). GE shares
have underperformed the market over the last decade, and some blame the
immense size and scope of all their businesses. GE has been shedding non-
core units like the appliances side of things, but still has a lot of
different units like energy, water, transportation, aviation and health
care devices.

Now, the question is, will other companies also choose to take a look
at separations?

TONI SACCONACHI, SANFORD: So, when you see major players starting to
move towards, you know, splitting up and focus is better, you know,
invariably others in the industry follow.

CHU (on camera): Investors should keep a close eye on larger
companies that have lots of different business units. If the stocks do
underperform, someone could step in and propose a value-enhancing move like
a spin-off.

For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.

(END VIDEOTAPE)

GRIFFETH: Now, Chevron (NYSE:CVX) isn`t splitting up, but it is
selling off some assets. The oil giant and Dow component announced plans
to sell a 30 percent steak in its Duvernay shale properties up in Canada to
a Kuwaiti oil company. The price tag on that, $1.5 billion.

GHARIB: On Wall Street today, stocks kicked off the week on the down
side as small caps resumed their sell-off. Also, investors turned a bit
cautious ahead of the release of the minutes from the last Federal Reserve
meeting on Wednesday, and the start of earnings season later this week.
The Dow fell 17 points, the NASDAQ down 20, and the S&P ended lower by 3
points.

GRIFFETH: And we have a big acquisition to tell you about in medical
sector. A New Jersey-based medical device maker Becton Dickinson
(NYSE:BDX) is paying $12 billion cash to acquire rival CareFusion
(NYSE:CFN). That`s a San Diego-based company best known for making
infusion pumps. Both companies went higher. B.D. rose nearly 8 percent,
while CareFusion (NYSE:CFN) shot up by 23 percent today.

GHARIB: The president of the New York Federal Reserve says the U.S.
economy still needs a central bank`s help but says he would be, quote,
“delighted to raise interest rates next year.

In a radio interview, Bill Dudley said he believes the Fed should let
the U.S. economy, quote, “run a little hot in order to boost inflation and
get more of the nation`s long-term unemployed back to work and then the Fed
can begin raising rates, which he says would be a sign of economic success.

GRIFFETH: Meantime, the economic outlook for China still calls for
strong growth but not as much as previous estimates. Just today the World
Bank cut its growth forecast for China and for developing East Asian
countries for the years 2014 through 2016. That forecast now calls for
growth of 6.9 percent for this fiscal year. That`s down — and next year –
– down from 7.1 percent.

Still healthy though, right?

GHARIB: But, still, that modest slowdown in China is expected to be a
factor in the upcoming earnings season on Wall Street.

Bob Pisani takes a look at what investors will be watching for.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Earnings season
starts this week and there`s good news and there`s potentially some bad
news.

Now, the good news is that the U.S. economy is improving, and
companies with a strong U.S. focus are likely to report strong results.
But that`s only part of the picture. The largest companies, those in the
S&P 500, only get about half of their revenues in the U.S. The other half
comes from places like Europe, as well as China and Latin America.

Now, the concern is that, while the U.S. is recovering, Europe`s
growth is flat at best and some countries like Italy are again seeing
negative growth. In addition to weakness in Europe, there`s also concerns
about a softer Chinese economy.

In the past, strength in China was enough to offset disappointment in
Europe. That may not be the case in time. The World Bank today said
China`s growth is slowing and that GDP growth will be lower this year and
next.

That`s why there`s a lot of interest in Yum Brands (NYSE:YUM). They
report earnings tomorrow. The company gets 53 percent of its revenues from
China, only 23 percent from the U.S.

So, the concern is that we could have a split earnings season. Good
news for smaller companies with a U.S.-based focus but more cautious
commentary from those larger companies that have operations in Europe and
in Asia.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock
Exchange.

(END VIDEOTAPE)

GRIFFETH: Mike Thompson says corporate America could reveal that
earnings rose by as much as 10 percent in the third quarter. Of course,
Mike is head of research and advisory services at S&P Capital IQ and he
joins us tonight.

Mike, welcome back.

MICHAEL THOMPSON, S&P CAPITAL IQ GLOBAL MARKETS INTELLIGENCE: Hi,
Bill.

GRIFFETH: So, another good quarter. I mean, do you — you know, the
expectations we have to keep saying start high, then they have to keep
coming down. But you`re looking for a pretty good quarter this time.

THOMPSON: Oh, yes. I think, you know, it`s funny — from October to
the — you know, the beginning of October to now, you know, earnings are
probably going to start moving up, but, you know, if you look back six
months, they were higher. They were probably just shy of 10 percent. So,
this is kind of the way the earnings expectation game is sort of played and
it cycles up.

So, I think you can probably expect something in the 9 percent to 10
percent range when all is said and done, if we have a good news scenario
with earnings.

GHARIB: So, Mike, what`s driving all that positiveness?

THOMPSON: Well, you know, in particular, there are three sectors that
are going to lead this quarter. You know, it`s going to be the material
sector, up 14 percent, telecoms up 11, and health care, health care is
really becoming a solid contributor to the S&P earnings growth. They`re
going to be up in double digits as well.

The consumer is actually having a modest quarter, but, you know, such
a big sector that, you know, anything 5 percent, 6 percent is additive.
So, you have a pretty good dynamic going on with the way these sectors are
— and the constituents work in the S&P 500.

But generally at the core of this is that the economy is in a bit of a
recovery. That`s the good news thing. I`ll underline that by talking
about revenues.

GRIFFETH: Right.

THOMPSON: Revenue growth is going to come in around 4 percent, which
after several years of really anemic top line growth is a real breath of
fresh air.

GRIFFETH: Yes, revenues have been lagged and companies have had to
cut costs to keep that bottom line growing there at the same time.

Alcoa (NYSE:AA), per tradition, starts the parade tomorrow by
reporting earnings that are not the bellwether that they used to be, but
what can we learn from Alcoa`s earnings for this earning season?

THOMPSON: You know, it`s really interesting, but I think Alcoa
(NYSE:AA) is actually well-positioned. I think the numbers I saw as last
year, 11 cents. I think the expectation for them to do 22 cents this
quarter.

I think you`ll see demand, you know, strengthen their top line. I
think what you`ll see is potential improvement now, or at least beginnings
of improvement, and some really — maybe positive comments out of their
management team. Largely because commodities, the aggregate that goes into
their finished goods, there`s favorable some currents there for them as
commodities continue to go down in price.

GHARIB: You heard, Mike, our report from Bob Pisani talking about
some of the themes especially about China. And what do you expect to hear
from CEOs in the conference calls with analysts after the numbers come out
about the — you know, quarter pass, current quarter and the quarter
looking ahead?

THOMPSON: I think — I don`t think China`s going to be a big problem
in terms of what you`re going to hear in terms of verbiage out of the CEOs
of S&P 500 companies. I think, you know, you`re going to have a lot of
conversations and questions around a rapidly — well, a dollar that`s
improved in terms of price against other currencies. You know, and I guess
the threat of interest rates going up, right?

But I think with China, you know, in a lot of ways the benefit is not
always, you know, with exceptions to certain companies, a lot of the
benefits to the U.S. economy is actually as a producer, an advantage,
because what happens is costs may actually the advantage of that if there`s
a softening, there will be more competition among manufacturers for
American companies to provide in their supply chain.

So, in effect, I`m not sure this is — you know, it might be a problem
for a previously reported Yum Brands (NYSE:YUM) and companies like that,
which actually have a big top line business. But I think generally, it
will be a little bit more muted.

GRIFFETH: We will see. Mike, always good to see you. Thanks. Mike
Thompson, the head of research and advisory at S&P Capital IQ.

GHARIB: Still ahead: in court and under oath. What former Treasury
Secretary Hank Paulson revealed about the bailout of AIG. That`s next.

(MUSIC)

GRIFFETH: Well, as you heard, former Treasury Secretary Hank Paulson
took the stand today as the second week of former AIG CEO Hank Greenberg`s
trial against the federal government got under way. Mr. Paulson defended
Treasury`s 2008 bailout of the insurance giant saying it was needed at that
time to stabilize the U.S. financial system.

Mary Thompson has more tonight from federal claims court in
Washington, D.C.

(BEGIN VIDEOTAPE)

MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Six years after helping engineer the government`s response to the financial
crisis, former Treasury Secretary Hank Paulson returning to D.C. to defend
his and the government`s actions in putting together what became a $182
billion bailout for the insurance giant AIG.

In less than two hours on the stand, Paulson defending the harsher
terms of AIG`s bailout, saying the public saw AIG as a scapegoat for
everything wrong on Wall Street. Paulson equating AIG to Citigroup
(NYSE:C), a firm set to fail without government help. The difference
being, according to Paulson, Citi`s failure would lead to other bank
failures, whereas AIG stood along among insurance companies.

Paulson said AIG`s tough terms were needed to get a reluctant Congress
and an angry American public to buy into an AIG bailout and to pave the way
for the delivery of $350 billion in TARP money Paulson says he needed to
help other firms.

Paulson claiming his first priority during the crisis was always to
maintain financial stability.

(on camera): AIG`s former CEO Hank Greenberg and its investment firm
Star International alleging the government cheated AIG shareholders by
violating their Fifth Amendment rights. Despite charging unusually high
interest rates on loans and failing to pursue other options to save the
company.

(voice-over): To that end, Greenberg`s lawyer David Boies questioned
Paulson at length about interest shown by Chinese investors in AIG at the
time. Paulson, who says he was constantly engaged with the Chinese, said,
“I was 100 percent certain the Chinese would not come in and make an
investment of the size needed to save the company, without assurances I
couldn`t give.”

Paulson was on the stand about four hours less than expected, causing
a scramble in the courtroom when he was dismissed. Paulson`s successor
Timothy Geithner who ran the New York Federal Reserve at the time is the
next key witness to take the stand followed by former Federal Reserve
Chairman Ben Bernanke on Wednesday and Thursday morning.

In Washington, D.C., I`m Mary Thompson, for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

GHARIB: Walmart will soon be helping customers choose a health
insurance plan. The world`s biggest retailer is teaming up with
directhealth.com to put agents inside Walmart stores to help shoppers
compare various private insurance plans as well as Medicare and Medicaid.

The goal is to help them pick one that best suits their needs and
their budget.

GRIFFETH: We begin tonight`s “Market Focus” with an update on the
Ebola crisis.

The Food and Drug Administration has now authorized an experimental
drug made by a company called Chimerix for use as an emergency treatment
against the virus. Now, that drug is being used to treat Thomas Duncan.
He`s the man hospitalized in Dallas with Ebola. Shares of Chimerix
continue to rise throughout the day as word got out about this. It
finished up about 4 1/2 percent at $31.47.

Meanwhile, H&R Block`s plans to sell its banking business have been
delayed, sending those shares lower. The tax preparer said that regulatory
approval to sell its banking unit of B of I Federal Bank will not come
through this year. So, that means H&R Block (NYSE:HRB) will continue to
offer financial services though the coming tax season. And as a result,
shares fell by 5 1/2 percent today to $29.91.

And shares of Durata Therapeutics soared after Actavis said it would
buy the company for $675 million. The move will help Actavis, which is a
specialty pharmaceutical company, bolster its infectious disease portfolio.
Shares of Durata up almost 75 percent to $24.24. Actavis fell almost one
percent to $243.95.

GHARIB: Disney (NYSE:DIS) and Time Warner`s Turner Broadcasting both
inked contracts with the NBA. Both companies have a new nine-year with the
NBA, under which their channels will be able to televise games, starting
with the 2016 season running all the way through the year 2025. Disney
(NYSE:DIS) shares rose slightly to $88.56. Time Warner (NYSE:TWX) shares
were down 1 percent to $73.82.

After the bell the Container Store posted weaker than expected second-
quarter revenue. The retailer`s sales also slipped below forecasts and its
outlook for the year disappointed investors. After hours, the stock
initially fell. During the regular session, shares were off almost 4
percent to $21.89.

GT Advanced Technologies plunged today after a surprise filing for
bankruptcy. The company makes sapphire Glass, which was once speculated to
be a component of the newly release iPhone, but the stock tumbled last
month after Apple (NASDAQ:AAPL) said it would not use the sapphire screens
in its new devices. Today, GT plummeted — this is one time where you can
really say that — falling more than 92 percent to under $1.

Jon Fortt has more.

(BEGIN VIDEOTAPE)

JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s a rough day
for GT Advanced Technologies, the company that makes what`s called sapphire
glass, an extra hard type of glass that a number of companies including
Apple (NASDAQ:AAPL) trying to use on the touch ID button of its iPhones and
also on certain Apple (NASDAQ:AAPL) watch models. Apple (NASDAQ:AAPL) has
backed this company, GT Advanced, with some payments like loans for them to
be able to outfit a factory in Arizona with equipment to produce more
sapphire glass.

This company now saying they`re moving into Chapter 11 bankruptcy.
Earlier filings said that they were having trouble producing the amount of
sapphire glass they thought they would be able to under agreements with
Apple (NASDAQ:AAPL).

As far as Apple (NASDAQ:AAPL) itself is concerned, it`s important to
point out none of what GT Advanced has produced, thus far, has actually
gone into any Apple (NASDAQ:AAPL) products that are upped production.

My understanding is that GT Advances might not go into any Apple
(NASDAQ:AAPL) watches either. Apple (NASDAQ:AAPL) is known to have other
suppliers for sapphire glass as well. But right now, a rough trade for GT
Advanced as they try to go into Chapter 11 bankruptcy and get production up
of sapphire glass.

For NIGHTLY BUSINESS REPORT, I`m Jon Fortt.

(END VIDEOTAPE)

GRIFFETH: Well, you may want to start thinking about drinking tea if
that cup of morning Joe starts getting too expensive. A severe drought in
the largest coffee-growing region of Brazil has sent the price of coffee
beans to a fresh 2 1/2-year high, nearly double what prices were a year
ago. Experts are already concerned about how those weakened trees are
going to fare next season as well.

GHARIB: At least gas prices are going down. GasBuddy.com reports
that 10 percent of all U.S. gas stations are now selling regular gasoline
for under $3 a gallon. The states with the lowest prices include South
Carolina, Oklahoma and Illinois, and in St. Louis gas is the cheapest, now
$2.95 a gallon on average. No such luck in Honolulu, though, gas prices
there are the highest in the nation, averaging over $4 a gallon.

GRIFFETH: I paid $2.97 this morning. I was thrilled.

Coming up: an iconic New York City landmark has a new claim to fame.
It is now the most expensive hotel ever sold. That story, next.

(MUSIC)

GHARIB: A luxurious landmark hotel in New York City is changing hands
as more cash-rich foreign investors pour money into U.S. hospitality
properties.

Robert Frank has more.

(BEGIN VIDEOTAPE)

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): A
flood of capital from China has found a new place to stay in New York, the
Waldorf Astoria. Chinese insurance giant Anbang buying the iconic hotel
for $1.95 billion. That makes it the most expensive single hotel ever sold
in the U.S., and it works out to be about $1.4 million per room key.

Hilton will continue to operate the hotel for 100 years but Anbang
will invest in the hotel`s renovations. It`s all part of a flood of
foreign money buying up U.S. commercial real estate.

DANIEL LESSER, LW HOSPITALITY ADVISORS: Money is flowing over to the
United States. A lot of it is considered flight capital, looking for
safety and the United States is the safest place on the planet to invest.

FRANK: Chinese companies are quickly buying up hotels and commercial
real estate around New York. Soho China bought a 40 percent stake in the
GM building for $700 million last May. And Dalian Wanda is putting a
billion dollars into a new luxury hotel project here in Manhattan.

But it`s not just money from China. Two years ago, an Indian
investment group bought a controlling stake in another iconic New York
hotel, The Plaza, for around $500 million.

(on camera): So, for their $2 billion, Anbang Insurance gets this,
one of the trophy properties in all of New York, and they get a full square
block of real estate in the heart of midtown Manhattan.

(voice-over): And while this purchase marks a new peak for Chinese
buyers of hotels, the question now some are asking is whether or not this
peak is a bubble.

Robert Frank, NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

GRIFETH: Finally tonight, who will be instrumental in shaping the
future of business and finance over the next 25 years?

CNBC, which produces this program, has put together a list of
individuals who are at the forefront of the changes that could define the
business landscape for years to come. We`re calling it the “Next List”.
This follows CNBC`s earlier look at the people who have had the greatest
influence and sparked the biggest changes over the past 25 years. Steve
Jobs, by the way, came in at number one on that list. Although the next
list isn`t ranked, it does include some familiar names like Alibaba`s Jack
Ma, Tim Cook, the current CEO of Apple (NASDAQ:AAPL), hedge fund
billionaire Bill Ackman, Sheryl Sandberg of Facebook (NASDAQ:FB), and
Tesla`s Elon Musk.

There are also some not so familiar names. People like MasterCard
(NYSE:MA) CEO Ajay Banga, co-president of the Carlyle Group, Mike
Cavanaugh, Daniel Elk, the founder and CEO of Spotify, and Uber founder
Travis Kalanick, and the CEO of SolarCity, Lyndon Rive, some names that
you`ll want to pay attention to in the future.

You can find the full list of future movers, shakers and power players
on our Web site, of course, at NBR.com.

And some of those names that aren`t familiar now, I`ll bet you,
they`re just going to roll off people`s tongues. They`re going to be as
well known as Steve Jobs.

GRIFFETH: Only a matter of time, absolutely.

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

GRIFFETH: I`m Bill Griffeth. Have a great evening, everybody. We`ll
see you tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
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on Nightly Business Report is not and should not be considered as
investment advice. (c) 2014 CNBC, Inc.

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