10/08/2017 BBC Business Live


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10/08/2017

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This is Business Live from BBC News with Ben Thompson and Sally Bundock.

:00:00.:00:10.

Embattled electronics giant Toshiba has finally

:00:11.:00:11.

reported its long-awaited earnings, but with losses mounting does

:00:12.:00:13.

Live from London, that's our top story on the 10th of August.

:00:14.:00:39.

Analysts warn the 140-year-old iconic Japanese firm is still facing

:00:40.:00:47.

serious challengers. We'll talk you through Toshiba's latest

:00:48.:00:52.

revelations. And Facebook versus YouTube. The social media giant goes

:00:53.:00:58.

all out to woo TV viewers. Markets in Europe are open and trading but

:00:59.:01:11.

very mixed. We are going to find out how one man used his skills

:01:12.:01:16.

combating insurgents in the army can now sell us all sorts of things

:01:17.:01:22.

including the FT. As Facebook launches a new video service, we

:01:23.:01:27.

want to know what would you watch on social networks? What TV shows would

:01:28.:01:29.

you watch? Let us know. Welcome to the programme. As usual

:01:30.:01:44.

it's action packed. Toshiba has reported

:01:45.:01:52.

its much-delayed earnings - finally reducing the risk it will be

:01:53.:01:54.

de-listed from the The embattled electronics firm

:01:55.:01:56.

posted a loss of $8.8 billion It follows an accounting scandal

:01:57.:02:00.

and massive writedowns. So, what's gone wrong

:02:01.:02:03.

for the 140-year-old Japanese giant? Two years ago an accounting scandal

:02:04.:02:09.

was revealed that led to the resignation of several

:02:10.:02:12.

members of the firm's senior The company was found to have

:02:13.:02:17.

inflated the previous seven years Problems came to a head again this

:02:18.:02:25.

year, when Toshiba's US nuclear unit, Westinghouse,

:02:26.:02:31.

was forced to file for bankruptcy protection after suffering

:02:32.:02:37.

a $13 billion cost overrun. It's proving pretty difficult

:02:38.:02:42.

to find a buyer for Westinghouse. In a desperate move,

:02:43.:02:48.

Toshiba has been forced to put up This is a major part of its business

:02:49.:02:51.

- making memory chips It's been valued

:02:52.:03:00.

at about $18 billion. This has taken its toll

:03:01.:03:08.

on the company's share price which has effectively halved,

:03:09.:03:13.

and in April Toshiba actually warned With me is Pelham Smithers,

:03:14.:03:15.

Managing Director of A lotto details about why we are

:03:16.:03:37.

where we are with Toshiba. But some relief I suppose today that they

:03:38.:03:40.

have finally posted the earnings. This is just one of their

:03:41.:03:45.

challenges. That's right. They faced separate problems. The first is

:03:46.:03:52.

whether there are accounts would be qualified by the accountants. The

:03:53.:03:56.

other question is an ongoing investigation by the Tokyo stock

:03:57.:03:59.

exchange into whether or not the company has been improving its

:04:00.:04:03.

internal controls. They've overcome the first hurdle, they've got the

:04:04.:04:07.

second to come. It doesn't mean their future is secure? It doesn't.

:04:08.:04:14.

Even if they manage to get the Tokyo stock exchange to agree their

:04:15.:04:18.

controls have improved, they still have the problem that they have a

:04:19.:04:21.

negative net worth, so they need to reverse that situation. The only way

:04:22.:04:27.

they have of doing that is to sell their memory business. We've seen

:04:28.:04:32.

the dithering about trying to sell that and who they might sell it to.

:04:33.:04:35.

Let's talk about Westinghouse, that's been the bone of contention

:04:36.:04:40.

for Toshiba and the source of the problems. Cost overruns, delays,

:04:41.:04:47.

talk us through it. It started off when they paid too much for it in

:04:48.:04:51.

the first place. They then became aggressive in bidding for nuclear

:04:52.:04:55.

contracts around the world. Having been aggressive they then got hit,

:04:56.:05:00.

first by the earthquake which caused construction costs to go up and

:05:01.:05:05.

greater safety requirements. It also meant several countries decided not

:05:06.:05:09.

to go ahead with plans limiting them to a handful of important projects.

:05:10.:05:13.

Those projects run into trouble because they used a new untested

:05:14.:05:16.

technology and guess what, production costs went through the

:05:17.:05:21.

roof. In some respects, putting out the figures they've put a barrier

:05:22.:05:24.

around that. We know the cost associated with it and they can

:05:25.:05:28.

hopefully move on. Again, the future of Toshiba isn't assured. They have

:05:29.:05:35.

ring fenced the cost overruns to date but that doesn't necessarily

:05:36.:05:38.

mean there won't be any more in the future. They have a big issue in the

:05:39.:05:46.

UK with Moorside and the cost of that going up. While they are

:05:47.:05:50.

negotiating that project that's fine, but imagine if the costs went

:05:51.:05:56.

up after they fixed it. Everyone is very excited about the sale of

:05:57.:06:00.

memory chips but that is incredibly cyclical business. Where will it be

:06:01.:06:05.

this time next year? It's fascinating and you realise how a

:06:06.:06:10.

giant like Toshiba can face such problems putting its future into

:06:11.:06:11.

question. Thank you. Let's take a look at some of

:06:12.:06:14.

the other stories making the news. The owner of Fox News and 21st

:06:15.:06:17.

Century Fox movie studio looks Fox said revenues were up 1.5%

:06:18.:06:20.

to $6.8 billion in the fourth quarter after ratings at its cable

:06:21.:06:24.

TV business improved and drew Toy brick maker Lego is to appoint

:06:25.:06:27.

its second boss this year. 61-year-old Brit Bali Padda has been

:06:28.:06:36.

pushed aside by the Danish company after just eight months in the hot

:06:37.:06:39.

seat to be replaced He said he was never expected to

:06:40.:06:42.

stay in the post long term. The new chief will be 51-year-old

:06:43.:06:52.

Niels B Christiansen. Zurich Insurance has posted a 21%

:06:53.:06:55.

rise in Q2 net earnings. The Swiss insurer set out

:06:56.:06:57.

a turnaround plan last year and its latest numbers suggest it's

:06:58.:07:00.

already reaping the rewards. Net profit for for the three

:07:01.:07:02.

months to the end of June climbed to $896 million,

:07:03.:07:05.

That beat the average analyst Facebook has announced plans

:07:06.:07:07.

for a new TV service - putting it head to head

:07:08.:07:17.

with services like YouTube and Netflix - but could this also

:07:18.:07:20.

help the social network crack Asia? What is Facebook actually doing now?

:07:21.:07:41.

The social media giant is hot on the heels of other companies, Netflix

:07:42.:07:45.

and YouTube, as well as traditional TV networks. It will first launch in

:07:46.:07:50.

the US but eventually friends from across the globe will be able to see

:07:51.:07:57.

a range of shows including a safari programme from National Geographic

:07:58.:08:00.

and professional sports like women's basketball. Users will also have a

:08:01.:08:03.

chance to connect with other friends and dedicated groups. They hinted

:08:04.:08:10.

last year something bigger was in the pipeline. It has been reported

:08:11.:08:14.

Facebook has signed deals with groups like Buzzfeed. It is expected

:08:15.:08:23.

to open up new revenue potential for Facebook and programme makers in

:08:24.:08:26.

Asia and around the world, that could mean you will have to sit

:08:27.:08:31.

through commercials in between the show and before the show begins.

:08:32.:08:35.

There you go. We know what that's like!

:08:36.:08:38.

Tell us what you think about that story. We are asking what you would

:08:39.:08:44.

be watching on Facebook but also what you think about that. Give us

:08:45.:08:46.

your thoughts. Now the markets. Flat for Japan.

:08:47.:08:54.

Toshiba is a story that has dominated the day. Elsewhere it big

:08:55.:09:02.

loss in Hong Kong. In Europe right now it's a fairly similar picture.

:09:03.:09:07.

Markets are in a funny place. It's the middle of August so many are

:09:08.:09:11.

away on holiday. Trading volumes are thin. We've also got this sabre

:09:12.:09:16.

rattling going on between the United States and North Korea which is

:09:17.:09:21.

causing everyone to put their money in safe places during what is often

:09:22.:09:27.

a volatile time. When things happen they tend to be really exaggerated.

:09:28.:09:31.

Let's have a look at the day ahead on Wall Street.

:09:32.:09:35.

Rising tensions between the US and North Korea gave the market

:09:36.:09:37.

Now, this follows a period of record highs for US stocks.

:09:38.:09:41.

Investors, though, will have more than geopolitics

:09:42.:09:43.

One question - is the retail sector ready for a comeback?

:09:44.:09:47.

Several big department stores, from Macy's to Nordstrom to Kohl's,

:09:48.:09:51.

all reports second-quarter results, and they're struggling

:09:52.:09:53.

with competition from online retailers, as well as discount

:09:54.:09:55.

shops, and that has led to less people going to the mall.

:09:56.:10:02.

Add to that the big picture, which has been weak -

:10:03.:10:05.

retail sales have fallen for two months of the second world,

:10:06.:10:09.

so expectations, it's fair to say, aren't high.

:10:10.:10:13.

On the tech front, Snap reports results.

:10:14.:10:17.

Since it went public, there have been concerns

:10:18.:10:19.

that it is not doing as well as rival Instagram,

:10:20.:10:21.

so expect investors to eye Snap's daily active user numbers for any

:10:22.:10:25.

Joining us is Maike Currie, investment director

:10:26.:10:32.

Nice to see you. Sally called it sabre rattling and it really has

:10:33.:10:44.

rattled markets, these tensions between North Korea and the US.

:10:45.:10:48.

Markets have been shaken out of the summer lull. We saw yesterday that

:10:49.:10:55.

move into safe haven assets. That has cooled down a bit today but

:10:56.:11:01.

there's still some nervousness. There is a question over whether we

:11:02.:11:05.

will see a correction or even a bigger market collapse. What are you

:11:06.:11:11.

saying about that at Fidelity? There is a real debate going on. There is

:11:12.:11:16.

still a lot of money in cash and fixed income and bonds. There's a

:11:17.:11:20.

lot of money on the sidelines. We really need to see that money moves

:11:21.:11:25.

into the market before we can talk about a correction. The painful

:11:26.:11:29.

thing is it's in these final stages where investors can actually make

:11:30.:11:34.

the best profits. As always, you can never call the end of the market.

:11:35.:11:38.

But a lot of them are a way, it's one of the quietest times of year

:11:39.:11:45.

right now. Is that the danger zone, is that the time when a lot can go

:11:46.:11:51.

on? Absolutely. We saw this two years ago in China. In the summer in

:11:52.:11:55.

August, when a wasp in trading going on and we had the tensions and

:11:56.:12:00.

worries about debt levels in China, it really rattled markets. We will

:12:01.:12:03.

see if the tensions between North Korea and the US has the same

:12:04.:12:09.

impact. Thank you. You'll be back later to talk about Lego.

:12:10.:12:14.

Still to come - using psyops to sell baby products.

:12:15.:12:18.

We speak to the man using military intelligence skills to run

:12:19.:12:20.

You're with Business Live from BBC News.

:12:21.:12:38.

We are in earnings mode in the UK still. We've had news from the

:12:39.:12:43.

Co-op. The Co-operative Bank has posted

:12:44.:12:45.

a ?135 million loss in its first earnings report since a rescue

:12:46.:12:48.

package ended plans But the bank continues

:12:49.:12:50.

to lose customers. Our business editor, Simon Jack,

:12:51.:12:53.

has been going through the numbers. Simon, loving the trainers! Talk us

:12:54.:13:06.

through the Co-op. I've just got off the train! The Co-op bank, is it

:13:07.:13:10.

turning the corner? Yes and no. It's still losing money. It is narrower

:13:11.:13:17.

than the loss they made last year. They've been spending a lot of money

:13:18.:13:22.

on trying to knock it into shape. It had a near death experience in 2013

:13:23.:13:27.

when it discovered a ?1.5 billion hole in its finances. That led some

:13:28.:13:31.

of its investors to pump in additional money. In February they

:13:32.:13:35.

said they aren't turning it around, they were putting it up for sale.

:13:36.:13:40.

They didn't get any buyers said the existing bondholders have agreed to

:13:41.:13:45.

sink ?700 million of extra capital into the bank. That will see the

:13:46.:13:50.

Co-op group, the ethical mutual group which used to own the Co-op

:13:51.:13:54.

bank, C at stake reduced from 20% down to nearly 0%. The question is

:13:55.:14:00.

is this still the same Co-op a lot of customers like with its ethical

:14:01.:14:06.

stance? We've seen some of that in customer numbers, 25,000 customers

:14:07.:14:11.

out of 1.4 million current account holders decided to close accounts.

:14:12.:14:16.

That's not a stampede but it is a trickle. I was listening to the

:14:17.:14:20.

management talking today and they are at pains to stress they will

:14:21.:14:24.

continue their ethical stance. It's the one thing that sets the Co-op

:14:25.:14:29.

apart. It may not be the Co-op we know and love but they say it will

:14:30.:14:33.

look and feel the same. We've got to hope now this uncertainty is over,

:14:34.:14:38.

they are going to get an infusion of new capital in September, that the

:14:39.:14:42.

bank will be safe and behave like it always has, and they will be able to

:14:43.:14:47.

hang on to customers. In total both got 4 million with either a council

:14:48.:14:50.

mortgages. You get the impression this story is going to run and run!

:14:51.:14:53.

He's got the right shoes on! You don't want to know what I am

:14:54.:15:03.

wearing under the desk! You know why I am standing today!

:15:04.:15:10.

News on the website that Blockbuster films have boosted cinema revenues

:15:11.:15:11.

by nearly 20%. You're watching Business Live,

:15:12.:15:16.

our top story - Japanese industrial giant Toshiba has met a deadline

:15:17.:15:19.

to report its long-awaited earnings results, which may

:15:20.:15:21.

save it from being delisted That is after a major accountancy

:15:22.:15:35.

scandal that was revealed two years ago. By publishing them, it will

:15:36.:15:38.

save them from being delisted from the Tokyo stock exchange, which was

:15:39.:15:43.

a real worry. The figures are not great, but it means that for now it

:15:44.:15:49.

remains on the Tokyo stock exchange. Markets in Europe have been trading

:15:50.:15:54.

for 45 minutes, and they are all headed lower, following the same

:15:55.:15:58.

mood in Asia today, and the night before on Wall Street, real concern,

:15:59.:16:01.

as we have mentioned, with what is happening with regards to North

:16:02.:16:05.

Korea and the United States, something that is very relevant for

:16:06.:16:06.

our next conversation. Here's a question -

:16:07.:16:08.

does getting inside the mind of a potential radical extremist

:16:09.:16:10.

and persuading someone to buy a brand of washing powder require

:16:11.:16:13.

the same set of skills? He's a former UK army military

:16:14.:16:18.

intelligence reservist He's now runs marketing agencies

:16:19.:16:21.

Global Influence and Verbalisation. Using counterinsurgency

:16:22.:16:36.

skills to sell products, he has built up a client list

:16:37.:16:38.

that ranges from the FT to Nice to see you. We sort of hashtag

:16:39.:16:54.

away through that interview, trying to explain what you do, maybe you

:16:55.:17:01.

can do it better! It is a really fascinating area, trying to explain

:17:02.:17:04.

people to do things by talking to them in a language they understand

:17:05.:17:06.

ultimately, but there are clever ways you can do that. Essentially,

:17:07.:17:14.

there is a science of behaviour change, and using language to affect

:17:15.:17:19.

behaviour change, so really what my companies do is better and stand the

:17:20.:17:23.

target audience, using scientific techniques, to then verbally

:17:24.:17:27.

engineer language to increase empathy, really, between the

:17:28.:17:32.

audience and the product and message they are trying to bring to the

:17:33.:17:36.

audience. And language has become more important, hasn't it?

:17:37.:17:40.

Especially through social media, more so than perhaps images. Not

:17:41.:17:46.

least here we are sitting in a BBC studio, the 24 hour news cycle gets

:17:47.:17:52.

people, obviously, hooked on hearing more information, talking about more

:17:53.:17:55.

information. The difference between being informed and being

:17:56.:17:58.

well-informed is fundamentally important, and that is why we work

:17:59.:18:03.

with commercial brands such as the Times, who believe very firmly in a

:18:04.:18:06.

difference between informed and well-informed. You started the

:18:07.:18:11.

company six years ago, you described to me earlier that you had an

:18:12.:18:17.

epiphany in a trench - explain. Yes, in Afghanistan, we were having to

:18:18.:18:21.

power down at the bottom of a trench because of a situation going on

:18:22.:18:25.

around us, and as we were talking at the bottom of the trench, a group of

:18:26.:18:30.

soldiers and myself, we saw a little blue triangle on the floor, and it

:18:31.:18:34.

was only later that we worked out that they were arrowheads from

:18:35.:18:39.

Alexander the great. Fundamentally, we hadn't progressed in Afghanistan.

:18:40.:18:42.

A thousand years by using those techniques. That was sort of the

:18:43.:18:48.

moment when I thought we needed to create a business to help us with

:18:49.:18:54.

dialogue over division. Explain what you have done with dialogue over

:18:55.:18:57.

division in terms of work with young people, trying to prevent them from

:18:58.:19:02.

signing up to organisations like so-called Islamic State. One area of

:19:03.:19:07.

the company, of the two companies, is focused on helping charities and

:19:08.:19:13.

NGOs to intervene when people are being radicalised, to understand the

:19:14.:19:16.

language patterns that so-called Islamic State might be using to

:19:17.:19:21.

recruit these people, and then to create interventions, often online,

:19:22.:19:26.

to counteract that process. So, again, understanding the audience,

:19:27.:19:29.

decoding the psychology of the audience, and verbally engineering a

:19:30.:19:33.

more effective way to disrupt the messaging or provide a more dialogue

:19:34.:19:39.

based messaging step. And we might come into contact with this more

:19:40.:19:42.

than we expect, because marketers are using this as well. There is a

:19:43.:19:48.

slight difference, the marketing industry is using a certain kind of

:19:49.:19:53.

insight, a certain kind of insight methodologies that is not

:19:54.:19:57.

linguistically based. What we bring to the market is something pinpoint

:19:58.:20:00.

targeted at language analysis and the use of words more effectively.

:20:01.:20:05.

How big you know, though, that your method of persuasion are working? If

:20:06.:20:11.

we take a commercial client like the Times, they saw 200 36 cents

:20:12.:20:15.

increase in their yields... But how do you know that young people are

:20:16.:20:18.

not signing up to Islamic State because they watched a video you put

:20:19.:20:22.

together? In that particular instance, with a film we put out, a

:20:23.:20:27.

viral, there was a measure of the impact was the media reach, 500

:20:28.:20:31.

million media impressions in seven days, but we can also track and

:20:32.:20:37.

trace the conversations that our work influenced online. We have a

:20:38.:20:49.

great deal of KPIs to show behaviour change in that instance. Some people

:20:50.:20:52.

would call this a dark art, you are trying to convince somebody to do

:20:53.:20:58.

something they are not aware of, and that is all too true of selling

:20:59.:21:02.

stuff. Equally, when it comes to politicians, you know, a lot of

:21:03.:21:05.

political messaging is about persuading us to vote when a certain

:21:06.:21:11.

way, none more so than during the Brexit referendum. A lot of

:21:12.:21:14.

criticism of the claims and counterclaims, it is a dark art,

:21:15.:21:18.

isn't it? Not at all. First of all, if you have children, if you want, I

:21:19.:21:24.

have got two children, if you want them to go to bed, you have to

:21:25.:21:27.

understand the individual you are talking to. One of my children,

:21:28.:21:33.

let's play a game, race upstairs. The other one is, look, daddy is

:21:34.:21:37.

going to get angry if you don't go. You have to understand the audience

:21:38.:21:41.

to speak more effectively to them. But there is no ulterior motive, but

:21:42.:21:46.

if you are a political party with a particular persuasion, you want

:21:47.:21:50.

people to vote the way you think. The first thing to do is communicate

:21:51.:21:54.

your policy in an effective way. We lived through the area of Spain with

:21:55.:21:59.

top-down messaging. We are advocating much more dialogue based,

:22:00.:22:06.

empathy with the target audience, I think that is a good thing, not a

:22:07.:22:09.

bad thing. I think we will leave at there, apps I could use your skills

:22:10.:22:13.

in my home! I can't get my kids to bed ever! I go to bed before them

:22:14.:22:20.

now! But then I do get up at two in the morning.

:22:21.:22:24.

You have never mentioned that(!) A lot more to come in Business Live,

:22:25.:22:32.

this is how to stay in touch. The Business Live page

:22:33.:22:41.

is where you can stay ahead of all the day's

:22:42.:22:43.

breaking business news. We'll keep you up-to-date

:22:44.:22:45.

with all the latest details, with insight and analysis

:22:46.:22:47.

from the BBC's team of editors Get involved on the BBC business

:22:48.:22:49.

live web page, bbc.com/business, on Twitter @BBCBusiness and you can

:22:50.:22:55.

find us on Facebook Business Live on TV and online,

:22:56.:22:57.

whenever you need to know. Particularly about this story about

:22:58.:23:10.

Facebook moving into the television arena, we would get into that in a

:23:11.:23:14.

moment, but Maike is back, the story about the new boss of Lego going

:23:15.:23:20.

after eight months, tell us more. It is interesting, because he is the

:23:21.:23:24.

first non-Danish chief executive of Lego, he has only been in the job

:23:25.:23:27.

for eight months. They have said this was always the deal, since he

:23:28.:23:31.

was appointed they would start looking for a new chief executive,

:23:32.:23:36.

so there may or may not be more to the story, but what is interesting

:23:37.:23:39.

is that Lego is feeling the pressure. It dominates the

:23:40.:23:49.

construction aisle, but their biggest competitor is moving into

:23:50.:23:54.

that space. What do we know about this new guy? So interesting,

:23:55.:24:03.

because the first guy was there just eight months, and then another Dane.

:24:04.:24:10.

It does seem that way, but the new chief executive has got a very good

:24:11.:24:16.

track record. Is he good at building?! He is a master builder!

:24:17.:24:22.

Is good at increasing profits, which is what you want your chief

:24:23.:24:27.

executive to do. Isn't it everybody's dream job?

:24:28.:24:30.

We think it probably looks really easy to run.

:24:31.:24:34.

Everything is awesome! But to keep up with current

:24:35.:24:38.

trends... By the way, I'm just quoting a song from the Lego movie,

:24:39.:24:44.

that is not the BBC opinion of Lego! Because it is such an iconic brand,

:24:45.:24:49.

there is so much and tapped potential, and in this world of new

:24:50.:24:53.

technologies, there is so much you could do, so you need someone very

:24:54.:24:58.

forward thinking. That moves us nicely onto Facebook, we have been

:24:59.:25:01.

asking your views about watching TV through Facebook. The journal is

:25:02.:25:07.

talking about how Facebook squashes, edition from start-ups. All well and

:25:08.:25:12.

good them coming up with good ideas, but Facebook I'd buys them or copies

:25:13.:25:23.

them. These big tech giants can afford to sweep up the start-ups,

:25:24.:25:27.

and it raises a few questions about the future of the tech sector, so we

:25:28.:25:34.

have those big giants, Facebook, Google, Amazon, with deep pockets,

:25:35.:25:41.

spending cash to buy up smaller companies like Snapchat, WhatsApp,

:25:42.:25:47.

Instagram, to expand. Just to say, Snapchat's earnings are out today,

:25:48.:25:52.

and in terms of your views on Facebook, Matt says, I'm worried it

:25:53.:25:56.

will be the perfect forum for fake news and alternative facts. Alex

:25:57.:26:00.

says, not at all, I want to sit on my sofa, not watch it on a tiny

:26:01.:26:02.

screen. Bye-bye. I am pleased to say that this

:26:03.:26:16.

morning is a much sunnier start than yesterday, some really quite heavy

:26:17.:26:19.

rain in the south-east yesterday, rainfall totals

:26:20.:26:21.