02/11/2017 BBC Business Live

This is Business Live from BBC News

with Ben Bland and Sally Bundock.

More cash - and more controversy.

Facebook's profits rise again

despite growing concerns over it's

role in last year's US election.

Live from London, that's our top

story on Thursday 2nd November.

The social network made more

than $4.5bn in just three months

but says its going to

spend more on security

and policing the service.

Also in the programme....

It could be a boost for global trade

- China cuts import tariffs

on consumer products just days

before the US president

arrives to talk business.

As always, we keep an eye on the

markets, a softer open across the

main markets in Europe, all eyes are

on the Bank of England later for its

decision on interest rates.

And we'll be getting

the inside track from one

of the world's biggest computer

software companies on how it keeps

everything from banks to transport

systems and the internet running

despite offering it's

products for free.

Today, we will be speaking to the

boss of one of the world's biggest

software companies. We want to know

if you are willing to pay extra for

technical support, or even for the

knowledge that you are secure? Get

in touch, use the hashtag.

Hello and welcome to Business Live.

Welcome to the programme.

We start with the world's

biggest social network -

it keeps getting bigger,

more profitable...

And more controversial.

Facebook has announced record

profits and another big jump

in the number of people using it.

That will only fuel the debate

about the power of the network

and the content that appears on it.

Mark Zuckerberg's company made

a profit of $4.71bn in the three

months to September -

that's up 80% same time last year -

as advertisers spend ever more cash.

They're doing that because well over

two billion people log on now

at least once a month -

more than a quarter

of the world's population.

It's up 16% over the past year.

With this vast reach of course

comes growing scrutiny -

for example over its role

in the US election.

Earlier in the day Facebook admitted

to a Congressional hearing that

political content originating

from Russia was seen

by 126 million people -

a huge chunk of the electorate.

With me is Tarek Nseir,

a Founding Partner at the digital

agency, TH-NK - who help

big companies including

Nandos and Warner Brothers

to grow their online presence.

Thank you for coming in. Give us

your take on these earnings. It

would seem that Facebook is going

from strength to strength in terms

of its core business but this extra

added new scrutiny is quite a big

headache for it?

It must be. Putting

scrutineers side for a second, this

is a great quarter. Two years ago,

they invested heavily in Mobile,

they were behind the curve but now

80% of their revenue has come from

mobile advertising. Advertisers love

the platform and the degree of

targeting that you can get. The data

Facebook olds is incredible but

advertisers are beginning to

question the responsibility Facebook

take on.

It is a tricky one, if we

talk about it in more detail,

looking at the last two days of

lawyers confessing to Congress about

what was going on at Facebook

before, during and after the US

election, which Mark Zuckerberg

himself said weeks or months ago,

this is crazy talk. It isn't crazy

talk, it is the reality.

It is, the

mixed news of this earnings release

this morning is that next quarter

will be a softer quarter because

Mark's moving the team, there are

10,000 people at Facebook who look

after the community and are trying

to stop these things from happening.

He is upgrading it to 20,000 people.

Considering there are 20,000 people

there already, it's a big move.

Considering the platform size, it's

a tiny number.

It's a big and

expensive move, over 2 billion

people are logging in monthly, many

would argue that this is impossible,

isn't it?

Pretty much, it's about

having smarter and smarter

technology and is definitely about

applying more and more human capital

to the problem. Facebook haven't

been doing enough fast enough.

What

will happen, will they be regulated

in future and what impact does it

have on Facebook, Google and

Twitter, some of its rivals?

A good

question, for it to be regulated it

would need pressure from many

corners and many nations for it to

be the case. That is probably quite

unlikely but I do think that

Facebook will continue to take their

responsibility more seriously. I'm

interested to see how this upgrading

of their resources go.

And in terms

of the core business and growth,

talking of great month on month, how

will it continue? When we think

about the younger people who aren't

really on Facebook at all?

There is

plenty of fuel left in their tanks.

WhatsApp and Facebook Messenger are

not really monetised but the leading

social network in China, you can get

taxes on it, you can buy clothes on

it, Facebook is taking those moves.

There are over 1 billion users on

these two platforms which is a great

opportunity for Facebook.

We will

talk about it again and again.

It will not be off my agenda. Thank

you.

Let's take a look at some

of the other stories

making the news.

The leading electric car-maker Tesla

has said it's car production

is behind schedule again.

The company has been struggling

to incease the number of Model 3's

that are rolling off

the production line.

It now aims to make 5,000 a week

by early next year off.

The vehicle is key to its ambition

because it is more afforable

than others at just $35,000.

Tesla also announced it's

biggest ever quarterly

loss of more than $600m.

The Anglo-Dutch oil giant Shell has

announced a big rise in profits

for the three months to September.

It made just over $4bn and was well

ahead of expectations.

It reflects growing optomism

in the oil business

as well as the impact

of cost cutting measures.

The chief executive said

it was evidence their turnaround

strategy was working.

A new study claims women around

the globe may have to wait more

than a century to achieve equality

in the workplace.

According to the poll

by the World Economic Forum,

the global gender gap has widened

in the past decade and will take

100 years to close.

The research ranked 144 countries

on the gap between women

and men based on economic,

health, education and

political indicators.

If you watch the show regularly,

it's a big day for you today...

There's a widespread expectation

that the Bank of England,

one of the world's most important

central bank,

will raise interest rates

in a few hours' time.

If they do that...

It would be the first

rise for ten years,

in which time the UK as been

recovering from the global

financial crisis.

Simon Gompertz reports.

This could be a shock for people

in millions of homes

which are saddled with

a variable-rate mortgage,

homes like this one in Oldham.

The owner, Lynn, has struggled

financially ever since a car

accident stopped her working.

I am literally living -

I wouldn't say on the bread line,

but very, very close,

and any hike in interest

or supermarket bills

affects me instantly.

The Bank of England has to decide

whether, with the economy growing,

there is a case for keeping

interest rates low.

The Governor, Mark Carney,

has already given hints that a rise

is on the way.

The bank's base rate was cut to 0.5%

in the midst of a financial crisis,

then to 0.25% after the EU

referendum last year.

The speculation is that it will be

put back up to 0.5% again.

I think, whether you are a saver

or a borrower, I don't think

the increase will be

that significant now.

But the likelihood is we'll get

a series of increases,

maybe two more over the next two

to three years, so it will start

to have a more material impact

on our everyday lives.

In the financial world,

they are so convinced that a rate

rise is on the cards

that the pound has gone up,

in the hope the money kept in the UK

will give higher returns.

So, if that doesn't happen,

the markets will be caught

on the hop.

You will be all over that later,

won't you?

Yes, I will be in the

city to gauge the reaction is to

that, and how it will affect the

pound and people's pockets.

If it

happens...

Indeed.

China is taking steps to boost

foreign imports ahead

of President Trump's

visit next week.

The trade relationship

between the two heavyweights

is expected to be a major

topic of discussion.

The US president has been strongly

critical of China's massive trade

surplus with America,

blaming unfair trade practices

including heavy tariffs.

Our Beijing Correspondent,

John Sudworth, joins us.

Talk us through what China has

announced ahead of Donald Trump's

visit? These reports are coming from

the Chinese Ministry of commerce.

Basically saying that they are going

to cut tariffs on a range of

consumer products and boost bank

lending for imports. The reason that

the commerce ministry suggests is

nothing to do with concern about

what China's huge trade surplus is

doing to other markets but there is

concern about what the trade surplus

means for its own consumers. There

is a knock-on impact here, and an

impact on inflation and they say

that they are acting in the

interests of allowing Chinese

consumers to share a greater portion

of national wealth.

John Sudworth,

many thanks.

Asian shares inched higher.

A relatively weak yen, a positive

factor for Japanese exporters,

helped lift the Nikkei.

Sony shares added another 2.8%

as the firm raised profit

forecasts and announced plans

to revive its robot pet dog.

Chinese internet giant Alibaba

was due to release its third quarter

earnings after Asian markets closed,

with investors watching

closely to see if heavy

investment has yielded further

rapid revenue growth.

Meanwhile, investors are braced

for what many of them expect will be

the Bank of England's first interest

hike in more than ten years.

On equities - oil giant Shell has

reported a large rise

in third-quarter profits

after the energy giant was boosted

by higher oil prices

and increased production.

It comes as the price of crude rose

above 60 per barrel this week,

its highest price for five months.

Tesla's share price fell after it

admitted production of its new Model

3 car is months behind schedule.

In the US the Fed, as expected,

kept interest rates unchanged.

But all eyes will be

on the confirmation of the next

Fed Reserve chair widely expected

to be Jerome Powell.

Tech giant Apple will be reporting

earnings on Thursday. We could hear

more details about pre-orders for

the new iPhone X that begins

shipping on Friday. Investors will

want to know about the company's

outlook for the upcoming holiday

season. Coffee giant Starbucks will

be reporting their earnings, they

face stiff competition from low

priced food chains like McDonald's

and more upscale food chains like

Bluebottle. They are grappling with

calling growth in the dominant

market here in the USA. Finally,

Canada's Aerospace pacemaker

Bombardier will be reporting

earnings, analysts are looking at

more details for the decision to

give a majority stake to your's

Airbus, the news came after US

officials slapped Bombardier with a

300% tax for any C series plane

coming into the USA.

It is such a

busy day today, I cannot stress that

enough!

Joining us is Jessica Ground, UK

Equities Fund Manager at Schroders.

I say that because we have the

central bank news, John Rovman

Powell as a possible nominee and

aunts today and all of the earnings,

apple to come later. What are you

watching? What are you most

interested in today?

The

expectations are key on all of these

things, the expectation is that we

have a 25 point bass rise from the

Bank of England but people are not

expecting interest rates to rise

significantly after that. The key is

we have the minutes and we

understand better what people are

thinking about in the future. John

Rovman Powell is expected to be

announced to leave the Fed... --

Jerome Powell. He has been there for

a while and as we have learned with

Donald Trump, until something is

signed, sealed delivered...

We will

be watching his Twitter feed!

And

the interest rates, I was reading a

take, because it is widely expected

that they will raise those rates, a

lot of it been priced in. If they

don't, that is where we could see a

bigger move in response?

People

would be surprised. On one hand it

is a doubling of rates to half a

percent but the 25 base points were

taken towards the end of last year

in response to Brexit and the bank

wanting to support the economy into

that. As you say, it is a sign of

strength when the bank feels that

they can return rates to a more

normal rate but if they feel like it

is weak, that will be a negative

surprise.

Shall's share prices have

barely moved this morning inspired

birth strong results -- Shell.

The

key thing is not only their oil

price but they are digesting their

acquisition of British Gas. BT. That

will change your as is quite

significantly. It's great that it

seems to be going well. There are

quite a lot of investors that would

go well and it is quite in line with

expectations.

Thank you. Jessica

will join us later on other stories

like Tesla, we will talk about that

soon.

Still to come:

We get the inside track on one of

the biggest software companies in

the world. How it keeps banks and

transport systems running, despite

offering software solutions for

free.

BT Group reports a 14% drop

in second-quarter adjusted earnings

BT Group reports a 4% drop

in second-quarter adjusted earnings

to £1.81 billion for the three

months to end of September.

But the company's earnings

still came in ahead of target,

despite struggles to turn

around its Global Services unit.

Our business correspondent,

Theo Leggett, is in our

Business Newsroom with more.

Talk us through it.

It is a mixed

bag but generally disappointing

results from BT. A key problem is in

its global services unit, the unit

that provides outsourced network IT

infrastructure for companies and it

seems the trend away from

outsourcing is affecting that the

mission. It has been weighing on

BT's results for a while. In this

quarter profits were down 40% and

sales down 10%, so that is the weak

area. Some concerns over BT's TV

business despite the fact it has

invested in sports rights, Premier

League sports rights. It only added

7000 new subscribers during the

quarter, compared to 63,000 added

last year. There is a bit of concern

there. But on the other hand the EEE

mobile division has been doing well

and that has offset business in

other parts of the company.

And talk

this morning about BT considering

what to do with its pension scheme.

There were some people expecting BT

to announce the closure of its

pension scheme. That has not

happened, it says it is still in

discussion with its unions. But it

still has a deficit that is a

problem. What we are likely to see

is some form of closure of its

existing scheme, or restrictions to

it, and a new scheme coming in. At

the moment those talks are still

ongoing.

Thank you very much indeed.

There is so much news coming out all

the time and it is on the business

live page. Also Morrisons is

stepping up its competitiveness and

it has just released its

like-for-like sales for the 13 weeks

to the end of October. Its

like-for-like sales represent 2.5%,

but it is talking about the impact

of a lower sterling on its profits,

making its margins really squeezed.

It is tough out there for retailers

on the high street, especially

supermarkets.

Our top story, Facebook's profits

soared in the three months to

September, it brought in $10 billion

from advertising. It says it will

spend more on security over scrutiny

over how big was exploited during

last year's US election.

over how big was exploited

during last year's US election.

A quick look at how

markets are faring.

Not giving as much direction, but

those are the numbers. They are

treading water ahead of that

decision from the Bank of England in

London.

decision from the Bank

of England in London.

Now, we're going to be talking

about open source technology.

Put very simply, this is software

which is free for anyone to use.

Red Hat provides products based

around the world's most popular open

source platform Linux.

It offers bespoke software such

as operating systems,

cloud computing platforms

and software development.

And if this sounds like the sort

of thing for small or startup

companies, you may be surprised

to learn that Red Hat helps more

than 90% of Fortune 500 companies.

Jim Whitehouse is CEO

and President of Red Hat.

Good morning, welcome. We have

explained in a very simple way what

you do, could you elaborate on that?

We take software that is often

developed by Google and Facebook,

things like Alexa and hey, Google,

that those companies allowed to be

open so the source code is freely

available and we take that and apply

that to a bank because the same

technology can do fraud detection.

We take this open source software

and make it secure and reliable for

large enterprises to use.

What you

are saying our big organisations and

some of them are old and traditional

and some are not so. You say, yet is

this software, we will make sure it

works for you, it is secure and it

does what it needs to do and it

makes you better and does not harm

you?

Exactly. When these web

companies write the software it is

not built for enterprises in mind

and we take the software and make

sure there are no security issues,

we offer tech support and we

life-cycle it. We take this

information and make it consumable

for enterprises.

And these clients

pay for that service and that is how

you make money.

We were asking for tweets about open

source tech and tech support and

people are happy to pay for this

premium model where you get

something for free and pay extra for

a premium service. Linda says, why

would I pay somebody to tell me to

switch it on and off again? Maybe it

must be the software. Someone else

says, I know how to Google, I do not

need tech support.

But one person said, I will not pay

to have a person tell me how to make

your product work. Explain why to

your clients this is critical.

We

have free versions of all of our

software that any consumer can

download and use. But if you are a

stock exchange or you are running a

nuclear submarine, some of the most

mission-critical applications out

there, you are not plugging it out

and in again, so we have to make

sure it works 100% of the time. We

are paid for production applications

like trading platforms and billing

systems which you cannot take down.

You have been running the company

for ten years and prior to that you

were with D, you were the chief

operating officer there when it was

going bankrupt and you were there

for some time. This is such a

different job. Your skill set moving

from that to this, talk us through

that, it was a big change.

It was a

different type of situation because

you are trying to drive efficiency

across a big global business. Legacy

airlines, big issues. Indeed, but

Read Hack is all about innovation.

But leadership and building a team,

building a culture and driving

direction, those across enterprises.

In technology are a lot of companies

rely so much on a founder's vision

that they have trouble scaling and

one of the things I think

leadership, not necessarily me, it

can be helpful in some of these

newer tech companies to help them

build their culture as they go

global.

Do you think companies so

much in the news right now like

Facebook, in some ways some of those

companies are lacking that? They are

growing extremely quickly

exponentially globally, and yet they

have not got that skill set say

somebody who has worked in other

areas of business elsewhere, that

they may bring.

I do not want to

speak about specific companies, but

people who run small companies and

founders are great at getting

companies to a certain size. It is a

different skill set to run a 50,000

company than a 5000 present company.

A person running a 5000 company

would fail running a 50,000 company.

Bill Gates recognised that and

brought in a team as Microsoft

groove. Great companies learn and

their founders learned at some point

that it is time to recognise what

you are good at and bring in others

to augment it. Some companies have

been successful and done that and in

others the founder stays too long.

Your name is Jim Whitehurst, not Jim

Whitehouse, you were too polite to

tell us. Thank you for coming in.

Thank you for coming in.

In a moment we'll take a look

through the Business Pages but first

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online whenever you need to know. We

are running out of time.

We are running out of time.

Let's see what other

stories are being talked

about on social media.

Let's kick off with Tesla, Jessica.

Concerned about production levels

and about how much the company is

spending. What is interesting is the

shares are off and the debt as well.

People are thinking about leveraged

and it is hard to build a car maker

from scratch.

And delay on the model

three-car, there is so much

anticipation, everybody wants this

car, yet it cannot seem to deliver

right now.

Scaling up the production

was always going to be complex and

issues around the batteries as well

are causing delays.

I was fascinated

by Tesla because Elon Musk is

raising money over and over again

and yet this is a company that has

still got a lot of questions hanging

over it.

It is significant that the

bond is traded off and people are

doubting whether profitability will

be. Tesla can still be a success,

but there are questions over the

equity.

It has been good to have you

here. Goodbye.