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tv   Worldwide Exchange  CNBC  November 7, 2013 4:00am-6:01am EST

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hello. you're watching "worldwide exchange." i'm ross westgate. the headlines today, from tweet to trade, twitter prices its shares in its ipo $26 each, above the expected range. it values the company more than $18 billion. we'll bring you an exclusive interview with a twin twitter ceo dick costello at 11 o'clock cet. and market participants expect the ecb to keep rates on hold, but weak eurozone
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inflation leaves many wondering if president mario draghi to halt for a stock. germany's second biggest lending beating forecasts with a 15% rise in net profits. and it's all change at se seemans. making the freshly appointed ceo vowed to return the company to growth. >> ready to look forward and bring the company back to where the company stands for. and it is about innovation, about reliability, quality. and that is what we are going to do by exploring our market opportunities and then return to growth. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> hello and a warm welcome to you. it's a busy few hours here on
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cnbc. on today's show, london gets its first j. crew store. but it won't be the last. we'll have the ceo first on cnbc to speak about j. crew's expansion plans at 11:20 cet. while other pcmakers are feeling the pressure, lenovo sees its profits up 13 the%. we'll have analysis of the earnings at 10:30 cet. and it looks like a rough road ahead for german continental, lowering its target for third quarter sales. more on results in about 20 minutes. could he better bonuses for wall street bankers. financial advisers might see a 5% pop in bonuses. bond traders won't be so lucky. we'll have more on that at 11:40 cet. and societe generale is
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planning to cut 375 jobs in france. it did miss on net profit expectations. don't miss stephane pedrazzi's report on that. but first, twitter will make its debut on a public company on the new york stock exchange. cnbc's kayla tousche has been following the ipo from the beginning. >> twitter priced its highly anticipated ipo at $26 per share. that means the company will raise roughly $1.8 billion in proceeds with an option to raise an additional $270 million more. was more is that the company will now be valued at more than $18 billion, quite a rich valuation for a company that's not yet profitable. in to 16, it's expected to have 1.3 billion in revenue and
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potentially over on $200 million in edta. that's for a company seven years old, one of the highest growing in silicone valley and one of the most eagerly anticipated of this year to be sure. we'll have more details as we get them, but that's the latest. >> that's kayla with the details. we will bring you an exclusive interview with the twitter ceo in just under an hour. so clearly we want to know today where do you think the twitter stock will close at the end of the day? send us your thoughts, your e-mail,, tweet direct to me @rosswestgate or @cnbcwex. now, besides twitter, plenty of focus on central banks today. flagging inflation in europe's peripheral countries is expected to dominate at the cb's rate
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decision meeting in frankfurt. geoff and anna have taken up their usual perch in frankfurt and join us for more. big question, guys. as we see the euro at a rate that just isn't just a five at the economic box, does the ecb have any tools in the box to bring it down? >> well, i guess the euro is a challenge here, but depending on who you lisp to at the moment, it's a question of what is happening in the united states and japan and elsewhere rather than what the ecb is doing or what individual european policymakers can do at this point. but the euro is a part of the problem as is the very weak growth story. >> the recovery is still intense. it's gradually progressing, but it's still weak, uneven and fragile. >> we must find a way to close
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this financing gap. and there is absolutely no way that it can be done in way of rollover bond which results in monetary fnz financing. >> i don't want to anticipate the results of our deliberations. i think what is clear is there will be liquidity provision peps. >> the european central bank has a number of instruments at its disposal and they will eventually use all the possible remedies. >> so, ross, there is a temptation to say mr. draghi's armory is quite limited at this point. it's either going to be an interest rate move to deal with this disinflation trend or it has to be some additional liquidity facility, it seemed to me. but you can't write this gentleman off. he always seems to pull a rab i didn't tell from a hat, whether it's forward guidance or something else. what do you think? >> for the last one in paris was
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very quiet. no news at all. but we'll be joined now by teachers who is an economist with do you have ya bank. what are you expecting from that meeting today? >> we expect from the ecb we expect no change of policy today. we expect that we'll continue with the forward guidance. they will highlight that they're ready with all instruments available and also that ready. what disappoint recently were the unemployment rate which increased to a record level of 12.2% and also a disappointment rather falling off the inflation rate, so only 0.7%. but the dis appoiappointing inf rate was mainly due to one off factors which we think is only valid for october. it's falling food prices and energy prices and also we have
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somewhat of fx due to tech change from previous years. >> what's going to change is that we have this asset quality review program that will kick in at the end of the year which leads us down the road to the single supervisor and obviously some stress testing. the bank must be concerned at this stage that we will see some tightening up, perhaps, of liquidity, a reduction in the extension of credit for the smes as the banks try to, perhaps, window dress their balance sheets a little bit here. could we get the extra liquidity in a more targeted country specific way, perhaps? >> this could be at the beginning of next year. no -- on the quality will increase and maybe the volatility could be higher. this could be a reason for the ecb to start a new hero and to have the banks near liquidity measures and the banks could then use this money with, again, carry trades like in the past at
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the end of 2011 starting at 2012. and to increase their -- is one possibility and where the ecb could step in at this time. but for this to happen, we expect this only to happen if we see some weaker data points and some negative new slows at the quality review. >> so we can expect the ecb to cut rates anytime soon next year. i mean, looking at the inflation data, we already stressed that looks a little bit like they're heading into a deflationary environment, i believe, since some parts of the eurozone. >> would you look at the thing, the countries of the eurozone, you will see it offered in germany and some other countries. and the periphery countries, the inflation rate is very low, in some cases negative. and this is a number processed with all the restructuring of the economy. and we also expect use the one off effect at the moment that
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the inflation rate on a whole will increase by some 10 percentage points and for the end of the year and even to be on a relatively low level next year in 2015. but that shouldn't give a reason for the ecb to step in because of the normal structure changes. >> what is the funding for lending program for europe here? where is the help to guy scheme that you see in the uk? we did get a whiff of an sme asset backed securitization plan. it's gone away in the interim. is it time for mr. draghi, perhaps, to put that back on the table just to talk about it, perhaps, so you show the market that there is still very much an easing bias and a willingness to help small and medium sized enterprises with funding? >> what could be a possibility for the ecb would be that they extent the regime in the middle of next year to maybe 2015.
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this could be one in the short-term. but for small and medium sized company, i think it's not to the ecb, it's, instead, from the political side and to improve the credit conditions. >> okay. thanks so much for joining us, heico peters from deutsche bank. and we do have a poll running on our website asking you whether you think a rate cut is likely at this meeting. i don't see it, really. annette? >> i think it's a very, very uk bias we're having in that poll, but that's just my first reaction. people who think that rates will stay at the level where they are now and almost 50%, so i rather doubt it. >> so hold or fold, ross, are you a gambling man? >> i'd go for the hold if it was me. and i agree with annette. there is certainly an
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anglo-saxon bias in that. and i wonder what people are saying what they think they should do rather than what they actually are going to do. plenty more. thank you for now. it's not just the ecb meeting today. the bank of england is really to reveal the latest on its benchmark interest rate. it could be a quicker unemployment race. the bank announced in august this year that that level would be a potential knockout for any rise in borrowing levels. helia is outside the bank of england. helia, we keep seeing the data, more data this week, very strong services sector pmi. i don't think there's an economist around at the moment who believes in the current bank of england forecast. >> i think you're right, ross. i think it's all been about mark carney versus the markets. markets don't believe rates will stay low at these historic levels for that long.
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economists don't believe it. we've had a slew of revisions from both economists, the imf earlier this year. we had it from the cvi revising upwards. and what you were talking about earlier is not actually what's happening today. i don't think we're expecting anything to happen from the mpc decision today. rather it's next week because next week, the bank of england behind me will bring out their inflation report. and this is how the bank tells the world how it sees the economy, how it sees risk, and this is how it unveiled forward guidance the last time round. as you said, those expectations that unemployment wouldn't fall to 7%. remember we're at 7.7% at the moment. we're expecting the bank of england will come out and say, actually, we don't have to wait. we don't think it's going to take until the back end of 2016. it might happen earlier, somewhere around the beginning of 2016 is when unemployment
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might get to that important 7% level meaning interest rates would be taken up at that point. the one thing i would mention is productivity because that's important to look out for, too, in that inflation report. it was said recently really historically low productivity levels in this country. we've had five years of productivity falling. so if we see productivity rise in the same way we're seeing economic growth in this country, then unemployment rates might not fall that far. so next week is going to tell us. >> thanks very much indeed for that. that rate discussion coming out at 12:00 london time, the ecb rate decision coming out at 13:45 cet. in other words, only 45 minutes after the bank of england. so here we are, an hour and 14 minutes into the trading day in europe. over nearly 200 companies reporting today in europe.
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it's been an anormus earnings day. caution ahead of those central bank meetings and u.s. gdp numbers a little later. around about 6 to 3 currently decliners outpacing decliners. the ftse yesterday was down some 15 points. right now, we're down another 12. the xetra dax is fairly flat as is the cac 40. the ftse mib is down 0.6%. 2.64% on treasury yields. where we were kind of this time yesterday. gilt yields still yielding 2.71%. on the currency markets, the dollar index has just come off its seven-week high. dollar/yen, 98.70. the aussie has taken a bit of a tumble today. sterling above 1.600.
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and it looks in a better place compared to the likes of euro, which is nevertheless firmer today, 1.3522. off that 1.32342 seven-week low which we hit earlier in the week. that's where we stand right now in europe. sixuan has the wrap for us out of asia. hi, sixuan. >> thank you, ross. asian markets under pressure ahead of the sensitive u.s. jobs number as well as the ecb decision. the nikkei 225 ended down about 0.75% as markets digest another batch of earnings. in caution prevails in china ahead of more macro data along with the key policy meeting starting this saturday. the shanghai composite lost 0.5%. the hang seng index in hong kong down 0.87%. elsewhere, south korea ended near its four-week lows as samsung electronics continued to
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underperform. australia's asx 200 lost a modest 0.2% as banks traded ex dividends. earnings are very much in place. in japan, toyota succumbed to profit taking after q2 earnings but not as high as expected. on the other hand, a hong kong chinese pc giant saw its profit just to $220 million beating forecasts. and that marks more than three straight years of quarterly double digit growth. lenovo shares gained over 2%. but chinese financials under pressure today after a report that beijing is working on restrictions on inter bank market activity to crackdown on shadow banking.
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minsheng bank h-shares were heavily affected and shares ended lower by 2%. that's a look at the asian markets. back to you, ross. >> catch you later, sixuan. still to come on the show, as european firms continue to blame head webds for their performance, continental beat expect azs despite the effect. how did they do it? we'll find out after this.
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astonish glg, nearly 200 companies reporting results today in europe. adidas shares in frankfurt up 3%. sales dropping because of a distribution problem in russia. and the company lost ground to nike. but it's the same performance will pick up ahead of the football world cup in brazil. rangold resources, stock is up 6.4% today. core profits have been hit by the falling gold price. but the mining giant revealed it's still on track to reduce costs and boost production.
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that was the bit the market focused on. we'll talk about continental in a few moments time over here. we'll be joined by the cfo shortly. before that, siemans has announced a $4 billion share buyback program. it says full-year earnings will rise about 15%, more than double the growth rate this year. joe told cnbc on a interview that he was committed to the turn around plan. >> we look forward to an even greater to 14. we wanted to improve our profit per share by at least 50% on a assumed flat revenue base. we also are going to issue a share buyback program up to $4 billion over two years and that that will take it from there. >> in terms of the operating
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margin, what was the operating margin and how far away from the key rivals are you on that metrics? >> well, the company has always said that in a transition period. and so the operating margin was 7.5%, which was up to our expectation. and we are going to improve that during the course of 2014 of up to at least 200 to 300 base prints. so we will arrive at some 10 pish percent going forward in 2014. >> what do you need to do to the company to get it to those levels? we've already seen, obviously, you putting your mark on the company in the first 99 days, getting ready of the regional classes, announcing 15,000 job cuts, 4% of the workforce. what are the key areas where you see siemens needs to improve? >> the key areas definitely are
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that we need to get even closer to our customer toes create demand so that it can grow again, grow the company to its opportunities. second topic is, of course, to improve our operational excellence, which gives us at least 200 to 300 base points on margin improvement on the operating level. then we also need to make sure that our corporate core is as effective as it can be. then this company will be back where it belongs to be. >> that was the siemens ceo earlier speaking to "squawk box." continental beat expectations. third quarter sales up to 8.35 billion euros. it was 8.13 a year ago. joining us for more, wolfgang slaifr at continental in a first on cnbc interview. herr slaifr, thanks very much indeed for joining us.
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you've hiked your epic margin goal because costs haven't gone up quite the way you thought. i'm wondering if maybe on that front the stronger euro helped you deal with raw material costs. >> we are losing on the top line due to the exchange rate effect. on the profit side, it's basically neutral. we are feel hedged, so, yes, we profit a little bit on the raw materials side, but then we sifr on the other end side. >> do you think people have -- companies we've heard a lot from have talked about the strength of the euro being an imbedment. are they bleeting too much? do you think policymakers should try and talk the currency down? >> well, actually, i think this
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is not always the right way for policymakers to try to influence the exchange rates in a certain way. for continental, overall, yes, on the stateside, we have some negative impact. as i said, on the profit side, for us, this is balanced out. we are naturally hedged. so for us as a company, this is not so much of a headache. >> just tell us more about your view of the european car market. you said it's -- you think it's going to stabilize. what else are you seeing? what is giving you the information that that is the case? >> well, we have seen, as you know, quite some quarters where the markets were declining in europe. and now we see for the second quarter type of a sideways development. and if i look forward, if i look at the orders which our customers are placing, it, looks like the market is stabilizing. quite low volume now and really
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moving sideways. we do not yet have indications that this type of movement is turning into a stronger growth. >> and look, you want to raise the share of the nonautomotive business to 40% from t current 30%. how are you going to achieve that? >> well, the automotive part of our business is still a part which has strong growth opportunities over the next year due to our product portfolio and due to all these new products which will have higher installation rates which we are delivering. so to achieve this target, might be we need some addition to our portfolio external acquisition might be necessary to finally achieve this starting, 40% of our group nonautomotive sales. >> so some acquisitions may be
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in the process. do you have a time frame in that mind for achieving that goal? >> acquisition indebtedness was high. and we feel now to do an acquisition of around $1 billion. so if there is an attractive opportunity, we definitely would close a look at it, but we don't feel pressed at all. >> and just a few on the eurozone economy at the moment. a lot of people suggesting the ecb should cut rates. it's clearly been a growth problem. do you think that will help? would you like the ecb to lower rates further or provide more liquidity into the system? >> we have indebtedness in the euro. if i look at continental, we would see some positive development out of this for the economy. i think the economy in europe is not yet back to a stronger
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growth, overall, other country which seems to be stabilizing. and i think some are easing in the ecb policy could be the right step to help europe get back on the road fast. >> wolfgang shaffer, thanks so much for joining us. now, like continental, the italian tiremaker pirelli is worried about currency effects. i caught up with the ceo of pirella and asked him his thoughts. >> that would be positive to rebound the value of the euro. so we -- it's a contradiction. we have the weakest part of the world in terms of growth and we have the strongest currency. which is wrong. the inability to have common projects to be competitive.
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it's not enough for the currency. so we need a common policy. >> so should the ecb be talking down the euro? >> i think it would be naturally to have a weaker euro. we made the exchange rate to dollar in 20011 at 117. now we are over 1.30. and the economy in europe is weaker. the economy in the u.s. is stronger. so there's a contradiction. >> still to come, pc sales continue to lag. lenovo gets a boost as it expands in new areas. we'll break down those figures right after this very short break.
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the headlines from around the globe, twitter prices shares in its ipo at $20 each above the expect dollarsed range and valuing the company at more than $18 billion. we'll bring you an exclusive interview with the twitter ceo at 11:00 cet. will he succumb to the pressure? market participants expect the ecb to keep rates on hold. leaving many wondering if president mario draghi should opt for a cut. banks stocks rise with commerce
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bank leading the way. it's begin to go pay off. germany's second biggest lender cutting forecasts with a 15% rise in net profit. the german enginee gia promising a new strategy in may. they vow to return the company to growth. >> it is about innovation. this is about reliability. quality. and that's what we are going to do. by explorering our market opportunities and then return to growth. >> plenty for investors to deal with today, the bank of england meeting, the ecb, twitter's ipo. this is where we stand with european equities. cautious and softer, the ftse down 0.3%. the xetra dax down 0.11%.
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cac 40 down 0.3%. the ftse mib is down 1%. only 34% of companies that have beat have come in with expectations above revenue. ten-year gilt yields, 2.71%, as well. on the currency markets, dollar/yen just off a seven-week high. euro/dollar, currently trading at 1.3517. big focus today on twitter. it's priced its ipo at $26 a share, above the expected range or the raised range of $23 to $25. sources have told cnbc that underwriters initially were looking to aim prices at $27, barring any last-minute hitches. but 17 million shares being issued, the offering will raise
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$1.82 billion. that values twitter at over $18 billion fully diluted. the company has gone to underwrite an option to buy up to $10.5 million doishl shares. if those are sold, twitter will raise under $1.2 billion. which will make this the second biggest internet ipo bhievend facebook. shares will begin trading today on the nyse under the ticker twtr. and stay tuned because we'll have an exclusive interview with the twitter ceo, dick costolo. that is in 25 minutes from now. as a result, we're asking viewers today, where do you think twitter will close? send us your number. ronnie tweeted in and said i believe twtr will close between $27 and $28. keep your responses coming. e-mail us,, tweet @cnbcwex or direct to me
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@rosswestgate. meanwhile, shares of lenovo are higher in hong kong. rovts up 36% to record levels in the second quarter which beat estimates. lenovo benefiting from its drive into the server and smartphone markets as pc demand goes limp. solid sales on tablet devices have helped. lenovo says it will continue to hunt for acquisition to expand. there are no reports of a planned bid for blackberry. mark is industrial principal at itt practice. he joins us now. mark, very good day to you. so are they doing enough in the smartphone and the sort of tablet sector to offset the decline in traditional pc? >> so i think what we saw in the earnings were actually quite good. so we had revenues that were high enough to offset the decline in their pc business, which was only about 3% compared to about 10% global decline. so we are seeing good results.
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but they're mainly doing this in china. they haven't gone into the western, more developed markets yet. so that's going to be something to watch. >> yeah. .how much of their sales is still pc based? it's the vast majority, isn't it? well over 80%. so they've got a lot of work to do. >> correct. it's still 85% of their revenue is still tied to a market that is declining. so this is the concern and this is what might lead to the acquisitions that you mentioned. and the jury is still out. they're going to want smartphones in the united states next year. so i think we'll have to see how those devices do. >> yeah. how big is that a challenge? people will know lenovo for pcs. will that translate into people wanting to buy smartphones? >> i think this is a huge valg. basically everybody except for apple and samsung, if you look at htc, blackberry, all these companies are struggling.
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so it's definitely an uphill battle to build a premium brand in the smartphone space. >> the good news is they're a pretty strong financial decision. wa can they do with that financial muscle? >> so i do think the acquisition would make sense. the canadian government told them not to bid on blackberry due to security concerns. i believe that's very likely. but that being said, there are a lot of struggling smartphonemakers out there. also in the tablet space. so an acquisition in this space is, i would say, likely going forward. >> and you just talk about the chinese markets, smartphone penetration there is low. was that an opportunity for them? >> yeah. the really good news for lenovo is even if their devices don't take off in the west so soon,
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the chinese market in terms of smartphone and tablet growth is going to be able to insulate them for quite some time. two to three years. this is really one of the things they have going for them right now. >> mark, we appreciate your time. have a good evening. now, let's get back to japan for results from yamaha motor and bridgestone. yukak os ono is with us in tokyo. >> hi, ross. like toyota yesterday, exporters are enjoying a strong earnings season here thanks to the weakening yen. today, yamaha motors said its operating profits jumped nearly 58% from the previous year despite sluggish demand in asia. its largest market. the weakening currency drove sales higher, again rating more than half of its operating profits. mean wile, bridgestone operating profits rose by more than 50% in
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the january/september period to more than $3 billion, helped again by the weaker yen and falling material prices. both yamaha and bridgestone kel kept their full year outlook unchange. that's all for the business report. back to you. >> thanks for that. china begins its october deluge ahead of its policy meeting with the release of trade numbers. we'll get more china data on saturday, as well. meanwhile, corporate earnings continues in japan. we get atlantis and united reports due. >> only 11% positions were created last month. workforce participation continues to deteriorate as baby boomers retire. the latest stats show only
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part-time jobs are on the rise. that undermine tess aussie/dollar, as well. some foreign banks in incident ya may get the same treatment as local counterparts. if they move to a wholly owned subsidiary. converting will allow them to open more branches and raise debt. but they'll have to over mark 40% of their loans for so-called priority sectors like agriculture. there's an awful lot on the show. e-mail us, just there would be the e-mail address. ert evicting dozens of protesters that have occupied the building since june. the station was abruptly closed by the greek government in order
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to meet targets for job cuts set by foreign lenders. the five-month standoff ended with the arrest of several people. still to come on the program, london gets its first j. crew store. will the atlantic crossing prove successful? it was really only one lady we could send down to do this. karen. we'll hear more from him.
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profits down by 50%. the drop was less than analysts expected for swiss r he. stock up 2%. munich re saw net profit hit hard in the third quarter, hit by a number of major claims. this announced a $1 billion buyback plan. we'll be joined by company's cfo york snyder in a first on cnbc interview in around 20 minutes time. meanwhile, strong performance of the nonlife and life businesses helped to boost generales business in the third quarter.
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it was planning to sell its swiss business rsi. iegon, meanwhile, stock up 2.2%, its net income down 0% to $227 million euros in the last quarter. hit again by hedging losses and back in the uk, rsa down about 11%. losses are above expectations and, therefore, full year return to shareholders are likely to suffer. so that is the insurers. wa about the banks? they're looking better on the share performance today. commerzbank up nearly 9%. it beat estimates, posted a 15% rise in quarterly profit. that was driven by business from
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its core market. credit agricole may be back in the mrook. the rival societe generale, missing expectations despite a six fold increase in net income from the previous year. with more on this and the seconder, stephane joins us out of paris. hey, stephane, clearly the shareholders or investors are liking what they hear. >> absolutely. because at first glance this morning, we could see societe generale was hit by expectations. if you look at the underlying conditions, it beat expectations for the third quarter. the cib division was resilient with a 3.5% increase of its revenue on the quarter. that's to compare with a 10% contraction at bnp paribas or a 15% contraction at credit agricole.
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the ceo of the banks is satisfied with the set of results. >> we're concerned that we have under third quarter of this user a solid set of earnings. the first point is that our businesses revenues, despite the difficult environment where we are, we compared to last year, same period of time by 4% in this difficult environment. and this is good for all our business lines. so it's clearly that our containment management program is on track and our cost of risk is mastered stable compared to last quarter. i think that the good news is the underlying results of this quarter is very close to $1 billion euros. our net result is 534 million and there is -- so the 1 billion is always, in my view, a demonstration of this solid --
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of our earnings this quarter. and the return on equity is for this quarter 8.6%, which is not the target that we have announced, but we are now improving the quarter. revenue from the cid activity increased by 3.5% in the quarter. are you satisfied with this performance? >> xaerdz to the industry, fair to say the set of results in our corporate investment bank is comparab comparable, better than the average, and it is probably linked beside that first of all we have still market share gains in our different business lines. it's fair also to say that if you look at the fixed income of the activities, for example, we are a lower exporter which has been an impact on the third quarter due to the crisis of the emerging markets, the u.s. federal reserve policy.
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so we have also a good set of results in equity this quarter, despite the low volumes. so all in all, i think our corporate investment bank is looking at its capacity to gain market shares in the environment. >> can you give us an update on your cost production plan. >> this quarter is the most that we have delivering out of formation plan as scheduled. and we have secured at the end of the third quarter 260 million euros of savings. more than 900 million plan we announced at the beginning of this year. so we are fully on track on that. instead of transformation, another point which is important to underline is our new organization which from the first -- the second of september, we implemented the new organization of the group. more simple, more focused organization through our precore activities and this gives a further opportunity to gain synergies in terms of revenue
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and cost. so we continue to do that over the next quarters. >> credit agricole was reporting this morning the bank missed expectations for the third quarter. the net profit improved significantly from last year. 728 million euros for the quarter compared with a massive loss, ross, of 2.8 billion euros last year at the same time that was because of its -- over to you. >> good stuff. thanks very much for that. stephane knows a thing or two about how to dress, which is how good because this next segment is all about it. the clothing brand loved by michelle obama, j. crew has set its sites on the uk. this week, the company is opening its first overseas flagship tore in london's region street. there's only one person to send there. karen asked if this was a toe in the water before a wider push
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into europe. >> this is much more than a toe. this is probably arguably the most important store we've opened in a long time because it's the first time we're going overseas, it's the first flag ship we've ever had outside of north america. so -- and it's also an indication of how will we will be received in the rest of europe and reps internationally all over. because regents streets and international street. so it's a toe but hopefully it's a toe that immerses the whole body eventually. >> this is a significant investment you're making. does it mean you see the wider economy improving? >> no. we can never time an opening to an economic climate. we're a relatively small business. we don't have any real market share in london and we think most importantly that we bring a different sense of style to the market here, a style that we
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think the english customers will like a lot and we'll find out in the of course few months if they do. and, you know, we've had this in the planning stages for well over two years, so you can't really forecast the economy. >> there was a controversial report in the local press which found that j. crew is 40% more expensive in the uk than in the states. retail sg a global business these days with internet shopping. so why the higher price tag? >> you know, i find it a little stunning and i'm surprised. when has it been that prices in the uk for american products haven't been higher? when has it ever been that prices in america in the uk for uk products are higher than america? we sell a few brands here from english companies and we sell them more in america. is brands in america that are made in england are higher priced in america, in italy, so on and so forth. petro, cars. so for some reason, and i can't explain it, there seems to be an
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attachment to talk about retail apparel pricing, and not gasoline, not cars, not computers, and nothing else. it is what it is. it's a fact of life, given the economics. and yes, it is higher. but go ahead. >> let's talk about those economics. you still haven't told me why. but there's nothing to explain. the economics are it's a higher cost of on doing business overseas than it is in your home country. and i don't really know much about -- i'm not an economist, but we base our business on a fair return and profit like everyone else does. and when i hear the right answers on that from everyone who's selling products worldwide, prices are not the same worldwide. and it seems to me it's kind of logical. >> okay. big flash for j. crew. meanwhile, as part of our trader poll this week, we've been asking how do you think twitter will close on its first day of
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trade? 63% of you said higher. 23% lower and 14% thought it would be flat. now we're asking where do you think it will close in terms of price today? send us your thoughts. gordon gable tweeted his guest at 30.30. ray predicted twitter will print at $57 by the close today. so more than doubling its price. keep your responses coming. e-mail us, but it would be much more right to tweet us,@krns wex or direct to me @rosswestgate. still to come, munich re is trying to win over investors with a $1 billion euro share buy back. the stock is down. we'll find out why. we'll be joined by the company's cfo kwloshg snyder on a first on cnbc interview. plus, twitter's ceo dick costolo spoke with julia boorstin in an exclusive interview at the
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company's headquarters. we'll bring you an exclusive of that interview but we promised more than 140 characterses.
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this is "worldwide exchange." i'm ross westgate. twitter prices its ipo at $26 apete, above the expected range, and values the company at more than $18 billion. come up, we'll bring you an exclusive interview with the twitter ce on o, dick costolo. will he succumb to the pressure? market participants expect the ecb to keep rates on hold. but weak eurozone inflation have kept many wondering if president mario draghi should ask for a
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cut. germany's second biggest lender beating forecasts with a 15% rise in net profits. twitter ipo is finally here. remember the dow had a record chose last night. and we're currently, what, some, i don't know, 15 points below fair value. we are currently, what, 2.5 points below fair value. the ftse 1 hin down 0.25%.
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in europe it's all about cb. the xetra dax is flat. the ibec is down 0.5%. the cac 40 down 0.15%. but, really, the big corporate news of the day, of course, is twitter. it's pricing its ipo at around $26 a share. now, that is above the expected range of $23 to $25 a share. sources have told cnbc that underwriters initially aimed to price it at $27 barring any last-minute hitches. so with 20 million shares being issued, the offering is going to raise $1.82 billion. which values the firm at over 18 billion fully diluted. the company has granted underwriters a 30-day auction to buy up to 10.5 million additional shares. if all those are sold, twitter will raise just under $2.1
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billion, making this the second biggest internet ipo behind, yes, facebook. shares will begin trading today on the nyse under the ticker twtr. and you've got to remember how it compares. facebook issue prices $38. and on the opening day, it was just up 0.6%. now, cnbc's julia boorstin has been speaking with the twitter ceo dick costolo at the company's headquarters this week and she asked him about the ups and downs of getting to this stage, taking twitter public. >> knowing what you know now about the ipo process, what would you do differently? >> i hate to give that trite answer, but here it comes. so get ready for it. i really wouldn't change anything about the way we've approached the process this time.
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so i'm supremely happy with the process we've gone through to get here and how everything has gone so far. coming up in the show, plenty more of that exclusive interview with the twitter ceo. where he thinks future growth opportunities are going to be. and so we want to know, clearly, where do you think twitter stock is going to close today? send us your number. you can e-mail us, but i think it's far more appropriate to tweet us, @cnbcwex or direct to me @rosswestga @rosswestgate. plenty more to come on that. i don't know whether sixuan has a view on where she thinks the twitter ipo will close. but i'm sure they're talking about it in asia, as well. sixuan. >> yeah, you are right, ross. actually, everyone is talking about the twitter story today and along with the much anticipated u.s. jobs number as well as the ecb meeting. that's why asian markets lack a direction.
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but most of them traded in the red. and kaugdz prevailed in china along with a macro meeting starting this saturday. and some hong kong listed financials headed south after reports that beijing is working on restriction toes crackdown on shadow banking. elsewhere, the kospi ended lower 0.5%. the asx 200 ended marginally lower as banks traded ex dividends. earnings are very much in play. in japan, toyota sa summed to profit taking -- excuse me, can we have the wall for toyota. after earnings surged, but not as much high many hopes with shares down by 3%.
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hong kong giant pcmaker lenovo saw profits just 36% to $220 million. that's beating abdomen list forecasts. lenovo shares gained over 2% and that profit marks more than three straight years of double digit quarterly profit growth and helped by higher margins in its chinese pc business. quite impressive there. back to you. >> all right, sixuan. thanks for that. that's the latest out of asia. now, munich re shares taking a hit because of the large claim costs and a negative currency effect. the net profit of $336 million euros still came in ahead of reuters forecast for 611 million. the group offered investors a sweetener with a buyback and said a more optimistic target was in reach. joining us on the phone in munich, the cfo of munich re.
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thanks so much indeed for joining us this morning. you're getting some money back to shareholders. will that do anything to affect your company's capital position or the ability to write new business? >> it's a pleasure to be with you. good morning. no, not at all. we have a very comfortable capital position and tlrch, it's time row view the share buybacks when we had interrupted in 2011. >> let's talk about pricing. we had more than a million claims. normally we get those events, pricing would go up. but you have such great competition coming into the market from mention funds, are you going to be writing business less profitably than you might have hoped?
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>> not really. you are absolutely right that there is a tendency of the re-insurance capacity coming from investors. it comes until the form of insurance linked securities and some other forms. but it's normally linked to noncatastrophe business especially in the u.s. and this is an area where we have some business, but it's just a fraction of what we offer. we are highly diversified and the bulk of our business sfot directly affected. >> well, in the re-insurance markets, normally done particularly well in the u.s., high margin risk, we haven't had a lot of damage from hurricanes. so what happens now to premiums there? >> so we still remember sandy. it's less than a year ago. roughly a year ago. and, therefore, there's enough
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reason to keep the discipline intact and i firmly believe that this will hold true also through the renewal season of on our major re-insurance contracts. so in tendency whether risks are increasing in the course of the global warming and, therefore, there will be an urgent northeast need of a lot of capacity. so we are confident that the pricing level will hold at the reasonable level and this especially applies for europe where we have just recently had the major storms and the hails. and so we are mildly optimistic with regard to the incoming negotiations. >> all right. herr schneider, thank you very much for joining us. it will be very focused on what the ecb has today and what
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happened with investment rates, as well. flagging inflation in europe's peripheral companies expected to dominate today from the european central bank in frankfurt. ahead of that, you can see where buntd yields are trading at the moment. slightly bid. the currency has an awful lot of focus. remember, it was only a couple of weeks ago we were at a two-year high of 1.3833. today, currently trading at 1.3517 against the u.s. dollar. but with this disinflation pressure growing, the core rate of inflation at 0.8%. that matches the record low. should they be doing anything? jeff and annette are both outside the ecb headquarters at their normal perch in frankfurt. they join us right now. guys, there's a lot of pressure building on the ecb because of this disinflationary threat. so how are they going to respond to it, if at all? >> how do they respond to it, annette? >> most likely won't respond to
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it and wait until we get the projections in december. >> yeah, yeah. and that's the point here, ross. the current language that we've had from the ecb still continues to make the case. but what we've seen in terms of disinflation is a temporary phenomenon in that it has something to do perhaps with lower food prices through this very short recent phase. and that as we move into the winter here, we're going to see a turn around in some of these inflation prints. so we wait and watch. but if that's the kind of language they use, it gets them off the hook somewhat here on the need to do anything urgent at today's meeting. the euro is, as you pointed out, the topic that seems to be more come nabt when it comes to how the investment bax are viewing this meeting .how some of the corporate are looking at this meeting. so on let's play you a clip of a sequence we put together where we get various important bankers and others talking about this
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euro rate. >> there have been a lot of strong fluctuations between euro and the dollar in the past. as long as the present development more or less is part, fits into this historical context, i would not see any major course for major concern. >> as far as the italian situation is concerned, certainly what could be more effective is certainly injection of liquidity. but also some measures that would signal that the stance of monetary policy in europe also taking into account the fact that the euro is becoming very strong. >> you can be very optimistic because we saw a record year in 2013 both in terms of
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international rivales and both in terms of revenue. and the signs of a positive for 2014. so overall, i would say that tourism is definitely one of the -- that would help rebound. >> for us, it's almost an on sigdz to exit the bailout program and not needing another bailout program. and we are quite committed to do so. >> elect today program on the 15th of december. that's when the program ends farmally. there are two programs between the european union and the imf. so we exit on the 15th of december. >> so two real issues on the table today. one is the interest rate issue and the other one is what replaces the ltros and whether there is a need for any further liquidity from the banking system. we've seen a contraction in excess liquidity in the eurozone from the start of the year. do they need to do something today given what you've said about the staff projection? >> well, when it comes to liquidity, i don't think there will be a lot of news out of that press conference, either. because in the recent speeches, the wording or the edge of it
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was missing there. so it's a clear indication that the market is not really prepared to hear anything new about it. on the other side, one can say hinge towards what could happen next year. >> and the other side of the coin on this, ross, when you look at this currency story, there are a number of banks and analysts out there who say this is not about the euro, it's not about the ecb decision, it's about tapering and it's about what's going on in the u.s. and the strength of the recovery there. and that's the other point here, that there is a stoibtsy on the council, i think, the dry constituentsy, let's call them that, who think that maybe we leave rates where they are, just in case tapering, when it does come, leads to any foreseen tightening in money market rates and then at least we have something in the box of tricks that we can wheel out at that time. >> it's a fair point. geoff and annette, for now, that rate decision is due at 13:45
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cet, 12:45 london time. with me in the studio, eric nielson. eric, the big question is, do they have any powder compared to the likes of the fed and the bank of japan to bring their currency down? do they have enough tools in the box to use? >> sure they have if they really wanted to, right? >> what mandate could they do similar things to the fed? >> they can do anything that they can do including qe. they just have to do it in proportion country by country. but we're not even nearly there. i mean, the euro is strong. so it's not as dramatic as it appeared when you look at the euro/dollar. >> i understand that. but at 1.37 earlier this year, the ecb did talk about it in february. >> yeah. >> so what's the difference between then and now? >> if february, it had increased by over 1% in a month. and it has done about one month
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since then. so it's to speed up appreciation that worries them in february. and is it the speed of appreciation in terms that have been -- >> but the impact is just the same. and actually the fact that it stays there at those levels for the rest of the year, we are seeing in report after report after report, pirelli, and continental, all talking about the strength of the euro is hampering their competitors. >> i agree. it's not nice. but here is the problem, right? the eurozone runs at 2%, 2.5% current account surplus. who are you to say then that the currency is too strong? how do you -- if you get into a battle with the fed and the bank of england and the japanese fighting about weaker currencies, it's a world that central bankers don't want to get into. you have an underlying current account surplus -- >> and that gets us back into the united states with the u.s. treasury and the european commission both saying germany has excess surplus and you need to do something about it. >> yeah. i think that is a vastly
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overstated issue. the germans have a surplus. the dutch have an even bigger surplus. so if you know what to do in germany, you could do some on that one. but the real issue here is that the intra eurozone flow stopped and the deficit country ves to rebalance the current account overnight. that is really what blows the current account surplus. now you get a bit of a stronger euro, which is not good. and nobody likes it, for sure. still to come, siemens has announced a buyback share. we'll hear from the c company's new ceo right after this. sfoo [ horn honks ]
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. a recap of the headlines, twitter values its stock at $18 billion with an ipo price of $26 a share. inflation, the main trooem theme in europe as the ecb and the bank of england announced rate decisions. and solid earnings helped banks in germany and france push to the top of the european equity markets. nearly 200 companies reporting in europe today. siemens among its shares and the top of the germ xwran market, the engineering giant announcing
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a 4 billion euro share buyback. it's expecting full year earnings to rise by 15%, more than double the growth rate this year after it reported a 10% drop in fourth quarter profits. earlier, the new ceo told cnbc in a first on cnbc interview we was committed. but explained how committed he was to the turn around plan. we look forward to an even greater 2014. we want to improve our profit per share by at least 50% on a assumed flat revenue basis. we also are going to issue a share buyback program up to 4 billion over two years and we will take it from >> in terms of the operating figure, what was the operating margin and how far away from key rivals are you on that metric? >> well, the company has always
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said that we are in a transition period and so the operating margin was 7.5%, which was up to our expectations and we are going to improve that during the course of 2014 of up to at least 200 to 300 base points, so we will arrive at some 10ish percent going into 2014. >> joe kaiser, the ce of o on of siemens earlier a little. now, j. crew has decided to dial into the london fashion theme. michelle obama's favorite store. karen tso has been taking a look around and caught up with the retail guru.
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u.s. closing brand j. crew has decided to open its flagship store in london. karen caught up with the ceo mickey direction lrexler and as so-called merchant prince about the secret to his success. >> there is no secret sauce. i think those of us who do certain things well, i don't know if it's dna, if it's genetic, it's an ability to merchandise and have a vision for business. it's an ability to see around corners to a degree.
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and there are turn arounds, but i have loved all my jobs in a sense. but i think anyone who -- you know, i was speaking to a singer yesterday, a well known singer and i said what's the secret sauce in a sense? well, his mother was a pianist. his father was a song writer. and i think part of it is of dna and nature versus nurture and it's a really large question. i don't know what makes my heart go aflutter when i see a good style that's going to sell a lot. i don't know. but it's something that i feel that i like doing. i have maybe a fondness to do. >> the lines have been integral to the turn around here. is it the creative director of retail like the ceo of industry basically a ceo in waiting? >> well, i think -- i don't know any company that doesn't have a strong partnership, finance, creative merchandising in our business.
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and i don't think there's one right answer. i think jenner and i do well because we know each other's strengths and weaknesses, as i do with the entire team and as she does. and i think a beautiful symphony has many people playing beautiful music. i don't think there's any rule or regulation. i do think that creativity is critical in almost every about it business in the world today. certainly the silicone valley computer business. that's a fashion business. people talk about fashion in peril, in accessories. apple is a fashion company. fashion is -- i think you need all three or on four components to make your business a sess. >> till to come on the show, do investors tweet the smell of success as twitter prepares to go public? coming up, we'll preview the ipo and we'll leave you with these words from the ceo dick costolo.
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>> i'm going to continue to invest in the near terms in those kinds of infrastructure capabilities, in the partnerships that we've developed, in our platform partnerships in twitter and tv that we know and have full confidence in will allow us to grow the core business. r ] todae knew all about a bike accident, just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. [ driver ] and it got his okay on treatment from miles away. it even pulled strings with the stoplights. my ambulance talks with smoke alarms and pilots and stadiums. but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before.
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this is "worldwide exchange." i'm ross westgate. the headlines today from around
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the globe, from tweet to trade, twitter ipo prices its shares at $26 each. that's above the expected range. it values the company at more than $18 billion. coming up, we'll bring you more from our exclusive interview with the ceo dick costolo. and will mario draghi succumb to pressure? eurozone inflation may leave many wondering if the ecb president should opt for a cut. plus, bank stocks rise in europe. it's beginning to pay off. germany's second biggest lender beating forecasts with a 15% rise in net profit. and it's all changed at siemens, the german engineering giant promising a new strategy making cnbc the freshly appointed ceo has vowed to return the company to growth on. >> ready to look forward and bring the company back to where the company stands for.
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and it is about innovation, this is about reliability. quality. and that is what we are going to do by exploring our market opportunities and then return to growth. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> okay. a very good morning to you if you've just joined us in the united states. it's the biggest ipo since facebook, twitter has priced its float at $26 a share above the expected range at 23 to 25 bucks. sources have told cnbc that underwriters were initially aiming to price the stock at around $27, barring any last minute hitches. with 70 million shares being issued, the offering is going to raise 1.82 billion. it will value twitter at 18.3 billion fully diluted. the company has granted underwriters a 30-day option to buy up to 10.5 million
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additional shares. if all of those are sold, twitter will raise just under $2.1 billion and that is what would make it the second biggest internet ipo behind facebook. shares begin trading today on the nyse, ticker twtr. ahead of this float, julia boorstin has been speaking to the ceo of twitter. twitter currently has around 231 million users. but costolo talked about where future growth may come from. >> how big do you think twitter could be? a billion users? what's your number? >> you know, when we've been on the road show, one of the questions i'll gel get is what is the total addressable market for twitter? and my first reaction to that question when i got it is, well, they must be talking about the financial. and so when they then asked, no, i'm talking about users, you know, at first i'm taking aback because everybody -- again, everybody inside the company knows and has experience with
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the value that twitter can deliver to anyone in the world. and so when people ask that question, my reaction is it's the entirety of the world of connected people because we all see, every day, everyone works here, examples of how twitter can be value to all of those people. >> all right. coming up, we'll get more of julia's exclusive conversation with dick costolo. plus, is the company, which isn't profitable yet, worth the $18 billion dollar valuation? we'll debate that coming up in the next 20 minutes. twitter co-founder and chairman jacks dorsey may not be done with all this going public business. cnbc has learned his other company square reportedly in early talks with banks about a possible ipo next year. square is the business which allows retailers and moisture chas chant toes accept credit and debit card payments by
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attaching a card reader to their mobile phone or tablet. ahead of the twitter float today, how are u.s. futures doing at the moment? this is a recap for you at the moment. the dow is currently some 17 points below fair value after finishing at a record close yesterday. the nasdaq is around 9 points below fair value and the s&p 500 at the moment is around 2.5 points below fair value. as far as european equities are concerned, the ftse 100 will be looking to a bank of england rate decision. that's coming in just under an hour and a half. 12:00 london time. the xetra dax is flat. the cac 40 up 13 2%. the cac 40 down 0.2. the ftse mib down around 0.8%. the ecb decision is coming at 10:45 cet. as far as the agenda in the united states today, weekly jobless claims due at at 8:30 eastern. forecast to drop by 5,000 to title of 335,000. also at 8:30, we get the first reading on third quarter gdp. growth is forecast to rise 2%.
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it was up 2.5% in the second quarter. examine then september consumer credit is out at 3:00 p.m. eastern. this ahead of the nonfarm payrolls report on friday, which is expected to play a pretty big role in the fed anticipates taper time line. fed governor jeremy stein and new york fed president bill dudley are also due to speak today. still with me in the studio, eric nelson. eric, good to see you. how much focus are we going to see this prince of gdp today? bearing in mind we're still focused on what the gooft shutdown as done in the fourth quarter. >> there's a lot of noise in that number. we think that we are going to have a little bit of an eegz in the quarter to maybe 2% annualized growth from 2.5%. but the more important thing is to see what the disbeautiful between domestic demand is and export. because the united states is now hit by severe fiscal tightening. we are talking numbers that could match some of the choppiest ones in europe.
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so we think we're going to see over this quarter and the next one a smaller contribution from domestic demand and then they will not quite compensate for the slowdown. >> because there are those would say the fiscal drag will ease in the fourth quarter and, therefore, that should be -- whatever this number today, the fourth quarter will be a little better than the third, despite the government shutdown. >> yeah. i mean, the clear slowdown in domestic demand from fiscal i think in the third quarter we get. but, again, on a trendwise basis, we think that fourth quarter could also see some drag on the domestic side. >> where does this -- where is this going to leave us with the employment report, as well, with the fed tapering discussion? there was this report out from goldman which suggested they could -- whenever they taper, december or march, they could do it by lowering the unemployment threshold rate. do you think that's a good idea or not? to sort of ease and tient at the
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same time? >> yeah. i hear this. i think this is a terrible idea. generally speaking, i think it's a terrible idea to leave monetary policy to unemployment numbers. and the reason for that are twofold. one, unemployment labor markets are backward looking factors. they are lagging growth and not forward looking. and the second thing is, there's so much noise and participation ratio and development in america and in europe for that matter that the unemployment number is really more a function of whether people decide to get in and out of the labor market, in a sense. so america is -- has lowered unemployment rate because people are leaving the participation issues. >> do you apply that to mark carney, as well? >> absolutely. he doesn't even have the dual mandates. >> so there's no justification for it. eric, good to see you today. thank you very much for joining us. russia is facing two more decades of weak growth hit by capital outflows and overdepe overdependence on oil and gas. the government there sees gdp
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expanding by an average of 2.5% well below the previous forecast of 4.3%. coming, 2013 shaping up to big a big year for bonuses on wall street. a new report says just about everyone will see some extra cash in their year-end checks. details, coming up. ♪ ♪
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all right. you're watching cnbc's "worldwide exchange." now, plenty of focus on when it comes to pay 2013 may spawn some fond memories if you happen to work on wall street. it seems rather unusual. cnbc's jackie deangelis is at cnbc hq for us in the united states. jackie, a good year for wall street for bankers? that seems unlikely. but why? >> well, it's interesting, ross. wall street bonuses forecast now to rise about 5% to 10% this year. that's according to a new report by xain compensation consulting firm johnson associates. so not so bad. that would mark the second straight annual increase as the sector continues its slow recovery from the financial crisis. now, top executives at wall street banks and firms, they could see bonuses at the low end of that range, so rising about 5%. however, johnson says there's a wide disparity in payoutes and
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that's interesting. it depends on what you do for a living within the industry. people in low risk, fee heavy businesses, they are going to likely get bigger year-end bonuses. johnson saying this group includes the asset managers, financial advisers and underwriting investment bankers who could see bonuses just as much as 515%. now, those who work in the volatile and risk heavy businesses like bond trading, they are going to see their bonuses drop by 5% to 10% or potentially even more than that. and that's because of the instability in interest rates that we've seen this year. the forecast reflecting the new realize for some of wall street's biggest banks. we're talking about goldman sachs, morgan stanley, citigroup, bank of america, jpmorgan, they all reported weaker fixed income revenue last quarter. some firms saying they're setting aside casts for compensation, suggesting fewer dollars from their revenue coughers will be spent on their employees. banks have shed thousands of jobs over the past three years
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with the big focus on high earn earners. that's allowed them to jack up bonuses for the mid level workers without having to increase their overall cost for compensation. so it's an interesting story, ross, and it's not the same across the board. >> all right, jackie. what's your twitter handle? >> @jackiedeangelis. >> so the big question is where do we think it will be at the close of play. we're starting with $26. what's your thought? >> when you look at a deal like this, there's a lot of range. i think a lot of people are going to want to get into this twitter ipo today. but at the same time, we have to look at what we've seen in the past. we have a top heavy market right now. people may want to get the pop in the stock today on the first day of trade .sell to brook those profits. i'm going to see we pop a little bit today and we probably come back to somewhere around where
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we priced >> it's a bit of fun. chuck us out a number. >> $26.50. >> that is not much of a pop. >> i think it's going to pop more than that throughout interday. >> and the point is at the close. i was slightly more bullish than that. this morning, it might close up. >> narrator: near 32. i know nothing. who knows where this is going to go. i think there's an intense interest in it. look, besides jackie and our thoughts, we would love to know what you think. you can e-mail us. it's probably more important to tweet us. and our twitter address for the show is @cnbcwex or direct to me @rosswestgate or @jackskydeangelis, as well. twitter has valued itself at $18 billion. $26 a share. the ecb and bank of england announce rate decisions and solid earnings help banks in
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germany and france push to the top of european equities. still to come, more of our exclusive interview with the twitter ceo dick costolo. we'll get his comments on asking silicone valley rivals for advice about the ipo process. we went out and asked people a simple question:
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how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed much is the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪
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to so twitter has priced its shares at $26. the company has granted underwriters a 30-day option to buy up to another 10.5 million additional shares. now, if those were all sold, twitter would raise just under $2.1 billion and that will make it the second bigger intirnt ipo
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behind facebook. the twitter ceo has been speaking to cnbc's julia boorstin. he talked about how twitter's management leaned on some of their silicone valley rivals for advice about the ipo process. >> i think that our strategy approach in the ipo has been based on me and our investors frankly having a number of conversations with on her ceos and investors around silicone valley. one of the great things about silicone valley is irrespective of how competitive you might be with another company or how closely you might be working with that company, there's a great sort of give-and-take and camaraderie between some of the executives of the valley and some of the other investors in the valley. >> twitter, of course, never turned a profit in its seven years of existence and more than three quarters of its users are outside the u.s., only a quarter of its revenue comes from abroad. costolo talked about where the company will invest for future growth.
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>> we have a significant number of investments we want to make as we move down that path. investments in our distributive platforms, investments in our twitter and tv strategy, etcetera, etcetera, investments in our product infrastructure for mobile testing suites. we will continue to make those investments in the growth of the core business for the foreseeable future. >> so how is it going to go? joining us now, michael caisson, founder and ceo of social radar. centrist, let's kick off with you first. you thought that out of 25 buck valuation, it would look a little bit rich at 14 times forward sales. it's now 26. so presumably, you think it's even more expensive. >> yes. good morning. thanks for having me. i think now at 16.6 times sales, it is rich. but i think it's understandable. it's a premium for facebook.
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but it's growing at twice the rate of facebook. it has a lot of promise ahead. it has many untapped revenue sources ahead. so i think the growth investors will give this company the benefit of doubt. and they will get into the stock. it's still a good value. >> you say it's growing at twice the rate, but when facebook listed, it was much further down the road in its development. there are those who might argue that twitter has come a little early. >> yes, it has. and that's good for the company because people don't know what the profit potential is. people don't know what the revenue potential is. so that's good that the investors will give them the benefit of doubt. it has a lot of promise. it's not just part of the mainstream. it has become the mainstream in digital media. so i think the promise is there. the potential is there. the company will grow into that valuatio valuation. >> michael, it's always lovely having potential and promise. a lot of people fail to deliver on it. what's going to happen with twitter? >> well, look, you have to realize it's a big difference between the twitter ip on o and
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the facebook ipo or even linkedin ipo is that the consumers have seen how social media stocks are performing. and the growth that facebook has seen over the last year and the tremendous performance oflingedin means that as people are looking at twitter, they know social media is working. it's generating strong revenue growth and good profits. so i think, quite frankly, wa you're going to see is a pretty big pop not only on the first day of twitter stock, but continued interest as this stock continues to do well and grow in the long-term. >> are investors looking at this just because they're blown away by the number of users and potential users rather than the financial metrics? because there's a difference. >> i don't think it's just -- i don't think that it's just that they're blown away by the number of users. you have to realize that the main interface for twitter is, indeed, the smartphone. people are basically using this technology on their smartphone all day long to a greater degree than they're even using facebook or they're using linkedin or
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other social media sites. so it's not just that you have 230 million users. it's that the majority of them are using it with smartphone technology. they're viewing it in their hand which means if there's a larger potential for twitter in the long-term to do things like direct eed commerce or other opportunities to expand that revenue base. >> how long -- i'll ask you both this, how long are investors going to give this company? they're now into quarterly revenue. the story is going to get better every quarter. how long are they going to give them before they go, you know what? it ain't working quite the way we thought or it's not working for the price that we've put on the company. >> yeah. i think they will give at least a year at the least because the potential is there. they need to monetize the international base. they need to add a few more revenue sources which they're working on at the early stage. so i think the investors will wait at least a year, year and a half before they form an opinion
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as to where it's going. so i think they will be patient. >> michael. >> well, i think that it's going to have a longer runway than a year. and it's not necessarily that the investors are going to be looking at that quarterly revenue number. what they're going to be looking for is continued growth, continued international expansion. where the users are coming from as more .more continue to utilize the twitter platform on mobile devices. so i think as long as those metrics continue to rise, the investors will be happy and the stock will continue to grow. they know at the end of the day that those large numbers are going to translate to significant revenue and significant earnings because you can see that it already happened for this other social media stock. so if you then realize that twitter has the even potential larger amount of users in the long-term, then you know that those numbers are going to eventually come and be pretty substantial when they arrive. >> we all know that they've got to generate refer knew from
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overseas. international is where they're going to have to start monetizing at the moment because that's where the bulk of their users are. is there going to be a challenge in that you have to monetize differently in different territories, michael? >> well, certainly breaking out into international is a challenge for any of the social media plays, in particular, twitter. because when it starts to arrive and being used and utilized in different countries, they see tremendous growth, really, right from the beginning. and then they have to turn that usage into different monetization opportunities. so it is a challenge. but the model is not that different. what history has shown us is the same way that you're able to monetize someone's social feed or mobile interactions in north america is very similar to the way you can monetize it overseas. there are unique challenges, of course, to setting this up in other countries, but once it's set up, monetization is similar. >> michael, santela, thanks for that.
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we'll see what happens over the next few months. we've been asking you how will twitter close on its first day of trade, higher, lower or flat and that is still going on. the vast majority have been saying higher. but have your say on twitter using #traderpoll. we've been asking you where you think twitter will close. 63% say it will close higher. where do you think it will close in terms of price on the first day of trade. peter from london predicted a closing price of $33.15. thank you all for sending in your guesses. now, still to come, plenty more on twitter for u.s. viewers. european viewers, you're going to stay with me because we've got extended coverage for rate decisions from both the european central bank as well as the bank of england. head to our website for a live breaking news and press conference. otherwise, good day to our viewers in north america. "squawk box" picks up the countdown to the opening of markets stateside.
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wherever you are, have a profitable day.
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good morning. the dow is coming off its best day in three weeks and closed at another high. economic tests today, key data on jobs and gdp. those will both come before the bell. plus a policy decision from the ecb and a sweet tweet, twitter prices its ipo at $26 a share. remember two weeks ago, we're talking somewhere around $17. so should be interesting to see where this baby opens. trade sg set to begin today on the nyse. i don't know when they'll get it open. remember facebook? it's thursday, november 7th, 2013. "squawk box" begins right now.
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good morning, everybody. welcome to "squawk box" here on cnbc. i'm barack obama along with joe kernen and andrew ross sorkin. we do have a big morning ahead. so let's get right to work. twitter pricing its ipo above the expected range ott of $25 23 to $25 with an offer of 7/0 million shares of $26 apiece, the company will raise at least $1.8 billion. julia boorstin sat down with twitter's ceo. she'll join us with is that conversation in just a minute. but first, the rest of this morning's agenda, there are a number of key economic stories to watch. the european central bank is meeting in frankfurt. policymakers are expected to hold rates steady despite intense pressure to cut interest rates because of


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