this is "nightly b report" with tyler m sue herera. a recipe for a turnaround. how mcdonald's new ceo plans to shake off years of slirsng sales and traffic. new role. down component cisco does something it hasn't done in nearly two decades. and wa the oracle of omaha said about stocks bonds and the topic that put buffett on the defensive. all that and more tonight on "nightly business good evening, everyone. and welcome. big changes are coming to two very very large companies. mcdonald's new ceo unveiled a massive global turnaround plan one that he says will revive the business and one that shareholders hope will revive the stock price.

cisco, longtime ceo john chambers is stepping down after 20 years in the top job. cisco veteran chuck robbins is in bringing to an end one of silicon valley's lo. mcdonald's investors weren't impressed. they sent shares lower today. cisco managed to rise fractionally. we have two reports. josh lipton on cisco but first courtney reagan looks for the new strategy for the world's es >> the golden arches have been a little tarnished in recent quarters. it will take a lot to turn around the world's largest restaurant chain, but today ceo steve easterbrook is detailing at least the initial strategy two months after taking o >> the reality is our recent performance has been poor. the numbers don't lie, which is why, as we celebrate 60 years at mcdonald's, i'll not shy away

from the urgent need to reset this business. >> mcdonald's will sell 3500 restaurants to franchisees taking global franchisee ownership to 90% from 81%. which easterbrook says will generate more stable and predictable revenue and c the fastfood chain will cut layers and bureaucracy finding $300 million in annual cost savings by the end of 2017. mcdonald's will reorganize its business units into four segments based more on growth opportunies than geography. it will return 8 to $9 billion to shareholders this year. let's define but still state admissions include improving food quali brand perception bringing the customer voice back into the business and being bolder and fastno easterbrook says the company is amping up consumer choices from how you order to what you order. mcdonald's is testing new menu

items like taste-crafted sandwiches where customers can choose beef or chicken. choosing between three roll types and four dif from here we'd expect to see sales improve gently through the year. second half recovery in sales. perhaps not a powerful one, but we see this story being an improvement story in the second half and that continuing into 17 as they g some of this restructuring done over the next couple of years. >> competition in the fast food and fast casual dining space has been as intense as it's ever been. winning the consumer will come down to the perfect combination of tas. for "nightly business report, i'm courtney reagan. we talk about changing the world back in 1993 changing the way the world works, lives, earns and plays. it's now happening on steroids. >> it the end of an era in

silicon valley. cisco announced that john chambers will be stepping down from his role as ceo. chambers has held that position since 1995. analysts who cover the company praise him for the passion that he brought to the tech bellwether which makes equipment that connects data traffic across the internet. chambers will assume the role of executive chairman in late july. >> am i doing what i would imagine i'm doing at this stage of my life? absolutely not. >> his replacement is chuck robbins. he's worked in several management roles a to the company. most recently he was the senior vice president of worldwide operations. in a conference call robbins said he was humbled and honored by the appointment. robbins does have a challenging task ahead of him, though. rbc says that cisco is facing a range of competitive threats on a number of fronts juniper in networking arista in switching and palo alto networks in securi a few.

they say cisco needed an insider like robbins who understands t company's culture and can steer them through this challenging period with a steady hand. analysts mention another hope with this change in the c sweet, greater capital return. >> the company does about a billion and a quarter in buybacks and another in dividends. investors think that can go to 3 to 4 in cash returns. >> cisco stock is up 20% in the past few months. can robbins keep the momentum going? only time will tell but investors could have a better sense when the silicon valley company reports earnings next week. for "nightly business report," i'm josh lipton in silicon valley. with john chambers staying on as executive chairman that could present a unique set of challenges to cisco's new ceo. we'll have that story for you a little later in the broadcast. on wall street today the s&p 500 closed just shy of a new record.

helping sentiments factory orders rose 2% in march, the largest increase in eight months. the dow jones industrial average was up 46 points to close at 18070. the nasdaq rose 11 points and the s&p 500 was higher by 6. warren buffett's shareholder meeting this past weekend set a new attendance record. and while the event was full of the usual fun and games, the billionaire investor also fielded more serious questions about the markets. and about some of his most recognizable investments. becky quick spoke to the world's most famous investor and has more from omaha. >> the most frequently asked question of warren buffett, where is the stock m it headed from here. something that he's called occasionally over the last 60 years in his career but right now he says that's much more difficult to do and that's beca it all depends what happens to interest rates. >> the market amidst normal

interest rates is on the high side of valuation. not dangerously high but on the high side. on the other hand if these interest rates were to continue tore ten years stocks would be extremely cheap now and one thing you can say is that stocks are cheaper than bonds. >> one of the companies that you told me you've been buying more stock in is ibm. you told me that on saturday. in the first quarter you bought more shares. we'll see that coming out in s.e.c. filings soon. >> ten years from now, they'll be earning a fair amount more money than they are now and i think they'll have a fair amount fewer shares so our percentage ownership will be up and i think we'll make considerable money. i can always be wrong on any stock. but that's my best estimate. i felt that way when we started buying it a few years ago. again, a they ve 590 million shares out now so our interest has gone up 15% without us laying out a dime in that respect. >> the other issue that seemed

to come up a lot was concerns about changing tastes consumer tastes in the food industries that berkshire owns major stakes in. companies like kraft, coca-cola. people concerned about whether this food is good for them. and that's something that millennials in particular have been thing about. >> there's 1.9 billion 8-ounce servings of coca-cola products served around the world today. and there will be more than 1.9 billion a year from now and more than that five years from now and more than that ten years from now. that's been true. and some people like other things and if they like broccoli and brussels sprouts, god bless them but don't invite me for dinner. >> in all seriousness, buffett says consumers' tastes can change over time but they're doing their best to stay ahead of the changing times and he has their full confidence in their ability to do just that. becky quick from omaha, nebraska. >> buffett also said he would short the 30-year bond if he

could and has no regrets over picking ibm over apple. joe tanney joins us to discuss what mr. buffett had to say on stocks bonds and the market. let's start with what he said about the bond market. he said he'd short the 30-year if he could. do you agree with that play? >> you know i understand his positioning. what he's essentially saying is that interest rates right now are incredibly low and odds are for a long-term investor they're probably going to go up rather than go down. of course one of the ways that you want to take advantage of that is just having a short position in the bond market. so i agree with taking an underweight position there. >> he also said as you probably heard there that if interest rates were normalized stocks would be highly overvalued or overvalued at today's prices. if rates stay low, they look like a bargain to him. how do you see stocks? >> i think buffett, again, is thinking about it the right way. you have to consider valuations

within the context of where interest rates are and, of course when interest rates stay incredibly low, it just becomes a more profitable environment for companies. think about borrowing costs, think about inflation, think about rates in general. and broadly speaking when interest rates are very low it's a good thing for companies and of course if interest rates are much higher it becomes more of a problem. so his perspective in saying that stocks today are not as expe because interest rates are low is dead on. >> in the past you've said that you don't think the fed will move on rates until the latter part of the year. do you still agree with that? >> i do. i do. i think the fed's -- they have a dual mandate and are focused on two things. one being the labor market and the other being inflation. we've seen a lot of signs that the labor market is healing. things are clearly moving in the right direction. and inflation, in our view is firming. i suspect that as the u.s. economy continues to heal the fed no longer needs to keep giving it medicine.

i suspect that some point later this year probably in the back half of this year you're going to see the federal reserve putting the u.s. economy back on a path towards normal which means raising interest rates. >> as you look at the u.s. market most particularly, what if any, sector feels like the one that offers the best opportunity today for the next year to two? >> you know as i look at the u.s. economy cle of a rough patch, if y in the first quarter year, a lot of it du weather, i think you'r see a lot of pent-up d coming into the seco on the back half of the consumer finally and starts to spd money that they were holding on to. also, you had this t you will, from lower which we haven't rea materialize into spe we've seen it turn i i suspect in the bac this year we're going spending pick up, an be focused on sector that stand to benefit from increased spending on the consumer side. think of cyclicals, think of

consumer discretionaries, even consumer staples to an extent. >> thanks still ahead, sue what the country's producer is doing to beverage relevant ag pimco's flagship total return fund lost its title as the largest bond mutual fund to the vanguard group. according to april data released by both companies and as reported in "the wall street jo" vanguard's total bond market index fund had $117 billion in assets as of the end of last nth. pimco's total return fund 110 billion. as we reported a bit earlier in the broadcast cisco's john

chambers is stepping aside as ceo, but he's not going away. he'll remain as chairman of the firm he ran for 20 years. his continued presence may soothe some investors, but as our mary thompson reports, it will also pose challenges for chambers' successor, chuck robbins. >> for two years john chambers served as chief evangelist and architect of a firm whose stock climbed 1400% under his waf. by stepping down as ceo and staying on as chairman he can now provide important cover and counsel to his successor chuck robbins. >> there are all sorts of aspects of the job that he's going to have to learn. and the advantage is having a great teacher around. >> still, chambers' continued presence at the firm could create problems according to professor joe bauer. >> when the stays on, it always makes it harder for the new ceo to make changes, particularly if the new ceo has

in mind dramatic changes. >> cisco! >> as executive chairman chambers will likely be in the office every day. and unless he checks his ego at the door experts say he may resist changes robbins needs to make at the company chambers built. his presence might also be seen as a constant threat to robbins.bb professor catherine her igen saying the board could easily turn to chambers if robbins stumbles. >> there will be nonexecutive meetings of the board where the chairman will stay and they'll talk about the ceo, and if he feels like he wants to get back in he could easily have the rest of the board, who is probably in awe of him anyhow rubber stamp the idea that the current ceo should be shunted aside. >> former ceos cast long shadows. remember starbucks chairman howard schultz returned to ceo following the disappointing run for the coffee chain. and while he's no longer ceo, oracle chairman larry ellison

remains the face of the software firm he founded. executive coach mark nadher say best practices dic a former ceo should stay on as chairman for a year or less than leave. citing steve ballmer's resignation as being exemplary. this gave the new ceo to plot a clear course for t softw firm. chambers' future is less clear. cisco says his firm as chairman is indefinite something that could definitely create problems for robbins. for "nightly business report, i' mary thompson. comcast earnings and revenue top estimates and that's where we begin tonight's market focus. the company's broadband division logged its strongest revenue growth in more than four years. comcast also announced it will spend another $2.5 billion buying back shares this year. shares were up a fraction to $58.78. and come cast is the apparent of cnbc which produces this

program. cablevision said its video subscriber losses in the first quarter doubled from a year ago. still the cable operator managed to beat on the top and bottom lines, shares up a nickel. >> cognizant technologies saw its profits rise as revenue increased in its financial services and its healthcare segments after beating analysts' speck takings, the firm upped its earnings for the year. shares popped 6%. strong ad sails helped amc network. earnings were up almost 70% on the success of the tv network's original programming. shares moved higher by almost 5% to $80.02. mcdonald's -- and we talked about a few moments ago -- isn't the only company food business trying to plot a turnaround. so the dean foods. that's the largest milk producer in the country. after a sharp drop in consumption, the company has a plan to get people drinking it again.

jane wells has more from city of industry california. >> remember this stuff? it's called milk. when's the last time you had a glass? >> this is a category that really needs innovation and news. >> milk consumption has been falling for decades. at least cow's milk. sales of plant-based milk especially almond are rising. now the nation's largest milk producer is trying to move the trend back. >> okay class. >> dean foods has launched the first national milk brand called dairy pure. by combining milk from its more than 30 regional dairies under one brand, dairy pure automatically becomes a $2.5 billion brand. one of the largest consumer package goods lines in the country. >> this is running about 100 jugs a minute. >> chief commercial officer is helping to lead the change. inside the altadena dairy the company owns in california he says in a unique twist, the

company does not want to lose regional brand equity. so dairy pure labels will be co-branded with the local brands. a similar strategy the company did with true moo chocolate milk which is number one. >> that brand is and $700 million business for us on its way to a billion. that's really our goal for it. >> this saul happening as milk prices fall due to a glut. so dean foods is spending heavily to promote milk as a good source of protein without antibiotics and from cow with no artificial growth hormones. >> this is probably the most that's been spent against fresh white milk in many years if not ever. >> i take it it's a seven-figure ad spend? >> yes, yes. thanks for asking. >> he says creating one national brand makes it easier for grocery stores by providing one bar code and the opportunity to partner with other national brands. >> cookies and milk is so natural it's unbelievable. pick your favorite brand.

>> the reaching out has gone back and forth. more to come. it will be exciting. >> the hope is to make milk something more you pour on your cereal or incoffee. to make milk cool. that's a big gamble. >> dairy pure. like moo. >> for "nightly business re jane wells, city of industry california. earlier in the program we heard from warren buffett hims at the annual gathering of shareholders where he was peoplo wanted to hear him give advice which he did. but the questioning got more serious. special correspondent at "fortune" magazine nbr contributor -- there she is -- suzie garrickgharib. >> she's back. >> gets bigger and bigger every year. >> what was different thi year? >> when i first started doing this ten years ago mostly american investors, now very international. a lot of asian out of a big

xhinz delegation that came to meet with warren buffett. the other thing you used to have to own one share of berkshire hathaway stock to get into the heating. >> a now? >> you can buy tickets. >> really. >> just a sign that it's gone very mainstream america. they all want to learn how to invest like warren buffett and have fun doing it. >> the succession always comes up. and he's in his almost middle 80s now. >> 85 in august. >> that's fantastic. >> he's amazing. high energy. >> he always is. but what about the succession issue? s this year or less? >> i think it's gotten to the point where they're not sopo worried about the actual name who it is but is this person going to preserve the culture, the corporate culture. we have ceo ast always talking about our culture, but in the case of berkshire it's about core values and trust and ethics and lead by example. so they want someone who is going to preserve that culture and presumably they've got a lot

to choose from. there are 80 ceos in berkshire hathaway and all know the buffett way. >> these gatherings have been pretty adulatory to mr. buffett. >> yes, a love fest. >> but i gather this year there were questions very pointed specifically with respect to his and berkshire's relationship 3-g, whose tactics one they take over companies become be pretty rough elbow. >> there were questions about 3-g capital. they're more serious, they're tougher questions, more sophisticated. the issue with 3-g was they partnered with buffett. they bought heinz ketchup reisn'tly kraft foods. when it came to heinz, they laid off a lot of people. one shareholder a woman asked this question are you moving away from aspiring to balance -- her words, capitalism with compassion because the buffett way is you buy a company, you let them do their own thing.

but you don't go in and start chopping up the staff. >> and you hold it for a long time. >> and we're not sure about what the business principles of 3-g are. a lot of concern about that. is it just making money or is it making money and also building a company you're proud of. >> susie, great to see you. thanks for covering the event for us. we appreciate it. when we come back behind the scenes with the winner of the kentucky derby at the moment that american pharoah won the floyd mayweather and manny pacquiao was called the fight of the century about you the real battle wasn't in the ring. instead it was between

traditional media giants and cutting-edge start-ups. julia boorstin has more. >> new live streaming technology is changing the game. those watching the fight in the flesh or via $100 pay-per-view by showtime or hbo livestreamed it via perry scope and its rival meerkat. and the winner is periscope. the big fight put the livestreaming app on the map but perry scope came under attack for enabling piracy. though periscope and meerkat said copyrighted content will be removed from their site. tweeting piracy does not excite us. trust me we respect ip rights and are working hard to respond to last night including myself. periscope drew so many eyeballs because the fight cost $100. if it had just cost five or ten, fewer people might have turned to pies ay. cable companies didn't win any

fans. several providers struggled with issues because they were so inundated by the flood of pay-pe requests which delayed the start of the fight. and those cable operators won't just be fighting periscope. entreprene predict others will get into livestreaming. i that industry right now is doing a great job at hype. and yesterday's news i said integrated into social media company and try to figure out they want to monetize it as one of their features. >> we'll be watching for more legal action from hbo and showtime whi filed a federal lawsuit last week and blocked two piracy sites from showing the match live for free. for "nightly business report, li corinthian colleges has filed for chapter 11 protection as we reported last week. the for-profit college closed its remaining 28 campuses affecting 16,000 students. at its peak the company operated 120 colleges with more than

110,000 students across the country. finally tonight, american pharoah won the kentucky derby. on friday's program we introduced to his owner. and on saturday our cameras were there when his horse crossed the finish line. robert frank has more. >> the most exciting two minutes in sports was exactly that on saturday. kentucky derby favorite american pharoah did not disappoint the record breaking crowds at churchill downs for the 141st run for the roses. the undefeated 3-year-old thoroughbred raced past his undefeated stablemate dortmund in the final stretch and outpaced firing line by one length. it's the first time his owners ahmad and justin zayat have ever won the race. >> i still can't believe it, okay? >> i feel like i'm dreaming right now. don't wake me up. >> a big win for zayat who has

been racing horses for ten years. before racing zayat earned the largest beverage company in the middle east. the winners bring home the roses. the tr and $2 million in prize money. >> hopefully the preakness. >> baltimore. >> american pharoah is now the favorite in the preakness in two weeks. the second leg of the triple e crown. for "nightly business report," i'm robert frank. and that's it for "nightly business rep" i'm sue herera. >> i'm tyler mathisen. thanks for joining us tonight. .

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