♪ >> announcer: this is "nightly business report" with tyler mathisen and sue herera. feeling blue. ibm reports its lowest quarterly revenue since 2002. and its shares slide initially in afterhours trading. securing your nest egg. how much retirement income will you need? it may not be the amount you think. fighting the flu. it's big business for some very big companies. tonight begins the first of our three-part series. all that and more tonight on "nightly business report" for monday october 19th. good evening, everyone and welcome. case of the blues for big blue. ibm's revenue fell for the 14th straight quarter, missing analyst estimates. the world's largest technology services company said it was hurt by a strong dollar and by the sale of low margin businesses as it shifts from

making hardware into cloud computing. ibm reported earnings of $3.34 a share. that was four cents better than estimates. that's the good news. but revenue fell nearly 14% from a year ago, coming in at $19.28 billion. and that sent shares of the dow component initially lower in afterhours trading. in an interview after the results were released ibm's cfo talked about the decline in revenue. >> within the revenue we report we obviously have a pretty substantial currency headwind that we continue to deal with. and as we transform our business we continue to move out of areas where we don't see long-term value. so across that -- across our revenue base that's about 13 points of impact. >> josh lipton has more now on ibm's results. >> reporter: $5.1 billion. that is what ibm reported for its software revenue. a drop of 10% compared with the third quarter of last year.

analysts had been looking for 5.2 billion. so a point of weakness where the street was expecting strength. fbr's dan ives says the bigger point here is that ibm continues to have real challenges adapting to this you new era of corporate computing. ibm is putting a lot of time and money to work in building out its portfolio of higher-value products and services shifting billions into clouds, analytics, mobile, social, and security services. but investors remain skeptical it can move quickly and ably enough. the stock is on track for its third straight year of declines. for "nightly business report" i'm josh lipton in san francisco. this is a big week for tech earnings, and it will be closely followed since that sector is the biggest among the s&p 500. we'll hear from yahoo! microsoft, amazon, and google's parent company alphabet. brian blair joins us now to give us a preview of what to expect. he's principal and co-founder of grays peak capital, an investment management firm that

focuses on technology, media and telecom. welcome back, brian. good to have you here. >> thanks. thanks for having me. >> so what are you expecting overall? let's do a broad brush look at tech and then we'll maybe drill down a lilt more. >> i think for q3 we're going to see a lot of in-line results. one of the things that happened back in august and september when the market was selling off largely because of china concerns is we saw a lot of the sell side bring down expectations. so i think that expectations overall are going to be largely met. you know, some guys might be a little light but we're thinking broadly in line for q3. the big question mark and what -- is going to be q4. and what we're expecting is going to be a conservative approach across the board for a lot of these tech companies because there is a fair amount of uncertainty. not just with the typical uncertainty around the consumer and holiday-related demand but you know there's a lot of uncertainty around the global market right now and what's going to happen in international markets like asia. as was mentioned by ibm, what is going to be the longer-term impact of currency, you know, over the next several months.

and so that's how we're looking at the overall tech environment right now in terms of earnings. >> let's talk about three particular companies just very quickly. what do you expect from microsoft, google and amazon? >> on microsoft they're seeing a number of good trends right now. very positive for windows 10. they're seeing some progress on the cloud side. but the pc market is still very sluggish. i think microsoft's likely to be relatively mixed. there's a few things you can point to where there's strength but there are also some areas where they're still lagging. >> on to alphabet or google. >> alphabet, i think this is going to be a very positive one. they have the wind at their backs. they gave a very critical stat just very recently that mobile searches are up over desktop searches for the first time. so they are really benefiting from the continued growth of bobel usage of google. >> and quickly amazon. >> amazon is one that i think is going to be one of the more exciting ones to watch. continuing to invest in this amazon web services and they're taking share and really

destroying a lot of the smaller players. i think this is going to be a very positive period for amazon. >> brian, a number of those companies have in the past, and ibm did it today, cited the currency issue that they have with the strong dollar. how legitimate is that? we hear it so much now. >> you know, in some cases it is legitimate but i do think that some companies probably like ibm are going to use it as a mass tok hide some softer fundamentals. there certainly are examples of companies that manufacture abroad and they're buying parts abroad or manufacturing abroad and there will be some impact to currency there but i think some companies are going to use it as something to hide behind when their fundamentals are a little softer. >> all right, brian, thank you so much. >> you bet. >> brian blair with grays peak capital. on wall street today stocks closed slightly higher even as energy prices fell as investors await a fifth of the s&p 500 companies to report earnings this week. the dow jones industrial average was up 14 to 17,230. nasdaq gained 18. and the s&p 500 added a boisterous half a point. well, results for morgan

stanley certainly didn't help the market sentiment. the bank reported a plunge in quarterly profits. disappointing investors. the last of the big banks to report its numbers was hard hit by market volatility in the u.s. and china last quarter. and capped what some characterized as downbeat results for the entire industry. that pressured the stock, which fell 4%. mary thompson digs deeper into the numbers. >> reporter: in the wake of the financial crisis morgan stanley ceo james foreman has restructured the bank's business to be more stable. but in what gorman called an unusual trading environment stability was in short supply as the banks posted a 42% decline in third quarter profit. >> after relatively strong first half the third quarter was obviously dispointing and reflected a difficult market environment throughout the quarter. >> reporter: while morgan fund increased in advisory fees linked to mergers and acquisitions and a steady performance in equity trading gorman noted the quarter was market by three challenges.

first the volatility in china led to a steep decline in one of the firm's asia-focused private equity funds. second the firm put aside more money to address legal issues. and third and most importantly, like its rival banks, morgan's fixed income commodities and currencies for fixed trading unit recorded its worst performance since the financial crisis, hurt by jumpy markets in securitized products and credit. >> they have a decline in fixed income. that's understandable. but a 40% decline is just undefendable. >> reporter: since he took over as ceo five years ago gorman's work to address the ongoing problems in the firm's fixed income trading business shrinking it to a size that allows it to serve clients without hurting results. and while that wasn't the case in the third quarter, gorman brushed off suggestions more cuts need to be made in the business, saying there won't be a knee-jerk reaction to a single bad quarter. still, even the firm's brokerage business, which gorman's expanded to provide stability for the firm, saw revenue

decline. as the volatile markets kept retail investors on the sidelines. now morgan stanley investors are sidelined with the stock down 17% here year to date. looking and hoping for a fourth quarter turnaround. for "nightly business report" i'm mary thompson. a shake-up to report at deutsche bank. the german financial firm announced over the weekend that it plans to split its investment bank into two and shuffle top management. the moves are an attempt to overcome legal problems and address complaints that the bank is too complicated and not profitable enough. to china now where that country's economic growth logged its weakest growth since the financial crisis. the world's second largest economy grew 6.9% in the third quarter, below the government's year on-year growth rate of 7%. despite the slowdown the result was slightly better than expectations. but that slower growth from the world's largest consumer of energy pressured domestic oil prices, which fell nearly 3%. meantime, u.s. builders are positively bubbly. a periodic report out today

showed that u.s. home builders are the most optimistic they have been about their business in ten years. the national association of home builders says sales expectations for the next six months are growing and that the softness in some markets is the result of labor shortages and land availability. still ahead, ready to retire? okay. but how much income do you really need? and should you follow the rules of traditional retirement? ♪

♪ united continental said it will provide more information on the airline's leadership soon. this after the company's ceo was hospitalized late last week. in a brief statement the airline offered no new details on the condition of oscar munoz but that it is working on a plan of action. munoz has been on the job just five weeks. he took over for the former ceo jeff smisek, who was forced to resign amid a scandal related to the port authority of new york and new jersey. ferrari is one of the big stories on wall street this week. the ultra luxury auto brand is expected to start trading on wednesday with shares in high demand. but while ferrari may be the headline grabber the bigger story may be how this ipo can rev up the global expansion of its parent company, fiat chrysler, and of course its jeep brand. phil lebeau explains. >> reporter: they're fast, ultra

luxurious, and this week they'll be all over wall street as investors snap up shares of ferrari. it's being positioned as one of those rare luxury brands that will trade at a premium like prada and hermes. for fiat chrysler ceo sergio marchione a successful ferrari ipo is crucial to fca's future, which is spending more than $50 billion over the next five years to expand sales worldwide. >> i think the jeep renegade they've come out with that they're going to unleash in latin america is kind of fitting the gas prices and kind of the narrow road. so i think jeep is a tremendous global brand. >> reporter: the key to fiat chrysler's global expansion is jeep, which is primarily sold in north america. but worldwide sales are expected to soar as jeep adds new plants in china and brazil. paying for a portion of those plants and fca's global expansion will be the proceeds that comes from ferrari's ipo. but some are worried farrar yer

cachet and the value of ferrari models will slide if the automaker expands production once it becomes a stand-alone company that needs to show investors it can grow profits. >> to keep the premium they have to almost in a sense keep growth low. they can't allow growth to pick up to 10%, 15%, 20%. >> reporter: so far concern about ferrari flooding the market with more models has not dam 3e7bd enthusiasm for its ipo. in fact, demand for shares of the italian automaker is revving up ahead of its offering later this week. phil lebeau, "nightly business report," chicago. oprah winfrey is buying a stake in weight watchers, and that is where we begin tonight's "market focus." the 10% investment comes amid declining membership at weight watchers. cost cutting, increasing competition. now, half of the company's stock is owned by private investment firm artau. fid sxelt vanguard are also big owners. now, news of the investment watch these -- look at those numbers. sent shares up 105% to $13.92.

that, folks, is the oprah effect. chip maker micro semi has made an offer to acquire pmc sierra for nearly $2.5 billion. the rival chipmaker skyworks solutions recently offered 2 billion for pmc. the deal would be subject to regulatory and shareholder approval and it comes amid a wave of consolidation in the semiconductor industry. shares of pmc sierra finished the day up more than 14% to 11.73. micro semi dropped 5 1/2% to 35.28. and sandisk is reportedly in talks to sell itself to western digital. this according to bloomberg. the talks are described as advanced with a possible deal occurring this week. sandisk rose in after-hours trading finishing the regular session up about 3%. western digital, meantime, fell after hours. it finished the regular session up about 3%. valeant pharmaceuticals under fire for the way it prices some medicines.

reported better than expected quarterly profit but the ceo predicted that the entire industry will face lower drug price increases given the current environment. it is also, it says, considering a sale or spinoff of its neurological business. the upt to tends to see those big price increases. that sent shares of valeant lower by more than 7% to $163.83. weak sales of toys for girls hurt hasbro's quarterly results. the toymaker reported lower than expected revenue, which was also hurt by a strong dollar. revenue in the toys for girls category fell 28%. it's the fourth straight quarterly decline in that segment. shares dropped 7% to 72.33. halliburton saw its revenue plunge in the third quarter, citing weak north american production. the company has already shaved about 18,000 jobs this year alone. as part of a wide cost-cutting effort. shares of the company down about 1% to 37.36. supply chain solutions

company flextronnics announced its third quarter results after the bell beating analysts' expectations. the stock surged late today after those results. it fell slightly in the regular session to $11.20. and the theme park operator six flags saw growth in attendance during the quarter as well as higher park revenue. shares rose just slightly in initial after-hours trading. they finished the regular session about 2 1/2% higher to 50.23. key question here. how much money do you really need to live on when you retire? new research calls into question the familiar 80% income replacement rule and suggests that some retirees might need to replace less of their preretirement income than originally thought and others more. john sweeney, executive vice president with fidelity investments and planning and advisory services, is here to offer some insight. john, welcome back. the article in the "wall street journal" today was interesting because it points out when people retire typically some of the draws on their income

disappear. you're not going to be paying social security tax or maybe not as much or medicare tax or maybe not as much. or contributing to a 401(k). but my question is what should i really be looking at? my gross income? my after-tax income to replace? or do i want to look at my expenses? >> expenses are absolutely the place to start, tyler. when we talk to people about planning for retirement we ask them to think about their essential expenses, food, shelter, and health care. and when we construct an income plan for people often it's centered around the starting number that's like 80% of the last dollar you that made before you retired. and when you think about that number you're exactly right. you're no longer contributing to retirement. so if you've been saving 15% you've already been living on 85 cents of every dollar that you make. you have other contributions that presumably have evaporated. the big nut here is have you paid off your mortgage. so if you've paid off your mortgage then all of a sudden that's a big expense that you no longer have to pay as well. or if you can downsize and reduce your monthly nut.

those essential expenses start to go away. >> you know, john, it's interesting because so many people are underinvested in their own future. they're underinvested in their retirement. and it does seem like the mortgage aspect of things is very key. if you can sell what you're living in now, downsize, and don't have a mortgage, that's a very big addition to what would normally be going right out the door. >> you're exactly right, sue. people don't need that big suburban house with three or four bedrooms. the kids have grown, they've moved out of the house. so the question is what do you really need to live on and how can you pare down your expense structure? the key, the wild card here is health care. a recent study suggested people will need about $245,000 in retirement. that's per couple. over the life of their retirement. and oftentimes health care expenses are expenses that you didn't have when you retired but you incur some regular prescription over regular doctor visit that will require some ongoing medical expenses. those expenses become essential once you --

>> so $240,000 cash out of pocket through the lifetime of your retirement per couple for medical care. right? >> per couple over a 30-year period. correct. >> let me go back to expenses. and you said that the key is not to look at the replacement rates of income but to look at your expenditures and see what they are. do retirees spend the same, more, or less in retirement in sort of standard, you know, sort of inflation-adjusted dollars as they did before they retired? >> so there are three big drivers. the first is your income. the second is the lifestyle you hope to live in retirement. and the third is health care. so let's start with income. if you make $20,000 a year you basically need about 100 cents of that $20,000 to replace in retirement. if you make $150,000, hopefully you've got some discretion in your income and you're already saving through the amount that you would need per dollar lower than 100 cents on the dollar. lifestyle in retirement. if you're going to live a fairly sedentary lifestyle and not be traveling around the world, again that number comes down.

if you're going to be more active in spending and traveling more than you were when you were working, that number's a little bit higher. and then health care's essentially the inverse. the worse your health care the higher your costs are going to be, the higher your out of pocket. it's essentially the combination of those three factors that give you a replacement income rate that we talk about that somewhere between 60 cents on the dollar and 100 cents on the dollar depending on those three factors. >> all right, john, thank you very much for your help. john sweeney with fidelity. coming up, have you gotten your flu shot yet? the big numbers behind this $1.5 billion business. in the first of our three-part series on the flu-fighting industry. ♪

the u.s. treasury softening its stance on china's currency. in its semi-annual report on exchange rates the department says the yuan is "below its appropriate medium-term valuation." previously, treasury said the yuan was significantly undervalued. china devalued its currency back in august. meantime, treasury secretary jack lew says the debt ceiling will be exhausted november 3rd. and in an interview today he said waiting until the last minute to raise the nation's borrowing authority would be ridiculous. >> i think it's very important to remember that only congress can act to raise the debt limit. i will have used all the tools that i have as of november 3rd. and they were operating on cash. and just think about it. when you have a government of the united states that's a $4 trillion a year enterprise, swings of a few billion dollars can determine whether or not you have enough cash to pay your bills. it's ridiculous. the debt nimt needs to be raised. >> lew insisted that raising the debt limit gives the country an ability to pay the bills on money already spent and that it

does not represent a commitment to new spending. new rules for drones. federal regulators say they will require most recreational drones to be registered with the government. transportation secretary anthony foxx says the registration will make users accountable and responsible and will protect public safety. >> we've also seen unmanned aircraft interfere, not help with our lives. most recently in california during wildfire operations. some have come too close to airplanes and airports. and even at the u.s. open tennis tournament in september an unmanned aircraft flying in a densely populated area near laguardia airport crashed inside arthur ashe stadium during a match. >> foxx wants to have the registration requirement in place by mid december before the holidays because drones are expected to be a popular holiday gift. the recall of takata airbags

involves more than the 11 automakers that have already been identified. according to the head of the national highway traffic safety administration. the agency will disclose the additional car manufacturers at a public hearing thursday. the air bag inflateors, which can spray shrapnel, have been linked to at least eight deaths and 100 injuries worldwide. the republican presidential candidates have been outlining their plans for the economy and your money. john harwood recently spoke to donald trump, jeb bush, and others. tonight we hear from rand paul and his take on why the federal reserve should be audited and what he really thinks of former federal reserve chair ben bernanke. >> bernanke has said that he was a republican, of course appointed by george w. bush, but he no longer is because republicans have been taken over or given in to know nothingism. and he was talking about people like you who want to audit the fed. >> he should also self-examine and look back at how he's been

part of the problem and he should make the answer how is it a good thing to have price controls over the price of money? see, and this is the real contradiction that they don't quite get and they're unwilling to get. if you ask ben bernanke or any of the other so-called free market economists whether or not they're for price controls of eggs or potatoes or bacon they'll say oh, no, price controls cause a distortion, they lead to shortages or abundance or food rotting on the shelves. but then you ask them about money and they're like oh, no, we should control the price of money. but it's a fallacy in their argument. and if the price controls are bad for the market they're also bad for the money as well. >> candidate rand paul also told john that he's in favor of a flat tax, smaller government, and term limits. and finally tonight, more than 150 million americans will get vaccinated for the flu virus this year, and that means big business for some well-known pharmaceutical companies. in the first of a three-part series meg tirrell looks at the big numbers behind the

flu-fighting industry. >> reporter: many think the flu's not that big a deal. but every year as many as 1 in 5 americans get sick with the virus. flu causes more than 200,000 hospitalizations and thousands of deaths each year. it takes an economic toll too. more than $10 billion a year in direct medical costs. not to mention billions more in lost productivity. >> a lot of people say, oh, well, the flu, i get the flu, that's not a problem. they probably don't have the flu. when you have influenza, it can be a serious disease, particularly vulnerable people are infants, pregnant women, the elderly greater than 65 years old, and people who have underlying conditions like chronic lung disease or heart disease or diabetes. >> reporter: vaccination rates have been on the rise, helped by a big public health push. in 2010 the centers for disease control and prevention expanded its recommendation for flu vaccination to everyone over six months old. now about 44% of american adults

and 59% of kids get the flu vaccine. that also means big business for manufacturers. this year companies are making more flu vaccine than ever. up to 179 million doses are expected to be distributed. up from about 150 million last year. public health officials say there should be enough vaccine for everyone who wants to be vaccinated. as of the start of october, just under 100 million doses have been distributed. the three biggest makers of the flu shot make up 90% of all the doses distributed. and manufacturers tallied more than $1.5 billion in u.s. flu shot revenue last year. >> it's very challenging but also very important business. >> reporter: not all flu shots are the same. some offer protection against three strains of the flu virus. those are called trivalent vaccines. others offer protection against four. those are called quadrivalent. glaxo smith kline switched to the quadrivalent vaccine this

year according to its chairman of vaccine ppz. >> we are making more vaccine than we ever made. >> reporter: there's also a high dose version of the vaccine for people older than 65 by sanofi pasteur. as well as a nasal spray made by astrazeneca. and so far this season public health officials say the flu vaccine is tracking well with the virus and it's not too late to get vaccinated. for "nightly business report" i'm meg tirrell. >> and our series on the big business of the flu continues tomorrow, and meg will show us how the flu shot gets made. >> i've got to get mine. >> me too. >> that's it for "nightly business report" tonight. i'm sue herera. thanks for joining us. >> and i'm tyler mathisen. thanks from me as well. have a great evening, everybody, and we hope to see you right back here tomorrow night. of your cavalry.

and that, father, is checkmate. ha ha ha ha! yeah... never did have much luck with my bishops. still, it wouldn't be summer until you'd beaten me at chess. so time for a rematch? mrs. mccarthy: this way, mr. moxley. hmm. later perhaps. right now, i think i have some visitors. ( sighs ) father brown. i might have known. mrs. mccarthy, jeremiah. i was just welcoming aggie back to kembleford. bridget, how have you been keeping? until this morning, i was doing quite well.