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Lou Dobbs Moneyline

Dow Falls 16.07 to 10,935.17; Nasdaq Slips 17.96 to 2,173.57; Dell to Cut Thousands of Jobs

Aired May 07, 2001 - 18:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WILLOW BAY, CNN ANCHOR: Gas prices head higher, and summer hasn't even begun. This is MONEYLINE for May 7, 2001.

Americans are paying more to gas up than ever before. Will it be another blow to consumer confidence? What, if anything, can Washington do to help?

Downsizing, direct from Dell. The PC maker is laying off thousands more.

Just months ago, she was honored as corporate America's second- most powerful woman. Now Debby Hopkins is out of her job as Lucent's CFO.

And a story we broke here on MONEYLINE becomes official: Apple Computer going retail.

ANNOUNCER: This is MONEYLINE. Reporting tonight from New York, Willow Bay.

BAY: Hello, everyone, and welcome to MONEYLINE. We begin tonight with bombshell news for thousands of workers at Dell Computer. The Texas PC giant, struggling with slumping sales, said after the bell it would slash thousands of additional workers, as many as 4,000, over the next two quarters. Checking the late reaction, Dell shares up 64 cents in after-hours trading, still down more than 50 percent from its 52-week high.

Peter Viles reports.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): Just four days after an executive reportedly vowed Dell would be -- quote -- "ruthless" in managing costs, the company announced a second round of deep job cuts. In a press release after the closing bell, Dell said it will cut 3,000 to 4,000 jobs over the next two quarters. The cuts will come primarily in central Texas, and warned it will require most salaried workers to take unpaid time off this spring.

Wall Street had been expecting a second round of cuts, particularly after Dell confirmed in late April it had slashed prices by 20 percent on some desktop models. BRUCE UPBIN, "FORBES": My heart goes out to the people at Dell who are losing their jobs, but I think it's just going to be even more painful for Compaq and Gateway, because Dell's clearly doing this so that they can cut prices aggressively.

VILES: Dell in February announced 1,700 job cuts, also mainly in Texas. The two waves of layoffs could add up to 5,700 jobs: That's 26 percent of Dell's work force in the United States.

ROBERT WALBERG, BRIEFING.COM: You're probably going to see additional announcements of jobs cuts from other PC makers like Compaq and Hewlett Packard going forward. So I think this is an indication that we're still seeing the industry slowing down. It hasn't bottom quite yet.

VILES: In announcing the job cuts, Dell said it will meet previous first-quarter former guidance of 8 billion dollars in revenue. That's a drop of 8 percent from fourth-quarter revenue, but it means Dell is outperforming its rivals; Gateway, which suffered a 14.4 percent revenue drop; and Compaq, which saw revenues slip 20 percent. And Dell shares have been quietly rallying. Since bottoming at 16 and change in December, Dell shares have gained 55 percent.

(END VIDEOTAPE)

VILES: So one message from these layoffs is that Dell is bracing for an all-out price war. And analysts say that price war could last all the way into the holiday selling season 7 months from now.

BAY: So, Pete, these job cuts qualify as ruthless?

VILES: Certainly ruthless in the computer industry. Dell has always been known as being aggressive in containing cost, but it hadn't come to job cuts until this year.

BAY: Pete, thanks.

In addition to growing layoffs, another threat to American consumers stems from the surge in gas prices. Millions of Americans face sticker shock at the pump as retail gasoline is rising along with the temperature.

Lisa Leiter has the story from the city paying the steepest price of all: Chicago.

(BEGIN VIDEOTAPE)

LISA LEITER, CNN CORRESPONDENT (voice-over): A gallon of gas has never cost this much. The average retail price over the past two weeks spiked more than 8 cents to $1.76 a gallon, an all-time high not adjusted for inflation. And here in Chicago, a gallon of regular gas is well above the national average, costing more than $2.

UNIDENTIFIED MALE: If it gets any higher I'm going to sell this truck.

LEITER: No doubt SUV owners are the hardest hit. It cost this man $80 to fill up his Chevy suburban.

UNIDENTIFIED MALE: I don't have a choice. I need a large vehicle for work.

LEITER: Prices are so high because it costs more to produce the cleaner-burning gas required in the summer months. Also, refineries are having trouble catching up with demand. They got a late start with summer gasoline production because they spent all winter making enough heating oil to avoid a shortage.

PHIL FLYNN, ALARON: The big problem is, is that we still have a refinery capacity problem in this country.

LEITER: Low capacity means even higher prices as the peak-demand summer driving season approaches. But not all analysts see gas prices reaching $3 a gallon, as many have predicted.

MICHAEL ROTHMAN, MERRIL LYNCH: The prospects of seeing another dollar increase in gasoline prices would really probably have to stem from major refinery catastrophes and a dramatic loss of capacity.

LEITER: And already there are some signs prices may actually drop, an unexpected jump in gasoline stockpiles and imports.

(on camera): Record gas prices have put an even bigger spotlight on consumers, whose confidence is already damaged from rising layoffs. The question is whether consumers will pull back on spending overall if they're paying more to fill up at the pumps.

Lisa Leiter, CNN Financial news, Chicago.

(END VIDEOTAPE)

BAY: This rise in gas prices has raised eyebrows at the White House. For the latest we got to senior White House correspondent, John King -- John?

JOHN KING, CNN CORRESPONDENT: Raised eyebrows, Willow, but this administration saying there's not much a president or any politicians can do: no magic wand, no quick fixes. The administration saying it is concerned about rising gas prices because, in the view of the White House Press Secretary Ari Fleischer, they are tantamount to a tax increase on the American people. But this president, once again, saying today as he said as a candidate for president, that he would not be in favor of a temporary cut in the federal gas tax.

And we asked a question about -- what about the moral authority of a president? Should this president stand up and say -- urge Americans to go online less, to conserve electricity, or stop driving those big gas guzzling sport utility vehicles?

Here's the White House response.

(BEGIN VIDEO CLIP)

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The president believes that it's an American way of life, and that it should be the goal of policy-makers to protect the American way of life. The American way of life is a blessed one, and we have a bounty of resources in this country.

What we need to do is make certain that we're able to get those resources in an efficient way -- in a way that also emphasizes protecting the environment and conservation -- into the hands of consumers so they can make the choices that they want to make as they live their lives day-to-day.

(END VIDEO CLIP)

KING: So the administration believing no short-term solution to rising gas prices. There will be a political debate about this for sure, many people saying the president should do more. The White House view is that this president will spend his time and his political capital talking about long-time solutions. The administration's plan quite controversial due out next week -- Willow?

BAY: So John, is the president absolutely, positively ruling out a cut in the gas tax?

KING: A little wiggle room added to the White House today, and here's why, Willow. CNN is told that administration officials know much of their plan will be a tough sell on Capitol Hill. Just like the tax cut plan was changed to win over some votes, they don't rule out that perhaps to get the energy plan through Capitol Hill they might have to agree, say, to a one-year suspension of, say, four or five cents of the federal gasoline tax. If that is the price it takes to get the rest of the president's energy plan through, the White House would be open to that.

BAY: OK, John, thank you. And we should point out that John King will be talking to Vice President Dick Cheney tomorrow, and we look forward to bringing you that interview.

As policy makers and consumers focus on the rising cost of energy, investors are keeping their eyes on the industry wheelers and dealers. Today, refining giant Valero energy, offering $4 billion in cash and stock, plus $2 billion in debt for rival Ultramar Diamond Shamrock. The combined company will be second only to ExxonMobil in refining capacity.

And Williams company is paying $2.5 billion in cash and stock, or about $73 a share, for Barrett Resources. That trumps a hostile bid from Royal Dutch Shell. And Shell says it will not raise its $60- dollar a share offer. Barrett is relatively small, but its highly coveted stockpile of reserves will vault Williams into the top 10 U.S. natural gas companies. Williams fell nearly 2 1/2 on the news, Barrett jumped almost 3, and Valero lost about 2 3/4. Ultramar gained nearly 8.

But overall it was a go-nowhere session on Wall Street. Up next we'll look at why. Why stocks failed to build on Friday's big gains. We'll go live to the big board and we'll go to the Nasdaq.

Plus, the CFO shuffle at Lucent, a big blow to one of corporate America's most powerful women, Debbie Hopkins.

And the treasury secretary says the Bush tax plan is a boon to small business. But is the White House using fuzzy math?

(COMMERCIAL BREAK)

BAY: The action on Wall Street, if you can call it that, could be summed up in one word: lackluster. Stocks barely budged on the day, taking a breather after Friday's big run-up. The Dow fell 16 points, ending at 10,935 after triple-digit gains on Friday. The Nasdaq retreated as well, losing just under 18 to close at 2,173. The S&P: that fell three, ending at 1,263.

Allan Chernoff joins us now from the New York Stock Exchange with a look at what today's tepid performance says about the market's outlook -- Allan.

ALLAN CHERNOFF, CNN CORRESPONDENT: Thank you, Willow. The story at the big board today: the volume. Trading here at the New York Exchange was the slowest in three weeks and the third-slowest day of the year, only about 933 million shares.

Bulls argue that's a positive. The fact that the market traded lower on light volume, consolidating some of Friday's gains while market skeptics say it's another indication that the Dow is likely to remain in a trading range.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): A day of digestion is how many traders described the day's action following Friday's strong rally. Most market sectors ended lower, particularly some of the groups that have been strongest recently, like technology and retailing.

NICK ANGILLETTA, SALOMON SMITH BARNEY: Giving back a little on a day -- after a day like Friday, I think, is, you know, OK. You expect that to happen.

CHERNOFF: But what has also come to be expected is resistance for the Dow, whenever it comes close to 11,000. In the morning, it came within five points of 11,000 only to pull back.

DONALD SELKIN, JOSEPH GUNNAR: You could see this morning, we hit 10,995 and then it just seems that there's automatic-sell programs that kick in once we get to that level.

CHERNOFF: Time and again, in early February, January and November, the Dow briefly topped 11,000, then pulled back. Now, the index has climbed 16 percent from its low on March 22. And analysts are closely watching 11,000 as a test of the rally's strength.

Not only do analysts want to see the Dow close convincingly above 11.000 for an extended period, but they're also looking for it do so on strong volume with good breadth -- advancers well above decliners.

Another confirming indicator: An expanding number of new 52-week highs. New highs rose for the second day in a row today, up to 118, but that is well-below numbers from a week-and-a-half ago.

While many investors focus on the Dow, most Wall Street strategists deal more with the broader Standard & Poor's 500. One of Wall Street's leading strategists, Tom Galvin of CS First Boston, lowered his year-end targets for the S&P down to 1,450 from 1,520. That would still be 14 percent above today's close. Galvin's new year-end target for the Nasdaq is 2,600, down from 3,000, still 19 percent higher than today's close.

TOM GALVIN, CREDIT SUISSE FIRST BOSTON: I would say over the next 18 months, I feel like we could still see 25-30 percent appreciation, which is still, by all dimensions, relative to the pain that everyone's absorbed over the past year, I think a really solid rebound.

(END VIDEOTAPE)

CHERNOFF: That kind of rebound will likely depend on Wall Street seeing evidence that the worst of the economy and the corporate profit outlook has already passed -- Willow.

BAY: Allan Chernoff on the big board. Thanks, Allan.

In tonight's "Tech Watch," a disappointment on the Nasdaq, tech stocks today couldn't keep up the momentum after the Nasdaq scored a big 6 percent gain last week.

Greg Clarkin joins us now from the Nasdaq marketsite with a look at the stocks making big moves today -- Greg.

GREG CLARKIN, CNN CORRESPONDENT: And, Willow, analysts say all things considered not too bad of a performance by the Nasdaq today. Keep in mind, investors were still digesting profit warnings as well as more layoff announcements even before Dell's news after the close of trading.

So where do things go from here? Well, the attention really now focuses on Cisco Systems. Let's take you back here to the wall, give you an idea of what it did on the day. You can see, Cisco down 1.6 percent on the day. It lost 31 cents a share. The company out with earnings tomorrow, after the close of trade, expected to post a profit of two pennies. But more importantly, what they say about their business really is what investors are going to focus on.

Now, Cisco is really a barometer for the tech business. Siebel Systems, a software company, down 8 percent today. Some say that you can trace that to nervousness over Cisco's announcement tomorrow, that Cisco could have some negative statements with that earnings report.

Portal Software, a whole other set of circumstances, lost 36 percent on the day. They were expected to post a gain of one penny. Well, now the company says they will lose 19 to 21 cents a share. They blame a slowdown in spending by their clients.

Microsoft, meanwhile, up about 1 percent. It was one of the few winners on the day in the software sector. Let's take a look at some of those sectors and show you how they made out today. The software sector, again, was down overall -- down 2.9 percent. Microsoft, a winner there on word from a analyst they're changing the way they license their software to businesses.

Goldman Sachs Internet index down 2.6 percent. Philadelphia semiconductor index down 1.3 percent. So, that gives you a sense of kind of the widespread selling we saw today. But again, not deep selling, just kind of incremental losses for a lot of these stocks.

Willow, back to you.

BAY: OK, Greg, thank you. Coming up, are CFOs the new scapegoat of corporate America? We will tell you why more of them are losing their jobs. Plus, the battle over tax breaks in Washington: Will small businesses share the wealth?

(COMMERCIAL BREAK)

BAY: President Bush may have found someone to take the top job at the Securities and Exchange Commission. The White House is expected to name Harvey Pitt, an attorney in the Washington law firm of Fried Frank, to become the next SEC chairman. If confirmed by the Senate, Pitt would replace Arthur Levitt, who stepped down in February. Pitt had served as the SEC's general counsel in the 1970s before going into private practice.

The president was also speaking out today in favor of free trade, calling on Congress to grant him broad powers to negotiate trade deals with other countries.

He warned against what he called a new kind of protectionism in Congress and said that free trade would bring a host of benefits.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Open trade is not just an economic opportunity, it is a moral imperative. Trade creates jobs for the unemployed. When we negotiate for open markets, we're providing new hope for the world's poor. And when we promote open trade, we're promoting political freedom.

(END VIDEO CLIP)

BAY: The president said he would ask Congress to grant him trade promotion authority, which used to be called fast-track authority. Under that authority, Congress could not change a trade deal negotiated by the administration, but could only accept it or defeat it.

The Bush administration also played host today to the start of the annual Small Business Week. The White House has been looking to give small businesses a piece of the tax-cut pie, but some are saying the administration's figures just don't add up.

Kitty Pilgrim crunches the numbers from Washington. (BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Virginia-based Condortech makes smart cards and other security technology, employing 18 people. As a small business owner, Jorge Lozano applauds the Bush administration's proposal to lower the tax rate on small business from 39.6 percent to 33 percent.

JORGE LOZANO, CONDORTECH SERVICES: We've been taxed from left to right, and America, I don't think, was founded under those principles.

PILGRIM: The plan is the focus of small business week meetings in Washington, where Treasury Secretary Paul O'Neill announced the plan.

PAUL O'NEILL, TREASURY SECRETARY: The president's tax proposals would benefit every tax paying American.

PILGRIM: The debate revolves around just who would benefit from these tax cuts. Opponents of the plan say the real benefits would go to the rich individuals, not businesses.

It is true that many small businesses don't file taxes under corporate tax codes, they file as individuals and many receive income from partnerships and subchapter S corporate status. This makes it very hard to determine if it's a business or an individual who benefits.

According to the Treasury Department, small business owners would make up 63 percent of those who would benefit from the lower rate. But the center on budget and policy priorities says its more like 21 percent.

ISAAC SHAPIRO, CENTER ON BUDGET & POLICY PRIORITIES: I think it's more than fuzzy math, particularly when it comes from the Treasury Department. They should know better when they're using their own numbers.

PILGRIM: This hotly-debated issue is part of a bigger picture. The Bush administration has taken a pummeling of what critics say is a tax cut plan for the rich. This can be seen as an attempt to show that tax cuts at the highest brackets create more jobs and benefit more Americans.

Kitty Pilgrim, CNN financial news, Washington.

(END VIDEOTAPE)

BAY: Last week, Republican leaders tried to push the budget swiftly through Congress, but those early attempts have run into a number of obstacles along the way. Jonathan Karl has the latest from Capitol Hill on those two missing pages -- Jonathan.

JONATHAN KARL, CNN CORRESPONDENT: Well, Willow, several bumps on the road to this tax cut on Capitol Hill. Right now, the problem for the president is getting this budget resolution -- this budget blueprint passed up here in the Senate. The Senate -- you can remember when it was first passed -- a budget blueprint that included a $1.2 trillion tax cut -- it had the support of 15 Democrats. Right now, several democrats who voted in favor of that budget blueprint, are getting cold feet.

(BEGIN VIDEO CLIP)

SEN. DIANNE FEINSTEIN (D), CALIFORNIA: I, who voted the first time, will not be able to vote to support that budget -- the conference report on the floor. I think the senator from Connecticut has very well made the points, and for me, it is really a profound disappointment, that something I thought we had worked out and that was understood, is going to be reversed and come back in a conference report, which is, really for most of us, I think unacceptable.

(END VIDEO CLIP)

KARL: Now, the problem for these Democrats and two moderate Republicans, is that after negotiations with the House, the tax cut got a little bigger and that budget blueprint and spending got a little bit lower. The vote on this is expected in the Senate on Wednesday, after the House votes also on Wednesday -- Willow.

BAY: All right, Jonathan, we'll stay tune. Jonathan Karl on Capitol Hill, thanks.

Just ahead: the U.S. Air Force gets back to business watching China.

Plus: Hong Kong gears up for massive protests, going all out to prepare for a global economic forum.

(COMMERCIAL BREAK)

BAY: There was a revival of sorts in international airspace off China. A U.S. Air Force Plane flew a surveillance flight off the coast of China.

The flight left from Japan, and followed what the Pentagon called a northern track, and returned safely to base without incident. This was the first such flight since the Navy EP-3 spy plane collided with a Chinese fighter last month. That damaged EP-3 plane is still on the ground in Hainan Island, China.

The U.S.-China tensions will loom large at a global forum beginning tomorrow in Hong Kong. The forum, sponsored by "Fortune" Magazine, a unit of CNN parent Time Warner, will boast some high profile names, including former President Bill Clinton and Chinese President Jiang Zemin.

But organizers are also gearing up for a storm of protest at the event: from the Falun Gong spiritual movement, which is currently banned in China, as well as from anti-globalization activists, who have disrupted similar gatherings, most recently in Quebec. The security operation is bigger than that for the 1997 hand over of Hong Kong to China. Coming up in the next half-hour of MONEYLINE: more on the gut- wrenching rise in gas prices. Could those prices hit $3 a gallon?

Lucent shows the door to one of its top executives. What went wrong for Debbie Hopkins?

Plus: a desktop pioneer that claims to think different, takes a different approach to reach its customers.

Stay with us.

(COMMERCIAL BREAK)

BAY: In tonight's headlines: Dell on a cost-cutting mission, announcing an additional 3,000 to 4,000 layoffs, tacked onto the 1,700 job cuts already announced in February.

As Dell is cutting back, Apple Computer is branching out. The PC maker continues to quietly set up retail stores. We have the story. And the prices at the pump hit a new record high, and the Energy Department warns prices could climb even higher this summer.

But first, both the Dow and Nasdaq made several attempts to climb into positive territory today, but neither index was able to hold onto gains, finishing the session in the red. The Dow added more than 40 points mid-morning, but lost ground for the major part of the day. A late day rally was also unsuccessful. The index did manage to close well off its lows, down 16 points to 10,935.

A similar story over on the Nasdaq, a rocky session with the index dipping in and out of positive territory. Software and chip issues were especially hit. The index finished off nearly 18 points, at 2,173.

A down session for the broader market. The S&P 500 closed down 3 points, at 1,263.

Dell announced its job cuts after the bell. We head now to the new Instinet trading floor, where Jen Rogers is tracking the after- hours trading action -- Jen.

JEN ROGERS, CNN CORRESPONDENT: Willow, while there was a smattering of applause here at the end of the regular session at the new trading floor here in Times Square, but then it was straight back to work.

Dell was most active issue, with over 600,000 shares changing hands. Now, as you said company coming after the bell announcing cutback of three to 4,000 employees. But the stock was up 64 cents to $26.55. The company said it's sticking to its guidance, revenue guidance and earnings per share guidance for the first quarter, and investors seem to like that news. We saw it as high as $26.80, so a little bit off in the after-hours, but still a nice gain.

Another stock to the upside: Priceline.com, a big percentage gainer after hours, up more than 11 percent, nearly erasing its loss on the day. It had been down 78 cents. The company is coming out and announcing a management shake-up. Richard Braddock is being reappointed CEO. Daniel Schulman is out. Jeffery Boyd is taking over as president, that's another position that Schulman has held.

But the company reiterated its guidance, and said it still expects operating profitability in the second quarter. Over 200,000 shares changing hands on this one.

And finally, Cisco Systems, not an enormous gain here after hours, but very solid volume. It was up to $19.27. The company is scheduled to report earnings tomorrow after the bell, and unless there's big surprise, the company will be reporting its first-ever revenue decline year-over-year. But a nice move and a solid volume -- Willow.

BAY: Jen Rogers in Instinet. Thanks, Jen.

Other stocks making moves today: Nova jumped more than 5 1/2, or 24 percent, on news of a $2 billion buy out bid from US Bancorp. The deal creates the nation's third-largest credit card payment company.

One of the most active issues on the Nasdaq today, Transmeta. An IPO lock-up on the chip maker, which prohibited nearly 90 percent of its shares from trading expired today, sending the stock down nearly 3 1/2 to $11.17.

And Guidant gained 3 1/4. The FDA says Guidant's recent press release regarding an experimental pacemaker did not violate the law. The news follows the FDA's charge on Friday that Guidant had made improper claims about the device. Today's rally is a boost Guidant can certainly use. Its stock is off 33 percent so far this year.

My next guest is bullish on the market, and says now is the time to invest. Joining me now, Gregg Hymowitz, money manager at Entrust Capital. Gregg, welcome.

GREGG HYMOWITZ, ENTRUST CAPITAL: Thanks.

BAY: So you took -- did you take today's moves down as maybe a good sign that investors were able to at least hold steady, shrug off some of the bad news?

HYMOWITZ: Right, absolutely. The fact that you didn't see any downward moves today in any major way is obviously a positive sign. I think the most positive sign is that you have a stock market now that's going up on good economic news, the GDP number, and also going up on bad economic news, the unemployment number. So, it seems like it's slightly now in a bullish trend.

BAY: In a bullish trend, but is it a rally that is on firm footing? We do have that frightening job market to look at, and can consumer spending hold up in the face of it?

HYMOWITZ: Right, absolutely. That's the question. The consumer is a lynch pinch here. But I think -- I sort of like the fact that no one believes this rally is for real. You know, I speak to a lot of hedge fund guys all the time, and everyone has been caught short here or not long enough in their portfolio. There is a lot of cash in the sidelines, and it's almost a positive that no one believes this rally is for real.

BAY: No one believes it's for real, and in fact, should investors expect a bit of pullback?

HYMOWITZ: I think you may get a pullback here and there. But I really do believe you have the Fed on your side, you have the economy recovery some time late this year, early next year on your side, you have the tax cuts coming. You have a lot of positive things on your side, and I think, furthermore, I think the market will be able to look through some negative earnings announcements, because I think a lot of that is already baked into the market.

BAY: What do you think, particularly Friday's report means for the Fed, and what we'll see in terms of Fed cuts?

HYMOWITZ: I think the Fed is cutting. I don't think that's even an issue. I think you'll get 50 basis points in -- next week. You -- probably -- I think probably get another 50 basis points in June.

They're making their cuts chunkier, and they're front-loading them. The risk of inflation is not even an issue, and they need to get this economy going again.

BAY: They still -- they're aggressive, as you point out, but there are plenty of folks who are concerned that the Fed may not be able to do it this time.

HYMOWITZ: You know, I think that's -- that's typical. I mean, the bottom line is, you always, hear, the Fed can't do it, the Fed can't do it. You just have to go about and look at what's happened in the past. Once the Fed begins easing, equity markets historically are up, roughly 20 percent from the first Fed easing.

BAY: Are you buying right now?

HYMOWITZ: Absolutely. We're buying. And the problem is it's hard to buy things here, because the valuations have come up a little bit. but we're buying the financials, Citigroup.

BAY: Let me ask you about the financials. J.P. Morgan Chase was one of the names that you liked. What do you make of today's call by that analyst issuing a sell order on the stock?

HYMOWITZ: Well, what I make of it is actually interesting. Prudential is taking the view -- and you see it in their commercials -- that they're going to be the firm on the Street that tells the true story, the full story. And it's sort of taking a marketing approach, I think, you see more and more sell recommendations out of Prudential. I think that's sort of the tack they're taking. Mike Mayo been negative on the financials for a long time.

I don't think there's any new news out there. We own J.P. Morgan Chase, and we think it's a very good company with an attractive valuation.

BAY: Five seconds left. Another couple of names?

HYMOWITZ: Viacom, Liberty Media. We like the media stocks a lot. Technology -- I like Dell. I think it's very good news for Dell.

BAY: Gregg Hymowitz. As always, thank you for joining us.

HYMOWITZ: Sure.

BAY: Coming up on MONEYLINE: just 13 months and $5 million later, Lucent hands CFO Debbie Hopkins a pink slip. And Apple quietly plants a seed in lower Manhattan.

(COMMERCIAL BREAK)

BAY: A major shake-up for a telecom company used to a flood of bad news. Lucent fired its chief financial officer, Deborah Hopkins, this weekend, after only a year in office. Unlike many recent layoffs in the high-tech industry, Hopkins will not be walking away empty- handed.

That's more than can be said for many Lucent shareholders. The stock is down about 70 cents today, to $10.46. Steve Young has the story.

(BEGIN VIDEOTAPE)

STEVE YOUNG, CNN CORRESPONDENT (voice-over): Former Chief Financial Officer Deborah Hopkins landed at Lucent last April from Boeing, where she was also a CFO. For 378 troubled days on the job, counting salary, bonus and a $4 million signing bonus, she'll get a queen-size payoff for a CFO: $5 million.

DAVID HEGER, AG EDWARDS: Deb Hopkins had a very attractive pay package that it's interesting that she stayed exactly a year to be able to collect the signing bonus.

YOUNG: In fact, Hopkins was handed her walking papers Saturday in a meeting with Lucent's acting CEO, Henry Schacht. She had wanted the top job. Schacht and a search firm are looking for someone else.

Hopkins gets high grades for arranging a critical line of credit, setting conservative accounting procedures, cutting overly generous lending to customers and overseeing the spin-off of Lucent's semiconductor business, Agere.

She'll be succeeded as CFO by Frank D'Amelio, head of Lucent's switching group. Many analysts are disappointed the replacement didn't come from the outside.

ALEX HENDERSON, SALOMON SMITH BARNEY: I think that the company felt it was more important to have somebody in that seat as quickly as physically possible. Given the quick turn here, I don't think they had the time to do an outside search. NIKOS THEODOSOPOULOS, UBS WARBURG: Whenever a CFO leaves, unless the Street viewed her as the problem, it's somewhat of a negative. And she was not the problem. She stepped into the problem.

(END VIDEOTAPE)

YOUNG: After two consecutive quarters of losses, analysts are focused on Lucent regaining profitability, with many convinced that won't happen until the summer -- the summer of 2002.

BAY: That's tough for investors. Steve, clearly they're having some problems finding a CEO.

YOUNG: Yes, and this is puzzling analysts because in a bizarre sort of way you'd think with the stock priced so low options would become valuable very quickly. But they still can't find the right person.

BAY: Interesting. Steve Young, thanks.

Lucent is not the only company to oust its chief financial officer. Several Fortune 500 CFO's have recently taken the brunt of earnings warnings and poor quarterly results.

Allan Dodds Frank has the story.

(BEGIN VIDEOTAPE)

ALLAN DODDS FRANK, CNN CORRESPONDENT (voice-over): Aetna, Kmart, McDonald's -- all companies whose chief financial officers have recently departed. When a CFO leaves, the company often says is it's for personal reasons or early retirement. But departures usually follow earnings surprises, revenue disappointments or damaged relations with Wall Street.

JOHN WILSON, KORN/FERRY INTERNATIONAL: The half-life of a CFO gets shorter and shorter, and I think we're seeing that these days. And up at the board level there is less tolerance -- even in a negative economic environment, there is less tolerance with poor numbers, and less tolerance with surprises.

FRANK: One outplacement firm says that in the last two months, 147 CFO's have lost their jobs. Some, such as Deborah Hopkins at Lucent, are following their bosses out the door.

JULIA HOMER, "CFO" MAGAZINE: Whenever a CEO changes, you can expect within months to see the CFO depart also. Number two, I think it's fair to say that several consecutive quarters of earnings surprises is likely to result in the ouster of a CFO.

FRANK: Then there's the Securities and Exchange Commission, watching CFOs more closely than ever. The SEC is pressuring CFO's for more disclosure, and is on the lookout for CFO's managing earnings by manipulating numbers improperly. Mergers also are taking a toll on CFO's, as are the collapses of dot-coms. That means there's no shortage of available CFOs. Just last week, for instance, Kmart hired a CFO from rival Sears. And Sears replaced him with a CFO from an insurance company.

Allan Dodds Frank, CNN Financial News, New York.

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BAY: In other corporate news: 3Com out with a second round of job cuts. The network equipment maker says it will slash 30 percent of its work force, or 3,000 employees. This follows 1,200 job cuts announced in February.

FedEx warns for the second time in five weeks. The shipping company expects to earn between 50 and 60 cents a share for the fiscal fourth quarter, well below the 85 cents a share it posted a year ago. FedEx blames a reduction in technology and durable goods spending for the slowdown.

And Computer Associates says it overstated its annual earnings due to a typographical error. The software maker now says it earned 16 cents per share for the fiscal year. Previously, the company had mistakenly reported 40 cents a share.

Pro forma earnings were not impacted and analysts say the mistake is not important. The news comes just days after a "New York Times" article questioned the firm's accounting methods.

Taking a look at how these companies traded today: 3Com finished down 38 cents, FedEx dropped nearly a dollar and a half, and Computer Associates dropped $2.50. That stock has fallen 20 percent since that "New York Times" article was published on April 29.

Straight ahead on MONEYLINE: solving the energy crisis. Is the answer expansion or conservation? We'll be right back.

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BAY: In tonight's "Sector Focus": energy. Surging gas prices are just one reason a coherent energy policy is one of the biggest priorities of this new administration. In a preview of his energy plan, Vice President Dick Cheney says the answer is to increase supply, but that means building more refineries. And as the CEO of refining giant, Valero, which is buying Ultramar, said today, that is not likely to happen.

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BILL GREEHEY, CEO, VALERO: It's cost-prohibitive to build a grassroots refinery, even if the environmental regulations allowed you to do it. The economics just don't work.

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BAY: Our next guest says the most viable solution may be fostering conservation, as well as increasing supply. Joining us now, Genevieve Murphy of the American Petroleum Institute.

Genevieve, welcome to MONEYLINE.

GENEVIEVE MURPHY, AMERICAN PETROLEUM INSTITUTE: Good evening, Willow.

BAY: Vice President Cheney has been somewhat dismissive of the notion of conservation as a key component of their evolving energy plan. Is that a mistake?

MURPHY: I think as we begin our national energy debate, we've really got to look at both the supply side, increasing domestic production, we have to look at all forms of energy. And we also have to look at conservation. I think all of those are going to play a part in mapping out where we are as a nation on energy and where we're going to be in the next five years, in the next 10 years.

BAY: So if you were designing this energy policy, on the conservation side, what would you recommend as the most effective approach to improve our conservation?

MURPHY: Well, I think we all have to use fuel efficiency, but we also have to look at demand. Let's say, for gasoline, has continued to go up, so we have to look at how we can make new investments in refineries in order to produce more gasoline, and also new fuels, so that we can continue to grow our economy.

BAY: How serious is the constraint in the refining capacity in this country? How big a problem is it?

MURPHY: Well, I think we reached the top of our refining capacity. In the past, we used to have the refineries running at about 85 to 90 percent. And most industrial equipment in this country runs at about 82 percent. Our refineries are right now operating at 100 percent, so all the crude oil that's being put in is actually coming right back out.

BAY: So Genevieve, if we just heard the CEO of a big refining company say forget, we're just not going to build anymore, it's not cost-effective, where are we going to get new refining capacity from?

MURPHY: Well, I think the investment climate has to change, as well as the political climate. The refinery rate of return has been running, on average, about 4 1/2 percent. So we definitely have to look at a better investment climate.

There's also been layer upon layer of government regulation that's been added on over the years, and now I think we're beginning to see the consequences of that. We've had the same number of refineries that are now having to produce close to 45 different types of gasoline, and we haven't...

BAY: Genevieve, speaking of gasoline real quickly, what's your take? Are we going to get $3-a-gallon gas prices this summer?

MURPHY: No one can predict what gasoline prices are going to do. I've seen stories today that gas prices are going to go up. Some of them say gas prices are going to go down. I think you've got to keep your eye on refineries. For the last six weeks they've been operating at full capacity, increasing their production of gasoline, hopefully right in time for the driving season. So as long the refineries keep producing 100 percent, we should be able to build inventories in time.

BAY: OK. Genevieve Murphy of the American Petroleum Institute, thank you.

Coming up on MONEYLINE: Apple goes retail. An update on the company's stealthy move to Wall Street.

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BAY: Three tobacco companies have struck a costly deal in Florida, but apparently, they think it's worth the price. Philip Morris, Loews, Lorillard Tobacco, and Vector's Liggett Group will post a $2 billion bond, $700 million of which will be nonrefundable, while they appealed the largest jury verdict in U.S. history.

The company's goal? Not to pay full damages to Florida smokers of $145 billion until the appeal of the case is resolved. The deal enables the companies to hold off posting a bond for the full $145 billion penalty, which they said would have driven them into bankruptcy.

Taking a look at tobacco issues: shares of Philip Morris, Loews, Vector, and RJ Reynolds all off a dollar. British American Tobacco is off fractionally.

An update on a story we brought you first here on MONEYLINE:

Apple Computer, on the QT, has been planning a chain of retail stores. And the latest one is right here in the Big Apple. Bruce Francis, who broke the story, brings up to date on Apple's grand ambitions.

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BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): This former restoration hardware store is being converted into an Apple retail outlet in Manhattan's trendy Soho neighborhood. Apple will nestle in among upscale retailers and restaurants and stand out as a high-tech merchant. Frank Gallo of Tishman Real Estate Services handled the lease and says Apple was fairly tight-lipped.

Gallo said: "The sense was that Apple was selling a product that the Soho customer was right for. More than that, they wouldn't tell us."

Apple CEO Steve Jobs was no more forthcoming with MONEYLINE recently, when pressed about our recent report that Apple is prepping retail outlets in California and Chicago.

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STEVE JOBS, CEO, APPLE COMPUTER: There are a lot of things we're thinking about that I really can't talk about at this time.

BAY: So, you can't comment, for example, that you got retail space in Palo Alto or that you've taken over a Gap store in Michigan Avenue?

JOBS: Yeah, I can't really comment on any future initiatives we might have.

(END VIDEO CLIP)

FRANCIS: But that could soon change. Apple is scheduled to briefing on its new retail strategy on May 15th near Mclean, Virginia. Retail maven Kurt Barnard says that Apple's move into downtown New York will be challenging.

KURT BARNARD, BARNARD'S RETAIL CONSULTING GROUP: Given the fact that competition is extremely fierce that the demand for computers for PCs is not really that great any more. I would say to you that Apple Computer is very courageous in starting a store in Soho.

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FRANCIS: Wall Street analysts have been divided on the strategy, seeing it both as a good way to show off unique features of Apple's products and a potentially costly money pit that could alienate existing retailers like CompUSA -- Willow.

BAY: What about the goal that you often tell us about of Apple broadening beyond its base over those core dedicated users? What are the odds it will help?

FRANCIS: I think, in that context, that's why stores actually look good. If you want to show off things that your computer could do that others can't, it's going to be hard to get that in a mixed retail environment.

BAY: Give us your take on what we should be looking for tomorrow with this Cisco report.

FRANCIS: Yes. All eyes are on that. We will see a lot of nervous action, probably tomorrow on the Nasdaq.

BAY: A lot of action today...

FRANCIS: Indeed. Will they actually decide to lay off more people? There has already been 8,500 layoffs.

Will they add to that $2.5 billion inventory write off they've already had? Will they give us some outlook? Of course, that's been difficult right here. Those are things to watch for.

BAY: And we'll get that after the bell tomorrow. Thanks, Bruce.

Up next, a box office blowout for a movie one critic called "a semi coherent piece of clap trap."

Plus "Ahead of the Curve": some of what you need to know tonight, ahead of tomorrow's trading. Stay with us.

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BAY: Taking a look at some of what could move the markets tomorrow: Keep an eye on shares of Dell Computer, which gained more than 50 cents in after hours, on news the company will cut up to 4,000 jobs. Cisco Systems is on tap to report profits, expected at 2 cents a share after tomorrow's closing bell. Also do out: BP Amoco and Web MD.

Finally tonight, "The Mummy" returns with a big screen triumph. The sequel to 1999's "Mummy," stormed into theaters this past weekend.

The box office tally? More than $70 million, the biggest draw ever for a movie during a non-holiday weekend. Not bad for a flick that had reviewers grabbing for their poisoned pens: One said, "It had all the clank and none of the swank of the previous version."

And then this gem from "The New York Times": "It may be the least original motion picture ever, and there's a lot of competition for that title these days."

That's MONEYLINE for this Monday. I'm Willow Bay in New York.

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