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Lou Dobbs Moneyline

Dow Advances 26.29 to 10,948.38; Nasdaq Slips 0.83 to 2,169.95; President Bush Begins His Tour of Europe

Aired June 12, 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.
LOU DOBBS, CNN ANCHOR: Tonight, the president tells Europeans the Antiballistic Missile Treaty is antiquated and will be replaced.

A powerful late-day rebound on Wall Street, with the second biggest IPO in history -- Kraft Foods to hit the market tomorrow.

"CEOs on the Edge": tonight, Michael Armstrong, once touted as AT&T's savior, now saddled with a corporate debacle.

And the talk of the town, legendary editor Tina Brown on building the talk media empire in an advertising recession.

ANNOUNCER: Live from the heart of New York City, this is Lou Dobbs' MONEYLINE. Here now, Lou Dobbs.

DOBBS: Good evening. A turnaround today on Wall Street: stocks battling back from a heavy morning sell-off, sparked by yet another profit warning from Nokia. We'll have market details in just a moment, but first we are going to Europe, where President Bush is kicking off his first tour of the continent, beginning in Madrid, Spain. Mr. Bush wasted no time addressing the most controversial topics of his tour: the Kyoto accord on global warming and his drive to build a national missile defense system.

Senior White House correspondent John King reports from Madrid.

(BEGIN VIDEOTAPE)

JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT (voice-over): At stop one, the president was polite, but defiant, brushing aside fresh criticisms from major European allies on global warming.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The Kyoto treaty was unrealistic. It was not based upon science. The stated mandates in the Kyoto treaty would affect our economy in a negative way.

KING: Spain's prime minister is among those urging Mr. Bush to reconsider. And as the president began his five-day visit, protesters took to the streets of Madrid, and the European Union called the U.S. approach, quote, "short on action that will contribute to actually reducing greenhouse gas emissions in the short-to-medium term."

Missile defense is another pressure point. Mr. Bush wants to amend or abandon the 1972 Antiballistic Missile Treaty, so the United States can test new intercept technologies.

BUSH: The ABM treaty is a relic of the past. It prevents freedom-loving people from exploring the future.

KING: Spain was a warm-up for more contentious stops ahead: Wednesday at NATO headquarters in Brussels, and a Saturday sit-down with Russian President Vladimir Putin.

BUSH: The days of the Cold War have ended, and so must the Cold War mentality, as far as I am concerned. And I believe we are going to make great progress on this issue. I truly do.

KING: His host offered Mr. Bush a helping hand, warning against a rush to judgment.

JOSE MARIA AZNAR, SPANISH PRIME MINISTER (through translator): What I am surprised by is the fact that there are people who, from the start, disqualify this initiative.

KING: U.S. officials described the talks here as upbeat, and took the prime minister's remarks as a sign of slow progress in the debate over missile defense.

But outside the U.S. embassy in Madrid, a reminder that controversy will shadow Mr. Bush in the days ahead.

(on camera): The president shows no signs of giving ground in the major disputes over missile defense and global warming, but over and over again he's promising to listen, and effort on his part to quiet European criticism that in his early months in office, Mr. Bush has too often taken the go-it-alone approach.

John King, CNN, Madrid.

(END VIDEOTAPE)

DOBBS: Other news out of Europe today: Nokia issuing another earnings warning that sent the Dow Jones Industrials down more than 130 points at its low, but it ended the day higher. The Nasdaq, also great volatility there as well, down 3 percent at its low, finishing the day unchanged. Peter Viles reports from Wall Street.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): The bad news came from Europe, and it came early. From Finland, an earnings warning from cell phone giant Nokia, and from Brussels, reports that European antitrust regulators may require General Electric to sell off big chunks of Honeywell to complete that merger.

Stocks fell sharply, the Dow at one point losing 133 points, but at that level, institutions stepped in with buy programs, helping to lift the blue chips to a 26-point gain.

LARRY LAWLER, DREYFUS: There was no panic, there was no big volume, there was no big sell-off, and when I think people saw that, you know, it wasn't going to be that bad, programs kicked in. Some value guys came into the market, they bought it. Things came back nicely.

VILES: The Nasdaq had a similar ride, falling 65 points before closing down only fractionally. New York Fed President William McDonough also helped, predicting in an afternoon speech the economy will most likely improve in the second half of the year.

ALAN HOFFMAN, VALUE LINE ASSET MANAGEMENT: When investors see the bad news first, they are more likely to, you know, do their selling early in the morning, and then step back and say: "What's really going on?" And what is really going on is that the economy is getting better.

VILES: Nokia, in heavy volume, finished sharply lower. General Electric gained sharply, and its merger partner, Honeywell, fell, reflecting fears European regulators may scuttle that merger.

Another big loser, though a much smaller company, genetic technology firm Affymetrix, which had warned of a shortfall in second quarter revenues.

(END VIDEOTAPE)

VILES: So far, First Call reports there have been 466 earnings warnings, or pre-announcements, in the second quarter. At this time three months ago, this far into the first quarter, there had been 468, so the picture is getting just a tiny bit better, but that 468 was on the way to a record 935 earnings warning in the first quarter, a record sadly that corporate America may be in the process of challenging right now -- Lou.

DOBBS: Pete, does the activity in the Big Board today give us any clues to trading levels today?

VILES: Well, they have been very weak prior today. Today, trading volumes did bounce back a little, over a billion shares traded here, but still below average. But those making the bullish case on Wall Street, and there are plenty of them right now, will say over and over again -- we've heard it a lot in the last couple of days -- don't short a dull market. So maybe even in a dull market, that's a good sign, Lou.

DOBBS: One thing we've got for sure, and that's a volatile market.

VILES: It sure is.

DOBBS: Thanks, Peter Viles from the New York Stock Exchange.

The most active Big Board issue today by far, Nokia. As we reported to you, shares of the number-one mobile phone maker plunging in New York trading, wiping out more than $25 billion of market cap. Before today's warning, just three out of 23 Wall Street firms had a cautious hold rating on Nokia's stock. Taking a look at what Nokia said today: it warned that sales growth could be below 10 percent for the second quarter. Nokia had been expecting 20 percent. It's the fourth sales warning from the company so far this year. The latest warning means Nokia's pro forma profits will come in at 14 cents a share, at most. First Call had an expectation of 18 cents. Today's Nokia sell-off brings the stock down 63 percent from its 52-week high. Rival Ericsson, down 77 percent. And Motorola down 65 percent.

And again, just to repeat, only three out of 23 firms had a cautious hold rating in Nokia's stock.

And news after the bell tonight: from the nation's largest food company, 280 million shares of Kraft Foods, priced tonight at $31 a share. The high end of the expected range of that offering: $8.7 billion, the second largest IPO in history. It represents a strategy shift for corporate parent Philip Morris.

Lisa Leiter reports now from Kraft headquarters in Northfield, Illinois.

(BEGIN VIDEOTAPE)

LISA LEITER, CNN CORRESPONDENT (voice-over): The Kraft name is probably in your refrigerator, your freezer, your pantry, or your purse, and tomorrow it could be in your portfolio. Kraft will begin trading as a stand-alone public company for the first time since 1988, when Philip Morris bought Kraft, merged it with General Foods and created the nation's largest food maker.

The offering is generating a lot of buzz in this year's lifeless IPO market.

UNIDENTIFIED MALE: The Kraft IPO is going to prove once and for all that the IPO market has gotten off its knees and is ready to make advances, albeit at a slower pace than we've seen over recent years.

LEITER: Kraft will use the IPO proceeds to pay off debt it took on six months ago to buy rival Nabisco for $19 billion.

(on camera): Just 16 percent of Kraft shares will be sold to the public. The rest will be owned by Philip Morris, which will have almost all of the voting power of the company.

(voice-over): Analysts say Philip Morris is spinning off Kraft to maximize its value, but some say Kraft stock will still be tainted by tobacco-related lawsuits.

BILL LEACH, BANC OF AMERICA SECURITIES: Sooner or later, the Kraft shares will be impacted by adverse tobacco publicity. Its investors tend to panic from time to time when you have adverse tobacco rulings.

LEITER: Kraft accounted for about 40 percent of Philip Morris' revenue last year, and a third of the company's profit. Most analysts agree Kraft's greatest challenge will be growing sales. LEN TEITELBAUM, MERRILL LYNCH: Acquisitions need to be made, and in Kraft's case, I think both domestic and international would be on the drawing boards.

LEITER: Adding to its huge list of brands may be one of the only ways analysts say Kraft can stand out in the slow-growing food business.

Lisa Leiter, CNN Financial News, Northfield, Illinois.

(END VIDEOTAPE)

DOBBS: And taking a look at the shares of Philip Morris: Philip Morris shares up 58 cents today. Philip Morris has had an extraordinary run over the past year. Philip Morris has nearly doubled in price, it is just a few dollars from its 52-week high.

A Wall Street trade group today taking action to impose a code of conduct and expand the code of conduct on analysts. The Securities Industry Association issued a guideline that prohibits firms from linking analyst pay to lucrative investment banking deals. Their goal is to cut down on perceived conflicts of interest, the rule approved by the chief executives of the 14 largest U.S. investment banks.

Coming up next here on MONEYLINE, Wall Street's powerful rebound. I'll be talking with Bernadette Murphy about whether that swing can continue on the upside.

And tonight's "CEOs on the Edge." We'll look at the hard- charging CEO of AT&T, now facing what one analyst calls "a perfect storm."

And we'll be talking with one of the most successful editors in publishing, Tina Brown. She's turning "Talk" magazine into a thriving media empire.

(COMMERCIAL BREAK)

DOBBS: Another blow to Lucent Technologies tonight. Standard and Poor's has cut its debt rating for Lucent to junk status. S&P cites what it calls significant concerns about Lucent's ability to improve profits and cash flow.

Lucent, for its part, says it is not surprised by the downgrade. It was only two weeks ago that Lucent broke off merger talks with Alcatel. Today's news coming out, of course, after the closing bell. Lucent stock finishing the day down 10 cents, closing at $7.94 a share, down 88 percent from its 52-week high.

Tough times also to report at a Lucent spin-off: Avaya. The company tonight saying it will cut 3,000 jobs, also saying it expects sales to decline in both the third and fourth quarters, The stock today finished just above $15 a share.

Well, overall, it was a turnaround in the markets today. But with continued earnings warnings from corporate America, my guest says: Be cautious.

Joining me now, Bernadette Murphy. She's market analyst at Kimelman and Baird. Good to have you with us, Bernadette.

BERNADETTE MURPHY, KIMELMAN & BAIRD: Thank you, Lou. Nice to be here.

DOBBS: This -- let's talk first about this market today. A market that suddenly on one company, Nokia, drops 130 points and then rebounds on what?

MURPHY: I think probably the desire to cover some shorts prior to triple expiration.

DOBBS: In bargain-hunting, this much enthusiasm? I mean, we're talking about 3 and 4 percent turns in this market today. Does that volatility scare you a bit?

MURPHY: Well, it does. The one thing that we've noticed is that on the rallies, there is an urge to buy (UNINTELLIGIBLE), and as a result, the volatility index, which measures the short term (UNINTELLIGIBLE) on the S&P 100 large capitalizations, tends to drop, which is a warning.

DOBBS: Right. And at this juncture, with those warnings, are some of this cautionary notes, if you will, on the market, as if we need many more -- what is your outlook for the market for the remainder, both of the summer and of the year?

MURPHY: Actually, I have a constructive view. I think that the Federal Reserve has created an excellent environment with the cutting of rates, the possibility of another cut in rates as well. Money supply has been increasing. The problem is that the -- as they say, the visibility of earnings isn't here yet.

DOBBS: Here we go again. Visibility.

MURPHY: Yes, visibility. And so that is why I think we get the gains in confidence and then the loss again, particularly when warnings come out. And so many of the warnings come out of the technology area, which was a driving force in the market in '99 and 2000, and it isn't there anymore.

DOBBS: And '98 and much of '97.

What is going to be the driver in the market here, Bernadette?

MURPHY: I think it's going to be the realization that we do have a good economy. That the -- we're more in an older, or the old economy area. That they are going to be able to produce earnings. We'll have slower growth but we will have growth.

DOBBS: Two stocks that you'd like a lot so everybody listening to you can decide whether or not to participate in your constructive view? MURPHY: Well, supposing we take two large capitalization stocks. One of them is Exxon. It's going to split its stock and it's been invited over in Saudi Arabia to help develop a natural gas field. I think that's very positive on a long-term basis.

Second, IBM. IBM is a great company, it's back into being a service company as well as being a technology company, and I think that's exciting.

DOBBS: Bernadette, thank you very much.

MURPHY: My pleasure.

DOBBS: Good to see you.

Coming up next, a tough day for a once-renowned figure on Wall Street. Saul Steinberg's -- the business he built heading to bankruptcy court. Also, another legend of corporate America, Jack Welch. He is finding the biggest merger of his career tonight almost stalled in Europe.

But next, blazing a new speed in space travel -- we'll hear from the scientists designing a solar sail for NASA. Stay with us.

(COMMERCIAL BREAK)

DOBBS: My guest now, at the forefront of speeding up space flight. Robert Winglee is associate chair of earth and space sciences at the University of Washington, and today he won a "Discover" magazine award for his innovation in aerospace. His breakthrough is known as mini-magnetospheric plasma propulsion, or M2P2, if you prefer: harnessing magnetic waves to propel spacecrafts at 180,000 miles per hour, 10 times the speed of conventional rockets. And the idea is to create a magnetic bubble that would capture the sun's electrons and ions, like a kind of solar sail, in fact, a technology now being tested by NASA for possible adaptation.

We are joined now by Professor Robert Winglee. Professor, good to have with us. Congratulations on your award.

ROBERT WINGLEE, GEOPHYSICIST, UNIVERSITY OF WASHINGTON: Thank you very much.

DOBBS: How excited should we get about the idea that we can move at 180 -- I mean, that is just a tremendous leap in speed.

WINGLEE: Yes, I think that we have something that could really open up the solar system. And I personally believe that something that we should see is trying to have the human race move out into space, not just to Mars but to the other planets, and this is one of the technologies that could get us there.

DOBBS: Now, when people like me say mini-magnetospheric plasma propulsion, M2P2, it sounds almost rational, but what does it really mean? WINGLEE: Well, we like to call it M2P2.

DOBBS: Thank you for that.

WINGLEE: After "Star Wars" characters. But it's designed to make a magnetic bubble around the spacecraft, much like the Earth has one, and much like you see in the movies of solar flares, and we can ride the sun's winds, of protons and electrons that you mentioned, that could really provide enhanced propulsion for a spacecraft.

DOBBS: And how large a spacecraft would it be practicable -- I realize that you're testing and developing, but in your imagination at this point, how large a spacecraft could it accommodate?

WINGLEE: We started the work to a develop a probe to move out to the very rim of the solar system for a small scientific pilot. But through support from NASA Institute for Advanced Concepts, we started to look at even designing it for human exploration, so that we could even enhance possible mission to Mars.

DOBBS: Your development and work has taken you to this point, for which you have received the award. At what juncture do you think NASA will actually begin implementing the program?

WINGLEE: Well, the Discover Awards are just fantastic, and to be here in New York is great. We believe that we are right in the midst of some very large chamber tests in collaboration with people at NASA and Marshall Space Flight Center, and we hope to complete those tests in two years, and after that, if they're all successful, we should be able to hopefully get onto a spacecraft and maybe launch in 2006, 2007.

DOBBS: Very exciting, and again, our congratulations.

WINGLEE: Thank you very much.

DOBBS: Robert Winglee.

Well, still ahead, a sentence is handed down for one of the men behind the bombing of U.S. embassies in Africa. Also, taking the toll of tropical storm Allison. Allison leaves a devastating mark across the Southern United States. Also, a legal victory for women who seek to have insurance cover birth control. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Late word tonight. We can report to you possible progress in the Middle East conflict. Sources telling CNN that Israeli and Palestinian leader have accepted a blueprint for a cease- fire from CIA Chief George Tenet. Palestinian sources telling CNN that they accepted Tenet's proposed blueprint, but rejected a clause proposing a buffer zone. Those same sources say Tenet also promised the Palestinians there will be a timetable for the lifting of Israeli closures of some Palestinian regions.

In this country, a federal jury has spared the life of one of the men convicted of the U.S. embassy bombings. The jury in Manhattan has sentenced Mohamed al-'Owhali, a 24-year-old citizen of Saudi Arabia, to life in prison without parole. He faced the death penalty, but the jury did not reach a unanimous decision on the death penalty.

(BEGIN VIDEO CLIP)

FRED COHN, DEFENSE ATTORNEY: This is an extraordinary victory for a system that was really put to the test. And that a jury in New York could make the findings it could in the face of real human tragedy that was well presented by the government is a credit to the system, and obviously I'm pleased with the verdict.

(END VIDEO CLIP)

DOBBS: The defendant has been convicted of carrying out the bombing of the U.S. embassy in Kenya, killed 213 people. Another man, K.K. Mohamed, faces the death penalty for an almost simultaneous explosion at the U.S. embassy in Tanzania. His sentencing begins next week.

We have a clearer picture tonight of the kind of devastation that tropical storm Allison wrought across the South. That storm claimed the lives of at least 20 people, most of them in Texas. In Louisiana, though, the week-long deluge overwhelmed roads, and flooded hundreds of roads, in fact. President Bush has approved federal funds for 10 Louisiana parishes. It is a similar story in Alabama, where the remnants of the storm turned roads into rivers. Damage there is estimated at more than $1 billion, easily the most expensive tropical storm in this country's history.

From the South, we turn to the Pacific Northwest, where a federal judge in Seattle has ordered a drug store chain to include contraceptives for women in its employee health insurance plan. The judge issued a summary judgment in favor of a female pharmacist who had sued her employer, Bartell Drug, for leaving birth control out of its health plan. This is the first federal challenge to employers who do not cover birth control. Women's groups have sought for years to force employers to cover contraceptives in their health insurance. The debate intensified after some insurers began to cover Viagra, the male impotence pill.

Coming up next on MONEYLINE, "CEOs on the Edge." Tonight, Michael Armstrong, stumbling as he tries to find a new direction. Also, a force to be reckoned with: General Electric could be facing a major hurdles in its efforts to acquire Honeywell. And later here, Tina Brown and the big business of talk.

(COMMERCIAL BREAK)

DOBBS: Topping tonight's headlines: stock prices move higher in late afternoon trading, shaking off deep morning losses. The Dow ends the day 25 points higher. The Nasdaq flat.

And Lucent debt falling into junk bond status after S&P cuts its ratings on the troubled telecom. And Kraft prices (AUDIO GAP) in history, with shares going for $31 apiece, raising $8.7 billion. Now, our segment: "CEOs on the edge." Corporate bosses whose companies have been on the rocks. And tonight, we look at Michael Armstrong who's reign at AT&T has seen the telecommunications giant humbled, as long distance telephone has become a commodity.

Steve Young has our look at Michael Armstrong on the edge.

(BEGIN VIDEOTAPE)

STEVE YOUNG, CNN CORRESPONDENT (voice-over): AT&T stock has skidded 60 percent in the last two years, most of that since chairman Michael Armstrong announced plans to take an American icon and chop it into four pieces. The buzz shifted from bundling products to spin- offs and tracking stocks.

And since its debut, the first of those, AT&T Wireless, has crumbled by almost half. To get Ma Bell ready to boogie in the digital age, Armstrong made about $120 billion in investments, mostly for cable TV systems that could support broadband data, voice and high-speed Internet service.

SCOTT CLELAND, CEO, THE PRECURSOR GROUP: He made a very big bet. Essentially, he bet the farm on a cable broadband strategy, and the market shifted under him, and the strategy didn't work, and now he has to unwind his big bet-the-farm strategy. So he's had a troubled time.

YOUNG: Cleland says Armstrong and his telecom competitors are also being swamped by forces he calls "the perfect storm." Congress getting all the economics wrong in rolling out deregulation, and the telecom companies overestimating demand and building too much infrastructure.

In this analysis, AT&T and its brethren are both victim and perpetrator. Most sellside analysts are now neutral moving toward negative on AT&T stock. They say its CEO, who arrived in 1997, has the toughest job in telecom, and rates a b+.

GREGORY MILLER, ABN AMRO: He's done pretty close to the absolute best he could with what he has had to work with, that is the consumer long distance industry on the cusp of absolutely falling apart before his arrival, and then falling apart while he began transforming the company.

YOUNG: If his investors are feeling pain, Armstrong's feeling less, but his pay is overshadowed at some of the regional Bell phone companies, still more or less protected monopolies. For example total take for Ivan Seidenberg, head of Verizon -- nearly $74 million.

Armstrong, whose company has 162,000 employees and nearly $66 billion in sales, had total compensation of $56 million, though that's mostly options that are underwater.

(END VIDEOTAPE)

It is, says analyst Scott Cleland, almost a purgatory for AT&T's investors and its CEO. The four way breakup is in the works, but it will take almost two more years to get there -- Lou.

DOBBS: And it is very unclear from Wall Street's views just how attractive the breakup is. That is a piece of financial engineering that has yet to win its way on Wall Street.

YOUNG: That is true, but there seems to be more underlying equity in this breakup than that announced Worldcom last week.

DOBBS: And the margin would be?

YOUNG: Well, I don't know.

(LAUGHTER)

DOBBS: Steve, thanks very much. Steve Young.

Well, tomorrow night we'll take a look at another CEO on the edge. on Hewlett Packard boss Carley Fiorina.

In other corporate news tonight, property and casualty insurer Reliance Group Holdings has filed for Chapter 11 bankruptcy. The company, owned by legendary corporate raider, Saul Steinberg, has more than $700 million of debt. Efforts to sell it failed. Reliance sold off several units in an effort to stem its losses, and the New York Stock Exchange recently moved to delist the Reliance stock.

Verizon has filed suit against Covad Communications, alleging the high-speed Internet access provider blamed its own service problems on Verizon. Verizon's lawsuit claims Covad employees were "pressured and badgered" into releasing false reports about Verizon. On the session, shares of Verizon finished at $54.35. Covad closed at 95 cents. Its 52-week high, by the way, over $29 a share.

Major challenges tonight facing the $42 billion deal between General Electric and Honeywell. European regulators have asked GE to sell a large portion of Honeywell's aerospace operations. That's the very unit that originally sparked GE's take over interest in the first place. Neither GE nor Honeywell will comment on those reports. GE chairman, Jack Welch, is expected to meet with EU commissioners within the next two days.

On the session, GE shares up $1.37, Honeywell down $1.78.

The GE-Honeywell merger is hardly the first deal to face intense overseas scrutiny. The European commission has become a force to be reckoned with.

Kitty Pilgrim has the report.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): The European Commission Merger Task Force is putting pressure on General Electric's planned acquisition of Honeywell International, a deal the U.S. Justice Department has already cleared. KENT NEWCOMB, A.G. EDWARDS: From the European side is that they seem to be demanding up to $6 billion in aerospace divestitures, which -- if that's their final negotiating point, I think we'll hear resolution to this saga very soon. It will be the sound of GE walking away.

PILGRIM: In mergers and acquisitions European regulators have put their mark on many a deal, asking for changes before approving mergers. While they often don't kill deals outright, they can change the structure, such as the Boeing-McDonnell Douglas merger in 1997, when American authorities gave it a green light, but Europeans asked for major concessions from Boeing.

The United States scrutinizes more deals from a regulatory standpoint: last year, nearly 5,000. The deals examined are smaller, valued starting at $100 million. A probe was called for in 137 of those cases, and 20 ended up being challenged in court. By contrast, European regulators look at fewer deals, and only the really big ones, generally valued at $1 billion or more. Of 345 looked at last year, 17 were put under a secondary probe, but only two were blocked.

DAN SWANSON, GIBSON, DUNN, CRUTCHER: They don't tend to block deals, they tend to put conditions on deals and try to make them work if there's any way to do so.

(END VIDEOTAPE)

PILGRIM: Europe has only been scrutinizing deals for antitrust concerns like this for the last decade, while U.S. regulators have a 50 year history of antitrust legislation -- Lou.

DOBBS: Now, Kitty, in the case of the European Union, this is an interesting deal between Honeywell and GE. And the idea that the EU is thinking about asking them to selloff part of that aerospace unit in Honeywell properties, that's a clear conflict of interest since the consortium is state owned in the European Union and the commission itself obviously operating in its own benefit.

PILGRIM: In terms of these regulations, Lou, you do get apples and oranges. And there are two entirely different systems. And the trick is to try to make everything work with two entirely different systems. And that's where the are really comes in. But the European commissions really wants these deals to go through.

DOBBS: And now we'll find it if Jack Welsh wants it to go through, thanks.

Ahead, in tonight's movers, they include Tenet Health Care, which hit a new 52-week high. One of the biggest hospital chains in the country, it's raising its earnings guidance due to strong growth in patient admissions. Hughes Electronics falling today more than 10 percent. As we told you last night, the satellite broadcaster, a unit of General Motors, cutting its revenue targets because of weak sales of DirecTV, particularly in rural areas.

GM giving a lift to shares of Impco. It's taking a minority stake in the alternative fuel company. Both planning to work together in the development of hydrogen powered cars. And in the area of transportation, Huffy down nearly 18 percent today. Huffy, of course, makes bicycles and those collapsible aluminum scooters.

It's cutting earnings estimates because of what it calls a soft retail environment. Huffy's stock took off last summer as investors bought into those scooters. But the stock has pulled back as more competitors have entered the market, and the scooter fad is fading.

Coming up next on MONEYLINE, one of the most celebrated editors in publishing.

(COMMERCIAL BREAK)

DOBBS: Tina Brown has been called the best magazine editor alive. She is also a master at generating buzz, first as editor of "Vanity Fair," then of course at the "New Yorker."

Brown transformed that legendary magazine, but lost millions of dollars doing it. She left the Conde Nast empire in 1998, and she found Talk Media with Disney unit Miramax.

Brown launched "Talk" magazine with great fanfare in the summer of 1999. Since then, the entire media business has been hit by an advertising slump. Maybe slump is too kind of word for what it's been hit by. Still, "Talk" magazine, however, has seen its ad revenue jump 60 percent over the past four months, as compared to a year ago.

And the talk division has acquired the rights to the memoirs of several marquis names, including former Secretary of State Madeleine Albright and New York Mayor Rudy Giuliani.

Tina Brown in New York, good to see you. You've had quite an impressive first half of the year. How are you doing that in the midst of what we all know is a slump, it's almost a depression?

TINA BROWN, CHAIRMAN, TALK MEDIA: It is wonderful that "Talk" seems to be bucking the trend. I think it's because -- you know, in a strange way, we've created a little niche of our own, where advisers really feel they can reach a very high quality audience in a very focused way. And that this is a place really to be a kind of smart alternative. So, they are buying into us, which is very exciting for us.

DOBBS: And it's really counter to -- as I mention, you create a lot of buzz, and no one could quite do it with your fervor and standard. But last year you were being raked over the coals, sales weren't as good. The advertising -- what transpired between the end of last year and the beginning of this?

BROWN: I think it takes time for a new magazine to take hold. You know, when I was at "Vanity Fair," it took us several years before there was any real advertising bite. And it took the courage of New House, who owned it, to keep persisting with it. Until, by the time I left, we were making money.

You said we lost millions, but actually we created an incredible brand and were in profit when I left. Just wanted to say that.

DOBBS: I was speaking humor. And indeed, the magazine that the other criticism last year, and I don't know what the figures are this year, but in terms of your sell through in the newsstand, has that improved as well?

BROWN: It's improving all the time. Of course, again, we're selling in the top 30 percent of magazine on the newsstand, so it's really incredible, that after like 18 issues, we're in that percentage on the newsstand. And of course, there is a newsstand slump. So, we are prevailing and more than prevailing in the advertising area,as you say.

DOBBS: And the other parts of the division, the talk division itself, the enterprise, books, you had what? About 4 bestsellers last year? How does this year look?

BROWN: It's incredible. We've launched this little book company just over a year ago, and we publish 20 books a year, about that. And remarkably, we've had four best sellers. This year, already, on the best seller list, which is really quite an incredible thing. We've got great content. I think that's really the key to it. We have incredible books, and we bring a lot of energy and I would say, quite a lot of shed ingenuity in the marketing of books.

DOBBS: Give us your outlook for the rest of the year for your business.

BROWN: For our business.

DOBBS: Right.

BROWN: I think it's terrific. We have -- we're on a very, very strong streak, we've been through our tough times, and we've now I think proved that we're a quality media boutique where people could reach an elite audience in a very aggressive and smart way, and it seems to be working and I think it will continue to work.

DOBBS: The other part, the other leg of the stool, if you will, is in terms of "Talk" entertainment, movies. When will we see a major "Talk" project there?

BROWN: Well, we have two or three in the works right now, which is very exciting. Miramax, one of our partners, is developing, as we said they would when we created this boutique, some of these project as movie projects. They are developing "Icebound," the Jerri Nielsen, one of our best selling books, they're developing that as a movie, and they're also developing "Stolen Lives," which is our other best- seller, which actually Oprah just chose as one of her book club choices, they're developing that as a movie too.

So, we'll see those movies I think in the next year or two.

DOBBS: Terrific. Well, congratulations on the improvement and the continued success, and I suppose, in this case, probably the criticism in the past year, is probably one of the greatest compliments, you set the bar so high, you have to keep running.

BROWN: I guess.

DOBBS: Tina, thanks a lot.

BROWN: Thank you.

DOBBS: Coming up next here: betting on biotech. A look at today's action in a very volatile sector.

Later, sharing the economic boom. How low-paid workers are fighting for more than just the minimum wage.

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DOBBS: In tonight's sectors report: biotechnology. The group losing ground for the fifth straight day following a revenue warning from Affymetrix. It cites weak demand for one of its products scientists use to study genes.

Adding to the downward pressure on the group, Praesis Pharmaceuticals and Amgen. Their application to sell a drug to treat prostate cancer was rejected by the FDA. Affymetrix and Praesis the biggest decliners on the Nasdaq today. Both lost a third of their price, but positive news gave Biogen stock a lift, it says late stage trials for its psoriasis drug are promising.

Despite the volatility of those stocks, at least one analyst is positive on the sector, we should note.

The group has gained almost 60 percent since late March.

Ahead on MONEYLINE, we'll hear from you.

Also, an uproar from California businesses: one city council about to push through a four figure minimum wage.

Stay with us.

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DOBBS: Good news, and possibly some bad news for California in tonight's "Powering America."

The state of course is strapped for cash, because of its energy crisis. And today, California sold $1 billion worth of general obligation bonds at better than expected rates. That bodes well for a much larger bond sale, $12.5 billion expected to come later this summer. That money would be used to replenish state coffers until the energy crisis abates.

The bad news coming from the Environmental Protection Agency, which said California is not exempt from rules that mandate cleaner gasoline. As a result, some say, that fuel prices could rise by several cents a gallon at least. The White House however denies it. In Santa Monica tonight, the city council is set to pass a so- called living wage proposal, a proposal that has outraged area businesses. That plan would require a $10.50 minimum hourly wage.

Casey Wian reports.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): The Santa Monica city council is about to adopt a law that will require dozens of businesses to pay workers a so-called "living wage" of $10.50 an hour with benefits, or $13 an hour without. Supporters say low-wage workers should share in the city's economic boom.

VIVIAN ROTHSTEIN, LIVING WAGE ACTIVIST: In the midst of this economic prosperity, the actual people who made this industry function, the housekeepers, the doormen, the waiters -- were living in poverty and earning poverty wages. And we decided we wanted to address that problem.

WIAN: Unlike other living wage laws, which only cover companies with local government contracts, Santa Monica's targets tourist-zone businesses with annual revenue over $5 million, mainly hotels and a handful of restaurants, like The Lobster. Its general manager says paying double the existing state minimum wage will increase his costs by 15 percent, or some $700,000 a year.

JACK DE NICOLA, RESTAURANT MANAGER: I believe it'll render us pretty much profitless.

WIAN: Housekeepers at the beachfront Loews Hotel already make more than $9 an hour, which they attribute to union activism. But this housekeeper says she deserves more.

MYRA RODA, HOTEL HOUSEKEEPER (through translator): If I made $10.50 an hour it would allow me to send more money to my daughter in El Salvador, and it would also allow me to save money to send my daughter that's here to the university eventually, someday.

WIAN: The 17th Street Cafe is outside Santa Monica's coastal zone and is exempt from the living wage law. Still, the owner says his business will also suffer.

JACK SREBNIK, RESTAURANT OWNER: I will have a lot of my highly trained personnel here that are making less -- can choose to go down to the coastal zone and take a job with less responsibility for more money. So for me to maintain them, I'm going to have to match the salaries.

WIAN: Living wage supporters say businesses seriously hurt by the law can apply for a waiver, but business owners plan a legal challenge.

(on camera): More than 60 cities and counties in the United States have already passed living wage laws, and at least 80 others are in the process. Casey Wian, CNN Financial News, Santa Monica, California.

(END VIDEOTAPE)

DOBBS: Just ahead here on MONEYLINE, my thoughts and yours, and "Ahead of the Curve." Stay with us.

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DOBBS: Several companies releasing news after the bell: Kraft's IPO, priced at $31 a share, it begins trading on the big board tomorrow. Lucent's spin-off, Avaya, lowered its profit expectations for the fiscal year and announced it will cut 3,000 jobs. The S&P Cut Lucent's debt rating, that debt now rated at junk status. Also tomorrow: the Fed's Beige Book and retail sales for May.

And Major League Baseball owners will hold talks in Pittsburgh tomorrow. One of their major issues: team relocation. We'll have live coverage for you right here on MONEYLINE.

And Wall Street today, a sobering place. Nokia warned, and the market dropped precipitously. Odd, since Nokia had already warned and no one should have expected any good news from a wireless sector beset by overcapacity and a recently resistant marketplace.

The volatility of today's market suggests an anxiety overall among investors, and perhaps overly exuberant bargain-hunting today. This market is most likely headed higher this year, but we won't regain those losses in a week. And this level of volatility should be a caution to investors who haven't let go of the momentum mentality.

And the caution today from the Securities Industry Association, expanding the code of conduct for Wall Street analysts will ultimately benefit the market, as well as analysts, as Wall Street analysts struggle to overcome their PR problems and restore their credibility with the investing public. And that won't happen in a week, either.

One viewer tonight reminds us to be respectful of the president of the United States. Our viewer Donald writes -- quote -- "When you make a reference to our president, it is proper to refer to him as President Bush, not Mr. Bush. Your use of Mr. Bush shows a lack of respect for our president."

Donald, I assure you, we're always respectful of the president. CNN guidelines require use of "president" before his name, but in succeeding references, either president or Mr. is appropriate. The industry standard by the way, as set by the "Associated Press Stylebook," is more informal. AP style requires the first reference to be President Bush, but then suggests dropping all titles, including "Mr.," using only Bush for subsequent references. We chose to be more disciplined than that, I think.

Finally, the White House, well, it tells MONEYLINE it doesn't have an official policy at all on how the media should refer to the president. It does ask us to show respect. We do.

Please e-mail us at moneyline@cnn.com.

That's MONEYLINE for this Tuesday evening. Thanks for joining us. I'm Lou Dobbs. Good night from New York. "CROSSFIRE" is next.

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