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Lou Dobbs Moneyline

Dow Climbs 21.74 to 10,645.38; Nasdaq Slips 39.80 to 1,988.63; Federal Regulators Impose Electricity Price Constraints

Aired June 18, 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.
ANNOUNCER: Live from the heart of New York City, this is LOU DOBBS MONEYLINE. Here now, Lou Dobbs.

LOU DOBBS, CNN ANCHOR: Good evening.

The Nasdaq today tumbled for a seventh straight session. The Nasdaq down 12 percent in just over a week.

After the bell, Oracle narrowly beat expectation with its quarterly profits. Tonight I'll be talking with CEO Larry Ellison.

And Europe's top trust buster went public and complained of political meddling in the GE-Honeywell deal.

And federal regulators today imposed electricity price constraints to ease the crisis in California and prevent price spikes in 10 other Western states.

We begin tonight with the seventh decline in a row for the Nasdaq. The index ended below 2,000 for the first time since mid- April. The Dow managed to gain 21 points today. Rattling technology investors today: a warning from Level-3 Communications. The fiber optic telecom company said that revenue this year and next will disappoint.

It's the second sales warning from Level-3 in just two months. The news compounded fears after Friday's bombshell warning from fiber optic equipment maker Nortel Networks. Peter Viles reports.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): The $19 billion Nortel bombshell reverberated on Wall Street for a second day, dragging the Nasdaq below the 2000 barrier.

LARRY WACHTEL, PRUDENTIAL SECURITIES: The real problem is this overwhelming technology psychology to the downside, that just pervades the entire investment structure. I think we have to bite on technology and we've been trying to do it for a year now.

VILES: The Dow Jones Industrials did manage a 21 point gain, closing at 10,645. But the S&P 500 was lower as was the Nasdaq. The composite down another 2 percent, closing at 1988, it has now lost 12 percent in a 7 session slide, that has pushed some tech stocks to all- time lows.

Fiber optic company Level-3 Communications, which once traded at 130, fell below $6 after slashing revenue estimates. Global Crossing, which peaked at 61, fell below $8. Lucent has never been lower: $5.69 a share. Palm fell to $4.35; it peaked at $80. Ariba fell below $4 a share.

Just as scary, Salomon Smith Barney, which called first half earnings horrendous and slashed earnings estimates for this year and next for the entire S&P 500, predicting technology earnings will be 45 percent below last year's levels and that even with solid economic growth "It would likely take until 2004 at the earliest for tech EPS to recover to 2000's level."

Hopes are building on Wall Street for a 50 basis point rate cut by the Fed next week. Traders are not sure even that will help the market.

NICK ANGILLETTA, SALOMON SMITH BARNEY: I think they'd be willing to give up the next Fed cut to actually see the economy improve, they want to see some results now.

(END VIDEOTAPE)

VILES: That is a growing theme on Wall Street and on Nasdaq trading floors. The idea, as one trader put it, that if five interest rate cuts from the Federal Reserve couldn't put some juice in this market, it's hard to see how number six next week would miraculously do the job -- Lou.

DOBBS: Pete, I imagine how most people, however, would like to see if six would do the trick?

VILES: That's not to say they wouldn't accept it, Lou. They're excited about it.

DOBBS: Right, Peter Viles, thanks. Peter Viles from Wall Street.

More than $3 trillion in market value has been wiped out since the Nasdaq plunged from its high. Despite that, price to earnings ratios of many tech stocks remain richly valued to say the least. Microsoft, Intel, Sun, Dell, Apple Computer all have PEs of 23 or more.

The historical average over the past 50 years is about 15. And there is no real PE for Cisco, Lucent, JDS Uniphase, Nortel, nor Computer Associates, for example, because all of those companies have reported quarterly losses.

One big cap stock that's down nearly 70 percent from its all-time high: Oracle. After the bell today, Oracle released its quarterly results. The number two software maker beat expectations by a penny a share. But revenue, short of expectations and lower compared to a year ago. The company said, in a conference call, that last quarter may have been the bottom. And the stock, down fractionally during the regular session, has actually risen in after hours trading. Bruce Francis reports.

(BEGIN VIDEOTAPE)

BRUCE FRANCIS, CNN CORRESPONDENT: Weakened but not crippled by the contraction in tech spending, Oracle slightly edged out profit expectations. Oracle earned 15 cents a share, a penny better than the estimate. But revenues of over $3.2 billion were less than the Street expected. Analysts said cost-cutting helped them squeak past estimates.

BOB AUSTRIAN, BANC OF AMERICA SECURITIES: We know they had to work extremely hard to get to these results. So, cost control, you know, two thumbs up. The question that investors always have relates to growth, and we pay mostly for growth, not for cost control.

FRANCIS: Oracle rode the dot-com bubble on the way up, trumpeting itself as the software that runs the Internet's top company. New business there has dried up, and the company's more traditional Fortune 500 clients are far less willing to spend these days.

As a result, Oracle's earnings were a full 83 percent below last year's, and the stock has lost about two-thirds of its value since its all time high. Analyst Chuck Phillips says right now Oracle is only for patient investors.

CHUCK PHILLIPS, MORGAN STANLEY: The fundamentals aren't improving yet at the rate the stocks were appreciating over the last month or so. So they're going to bounce around until we get some clear signs that the economy is stabilizing and that the growth will return.

(END VIDEOTAPE)

FRANCIS: Oracle says the best news for its conference call, telling analysts that last quarter may indeed have been the bottom, and that spending will start to improve on technology products, if not return to normal. Oracle credits Fed rate cuts and lower taxes for restoring the confidence of customers in the economy. Europe, though, will lag behind -- Lou?

DOBBS: Bruce, thanks a lot. Bruce Francis.

I'll be talking with Oracle's chairman and CEO about the outlook for his company and the industry: Larry Ellison, ahead here on MONEYLINE.

Oracle hit its all-time high at more than $48 a share in September of 2000. Since then, investors have lost more than $175 billion of market value.

Joining me now, a tech fund manager who sold his Oracle Holdings before the stock cratered: Dennis McKechnie of Pimco, who manages $3 billion in investments.

Dennis, good to have you with us.

DENNIS MCKECHNIE, PIMCO: Thank you.

DOBBS: Oracle talking about a bottom. Do you see a bottom?

MCKECHNIE: Yes, there's a couple of encouraging things they did say. Their license revenue was down, less than people thought, only down 10 percent. One thing that they did mention on the conference calls as well, is that dot-com, which had fallen apart about 12 months ago, is less important now, and the comparisons get much easier going forward.

DOBBS: And in terms of the relationship between their application and database software, database software obviously the preponderance of the company?

MCKECHNIE: Yes, it's about 80 percent of the database business. The database really more -- closely mirrors what's going on in the economy. That being down only 10 percent, much better than applications which was down 24 percent.

DOBBS: If you look at net income as opposed to the year ago quarter, down significantly -- but a lot of that from year ago investments -- what is that story?

MCKECHNIE: Well, the EPS, when you X-out all these investment gains that they had last year, were roughly flat. So, it's actually kind of a stabilizing bottoming type of picture that I get.

DOBBS: Because I looked at those numbers and I thought, what a better investment climate a year ago for Oracle and everyone else. At this juncture, where would you be in technology?

MCKECHNIE: There are a couple bright spots. Out of all the technology, I think about 85 percent is still facing the fundamental bottom going forward. There's still more problems to go. The 15 percent that seems to me to be on the mend, would be local area networking. Companies that sell data networking into Fortune 500 -- Extreme, Foundry, even parts of Cisco -- found the inflection point.

Once again, a company does have the telecom exposure, which is a total nightmare. But the Fortune 500 exposure seems to be on the mend in turning back up.

DOBBS: At this juncture, asking you what you would buy, what would you sell?

MCKECHNIE: I would still continue to sell into the telecom equipment, I think that business doesn't really find a bottom until very, very late this year or early next year. Companies like Nortel, I'd be selling. Lucent.

DOBBS: You mean after all the damage is done? MCKECHNIE: Yes, I actually don't see the recovery for awhile. The networks need to tighten up. There's just tremendous overcapacity, and it doesn't really get much better for the next nine months.

DOBBS: Dennis, thanks a lot.

MCKECHNIE: My pleasure.

DOBBS: Coming up, Europe's top trust-buster speaks out on the GE-Honeywell deal. Mario Monti doesn't like politics.

Also, the hang-up that derailed a deal between Microsoft and AOL Time Warner.

And tonight we'll ask Oracle CEO Larry Ellison about his company's results, and his plans to get Oracle back on track.

(COMMERCIAL BREAK)

DOBBS: Well, General Electric has offered European regulators its final package of concessions to win approval for its deal to buy Honeywell. Since those concessions fell short of E.U. demands, GE said the deal was all but dead. But today Honeywell said it still expects GE to do everything possible to secure approval. And Europe's top antitrust enforcer, Mario Monti, noted that a final decision from the European Union is still weeks away.

Kitty Pilgrim has the report.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): The European competition commissioner, Mario Monti, Monday spoke out for the first time on GE-Honeywell, saying there is still time.

MARIO MONTI, EU COMPETITION COMMISSIONER: The commission has until 12 July to reach a decision on the proposed merger.

PILGRIM: Monti also said the final decision will be a matter of law and economics, not politics or what he called "political intervention," a not-so-subtle reference to comments from President Bush last week.

During his European trip, Bush said he was, quote, "concerned" about the blocked merger. Today, the White House defended the statement.

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The president did not intervene. The United States had already supported the merger.

PILGRIM: Another sign this deal might not be dead just yet, Honeywell's board met today and said it is committed to the merger and expects GE to do the same. Some analysts say GE is not upset the rhetoric has escalated. ROBERT NORFLEET, DAVENPORT & COMPANY: I almost feel like GE is somewhat, without stating it, is somewhat welcoming this discussion that's going on, having support from the United States politically and then having the E.U. somewhat have to, you know, run to the rescue and say it's really not a political issue.

PILGRIM: But others worry about the implications of the verbal sniping that is going on.

STEVEN BUFFONE, GIBSON, DUNN & CRUTCHER: I think it's unusual that a merger such as this would have hit such a high level of politics.

You have to remember that this is the largest proposed industrial merger ever, and that the head of General Electric, Jack Welch, is obviously a legendary chairman of one of the great U.S. companies who delayed his retirement until this deal could be completed.

(END VIDEOTAPE)

PILGRIM: Though not dead yet, the GE-Honeywell deal is certainly on the rocks. That continues to feed speculation about other potential suitors and that's intensified. United Technologies made a bid for Honeywell last fall, but analysts point out the breakup fee on the GE-Honeywell deal will keep other potential suitors in the wings until after July 12th. That's the deadline for European approval -- Lou.

DOBBS: I keep thinking about what Jack Welch said, Kitty. He's too old to -- you're never too old to get a surprise. There's a corollary to that, particularly in Jack Welch's case: He's probably not too old to offer up a few surprises of his own. So we'll get to wait and see, as they say.

PILGRIM: I think that's the thing to do in this case, Lou.

DOBBS: All right, Kitty, thanks.

Taking a look at three stocks now, General Electric up fractionally, Honeywell up more than a dollar a share, United Technologies up more than $3 today.

Well, next here it's the equivalent of beach-front property in the digital age, but AOL will not be part of this real estate deal with Microsoft. We'll tell you why next. And as Alan Greenspan gears up for next week's Fed meeting, I'll talk with one economist who says the Fed must stay aggressive.

Also, the latest hot property in broadcasting, Spanish language television.

(COMMERCIAL BREAK)

DOBBS: In tonight's "Tech Watch," a breakdown in talks between AOL and Microsoft, the two sides apparently so far apart they can't even agree on why they disagree. Steve Young has the report.

(BEGIN VIDEOTAPE)

STEVE YOUNG, CNN CORRESPONDENT (voice-over): The beast and the borg, as they called each other, may be heading for an increasingly bitter battle because 10 weeks of talks between Microsoft and AOL Time Warner crashed over the weekend. AOL wanted to be a part of Windows XP, due out this fall, but it says it couldn't agree to a Microsoft demand that it stop using a media player from its partner and Microsoft's competitor, Real Networks, or switch to a version that didn't work well with the new operating system.

Microsoft wanted AOL to stop telling legislators that Windows XP, which includes a raft of Microsoft consumer online services, is anti- competitive. It also wanted AOL's agreement not to bring a Windows XP antitrust suit for a year and make AOL's messaging service compatible with Microsoft's. AOL now says it doesn't care about not being bundled in Microsoft's forthcoming operating system, because it has distribution deals with major PC companies.

But one industry observer says bundling in the dominant PC operating system is a big deal and he's not surprised the talks reached an impasse.

RICHARD SHAFFER, TECHNOLOGIC PARTNERS: It's all about power and about market share. I mean, it's the usual big-player finger- pointing. It's the other guy's fault. It's not me. I'm a perfectly reasonable person, you understand, but he just wouldn't see it my way.

YOUNG: AOL hints it might switch from Microsoft's browser to the Netscape browser it already owns later this year, but analysts say that's a long shot.

JOHN CORCORAN, CIBC WORLD MARKETS: When it comes to the browser wars, I think that game is basically over and Microsoft has really won, just as in the dial-up ISP space AOL really has won already.

(END VIDEOTAPE)

YOUNG: Analysts say each company is trying to keep its finger in the other's pie, but the new war is over how much Internet subscription and consumer services revenue these giants can garner -- Lou.

DOBBS: These stocks, however broad or however deep, are truly over you think at this point?

YOUNG: There is some speculation they could be resparked, but that's probably a long shot, too.

DOBBS: Out of curiosity, why in the world wouldn't AOL resurrect Netscape, a perfectly good browser?

YOUNG: Microsoft been saying for some time that it's inferior, that if it was so hot, AOL would have switched to it. DOBBS: Oh, that explains Microsoft's view. What's AOL's?

YOUNG: Well, AOL simply tells us that version 7 comes out in the fourth quarter and you never know.

DOBBS: And guess what comes out in the same time period? Windows XP?

YOUNG: Yeah, around October 23rd.

DOBBS: What a coincidence. All right. Steve, thanks. Steve Young.

Checking how many of these stocks did well today, well, let's look at AOL, the parent of this network, which dropped more than a dollar. Microsoft also fell a dollar. Maybe they'll continue talking.

Coming up next, a controversial order out of Washington: Federal regulators say they're ready to impose price controls on electricity through much of the West. And we'll tell you about the spin battle between Ford and Firestone ahead of hearings tomorrow on Capitol Hill.

(COMMERCIAL BREAK)

DOBBS: Some relief today for the price of crude oil. All OPEC members, excluding Iraq, boosted oil production by almost 3 percent in May. OPEC may raise output again if Iraq keeps its 3.5 percent share off the market. Light sweet crude fell almost $1 to $27.55 a barrel.

In tonight's "Powering America": price controls. Energy regulators today agreed to stricter controls on California energy prices, and extending those price constraints beyond the state. Kate Snow reports from Washington.

(BEGIN VIDEOTAPE)

CURTIS HEBERT, FERC CHAIRMAN: The commission feels and certainly I believe that it is time to stop blaming and start solving problems.

KATE SNOW, CNN CORRESPONDENT (voice-over): The Federal Energy Regulatory Commission's new order extends price mitigation efforts beyond California to 10 other states, 24 hours a day, seven days a week, through September 2002.

The price of electricity would be based on how much it costs the least efficient plant to produce that power, an idea embraced by President Bush.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: They're not talking about firm price controls. They are talking about mechanism to -- as I understand it, a mechanism to mitigate any severe price spikes that may occur, which is completely different from price controls.

SNOW: Politically, it's a sort of middle ground, not going as far as capping prices, but allowing Republican members, especially those from California, to show they're doing something. Congressman Doug Ose was one of the first to promote the new plan. He says his constituents will be relieved.

REP. DOUG OSE (R), CALIFORNIA: They understand that price caps don't get them more supply. They understand that price caps reward the guy who pollutes everything in the area. They don't want that. What they want is available supply, low prices and no harm to the environment. And that's what my plan does.

SNOW: But Democrats say the action by the commission, known as FERC, won't bring prices down.

REP. HENRY WAXMAN (D), CALIFORNIA: FERC is acting under pressure from Republicans who want to relieve the political onus on them for not having acted, but they pushed FERC into a position that isn't what's needed in California. It may be needed to get the political heat off Republicans, but it isn't what's needed to stop the gouging and shortages in California.

(END VIDEOTAPE)

SNOW: While Democrats have tried to cast this as one giant political calculation, the chairman of the commission said today that this was not a partisan decision. He said "no governor or senator is likely to be entirely happy with our decision here," but he went on to say that "we didn't do it for them, we did it for the people of California and the West."

Kate Snow, CNN, live on Capitol Hill.

DOBBS: Kate, thank you very much.

Well, the CEOs of Ford and Bridgestone/Firestone tonight are bracing to defend their companies tomorrow on Capitol Hill. Two House subcommittees are set to hear testimony from Ford Chief Jaques Nasser and Bridgestone/Firestone's John Lampe. At issue: whether tire trouble alone was responsible for a string of deadly accidents, or if a design flaw in the Ford Explorer contributed to the problem.

Tim O'Brien has the story.

(BEGIN VIDEOTAPE)

TIM O'BRIEN, CNN CORRESPONDENT (voice-over): A caravan of hundreds of Ford Explorers motored to Washington today in support of the auto company. The demonstration, organized by the United Auto Workers union, the vehicles owned and driven by Ford employees.

UNIDENTIFIED MALE: It's time for the working people to stand up and support Ford Motor Company.

O'BRIEN: The CEOs of the auto company and the tire company will square off in this hearing room with what is expected to be yet a new round of finger-pointing.

JAQUES NASSER, CEO, FORD MOTOR COMPANY: We know that this a Firestone tire issue, not a vehicle issue.

JOHN LAMPE, CEO, BRIDGESTONE/FIRESTONE: Most of the deaths and injuries involved Ford Explorers, not other vehicles equipped with the same tires.

O'BRIEN: Government studies show that sports utility vehicles are two to three times more likely to roll over than most passenger cars. Firestone admits problems with its tires, but says Explorers are more likely to roll over after a tread separation.

Ford denies that, and points out that overall, the Explorer has a better than average safety record among SUVs. Some safety experts place blame with both companies, and with the Department of Transportation for failing to adequately warn the motoring public.

CLARENCE DITLOW, CENTER FOR AUTO SAFETY: The government has not done anything visible -- and yet, once again, we're entering another summer driving season, when Firestone tires are most likely to fail on Ford Explorers.

O'BRIEN: Top Transportation Department officials are sure to be questioned about that at the hearing tomorrow.

(END VIDEOTAPE)

O'BRIEN: As for Lampe and Nasser, the plan is for them to testify separately. They don't get along. Notwithstanding doing business for almost 100 years, the relationship between the two companies is not cordial, and Lou, the 4th of July may be weeks away -- the fireworks could begin here as early as tomorrow.

DOBBS: Tim, we appreciate it and we will be looking forward to those hearings. Tim O'Brien from Washington.

Also today: President Bush met with Secretary of State Colin Powell to talk about plans for closer ties with Russia. That after the president met for the first time Saturday with his Russian counterpart, Vladimir Putin. Mr. Bush says he's confident that cooperation can exist between Washington and Moscow. The two leaders plan to meet three more times, in fact, this year.

And in Yemen, a close call at the U.S. embassy there. Bush administration sources telling CNN that terrorists not only targeted the embassy over the past few days, but came dangerously close to attacking it. One U.S. official describes the threat as, in his words, "imminent, specific and credible." The FBI says the danger forced the withdrawal of its last dozen or so agents from Yemen. The agency opened a field office there after last year's bombing of the ship the USS Cole.

Coming up next: we'll look at what's ahead for the Nasdaq, after seven dives in as many sessions. Among the techs fighting to stay on top in this tough market: Oracle. We'll hear tonight from its Chief Executive Officer Larry Ellison about today's after-the-bell results. Also, Bruce Steinberg joins us. He'll tell us why the Fed is ready to take another aggressive move. At least, he hopes so. (COMMERCIAL BREAK)

DOBBS: In tonight's headlines: the Nasdaq down nearly than 2 percent on the day, its seventh consecutive session of losses. The software maker Oracle after the bell beating Wall Street's expectations by a penny. Sales slightly below estimates, but the company suggests the worst may be over, and I'll be talking to CEO Larry Ellison later.

Power regulators agree to stricter controls on California electric prices, and extend those controls beyond the state to the Western region.

Taking a closer look now at today's market action: the Nasdaq's sell-off puts the index below 2,000 for the first time in two months. It finished down nearly 40 points, at 1,988, the seventh losing session in a row.

But a different story for the Dow, finishing higher for the first time in four sessions. Helping lift the Dow today, strength from United Technologies and GM, both companies saying they will meet earnings' estimates. The Dow finishing at 10,645.

But on the Big Board, decliners beat advancers by a three to two margin. And year to date, the Dow has now lost more than 1 percent, while the S&P 500 has dropped more than 8 percent. The Nasdaq is off nearly 20 percent so far.

Tonight's "MONEYLINE Movers": IBP rallying more than $6 a share. A Delaware judge today ruling that Tyson Foods improperly broke off its $3.2 billion takeover of IBP, and the stock soaring. Tyson is now trying to complete that deal, calling talks "positive and productive." Tyson called off that agreement after an investigation into IBP's accounting practices. Tyson Foods down more than $2.

Krispy Kreme surging more than $3.5 a share, prices rallying after Friday's two-for-one stock split. Level 3 Communications tumbling more than $1.5 to its lowest price ever, the provider of high-speed telecom service slashing 1,400 jobs, nearly one-quarter of its work force, on top of layoffs announced in April. Level 3 also cutting revenue projections for this year and next, citing slumping demand for bandwidth. Level 3 Communications has lost 93 percent of its value over just the past year.

Investors this week will also be focusing on the Federal Reserve. Next Tuesday and Wednesday, Fed policy-makers meet to discuss interest rate direction. And increasingly, economists are predicting a 50- basis point rate cut. One of those looking for aggressive action: Merrill Lynch chief economist, Bruce Steinberg who joins us now.

Bruce, good to see you.

BRUCE STEINBERG, CHIEF ECONOMIST, MERRILL LYNCH: Good to see you, Lou.

DOBBS: 50 basis points, that's what you think they'll do, and you obviously think that's critically necessary?

STEINBERG: I think it's necessary. The economy over the last month has continued to deteriorate, basically almost every kind of indicator that we look at doesn't show any sign of bottoming as yet.

DOBBS: All right. In terms of employment, you don't see strength just in the fact that we're looking at 4 1/2 percent unemployment rate? That's where we were two years ago, and we also then had a booming market and a strong economy.

STEINBERG: Of course, it's the direction that matters. Then, the direction was down and now the direction is up. Initial unemployment claims are actually at a nine-year high right now. The unemployment rate tends to lag the business cycle, so it's certainly headed higher, toward 5 percent and probably beyond.

DOBBS: I'm going to try again. How about automobile sales, we've seen remarkable strength in the auto sector?

STEINBERG: Auto sales have held up remarkably well, but they might be beginning to run out of steam. The consumer has been really holding up the economy. We have broad sectors of the economy shrinking. The capital goods sector, industrial activity and so on are going down, and so the consumer really single-handedly has kept things kind of edging forward.

But lately, even the consumer has begun to kind of run out of steam, and that's why I think the Fed has got to do some more in here.

DOBBS: Now, the Fed moving here would give us 300 basis points in the course of roughly six -- exactly six months, point of fact. Would that be enough to significantly turn things around? Because there's is that lagging effect with monetary policy.

STEINBERG: Eventually, it will be enough. It's a question of when the economy turns. This time, in this cycle, we have something gratuitous, which is tax cuts actually were scheduled to arrive in the very moment that they were needed in terms of fiscal stimulus to the economy.

In combination with the tax cuts that are going to start in a few weeks from now, the tax rebate checks, we should see I think the economy begin to turn by the fourth quarter. But you know, right now, that's a forecast, and for the Fed too it's a forecast, and the Fed has to try harder.

DOBBS: With all of the negatives that you're identifying, are we talking about a recession here in your judgment?

STEINBERG: Had the Fed not started to act as aggressively as it did back in January, we'd be in a recession now. Because it acted so rapidly, the economy is sort of on the cusp of one, but it's not really in one, in a sense that GDP is still growing, however slowly it's growing.

DOBBS: Do you expect we'll positive growth in GDP second quarter?

STEINBERG: I think second quarter GDP will be up around 1 percent, not much but up. And then, in the third quarter, we get this $40 billion of tax rebate checks flooding into the economy, you know, in a couple of months' time, and that should keep the consumer -- kind of invigorate the consumer at that point.

DOBBS: These tax cuts that six months ago most people were saying we didn't need, and it was a foolish idea.

STEINBERG: Well, it's lucky we got them, because we certainly need them now.

DOBBS: And at this juncture, what do you look forward in terms of these markets?

STEINBERG: I think that the turn in the economy, the turn in the earnings cycle is still, you know, out there. Hopefully, by the fourth quarter, but things are still going to look pretty lame during the summer. And until the equity market can get some sense that things are going to turn, it's probably going to remain kind of choppy.

DOBBS: Are we at a bottom?

STEINBERG: I think we saw the bottom. I don't think we're going to go through those low levels we saw back in late March and early April, but it will take some time to, you know, clearly move off that floor.

DOBBS: Well, I'm going to take that as a positive and bright outlook. And Bruce, as always, it's great to see you.

STEINBERG: Good to see you, Lou.

DOBBS: Bruce Steinberg.

Coming up next here, Oracle CEO Larry Ellison will join us to talk about his company's latest results and its future.

Also, a possible bright spot in the chip equipment sector, we'll have the story.

And later: the media world is buzzing with deal talk tonight. A possible target: Spanish language broadcasters, media giants trying to grab hold of an exploding audience. MONEYLINE will be right back.

(COMMERCIAL BREAK)

DOBBS: In tonight's "Sectors Report": chip equipment. Salomon Smith Barney today upgraded the entire sector. Analyst Glen Young says the latest industry report, due Thursday, will show orders for chip equipment rebounding. The most recent data shows the ratio of shipments to orders sitting now at a 10-year low. The upgrade helping the stocks in the sector to end slightly higher on what was a down day on the Nasdaq. Only Applied Materials closed weaker. Still to come here: Henry Silverman gets back to deal-making, as Cendant inks a multi-billion-dollar deal. Also, we'll talk with one of technology's most powerful CEOs about whether that sector has hit bottom. And that's coming up next.

(COMMERCIAL BREAK)

DOBBS: The Securities and Exchange Commission today said it is investigating what it termed "several companies." The SEC suspects those companies of trying to deceive investors by reporting so-called pro forma earnings. Critics describe pro forma earnings as "everything but the bad stuff." The SEC would not reveal which companies it is now investigating or how many.

In other corporate news, Cendant is on the acquisition trail again, buying Galileo International, spending almost $3 billion, expanding its electronic travel reservation business. This marks a return to deal-making for Cendant CEO Henry Silverman, who has not made an acquisition of this size since 1997, when his company discovered it was the victim of an accounting scandal. Cendant and Galileo gained on the session.

Merrill Lynch is overhauling its research department. Among the changes, analysts will now use four ratings instead of five. And Merrill will disclose whether it has a business relationship with the company, its analyst is covering. And whether the analyst owns shares. The changes follow last week's Congressional hearings on analyst practices and recent Security Industry Association voluntary guidelines.

And a high honor from across the Atlantic bestowed on IBM's Lou Gerstner. Gerstner named an honorary knight of the British empire, one of the few businessmen ever to receive the honor. Although foreign nationals cannot hold the title 'Sir', they can use the initials KBE, for Knight of the British Empire.

Oracle topped Wall Street estimates by a penny; revenues, however, short of expectations. The software giant earning $855 million, 15 cents a share on revenue of 3.2 billion.

As for the company's outlook, Oracle's CEO Larry Ellison joins us now from Redwood Shores, California.

Larry, good to have you with us.

LARRY ELLISON, CEO, ORACLE: Hi, Lou.

DOBBS: These results, you've got to be pleased with basically being flat against a year ago.

ELLISON: Yes, we're pleased with the results in terms of profitability and we're cautiously optimistic going forward. We think the Q4, the quarter we just reported, was a low point and things are getting more solid. And again, Q1 looks a lot better.

DOBBS: Your Q4, just to remind everybody is everyone else's Q2 or just about everybody else's Q2. What's changing here, because nearly every other technology company -- I know they're unique as they apply to Oracle, certainly. What's unique here, because nearly every other technology company is looking at tough times ahead?

ELLISON: Well, we're at the beginning of a very, very strong product cycle. About a year ago, we introduced what we call our E- Business Suite, this complete suite of applications to run every aspect of your business, and it was a kind of untried idea.

But in this last 12 months, we have gotten over 450 customers, big customers, General Electric, Ford, Alcoa, Hewlett-Packard, live and running their businesses on the E-Business Suite. So, we've gone from interesting idea to proven technology. And we see the application business making a very very strong rebound, starting in Q1.

DOBBS: You're application business -- when will it overtake your database business?

ELLISON: I think it will be a few years. Our database business is also very strong. The good news is, we've announced, not only do we have a new version of our application, the E-Business Suite, we have the new version of our database and our application server, that's the 9i version, where we compete against IBM and BEA.

DOBBS: And in terms of your database software, which is obviously the guts, the strength and remarkable part of its future -- is it holding up as you would have liked?

ELLISON: Yes, well, again, on this past quarter, we were flat. But considering that a year ago, as we all well know, the dot-coms were flying high. The telecommunications industry was flying high. And we're the primary supplier to database technology to all the dot- coms and all the telecommunications. Those guys are buying at a much reduced rate.

Fortunately, the other companies, the City Banks, the General Motors, the General Electrics are still buying. We're pretty well diversified supplier to technology to the economy, compared to some of our competitors.

DOBBS: Now, some analysts are concerned obviously in terms of what looks to be some significant price competition here. What are we going to be looking at, in terms of price for your products and services?

ELLISON: Well, on the application side, one of the most interesting things about our applications, is if you buy a million dollars worth of Oracle software, the 11i Suite, it will probably cost you at most a million dollars to do the installation.

If you buy one of our competitor's products, say SAP or Siebel, a million dollars worth of software might cost you $5 to $10 million to install. So, we're much less expensive to put our applications in.

On our database side, IBM has been saying, we're more expensive than the IBM product. Well, we did two things to respond to that. We changed our pricing model, and the other is, we bundle a lot of things into our standard database that IBM charges separately for. So we think we're actually cheaper than IBM.

DOBBS: So, it's just an illusion, that issue of expensive terms of database software?

ELLISON: We think so. But -- seriously, we think IBM is pretty good at creating illusions.

DOBBS: Well, in point of fact, a lot of focus has been turned to, over the last couple of weeks in particular, to rumored talks and reported talks between AOL and Microsoft and is one of the certainly the leaders of the technology industry. What's your reaction when you hear talks about Microsoft, of which you have of course some strong feelings and AOL, the leading media company in the world?

ELLISON: Again, I'm not surprised to see that those talks between AOL and Microsoft broke down. Microsoft recently has gotten much more optimistic about how they're going to be treated by the Justice Department, and are back to their old tricks. So they don't want -- they don't want to distribute the AOL software with the, you know, with the Windows XP operating system. Microsoft would just assume customers not have choice.

DOBBS: Larry, as always, good to have you with us. And congratulations on these results.

ELLISON: Thank you, Lou.

DOBBS: Coming up next here, a rapidly growing television market has won the attention of big broadcasters and now Wall Street. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Speculation swirling tonight that a Spanish broadcaster may soon be scooped up by the owner of a major television network. The appeal is clear. The big four networks continue to see their audience decline at a time when the Spanish language market is booming. Susan Lisovicz has the story.

(BEGIN VIDEOTAPE)

SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): The Hispanic population is growing so fast that by the year 2025 the U.S. is expected to be the second largest Spanish-speaking nation in the world. The 2000 census shows that Latinos are already the nation's largest ethnic group, which is exactly why the nation's two biggest Spanish-speaking network, Univision and Telemundo, have enjoyed big gains at a time when network TV viewership in general is on the decline.

BRAD ADGATE, HORIZON MEDIA: You put prime-time television on, and there really aren't any Hispanic characters right now on television, there is no place for Hispanic viewers to go that they can identify on broadcast television. There's a few on cable. So, that leaves Telemundo and Univision and a few other smaller networks to fulfill that niche.

LISOVICZ: Further enhancing the attraction of Univision and Telemundo: the demographics. The median age of Hispanics is more than 10 years younger than that of the white population, and younger than African-Americans and Asian Americans as well. Advertisers crave youth for the proclivity to spend on fast food, apparel and music. And the bulk of the Hispanic population is centered in the nation's biggest media markets -- Los Angeles, New York and Chicago, which would facilitate cross-promotion for another media company already entrenched in those markets.

JESSICA REIF COHEN, MERRILL LYNCH: Univision reflects the growth characteristics of the segment. It's trading at 27 times EBITDA on this year's estimated earnings, so it's a super, super high multiple, and Viacom and most of the companies in film and entertainment sector are very, very disciplined by it. So, Univision seems to be out of bounds for most companies, which I think is why everybody is focused now on Telemundo, which is still private.

(END VIDEOTAPE)

LISOVICZ: Univision, meanwhile, today held a late-afternoon conference call to announce its access to programming from two South American networks, Colombia's RCN and Venezuela's RCTV. The number one Spanish-speaking network needs expanded programming, because it will launch a new 24-hour network in January that's geared toward a younger audience. And of course, advertisers love those younger audiences.

DOBBS: It sounds like the price might be going up here, as we speak.

LISOVICZ: Exactly.

DOBBS: Susan, good to see you. Welcome back.

LISOVICZ: Thank you.

DOBBS: Coming up next: my take and yours, and "Ahead of the Curve."

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DOBBS: Well, tomorrow investors will be watching Oracle. The company reported profits of 15 cents a share, beating the Street by a penny. Also tomorrow, the House Energy and Commerce Committee holds hearings on the safety of Firestone tires and Ford Explorers. Ford CEO Jaques Nasser and Firestone CEO John Lampe will attend.

Watch for housing starts for May, economists expecting a decline. Also tomorrow: quarterly results from Goldman Sachs and Lehman Brothers, also Best Buy and Jabil Circuit.

Well, tonight: sometimes regulation works, when the political economy works as it should. The decision to expand price controls from California to other Western states seems like a reasonable bipartisan decision, giving those states the opportunity to work through vast fluctuations in energy prices, while the market has to time to adjust, which means that power companies will have time to build new generation.

You may have noticed that both Democrats and Republicans are now calling these measures "price constraints," not "price controls." Sometimes common sense makes for good politics and good economics, and usually that happens with elections approaching. As it turns out, they are next year for Congress.

Well, sometimes regulation doesn't work as well as it might, at least not in Europe. That may be because the European Union doesn't tolerate politics in its economics and regulatory decisions. That is, at least if you believe Mario Monti, the European Union antitrust czar.

Monti is apparently angry that some people on this side of the Atlantic were trying to influence his decision about the GE-Honeywell deal through the employment of politics. Now, people doing exactly the same thing on the other side of the Atlantic and that issue were simply discussing economics and law, according to Monti, which leaves us all wondering what Monti means when he says this is not a trans- Atlantic dispute. Maybe it's just a language problem.

Now for a look at your comments: "I count five telecom companies with a market cap exceeding $45 billion, and this is after the huge declines in the sector. How will all of this shake out? Are there any true regional or local players anymore that still have some sort of strategic advantage?"

We talked with Goldman Sachs' telecom analyst Larry Benn. He says the CLECs, or competitive local exchange carriers, actually fill a specific need in a local market. And while there is a glut of fiber on the long-haul side, there is a real shortage in the local market. Benn still likes Allegiance Telecom, Network Plus, and Time Warner Telecom.

And as the energy crisis continues: "Why do Americans, and mostly Democrats, have such problems with energy companies? We use their products every day, and yet if any of these companies make money more than two quarters in a row, some senator will start an investigation."

Let us hear from you at moneyline@cnn.com.

And that's MONEYLINE for this Monday evening. Thanks for being with us. I'm Lou Dobbs. Good night from New York.

"CROSSFIRE" coming up next.

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