LOU DOBBS MONEYLINE
Dow Advances 68.10 to 10,715.43; Nasdaq Climbs 27.52 to 2,058.76; Battle Erupts Over Control of Computer Associates
Aired June 21, 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: stocks advance broadly on Wall Street, the best back-to-back gains in more than two weeks.
Two brash billionaires fighting for control of Computer Associates. I'll talk with Sam Wyly about his bid to oust CA founder Charles Wang.
Graduates, all dressed up for the work force, and nowhere to go.
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UNIDENTIFIED MALE: I did not know it was going to come to a crashing halt like it did.
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DOBBS: And, we'll be shipping off to CEO boot camp.
ANNOUNCER: Live, from the heart of New York City, this is LOU DOBBS MONEYLINE. Here now, Lou Dobbs.
DOBBS: Good evening. We begin tonight on Wall Street, where stocks advanced across the board, the second-straight day of gains. Financial stocks helped lead the rally. Morgan Stanley's stock soared after the company reported quarterly profits that were weak, but still better than expected. And that was enough for many investors, who are also betting the Fed will once again cut interest rates aggressively next week.
Kitty Pilgrim reports.
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KITTY PILGRIM, CNN CORRESPONDENT (voice-over): The tone was set by financial stocks in the market Thursday, when Morgan Stanley reported earnings that beat estimates. Those results were not as good as it might have first appeared. Compared to last year, profits for the brokerage house were down 36 percent. Nevertheless, Morgan's stock jumped, rising more than 15 percent for the week.
Other financial stocks followed suit, including Lehman Brothers, up 16 percent for the week, Goldman Sachs, Citigroup, and J.P. Morgan Chase. UNIDENTIFIED MALE: I think they're feeling marginally safer. Some of the recent warnings have produced dips, and not disasters. If you're a portfolio manager, you don't want to get caught with a disaster as the quarter is ending.
PILGRIM: The Dow ended the day up 68 points, to close at 10,715. The Nasdaq also did well. That index closed up 27 points. The bad news on the day did not seem to rattle the markets. Transmeta, which makes chips for notebooks, said its shipments to Japan were weak. Other chip stocks followed suit, including Intel, Applied Materials, Vitesse Semiconductors and chip equipment testing manufacturer Teradyne.
The focus of the market is beginning to turn more to the Fed, with its policy setting meeting next week. Wall Street is said to be counting on a sixth cut for the year.
JOHN MANLEY, SALOMON SMITH BARNEY: Slowly but surely, the Fed's presence is beginning to be felt. I think one has to realize when one invests, at this point in time, the Fed is on your side.
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PILGRIM: Another sign today of consumer weakness, Gap apparel company says it's reviewing 10,000 jobs, or up to 7 percent of its work force to revive sagging profits. And more warnings coming after the closing bell. Internet security company Semantics, saying sales and profits will fall short of estimates. And that stock's down more than $16 in after-hours trading -- Lou?
DOBBS: Suggesting an interesting day of trading, perhaps, for tomorrow. Kitty, thank you. Kitty Pilgrim from the New York Exchange.
One winning sector today for sure: tobacco stocks, which surged for a second straight day. That, after Philip Morris became the first tobacco company to say it would hold settlement talks with the Justice Department. RJ Reynolds and Lorillard then said they, too, are willing to talk.
Allan Dodds Frank has the report.
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ALLAN DODDS FRANK, CNN CORRESPONDENT (voice-over): Big tobacco says it is willing to listen. That's the response from Philip Morris and RJ Reynolds, the nation's two largest tobacco companies, to Attorney General John Ashcroft's Tuesday invitation to open litigation settlement talks.
MARC COHEN, GOLDMAN SACHS: Usually, if you have a strong lawsuit, you don't reach out for a settlement. So it's not clear that the industry has to give anything up at the outset here.
FRANK: The Bush administration has been lukewarm, at best, about pursing the multibillion-dollar racketeering suit, brought initially by the Clinton administration.
DAVID ADELMAN, MORGAN STANLEY: I think the industry is in a very good position to push for an extremely good bargain from their perspective, remembering also, that Congress has not shown a high level of interest in even funding this case.
FRANK: Despite a federal judge's rejection of part of the case already, tobacco critics believe the attorney general's move hurts.
WILLIAM KORR, CAMPAIGN FOR TOBACCO FREE KIDS: Of course there will be, in a case of this magnitude, at some point discussions about settlement. But the government has not yet discovered the last five years of documents that are held by the tobacco companies. And until they do, we believe they should not be engaged in settlement talks.
FRANK: There's no indication yet when talks might start, but when they do, the companies are expected to take a hard line. They are not likely to agree to any big money settlement when they believe they can still win in court.
Allan Dodds Frank, CNN Financial News, New York.
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DOBBS: Taking a look at tobacco stocks today: Philip Morris, RJ Reynolds, Loews all gained more than $1 a share. In the past two sessions, the S&P tobacco index surging more than 6 percent.
A major deal today from cable legend John Malone. His Liberty Media is buying German cable operations from Deutsche Telecom, the terms of the deal not disclosed, but some analysts are estimating the deal valued at nearly $5 billion. The operations cover more than 10 million homes in six regions of Germany.
A dramatic battle has erupted over control of Computer Associates. Texas billionaire Sam Wyly has launched a proxy fight to oust the leadership of the software company. CA is led by another billionaire, founder Charles Wang, and his protege, Sanjay Kumar. The company has been sharply criticized in recent years for its accounting practices, its treatment of employees and executive compensation, and the stock is now down more than 50 percent from its all-time high.
Fred Katayama has the report.
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FRED KATAYAMA, CNN CORRESPONDENT (voice-over): Shareholders often dismiss proxy fights, but analysts say they may be receptive to Texas billionaire Sam Wyly's battle to control Computer Associates. Many institutional investors criticize CA's accounting and executive compensation practices. Wyly will take the company to task in a full- page newspaper ad tomorrow.
He said in a statement: "By any performance measure -- stock price, financial growth or customer satisfaction ... Computer Associates has clearly underperformed against its peer companies." Some analysts say CA is vulnerable because its directors come up for reelection at once this summer. Wyly, who owns a $55 million stake in CA, wants to replace CA's board with people like Broadcast.com founder Mark Cuban, and Former Commodity Futures Trading Commission Chairman Wendy Gramm. And he plans to split CA into four businesses and consider spinning off or divesting them to boost shareholder value.
But other analysts say the odds are against him.
MELISSA EISENSTAT, CIBC WORLD MARKETS: We think it's less than 50-50 right now, in terms of the information that we know. While what they are trying to do is certainly commendable, I think, No. 1, I think CA management is trying to address the problems right now.
FRANK: One big hurdle: CA contends its largest shareholder, investor Walter Haefner, with a 21 percent stake, backs its current management team. And analysts say Wyly isn't all that different from CA's chairman, Charles Wang.
JIM MENDELSON, WIT SOUNDVIEW: Oddly enough, in many ways, very similar to the CA management, in being somebody who's very much capable of marching to the beat of his own drummer, which has always been a trait that's characteristic of CA. So I don't know that it's, by definition, a case that he would automatically be better.
FRANK: Over the last decade, CA's stock has outperformed that of Wyly's former company, Sterling Software nearly two to one.
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FRANK: If anything, analysts say the proxy battle is good for CA's beleaguered shareholders, Wyly included. It could serve as a wake-up call to CA's board and executives, and lead to faster changes. The shareholders meet August 29 -- Lou?
DOBBS: Fred, thank you very much.
Sam Wyly today blasted CA's leadership, fostering, he says, what he called a "pervasive culture of fear and intimidation" that has hurt CA employees and investors. He joins us now to talk about his fight for CA.
Sam, good to have you with us.
This is quite a move to make. You just -- you just sold your company in March of last year. Have things really changed so much in the past 15 months?
SAM WYLY, RANGER CAPITAL GROUP: Well, things have gotten worst. I have a $55 million investment in the company now, and year ago, it was a $110 million investment, and that's no fun. This company has underperformed horribly under Sanjay Kumar's management for the last five years. The average software index has done 170 percent, while they produced minus 11 percent. In the last five years of our running Sterling Software, we produced a 400 percent return to the Sterling Software shareholders.
DOBBS: Sam, we were just handed this from Computer Associates, a statement from the company. I'd just like to read it to our viewers and to you. I'm not going to read all of it. I'm going to read the top line and what I think is the essential element here:
"We strongly disagree with Mr. Wyly's charges and deeply resent his outrageous and self-serving assertions regarding our customers and employees. Our board and management have done well for CA's shareholders, and we intend to strongly oppose Mr. Wyly's proposal. Despite the generally difficult environment in our industry, the company's stock is up nearly 72 percent over the past six months."
WYLY: The company's just -- the stock's up, just rebounding from a low. Their performance has been terrible. Their performance is -- compared to the top 10 software companies, they're in bottom 10th by any index. And the reason is, that they have abused their customers and they have abused their employees. We did a customer survey that shows that 46 percent of the customers would leave if they could. And -- the customers believe that the big reason for the poor service performance is the top management of Computer Associates.
DOBBS: At this juncture, a proxy fight to take control, the next meeting you'll engage, put in your own slate, put forward your own slate for election to the shareholders. It's sort of stunning that CA does not have a staggered board election, which gives you an opening and an opportunity.
WYLY: Right. Because all of the board are up for election, we have proposed a powerful, strong new board, composed of software entrepreneurs, many of whom have merged their products into computer associates, and other outstanding people. For instance, one thing they've done is phony accounting. The chairman of our audit committee will be Cece Smith, who was the chairman of the board of the Federal Reserve in Dallas. We'll have honest accounting.
DOBBS: Now, there are cynics who say that you're doing this perhaps out of a desire to take over CA, but also knowing that it might be very good for the investors of CA.
WYLY: Well, of course we think it will be good for investors. The contest will be good for the investors, and I think the stock will be better off because we're having this contest. But we're going to win. I've done three of these, Lou, and I've won them all. Sure, I would love to have Walter Haefner's vote. He's the biggest stockholder...
DOBBS: We should point out, he has 21 percent of the company.
WYLY: He has 21 percent of the company, but if we get the overwhelming support of all the other investors -- and we're going to go to all of them, from the biggest to the smallest -- then we think we'll win.
DOBBS: All right. Sam Wyly, good to have you with us here.
WYLY: Thank you, Lou.
DOBBS: Thank you.
Well, we invited Chief Executive Officer Sanjay Kumar to appear here with us on MONEYLINE. The company said that Mr. Kumar is not available, however he has said he will be happy to be with us on the program as soon as his schedule permits.
Coming up next: President Bush vows to veto a Democratic version of the patients' bill of rights. Defense Secretary Donald Rumsfeld warns that the military is underfunded and overused. I'll be talking with former Defense Secretary William Cohen.
And recent college graduates, once the targets of intense recruiting, now facing a far more difficult environment.
Also...
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UNIDENTIFIED MALE: I don't feel as much banged around as some boot camps I've been at.
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DOBBS: One day, $10,000. New CEOs learning lessons in their corporate trenches.
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DOBBS: Well, on Capitol Hill today, the Senate began debating a Democratic version of a patients' bill of rights. President Bush threatened to veto the bill. Mr. Bush said in a statement that it would increase health care costs by allowing patients to seek unlimited damages from their HMOs in court.
Defense Secretary Donald Rumsfeld today told Congress he wants to drop America's broad military strategy, but isn't sure how to replace it. Rumsfeld today testified before the House and the Senate Armed Services Committee. He said that in a changing world, the Pentagon's strategy of staying ready to fight two major wars at once is out of date.
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DONALD RUMSFELD, U.S. DEFENSE SECRETARY: The threat to the U.S. has increased. Terrorism and attacks, including the use of nuclear, chemical and biological weapons, is clearly a growing concern. Cyber attacks are increasing. The threat of ballistic missile attacks is increasing. Allied and friendly nations are also at increased risk. A new defense strategy would need to take this growing and increasingly complex threat into account.
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DOBBS: Rumsfeld says he's consulting with the joint chiefs of staff and top military commanders, of course, to create a new strategy. The Defense secretary said he'll present it to the president by the end of the summer.
Well, for another view on scrapping the two-war standard, we're joined by Donald Rumsfeld's predecessor in the post, William Cohen, who served as Defense secretary under President Clinton. Today, he is chairman and CEO of the Cohen Group, a strategic consulting firm. Bill, good to have you with us.
WILLIAM COHEN, FORMER DEFENSE SECRETARY: Lou, it's great to be here.
DOBBS: The secretary's view on a two-war strategy and scrapping it, do you concur in that judgment?
COHEN: Well, we have to be careful in the words we use. We never had a two-war strategy, we had a two-war, quote, "capability," and that was the capability to be able to handle two nearly simultaneous wars.
The problem was that as we have downsized our military, as we have cut back on military spending over the years, that second capability of dealing with a second contingency became more problematic. Namely, we could still win the two wars, but the second one would be at a higher cost in lives, and also take longer, and that's the problem we have today.
So, whether we're talking about a two-war capability or a one-war capability, we have to be careful of the terms we use. But we have to have a capability to carry out a multiple number of missions nearly simultaneously.
DOBBS: And what the defense secretary and also the chairman of the joint chief of staff are saying, basically, the military is overused and underfunded. You've heard those words before when you were in office as well. What's the solution, more money?
COHEN: Well, we certainly need more money. If we're going to modernize our force, if we're going to have a transformation of where we are today, where we have to be for tomorrow, we have to have more funds to pay for the equipment, and the technology, and the people. And we have to put the people on top of that pyramid of our values, because without them, it doesn't matter how good our technology is, if we don't have good people to operate it.
So, we have to put more money into readiness, quality of life, people issues, and also technology at the same time. More money, and also we need to limit as best we can the commitments that we make. We have to be more judicious and selective in terms of where we commit our forces in the first instance.
DOBBS: In another type of confrontation, this one over trade, Senator J. Rockefeller yesterday threatening, basically, retaliation against the European Union, should the EU block the GE-Honeywell merger. Do you think it's going to come to that? COHEN: Well, we'll have to wait and see what the EU is finally going to decide. It appears that the deal is dead, for all purposes. But it could be revived, depending upon how the EU decides to look at it finally. But I think that we have to be careful that we don't by our rhetoric precipitate a trade war.
DOBBS: Well, the rhetoric is certainly heating up.
COHEN: It is, and there's also on the other side, the EU can look at the United States and say, now that the Bush administration is looking at possibly investigating the steel industry and looking whether we're going to be strict in the future, so we have to be careful and see if we can work our way through this. No one is interested in a trade war.
DOBBS: Bill, as always, good to have you with us. Bill Cohen.
Still ahead here: continuing our look at "CEOs on the Edge." Tonight, we look at John Loose, the chief executive at Corning, trying to keep his company on track after a steep decline in fortune.
But up next: a solar spectacle for all the world to see. The best seats were in Africa and at home.
And we're trying to answer a burning question back here on earth: just how space and time will eventually conclude.
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DOBBS: A brilliant show in the skies above Southern Africa today, millions experiencing the first total solar eclipse of the new millennium. This is, after all, the summer solstice, and the eclipse began early this morning on the coast of Angola, and then swept across the continent to Madagascar. Tens of thousands of tourists poured into Zambia and Zimbabwe, which offered the very best viewing points. And in some places, the moon blocked the sun for as long as four minutes.
Well now, scientists are suggesting that they know how the universe began, and after having some considerable trouble with the question of how it might end, they think they have it figured out.
After decades of probing the cosmos, we are closer than ever to explaining what happens at the other end of space and time. The latest edition of "TIME" Magazine explores this question in its cover story: "How Will the Universe End?"
Michael Lemonick is the author of the story, and joins us now from Princeton, New Jersey.
Good to have you with us, Michael.
MICHAEL LEMONICK, "TIME" MAGAZINE: A pleasure to be here.
This question and the research that are going into it, astrophysicists have been trying to come up with the answer. What's the reason for the breakthrough now?
LEMONICK: It's really an accumulation of information gathered from large telescopes on earth and in space. It's like a convergence of evidence; there's no one piece of evidence that says it for sure.
But the most exciting and confirming piece of evidence is the discovery or the confirmation just a couple months ago that instead of slowing down, as it expands, the universe is expanding, you'd expect it will start slowing down as gravity works its way on the galaxies. Instead of slowing down, the universe appears to be speeding up, it's expanding faster and faster all the time.
DOBBS: What is wonderful, as you point out in your article, you don't put it quite this way, Michael, but Albert Einstein was finally wrong about something: he was wrong about being wrong?
LEMONICK: Right. Einstein actually came up with the idea that there might be a force in space that counteracted gravity, and tended to push things apart, rather than drawing them together. Put he only put that in his equations of general relativity, to make the books balanced and he didn't like doing it.
DOBBS: The cosmological constant, without getting this too arcane, the fact is, there's stuff out there that no one had really thought about except mathematically. And it is anti-matter, it is dark. Energy dark, dark matter, what is it?
LEMONICK: What we've learned now is that the ordinary matter that makes up human beings and planets and stars, everything we can see, amounts to only 5 percent of what's in the universe.
Another 35 -- 30 to 35 percent -- is some kind of mysterious dark matter. We don't know what its nature is. And the rest is this mysterious dark energy, a kind of anti-gravity force, that's making galaxies fly apart faster and faster all the time.
DOBBS: Well, Michael, a terrific article, provoking our thoughts and leading us to what may be, may be the conclusion to the cosmological question of not only where did it begin, but how it will end?
Thank you very much. Michael Lemonick, "TIME" Magazine.
LEMONICK: Thank you.
DOBBS : Coming up next, find out how the weakening job market is shaking up this year's college graduates.
Also, we'll take you to the training program where CEOs get the business. We'll take you to CEO boot camp.
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DOBBS : A plea for help tonight from the family of missing intern Chandra Levy. Levy's parents and their attorney Billy Martin today met with police in Washington D.C. Martin asked for help in finding Chandra from those who know her, including California Democrat Gary Condit.
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BILLY MARTIN, ATTORNEY FOR LEVY FAMILY: Congressman Condit has acknowledged he's a friend of Chandra Levy. We asked the Congressman and all other friends who have any information regarding either Chandra's emotional state prior to her disappearance, the existence of in depth of any relationships and any information from her friends. So we would ask Congressman Condit and anybody else with information to please come forward.
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DOBBS: In a statement released tonight, Condit said: "If there is any new information I can provide, I will do so without hesitation."
Congressman Condit denies he was romantically involved with Chandra Levy.
Praise tonight from President Bush for the Justice Department, as 14 are indicted for the Saudi Arabian Khobar Towers bombing. The 1996 truck bomb attack on a military housing complex in Saudi Arabia left more than 350 dead, including 19 U.S. airmen.
A federal grand jury today indicted thirteen Saudis and one Lebanese for the strike. The indictment alleges that the suspects received help and inspiration from Iranian officials. It does not however name any Iranians directly.
Still ahead: As Corning grows fragile, we'll tell you how CEO John Loose is fighting for a comeback.
Plus, the management course where the chief executive officers are the ones taking the orders. We'll take you to CEO boot camp.
Also ahead, a complete wrap-up of today's Wall Street results. They're more pleasant than usual.
And we'll ask money manager Todd Eberhard where the smart investors are heading.
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DOBBS : A positive day on Wall Street. The Nasdaq closing higher for the third day in a row. Shares of Symantec plunging in after hours trading. The Internet security company cut its first quarter forecast, blaming a slowdown in tech spending.
And President Bush, threatening to veto a Democratic version of the patients' bill of rights. The Senate today began debating that legislation.
Now let's take a closer look at the market. Stocks advanced for the second straight day. Investors ignored a steady stream of earnings preannouncements, or as some people call them, warnings. As one money manager put it, you get hit in the head with a two-by-four enough and it stops hurting.
Instead, today, investors focused on results from Morgan Stanley. Its profits dropped sharply in the quarter, but no matter. They beat estimates, and that was enough for many investors. The Dow Jones Industrials gaining as much as 109 points during the session. The Dow closed up 68 points.
The Nasdaq advanced 27 points. A strong session for Cisco. And on the Big Board advancers beat decliners by a 4 to 3 margin. Also helping the markets today, the latest read on jobless claims which came in at 400,000. That is the lowest level in five weeks, it is also the second week of declines, but many economists say the number is still high enough to encourage the Fed to cut rates to when it meets next week
And the latest reading on trade, the trade deficit narrowed in April as both imports and exports fell.
Topping tonight's MONEYLINE movers, Exodus Communications losing a third of its price, more than 185 million shares changed hands. After the bell yesterday, the Web hosting company warned of a steeper than expected second quarter loss. Verity down more than $4.l5 a share. The maker of Internet software warning first quarter earnings and revenue will be short of expectations.
Boeing capped its third straight day of losses, falling another $3, on renewed concerns that aircraft orders may weaken. Despite recent losses, shares of Boeing have soared more than 45 percent this year.
The proposed $42 billion merger between General Electric and Honeywell continues to stir controversy. Commerce Secretary Don Evans today talked at a congressional hearing on trade. He said the European Union's divestiture demands were very, very troubling. That follows comments from Senator Jay Rockefeller yesterday, who threatened retaliation against the European Union if the GE deal is killed.
But when we caught up with G.E.'s incoming CEO Jeffrey Immelt today, he continued to downplay any hope for that merger.
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JEFFERY IMMELT, PRESIDENT, GENERAL ELECTRIC: I think we've worked very constructively with the commission. We remained there today, but we remained very far apartment.
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DOBBS: The European Union has until July 12 to formally approve or reject the merger.
Despite all the merger controversy, shares of G.E. are higher in the last week. And my guest says that's proof the market hopes the merger with Honeywell does not go through. Joining me now, Todd Eberhard. He's president of Eberhard Investment Associates. Todd, good to have you with us.
TODD EBERHARD, EBERHARD INVESTMENT ASSOCIATES: Thank you, good to be here.
DOBBS: You mean the market, unlike the rest of the world doesn't want G.E.-Honeywell to happen?
EBERHARD: I think the market is probably looking at it at a point that, when you first heard the news announced that it might happen, it dropped down. G.E. fell on that news. It's now come back on a basis of I think both the present chairman and the future, saying that it's not going to happen.
DOBBS: Yes, but (UNINTELLIGIBLE) is some influence on that as well?
EBERHARD: Definitely, to some degree. But I think the individual investor as well looking at it as a positive.
DOBBS: This market today, Morgan Stanley, beats expectations although they have earnings 36 percent below a year ago. What's that all about?
EBERHARD: It's interesting. Certainly trading volume is a major play here. There's not a lot of stuff going on in the street, certainly for a number of months. And that's going to effect all Wall Street and definitely their profits. The interesting thing is, when any company comes out these days and announces they've met or exceed expectations, typically, they're flying up very fast, and the opposite's happening.
DOBBS: We had the same thing happen today with Winnebago. It's sales down as well and it's year-ago earnings also higher than this report.
EBERHARD: It's the analyst pick these days. If they beat, it looks good.
DOBBS: In terms of this market, do you think we have seen the lows for the year?
EBERHARD: I think we have. I think it's still going to be in a very tight trading range for a while until either the Fed cuts start to take a place and get some numbers back into this game, and that has not happened. Or earnings, in a more consistent fashion, are going to come out and exceed or meet the expectations. And we're not seeing that. We're seeing that very much in a piecemeal fashion.
DOBBS: When are we going to see it?
EBERHARD: Well, that's the trick, right? We're looking probably three to six months out. Everybody started with a second quarter they were expecting, then it went to the third, now we're doing the fourth and possibly the first quarter.
We think it's toward the end of the fourth quarter of this year, we're going to start to see turnaround and earnings expectations beaten, which will start to get these markets breaking out in the upside of the trading range.
DOBBS: And in terms of that occurrence here, what do you buy?
EBERHARD: Well, we're not buying the stocks that everybody's talking about, which are the tech stocks that have been pounded so dramatically. Though they will probably turn around, I don't they're going to lead us out of the market.
What will lead us out are going to be the large cap Blue Chips, the guys that have held relatively well in this whole market turnaround. So we're talking about AIG, American International Group, IBM which today was downgraded and went up. A perfect example. We looked at Johnson & Johnson. Just split two-for-one, very good pipeline, strong company.
We're Looking at General Electric, which you talked about in the (UNINTELLIGIBLE) which I think is going to be a great stock regardless. And the one that's sort of fun is one called professional detailing. They do not paint cars, they...
(LAUGHTER)
DOBBS: What do they do?
EBERHARD: They're out there marketing pharmaceutical products to doctors and so forth. It's a great company.
DOBBS: Anything you want to tell us you're selling?
EBERHARD: I'm not in Congress now, having to do that. But we're not holding companies like Lucent at this point, we are selling.
DOBBS: Todd, good to have you with us.
EBERHARD: Good to be here. Thank you.
DOBBS: Thanks.
Coming up on MONEYLINE as Corning marks a key anniversary, we'll tell you how CEO John Loose is working on a comeback for his company.
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DOBBS: Zions Bancorp tonight suspended its chief financial officer after he was arrested. Thirty-nine-year-old Dale Gibbons was taken into custody. Police telling MONEYLINE he's charged with possession of a controlled substance and child abuse.
Zions Chief Executive Officer saying tonight he was "stunned and saddened by the allegations." The bank, which is based in Salt Lake City, owns and operates six commercial banks with more than 350 offices, most of them in the West. Zion Bank Corp is expected to be added to the S&P 500 index after the close of trading tomorrow.
Continuing our "CEOs on the Edge" coverage, tonight: Corning. The fiber optics company, one the major beneficiaries of billions of dollars of spending by telecom companies, but that spending of course has dried up, and Corning's stock is suffering. Today Corning met with its shareholders at headquarters in Upstate New York, and as Bruce Francis reports tonight, Corning was celebrating its rich history while many investors are worried about its future.
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BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): Before Hewlett and Packard entered the garage, before IBM sold a single typewriter, even before AT&T connected a single call, there was Corning. Corning Glass Works became known to millions of consumers for its Pyrex cookware, which it sold off three years ago.
Now known as Corning, the company has gone from the frying to the fire - fiber optics and equipment, a hot spot of the new economy that is cooling faster than anyone predicted. Corning is celebrating its 150th anniversary today.
JOHN LOOSE, CEO, CORNING: In the Fortune 500 there are only 16 companies that are, in fact 150 years or older, and there are only 10 of them that are older than we are. So this is clearly a special day for us.
FRANCIS: But Corning shareholders are anything but elated. As telecom companies laid mile after mile of in optical fiber, Corning's sales soared, and so did the stock as investors anticipated limitless demand for high-bandwidth data lines.
But actual demand for all that fiber hasn't materialized, and Corning's customers have been cutting back on spending. As a result, Corning has slashed expectations, laid off 4,300 employees and watched its stock fall almost 90 percent from its all-time high in September. After warnings from competitor JDS Uniphase and customer Nortel, investors are braced for even more bad news.
CEO Loose wouldn't comment about the current quarter, but said that investors are too focused on one segment of the market: large nationwide networks, or long-haul.
LOOSE: The long-haul market represents just 10 to 20 percent of the overall telecommunications business. But when you add it all up, we're actually selling more fiber this year than we did last year.
FRANCIS: But analysts note that Corning is benefiting from a huge backlog of unfilled orders that were booked when fiber prices were higher. The orders have slowed down and prices are falling. So much of Corning's troubles are still ahead.
STEVEN FOX, MERRILL LYNCH: In terms of the earnings per share, yes, the worst is yet to come. The Q2 results will probably prove to be higher than what you'll see in Q3, Q4, and Q1 of next year.
FRANCIS: Prospects like that are scaring away portfolio managers like Peter Doyle.
PETER DOYLE, KINETICS NEW PARADIGM FUND: If I would to inherit Corning in a portfolio today, I would actually say that I would sell it, only because it represents more speculation than investment.
FRANCIS: But even bears like Doyle, or earnings skeptics like Merrill's Fox stop short of blaming management. CEO John Loose has held that title since January, after 14 years in senior management at the company. Shareholders can only hope there's more to celebrate at Loose's retirement than in his first year.
Bruce Francis, CNN Financial News, New York.
(END VIDEOTAPE)
DOBBS: In other corporate news tonight: the weakening economy surfacing in very different parts of corporate America. NBC, bowing to a tough advertising market, lowering its ad rates for the fall television season. It is the first network to do so. That could force competitors to follow suit.
Disney, slashing prices at its new California Adventure theme park for local residents. Disney is cutting adult tickets to $33 from $43, and they will allow children in free. Attendance has been running below projected forecasts since the park opened in February.
And U.S. hotels, feeling the squeeze of corporate cost cutting. For the first time in a decade, the hotel industry expected to post a year-over-year decline in revenues.
From corporate America to campus: The class of 2001 is learning the importance of timing. They're experiencing an economic slowdown, first hand. Lisa Leiter reports from Chicago.
(BEGIN VIDEOTAPE)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: A Yale degree is worth a lot...
LISA LEITER, CNN CORRESPONDENT (voice-over): But it can't always outweigh a weak economy. Brokerage firm Robertson Stephens rescinded Clay Armistead's job offer just weeks before President Bush spoke at his Yale graduation.
CLAY ARMISTEAD, YALE UNIVERSITY GRADUATE: The market for all sorts of jobs: technology, finance, everything was great. And I did think it was going to have to cool down. I did not know it was going to come to a crashing halt like it did.
LEITER: Neither did Northwestern graduate Leah Lucas. JDS Uniphase reneged on her offer in April. She has yet to find another job.
LEAH LUCAS, NORTHWESTERN UNIV. GRADUATE: I had my heart set on going out to California where I have a lot of family. It was going to be a great opportunity, an exciting new career. LEITER: Companies blindsided by the economy's abrupt downturn are scaling back hiring plans, especially for college graduates. Some companies, like Cisco and Intel are actually paying new hires not to come to work at all. Others offered stipends for those willing to start at a later date. But University of Chicago MBA Craig Clawson will not be paid at all for the next 10 months. This week, his start date at a major consulting firm was delayed from October to next April.
CRAIG CLAWSON, UNIV. OF CHICAGO GRADUATE: I was notified by e- mail. The first reaction was just frustration, mostly because I had made so many plans.
A recent survey showed that less than 4 percent of employers actually revoked offers to college graduates. But experts say it's a growing problem.
MARTIN NEMKO, CAREER CONSULTANT: I think it may be a little more severe than it's even been identified to be. I think it will speed up for at least six to nine months, especially in high tech.
LEITER: For now, recent grads are remarkably optimistic about their job prospects. Laura (sic) Lucas offers this advice for those still on the job hunt...
LEAH LUCAS: I think I would ask for the signing bonus right up front.
(LAUGHTER)
LEITER: Lisa Leiter, CNN Financial News, Chicago.
(END VIDEOTAPE)
DOBBS: Next on MONEYLINE, a sector for retiring baby boomers. We're going RV-ing right after the break.
(COMMERCIAL BREAK)
DOBBS: It's the first day of summer, so we thought it appropriate to look at mobile homes and RV's in tonight's "Sectors Report." Winnebago, one of the biggest makers of motor homes, today handily beat Wall Street earnings estimates, even though its profits and sales declined from a year ago. The company's CEO says he's positive about the future. Shares of Winnebago, jumping more than $3 a share. It's at a new 52-week high, in fact.
Monaco and National RV also hitting new highs today.
Still ahead, a crash course in success. We'll tell you about a program that shows executives who have risen to the top how to stay there.
(COMMERCIAL BREAK)
DOBBS: Developments tonight in the Ford-Firestone dispute. House Commerce Committee Chairman Billy Tauzin says Ford has agreed to test the tires its using to replace 13 million Firestone tires. The committee has also turned over safety information to Ford about the safety of those replacement tires. And attorneys for Firestone said today they have subpoenaed tire warranty claims data from Goodyear. Firestone wants the information to help bolster its claim that the Ford Explorer design contributed to tire-related rollovers.
Now a course that toughens up CEO's for the boardroom, sending them off to boot camp. CEO Academy is a new program from the M&A group, an organization for chief executives. Members pay $10,000 for a day of lectures, classes and the kind of wisdom that usually only comes with experience.
Peter Viles has the story.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: Let's show them -- halt!
PETER VILES, CNN CORRESPONDENT (voice-over): It's been called CEO boot camp, if such a thing can exist inside a Park Avenue mansion.
UNIDENTIFIED MALE: I don't feel as much banged around as at some boot camps I've been at.
VILES: It's more like a finishing school run by the M&A group, and a very expensive one -- $10,000 to spend one day learning from veteran executives like Larry Bossidy.
KEVIN SHARER, CEO, AMGEN: Larry started out by saying that in the last 15 to 18 months, 38 or 200 top CEOs have left under other than normal circumstances, so it's a high mortality job.
VILES: Once he had their attention, Bossidy preached the importance of time management.
LAWRENCE BOSSIDY, FORMER CEO, ALLIED SIGNAL: I tell them to set their own agenda, and spend time on the things which are priorities for you and for the business. Don't let somebody else set the agenda.
VILES: Joseph Nacchio of Qwest had similar advice.
JOSEPH NACCHIO, CEO, QWEST COMMUNICATIONS: If you say, I'm available who wants to talk to me or have me work to something. I mean, you'll never get to everything. The hardest thing is to decide what you're not going to work on. Because there's lot of important stuff you're not going to work on.
VILES: Another lesson: get to know the people who control your fate, your board of directors.
FRANCIS SCRICCIO, CEO, ARROW ELECTRONICS: I made a note that I've got to discipline myself to basically have more frequent interactions with my board members. I made a note and said, gee, you know what? I'm going to try and call at least one board member every week. VILES (on camera): The old wisdom is that it's lonely at the top, and lately it's awfully hard to stay there. CEOs are now on call 24 hours a day in a global economy that changes all the time. Investors are demanding and impatient, competition is cut-throat, but most of the people at this school tell us the job they have is actually a lot of fun.
UNIDENTIFIED MALE: Not many people get a chance to do these kind of jobs. It's worth every single minute of it.
RICHARD SYRON, CEO, THERMAL ELECTRON: If you look at the questions that come to you as a challenge, not just as a problem -- and you like to solve puzzles, and think, how do we work our way through this? -- then it's a lot of fun.
VILES: It's also fun because of the perks like having renowned portrait artist Richard Avedon take your class pictures.
Peter Viles, CNN Financial News, New York.
(END VIDEOTAPE)
DOBBS: "Forbes" out with its list of the world's richest people, The magazine posting for the 7th year in a row: Microsoft's Bill Gates at the top spot. Among the Americans, Warren Buffett, Paul Allen, Larry Ellison, and Jim Walton.
Taking a look at that list it's fair to say three easiest ways to make the top 20 is certainly via Microsoft founder, part of a technology concern, or a Wal-Mart family member.
Up next, my take and yours and "Ahead of the Curve."
(COMMERCIAL BREAK)
DOBBS: Keep an eye on shares of several stocks tomorrow. The Gap saying it will begin reviewing positions in order to cut its headquarters staff by as much as 7 percent. Symantec lowering fiscal first quarter estimates on weak sales. And MGM saying it will miss second quarter and full year 2001 estimates due to weaker than expected profits from theatrical releases.
Now your comments. One viewer had a follow-up question on a story we ran last evening about companies cutting back on their 401(k) contributions, asking:
"What happens to retired workers' pay checks or medical benefits when big companies are bought by other companies, or otherwise become insolvent? Lucent Technologies must have thousands of former employees on their retirement roll. How are their benefits maintained under these or similar circumstances?"
Well Lucent tells us the company has not made any changes in pension or medical benefits, and that it has the liquidity needed to execute a turnaround. And another viewer had a comment about an interview we ran last evening, talking with Morgan Stanley Internet analyst Jeff Camp, who is amongst the very rare. He admitted he made a bad call on Exodus Communications in this instance. The viewer saying:
"I see no value in MONEYLINE showing an interview with Jeff Camp. Was this the first and only time this analyst made a wrong recommendation? He really made it look like that."
You may have a point. We took a look at a few of the stocks Jeff covers. Camp has an outperform rating in Digex. That stock is down 88 percent from its 52-week high. Camp also has an outperform on Intermap Network; that stock is down 96 percent from its 52-week high.
So perhaps Camp, like many of his analysts peers, has a few bad calls on their record, but unlike them, he's admitted a mistake.
Let us hear from you at moneyline@cnn.com.
Some of today's market enthusiasm was inspired by investors impressed with Morgan Stanley's earnings, which beat expectations by three cents a share. Those investors perhaps should remind themselves that a P/E ratio is not a price to expectation ratio, but rather price to earnings. Morgan Stanley's earnings were actually 36 percent lower than a year ago, but did beat expectations by 4 percent. Does it really make sense for investors to rally that stock by $5.50 a share on that performance? Only perhaps if you think P/E ratio mean price to expectations.
That's MONEYLINE for this Thursday evening. I'm Lou Dobbs. Good night from New York. "CROSSFIRE" is next.
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