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Lou Dobbs Moneyline

Dow Advances 46.72 to 10,299.40; Nasdaq Climbs 22.55 to 2,026.71; Comcast Makes Offer for AT&T's Cable Business

Aired July 09, 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 on MONEYLINE, AT&T on the defense. Comcast makes a hostile bid for AT&T's cable business, a $58 billion unsolicited bid. He was once the most powerful man in telecom, now embattled AT&T boss Michael Armstrong is fighting to hold onto his cable assets. And one of the most powerful men in media -- tonight, Sumner Redstone of Viacom.

An up day on Wall Street, the Nasdaq posts its first gain of the third quarter. And a $1 billion debacle for Webvan: The online grocer goes offline.

ANNOUNCER: From the heart of New York City, this is LOU DOBBS MONEYLINE. Here now, Lou Dobbs.

DOBBS: Good evening. We begin tonight with a major move in the cable business. Comcast, which provides the cable service for more than 8 million homes, making a pitch for 14 million more subscribers. And to make that pitch, Comcast bidding $58 billion to buy the cable assets of AT&T. Bruce Francis has the report.

(BEGIN VIDEOTAPE)

BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): Trying to avert AT&T's plan to spin-off its cable TV assets, Comcast is making a complex 11th-hour bid. Comcast is going for assets it lost out on back in 1999 when Media One accepted a bid from rival AT&T. In a "Dear Mike" letter to CEO C. Michael Armstrong, Comcast president Brian Roberts is offering slightly more in the merged company for every AT&T share. AT&T shareholders would keep traditional phone service business, an asset Comcast says is worth $70 billion.

Overall, Comcast says that its bid is worth more than $4,000 per AT&T subscriber. But some analysts say that's below what other cable systems trade for right now. If the deal is completed, AT&T shareholders will control 51 percent of the company.

FRED MORAN, JEFFRIES: I think AT&T's board should give this some serious consideration, maybe push for a little bit of sweetener and then go forward with this merger with Comcast.

FRANCIS: The big appeal to investors is cost savings. Comcast says that it runs its own businesses at a higher operating margin than AT&T does and that AT&T shareholders can expect savings of about $1 1/4 billion or more.

LINDA BANNISTER, BANC OF AMERICA CAPITAL MANAGEMENT: This management team has a proven track record in integrating acquisitions and being successful in reaching their targets. So at this point, we're willing to give them the benefit of the doubt.

FRANCIS: But some analysts wonder whether any track record can prepare Comcast for the task of remaking AT&T broadband.

TOM WOLZIEN, SANFORD C. BERNSTEIN: A question for Comcast shareholders is, are they able to raise the margins fast enough to really create value? Or do they get bogged because the AT&T systems are spread all over the country and the Comcast systems are basically on the East Coast?

(END VIDEOTAPE)

FRANCIS: AT&T says that it isn't interested in a sale, but it will evaluate the proposal. And if the spin-off goes off as currently planned, AT&T broadband might not be part of a tax-free merger for two years. Comcast apparently doesn't want to wait again -- Lou.

DOBBS: Bruce, thanks. Bruce Francis.

The Comcast bid also poses a serious challenge to the plans of AT&T's CEO, Michael Armstrong. Steve Young now reports on what those changes could mean for beleaguered shareholders.

(BEGIN VIDEOTAPE)

STEVE YOUNG, CNN CORRESPONDENT (voice-over): Michael Armstrong said it wasn't just financial re-engineering to chop AT&T into four pieces: wireless, business, broadband and consumer, because the units would cooperate and enhance each other. Now Armstrong may be hard- pressed to convince his board to turn down the unsolicited bid for broadband, because Comcast has been getting more value out of its cable assets than AT&T has been able to achieve, but a sale to Comcast would short-circuit Armstrong's strategy.

GARY JACOBI, DEUTSCHE BANC ALEX BROWN: Clearly, if broadband winds up being run by Comcast, it will be harder for him to achieve that scale, that scope and those synergies that were so vital to his plan.

YOUNG: AT&T says it was approached by Comcast, not the other way around, that there wasn't a negotiation but what AT&T calls a conversation, and that it didn't reach an impasse over so-called social issues, namely, would Michael Armstrong or Comcast run the merged broadband company? Many analysts believe a sale of AT&T's cable assets is now all but inevitable.

SCOTT CLELAND, CEO & FOUNDER, THE PRECURSOR GROUP: No company has destroyed more cable value than AT&T in a short amount of time. And those properties can and will be more valuable in the future.

YOUNG: While some say it would be a humiliation if his grand plan gets unhinged, others say Armstrong could sell broadband and still save face.

TIM HORAN, CIBC WORLD MARKETS: In many ways, AT&T could use this to their advantage if they negotiate open access onto Comcast systems. They'd have a larger footprint for AT&T's long distance customers to have a bundled product together.

(END VIDEOTAPE)

YOUNG: AT&T will have to decide what to do about the Comcast bid in the next three or four weeks. Otherwise it would have to delay its planned shareholder vote on a broadband IPO now set for the September, October time frame. Lou?

DOBBS: Steve, thank you. Steve Young.

Well, checking Wall Street reaction to the hostile bid, AT&T shares up nearly $2, Comcast shares down almost $3.

Now for more on Comcast's bid for AT&T's cable business, the president of Comcast, Brian Roberts, joins us. Brian, good to have you with us.

BRIAN ROBERTS, PRESIDENT, COMCAST: Thank you, Lou.

DOBBS: This is a -- at the very least, a rare and unique approach, a hostile bid for a company's assets with which you've been in negotiation. Why do it?

ROBERTS: Well, I think you have to go back to the beginning of how this got started. Last October, the board of directors of AT&T said they were going to break AT&T up into the four parts just as your report said. And so, one of those parts, broadband was going to be therefore no longer strategically essential to AT&T. And they're going to give it to shareholders. Shortly after that, we approached AT&T and said if we could put the companies together right away, there was a tax-efficient way to do a spin-off with a merger with Comcast, a very unique structure. And in doing so, we would have...

DOBBS: In a stocks exchange?

ROBERTS: In a stock exchange where we give AT&T 51 percent, not the other way around.

DOBBS: Right.

ROBERTS: Of the combined company shares. And so, we took a while until we got started having serious discussions. We did have those discussions, but what would come -- as a result of this proposal today, is that you'd have one company with 22 million customers be the leader in the broadband industry and at the same time, their shareholders get a huge premium and an acceleration of their own plan.

DOBBS: Brian, another way of looking at it is AT&T would get just about half what it spent two years ago?

ROBERTS: I don't think the math is really right. At this point they have 18 percent operating margins. Comcast has 42 percent.

DOBBS: Right.

ROBERTS: So about less than half. We're talking about $4,000 per subscriber. Our stock is trading today right around that level. So here they're getting the full benefit, as if they've become a Comcast shareholder, even though customers only produce half their results that ours do.

And the reason we can do that is we're very confident under our management team that there's such duplication and that we know how to run cable. That's all we do, that we can get those margins up very quickly.

DOBBS: How quickly you can you double margins for the AT&T business?

ROBERTS: Well what we said today to the investors was we're not even going to -- every other acquisition we're able to get there within two years. For this deal since it is so much larger, we're saying we're only going to get halfway there in three years. And if we do that, the deal is accretive to the Comcast shareholders in year 2. So this way we could pay a 60 percent or more premium to AT&T stockholders. It worked, Lou, as of Friday's close to be 75 percent of value of all AT&T.

DOBBS: So you're suggesting that there's been a market adjustment in valuations over the course of the last 2 years as well?

ROBERTS: I think in the last two years, but also, they sold a bunch of systems, a bunch of assets. There's still the Time Warner stake. When you add it up, it's still about what they paid. They paid about $4,000 to get into the cable business. So I think it's been a great deal.

DOBBS: Now much has been made from the standpoint AT&T, that these were not negotiations, that they were discussions. You just used the word discussion. Were they negotiations?

ROBERTS: I think they were serious meetings. It's almost irrelevant at this point. We approached them.

DOBBS: Right.

ROBERTS: We said here's a structure that can be -- I think at this point when you say I'm going to spin-off a division to my shareholders and it was going to go into a tracking stock...

DOBBS: Right.

ROBERTS: ... and then a spin-off a year later. And then it couldn't do a merger probably for a couple years after that, you're talking three, four years. We said we can get you there right now, this directly to your shareholders tax-free and it's very compelling.

DOBBS: And it was reported today that one of the major sticking points, if you will, in these discussion, negotiations, or whatever, were social issues: i.e., a role for Michael Armstrong?

ROBERTS: Well, I've said I'm not going to talk about because we do want to get a deal done. We're not going to negotiate publicly that way.

DOBBS: Right. Would he have a place in the resulting combination?

ROBERTS: Well, I think at this point, he's chairman of the AT&T. I don't know what he wants to do, but I think what's more important is something that I'm very proud of, Comcast. And you know my dad, we've been in business for 29 years. We have a 24 percent compounded return on our stock for 29 straight years. The AT&T shareholders can get into the Comcast stock, own half the company and at the same time unlock the value.

DOBBS: One last question in terms of the structure of the deal, in cable, the industry has been looking with great greed at cluster approaches and strategies. You're looking at a system in which there is a great diffusion of cable systems. This doesn't concern you?

ROBERTS: Well, we've actually done some very good clusterings and swaps. So eight of the ten largest cities in America, the leading cable company will be this merge company. By the way, there's no regulatory issue, because the combined company would have 22 million customers which is below any of the federal limits. And of the top 20 cities in the country: 85 percent of the this company would have its cable systems in the top 20 market. So it's very powerful story. We hope their board will do the right thing and get maximum value for shareholders.

DOBBS: Brian Roberts, CEO of Comcast. Thanks for being with us. Coming up next on MONEYLINE, the Nasdaq breaks a four day losing streak, but can Wall Street keep up the momentum? We'll be bringing that to you. And an online grocer -- well, it turns out it's a business model that doesn't deliver. And, one of the most powerful men in the media business, Viacom's boss Sumner Redstone joins me: the network ratings battle, the slump in TV advertising, and the future of media. Stay with us.

(COMMERCIAL BREAK)

DOBBS: A positive day on Wall Street, the Nasdaq posting its first gains of third quarter, breaking a four day losing streak. But today's gains for the Nasdaq, and the Dow, failed to make up for what was a miserable week surrounding the July 4th holiday.

Jennifer Westhoven has the report from the New York Exchange.

(BEGIN VIDEOTAPE)

JENNIFER WESTHOVEN, CNN CORRESPONDENT (voice-over): It was a rally in the end, but not much of one, and not enough to wash away the bad taste left after last week's heavy sell-off on Wall Street.

LARRY WACHTEL, PRUDENTIAL SECURITIES: You had a pretty severe correction on Friday. It isn't likely that, with nothing happening over the weekend, that we suddenly move into Monday and automatically go roaring higher. I think we're striving for mediocrity today.

WESTHOVEN: Tech stocks led the bounce back. The Nasdaq finished up 22, or 1.1 percent, at 2026. Bulls still worry those gains don't amount to much compared to last week's losses. For the year so far, the Nasdaq is still down nearly 19 percent. Some of the same firms that made blistering headlines last week came back today. One exception though, IBM. Despite Big Blue's loss, the Dow Jones Industrial average rose slightly, adding 46 points to 10,299.

AT&T was the Dow's top gainer. It received a surprise $58 billion bid for its broadband business. Oil drillers sold off sharply. Oil futures, traded in New York, fell more than 2 percent as the United Nations said Iraq will start supplying more oil to world markets. And a Merrill analyst forecast less drilling for natural gas, which would mean lower profits. and traders say the market won't be able to turn higher until it gets more evidence of better profits or economic data.

NICK ANGILLETTA, SALOMON SMITH BARNEY: Now we need the economy to start showing signs of improvement. And I think people are really looking toward the Fed cuts that have been put in place this year to actually start taking effect. And it's going to be the earnings.

WESTHOVEN: With no economic data on-deck until late this week, that means this week's earnings could have a bigger market impact. Motorola, Yahoo! and Juniper are among the 250 companies expected to hand in earnings reports, according to First Call.

(END VIDEOTAPE)

WESTHOVEN: And the deluge is really going to start next week when 2500 companies are due to hand in their quarterly results. Traders right now say that with things looking grim, the market might get into one of those moods where it starts to make fast moves higher on even small signs of strength -- Lou.

DOBBS: Even small signs of strength would be welcome in most quarters, Jennifer, I suspect. Jennifer Westhoven from the New York Exchange. More corporate news after the bell. Xerox, Inc., Corning each announcing they're ending dividend payments. And Corning had other ominous news. The fiber optics pioneer warning it will shut down three of it plants. It will cut 1,000 jobs, and take a $5 billion charge related to recent acquisitions against it quarterly earnings. Corning also saying its second half earnings will disappoint, blaming an abrupt downturn in telecom. In after hours trading, Corning shares are down 73 cents. Xerox are off 43 cents as well.

It's not just the slowing economy weighing on corporate profits these days, the dollar's been gaining strength. And that rise is having an effect on U.S. exporters, as you might expect.

Peter Viles takes a look at the dollar effect.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): Whether they sell diapers in Denmark or Explorers in Alabama, American businesses are feeling the squeeze of the strong dollar. At home, it opens the door to imports, Hondas, Toyotas. Abroad, it cheapens the value of sales tallied in other currencies. Conglomerate 3M is the latest to feel the pinch, saying the dollar cut seven cents a share off second quarter earnings, or $27 million. Gillette says the dollar knocked 5 percent off first quarter sales, $88 million. Procter & Gamble says the cost was 3 percent of sales, $285 million. Increasingly, analysts believe the dollar's strength is hurting the entire U.S. economy.

TIM FOX, STANDARD CHARTERED BANK: Clearly if the dollar was to continue strong and strengthen further, U.S. multinationals are going to feel more of a pinch, and that is going to maybe extend the period in which this weakness is going to last.

VILES: The National Association of Manufacturers estimates the dollar will knock a full percentage point off economic growth this year. That's roughly $100 billion worth of activity. Still, the Bush administration is continuing the strong dollar policy charted by the Clinton administration. And Wall Street generally approves.

RICHARD BERNER, NATIONAL ASSOCIATION FOR BUSINESS ECONOMICS: But the fact of the matter is that, as ex-treasury secretary Bob Rubin used to say, you know, the strong dollar served us well. And for consumers it's been a benefit. A strong dollar holds down inflation and inflation expectations.

VILES: It is a growing concern, however, in Europe, where the euro is shrinking and the rhetoric rising. A European central bank official said Friday, quote: "The exchange rate is ridiculous. We are now so competitive, the U.S. cannot compete in steel, in automotives, in planes."

(END VIDEOTAPE)

VILES: The strong dollar is a headache, but it is also a compliment, reflecting the confidence international investors have in the future of the U.S. economy. In the words of one analyst, the dollar is so strong because the U.S. right now enjoys "a confidence surplus" -- Lou.

DOBBS: And that's a lot better than a deficit.

VILES: It sure is.

DOBBS: Pete, thanks. Peter Viles. Next on MONEYLINE, the latest dot-com bust. We'll be telling you about a concept that attracted hundreds of millions of dollars in investment and failed to deliver.

Also, property damage, hundreds left homeless tonight, the latest on the deadly floods swamping West Virginia.

(COMMERCIAL BREAK)

DOBBS: Online grocer Webvan, the latest dot-com to collapse, launched two years ago. It promised to change the way people buy their groceries, but it failed to upstage traditional supermarkets and never made any money. It's filing for bankruptcy. And Webvan says its concept was of its time. Now like many other dot-coms, its time has run out.

Susan Lisovicz with the "Tech Watch."

(BEGIN VIDEOTAPE)

SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): Webvan employees had already suffered through cutbacks, closings, and a nearly worthless stock price, but they still expressed shock that a business that said it would revolutionize the supermarket industry was instead shutting down for good.

JIM AUST, FORMER WEBVAN EMPLOYEE: Management just came in and said we just have bad news to tell you, that we no longer have the funds to continue forward.

LISOVICZ: But Webvan had money. Over its brief two-year lifespan, Webvan boasted $1.2 billion in venture capital. The problem: It lost money on every order.

ROB RUBIN, FORRESTER RESEARCH: They needed a traditional grocery store to become a partner. The problem that Webvan had, their principal problems were that their cost of goods, the amount of money they paid to buy the products that they were reselling, was significantly higher than traditional grocers.

KEN CASSAR, JUPITER RESEARCH: The fixed costs are so high. When you look at a business like books, you can ship from a national distribution center whereas with groceries, because half of the typical order is perishable, you really have to build an infrastructure on a local level.

LISOVICZ: Meanwhile, Webvan's stock, which hit a high of $25.44 in 1999, collapsed, closing at 5 cents on Friday. The company had announced a rare 25 to 1 reverse stock split last month in a desperate bid to save it from being delisted on the Nasdaq.

BUD GREBEY, SPOKESPERSON, WEBVAN: We've operated in a very difficult environment. In a different environment, we believe our business would have proved successful.

(END VIDEOTAPE)

LISOVICZ: Analysts say there are a few requirements a dot-com needs to achieve success. One is a product or service that everyone wants. The other is to price the product so the business makes a profit.

In the end, some critics say it was Webvan's own business model, not a challenging business environment, to blame for the failure of Webvan -- Lou.

DOBBS: I suspect those criteria would apply to any business, would they not?

LISOVICZ: It's old -- basic old economy fundamentals at work.

DOBBS: Susan, thanks very much. Susan Lisovicz.

Coming up next, West Virginia assessing the damage after a weekend of devastating floods. And a warning from the Treasury Department. You should know about a scam linked to the upcoming tax refunds.

(COMMERCIAL BREAK)

DOBBS: The Treasury Department tonight is investigating a scam aimed at taxpayers. A department spokesman says people in four states are offering to calculate refunds that taxpayers should expect from the Internal Revenue Service. They're charging $15. Those refunds are the result of the $1.35 trillion tax reform package signed last month by President Bush, but the Treasury Department says you'll find out the size of your check in advance, for free.

The IRS will be sending letters this month telling taxpayers whether they'll receive refunds, and if they do, are set to receive them, they'll tell them just how big the checks are.

Well, officials in West Virginia are assessing the damage from a new round of heavy flooding. As much as 5 inches of rain falling on the southern part of the state over the weekend. The flooding left at least one person dead, sweeping away roads and bridges. The flooding wrecked homes, and forced hundreds of people to evacuate. The flooding also washed out railways vital to West Virginia's coal industry. West Virginia is still recovering from flood damage suffered back in May and June.

General Motors signing a sponsorship deal with China's Olympic committee. That agreement makes General Motors the committee's first- ever exclusive automotive sponsor. It calls for GM to provide cash and vehicles over the four-year life of the deal. GM will also sponsor Beijing's 2008 Olympics bidding committee.

Well, still ahead, a critical deadline passes in California's power dispute. We'll be taking a look at what lies ahead in the fight for power and payment. Also, more changes in the television news business right here at CNN. I'll be talking with former "Time" magazine managing editor Walter Isaacson about his new job.

And a business legend on the future of his media empire.

ANNOUNCER: Up next, Lou is joined by Viacom CEO Sumner Redstone.

(COMMERCIAL BREAK)

DOBBS: In tonight's headlines, a bold move by Comcast. The cable operator making a hostile bid of $58 billion in stock and debt for AT&T's cable business. And it was a positive day on Wall Street. Both the Dow and Nasdaq finishing higher after last week's losses. The Nasdaq, in fact, scoring its first gain of the third quarter.

And Webvan, folding its operations, firing its employees and filing for bankruptcy: the online grocer blaming a decline in orders and difficulty in raising more cash.

Well, more on the market: Tech stocks today leading the way today. Strength in software and networking issues helped the Nasdaq finish higher for the first time in five sessions. Several analyst upgrades ahead of the opening bell helped out. Also, Comcast's bid for AT&T's cable business set a positive tone. AT&T a huge winner on the Dow today along with Johnson & Johnson and Caterpillar. The Dow finished the day 46 points higher.

The Nasdaq managed to stay above 2,000 mark, despite touching that level early in the session. The index gaining more than 1 percent. On the big board, advancing issues beating out decliners by only a modest margin.

And topping tonight's "MONEYLINE Movers": Qualcomm, up more than $3.50 a share. The maker of chips for cellular phones formed a joint venture with South Korea's SK Telecom. They'll be developing products using Qualcomm's high-speed technology. SG Cowen upgraded the stock as well.

And children's place losing more than $2.25 a share. The retailer reporting disappointing June sales, the company also warning its second quarter loss may be more than double Wall Street expectations.

Online real estate company Homestore.com down more than $4 a share. Merrill Lynch's Henry Blodget downgraded the stock, saying the company trades at a premium to eBay and other Internets. Homestore.com has fallen 44 percent from its 52-week high.

CNN parent AOL Time Warner is the largest media company in the world, but if Sumner Redstone has his way, that may not be a permanent positioning. The chairman and CEO of Viacom says sooner or later all of that will change because of what his company owns. Among Viacom's holdings: CBS, Paramount, MTV and Blockbuster. CBS has had amazing success with its reality-based series "Survivor," but along with the rest of the broadcast world, Viacom faces a challenging environment in the advertising market. Joining me now to talk about his company, his outlook on the industry and a brand-new book is Sumner Redstone.

Sumner, good to have you with us.

SUMNER REDSTONE, CHAIRMAN & CEO, VIACOM: Nice to be here.

DOBBS: Now, you don't really want to overtake all of us good people here at AOL Time Warner.

REDSTONE: Absolutely. My -- I have an obsessive drive to be No. 1, not that I always am, and an obsessive drive to see Viacom as No. 1, which it already is in quality, of course.

DOBBS: In -- well...

REDSTONE: You might disagree with that.

(LAUGHTER)

REDSTONE: Friends at Time Warner, but it is what it is.

DOBBS: I'm perfectly content to let the market decide, Sumner. How is that?

REDSTONE: Well, sooner or later the market will be efficient and it will decide that Viacom is No. 1.

(LAUGHTER)

DOBBS: Well, your new book "A Passion to Win" lays out an intriguing narrative, the story of your passion to win. And it's been a remarkable career. At this juncture, I don't think too many people are going to bet against you. What do you see as the biggest challenge facing Viacom right now?

REDSTONE: Well, we are living in a slowdown in the economy, and in the advertising environment. Although, if I may say it, I think Viacom has been hurt more by perception than reality, because Viacom is doing very well in this environment.

The bottom line is this: the environment will change. Every time the Fed has cut rates aggressively -- this is empirical evidence -- within one to 11 months thereafter, the market changes, advertising is a leading indicator. And when that happens, since Viacom is the advertising juggernaut, Viacom will be rewarded more than any other media company.

DOBBS: How soon do you think the advertising market changes?

REDSTONE: Well, it's hard to make predictions but I think there's a good chance at changes in the second half of this year.

DOBBS: Your company was talking about 20 percent even growth in April. If the -- with the qualifier that if advertising did not fall out of bed, where are with we in terms of your projections?

REDSTONE: All I can tell you is this. I think -- well, I'm not going to cry about our second quarter. You know I can't tell you what it's going to be, but I think you can expect from us, in any event, strong double-digit growth. And I don't think too many companies can say that in today's environment.

DOBBS: And in this difficult environment, as you put it, your company's growth -- are you going to continue to be aggressively acquisitive?

REDSTONE: First, you know, a lot of our growth is internal. You take CBS, for example. I know you talk about "Survivor," which is the No. 1 show in television.

DOBBS: Right.

REDSTONE: That's the tip of the iceberg. We have the two top dramas, "CSI" and "District." We have one of the two top new comedies, "Yes, Dear." We have "Everyone Loves Raymond," we'll have "Jag," we have "Becker." These are what advertisers buy. They buy content, you know? Content is king, as I had occasion to say. They buy content.

DOBBS: You built a pretty good career out of it.

REDSTONE: Well, thank you.

DOBBS: Content is king, advertising support is critical to your business as it is to nearly every -- certainly, to all the advertising supported media businesses. Do you see your company being able to drive more from internal growth, or from acquisition?

REDSTONE: Well, I think first, CBS is doing fine, as you know. It's been a total turnaround. It's the No. 1 viewed network, individuals, households. Our ratings are up, double-digits in every demographic.

DOBBS: Are you saying you don't need...

REDSTONE: Every other network is down. Paramount is No. 1 in profitability today. And I think what no other company has, and puts us in a class by ourselves is our overseas operations. We're in 340 million households with MTV. Nickelodeon is now in 300 million household all over the world. Nobody else is doing this. We're in a class by ourselves. Don't judge us by the industry.

DOBBS: Are you going to be buying any other companies? I'm going to take one more run at it.

REDSTONE: Well, you can take another run at it.

(LAUGHTER)

DOBBS: Obviously, I couldn't tell you if I had a target in mind. Although we have said that we recognize that the Hispanic market is extremely important. So you should think that we'll look at what we should look at. What you think we should look at, we look at.

DOBBS: You got it. Sumner, the issue of succession always -- you and I have been talking about this, I swear, for two decades.

REDSTONE: Yes.

DOBBS: A succession plan at Viacom?

REDSTONE: Listen, you are getting older every day.

(LAUGHTER)

REDSTONE: And I am getting younger every day.

DOBBS: I swear, Sumner, I may not sit here and argue with you.

REDSTONE: And all I want to say about that is I am not ready to go. I work harder than I ever have in my life. I love what I'm doing. I have a passion, not just for winning -- I have a passion for Viacom, and I'm not going anywhere.

I will say this. When the day comes, should it ever come, Viacom will not have to look outside its ranks for a successor. And that's different from a lot of other companies.

DOBBS: Mel Karmazin has got to be pleased to hear that.

REDSTONE: Well, he should be. He's a great operator.

DOBBS: All right. Sumner, thanks a lot. As always, Sumner Redstone.

REDSTONE: Thanks for having me here.

DOBBS: Coming up next here, a bumper year for coffee growers. It means lower prices for them.

And the CNN News Group has a new chief. We'll be talking to the new boss next.

(COMMERCIAL BREAK)

DOBBS: In today's corporate briefs: the world's No. 1 slot machine maker, International Game Technology, buying Anchor Gaming. That's a stock deal valued at 1.37 billion. The sale price also includes 430 million in debt.

Continental Airlines, planning to spin off the parent company that operates Continental Express. The proceeds of that IPO will be used to repay a portion of debt that the subsidiary owes.

And NCR, which makes computer systems for banks, retail stores, warning its second quarter earnings and revenue will be sharply below Wall Street expectations, the company citing a slowdown in its data warehousing unit.

And checking those stocks, International Gaming losing 8 cents a share. Anchor Gaming a little better than $3, and Continental up $1.52. NCR losing more than $6 a share.

Waste disposal company Safety-Kleen, restating its earnings for fiscal years '97 through '99. That wiped out about half a billion dollars. Also posting a fiscal 2000 loss of 833 million. The company, which filed for bankruptcy last year, cites accounting irregularities for the restatement. An investigation into the company's accounting practices began in March of last year. It also led to the firing of its three top executives. A spokesman for the company is not commenting on who is responsible for those accounting irregularities. Well, coffee prices have been on a sharp downward spiral. In London, coffee prices hitting the lowest levels in 30 years this month. In New York they've hit eight-year lows. But that doesn't necessarily mean lower prices at your local coffee shop or grocery store.

Kitty Pilgrim has the story.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): You wouldn't know it by standing at the latte counter or in the supermarket, but coffee prices are plunging. Not here -- but here. In New York trading, where the higher grade Arabica coffee is traded, the commodity has been steadily declining in price for nine years. And in London, where the cheaper quality coffee or Robusta coffee is traded, prices are the lowest in more than three decades.

The simple reason: the market is being flooded by lesser grade coffee from relatively new producers such as Vietnam, while the quality coffee producers like Colombia are using more of their land for more lucrative crops.

GEORGE WILLEKES, PRESIDENT, HOLLAND COFFEE: Brazil has always been the biggest. Columbia used to be No. 2 but Vietnam, in particularly, a country which didn't produce one million bags 10 years ago, currently produces about 30 million bags. So Vietnam is actually one of the reasons why the market is so much down.

PILGRIM: But what about demand? Aren't people drinking more coffee than ever? Worldwide consumption has been notching up 1 or 2 percent a year, not enough to drink up the oversupply. The coffee cartel, the Association of Coffee Producing Countries, is trying to withhold beans from the market, especially lower quality beans. But more than 52 countries now produce coffee around the world, so supply is not controllable.

The only other hope for higher prices is a frost in Brazil to kill some of the crop, but the last chance of that is in August.

ANDREW BUDERUS, A.G. EDWARDS: If we don't see a frost in Brazil, I think prices could take out the 1993 year lows.

PILGRIM (on camera): Some retailers have started to use the cheaper blend coffee in their mix. But those who still use the high end coffee say prices have not come down enough to pass the price breaks along to the consumer. That and $2.50 will get you a cup of coffee.

Kitty Pilgrim, CNN Financial News, New York.

(END VIDEOTAPE)

DOBBS: The parent of this network, AOL Time Warner, today announcing Walter Isaacson to be the new chairman and chief executive officer of CNN News Group. Isaacson serving as the editorial director of "TIME," and he succeeds Tom Johnson, who recently stepped down.

Walter Isaacson joins us now from our studios in Atlanta.

Congratulation, Walter, and welcome.

WALTER ISAACSON, INCOMING CEO, CNN NEWS GROUP: Thank you, Lou. It's good to be back talking to you again.

DOBBS: What do you see as your first challenge in this new role?

ISAACSON: Look, restoring the basic mission of CNN, making CNN proud of its basic mission, which is good journalism. I mean, at times people got a little bit distracted. I think CNN is really -- has a lot of momentum going for it now, a lot good has been happening, but we have to remember that good, honest journalism is at the core of what CNN does. And I look forward to putting on shows like your show, like a signature news show in the evenings that is really based on good reporting.

DOBBS: And your entire background, and a terrific background it is, in print and in new media. Do you have any qualms at all about this being television?

ISAACSON: Yes. I mean, to be honest with you, I'm a person who came up in print. But I believe the values of journalism: good reporting, you know, honest judgments, good assessments are what I'm trying to bring to CNN. And we've got a team in place with people like Phil Kent and Eason Jordan, and a real genius in television, Jamie Kellner, who runs the group, so that with that team, we'll have television, good journalism, good reporting. We'll be able to make a team that will make CNN really proud.

DOBBS: Let me ask you, Walter, all of that is good and it is actually music to the ears of every journalist who works in this organization, but also music their ears would be to see ratings rise. Your plans there?

ISAACSON: Look, in this new information age, I truly believe that people are hungry to be well-informed for sources they trust. They've got about 1,000 sources of information they go to. If we can be credible and honest in our judgments and reporting, and we're a place that they can trust to get interesting, informative information, you don't have to dumb it down to get good ratings. You don't have to try to be -- think that the viewer is stupid to get good ratings.

If you put on smart shows like your show and the Jeff Greenfield show and the show we're going to try to do with Aaron Brown, and Joie Chen's show -- I do think that smart people will go where there's good reporting, and the ratings are going to follow. And we'll get a good audience as well -- and ratings aren't the only thing we're looking for.

DOBBS: Can we also have fun, boss?

ISAACSON: Look, you know, we should have a lot more fun. And Lou, you've got a serious job and I know you've got a great sense of humor, and I like it when your humor and personality comes out.

DOBBS: Walter Isaacson, congratulations. Look forward to working with you, and for you.

ISAACSON: Thank you, Lou. Well, it'll be fun.

DOBBS: Still to come here on MONEYLINE: a federal judge steps in to settle a bitter dispute between California and power generators.

And up next, a safe haven for investors losing some appeal.

(COMMERCIAL BREAK)

DOBBS: Tonight's "Sectors Report": grocery stores. The country's third-biggest grocer, Safeway, today reporting profits in- line with expectations, but same-store sales falling short of analyst expectations. The slower-than-expected growth giving analysts reason to be cautious on the sector. Grocery store stocks have outperformed the broader market, by the way, as safe haven assets, but they're losing some momentum, in part, because of higher energy costs. Safeway, today, falling more than $3 a share. Also reducing its profit targets because of its on-line unit, Groceryworks.com.

Also trading lower today: Albertson's and Kroger. Pathmark and Supervalue posting small gains on the day.

Coming up next here: California demands billions of dollars in refunds from the power industry. We'll tell you what the judge said.

(COMMERCIAL BREAK)

DOBBS: The state of California and power generators today failed to reach an agreement on a settlement deadline for alleged overcharges for electricity. California's government is demanding nearly $9 billion in refunds. Now a federal judge who's been overseeing the talks is stepping in to try and end the dispute. Casey Wian has the report from Los Angeles.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): Federal judge Curtis Wagner delivered a sharp rebuke to California Governor Gray Davis and state power officials. They claim they were overcharged by $8.9 billion by power generators. The judge sided with power producers, declaring what they owe in refunds is probably less than a billion dollars, and less than what the state owes the companies for power purchases.

After two weeks of increasingly tense negotiation, power generators in the state failed to reach a settlement.

CURTIS WAGNER, ADMINISTRATIVE LAW JUDGE: I had settlement offers of $716.1 million. $716.1 million. Based on that, I said that there's hundreds of millions of dollars overcharges and nobody denies there are overcharges. And again, as I say, I don't think it's 8.9, because I haven't been shown that it was. WIAN: California's claims are based on Federal Energy Regulatory Commission, or FERC, rules that wholesale power costs must be fair and reasonable. Other states are seeking $6 billion in refunds.

MICHAEL KAHN, CALIFORNIA NEGOTIATOR: What's happened here is that we've had a ringing endorsement of the idea that there are refunds, that we will get back large amounts of money, and the governor and others have made absolutely clear that whatever money we don't get from FERC that we're entitled to, we'll use all available redress to get the rest of the money.

WIAN: California negotiators vow to continue their fight in state court. Judge Wagner also complicated matters by adding two dozen interested parties to the dispute, ranging from creditors of bankrupt Pacific Gas and Electric to Los Angeles County to Universal Studios, which is trying to get out of buying power from nearly bankrupt Southern California Edison.

(END VIDEOTAPE)

WIAN: The judge's proposal will be delivered to federal energy regulators for a final ruling. He called it a work in progress, perhaps leaving room for future settlement talks -- Lou?

DOBBS: Is there any likelihood, Casey, that the people in the state of California will know whether or not they'll get any money back any way soon?

WIAN: Absolutely not. The judge said that FERC will take probably 60 days to hold more hearings on this matter. Governor Davis said he will continue to pursue the matter in state courts. So this issue will be debated for quite some time.

DOBBS: It's kind of interesting to hear the specificity of the claims on both sides, including the offer of $716 million versus $8.9 billion. Where are they getting these numbers?

WIAN: Both sides would claim the other side are getting their numbers out of thin air. The state's numbers -- the disparity between the state's numbers and what the judge said they're owed, came as a result of time disputes and as a result of, how they calculated the price of natural gas. Several complicated issues. But the judge clearly said that the state overreached.

DOBBS: At this point, no rolling blackouts in California for this week?

WIAN: Keeping our fingers crossed. No signs of them so far.

DOBBS: Casey, thanks a lot. Casey Wian reporting from Los Angeles.

Coming up next, we'll take a look at your e-mails and "Ahead of the Curve."

(COMMERCIAL BREAK) DOBBS: Keep an eye on Corning stock, when trading resumes tomorrow. The fiber-optic stock down in after hours trading. The company warning it will take a 5 billion charge, close three of its plants, and layoff a thousand of its workers.

Watch for news tomorrow from Doubleclick and Dole foods. Both companies reporting, amongst the 250 companies scheduled to report this week.

Now for your comments. Carl Aven writes: "Our reps in D.C. receive a full pension upon completion in one term of office. Is that true?"

The short answer is no, it isn't. Representatives are entitled to a full pension only after the age of 62 with at least five years of service. Those who decide to retire earlier must have served longer in order to receive a full pension.

And another viewer commented on a story we brought you last week regarding new power plants. "Your report stated they were more efficient than previous plants. What is the actual efficiency of the new plants?"

The new natural gas plants, called "combined cycle plants," are between 50 percent and 60 percent efficient. The existing fleet of fossil plants are only about 30 percent efficient.

We love to hear from you. E-mail us at moneyline@cnn.com. And be sure to include your name and your location.

And that is MONEYLINE for this Monday evening. We thank you for being with us.

I'm Lou Dobbs. Good night from New York. "CROSSFIRE" is next.

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