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Lou Dobbs Moneyline
Lucent Loses Big and Announces More Layoffs
Aired July 24, 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, HOST: Tonight, fierce selling across Wall Street. The Dow Jones Industrials plunges nearly 200 points. The Nasdaq is at its lowest level of the summer. Lucent Technologies lost $25,000 each minute of the last quarter. Lucent reports a loss and announces another painful round of layoffs.
Tonight my guest is the man who had the worst day of his career: Lucent CEO Henry Schacht. I'll talk with Argentina's finance minister Domingo Cavallo on his country's economic crisis, and former Defense Secretary William Cohen on a possible breakthrough on arms control talks between the United States and Russia.
ANNOUNCER: From the heart of New York City, this is LOU DOBBS MONEYLINE. Here now, Lou Dobbs.
DOBBS: Good evening. In tonight's headlines: Stocks plummet across the board on Wall Street and the Nasdaq hits a three-month low. Lucent Technologies lost more than $3 billion last quarter. The company says as many as 20,000 more workers could lose their jobs. The world's second largest oil company out with profits. Chevron beat expectations while ExxonMobil, the largest, fell short.
We have complete coverage of what has been a busy day in business news, a day that stretched from Wall Street to Washington to corporate America. Let's go to our reporters with a quick look at what they're working on tonight -- Jennifer.
JENNIFER WESTHOVEN, CNN CORRESPONDENT: Lou, more than $200 billion in market value was wiped out today as stocks tumbled for a third session.
STEVE YOUNG, CNN CORRESPONDENT: And Lou, it was Lucent that had investors rushing for the exits after the company posted a massive quarterly loss.
TIM O'BRIEN, CNN CORRESPONDENT: And investors focused not just on Lucent, but also on the latest word from Alan Greenspan. I'll tell you what the Fed chairman said on Capitol Hill had to say.
DOBBS: All that is coming up on MONEYLINE.
We begin tonight on Wall Street where stocks plummeted across the board. The Dow today losing nearly 200 points with all but four of the Blue Chips ending the day lower. And the Nasdaq fell nearly 1.5 percent. It's at its lowest level since mid-April. Jennifer Westhoven reports form Wall Street.
(BEGIN VIDEOTAPE)
WESTHOVEN: A sell-off on Wall Street driving the major stock averages back to the low end of their trading ranges and raising fears about owning stocks.
PATRICK BOYLE, CREDIT SUISSE FIRST BOSTON: There's really nothing to feed off right now. Second quarter earnings have been horrible and no direction into the third quarter. Greenspan didn't say a lot today that he didn't say last week. So I think people need a little guidance right now. There's really no place to hide in the marketplace.
WESTHOVEN: Lucent started the selling with news of its poor bottom line and a second wave of restructuring. That knocked telecom- equipment stocks lower. Lucent was the most heavily traded stock on the big board.
The Dow dropped 183 to 10,241. Volume was light. But technical strategists said the losses are doing real damage by erasing a two- week reprieve after seven straight weeks of losses. And one of nation's biggest Blue Chip stocks, General Electric, fell to a three and a half month low.
It wasn't any better on the Nasdaq. It fell 29 to 1,959. It's lowest close since mid-April. Internet stocks fell sharply after Amazon's results and semiconductors rolled over after an early rally. Texas Instruments was one of the few bright spots after it forecast a bottom in the third quarter, helped by a rebound in wireless.
And stocks traditionally seen as safe havens in times of economic stress also failed. The Dow Jones utilities tumbled within a hair of making a new low for the past 52 weeks during the session.
JOSEPH BATTIPAGLIA, GRUNTAL & CO.: If you put it out over the last several months you'll see that the pattern is for the Dow to stay somewhat above 10,000 and for the Nasdaq to be plus or minus 100 on either side of 2,000 without making any material ground.
(END VIDEOTAPE)
WESTHOVEN: The broad question is: When the economy will show signs of a bottom? On Friday one part of the answer is coming in the form of the second quarter GDP report. Stock traders say they are bracing for a negative surprise especially with indexes right near some dangerously low levels -- Lou.
DOBBS: Jennifer, with the earnings reports we're seeing and the suggestion that we can see even weaker results in the third quarter, we're also getting another clear indication.
WESTHOVEN: That's right, and the two together really combining for a bad day for the markets today.
DOBBS: Jennifer, thanks. Jennifer Westhoven from the New York Stock Exchange.
Topping tonight's "MONEYLINE Movers," Qualcomm falling more than $3 a share. The wireless communications company abandoning plans to spin off its semiconductor business and replace its chief operating officer. Weyerhaeuser losing more than $2 a share. The forest and paper products company reporting a 43 percent decline in second quarter earnings, the company cited lower lumber prices and a strong dollar.
American Home Products dropping more than $2.5 a share, despite reporting a 16 percent increase in its second quarter profits. Wall Street focusing instead on concerns about poor performances of older products and declining sales of second-string drugs. For the year, American Home Products has outperformed its peers, down just 8 percent versus the 14 percent decline for the broader AMEX Pharmaceutical Index.
A look now at what traders are talking about and focusing on after today's brutal sell-off. Christine Romans joins us now from the New York Stock Exchange -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Hi, Lou. Lots of traders telling me it was a grueling session again on Wall Street. They say they're pretty tired. By the last three days, Dow down some 370 points in just three trading sessions alone, and that broader market index, the S&P 500 at a mid- April low, the lowest level since mid- April. So folks are a little bit concerned here overall.
Meantime, they are watching Lucent Technologies. Really concerned by the action over there, 39 million shares changing hands in that stock today. It was hard to find a trading desk that wasn't sending someone over see what that one looked like today. A lot of activity around it. In fact this stock closing at $6.43 or so, it has halved its price this year. It's down 87 percent over the past year. Remember when this was trading up in the 50s? It's trading down in the $6 handle now.
Some folks telling me that they think the stock chart looks eerie. One technician saying he wouldn't said touch it with a 10-foot pole, though some fundamental traders, Lou, are saying that maybe, just maybe, the worst is behind Lucent Technologies. It might be time for some bargaining hunting perhaps -- Lou.
DOBBS: Bargaining hunting indeed. What is the sense? Is there demand for the stock there?
ROMANS: Folks are telling me they feel like a lot of the activity is mutual fund, hedge fund, the big institutional players. They think that retail investors are staying away.
DOBBS: Retail investors staying away and the institutions getting out?
ROMANS: Today they were getting out to the tune of 18 percent on the share price, Lou.
DOBBS: Quite a day. Christine Romans, thanks.
As we've said, the most troubling story for investors today: A devastating quarter for Lucent Technologies. The telecom equipment maker posting a colossal $3.25 billion quarterly loss. Lucent posting a pro-forma loss of 1.2 billion, that is far larger than had been expected by most analysts. And it will lay off as many as 20,000 more people, taking a $9 billion charge in the quarter to carry out the restructuring. As one investor put it today, it's like watching a slow motion train wreck.
Steve Young has the report.
(BEGIN VIDEOTAPE)
YOUNG: Lucent highlighted the fact that its June quarter sales were flat compared with three months earlier in a tough environment, and that was supposed to be the good news. The rest left even some company insiders numb. Analysts had expected a 22 cent a share loss, but it was much worse, 35 cents. With various charges added, it amounted to a loss of 55 cents a share compared with a 9-cent profit a year ago.
Struggling to regain profitability by its next fiscal year, Lucent is forcing investors and employees to swallow more bitter medicine. The dividend is being eliminated. The company will take an enormous 7 to $9 billion restructuring charge in the fourth quarter. And as much as 25 percent of the remaining staff, 15 to 20,000 workers will be eliminated. Twenty-five to 30 percent of the current officers and executives will be laid off too.
PAUL SAGAWA, SANFORD C. BERNSTEIN: I say bravo. If you cut as many of the line workers as you have, you obviously have too many people in the upper management ranks, and bravo, these are highly paid people. Let's get more leverage in this business.
YOUNG: The flood of red ink and other negative news led Standard and Poor's to warn it might cut Lucent's credit rating, possibly more than one notch. And it already slid last month to junk status, making it tough for the company to raise cash.
DAVID HEGER, A.G. EDWARDS: It does raise questions about the cash situation. Our initial look at it appears the company will still have sufficient liquidity through the end of the year.
YOUNG: Lucent managed to raise nearly $3 billion by selling its fiber optic cable unit to Japan's Furukawa Electric and Corning, but had hoped it would bring $8 billion.
(END VIDEOTAPE)
YOUNG: The company refused to provide sales guidance for the current quarter, and some analysts got into a brawl with Lucent executives on the conference call. One company executive told MONEYLINE it was more hostile than any conference call handled by the previous CEO, Richard McGinn, and he's blamed for many of Lucent's current woes -- Lou. DOBBS: Steve, thank you very much.
Joining me now is the man who is leading Lucent Technologies, the man charged with the turnaround effort, the company's chairman and CEO, Henry Schacht.
Henry, good to have you with us.
HENRY SCHACHT, CEO, LUCENT TECHNOLOGIES: Thanks, Lou. Glad to be here.
DOBBS: I know that this has to be a terrible day for you. It's a terrible day for Lucent and its shareholders as well. Let's start with that conference call this morning. Hostility, analysts attacking you on the phone?
SCHACHT: I didn't see it that way. Let's talk about the news for today, because I think that's the real news. When you look at it, the first thing...
DOBBS: Well, Henry, let me ask you this.
SCHACHT: Sure, sure.
DOBBS: That conference call set a tone where those analysts didn't feel that it was appropriate for what they were saying that you were putting a positive spin on what were, by any standard, dismal results. You don't feel that way?
SCHACHT: No, I don't. If you look at it -- first thing you look at is you see what you've reported quite accurately, large loss, more layoffs, cut the dividend, and a question from Standard & Poor's. But let's look at the other side of it and what we think is an indication of continuing progress at Lucent.
Sales were flat when a good many of our competitors had sales off by large percentages, and we think that validates our ability to deal with the service providers who do spend money. We managed to reduce the loss somewhat, although we are as disappointed as anybody else by the 13 cents that we had to put in there for charges we didn't expect, for (UNINTELLIGIBLE) and others. Take the 13 cents away from the 35, you hit Wall Street's 22 cents precisely.
We got $2.5 billion in new orders in the last few weeks, which is larger, we think, than anyone else. On the restructuring, we're on target with a seven-point program, but we're clearly going to have to do more. And it's going to be very painful, but having established a track record that we can do what we said we could do, we're now on a path to profitability and positive cash flow.
DOBBS: Investors, Wall Street, all give you great credit for the restructuring and getting ahold of the expenses, some would say somewhat late in this situation. But the fact is the top line going forward, you've had declining revenue over the past year and a half. Give us some sense of what you can reasonably expect and they can reasonably expect from Lucent in this environment. SCHACHT: Yeah. I think if you look at our first quarter, we did 4.3 billion.
DOBBS: Right.
SCHACHT: We surprised everybody positively by getting to 5.9 in the second quarter, 36 percent increase in the face of a very tough market.
DOBBS: Right.
SCHACHT: I think when people stop and look at this quarter, they will also be positively impressed that we were able to hold our revenues. Didn't get the sequential improvement by 90 million that we had hoped to get, but we were very close. And I think that is very good performance in a market where our competitors are off major percentage points quarter to quarter. So I think that shows people that our strategy of pursuing the large service providers worldwide is holding up.
DOBBS: In this environment, looking out, can you give us a projection on revenue growth for the remainder of the year?
SCHACHT: No and no one else has either.
DOBBS: Right.
SCHACHT: And we don't have any particular wisdom. So what we have done, which I think sets us somewhat apart, is we have said our bottom line will improve, even though we're not able to give a top- line growth. And we have said for the first time that with phase two going in effect we will be profitable and cash positive next year.
So we have been able to say that we believe our earnings performance will improve, and we've given our investors and everyone else involved with the company, including customers for the first time, a stake in the ground that we will get to profitability and positive cash flow next year with a smaller company.
DOBBS: A much smaller company in point of fact. The 20,000 jobs, do you believe that that will be the cap on layoffs at Lucent?
SCHACHT: I've been around too long to say never about anything, but it is our expectation that we'll do it, because what we have done is we have sized ourselves that we do not need growth from the expected sales next year to get to profitability and break even. We do not -- we are not dependent upon a market recovery to reach this target.
DOBBS: And with the sale of the fiberoptic process to both Furukawa and Corning, your cash position obviously improves. In terms of retiring debt, are you, when all of this is accounted for, are you debt-free?
SCHACHT: Well, let's put it this way: We have one of the lowest debt-to-capital ratios of anybody in the industry. Our issue is cash flow. And so we have been saying we have access to sufficient liquidity to get us through the restructuring, including the new charts. And I think today's actions prove that.
We did $4 billion in the last four weeks, if you look at the securitization, the real estate, the fiber, and now the outsourcing. We ended the quarter $2.3 billion in cash to offset the line we're using. If you say it takes a billion dollars to run the company, we've got plenty to draw on, on the line, and we have $4 billion of cash coming up. So I think that puts proof to the statement that we have adequate liquidity.
DOBBS: But you're not specifically going to retire debt with those funds?
SCHACHT: No need to retire debt. We have a very low debt ratio.
DOBBS: And CEO, you've been pressed into service, just in case anyone does not realize, pressed into service in these difficult times, coming back to the company to lead it through this turnaround. Where do you stand in the search for a new CEO?
SCHACHT: The search continues. As we've said, there's nothing imminent. When we find the right person, we'll bring him or her in. Nobody's looking over their shoulder. We have work to do and we're on our way to doing it.
DOBBS: Terrific. Henry, thanks for being with us on what I know is a very difficult day for you.
SCHACHT: Thanks to both of you.
DOBBS: Henry Schacht, thanks.
SCHACHT: Thanks, Lou.
DOBBS: On Capitol Hill today, one senator delivered a broadside at Microsoft. Charles Schumer, the Democratic senator of New York, urged the government to block the fall release of Windows XP until Microsoft makes it more compatible with rival software applications.
(BEGIN VIDEO CLIP)
SEN. CHARLES SCHUMER (D), NEW YORK: Reluctantly I have come to the conclusion that Microsoft's release of Windows XP in its current form will likely be unfair, anti-competitive, and in the long run extraordinarily detrimental to many consumers.
(END VIDEO CLIP)
DOBBS: Microsoft shares down 77 cents today, down nearly 9 percent in less than a week.
Coming up in the next half hour of MONEYLINE, corporate America doling out another round of pink slips. We'll be checking whether job cuts are setting back projections for an economic rebound.
The Fed chairman is back on Capitol Hill, a diagnosis of what is ailing the economy.
Also, heading off Argentina's economic crisis before it spreads: We'll be hearing from the man charged with restoring Argentina's economy and global confidence in it.
(COMMERCIAL BREAK)
DOBBS: This development on a story we reported to you earlier this month, a victory for farmers in Oregon: Drought relief coming to those hard-hit farmers along the Klamath Basin in Oregon. Interior Secretary Gale Norton today announced a plan to release as much as 75,000 acre feet of water to help farmers use that water for their livestock and save some of their parched crops. As you may recall, the federal government had been saving that water to prevent a sucker fish that is on the endangered species list.
In Washington, Federal Reserve Chairman Alan Greenspan today headed back to Capitol Hill for round two of his semiannual testimony on monetary policy to Congress, the Fed chairman appearing before the Senate Banking Committee. He left the door wide open for another cut in interest rates should the economy fail to turn around. But Greenspan said consumers still seem to have confidence in the economy's resilience, and so does he.
Tim O'Brien reports from Washington.
(BEGIN VIDEOTAPE)
O'BRIEN (voice-over): Although the technology sector has been leading the economy's decline, Alan Greenspan was quite emphatic: High-tech could come back to lead the recovery.
ALAN GREENSPAN, CHAIRMAN, FEDERAL RESERVE: We are only part way through a major technological expansion, which has elevated the underlying growth of structural productivity.
O'BRIEN: So what went wrong? Greenspan traced one problem to a simple lesson of supply and demand.
GREENSPAN: We've seen demand doubling for certain newer technologies every year, but the supply goes up three or four times a year.
O'BRIEN: The resulting glut, said Greenspan, produced a steep decline in production. But, he said, that that should not obscure the fact that demand remains extraordinarily high.
GREENSPAN: When we are through this period, we will go back to a rate of increase which is significantly above where we were in the two decades prior to 1995.
O'BRIEN: But not the 50 percent growth of the late '90s. On another matter, Greenspan said he doubted the current round of tax rebates will have any significant impact on productivity, as the Bush administration had hoped. GREENSPAN: It's not clear to me that the tax cut, which is really a quite modest size, is having any material effect on the underlying productivity structure of the economy.
O'BRIEN: But he predicted the reductions in interest rates, which may not be over, would have an impact, slowly over time.
(END VIDEOTAPE)
O'BRIEN: The Fed chairman did not cut back statements he made here only last Wednesday that the economy appears to be bottoming out, since making those remarks, the Dow has fallen more than 400 points, the Nasdaq off around 100. Of course a lot of that, Lou, today.
DOBBS: Indeed. Any substantial difference that you detected in what the Fed chairman had to say, either in word or tone as opposed to when he appeared before the House Financial Services Committee?
O'BRIEN: He did seem quite confident that recovery is around the corner, that it will be slow and steady. The big question, of course, is where is that corner? Of that, he didn't say today and he didn't say last week.
DOBBS: And isn't likely to say. Tim, thanks very much. Tim O'Brien from Washington.
Now, for a look ahead at what we can expect on Wall Street tomorrow, Christine Romans at the New York Stock Exchange -- Christine.
ROMANS: Hi, there.
So far what I'm hearing tonight is a lot of folks are expecting there could be a bounce in store for the major indices, because they've been beaten down here. As I said here before, the Dow down 370 points, some folks telling me that judging from the way equities futures closed in Chicago, there might be a mild upside by it.
There are also some stocks moving ahead in after hours trade, but we'll be closely watching to see how Europeans market fair as well. The question is: Are there any big announcements out there -- Lou?
DOBBS: Christine, thanks, Christine Romans.
One of the topics on Chairman Greenspan's mind: Argentina, which is struggling to cope with a massive debt burden. Fears of a financial crisis rocked Argentine markets this month and the shock waves spread to its biggest trading partner, Brazil, as well as to Wall Street, where U.S. banks have billions of dollars in exposure. But the Argentine government seems to have eased the crisis with an austerity plan, now working its way through Congress.
Joining me now from Buenos Aires is finance minister Domingo Cavallo, the man charged with turning it all around.
Minister Cavallo, good to have you with us. DOMINGO CAVALLO, FINANCE MINISTER: How are you, Lou? I am very thankful for this opportunity.
DOBBS: Well, you have a very difficult challenge in front of you, as you well know, at this point in time, great skepticism that you will be able to pull off this turnaround without a deepening crisis in Argentina. What could you say to us that will bolster confidence?
CAVALLO: You know we have been reducing the fiscal deficit during last year, during the first semester of this year and now we have decided to run the federal government and also all the provinces with zero deficit. That means that every month we will adjust all the expenses of the government, including salaries and pensions, down to the level of tax revenues. And we will operate on that basis as not to increase our public debt any more.
And this we are doing not only at the federal level, but also in the main provinces, for example in the province of Buenos Aires, the government has decided to introduce a very significant cut in expending. So we will not borrow any more on a net basis. We will roll over our outstanding debt and we will comply with all our interest payments and we hope -- we hope that will recreate credit of the private sector of Argentina.
DOBBS: Again -- you're about to go into another auction in just about two weeks. The last action you've had interest rates of about 14 percent. There's great concern that you could lose the peg to the dollar. How confident are you that that auction will go well, that you'll be able to preserve that peg?
CAVALLO: We're working on a rolling our treasury bills through the pension funds and through the local banks, so we have announced there were -- will be no wholesale options in the next weeks. What we will do is to offer treasury bills to our public in Argentina and that will be enough for rolling the treasury bills that becomes due in the next few months.
All the rest of our principal that comes due, we have the resources to pay them. And we are not relying on the markets for additional borrowing for the public sector. So actually, those that are saying that Argentina would default or Argentina would be unable to obtain the peg, don't know the reality of my country.
You know the peg, that is the convertibility law, is functioning very well and we're committed to continue with it and there's no risk of devaluation in Argentina.
DOBBS: Mr. Minister, final question -- we have about 15 seconds -- do you believe that the IMF is being adequately supportive of Argentina? Do you believe the United States and the Bush administration is being adequately supportive of Argentina?
CAVALLO: Yes. We think that the international community has been supportive. What we do not understand is why some people are speaking of -- are talking about default and devaluation when none of the fact would help in any way to Argentina and to any other economy related to Argentina.
DOBBS: Domingo Cavallo, we thank you very much for being with us, sir.
CAVALLO: OK, thank you, Lou.
Coming up in the next half hour, red ink across Wall Street and the balance sheet. We'll check out today's sell-off in stock prices.
And a profits recession leads corporate America to slash more jobs. That may be costly.
Also, the recent Bush-Putin meeting showing Cold War adversaries turning strategic partners. We'll get a read on those relationships coming up next.
(COMMERCIAL BREAK)
DOBBS: In tonight's "MONEYLINE Headlines": a sell-off on Wall Street. Stock prices lower across the board, the Dow posting a triple-digit loss, the second day in a row that's happened.
And a major shakeup at Lucent Technologies, Lucent announcing massive layoffs, up to 20,000 more workers will be laid off, right after posting a wider-than-expected loss.
And a rough quarterly report from Dow component Honeywell, charges relating to the collapse of its GE deal taking a huge bite out of profits, net income tumbling more than 90 percent.
Also tonight, I'll be talking with fund manager Kevin Landis about whether hopes for a summer rally are evaporating. Lucent, only one of the companies to announce layoffs today. We'll take a look at how trouble for workers is cutting across corporate America.
No profit recession for top oil companies, who are reporting earnings today. They posted higher earnings from a year ago, of course, but their stocks fell anyway. We'll take a look at why.
And I'll be talking with Former Defense Secretary William Cohen about the next generation of arms control talks between the United States and Russia, President Bush talking tough.
But more now on Wall Street's troubling session. A broad-based sell-off, most sectors taking a beating. Small areas of strength included some computer hardware issues and gold stocks. Only four Dow components managed to finish higher. Among the hardest hit today: 3M, Alcoa and United Technologies, that index down nearly 1.5 percent on the session. The Nasdaq hitting its lowest level in more than three months, falling nearly 1.5 percent.
Chip stocks, telecom issues and software stocks taking the brunt of the selling. On the Big Board, decliners beat out advancers again, this time by a margin of better than two to one.
One the job front on Wall Street, late breaking news from the New York Stock Exchange that it too plans to eliminate jobs. Christine Romans at the New York Stock Exchange with the latest for us -- Christine.
ROMANS: Hi, Lou. It looks like there's going to be 150 jobs here at the Big Board. It's not just layoffs they're talking about at the New York Stock Exchange, they are happening here as well. The board here is going to vote on that proposal on August 2.
It looks as though 150 market reporters -- these are folks who wear blue jackets and stand on the trading floor and in the old days used to help monitor trades and check prices -- now it looks as though some of the technology here at the Big Board has superseded those 150 jobs, so we'll be talking about that more ahead, I'm sure.
Also tomorrow, look ahead to more earnings. Folks keep saying that earnings should continue to drive sentiment here. We have SBC Communication on deck, Budweiser. We are also going to have Compaq, Dupont and Norfolk Southern, so barring any kind of big surprises in their guidance, folks accept a little more of the same, except maybe a little bit bargaining hunting. I hear a lot of people tonight, Lou, talking about the fact that the market appears to be oversold after three sessions on the down side.
DOBBS: And, you know, when you hear that sort of talk, Christine, you just start to wonder about that kind of talk?
ROMANS: Absolutely. You want to be contrarian, but you don't want to know who you are being contrarian to, the folks who think it's going to rally, or the folks who think it should.
DOBBS: All of which makes markets. Christine, thanks. Christine Romans.
With both the Dow and the Nasdaq and S&P 500 and nearly every other index tumbling, it's difficult at best to know where to put your money. Kevin Landis of Firsthand Funds says he sticks with the buy and hold strategy, saying while it's painful now, the strategy has worked for him before. Kevin, good to see you.
KEVIN LANDIS, FIRSTHAND FUNDS: Thanks, good to be back.
DOBBS: You know, on a day like this, I mean, it is very tough to get excited about putting your money in almost any investment, is it?
LANDIS: It sure is. It's -- there's a real absence of good news, and I think the markets -- in bull markets, you get a little positive feedback every day or at least every week, and you get used to that, and you don't realize how much you miss it.
DOBBS: You want to look at those monthly statements, you want to click on those portfolios on your computer, and most people I've noticed are sort of avoiding their PCs, they are not opening their mail at the end of the month. What would you advise an investor to do here?
LANDIS: Well, I think the thing to do is to keep your eye on the horizon and ask yourself: two or three years from now, if I am at a barbecue or a cocktail party or just, you know, in an elevator with somebody, and I'm listening to stories about the stocks that people wish they had bought, what stocks would those be and how I make sure I have the best chance of owning those stocks right now, because I will probably look back on these years as a great entry point coin the stocks that became the big winners.
DOBBS: Well, let's take a look at your holdings, if we can have that screen up. We don't have it, so we can't do that, but let's talk about those holdings. Have you changed your portfolio in the midst of this runoff?
LANDIS: Not really. There are always opportunities to add certain positions. For example, we bought into Peoplesoft, which was a turnaround story last fall, so we've had it less than a year right now, which for us is a pretty short duration. Some of our other co- holdings, like AMCC, for example, we've held since they went public in late '97.
DOBBS: And how has it done? It's off what?
LANDIS: AMCC is a great story. That stock went public at $8. It split tree times, so our cost basis is $1. It's $17 stock now, but at its peak it was 100.
DOBBS: Well, I wasn't suggesting you haven't done well with it, I was just looking at what it's done since the year to date.
LANDIS: Right, no, but I mean, this is a great example of how you can make money over time in tech stocks, and you could also lose money trading them.
DOBBS: How about Cabletron? Up 40 percent year-to-date.
LANDIS: That's a great story, a turnaround story. Cabletron used to be one of those companies that was chasing Cisco and trying to be Cisco, and then they realized that instead what they should be doing is turning inward and looking at all the gems that they've had. They turned into a value play by turning themselves into a holding company, and one of their subsidiaries that they've spun out recently, Riverstone Networks, is really knocking the cover off of all, and there are several other subsidiaries that haven't been spun out yet that were equally helpful for them.
DOBBS: Nortel, Lucent, with its horrendous news today, Cisco Systems -- it's off year-to-date just about 50 percent. Are you still holding, looking for big things?
LANDIS: We're still holding Cisco -- and let me give you a little bit of the philosophy of this. If you imagine what a pie chart looks like for market share in two or three years, Cisco is still going to be there, but I think Lucent and perhaps Nortel, they'll just be little slivers, and the question now to figure out is: Who is going to pick up their share?
DOBBS: Would you buy here? LANDIS: I'd buy Cisco here, and what we're trying to do is pick up the smaller companies that have a chance to take the place of the Nortels and the Lucents behind Cisco.
DOBBS: Great. Kevin Landis, it is always good to have you with us.
LANDIS: Thank you, Lou.
DOBBS: Thanks.
Well, Lucent's announcement of major layoff took Wall Street analysts by surprise, but the telecom firm was not alone by any imagination --several other companies out with job cuts as well. Peter Viles tallies the losses.
(BEGIN VIDEOTAPE)
PETER VILES, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): The bad news is coming from all walks of corporate life, from Saks Fifth Avenue to Snap-on Tools. From Murray Hill, New Jersey to Dallas, Texas, job cuts by the thousands, as corporate America tries to slash its way out of a profit recession.
JOHN CHALLENGER, CHALLENGER, GRAY & CHRISTMAS: These layoffs are shocking, they're unprecedented in their size. We've seen more layoffs this year through June than we saw all of last year.
VILES: The biggest number from New Jersey, Lucent, to shed up to 20,000 more jobs. In Dallas, RF Monolithics will cut half its workforce, 250 jobs. In Tupelo, Mississippi, HON Industries will close its furniture plant, 300 jobs will go. Wisconsin-based Snap-on Tools will cut 560 jobs, Long Island-based Arrow Electronics, 1,000 jobs in the third quarter. Alabama-based Saks will shut its store in White Plains, New York, 100 jobs at risk.
Increasingly, economists are worried that job-cutting will slice into consumer confidence and send the economy deeper into its funk.
STEPHEN ROACH, MORGAN STANLEY: As more jobs are taken out of the U.S. economy, there is another down leg coming. So, it postpones the time where we can say a true bottom is at hand, it lengthens the process of economic adjustment that I still think will culminate in a recession.
VILES: Another fear: the drum beat of layoff news may blunt the impact of tax rebates and tax cuts.
LAKSHUMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: A lot of that will depend on consumers' job security. If they're feeling secure, they'll spend it. If they're feeling insecure, even if they have a job, they may move more to pay down debt or to save that money. So, it's all about perceptions.
(END VIDEOTAPE) VILES: And right. Now, the reality is that the job market is still fairly strong. Unemployment is just 4.5 percent, but the perception, which is perhaps more important, is that the job market is weakening, and weakening in a hurry -- Lou.
DOBBS: Well, it certainly weakened today. And Lawrence Lindsey talking about more unemployment, higher unemployment, rising as much as 5 percent. That's another million people laid-off.
VILES: It is, it is not just the people who lose their jobs, it is the people who hear about it, who know somebody who loses their jobs, changes their behavior at a time when the consumer really is the last leg of the economy that you could depend on.
DOBBS: Well, we'll just keep expressing our confidence. Pete, thanks. Peter Viles.
Those job cuts aren't limited to the United States. In fact, many American companies are laying off employees in their overseas offices as well. And U.S. companies aren't alone. Increasingly European firms are cutting back on staff, as the economic slowdown spreads across the Atlantic.
Jim Boulden reports from London.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN CORRESPONDENT (voice-over): A quarter of all job cuts by U.S. firms this year have come outside the United States, many falling on staff here in Europe.
SONJA GIBBS, NOMIURA INTERNATIONAL: U.S. companies are taking the bet that their hopes for profitability and economic recovery are better in the United States than in Europe.
BOULDEN: Motorola and Compaq together are cutting almost 4,000 jobs in Scotland. Charles Schwab is cutting 15 percent of its British workforce. Britain is now feeling the pinch after benefiting most from U.S. company expansion.
SIMON BLAKE, CONF. OF BRITISH INDUSTRY: The fact that we are quite exposed to changes in the international economy is ironically a testament to how successful we were to winning inward investment.
BOULDEN: Now, European companies are shedding U.S. jobs. Volvo trucks says almost 90 percent of their 3,000 jobs cuts are coming in North America. And British engineering firm Invensys, which said Tuesday it will cut 6,000 jobs this year, says 60 percent of the cuts already taken came from U.S. operations.
DOUGLAS MCWILLIAMS, CENTER FOR ECONOMIC AND BUSINESS REFERENCE: European companies have now invested very heavily in the States when they get in trouble, and we are going to see that in the next six months because they are about six months behind in the cycle. They are going to be laying off people in the States before they lay off people at home. BOULDEN: Especially if European growth falls below the 2 percent level predicted for the year.
Jim Boulden, CNN Financial News, London.
(END VIDEOTAPE)
DOBBS: There's a lot more to come on MONEYLINE. Higher oil and gas prices lift the profits of two of the world's biggest oil companies today. But we'll tell you why the money train may be reach an end.
And former defense secretary William Cohen on President Bush's whistle stop European tour to drum up support for missile defense.
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DOBBS: Two of the world's biggest oil companies, Chevron and ExxonMobil, today reported higher profits over a year ago. The rise in energy costs that had been hurting profits in other industries, helping to push ExxonMobil's earnings up more than 5 percent. But with crude oil prices slipping, the good times may be coming to an end, analysts today saying this could be the last show of increased profits for the foreseeable future.
ExxonMobil's profit actually fell short of expectations. ExxonMobil's results were a disappointment to Wall Street, used to a history of upside surprises. Chevron beat expectations as profits jumped 21 percent. Earnings growth at Chevron driven by refining and marketing gasoline. The prospect of tougher times ahead pushing shares of the major oil companies as a group lower today. U.S. benchmark crude rising for the third straight day, because OPEC is expected to cut production to support world prices.
Just ahead, the president visits U.S. troops in Kosovo. We'll check out the implications of the president's European trip with a man who once ran the Pentagon.
ANNOUNCER: Coming up, Lou speaks with Former Defense Secretary William Cohen.
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DOBBS: President Bush spent the day visiting U.S. troops in Kosovo, this closing out a six-day trip to Europe, his second as president. Among the highlights: the president's participation in the G8 summit in Genoa, Italy and his meeting with Russian President Vladimir Putin.
For a read on the Putin meeting and the trip overall, we're joined by a MONEYLINE regular, former Defense Secretary William Cohen.
William, good to have you with us. This first G8 erupting to violence outside, more globalization protest, whatever that means, erupted, one person killed, do you think we'll see a change in the way these ministers and presidents conduct their meetings from now on? WILLIAM COHEN, CEO, THE COHEN GROUP: I think they'll try to downplay the G8 meetings in the future, perhaps make them less frequent and certainly less visible, in order to avoid generating the kind of protest we saw this past week. It's going to change the format somewhat. I think every country now that is a potential host for it is concerned about drawing a magnet for all of the elements in that protest movement.
DOBBS: Globalization, all of it, the issue itself seems very difficult thing to get passionate about, yet these people obviously protesting. Do you think it's going to become a significant movement beyond the anarchists principally who are engaged in Genoa?
COHEN: Well, the protesters don't seem to have much of an alternative other than saying that they are either promoting anarchy or an alternative to capitalism. They're not quite sure exactly what that is and so I don't think they will take on a large movement globally, no.
DOBBS: Some movement to report in terms of President Bush and missile defense. He and Vladimir Putin apparently reaching, nearing agreement, and then some backing away, and today, the president coming out and saying, we're doing what we're doing.
COHEN: Well, we're sort of closer but no cigar, President Putin saying progress but no breakthrough, and each sort of backing away because of the reaction back home. President Putin ran into a headline in one of his major papers saying "Russia Surrenders." President Bush has to be concerned in terms of the linkages, whether this means we are going to go down to 1,500 warheads and link that to a limited type of defense. So both are in a position of posturing somewhat right now.
DOBBS: Do you infer from what the president said today that it is damn the torpedoes, full speed ahead, we're going to have missile defense no matter what?
COHEN: I think that's the president's position, but of course he has something called the United States Senate and the Congress to deal with in terms of appropriations and hearings before the Senate. And also you have the issue as to whether this is going to be -- quote -- a negotiation versus discussions, an accord versus a treaty. The Senate is going to be very concerned about any kind of agreement being reached must be ratified by the Senate. So we have a long way to go yet.
But it was, I think, an important step forward in terms of dealing with the Russians, and a good signal to send to the Europeans that we are in fact seeking discussion with the Russians to try to reach some kind of an accord.
DOBBS: And we have a new president in Indonesia, President Megawati, first day -- her first day in office. Obviously, that has important implications for the region. Your take?
COHEN: Well, they like presidents so much they have two of them now, because President Wahid refuses to leave the presidential palace. She is someone who has been groomed for the position. She has been vice president now for several years. She is recognized as the heir to that particular position and I think that she will have the support of the military. That's important. But she also has to control the military to make sure they don't crack down in a way that undermines her own legitimacy. So stay tuned.
DOBBS: As they say. Bill Cohen, thanks.
Well, coming up next, we'll take a look at your e-mails and "Ahead of the Curve."
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DOBBS: More second-quarter earnings out tomorrow: Results expected from DuPont, Compaq, Agere Systems, SBC Communications, Xerox, as well as Texaco, Bristol-Myers-Squibb and Schering Plough. On the economic front, watch for existing home sales for the month of June. Economists expecting a decline from May. And tune in here tomorrow night when Stanley O'Neal, the president and chief operating officer of Merrill Lynch, will be my guest.
And time now for a look at some of your comments on the subject of the tax refund.
John writes: "Not once during your report on the tax rebate did you mention that taxpayers like my wife and myself get nothing! More right-wing media lies!"
John, right-wing media lies. Easy. I've been accused of both, but seldom in the same sentence. There are many reasons why you and many others may not qualify for a refund. Even if you had tax withheld last year, personal exemptions, itemized deductions or even child-care credits could reduce your taxable income to zero. Also, if you were claimed as a dependent on someone else's tax return, you wouldn't be getting a rebate check from the IRS either.
Well, onto earnings reports and Ted, who describes himself as a retired securities analyst. He says: "I am appalled by the confusion being generated by investment professionals and corporate executives who use pro forma and EBITDA numbers. Both are inaccurate and misleading, and are no substitute for plain vanilla gap reporting."
Well, Ted, we couldn't agree with you more. Here on MONEYLINE, our policy is to stick to generally accepted accounting principles, gap. It's not possible in every case obviously, but we hope we've managed to sort through most of the noise in the companies who try to put a good face on bad numbers and bad trends.
And a critical eye on our own reporting from Denise, who says: "Why do you report everything in gloom-and-doom terms? The way you report the news is helping drive the stock market down."
I hope not, Denise, and I assure you nothing pleases me and everyone else who works here on MONEYLINE than to report positive news, but for the market right now, there's just not a lot of it out there.
We'd like to hear from you. You can e-mail us at moneyline@cnn.com.
And for this evening, that is MONEYLINE. Thanks for being with us. I'm Lou Dobbs. Good night from New York. "CROSSFIRE" coming up next.
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