Return to Transcripts main page
Lou Dobbs Moneyline
Dow Advances 41.17 to 10,551.18; Nasdaq Climbs 19.00 to 2,087.38; Disney Beats the Street; Prozac Patent Expires
Aired August 02, 2001 - 18:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: From the heart of New York City, this is Lou Dobbs' MONEYLINE.
Here now, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening.
In tonight's headlines: the Dow today advanced while the Nasdaq moved higher for a third straight session.
A day that had to come for Eli Lilly. The exclusive rights to Prozac ran out today, several rivals ready to sell a generic version.
And Disney after the bell reporting profits that edged past Wall Street expectations. I'll be talking with CEO Michael Eisner.
Let's go to our reporters now for a quick look at what they're working on tonight. Christine?
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, words of optimism from a top Intel executive set off a strong rally today on Wall Street. But the enthusiasm cooled somewhat by the closing bell.
JENNIFER WESTHOVEN, CNN CORRESPONDENT: A lot of action in after the bell trading. Disney shares are higher, after reporting quarterly profits.
SUSAN LISOVICZ, CNN CORRESPONDENT: She she was once the queen of the Net and now Mary Meeker is facing a lawsuit alleging she crossed the line when she pushed investors to buy.
STEVE YOUNG, CNN CORRESPONDENT: A legal setback today for Microsoft, and critics say the company may try to run out the clock to ensure a smooth rollout of its most important product since Windows 95: Windows XP. Lou?
DOBBS: Thanks, Steve. All that is coming up next.
Our top story tonight: a solid advance on Wall Street. Stocks moved higher across the board. Chip stocks surging for a second straight day, that after Intel President Craig Barrett said the computer industry has "bottomed out."
But stocks today did close well off their highs for the session. Christine Romans joins us now from the New York Exchange -- Christine.
ROMANS: Lou, those comments from Intel lighting a fire under the chips again today. Lots of folks talking about that, and they were the buzz words of the session. Chips and computers stocks strong for the day, financials, retailers, and also some chemical stocks doing well. But it was a tough day for the biotechs, for the airlines and for the drug stocks. Breadth was positive here.
Let's take a look at how the Dow performed throughout the course of the day: you can see the Dow Jones Industrial Average closing up about 41 points, 10,551. It is off its best levels of the session, had a little bit of uptech into the last part of the trading session overall, but the market closing off of its highs, traders saying that could be a little bit troublesome. They're worried about the fact that the Dow is below the 200 day moving average, and that it can't crack 10,600.
But it was all about tech here today. IBM, Microsoft and Intel. The biggest Dow gainers overall. The question here on everyone's mind, blue chip and tech, is whether the chips might be a group that helps lead this market out of its current malaise. Still, volume here is still pretty light -- Lou?
DOBBS: It's always tech at the Nasdaq and its high today was briefly above 2,100 for the first time in nearly a month. The index up 19 points today, gaining 7 percent over the past seven sessions. Greg Clarkin now from the Nasdaq marketsite -- Greg?
GREG CLARKIN, CNN CORRESPONDENT: Hi, there, Lou. It has continued with the chip stocks. That really was the buzz on the trading desks today, technology traders talking a great length about Craig Barrett's comments, that the computer business has bottomed out. He expects to see really a seasonal rebound there in the second half of the year.
Want to focus on the Philadelphia Semiconductor Index, back to the wall. Take a look at this jump over here. This is the last seven trading sessions. The Philadelphia Semiconductor Index up 20 percent in that period, so traders today really buzzing about these talks out of Intel. And you can see what Intel did on the day, gaining 4.4 percent. Here's a quick check of some other chip stocks, give you some idea of how broad the buying was in the sector.
KLA-Tencor, Novellus, Applied Materials, Linear Technology, and Xilinx all posting nice gains.
Lou, I'll point out, there's some skeptics out there on trading desks, but still, a lot of folks feel very optimistic about that chip sector, that it could help lead those tech stocks higher. We saw today, again, the Nasdaq up 19 points, about a 1 percent gain, to close at 2,087 -- Lou.
DOBBS: All right. Optimism.
After the bell tonight: a profit report from Disney. The entertainment company late today reported its net income last quarter up 9 percent. When you take out special items, Disney earned 23 cents a share, that's 2 cents better than Wall Street had been expecting. Disney and the entire media business has been of course hurt by an advertising recession that has persisted longer than almost anyone imagined.
The stock is down 38 percent from its 52-week high.
(BEGIN VIDEO CLIP)
ED HATCH, S.G. COWEN: The real key to Disney's stock will be seeing the general economy do better, so broadcasting will improve, the ABC network will get a little bit of a shot in the arm come the fall, and then hopefully the consumer will be back a little bit stronger at the theme parks.
(END VIDEO CLIP)
DOBBS: Up later here on MONEYLINE, I will be talking with Disney CEO Michael Eisner.
Disney's stock down fractionally during the regular trading session. But it's up in after-hours trading. Jennifer Westhoven is at the Instinet trading floor and has the latest -- Jennifer.
WESTHOVEN: Hi, Lou, you are right, Disney shares are trading higher. They're getting too much in the way of volume but a decent amount. And the stock at last check here was up by about 60 cents, so that knocked off the 17 cent a share loss that the company sought during the day.
Other stocks that are really seeing a lot of movement here in the after-hours, we'll start with Noven Pharmaceuticals, that stock is getting killed. It is down by about 30 percent in after-hours trading. The company came out with second quarter earnings that were in line, but it said watch out for the second half. It said it has low international orders, that will translate into fiscal 2001 results that could be as much as 30 percent below what Wall Street had been looking for. That stock is down in very heavy trading.
And here is something else that is interesting. Take a look at the intradate chart of this stock: the news came out at 3:59 Eastern time, but this star starting spilling lower right around 1 or 2 p.m. Eastern time, ahead of that news and on very heavy volume. At least five times its normal average daily volume.
Another stock we're watching that's also on the downside, another biotech, is Protein Design Labs, it's down about 10 percent at last look. Here you have a company, again, with good quarterly earnings, but they're coming out with some disappointing looks going forward. Not giving enough up guidance. So that might be a little bit of a negative for the biotechs tomorrow -- Lou.
DOBBS: Jennifer, thank you.
Politicians have been attacking Wall Street analysts for the epidemic of buy recommendations over recent years that they say mislead investors. But investors themselves are fighting back as evidenced by a class action lawsuit filed against former analyst star Mary Meeker and her firm Morgan Stanley.
Susan Lisovicz looks at why this fight could be far more significant than a similar dispute settled just two weeks ago.
(BEGIN VIDEOTAPE)
LISOVICZ (voice-over): When the Nasdaq was riding high on the back of Internet euphoria, Morgan Stanley Analyst Mary Meeker was proclaimed the queen of the Internet. She may now be the poster child of investor backlash.
The class action suit against Meeker and Morgan Stanley comes just two weeks after Merrill Lynch paid $400,000 to settle a case involving an irate investor who followed the advice of star analyst Henry Blodgett. But Meeker's case is far more troubling to Wall Street because of the much larger number of investors involved which potentially translates into much bigger penalties.
Attorney Jacob Zamansky represented the investor in the Blodgett case and says this is just the beginning of a whole new wave of lawsuits.
JACOB ZAMANSKY, ZAMANSKY & ASSOCIATES: I am being flooded with calls and e-mails from investors, and I'm reading every single one and I'm going to answer every single call. Investors believe the advertising of some of the big Wall Street firms. Trust, experience, integrity, a lot of these folks were betrayed by the biggest firms on Wall Street.
LISOVICZ: The lawsuits center on Meeker's recommendation of two once high-flying Internet stocks. Amazon.com has now plunged 89 percent from its high while eBay has plummeted 50 percent. The suit contends that Meeker's recommendations were not based on objective analysis, but her desire to retain those companies as clients and that her compensation was directly tied to the amount of investment banking business she generated for Morgan.
JACK COFFEE, COLUMBIA UNIVERSITY: This is definitely a case that is trying to push the envelope. There is very little law that an analyst has to disclose all their possible biases or economic motivations.
LISOVICZ: Morgan Stanley says the allegations will not stand up in court and that it will vigorously defend the case.
(END VIDEOTAPE)
LISOVICZ: But in the court of public opinion, the credibility of financial analysts is badly damaged. Wall Street and Washington is its own watchdog, mulling the possibility of new regulations and the threat of widespread litigation may spur them to act quickly -- Lou.
DOBBS: And the House Financial Service Committee seems absolutely committed to carrying this through, the prospect of legislation there. SEC Chairman -- acting chairman -- Laura Unger saying that disclosure from the SEC is analysts were selling stock into their own recommendations to buy, that's devastating.
LISOVICZ: And Mr. Zamansky, by the way, says that he has up to 150 possible lawsuits.
DOBBS: Here we go! Susan, thank you very much. Susan Lisovicz.
Another legal setback for Microsoft. The court of appeals today denying the company's request for a rehearing on a key issue in its landmark battle with the government. While Microsoft says it is "committed to moving forward promptly in the legal process," it isn't saying whether it will appeal its case to the Supreme Court.
Steve Young has the story.
(BEGIN VIDEOTAPE)
YOUNG (voice-over): Microsoft thought that it dodged the bullet of the company breakup, but the court of appeals today reaffirmed the company's next worst nightmare, that its software designs will be second-guessed by bureaucrats.
The court of appeals refused to reverse a decision that Microsoft illegally mixed its Internet browsing software with its Windows operating system to thwart competition. Putting that into perspective, if Microsoft were in the auto business, it would be the same thing as selling a car with a radio which couldn't be replaced with another company's radio without making the engine quit.
JAMES BARKESDALE, GOVERNMENT WITNESS: This may in fact be one of the most important parts of this whole decision that was handed down by the appellate court a few weeks ago.
YOUNG: The appeals court also refused to speed up the case, as requested by the government, but a Justice Department spokeswoman said: "We're pleased that the rehearing was denied."
Faced with a setback, a Microsoft spokesman said the company "... is committed to moving forward promptly in the legal process."
But more than anything, the company's committed to moving forward with its most important product in six years: Windows XP, set to be shipped October 25th. Prosecutors say it's designed to crush competitors.
STEPHEN AXINN, AXINN, VELTROP & HARKRIDER: There is a possibility that there will be some kind of emergency proceedings, maybe in the Supreme Court, maybe in the circuit court, and maybe in the district court to try to clear this all up before Microsoft begins shipping.
YOUNG: If Microsoft seeks a Supreme Court review, success is considered unlikely. But just asking could give Microsoft six months more of breathing room.
(END VIDEOTAPE)
YOUNG: The (UNINTELLIGIBLE) could ship as soon as next Thursday back to U.S. district court. A new judge would be named the next day to handle arguments about the so-called tying part of the case, and how to control a company the courts have branded an illegal monopolist -- Lou.
DOBBS: Steve, all of this legal process is of course riveting and fascinating. What does it mean to Microsoft, in terms of Windows XP?.
YOUNG: Well, Windows XP means a great deal to Microsoft and to all of technology. They're pinning their hopes on...
DOBBS: Right, so what does this mean to Windows XP and its introduction?
YOUNG: This could mean that the states or the federal government may seek an injunction against the product, delay it. We'll have to see how that plays out. That would be very damaging for Microsoft.
DOBBS: Steve, thank you very much. Steve Young.
Still ahead here, as Congress debates a patients' bill of rights, we'll find out what the impact will be on all of us consumers and employers.
And the little pills worth billions of dollars. Why the price of a popular antidepressant drug may be heading lower.
Also tonight, California looking to raise a lot of money on Wall Street. We'll be talking with the state's treasurer about whether investors are showing interest in $13 billion bond of bonds.
(COMMERCIAL BREAK)
DOBBS: California Governor Gray Davis no longer facing imminent rolling blackouts in his state, nor are his citizens, but he and they are facing new problems. It turns out several of his top investors and aides have been investing in energy stocks, and that's raising accusations of insider trading and conflict of interest, while countercharges of a politically-motivated smear campaign.
Casey Wian has our story from Los Angeles.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): Just as Governor Gray Davis took a family break knowing California has avoided the crippling blackouts predicted this summer, a new firestorm has erupted. At least 18 state officials, aides and consultants tied to the governor have been found to be investing in energy stocks, or doing business with energy companies while working for the state. They include regulators and traders buying electricity for the state.
BILL JONES, CALIFORNIA SECRETARY OF STATE: The governor's closest advisers and consultants that have been spending billions of dollars of taxpayer money, owning stock in companies they potentially are buying energy from, is just patently a conflict. Beyond that, it raises the question: Who are they representing, the people of California or the energy companies?
WIAN: Investments were made in power generators vilified by the governor for their behavior during the electricity crisis, and in the parent company of Southern California Edison, which the governor has been trying to save from bankruptcy. Secretary of State Jones has requested investigations by state and federal agencies. Davis has fired seven aides and consultants with energy investments or business ties, but has rejected demands to fire press secretary Steve Maviglio, who bought 300 shares of power generator Calpine stock in June.
STEVE MAVIGLIO, GOV. DAVIS PRESS SECRETARY: The governor had been very supportive of Calpine for their investment in California, and it so happens that I went to a few plant openings. Did I know about a contract being signed? Of course not. Did I know about any of their day-to-day trades at energy? Of course not. And there's -- even if I did, my purchase had nothing to do with that.
WIAN: Maviglio sold the shares at a loss today. Others requested opinions from state ethics watchdogs. Davis aides call the matter a political witch hunt by Jones, who's running for governor himself next year, and trails Davis in fund raising 30 to 1.
HILLARY MCLEAN, DAVIS SPOKESWOMAN: I think he should disclose to the people of the state why he's using the taxpayers' money to conduct campaign activities on taxpayers' time.
WIAN: Jones says he has a duty to enforce the state's financial disclosure laws. Davis aides say they're studying ways to better comply with those requirements.
Casey Wian, CNN Financial News, Los Angeles.
(END VIDEOTAPE)
DOBBS: California apparently has been spared the worst of the predictions of power shortages. But the easing of the crisis in California has come at a steep price, the state paying dearly for electricity, only to find itself with a power surplus, in fact. And within all of that, actually selling power at a discount.
To cope with the financial strain, California is now looking to issue the largest municipal bond offering in history: a whopping $12.5 billion deal. California State Treasurer Phil Angelides is here in New York trying to convince Wall Street to buy those bonds, and he's here now.
It's good to have you with us.
PHIL ANGELIDES, CALIFORNIA STATE TREASURER: Good to be here.
DOBBS: How's it going? ANGELIDES: Well, it's a long, hard road, because we -- it's the biggest bond issue in American history, but underlying is a pretty good credit. The state of California, 35 million strong, fifth- largest economy in the world.
DOBBS: And so contentious in state government that it's -- I mean, it's amazing, even by New York standards.
ANGELIDES: Well, yes, but my job is to do my job. And my job right now is to make sure that we can sell these bonds, $12.5 billion, and the money for that will be used to buy energy to keep the lights on, and also to repay our general fund -- money for education, health care, children's services -- that was borrowed for education. So I've got to keep my eye on the ball.
DOBBS: Well, keeping your eye on the ball here means paying for a lot of electricity, a very steep bill. Are you past the worst of it in California, in your judgment?
ANGELIDES: I think it would be too optimistic to say it's over, but the market has stabilized pretty dramatically. We haven't had blackouts since May 9th, power prices are down dramatically, wholesale prices down about 50 percent. The federal government finally came in and put some caps on prices and we're getting new supply. And remarkably, Californians have conserved about 12 percent over last year. So we've made progress, but we're not out of the woods.
DOBBS: And this municipal bond offering, that is, as you point out, it is a huge number. Are you finding difficulty? Are you going to have to go broader than you think? Are you going to have to have a significant adjustment in your planning for price?
ANGELIDES: Well, first of all, it is big. We're going to offer a variety of product: variable rate debt, tax exempt debt, taxable debt, so we appeal to investors all across the country of different needs. And to make a pitch here, I think it's a good time to be in a fixed income investment like this.
(LAUGHTER)
ANGELIDES: Good secure credit with a good revenue stream behind it.
DOBBS: Well, if you're going to pitch, let's talk price.
ANGELIDES: Well, as cheap as we can sell it. But the fact is that one of my jobs is to kind of break through the political cacophony and all the noise and explain to investors that this is a secure bond, secured by revenues from rates.
DOBBS: And are you finding any resistance, just based on the contentious atmosphere in California between the governor, the secretary of state, all that is happening there -- aides fired. We've got new charges and countercharges, and we have an economy that, like the rest of the nation, is slowing, and slowing significantly? ANGELIDES: Well, the economy is slowing, but California still is a ballast for the rest of the country. And the one thing I'm telling investors is, look behind or beyond all the noise. Look at the specific bond, it's a secure device. It's got a good revenue stream, it's a good credit and it will yield you well over the next 15 years, which is the term of the bond. And so our -- what we're trying to do is focus investors on the investment.
DOBBS: And you're going to take the bond out when?
ANGELIDES: We hope to be in the marketplace in October, borrowing legal challenges. We hope we can get through the thicket of contention
(AUDIO GAP)
ANGELIDES: ... the market.
DOBBS: And you're going to price it when?
ANGELIDES: We would hope in October.
DOBBS: OK, thanks a lot. Good to have you with us.
ANGELIDES: Thank you.
DOBBS: In economic news today: more evidence of some contraction in manufacturing. There was some encouragement, however, in the unemployment area. Factory orders in June did fall more than 2 percent, a far bigger drop than most economists had expected. Orders declining across the manufacturing sector, but claims for unemployment benefits tumbled last week for the third week in a row, totaling 346,000. That is the lowest level, by the way, in five months.
The jobless reports sparked selling in the bond market: Yields rose as prices fell.
A cross-border disagreement over trucks grew more heated today. The Mexican government threatening to retaliate if Mexican trucks are not granted access to U.S. highways. Mexican President Vicente Fox today said that his country would block U.S. trucks from Mexican roads: that after the U.S. Senate yesterday passed a measure to impose safety standards on those Mexican trucks in this country.
The trucking dispute has been a difficult issue in otherwise relatively smooth U.S.-Mexican relations. The White House had hoped to fulfill provisions of NAFTA by allowing those Mexican trucks to travel across the United States beginning in January.
DOBBS: Well, here now to talk about the state of the economy and take a look at, perhaps, the future, from Aspen, Colorado, is MONEYLINE regular contributor Rik Kirkland. He is also, in his day job, the managing editor of "Fortune" magazine. And it looks like a pretty good day job there in Aspen, Rik.
RIK KIRKLAND, MANAGING EDITOR, "FORTUNE": It's beautiful out here, Lou. We're having a lot of fun.
DOBBS: Well, you've got a fascinating group of people brought together there, looking at the future. I know you're focusing on what's next. What's next?
KIRKLAND: What's next? Well, we're -- we've got 140 thinkers, business leaders, political leaders, academics trying to figure out where we're going to be about a decade from now. And it's kind of gratifying to do that, because as you were reporting earlier, the current news isn't so happy.
But if you look out, the amazing thing is the technological momentum that we've got going in this country and the world is just continuing at pace. I mean, 10 years out, computers, computer networks are guaranteed to be 100 to 1,000 times faster and cheaper. And that's going to be huge opportunity and huge new applications that are going to be coming out.
Biotechnology is going to be continuing to advance. It's going to be changing our lives so that within a decade we'll probably be adding a year to all of our lifespans every year going forward.
So I don't know about you, that encourages me. I'm thinking about renegotiating my contract.
DOBBS: Well now all you have to do is get a few other folks at AOL-Time Warner to go along with you. That unilateralism, you know, is out of favor these days.
KIRKLAND: Exactly, exactly.
DOBBS: In terms of the economy -- you alluded to it -- apparently there at Aspen there's visibility in years out, as just -- just as we're hearing nearly every businessman and women decry the lack of visibility in the short term. What do you make of that?
KIRKLAND: Well, I think, actually that's what we're hearing a lot from the people here. There's not a lot of visibility over the next 12 to 18 months. I mean, we forced people to vote earlier today, and there was a slight consensus that we'd start seeing a technology recovery sometime next year. But people admitted they don't really know.
What I'm talking about is the long-term innovation coming from advances in information technology and biotechnology, stuff that's in the keg, that's not a matter of capital shortages. It's going to happen and it's going to keep changing the world.
DOBBS: Well Rik, thanks very much for taking time to join us here.
KIRKLAND: Thank you.
DOBBS: Rik Kirkland, managing editor, "Fortune" magazine.
KIRKLAND: Thanks a lot. DOBBS: Well, still ahead on MONEYLINE: a blockbuster drug losing an exclusive license. A Prozac nation gaining access to a cheaper alternative. Also, the rising cost of health care: Tonight we look at how the president's bill of rights may affect patients, consumers, employers and insurers.
Stocks edge higher in today's market, driving the Nasdaq to a fifth gain in six sessions: 7 percent higher over seven days. Also, the latest numbers from the Magic Kingdom. We'll hear from the man who runs the Disney empire.
ANNOUNCER: Coming up, Lou speaks with Disney Chairman and CEO Michael Eisner.
(COMMERCIAL BREAK)
ANNOUNCER: LOU DOBBS MONEYLINE continues. Here again: Lou Dobbs.
DOBBS: In tonight's headlines, the Nasdaq makes it three in a row, finishing higher on another bullish call, this one from Intel's Chief Executive Officer Craig Barrett. The Dow also moving higher. And more evidence today of a slowing economy: factory orders down 2.4 percent in the month of June, twice as much as what economists had been expecting. Microsoft handed another legal setback today: a federal appellate court refusing the company a rehearing on a key issue in its anti-trust case with the government.
Well now a quick check in with our reporters on their stories tonight -- Christine.
ROMANS: Lou, both the Nasdaq and the Big Board edging higher today. I'll have a look at what may move the markets tomorrow.
DOBBS: And tonight Walt Disney Chairman and CEO Mike Eisner joins us from Aspen. We'll be talking about the firm's quarterly results. And also we'll take a look at Eli Lilly's prospects now that generic versions of its blockbuster drug Prozac are being shipped to drug stores nationwide.
And in Washington, the House of Representatives voting on the patients' bill of rights. That vote expected within just a few hours.
Taking a look at the markets: Both the Nasdaq and Dow closing higher, but well off the day's highs on late-session anxiety about the release, tomorrow, of July's employment report. The Dow today off to a strong start, soaring nearly 100 points in the first half-hour of trading, but closing with a gain of 41. The Nasdaq also strongly moving at the beginning of trading, closing the day up 19 points. That's the best Nasdaq close in a month, marking the third time in a row it's finished higher.
Taking a look at some widely-helds: IBM, Intel, AOL-Time Warner all up more than $1 a share. Verizon, SBC Communications both lower, and on the Big Board advancing issues again beating out decliners by a 3:2 margin. On the Nasdaq, advancers also beating out decliners but by a slim margin.
Now for a look at what investors and traders can expect tomorrow on Wall Street, Christine Romans from the New York Exchange -- Christine.
ROMANS: Hi there, Lou. Clearly we are watching shares of Disney. They're a Dow component so is their after-hours strong performance continues into tomorrow's session, that could bode well for the Blue Chip average.
Some folks are a little concerned that the Dow closed off of it's best levels of the session. Still, the factors for tomorrow are pretty clear. Summer participation on Friday's has been a little rough of late. We will see what participation is like. Also that jobs report comes out before the opening bell.
This is a July number, it is very important. Some people calling this the celebrated job's report, some call it the dreaded jobs report depending on what side of the market you are on. We will watch this one. Folks are telling me they expect jobs lost anywhere from 50 to 70,000.
The jobless rate at 4.6-4.7 percent. Average hourly earnings up just slightly. (UNINTELLIGIBLE) report some folks tell me it could be the launch pad for some sort of a summertime rally. They are going to closely keep watching the S&P 500 as well. Technicians are eying these levels, Lou.
This is the broader market gauge. And it's holding nicely above 1,220 so far -- Lou.
DOBBS: Say that again, a summertime rally based on the employment report, Christine? Is that right?
ROMANS: If it's benign, if it shows that things are not as bad as some had feared, some are saying maybe that will be the dreaded "C" word, "catalyst," that they have been looking for.
DOBBS: We are putting a lot of pressure on an employment report. Thank you, Christine Romans.
Topping tonight's "MONEYLINE Movers," Royal Dutch Shell falling more than $1. The world's second largest oil company reporting earnings in line with expectations, $3.5 billion of earnings. Profits jumping 12 percent from a year ago, significantly lower however than the previous quarter, snapping six consecutive quarters of record results.
Oakley losing more than a third of its price. That after cutting its sales and earnings forecasts for the remainder of the year. The sunglasses designer citing a surprise drop in orders from its largest customer: Sunglass Hut. PMC Sierra today climbing more than $3.5 a share. The communications chip maker as added to the S&P 500 after today's closing bell. PMC replaces Quaker Oats, which is being acquired of course by Pepsico. Despite today's gains, the stock has plummeted more than 80 percent this year. In other corporate news, General Motors is tapping former Chrysler executive, Bob Lutz, to head its product development. Lutz, a former Chrysler vice chairman, credited with reviving Chrysler's line of cars and trucks with edgy vehicles, left during the Daimler- Chrysler merger in 1998.
Neiman Marcus warning its fourth-quarter loss may double what Wall Street had been expecting. The upscale retailer reporting same- store sales for July dropping nearly 3.5 percent, that as slumping summer sales forced the upscale retailer to take deep markdowns.
CNA financial taking a big hit in the second quarter. The company blames asbestos. Excluding some gains on investments, the insurer's net loss came in at roughly $2 billion, mostly because it boosted reserves to pay for old asbestos-related claims. Shares of CNA Financial tumbled 12 percent today.
Turning now to Disney. The Walt Disney Company today reporting results after the close of trading. Excluding one-time charges, the company earned 23 cents a share, that's 2 cents better than Wall Street had been expecting. Revenues coming in flat at $6 billion. Here now to talk about the company, no one better to talk about it with than Michael Eisner, Disney's chairman and CEO, from Aspen, Colorado. Mike, good to see you and congratulations on the results in what is a very difficult environment.
MICHAEL EISNER, CEO, DISNEY: Thank you, Lou.
DOBBS: In terms of this advertising recession, as some are referring to it, do you see it abating?
EISNER: Well, not really. We really don't have any information about it going any further down, either. But we can't really say that the turnaround is here. We hope that it is. But unlike some of my competitors, I am not going to stand up here and say the sun is back out and everything's great.
(LAUGHTER)
EISNER: It's slow, it's difficult. And we're doing extremely well, considering the environment.
DOBBS: Absolutely. And within those results, your film division turning in very good results. Do you see that continuing, going forward?
EISNER: Yes. We've cut a lot of the costs, not only in the film division, we have cut about $800 million of costs in the whole company, and that has positioned us, I think, very, very well for this kind of mediocre economy at best. And so when you come out of the economy, you are really ready to roll and grow.
And in the film area we have reduced our risks, we have been much more careful about our selection, our overhead, and I am feeling very good about it. And of course we have a film opening up tomorrow called "Princess Diaries" which I am very hopeful about, the only G- rated film of the summer. So we are optimistic. Here I am pitching a movie here on CNN.
DOBBS: The last time you and I talked you were pitching "Pearl Harbor" and that did pretty well. It was a pretty good movie, too.
EISNER: I think that you will notice in our press release, the company will make $100 million profit from "Pearl Harbor," so I guess they buried us before we were actually dead on that one.
DOBBS: That tends to happen on occasion, particularly in Hollywood.
EISNER: Yes, it does.
DOBBS: In terms of your brand, your brand is absolutely synonymous with animated entertainment in film. And yet your brand is not the producer of the biggest animated hit of the summer. What are you going to do about that?
EISNER: That wasn't a Disney film?
DOBBS: I didn't -- I am told that it wasn't.
EISNER: I am shocked. I am shocked.
DOBBS: I am told reliability. It was a pretty good film too, by the way.
EISNER: It is a good film, and when Walt Disney was making films Chuck Jones at Warner Brothers was making films and Hanna-Barbera were at MGM making films. There is no monopoly on talent. Disney has a film called "Monster's Inc." this Thanksgiving, which is from Pixel, the people that made "Toy Story" and we have "Treasure Planet" next summer and we have a lot of very strong animated films. Competition only brings out the best in products. So I congratulate whoever they are that made that film.
DOBBS: All right. In terms of Fox Family, your acquisition, more than $5 billion, that's a big number. How quickly do you turn that into one profitable powerhouse in cable?
EISNER: Well, it's not only domestic. We get a very big channel selection outside of the United States, 35 million homes. Obviously, we have the domestic Fox Family. And between the two, we think that we can cut a lot of costs. We have our own cable companies and it will give us the ability to do a purpose programming off ABC and we are very optimistic about the strength of this content play and we think it's right down our sweet spot so we are happy about that.
DOBBS: Michael, if I may, give you just one last opportunity. You don't want to say that the recession in advertising in media has ended tonight?
EISNER: No, I can't say that. But I will say that these kinds of periods are not all that bad for American business. It forces you to tighten up the way that you operate and traditionally, particularly in our company with the theme parks, you know we have three new theme parks opening this year, when the recession ends, when it starts to go back, we are really poised for a strong growth. And we have very strong cash flow.
We were up 90 percent in cash flow this semester, so to speak. So we think that we are very poised for that turnaround whenever Mel Karmazin says it is going to come.
DOBBS: Or whenever some (UNINTELLIGIBLE) suggest -- no, I will not go there. Michael Eisner, good to talk with you. Thank you for being with us.
EISNER: Thank you, Lou.
DOBBS: In tonight's "Moneyline Focus": The state of the labor movement, 20 years to the week after President Ronald Reagan fired more than 11,000 striking air traffic controllers. President Reagan's action against the professional air traffic controllers union, known as PATCO, represented a watershed moment in labor-management relations. Tim O'Brien, from Washington, with the story.
(BEGIN VIDEOTAPE)
(BEGIN VIDEO CLIP)
RONALD REAGAN, PRESIDENT OF THE UNITED STATES: And if they do not report for work within 48 hours, they have forfeited their jobs and will be terminated.
(END VIDEO CLIP)
RON BLACKWELL, AFL-CIO: He was basically waving a green flag to employers, that you can do this, too.
TIM O'BRIEN, CNN CORRESPONDENT (voice-over): The AFL-CIO says labor-management relations haven't been the same since.
BLACKWELL: The stripping of benefits, pensions and health care has become routine. Layoffs, mass layoffs announced and advertised actually to the financial markets is a routine practice that you read about every day.
O'BRIEN: The playing field itself may have changed.
WILLIS NORDLUND, AUTHOR "SILENT SKIES": Strikes as a labor management or labor relations tool diminished dramatically in the wake of the PATCO strike.
O'BRIEN: The number of disruptive strikes has, in fact, dropped dramatically, averaging more than 280 a year in the 60's and 70's to only 145 in 1981 and consistently down since then to only 39 last year. The business community says the decline has less to do with the PATCO strike than with better job conditions for the nation's work force.
RANDEL JOHNSON, U.S. CHAMBER OF COMMERCE: Employers are not the same employers of 40 years ago. They're not the employers of Upton Sinclair's, "The Jungle." They're treating their employees right: 170 million Americans are covered under health insurance, 100 million under pensions.
O'BRIEN: Johnson says worker satisfaction would also explain the continuing drop in total union membership in the U.S., from 25 percent in 1981 to around 14 percent today. Union membership among government workers, however, is rebounding and is now up to almost 40 percent.
(END VIDEOTAPE)
O'BRIEN: And that, at least to some, is curious. If the ill- fated Patco strike had any adverse impact on union membership, it may have been lost on government employees, including air traffic controllers, who seem to be turning to labor unions in near-record numbers -- Lou.
DOBBS: Tim, thank you very much. Fascinating. Tim O'Brien from Washington.
Just ahead here on MONEYLINE, the biggest generic drug launch ever, and its makers are set to reap huge rewards. We'll be taking a look at this new version of a pill that revolutionized the treatment of depression.
And the debate over a patients' bill of rights, and how it will affect health care for millions of Americans.
(COMMERCIAL BREAK)
DOBBS: The exclusive rights for Prozac today ran out, a big blow to Eli Lilly, the maker of the antidepressant, and that may mean a huge savings for consumers and their insurance companies. Allan Dodds Frank reports.
(BEGIN VIDEOTAPE)
ALLAN DODDS FRANK, CNN CORRESPONDENT (voice-over): A depressing moment for the Eli Lilly company. Competitors began shipping generic versions of Prozac, the antidepressant drug that has brought Lilly more than $22 billion in sales since 1988. In a move expected to save drug buyers nearly $1 billion a year, the Food and Drug Administration approved generic versions of Fluoxetine, the chemical that makes Prozac work.
Barr Laboratories gets six month exclusivity to ship 20 milligram capsules. That dosage accounted for more than 80 percent of the $2.6 billion sales of Prozac last year. Barr began shipping 100 million capsules immediately.
BRUCE DOWNEY, CHAIRMAN AND CEO, BARR LABORATORIES: By the first of the week, I would expect this product to be in every pharmacy in America. The 100 million capsules converts into one Prozac capsule for every three citizens of the United States.
FRANK: Prozac retails for an average of $3.38 a capsule, while pharmacists say Barr's generic will be priced initially around $3. Pharmacists expect a large swing away from Prozac.
IAN GINSBERG, C.O. BIGELOW CHEMISTS: Insurance companies dictate the, you know, who gets generic and, you know, who doesn't. You know, when people aren't paying, they'll stick to the brand. Now, recently, you know, you are starting to get penalized for using the brand, and the insurance companies tend to jump on that pretty quickly.
FRANK: For investors, Prozac's prospects have already hit Lilly's stock and earnings.
BARBARA RYAN, DEUTSCHE BANC ALEX BROWN: Lilly, though, despite the introduction of several very successful new drugs, will have down earnings in the back half of this year and the first half of '02 as a result of a decline in Prozac.
FRANK (on camera): Pharmacists say Barr Laboratories' initial price break will be less than the normal 25 percent price cut for first-time generics, but that in less than two years, the price could be down as much as 80 percent.
Allan Dodds Frank, CNN Financial News, New York.
(END VIDEOTAPE)
DOBBS: And taking a look at those drug stocks today. Barr Labs, which had a major rally ahead of today's deadline, lost more than $4 a share. Talk about selling on the news. And Eli Lilly gaining 65 cents. As for other generic drug makers, Mylan Labs, Sepracor, Watson Pharmaceuticals, all barely moving on the day.
Up next on MONEYLINE, a hot topic on Capitol Hill, the debate tonight over a patients' bill of rights. We'll take a look at what it means for you.
(COMMERCIAL BREAK)
DOBBS: Still to come on MONEYLINE, it's been six years in the making. Tonight, lawmakers are still trying to agree on a patients' bill of rights. But even if you never sue your HMO, we'll take a look at what this bill means for millions of Americans.
(COMMERCIAL BREAK)
DOBBS: The House of Representatives right now is debating the patients' bill of rights, this after the White House and a key Republican struck a compromise over how much liability an HMO would face in patient lawsuits. The deal between the president and Congressman Charlie Norwood, a Republican, would allow awards of up to $1.5 million for pain and suffering and punitive damages.
But House Democrats spoke out against that compromise, saying it favored HMOs over patients. Debate on the bill is expected to conclude tonight.
The patients' bill of rights now under debate will have a real impact on millions of people. Peter Viles looks at how it will affect workers and their employers.
(BEGIN VIDEOTAPE)
PETER VILES, CNN CORRESPONDENT (voice-over): HMOs have been a hot topic lately at this small factory outside New York. No one's talking about suing their HMO. The issue that resonates here is not the patients' bill of rights, it's the patients' bill, the rising cost of health insurance.
HENRY GONZALES, VERNON DEVICES: The debate within this company here with some of the employees, they feel like dropping it, because it's just too expensive.
VILES: This is a family business, and the family that owns it is worried that Washington is about to drive up the cost of health insurance.
DAVID NEWMARK, PRESIDENT, VERNON DEVICES: It really doesn't make sense to me. I don't understand why we should be forcing additional costs on the HMO, which in turn put additional costs on the employer, which in long term ends up hurting the employees the most with higher rates.
VILES (on camera): Now, most Americans are never going to sue their HMOs. So what does a patients' bill of rights mean for them? And what does it mean for their employers, particularly small businesses like this one, for whom health insurance is already a financial headache?
(voice-over): In Erie, Pennsylvania, Harry Brown is already doing the math. Health insurance costs about $5,000 per worker. He figures those costs will rise 12 percent next year and another 4.5 percent if the patients' bill of rights passes, $825 in new costs. The costs that can't be figured yet is the legal risk. Washington hasn't settled that issue, but small businesses live in fear of lawsuits.
HARRY BROWN, CEO, EBC INDUSTRIES: Obviously, we cannot afford that additionally liability, and therefore we would look at a number of options. One of them, of course, is to drop the health care coverage.
VILES: So as Congress argues about lawsuits and liabilities, small businesses are bracing to pay for the patients' bill of rights.
Peter Viles, CNN Financial News, New Rochelle, New York.
(END VIDEOTAPE)
DOBBS: Coming up next, a look at your e-mails and "Ahead of the Curve."
(COMMERCIAL BREAK)
DOBBS: Tomorrow, we will have the employment report for the month of July, economists expecting the unemployment rate to edge higher to 4.6 percent, perhaps 4.7 percent, and non-farm payrolls to drop. And tomorrow night here on MONEYLINE, Secretary of Energy Spencer Abraham will join us to talk about the president's energy bill.
Turning now to some of your thoughts, the latest jobless figures prompting Kevin to write and ask: "I keep hearing about more job cuts every week, but jobless claims are falling. I don't understand."
Well, the most recent decline reflects the end of summer layoffs at many auto plants which shut down to retool their assembly lines, also when the firms make layoff announcements, they generally make them for the period of year ahead, but business conditions, obviously, are changing quickly, and it's important to remember some of those job cuts in point of fact never even occur.
And James in Canada writing to say -- well, he accuses me of being biased and constantly trying to talk down the market. "My observation of your program indicates to me you are a big bear."
Well, James, obviously I'm not revealing my bias sufficiently, so let me make it very clear. I'm a bull, I'm a bull, on the market, on the economy -- and let me repeat, I am a bull!
By now, a lot of you have received your tax rebate checks. Pat in Las Vegas, however, he is still waiting and writes: "The IRS is not perfect. They made a mistake on my address, and now it's going to take an extra four weeks to receive my rebate. Well, I guess the Wal- Mart will have to wait," he writes, "for my $300."
Pat, Wal-Mart tells us they're more than happy to wait. Wal-Mart also saying that their current sales continue to run above expectations. Folks are spending 25 to 30 percent of their rebate checks in the store. And what are they buying? The No. 1 item: electronics, televisions, computers and DVDs. The second most popular item: air conditioners.
Send us your e-mail at moneyline@cnn.com.
And that is MONEYLINE for this Thursday evening. We thank you for being with us. I'm Lou Dobbs. Good night from New York. "CROSSFIRE" is coming up next.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
