SUSIE GHARIB: Two of the oldest banks on Wall Street announced plans today for a new future together. Chase Manhattan bank is buying J.P. Morgan for $34 billion. The new bank will be called J.P. Morgan Chase. In New York City, the two banks confirmed today the merger, after much speculation. Here's Suzanne Pratt with details.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Nearly a century ago, John Pierpont Morgan and the bank that bore his name were big enough to function as the nation's central bank, before there was a Federal Reserve. Today, analysts say J.P. Morgan is too small to go it alone. Particularly in a world where the biggest banks usually get the best business. Once the deal is done, J.P. Morgan Chase will be the third largest bank holding company in the country, after BankAmerica (BAC) and Citigroup . But beyond critical mass, analysts say the combination makes strategic sense.

MICHAEL PLODWICK, BANKING ANALYST, UBS WARBURG: We think Chase is probably a better partner for Morgan than many of the other potential suitors that had been mentioned. They have a very complementary business mix; they've known each other a long time; and they are both domestic-based companies which should make the integration that much easier.

PRATT: Under the terms of the deal, each share of J.P. Morgan will be exchanged for 3.7 shares of Chase, or about $207 a share, based on yesterday's closing prices. Most analysts consider the price tag fair, but some say it's on the high-end. And even though executives say the union is mostly about revenue growth, there will be $1.5 billion in cost savings. But there will also be nearly $3 billion in costs associated with the deal; some of which will be taken as a charge. Analysts blame that up-front dilution for today's sell-off in Chase shares; although in the long-term, some say the stock should be a winner.

DAVID BERRY, BANKING ANALYST, KEEFE, BRUYETTE & WOODS: It's going to take a couple of years for the benefits of the merger to be realized. But I think as you get out a couple of years from now, earnings will be as good, or perhaps better, than they would have been for Chase alone. And I think there is a strong case to be made, we'll see, but there's a strong case to be made that this company will grow more rapidly and have higher returns than it would have, absent the deal.

PRATT: So far, Chase has a good track record in making big mergers work for shareholders. In the last decade, it succeeded with manufacturers, Hanover and with Chemical Bank. Still, Wall Street is waiting to see if Chase can deliver again. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.

GHARIB: Well, now that Chase and J.P. Morgan are joint accounts, the big question is: who's next? Analysts say that size does matter. And even big investment firms, like Merrill Lynch (MER) and Goldman Sachs (GS) could be looking for partners. But the pressure is more intense for Lehman Brothers (LEH) and Bear Stearns (BSC). Analysts say it's difficult for these mid-sized securities firms to go it alone, and still stay competitive. Also rumored to be on the block: Knight Trading Group (NITE). The NASDAQ's leading market maker is said to be facing a buyout from Morgan Stanley (MWD) or Citigroup. I talked to the two CEOs earlier today, and began by asking J.P. Morgan's chairman, Douglas Warner, that, of all his merger offers, why he chose Chase.

DOUGLAS WARNER III, CHAIRMAN & CEO, J.P. MORGAN: It's taking our content and capabilities, adding it to his. Is there overlap, so as to destroy value? Or is it additive? We concluded quickly, it was additive. Now drive it across the broader client platform, and one plus one equals a lot more than two.

GHARIB: Mr. Warner, for years, Wall Street analysts have been asking about J.P. Morgan merging with someone, and the famous answer was: "size is not strategy."

WARNER: Correct.

GHARIB: What changed?

WARNER: Nothing. Size is not strategy. This is not about size; this is about taking the enormity of the content and capabilities, and spreading them over more clients. And when we do that, we take our content and capabilities, and match them off against the kinds of things Bill has been doing, exceedingly well, because this is a wonderful firm, Chase. And, they're complementary; there's not great overlap, so there's not huge waste. So what we see here is taking what we each do well, and spreading it and growing it. And there has been no discussion about size per se as a critical success factor.

GHARIB: Mr. Harrison, do you feel that Chase is now big enough?

WILLIAM HARRISON, CHAIRMAN & CEO, CHASE MANHATTAN: We are big enough. And one of the most pleasant parts of this merger is, I won't have to answer that question again, because we have a complete platform. We think this creates a global powerhouse. And it's represented by scale: leadership positions, in a broad array of product and client sets, wrapped around by an outstanding group of professionals that will produce great profitability for this company. But most importantly, it will produce growth.

GHARIB: But even with Morgan, a lot of Wall Street analysts say that Chase is not in the same league in the equities' business as let's say a Merrill Lynch or a Goldman Sachs, and that other acquisitions would help.

HARRISON: J.P. Morgan did a great job of building an equities business. They were attracted to us because we have a very large client base, in addition to theirs, which will very much leverage that public equity platform that Sandy built.

WARNER: May I just interrupt just one second?

GHARIB: Yes.

WARNER: Take four dimensions of this: equities, private equity, debt, and risk management. Private equity, leader; debt, unquestioned leader; risk management, leader; equities, fully competent, capable, can win any assignment, any given day, anywhere in the world; both firms together. Three out of the four critical segments were the undisputed leader.

GHARIB: Gentlemen, you talk about growth. Tell me, where are the new revenues going to come from?

HARRISON: New revenues will come from many of the platforms that Sandy just described. Because when you have product capability combined with a very rich client base - and we think that, together, putting these two firms together, that no one will have a deeper, richer, broader client base than we do. It is hugely leverageable from a revenue perspective.

GHARIB: Mr. Harrison, you have a very good track record in making mergers work. You did it with Chemical. You've done it with Hambrecht and Quist. What is it going to take to make this merger work?

HARRISON: One of the things we feel great about is that we've gone through the last two weeks after we really got committed that this did make sense, let's now try to make it happen, we had many people from our top management team working together and through that process you will get a very good feel as to the cultural fit. We are both very excited about what we saw there in terms of how we can work together, the complimentary of the people. And again, having been through these mergers before, I feel very comfortable that we will have a very successful merger integration story here.

GHARIB: Mr. Warner, Wall Street is very concerned about a bloodbath of layoffs. What is it going to take to keep top people to stay?

WARNER: This is not about layoffs, this is about growth. The people component here, the redundancies, where there is overlap and we need to address that, is a relatively small part.

GHARIB: Still, one third, you're talking still about a lot of people. Is there going to be like a-

WARNER: $500 million in the great scheme of things is not that big a part of this deal for what it represents. But it is in the main about growth, which creates jobs.

GHARIB: Mr. Harrison, the market seems to think that Chase paid too much for Morgan. Is this a good thing for shareholders?

HARRISON: We think it's a very good thing for both shareholders. It was a fair deal. Sandy and I originally talked about it, it really hasn't changed since the first discussion we had. It's within the market comps. And most importantly when we look at the overall transaction two years from now, it should be accretive to the shareholders. So we think it's a very fair deal for both sets of shareholders on day one, but most importantly a very attractive proposition to the shareholders long term.

GHARIB: Mr. Warner, J.P. Morgan has a long tradition as a venerable and independent bank. How do you think John Pierpont Morgan would respond to today's news?

WARNER: Congratulations. I think we took 150 years of history and positioned it for the next level of opportunity and success.

GHARIB: Thank you very much and congratulations Mr. Warner and Mr. Harrison.

WARNER: Thank you.

HARRISON: Thank you. Nice to be here.

WARNER: Thank you.

Nightly Business Report transcripts are available on-line post-broadcast. The program is transcribed by FDCH. Updates may be posted at a later date.

The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT.

Information presented on Nightly Business Report is not and should not be considered as investment advice.

©2000 Community Television Foundation of South Florida, Inc.


09/13/2000: UK Fuel Crisis Chaos Gets Pumped Up

SUSIE GHARIB: Europe is in the grip of the worst fuel crisis in 25 years. Supplies are slowly trickling back online after blockades and protests in England, Belgium, Italy and France. From London, Dominic Waghorn looks at the economic impact of the problem.

DOMINIC WAGHORN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The U.K.'s fuel crisis came to the heart of London by midweek. Truck drivers paralyzed key parts of the British capital, including London's famous Park Lane, undaunted by the government's stern condemnation of their action.

PRIME MINISTER TONY BLAIR, GREAT BRITAIN: We cannot accept, as a government or as a nation, that policy should be dictated by illegal blockades, pickets or direct action.

WAGHORN: For the truck drivers, farmers and cabbies leading these protests, the fuel crisis is far from over, whatever Tony Blair says.

LES SMITH, TRUCK DRIVER: They're not going to give up until they win. I mean he might win this little battle, but he'll lose the war.

JANNIC SMEDLEY, TRUCK DRIVER: We're going to continue until we do get some results, because it's the industry that's been crippled. Our industry has been crippled by these rises over time, we just can't cope with it anymore.

WAGHORN: This kind of more or less spontaneous protest is bringing a new dimension to European politics and a new economic threat. These protestors have proven they can bring parts of their capital to a standstill whenever they like and effectively cut off the country's fuel supply. Blockades of refineries closed two thirds of the U.K.'s 13,000 gas stations for much of the week, with panic buying and long lines at the rest. Gas prices are at a 10 year high across Europe, pushing $5 a gallon in Britain, where pump prices are 75 percent taxed. As this graph shows, the price of diesel and heating oil have gone up the most, because European refineries haven't produced enough of either. Analysts predict little relief in the immediate future, especially if the coming winter is a cold one.

WILLIAM BUCHANAN, ENERGY ANALYST, STANDARD BANK: The market is really not ready for it. It's probably unable to supply that demand should it appear. And it's the expectation of that demand that has sent gas, oil and diesel prices going through the roof. So the prospect is for more real improvement in those prices.

WAGHORN: For companies here, the crisis means disruption and increased operating costs. For investors it means stock markets at a four week low, fares of creeping inflation through strong oil prices and possibly higher transatlantic air fares. Observers say the up and down fuel prices are likely to continue around the world for some time to come.

BUCHANAN: These are unprecedented times. The volatility is extreme. We're certainly not out of the Woods yet in terms of high prices. I would imagine it's going to be at least six months or more before prices could start falling.

WAGHORN: While protests continue around Europe, the Clinton administration will be taking note with the same underlying problems already threatening record heating oil prices in the U.S. this winter. Dominic Waghorn, NIGHTLY BUSINESS REPORT, London.

Nightly Business Report transcripts are available on-line post-broadcast. The program is transcribed by FDCH. Updates may be posted at a later date.

The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT.

Information presented on Nightly Business Report is not and should not be considered as investment advice.

©2000 Community Television Foundation of South Florida, Inc.

09/13/2000: Internet Companies' New High Tech Lend Lease Programs

PAUL KANGAS: There is a new trend in the networking industry involving such well known companies as Cisco, NorTel (NTL) and Lucent (LU). They have been lending their customers the money to buy or lease the networking equipment. Joining us now to discuss this trend is Tom Wolf, Bridge correspondent in St. Louis. And Tom, why is this trend developing and how risky is it?

TOM WOLF, EQUITIES REPORTER, BRIDGENEWS: Well, the trend is developing because there's more and more competition in the industry and because a lot of the newer customers are startup Internet firms or telecom firms and many of these firms can't get financing elsewhere.

KANGAS: And maybe some of the networkers can't make their numbers without financing the purchases?

WOLF: Well, that's right. For example, Cisco Systems' (CSCO) sales in the last quarter, 10 percent of those sales were from this vendor financing. That was up sharply from the previous quarter. And Cisco says this number is going to accelerate over the next year.

KANGAS: Well, of course, it's not that unusual. I mean the auto manufacturers loan their customers money and they haven't had major problems.

WOLF: Well, right, Paul, and this is fairly new in the industry. One thing you have got to keep in mind is that the collateral here has a relatively short shelf life as opposed to autos. The old technology changes really quickly here.

KANGAS: Ah, interesting point right there. Are there a lot of delinquencies, to your knowledge, developing?

WOLF: Well, so far there's not been many problems. Cisco, for example, has about one percent delinquency on its financing. But there have been some recent bankruptcies in the industry and if these deals go sour, that could hurt profits down the road.

KANGAS: Are any analysts on Wall Street expressing concern about this trend?

WOLF: Well, they're starting to mention it in their reports, but it's only been recently that, say, Cisco, for example, has even started revealing these numbers to the analysts. They think so far they're OK, but they're keeping an eye on it.

KANGAS: So, in other words, it's something for us to keep an eye on as well?

WOLF: Well, that's right, Paul. If more of the sales come from having to give their customers the money to buy the equipment, that means they're a little bit stretched.

KANGAS: Very good. Tom Wolf, Bridge Correspondent in St. Louis, thank you.

WOLF: Thanks, Paul.

Nightly Business Report transcripts are available on-line post-broadcast. The program is transcribed by FDCH. Updates may be posted at a later date.

The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT.

Information presented on Nightly Business Report is not and should not be considered as investment advice.

©2000 Community Television Foundation of South Florida, Inc.

09/13/2000: Washington Gives Hollywood An "R" Rating In Marketing

SUSIE GHARIB: Well, it's a plot line Hollywood wishes it could rewrite. In Washington today, the Senate Commerce Committee launched hearings into the movie industry's marketing of R rated movies to kids. These sessions follow a scathing report issued by the Federal Trade Commission two days ago showing 80 percent of R rated movies are aimed at the under 17 crowd. Senator John McCain blasted movie studio execs for missing the hearings.

SEN. JOHN MCCAIN, R- ARIZONA: Every single studio executive was either out of the country or unavailable. I can only conclude the industry was too ashamed of or unable to defend their marketing practices. Their hubris is stunning.

GHARIB: McCain wants the heads of Sony (SNE), Disney (DIS), Fox (FOX) and others to appear at a hearing in two weeks.

Nightly Business Report transcripts are available on-line post-broadcast. The program is transcribed by FDCH. Updates may be posted at a later date.

The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT.

Information presented on Nightly Business Report is not and should not be considered as investment advice.

©2000 Community Television Foundation of South Florida, Inc.


09/13/2000: Paul Kangas' Wall Street Wrap Up

PAUL KANGAS: It was a lower opening for stocks on Wall Street today. J.P. Morgan stock fell more than seven points after the sharp run-up late yesterday on rumors that Chase would acquire it. That undermined the Dow Industrial Average, as did a $4 decline on Intel (INTC) on a Banc of America downgrade. Both factors were to blame for a 41 1/2-point loss in the Dow at 10:00 a.m. Intel's weakness was also part of the reason why the NASDAQ Index was down 21 points at 10:00 a.m. Strength in Honeywell (HON) on news it would meet third-quarter earnings estimates, along with solid buying in Merck (MRK) and Johnson & Johnson (JNJ) stocks spearheaded a mid-morning rally, which cut the Dow's loss to only 23 points at 11:00 a.m. when the NASDAQ Index posted a snap-back gain of nearly 23 points. The blue chips went into a mid-session fade which extended throughout the afternoon, while the NASDAQ market, thanks to strength in some tech issues, firmed up. The Dow Industrial Average closed with a loss of 51.05 at 11,182.18. In today's 93-point trading range, the Industrial Average closed down 51 points from the best level of the session; up 41 1/2 points from the low of the day. The NASDAQ Composite came in with a gain of 44.38 at 3893.89. In its 102-point trading range, the Composite Index settled 100 points above its worst level of the day. Nice comeback there. Big board volume moved over a billion shares, nicely up from yesterday. And about nine million shares more of down volume than up volume.

The Dow Transport Index had a good day, up 38.06. The airlines in a little rally as oil prices faded a bit.

Utility Index down .60.

The Closing Tick almost neutral at -75.

Standard & Poor's 500 up nearly 3 points.

The 100 up .45

But the MidCap 400 fell nearly 2 1/2.

Bridge Futures Price Index down almost a point.

New York Stock Exchange Composite fell .62.

But a fractional gain in the Value Line.

Russell2000 up a little over a point and a half.

And the broadly-based Wilshire 5000 up almost 32 1/2 points.

The bond market was able to avoid a sell-off early today on news that the second-quarter U.S. trade deficit rose 4.6 percent to a record high $106 billion, because that was well-below the $108 billion trade gap expected. Add to that a consensus that tomorrow's August producer price index will be market-friendly.

And tax free and corporate issues ended with 1/8 and 1/4 point gains. As did the Treasury market.

5-year notes up 5/32.

11/32 rise in the 10-year note.

30-year bond up 10/32.

And the Lehman Brothers Long-Term Treasury Bond Index gained almost 5.

Several rally attempts by Wall Street's blue chips ran out of fuel today. But the Dow Industrial Average ending with a 51 point loss and the broader market down by only 13 issues, declines over advancers 152 new yearly highs, though; 61 new lows.

Chase Manhattan (CMB) topped the active list on a hefty 35.7 million shares, the stock down $5.38, 3.7 shares of Chase for each JPM share. It has a value of about 187 bucks as of today and J.P. Morgan (JPM) closed at $181.50.

AT&T (T) up $1.25. The company had no comment on a rumor that John Malone would replace C. Michael Armstrong as chief executive.

Nortel Networks (NT) making a comeback after recent weakness.

As did Lucent Technologies (LU), up $1.06 there.

Compaq (CPQ) down $1.56.

Then Micron Technology (MU) gained nearly $3.00.

SCI Systems (SCI) dropping $10.13. The electronic parts manufacturer says first quarter earnings will come in around $0.34, $0.04 below the Wall Street estimate.

Fannie Mae (FNM) up $3.19. Goldman Sachs began coverage with a market "outperform" rating on that stock.

Nokia (NOK) edging up $0.38.

And Advanced Micro Devices (AMD) down $1.75 after Bank America downgraded a "strong buy" to just a "market perform" rating and Prudential downgraded "strong buy" to just "accumulate."

AMR (AMR), parent of American Airlines, up $1.69. Oil futures fell about a half a dollar a barrel in New York today.

Hewlett-Packard (HWP) dropping $7.56. Yesterday Standard & Poor's put the company on its credit watch list with negative implications.

Johnson & Johnson (JNJ) showing a little strength, up $1.00. And the drug group showed signs of coming alive on the up side.

Lowe's Companies (LOW) down $3.31. This is the home improvement retailer. And Merrill Lynch thinks the company may have trouble making third quarter earnings estimates on Wall Street. It will be a little short of a year ago but still maintained a "buy" on the stock.

McDonald's (MCD) down $0.88 and it dropped a $1.00 below that after the close when the company said the strong dollar could cut this year's earnings by up to $0.07 a share.

Sherwin-Williams (SHW), the paint making company, up or down $1.38. This company sees lower than expected third quarter earnings in the range of $0.66 to $0.69 a share due to higher than expected raw material costs.

Minolta-QMS (MQC) up $1.13. Minolta Company Limited, the parent, says it'll buy all the shares it doesn't own for $6.00 each.

National Discount Brokers Group (NDB) up $4.19. Piper Jaffray has issued a "strong buy" and of course takeover speculation is rampant there.

Ryland Group (RYL), the home builder, up $2.56. This company says this year's earnings will exceed $5.50 a share. That would be 10 percent above the First Call estimate.

Applica (APN), the small appliance maker, down $2.13. Banc of America downgraded it from "buy" to just a "market performer."

Watson Pharmaceuticals (WPI) tumbling $12.13. The company sees lower than expected third quarter earnings of only $0.03 to $0.05. The Street was looking for $0.48. The company blames costs of acquiring Shein Pharmaceutical.

And Vimpel Communications (VIP) down $4.00. The Russian government wants this company to give back 30 frequency channels in the 900 megahertz frequency band. The company's going to fight that move.

NASDAQ trading, a 44 1/3 point gain in the index. Volume up a touch from yesterday, about 56 million shares more. And just about a stand-off between gainers and losers.

Cisco Systems (CSCO) coming back $2.44.

But Intel (INTC) down $3.69. Bank of America, as I mentioned, downgraded a "strong buy" to just a "market performer."

JDS Uniphase (JDSU) up $1.63.

Oracle (ORCL) gained $2.44.

CIENA (CIEN) rising $14.88, nice comeback there.

SDL (SDLI) down $1.19.

Sun