11/01/00:
One On One With WorldCom CEO, Bernard Ebbers
JEFF YASTINE: Well, back now to our top story, that restructuring
at WorldCom (WCOM). Just a short while ago, our Susie Gharib sat down with WorldCom's
CEO Bernard Ebbers in New York City.
SUSIE GHARIB, NIGHTLY BUSINESS REPORT: Mr. Ebbers thank
you very much for joining us. First of all, let me start by asking you why the
tracking stock? Why didn't you just spin off MCI or just sell it?
BERNARD EBBERS, PRES. & CEO, WORLDCOM: Well, there are
several reasons for that. The first and foremost is the time frame that it takes.
We need to do something now to impact our business and to free up our high growth
business, the data business, to get off and running with the new initiatives that
we have underway in that division. Spinning off the tracking business or the consumer
business takes a much more extended period of time, six to nine months, and we
wanted to get that, this thing rolling right away. The other thing that's very
important is that this transaction requires no regulatory approval and that in
itself could be a long time frame, an undefined time frame that we would know
if we decided we wanted to spin it off.
GHARIB: But tell us why would an investor want to buy an
MCI tracking stock given that it's in a declining business and has been a drag
on WorldCom?
EBBERS: Well, it's been a drag on WorldCom's growth and
that's a very different thing. The key to the separation of these businesses is
that there are different business metrics that drive these businesses. The MCI
business that will be in the consumer tracker is a very good business. It generates
a lot of cash and will produce a very good dividend. And there are a lot of investors
out there that invest in stocks for dividend yields and there'll be-
GHARIB: So it's not about growth then?
EBBERS: No. It is not about growth. It is about producing
cash. As opposed to the other segment of our business, which is the most important
part of WorldCom going forward, and that is our data business and all the initiatives
we have going with that division.
GHARIB: Let me ask you this, Mr. Ebbers, looking at the
WorldCom strategy over the past couple years, it seems to me that the ideal was
to combine the high cash flow long distance business of MCI with these new economy
businesses. By your announcement today, are you basically saying that that strategy
didn't work?
EBBERS: Well, to some degree it didn't work. Now, I would
not say that MCI had different cash flow characteristics than WorldCom did. What
has happened definitely in the environment since 1997 when we did the MCI transaction
is the nature of the consumer business and the switch voice business is very different
today than it was back then. And, yes, you can say that I didn't have enough foresight
to see that coming and so on and that might be partially true. But you see that
manifested itself in a lot of different companies today.
GHARIB: All right, your earnings have been disappointing
this year. You now came out today with another warning. What's it going to take
the get the earnings to grow again?
EBBERS: Well, I think we have established today a new baseline
that we feel very, very comfortable with. It has been an excruciating experience
for our shareholders and for management of the companies- for the company to keep
lowering estimates and revenue growth targets each quarter. It hasn't been a good
experience. And we have now set a new benchmark, so to speak, and with the separation
of these businesses in conjunction with that, we feel that we will be very, very-our
earnings will be very predictable and certain going forward.
GHARIB: So how long is it going to take to get WorldCom
back on track again? Are we talking about six months, a year, maybe longer?
EBBERS: I would say no longer than six months. We certainly
will have all our reorganization done by then. We will have had the opportunity
to prove to our investors that the revised numbers we gave them today are correct
and accurate. So I believe it will not be longer than six months.
GHARIB: Mr. Ebbers, you told analysts today that you were
not satisfied with the direction that the company has been going and that you
had let investors down. Why should a WorldCom stockholder hold onto his stock
now and why should new investors even think about investing in WorldCom?
EBBERS: Well, I think they're going to make that decision
based on-the investors that have been long-time shareholders-the tremendous return
they've gotten over a long period of time. WorldCom has still been a fabulously
successful company. We are going through some bumps right now. These bumps are
not unique to us and I think that they'll see that the quality of this management
team is capable of driving them to greater value in the future.
GHARIB: All right, thank you very much, Mr. Ebbers. We appreciate
your talking to NIGHTLY BUSINESS REPORT.
EBBERS: You're welcome.
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. © 2001 Community Television Foundation
of South Florida, Inc.
11/01/00: Campaign Finance: Joining The PAC Club
JEFF YASTINE: With just five days until election day, this
campaign is shaping up to be the most expensive in U.S. history. Tonight in the
final part of our series on campaign finance, Washington Bureau Chief Darren Gersh
looks at big business and the Washington money game.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: There
are many exclusive clubs in the nation's capital, but this year there is a new
one just for PACs, political action committees. The price of membership, give
75 percent of your organization's campaign contributions to House Republican Congressional
candidates. In return, PAC representatives are invited to cocktail parties with
House Republican leaders like Speaker Dennis Hastert and Majority Leader Dick
Armey. Harry Freeman, a former American Express (AXP) executive, says such stories
explain why business leaders are increasingly turned off by the pressure to make
political contributions.
HARRY FREEMAN, FORMER EXEC. VICE PRESIDENT, AMERICAN EXPRESS:
And I think it's gotten much more overt. I mean, I think people on the Hill particularly,
are saying, you know, we can shakedown these guys. Let's go after them.
GERSH: Congressional Analyst Tom Mann says one corporate
executive told him what happened when he presented a party official with a $50,000
check.
THOMAS MANN, CONGRESSIONAL ANALYST, BROOKINGS INSTITUTION:
The party official looked, you know, a little disappointed. So the businessman
said, "What's wrong?" The party official said, "I was expecting
another zero."
GERSH: Mann says such brazen demands for money undermine
trust in government and feed a public perception that special interests are buying
influence.
MANN: You shouldn't have to feel as if, that if you don't
pony up the bucks, you don't have a place at the table, you won't be heard.
GERSH: A recent survey by the Committee for Economic Development,
a nonpartisan business research and public policy group, says nearly 80 percent
of corporate executives agree and think the current campaign finance system is
broken and needs to be reformed. But 75 percent of those same business leaders
say donations give them an advantage in shaping legislation. Author Jeffrey Birnbaum
says it's no secret that money makes a difference.
JEFFREY BIRNBAUM, AUTHOR, "THE MONEY MAN": The
interests that do have money and hire the more adept lobbyists or give money to
the better places often get their way in Washington. Not always, but often do.
It is a distinct advantage and it is one of the reasons why voter turnout has
been falling and voter cynicism has been increasing.
GERSH: But former Iowa Congressman Fred Grandy says members
of Congress aren't bought by campaign contributions. He says the problem is campaigns
are now so expensive, lawmakers must spend most of their time raising money.
FRED GRANDY, FORMER MEMBER OF CONGRESS: I mean, it was always
a mystery to me why the Senate didn't start work until 6:00 at night when I was
in the House. But then I found out why, because they spend from 9:00 to 6:00 raising
dough. And so the nation's business basically works the graveyard shift. The corporation's
business gets prime time.
GERSH: As for solutions, Grandy, also a well-known actor,
offers this.
GRANDY: I think the best you can do, and particularly people
in the media, is try and do the same thing you do at the end of a movie or a television
show, you list the credits and you decide who is responsible for doing the good
and bad work.
GERSH: In the meantime, this election is setting new records
for campaign contributions. It's also likely to draw one of the lowest voter turnouts
of recent times. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
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. © 2001 Community Television Foundation
of South Florida, Inc.
11/01/2000: Employment Report Preview
PAUL KANGAS: This Friday the government releases October's
employment report. Joining me now from our Washington bureau with a preview is
Bridge economist Mark Serlin. Mark, what should we be looking for?
MARK SERLIN, ECONOMIST, BRIDGENEWS: The work week. The work
week is the most important thing to watch for. It's the leading economic indicator.
We've recently fallen back to four year lows. That suggests the need to hire more
people is probably diminishing, but at the same time it suggest very strong productivity
growth.
KANGAS: Is it enough to cause-an indicator that the economy
really is slowing a lot?
SERLIN: I think if the work week continues to slow, yeah.
It's going to get a lot of attention from the Fed because that work week plugs
itself into a lot of other economic data.
KANGAS: Does this all translate into an increase, a decrease
or no change in the jobless rate?
SERLIN: Overall the unemployment rate is likely to be unchanged,
maybe inch a little higher. Though, the unemployment rate is not the whole story,
though. There's the labor force participation rate and the employment to population
ratio. The thing to watch for is that they all move together, tell the same story
of either a labor market tightness or a labor market weakness.
KANGAS: Is there anything that is particularly out of line
with the other factors?
SERLIN: Yeah, right now the unemployment rate is suggesting
that the labor market is very tight. The labor force participation ratio and the
employment to population ratio are suggesting, they're suggesting that the labor
market is loosening up a little bit. That's why I wouldn't be surprised to see
a little uptick in the unemployment rate.
KANGAS: OK, a little uptick in the unemployment rate. But
you don't see the Fed being influenced one way or the other? You think they'll
hold steady for a while?
SERLIN: Yeah, I think they're going to hold steady for a
while. The issue now is strong consumer spending, a rebound in the housing market
versus a little problem with too much inventories and slowing in capital equipment
spending.
KANGAS: OK. All right, Mark. We'll be looking closely. Thank
you very much. We appreciate your thoughts.
SERLIN: Thank you.
KANGAS: My guest, Mark Serlin, Bridge economist.
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.
11/01/2000:"Money File"-The 411 On Mutual Funds
JEFF YASTINE: How much financial information do you know
about the mutual funds you own? Tonight's money file commentator says it's probably
not enough. Here's Don Phillips, CEO Of Morningstar.
DON PHILLIPS, CEO, MORNINGSTAR: Are mutual fund investors
second class citizens? I caused a bit of a stir recently when I suggested that
there was a dull standard between the disclosure of information on stocks relative
to that on funds. A stunned SEC official charged that I was off base to suggest
that the SEC, and specifically its Chairman, Arthur Leavitt (ph), didn't care
about fund investors. Just look, he pointed out, how we've tried to simplify fund
prospectuses and put more of the information into charts and pictures. Sadly,
his response proves my point. The standard for improving fund disclosure is how
can regulators shrink the amount of information and come up with simple charts
and pictures so that naive investors can make sense of it. For funds, the disclosure
standard is what are investors capable of handing. Now, contrast that with disclosure
on stocks. Would anyone dare suggest that the SEC should stream line offering
prospectuses by eliminating complex information and adding more pictures? Should
we remove the footnotes from financial statements because they can be confusing?
Of course not. With stocks one assumes that investors are capable of sorting through
complex information and making their own decisions. Accordingly, the disclosure
standard for stocks is what do investors have a right to know. Is it correct to
assume that stock investors are smart and able while fund investors need to be
spoon fed information? I think it's high time we applied the higher standards
of stock disclosure to mutual funds. After all, fund investors have rights, too.
I'm Don Phillips.
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.
11/01/2000: Paul Kangas' Wall Street Wrap Up
PAUL KANGAS: WorldCom's earnings warning and some normal
profit taking in the wake of yesterday's big rally on Wall Street led to a lower
opening today with the Dow Industrial Average falling 34 points in the early going,
while the NASDAQ Index dropped about 62 points. The modest losses and relatively
light volume on the opening sell-off convinced many investors that the path of
least resistance was still on the up side, especially in the tech sector. So they
did enough buying in mid-morning to cut the Dow's loss to only 33 points by 11:00
a.m., while the NASDAQ Index actually moved to an 18-point gain. The budding upturn
lost its luster over the mid-session hours when a fourth quarter revenue warning
from Altera (ALTR) undermined the semiconductor group, while financial stocks
weakened after Goldman Sachs trimmed earnings estimates for Merrill Lynch (MER),
Lehman Brothers (LEH), and Morgan Stanley (MWD). By 2:00 p.m., the Dow was down
100 points and the NASDAQ off 42 points. The downturn was staunched by bargain
hunters as they came off the sidelines again, and that trimmed the closing loss
in the Dow to 71.67 points putting it at 10,899.47. The NASDAQ Composite Index
lost 36.24, ending at 3333.39.
The big board volume trailed off a bit, but still active
at nearly 1.2 billion shares. About a 6 to 5 ratio of down volume over up volume.
The Dow Transport Index managed to edge up 8.15.
Utilities had a good day, rising nearly 6 2/3.
And the Closing Tick decidedly bullish at +614.
Standard & Poor's 500 fell nearly 8 1/4 points.
Just over a 2 1/2-point drop on the 100.
But the MidCap 400 managed nearly 1/2-point gain.
The Bridge Futures Price Index up a rather large 2.42.
New York Stock Exchange Composite down just over a point
and a half.
Nearly a 3/4-point drop in the Value Line.
Russell2000 Small Cap off exactly 2 1/2 points.
And the broadly-based Wilshire 5000 off just over 62 points.
After edging lower for the last several sessions, the bond
market moved modestly higher today in a technical rebound which was enhanced by
news of a drop in the National Association of Purchasing Managements Index of
Manufacturing Activity in October, and that underscored a slowing economy. This
report overshadowed news that September construction spending rose a brisk 2.4
percent, while the Federal Reserve's Beige Book report also showed continuing
moderate growth in the economy.
Tax free and corporates managed to rise about 1/8 point,
on average. And the Treasury market was higher across the board.
5-year notes up 5/32.
10-year note up 3/32, with the yield at exactly 5 3/4 percent.
30-year bond edged up 1/32.
And the Lehman Brothers Long-Term Treasury Bond Index was
up 1.11.
Well, the first trading day in November saw a little bit
of profit taking after yesterday's big rally, but relatively modest, down 71 2/3
points on the Dow. And only 35 more stocks closed lower than higher; 99 new yearly
highs, only 51 new lows.
Nortel Networks (NT) topped the active list on 21 ½ million
shares, down $1.50. Of course yesterday it was up $5.50. Today the company said
that it expects fourth quarter earnings to be about $0.26 a share, pretty much
in line with Street estimates.
AT & T (T) fell $1.19, no doubt hurt by the WorldCom
news.
Lucent Technologies (LU) down $0.44, same reason.
Wal*Mart (WMT) was up $1.31, recovering from recent weakness.
And EOG Resources (EOG) up $2.75. After the close of trading
today, this stock was added to the Standard & Poor's 500 Index so obviously
Index fund buying in there today.
Pfizer (PFE) rose $0.31.
GE (GE) down $0.38.
Qwest Communications (Q) on the WorldCom news down $2.94.
A $2.50 loss in Sprint FON Group (FON), the same reason.
And America Online (AOL) was up $1.47, 10th in volume.
Analog Devices (ADI) fell $5.50 today after Morgan Stanley
downgraded it from "buy" to just "market perform."
Aetna (AET) moved up $4.94. Third quarter earnings came
in at $1.10, way down from last year's $1.21 a share, but that was well above
the $0.90 per share Street earnings estimates.
Lehman Brothers (LEH) down $3.63. As I maintained earlier,
Goldman Sachs trimmed earnings estimates there, did on Merrill Lynch and Morgan
Stanley as well.
Quanta Services (PWR) up $2.38. Third quarter earnings nicely
higher, $0.53, way up from $0.34 last year, and revenues up a whopping 79 percent.
Tommy Hilfiger (TOM) up $1.38. The company had second quarter
earnings better than expected at $0.49 even though that was way down from $0.79
last year. And First Boston upgraded the stock from "buy" to a "strong
buy."
Watson Pharmaceuticals (WPI) down $2.69. The company received
a non-approval letter from the FDA regarding its new transdermal combination patch.
Liberty Financial Companies (L) a $9 gain. It's into asset
management and insurance. Third quarter earnings came in a little lower today,
$0.66, down from $0.68 last year, but the company has hired First Boston Corp.
To explore alternatives, including a possible sale of the firm.
Farm Family Holdings (FFH), another insurance company, up
$7.50. It's going to be acquired by American National Insurance Company (ANAT)
for $44 a share.
ResMed (RMD) up $3.69. The company's in the medical equipment
business and came in with first quarter earnings at a record $0.20 a share, up
from $0.15 last year, and revenues up 20 percent.
Administaff (ASF) tumbling $4.86. Now, first of all, it
was up $5.35 yesterday on no specific news. But today, a group called First Analysis
noted the company's gross profit margins are shrinking a bit.
Pittston Brinks Group (PZB) down $1.75. Third quarter earnings
sharply lower, $0.15 versus $0.48. Standard & Poor's said sell the stock.
Comerica (CMA) off $5.19. It's going to acquire Imperial
Bancorp (IMP) for $1.3 billion in stock, a little potential earnings dilution
there.
NASDAQ trading, a loss of 36 ¼ points in the Index and volume
down just a touch but over two billion shares, 18 stocks up for every 20 down.
Cisco Systems (CSCO) topped the active list, down $1.75.
WorldCom (WCOM), major loser, down $4.81.
Microsoft (MSFT) moved up $0.75.
Sun Microsystems (SUNW) down exactly $5.
JDS Uniphase (JDSU) fell $2.88, fifth in volume.
Juniper Networks (JNPR) down |
