SUSIE GHARIB: The economy is hanging on by a thread. Revised numbers show that the gross domestic product grew by a puny 0.2 percent in the second quarter. The latest numbers escaped an official definition of recession, but it was the weakest quarter in eight years. Suzanne Pratt reports.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: The collective sigh of relief was nearly audible after the nation learned the economy did not slip into recession territory last quarter. The government's preliminary revision to second-quarter GDP Showed the economy grew at 0.2 percent, well below a prior reading of 0.7 percent, but above expectations for zero or lower. A recession is usually defined as two consecutive quarters of negative GDP. Nevertheless, experts say the message is clear: the economy virtually stalled in the April-to-June period.

GARY THAYER, CHIEF ECONOMIST, A.G.EDWARDS: It's one of the weakest quarters that we've had in many years, and coming after several other weak quarters. This is probably one of the biggest slowdowns that we've had over the last couple of decades.

PRATT: One of the reasons for the revision was that companies reduced their inventories by more than the government previously thought. Estimates were also off for the trade deficit. It was steeper than originally calculated. Still, much of the overall weakness came from companies cutting back sharply their spending on plants and equipment. Consumer spending, on the other hand, was the major force keeping the country out of recession. And although some experts are unsure whether the yearlong downturn is likely to worsen, others say the worst is over. In fact, they predict the consumer will continue to carry the load in the second half of the year.

MICHAEL MORAN, CHIEF ECONOMIST, DAIWA SECURITIES AMERICA: We'll see improvement in the third quarter and in the fourth quarter, partly because of the rebate checks being mailed out and partly because of easier monetary policy that is in place. I think though we're still going to have a disappointing performance in the second half of the year.

PRATT: On September 28, the government will get one last chance to revise second- quarter GDP. Economists say even though the data will be pretty stale by then, a negative reading would get noticed on Wall Street. Suzanne Pratt, "NIGHTLY BUSINESS REPORT," New York.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. 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.

SUSIE GHARIB: In Washington, today's GDP report was met with optimism by the Bush administration. Washington bureau chief Darren Gersh sat down with Commerce Secretary Donald Evans and began by asking Evans about his outlook for the economy.

DONALD EVANS, COMMERCE SECRETARY: Well, I think the economy continues to under perform as it has been for the last 12 months or more. I mean, this economy started to slow down in the mid part of the year 2000. And that slowdown period has continued through the second quarter of this year. I'm optimistic though because this slowdown in the economy was on the president's plate when he was sworn into office. He took immediate action to implement a recovery plan. He has that recovery plan underway. The first important part of it is his tax cut plan, which was passed by Congress. Rebate checks are going out as we speak to the American consumer.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Now, one of your jobs, your duties as commerce secretary is to be the point man for contacts between the administration and the business community. What are business leaders telling you about their outlook for the economic recovery?

EVANS: Well, what business leaders are telling me is they look at their long-term strategic plans, they see much of their growth occurring outside the borders of the United States. And they continue to talk to me about how important it is that we participate, not only participate, but we lead when it comes to international trade policy.

GERSH: But in the latest GDP report, exports performed worse than people expected. They are contracting at a 12 percent annual rate. And normally when the economy slows, exports pick up and they help to lead our way out of recession. Why isn't that happening now? Why is our trade gap widening?

EVANS: Well, sure, it's just.- the global economy is slowing down. I mean, you can look at what is happening around the world. You can look at Japan. You can look at Europe. You can look at Latin and South America. I mean, all of these areas, you're seeing some slowdown. And so that, of course, will effect and impact not only their own economies but those countries that trade with them.

GERSH: But what is it going to take to turn around our export performance?

EVANS: Well, I think it's again staying with and sticking with the president's plan, his recovery plan. And you have to look long-term. I mean this is, as I mentioned, this is a slowdown that started not just this past quarter - we're focused on this last quarter's revisions - but this is a slowdown that occurred, began, some 12 months ago. But as leaders, what you need to do is stay focused on the longer term framework, structure, environment, for an economy to continue to grow. And so it's doing things like a full implementation of the president's tax plan, it's making sure that Congress remains fiscally responsible, and it's making sure that America can lead when it comes to these very important trade negotiations that are going to begin over the course of the next 12 to 24 months.

GERSH: What about consumers? They've been a bright spot in the economy and yet August consumer numbers, confidence numbers, came down. And there's concern out there among investors that after consumers cash all their rebate checks that they may run out of gas. Do you think that the consumer can hold on?

EVANS: The consumer confidence index this last report was the highest it had been in 15 out of the last 21 years. I mean, consumers are still very confident. Has it trended down slightly over the last few months? Well, yes it has. But when you look at it out over the last 20 years, the consumer remains very confident as to the future of this economy.

GERSH: Mr. Secretary, thank you.

EVANS: Thank you, Darren

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. 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.

08/29/01: One On One With Computer Associates' Chairman Charles Wang

SUSIE GHARIB: Well, the bitter proxy fight for Computer Associates is over. The company said today that shareholders voted to reelect the incumbent board of directors, and that the dissident slate proposed by Texas billionaire Sam Wyly was defeated. After the vote, I talked with Computer Associates' chairman Charles Wang, and asked if Wyly's proxy fight was a wake-up call for the company.

CHARLES WANG, CHAIRMAN, COMPUTER ASSOCIATES: I think the things that he talked about, I think it was an opportunity for him and he seized it. He ran a political campaign and ran out there and demonized some people and so forth. He hurt the company; there's no question about it. And certainly he postponed some of the things we were doing. For example, directors. We have directors that we were going to bring on here and so forth. No one would join the board at this point in the midst of a proxy fight. We're going to go back and readdress that. And obviously we did bring on two new directors that was started long before Mr. Wyly came along. So I think in one sense, yes, it's been a bad distraction. At the same time though we have to articulate and communicate better to all the different constituents.

GHARIB: One of the criticisms that Mr. Wyly brought up was that this pro forma accounting practice that was widely criticized. Are you going to make changes to that so that Computer Associates is using the same metrics as your competitors?

WANG: Well, I think you have to understand that there is something very fundamental about when they say pro forma. We report on an as-stated basis, which is the GAP standard. And that we do. And as a matter of fact, last quarter we led with that, as this is what it is. Pro forma in terms of earnings and so forth is the big sort of controversy today. These, our expense number earnings, et cetera, do not get affected by the pro forma. The reason there is a pro forma is that because we switched to a different business model, analysts and investors would like to know, well, how do we compare? So what we have to do, which is extra work, is to go back in time and say, if we were on a pro forma, on a ratable (ph) basis, not pro - ratable basis, what would it look like? And that's what we provide, is guidance.

GHARIB: There has been considerable criticism of your compensation package and the salaries of other Computer Associate executives. Are you going to be making changes to that so that they'll follow more along the guidelines of other executive compensation packages?

WANG: I think that one of the things is - and this is one of the sad things because, don't forget, when those compensation - that compensation package was put together in 1995, it was approved by over 75 percent of the shareholders of CA. It was written up by some of the same people who are criticizing very vocally today as one of the most innovative, aligning management incentives with what shareholders interests are, et cetera. It is a five-year compensation plan with a seven-year tail.

GHARIB: But do you have regrets that you went ahead with that?

WANG: Yes, absolutely.

GHARIB: In retrospect?

WANG: Absolutely, because obviously, sometimes if you're the pioneer, so to speak, I guess you get the brunt of it. And obviously one is looking at a 12-year kind of window. Every year we get measured and there will be ups and downs.

GHARIB: One of the other criticisms has been about customer satisfaction. And analysts I've talked to say that they get negative feedback about Computer Associates. What are you going to do to keep your customers?

WANG: Well, I think that certainly, one, yes, we do have negative feedback sometimes. And we are only going to be as good as our last support call, our last service call, our last implementation. This is the nature and the function of any service business you're in. We are doing more. We do more surveys today. We have 600-some relations managers that do nothing but ensure that our relations with our customers are right. They get compensated by our own survey which is done independently - but done by CA in the sense that we pay for it, they get compensated based on the improvements in that survey. So we are focused on this. And we know we still have more to do there.

GHARIB: Thank you very much, Mr. Wang. We appreciate you talking to "NIGHTLY BUSINESS REPORT."

WANG: Good, thank you, Susie.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. 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.

08/29/01: "The Energy Crunch: Gridlock"- The Technological Shift Of Power

SUSIE GHARIB: Experts in the utility industry say that the nation's system for transmitting electric power is under stress. The supply and demand for electricity continue to grow. But little has been done to help move that power over long distances to where its needed. As we continue our special series, "The Energy Crunch: Gridlock," Jeff Yastine reports that with some help from technology, changes are coming to power transmission.

JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: An electric substation in upstate Marcy, New York. High-power transmission lines from Canada converge here, before the power is then sent on its way to the New York City Metro area. Because of the huge demand for power in the city, these lines tend to run pretty much at maximum capacity, no matter what the season. But inside this building, behind this window of safety glass, is a new piece of technology that will make those lines more productive, a device called a static compensator. It's an array of high-technology ultra-powerful circuits which continuously regulate the power and stabilize it. That allows managers in a nearby control room to safely boost the amount of power flowing through the transmission lines. Next year, managers will even be able to shift power between different sets of transmission lines.

KENNETH HAASE, SR. TRANSMISSION VP, NY POWER AUTHORITY: That shifting of power will allow us to move power off lines that are more heavily loaded, onto lines that are more lightly loaded. Basically using more efficiently the power flow on the existing transmission network to again raise the transmission limits, the thermal transmission limits, of the transmission system.

YASTINE: The ability to instantly monitor and switch thousands of volts of electricity gives grid managers a flexibility that just hasn't existed before. And some think that investment in technology is sorely needed before the nation's power-transmission system to meet the growing demand.

LARRY OLIVA, PARTNER, ANDERSEN CONSULTING: It's a difficult problem because your congested areas of today may not be the congested areas of tomorrow. Weather and maintenance sometimes affect that. But overall, there's been an underinvestment in the transmission business, and with incentives, I think the market can find the right solutions.

YASTINE: And a few companies say they have. Canada-based TransEnergie builds and operates its own power- transmission lines. The company is proposing an undersea power line it would build from the Connecticut coast to Long Island, where consumers pay some of the highest electric bills in the country.

JEFFREY DONAHUE, PRES. & CEO. TRANSENERGIE US: We go through a process that is quite quick and quite efficient, and say, "we'll build a line, we'll charge you a certain amount of money, will you pay for it?" And if they say "yes," then we go forward and try to build the line. If they say "no," we don't. Which is very different than how the traditional grid has been developed in the United States

YASTINE: TransEnergie's power lines are unusual because they use DC, or direct current. That makes it possible for the lines to be buried in the ground like a telephone or data cable, with a minimum of environmental or community impact. Still, analysts say, relatively few companies are focusing on this end of the electric industry. But they expect more to join in as the potential rewards become clearer. Jeff Yastine, "NIGHTLY BUSINESS REPORT," Marcy, New York.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. 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.

PAUL KANGAS: The stock market's knee-jerk reaction to that GDP report was an opening rally prompted by investor relief that the economy showed any growth at all in the second quarter, because concern had been building that the figure would be negative. Well, judging by early run-ups of 35 points for the Dow and 15 points for the NASDAQ Index, one could see just how starved Wall Street was for anything even remotely positive, when a rally is triggered by bad news, only because it wasn't as bad as expected. Well, it wasn't long before uninspired investors sold into that strength because they figured chances were slim for a sustained rally in the last week of summer vacations. A rather steep sell-off ensued, which sent the Dow to a 123- point loss by 12:30 p.m., while the NASDAQ Index fell to a 20 points. It was another uneventful afternoon featuring low trading activity and not much else except for an overriding bearish tone. The Dow Industrial average closed with a loss of 131.13 points, or 1.3 percent, putting it at 10,090.90. The NASDAQ closed down 21.81 points, or 1.2 percent, at 1843.17.

Big Board volume drifted down to 955 million shares, summer doldrum style, and easily twice as much down volume as up volume.

The Dow Transports Index off just about 3 1/4 points.

Almost a 2 3/4 point drop in the Utility Index.

The Closing Tick, modestly bullish at +405, though.

Standard & Poor's 500 off nearly 13 points.

A 7 3/4-point drop on the 100.

The MidCap 400 fell 0.86.

And the Bridge Futures Price Index up 0.15.

New York Stock Exchange Composite down 5 1/3.

A loss of 1 2/3 on the Value Line.

Russell2000 Small Cap lost 0.86.

And the Wilshire 5000, almost 105-point drop or 1 percent.

Bond prices were buoyed by that report of meager second-quarter GDP growth because it was likely to keep the Fed in an easing mode until the economy turns around. And once again, the stock market's sharp downturn triggered plenty of safe haven buying in bond investments.

A firm dollar and weaker New York oil futures also contributed to 3/8 to ½-point closing gains in tax-free and corporate issues, as well as in the Treasury market.

The 5-year notes up 8/32.

The 10-year notes rising 18/32.

The 30-year bond up 20/32.

And the Lehman Brothers Long-Term Treasury Bond Index was up just about 1/2 point.

A lot of other things closed down, too, including the Dow, once again, a big loss, off 131 points and then some. For every 14 stocks higher, 16 lower, and yet 103 new yearly highs as against only 58 new lows.

Lucent Technologies (LU) topped the active list for the fifth consecutive session today on 20 million shares. Stock down $0.43. It's been firm in the other four sessions.

Global Crossing (GX) moved up $0.22, coming off 52-week low.

AOL Time Warner (AOL) fell $2.15.

Pfizer (PFE) losing $0.55.

And Nokia (NOK) dropped $0.57. The company said its second quarter share of the mobile phone market dropped ½ percent, down to 34.8 percent.

General Electric (GE) lost $0.62.

But American International Group (AIG) up $0.90.

EMC (EMC), a $0.62 loss.

The NASDAQ Qs (QQQ) in there, down $0.54.

And Citigroup, tenth in volume, off $0.60.

Advanced Micro Devices (AMD) fell $0.66. The company expects third quarter sales of its Flash memory products to fall about 30 percent from the second quarter level.

Corning (GLW) down $0.79. After the market closed Corning said it's going to close another 1,000 jobs at its optical fiber operations and it sees its optical business growth this year well below the earlier projection of 15 percent increase. After-hours trading, Corning stock was as low as 14.

Cypress Semiconductor (CY) fell $1.33. Lehman Brothers cut earnings estimates 5 percent for the third quarter, and for the full year of 2001, cut the estimate from $0.11 down to $0.06.

Equant (ENT) up $0.87 today. The company is in high-speed communications network services. And it said second quarter cashflow was up sharply on a 30 percent rise in revenues.

Gateway (GTW) up $0.19, that's in reaction to yesterday's post-market restructuring announcement.

And finally Ultramar Diamond (UDS) up $1.94. Lehman Brothers upgraded this stock from "neutral" to a "strong buy."

And it did the same thing with Tesoro Petroleum (TSO).

And Frontier Oil (FTO). Upgrades by Lehman from "neutral" to "strong buy."

Westvaco (W) moved up $2.09.

And Mead (MEA) gained $1.99. These two paper companies are going to merge into one which will be called Mead-Westvaco, logically enough. It will be the fourth biggest paper company, $3 billion stock swap deal. Mead shareholders will get one share of the new company plus $1.20 in cash per share. Westvaco will get 0.97 shares of the new company for each share they own.

Cooper Companies (COO) down $6.48, third quarter earnings were higher: $0.67 versus $0.59 last year. But part of the increase was due to lower tax rates. Analysts didn't like that. And they didn't like the company's forecast for 2002. They've apparently found it somewhat confusing.

NCI Building Systems (NCS) down $1.30. Company is into metal building and framing systems, sharply lower earnings for the third quarter, $0.30 versus last year's $0.66. And sales dropped 5 percent.

NASDAQ trading nearly a 22-point loss, 1.2 percent. Volume moved up 32 million shares from yesterday, 15 stocks higher for every 20 lower.

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