SUSIE GHARIB: Comcast is the new king of cable: it's paying $72 billion for AT&T's vast cable operations. The blockbuster deal makes Comcast the biggest cable company in the country, by far. It also raises questions about the future of AT&T, and whether Ma Bell can survive. We have two reports this evening examining these issues. We begin with Erika Miller in New York.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Five months after its initial offer was rejected, Comcast finally won it's much coveted prize: AT&T's cable unit.

BRIAN ROBERTS, PRESIDENT, COMCAST: As I think about the opportunity, it still hasn't completely sunk in, and I think it will take time. But this company has the potential to be a catalyst for so many great products for consumers.

MILLER: Comcast will pay $47 billion in stock, and assume $25 billion in debt for the assets. The deal will make number three Comcast the nation's number one cable company.

C. MICHAEL ARMSTRONG, CHAIRMAN & CEO, AT&T: I think we've put together the leading communications and entertainment broadband services company in the world, and I say that from its presence, combined we pass some 38 million homes and serve today some 22 million homes.

MILLER: That's nearly twice as many as number two cable operator, AOL Time Warner (AOL). That company was one of the suitors for AT&T Broadband, along with Cox Communications (COX). But an unusual ally for Comcast emerged in this fight: Microsoft (MSFT). The software giant was determined to block any deal that benefited its rival AOL Time Warner. For its part, Microsoft gets a $5 billion equity stake in the new company.

MELISSA EISENSTAT, SOFTWARE ANALYST, CIBC WORLD MARKETS: I don't think you're going to look at Microsoft as a cable play, but I think being allied with cable leaders will be - certainly make it an important part of its strategy.

MILLER: Analysts say the deal makes long term strategic sense, although several cut their ratings on Comcast concerned about near-term profits.

FRED MORAN, JEFFRIES & CO.: The biggest concern is whether or not Comcast can drive AT&T's Broadband's margins back to industry standards. There have been several years of major investment in new services that have really eaten into the margins of the AT&T Broadband unit.

MILLER: The Comcast/AT&T hook up raises questions about what happens to AOL Time Warner and Cox Communications. The word on the Street is that those companies will begin searching for other partners, potentially Cablevision (CVC) and Adelphia (ADLAC). Erika Miller, "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.

12/20/01: The Future of AT&T

STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: What's left of AT&T now is a plain old telephone company. Analysts say what remains will have a difficult time surviving on its own.

SCOTT CLELAND, CEO, PRECURSOR GROUP: It has a very challenging model going forward. Because the combination of wireless substitution that's going on that's lowering the margins of long distance and Bell entry into long distance, those are two double whammies that are very difficult for the long distance industry to survive.

WOODS: AT&T under Armstrong spent over $100 billion for cable companies TCI and MediaOne, only to sell them and more in today's $72 billion deal. But even before Armstrong's reign, AT&T had a history of bad transactions. It leapt into the computer business in 1991with a $7.3 billion bid for NCR (NCR), only to spin it off six years later. It paid $11.5 billion for McCaw Cellular (ph) in 1994, which was spun off this summer, and AT&T took a $3.5 billion charge when it called off its international joint venture with British Telecom (BTY) this fall.

GEORGE REED-DELLINGER, TELEMEDIA ANALYST, WASHINGTON ANALYSIS: AT&T has had a series of strategic errors over the past two decades that I think is going to result in the company's eventual dismemberment and demise.

WOODS: Analysts expect AT&T's long distance business to also be bought, most likely by one of the Baby Bells born when AT&T was broken up in 1984.

DELLINGER: SBC (SBC) and Verizon (VZ) that are both vying to become the first Bell company to get a critical mass of states that they operate in that are competitive, and then I think they are going to want to expand nationwide.

WOODS: The AT&T brand will soon be on several different companies. Experts say that may tarnish the once-sterling name and make the old Ma Bell seem so very 20th Century. Stephanie Woods, "NIGHTLY BUSINESS REPORT," Washington.

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.

12/20/01: Details Of The Deal From The CEO's Of Comcast & AT&T

SUSIE GHARIB: Back now to our top story, that big cable deal between Comcast and AT&T. After the announcement this morning, I talked with the heads of both companies and began by asking Comcast's Brian Roberts what's he getting for the $72 billion he's paying.

BRIAN ROBERTS, CEO, COMCAST: We're getting the opportunity of a lifetime to build the nation's premier broadband entertainment and communications company. And if you believe as I do that cable television can become so much more, whether it's video on demand, interactive, cable modems, digital, high definition, television, and, of course, telephony, and who knows, and that's just what we know today, that for 30 years this business keeps evolving and growing and yet it's always had a good business. And so as we look for the next 10 years, this is the opportunity to build a very special company.

GHARIB: Mr. Armstrong, broadband was the cornerstone of your strategy ever since you came to AT&T. You're now selling all of these properties that you bought for less than you paid for them over the last three years. Is this an admission of failure of your strategy?

C. MICHAEL ARMSTRONG, CHAIRMAN & CEO, AT&T: You're wrong. We didn't sell at less. We paid about $4,000 per sub for what we invested in at a time, you'll recall, a few years ago, when the equity markets were giving different multiples to the equities and we bought it with a highly valued AT&T stock. But we paid about $41, $4,000, depending upon the arithmetic and today we're getting $4,500.

GHARIB: Mr. Roberts, you talk about telephony. Wall Street was kind of surprised that up until this deal, that you really weren't too in favor of having telephone service over cable TV lines and now you are. How serious are you about telephony?

ROBERTS: Well, we think that the opportunity for Comcast alone in telephony was years away. But here comes AT&T (T) and AT&T Comcast. They've already made the investment. We're just a customer, an incremental customer, and the next customer has much more value than the first customer because of all the costs associated. We don't have to go through that. So by the time we get to closing we're going to have a real good window on how successful AT&T's phone business is. And the trajectory and on, it looks terrific.

GHARIB: Another concern from the Street is about the margins at AT&T Broadband. It's been well known that they're weaker margins at AT&T Broadband and the concern is, you know, how is this going to maybe bring down the Comcast performance?

ROBERTS: What's happened since we first began talking to AT&T is their margins are up almost, over 50 percent. And so we see them on a trajectory with or without this deal.

GHARIB: But what is it going to take to get these margins up?

ROBERTS: One is they're artificially low right now because of some of the telephony start up losses. So the more that that strategy gets to break even, the margins move way up. And then secondly, there's some synergy, programming costs and other procurement of goods and services where we buy $5 billion worth of expenses a year. Do you think we can get a little discount because we're together as compared to doing it separately.

GHARIB: Microsoft (MSFT) supported this deal. What role do you see Microsoft playing?

ROBERTS: I think that we're going to have a level playing field for all the potential suppliers and Microsoft is comfortable and understands that we're not going to give any special relationships. And they have made a very fair market for market. There's no new money from Microsoft. It just allows us, they only were going to get five percent a year on their money. Now they're in equity. The last time Microsoft invested in Comcast, they quadrupled their investment. How do you see it?

ARMSTRONG: I see it the same way. We're committed to open access over the cable infrastructure. Both companies have put out policy statements. We don't need a policy statement. It's good business to have an open network. We will carry multiple ISPs. We hope to carry Microsoft, as well. And by doing that, we expect to reach more subscribers and grow our business faster. That's how I think that's going to come out.

GHARIB: This merger is going to be like the first big telecommunications merger facing the Bush administration. What kind of regulatory issues do you think you're going to be facing?

ROBERTS: Time will tell, but the real decision that AT&T had to make, was this the right combination? But one of the factors is that Comcast isn't in the television business, broadcast television. We're not in the Internet business. Some of the other bidders might have had some regulatory issues.

GHARIB: Mr. Armstrong, you said that you're going to stay on as chairman of AT&T until this deal closes and then you're going to take on the title of Chairman in the new company. What exactly is going to be your role in the new company?

ARMSTRONG: We've got an office of the chairman that we're going to establish. We'll do what each of us can do to bring value to it. And I think the essence of this thing is to work as a team.

GHARIB: Who's going to run the company?

ARMSTRONG: Brian Roberts.

GHARIB: So are you more of a figurehead?

ARMSTRONG: I wouldn't say so. I hope that I can add value to this future company. I've had 42 years in this industry and in these businesses.

GHARIB: Mr. Roberts, investors were a little nervous about this deal today and there was some significant operational issues. What do you think it's going to take to make shareholders comfortable?

ROBERTS: We'll just have to judge it with the fullness of time. But I think there's been a tremendous enthusiasm from the large AT&T shareholders and the large Comcast shareholders to go for it and put this company together, because we're both in the same business. Now we can really accelerate that leadership.

GHARIB: Gentlemen, thank you very much. Good luck to both you, Mr. Roberts and Mr. Armstrong.

ARMSTRONG: Thank you.

ROBERTS: Thank you.

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.

12/20/01: The Economic Stimulus Package Loses Steam In The Senate

SUSIE GHARIB: As expected, the U.S. Senate abandoned plans for an economic stimulus package this year. Talks failed to reach a bipartisan agreement. But as Darren Gersh reports, any economic fallout should be limited.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Markets today took in all the political sound and fury surrounding the collapse of the economic stimulus effort and shrugged it off. Hopes had been falling for weeks that Congress would actually do something and even if Congress did do something, many believed it wouldn't help much.

STEVEN EAST, CHIEF ECONOMIST, FRIEDMAN, BILLINGS, RAMSEY & COMPANY: Most Wall Street economists, I think, realized that most of what was in the proposed package was not going to provide any kind of short-term stimulus anyway, maybe long-term, but the long-term was seen as going to take care of itself anyway.

GERSH: That's because consumers would not have gotten rebate checks until this summer, when most economists expect a recovery will be in full swing. Investment tax incentives were also unlikely to be much help to businesses that already have too much capacity. For the bond market, the stimulus gridlock is a relief.

MICHAEL FARR, CHIEF INVESTMENT OFFICER, FARR, MILLER & WASHINGTON: I think the economy is beginning to move and therefore with rates this low, I don't think we need a stimulus package in addition to all of the liquidity and low rates and available money supply we have right now.

GERSH: And with budget deficits looming, Democrats now say the White House backed stimulus plan was simply too expensive.

SEN. THOMAS DASCHLE (D-SD), SENATE MINORITY LEADER: And in spite of the fact that we're borrowing money, the Republicans want to commit $211 billion in tax handouts.

GERSH: But the President still sees a stimulus package as insurance against prolonged economic weakness and he pressed one last time for action.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I think for the good of the American people, that bill ought to get out of the United States Senate and get to my desk.

GERSH: Congress can always take up an economic stimulus package when it returns in late January, but by then analysts expect there will be more signs the economy is recovering, reducing any desire to go through this debate all over again. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.

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.

12/20/01: Commentary: The Only Good Recession Is A Gone Recession

SUSIE GHARIB: Tonight's commentator says there's one time that a recession is good, and that's when it's over.. Here's Charles Schultze, Senior Fellow at the Brookings Institution.

CHARLES SCHULTZE, COMMENTARY: It's widely expected that the economy will begin recovering some time in the first half of next year. But will that recovery return today's depressed corporate profit rates to the high levels reached at the height of prosperity from 1995 through 2000? During those years, eight percent of the national income generated by corporations went to after tax profits, a share almost one third higher than the average of the prior 25 years. But were the late 1990s a unique experience that won't be repeated? The answer is almost surely no. It is not that the late 1990s were abnormally good, rather the preceding period was abnormally bad. During those earlier years, we witnessed two massive spikes in oil prices and a sharp drop in productivity growth that helped produce long periods of high unemployment and inflation and kept profit rates low. The late 1990s represented a return to the more normal world of the 1950s and 1960s, with low inflation and unemployment and healthy productivity growth. Indeed, rather than being unsustainably large, the profit rates of recent years still averaged somewhat below the 1950s and '60s. And so barring a major disruption in world oil supplies, we're likely to see a quite healthy growth of profits over the next two or three years as the profit rate gradually returns to the level of the late 1990s. I'm Charles Schultze.

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: Well, let's hope the Santa Claus rally just had an interruption, rather than an end today. But there was some substantial selling, which drove the Dow down 85 points and then summoned the broader market lower by an 18 to 12 margin and more than twice as many new highs for the year than new lows, kind of an interesting mixture.

AT&T (T) topped the active list on 44.7 million shares, moving up $1.05. You heard the news. And, of course, it traded as high as $18.75 this morning.

Solectron (SLR) losing another $1. That's $5 it's lost in the last two sessions because of a first quarter loss reported on Tuesday.

Mirant (MIR) down $2.08. The company revealed its restructuring plan, which includes the sale of 60 million shares at a price of $13.70 each and it's going to cut its budget 40 percent, among other things. Salomon Smith Barney, however, downgraded the stock from "buy" to "neutral."

Calpine (CPN) edging up $0.16.

EMC (EMC), a loss of $0.92.

Texas Instruments (TXN) fell $1.40 in the weak high tech

group.

Lucent (LU) managed to gain $0.04.

J.P. Morgan Chase (JPM) down $1.48. The company says now it has $2.6 million exposure to Enron (ENE) but expects insurance will cover almost half of that.

NorTel Networks (NT) down a $0.50.

And AOL Time Warner (AOL) lost $0.25.

Bear Stearns (BSC) down $0.60. The company did report a 21 percent drop in its third quarter earnings from last year.

Celestica (CLS) dropping $3.86. Juniper Networks' (JNPR) gloomy forecast no doubt hurt this stock a bit.

Federated Department Stores (FD), however, up $2.05 after Merrill Lynch upgraded it from "buy" to "strong buy."

FedEx (FDX) up $2.11. First Boston Brokerage upgraded it from "hold" to a "buy" after the company reported better than expected earnings yesterday.

Goldman Sachs (GS) down $2.10. Its third quarter earnings were down 17 percent.

And finally, UAL (UAL) down $1.10. The widow of a passenger killed aboard a United aircraft plane that hit the World Trade Center filed a wrongful death suit today and it's the first of its kind against the company.

REX Stores (RSC) up $2.30. It's in the consumer retailing, consumer electronics retailing business. The company didn't return our calls. But on Tuesday you might recall Best Buy (BBY) and Circuit City reported good results.

NDCHealth (NDC) up $2.76. Second quarter earnings, $0.33, a $0.01 better than expectations, well up from last year's $0.24. The Thomas Wiesel Brokerage (ph) upgraded it from "attractive" to "buy."

Pharmaceutical Resources (PRX) rising $2.54. The company issued an upbeat forecast and estimates its fourth quarter earnings will be $0.69. That would be $0.06 above the Street estimate.

ACLN (ASW), this company transports new and used autos by ship to Africa and the company had no comment about that massive drop in its stock. J.P. Morgan downgraded the stock because it was unable to verify the company's supposed large cash holdings due to Luxembourg's bank security laws.

Jabil Circuit (JBL) down $3.50. First quarter earnings only $0.04 versus $0.24 last year, $0.08 below the Street estimate.

Benchmark Electronics (BHE) in sympathy with Jabil. It's another electronics contractor.

Nasdaq trading, a loss of 64 1/3 points in the Index. Volume up just over two billion shares. For every 16 stocks higher, about 20 lower.

Microsoft (MSFT) topped the active list, down $2.73. Now, the company says there is a serious security flaw in its Windows XP operating system.

Intel (INTC) down $1.07.

A similar loss in Cisco Systems (CSCO).

And then Oracle (ORCL) dropped $0.43.

Brocade Communications (BRCD) down $2.71, fifth in dollar volume on Nasdaq.

Amgen (AMGN) fell $0.53.

Broadcom (BRCM) losing $2.84.

Sun Microsystems (SUNW) a drop of $0.61.

Siebel Systems (SEBL) fell $2.87.

And then Applied Materials (AMAT) off $1.81 a share.

Stearns & Lehman (SLHN), this is a company that makes flavorings and syrups. A very sweet day, indeed, up $2.35. The company says it's in talks to be acquired for a firm that it didn't name for about $7.35 a share.

McGrath (MGRC), which rents modular offices and classrooms, up $12.53. Tyco International (TYC) will acquire McGrath for $38 a share in cash and stock.

And then Novoste (NOVT) down $3.90. The medical device firm announced its President and CEO William Hawkins is leaving to join rival Medtronic (MDT).

The American Exchange Index (XAX) down just over 5 points.

Hawaiian Airlines (HA) up $0.61, the best percentage gainer. It's going to merge with Aloha Air Group and it'll own 52 percent of the new merged company.

Environmental Tectonics (ETC) moving up $1.30. One of the units of the company introduced a new low cost drying and sterilization system for drug manufacturers.

And finally, the Index Shares ended all on a down note.

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.