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Program: Monday, September 29, 2003
09/29/03: Corporate Tycoon Dennis Kozlowski Faces A Storm Of Trouble In Court
SUSIE GHARIB: Two top businessmen whose names are synonymous with corporate greed finally went on trial today. In separate courthouses in New York, jury selection began for former Tyco CEO Dennis Kozlowski and former investment banker Frank Quattrone, once of Wall Street`s master deal-makers. Kozlowski is charged with looting Tyco of more than $600 million. And Quattrone is accused of obstruction of justice and witness tampering. Suzanne Pratt reports. SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Former Tyco International CEO Dennis Kozlowski arrived at court today looking tanned and relaxed for what is expected to be a four-month trial. Kozlowski and his former CFO Mark Swartz are accused of looting the conglomerate of more than $600 million to finance their lavish lifestyles. Manhattan Supreme Court Justice Michael Obus told prospective jurors that they must focus on the Tyco case specifically, and not think about other recent corporate scandals. The district attorney`s case is expected to center on Tyco`s loan programs, charging that the pair used company funds to pay for mansions, art and jewelry. JACK COFFEE, SECURITIES LAW PROF., COLUMBIA UNIVERSITY: The Kozlowski case is a Russian novel. It`s going to go on for months and it`s going to involve chapter after chapter of conspicuous consumption and self-dealing. And the issue is going to be whether he was authorized by the board, or whether the board knew that he was receiving these often apparently undisclosed benefits. PRATT: Meanwhile, just a block away at the federal courthouse, former star investment banker Frank Quattrone arrived to face his judge and jury. Quattrone`s trial, however, is expected to last just two weeks. Quattrone is charged with interfering with a federal investigation of the bank`s practice of doling out hot stock offerings. The case involves a single e-mail he sent instructing employees to destroy documents. COFFEE: Mr. Quattrone is a short story, it`s a vignette. It`s about one very narrow moment in time in which he told people to clean up their e-mails. And the issue is, what did he know when he said that and what was his motive? PRATT: Some legal experts say there`s never been a worse time for a defendant to go on trial in a case involving financial irregularities or investment banking. That`s because they say juries are likely to be less tolerant of what they perceive as bad corporate behavior today than they might have been in the past. 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. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
SUSIE GHARIB: Today is the first official day on the job for John Reed, the new interim chairman of the New York Stock Exchange. An hour ago, the former Citigroup (C) chairman held a press briefing here at the big board. He said he is ready to listen and learn. His top priority, fixing the Exchange`s corporate governance structure and making it "pass the test of the public good." When asked if there should be a formal probe of existing problems, Reed said he didn`t think it was necessary. JOHN REED, INTERIM CHMN., NEW YORK STOCK EXCHANGE: I don`t think it would be in the best interest of the Exchange nor serve a particularly useful purpose to have a formal investigation because frankly you would be less likely to get the facts under those circumstances. And it seems to me that we will get enough of an impression to make an appropriate set of decisions without, you know, launching an inquiry, if you will. GHARIB: Well, Reed`s day ended here at the New York Stock Exchange. But it didn`t start here. This morning he was in Washington, D.C., sitting down with the agency that oversees securities regulations for the nation. Stephanie Woods reports. STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: John Reed calls coming out of retirement to the crisis at the NYSE a culture shock. Reed traveled to Washington to seek the advice of Securities and Exchange Commission Chairman William Donaldson, who once headed the big board himself. REED: I`m here to listen, to find out what Chairman Donaldson has to say. My responsibilities are pretty clear. The Exchange has to look at reforming its corporate government, governance, its sort of managerial architecture, if you will. WOODS: Reed says the current work of the Exchange`s corporate governance task force doesn`t go far enough to reform the system. But he shot down published reports that he plans to force mass resignations from the 27-member board. REED: I think membership of the board should follow from the governance changes. If we make changes that require a different kind of board, then we would have to address that issue afterwards. I think it would be quite foolish to look at the membership issue first and the governance second. WOODS: The disclosure of former Chairman Dick Grasso`s almost $150 million pay package put the Exchange under intense pressure to separate its regulatory function from its listing business. Institutional investor groups say the only way the Exchange can credibly reform itself is for the corporate governance committee to be free from conflicts of interest. BRANDON REES, OFFICE OF INVESTMENT, AFL-CIO: One of the issues with the current composition of the New York Stock Exchange board is the role of organizations that are either members of the Exchange or are public companies that are regulated by the New York Stock Exchange. WOODS: Reed says he wants to reform the Exchange sooner rather than later. But it won`t happen overnight. He has his first meeting with the full board on Thursday. He says getting the job done effectively is his top priority. 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. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/29/03: UBS' Andrew Kligerman Analyzes The Manulife/John Hancock Merger
SUSIE GHARIB: Canada`s Manulife (MFC) is buying John Hancock Financial (JHF), one of the oldest and most well-known names in the American life insurance market. The $10.4 billion stock swap worked out to about 37.60 a share, based on Wednesday`s close, for every John Hancock share held. The deal makes Manulife Canada`s largest individual and group life insurer. It also gives the company a strong presence in the United States, ranking fourth in individual policy sales. Manulife says it anticipates no major layoffs as a result of merger. Joining us now to talk more about the Manulife-John Hancock deal: Andrew Kligerman, senior life insurance analyst with UBS Securities. Hi, Andrew. ANDREW KLIGERMAN, SR. LIFE INSURANCE ANALYST, UBS SECURITIES: Good evening. GHARIB: So tell me, do you think this was a good deal? KLIGERMAN: I think it was a good deal for Hancock shareholders because it`s a company that had significant below investment grade securities and its growth was going to be challenging. So our target was $30, the offer is now in the ballpark of 35. I think it was good for shareholders. GHARIB: Why do you think that Hancock sold out as opposed to being a buyer of another insurance company, it`s big enough? KLIGERMAN: I think that its capital position as well as relatively low stock multiple limited its ability to compete effectively in M&A. GHARIB: Tell me, the stocks of both John Hancock and Manulife were down today. What is that telling you about this deal? KLIGERMAN: Well, first it`s telling you that there`s an oversupply of shares that are going to come on the Canadian market for Manulife, and it`s selling off. Secondly, the return on equity of Manulife will likely drop from 17 percent currently to 13 percent, and people don`t like it. And in conclusion, with Hancock shares tied share for share with Manulife shares, it has gone down a bit. GHARIB: So do you think that this is a done deal or could there be a another bidder coming in here? KLIGERMAN: I would put the high probability that Manulife keeps it. In fact, on a conference call today, the CEO of Manulife said that this wasn`t necessarily his final bid. And I think that there`s a 1 in 3 shot that AIG (AIG) could come in and potentially do this. GHARIB: AIG coming in has a lot of muscle, financial muscle. Who do you think would end up with John Hancock if that were to play out that way? KLIGERMAN: That`s a tough battle because Manulife, like AIG, actually has a good multiple. And I think they are enamored with the integration effects on earnings. GHARIB: Andrew, do you think that this the beginning of more consolidation in the life insurance business? KLIGERMAN: I absolutely think it`s the beginning, but unfortunately, I don`t see a lot of transactions in the next 12 months. You see a lot of reluctant management. So I think as pricing pressures and other issues arise, you`ll see more of it, but in the near term we don`t see it. GHARIB: Tell us who might be the next buyer and who might be the next seller. What are some of the names out there? KLIGERMAN: Yes. I think some of the next buyers are the Europeans, AEGON (AEG), ING (ING), Prudential PLC (PUK), as their multiples and their capital positions improve. I think domestically, always AIG. They are the leader in a slow-growth market. And I think they need acquisitions in order to grow. On the acquiree side, I would say Nationwide Financial (NFS), Lincoln National (LNC), Jefferson- Pilot (JP), Phoenix Companies (PNX), Protective Life (PL). All of these companies appear reluctant to be acquired at this time but they would be the companies I would expect to be acquired over the next one to five years. GHARIB: If you are a holder of John Hancock stock, what could you advise investors to do right now? KLIGERMAN: We rate the stock neutral. We don`t see a lot of downside pressure in it, because again, if Manulife were to weaken, while we don`t see many buyers out there, we think there is a possibility that AIG could sneak in. So it`s a hang-in-there stock. GHARIB: All right. And Andrew, in terms of disclosure, what is UBS` and your personal holdings with John Hancock or Manulife? KLIGERMAN: Personally I`m not allowed to own any of these names, so I don`t. And in terms of investment banking relationships, I believe that John Hancock, we may have a relationship with them but other than that I`m unaware of any. GHARIB: All right. Thank you very much, Andrew. We appreciate you coming on the program. KLIGERMAN: Thank you. GHARIB: We`ve been speaking with Andrew Kligerman of UBS Securities.
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. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/29/03: Commentary: Small Changes Can Have A Big Impact
SUSIE GHARIB: Sometimes it`s the small things that can make a big difference. Tonight`s commentator has an example. Here`s Dan Mitchell, senior fellow at the Heritage Foundation. DANIEL MITCHELL, COMMENTARY: It is often difficult to determine whether a change in government policy has a meaningful effect on the economy. In large part, this is because there are so many factors that influence economic growth, making it almost impossible to isolate the impact of a specific reform. But sometimes a change in government policy can have a powerful and dramatic effect, and this is the case with President Bush`s initiative to reduce the double taxation of dividends. Since the law was enacted, stocks have jumped in value by about $800 billion. Lowering the double-tax on dividends to 15 percent also has encouraged a number of companies to increase dividend payments, or, in cases like Microsoft (MSFT), to being issuing dividends. Nearly 400 companies have increased their dividends since the tax cut was signed into law, and at least 55 corporations that did not pay dividends have begun distributing profit to shareholders. According to the American Shareholders Association, "increasing stock values and more cash in the hands of shareholders has boosted confidence among investors and businesses." The Association also states that "the initial phase of the tax cut has ignited the stock market." Now this does not mean that the dividend tax cut, or even the entire tax package, is the only factor boosting stock prices and dividends. But it does demonstrate that in a competitive global economy, it is more important than ever to make the right policy decisions. Good choices will help America win the battle for jobs and capital. Bad choices, by contrast, will make the United States more like France and Germany, suffering from double-digit unemployment and economic stagnation. I`m Dan Mitchell.
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. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use. 09/29/03: Last Word: "Ratting Out" The State Department
SUSIE GHARIB: And finally, the State Department has a lot on its plate: concerns over Iraq, Iran, and Afghanistan. Now it has another problem: mice. The department said today its main building is being assaulted by mice because the weather is starting to cool off and the furry creatures are looking for warm lodging and food. And to make matters even worse, renovations in some parts of the building are giving the rodents a lot of places to hide. Paul, apparently the agency is warning employees not to leave food around their desks, and to be sure trash is removed every day. KANGAS: I suppose it would be too much common sense for the bureaucracy to bring in a platoon of hungry cats. GHARIB: Well, that would be a solution. I was going to say that it`s a good thing there are no moles over there in the State Department. (LAUGHTER) KANGAS: Yes, well, maybe there are.
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. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use. 9/29/03: "Paul Kangas' Stocks In The News"
PAUL KANGAS: Wall Street opened in a modest rebound from last week`s sharp sell-off as bargain hunters combed through the ruins. Some buying was also prompted by a solid 0.8 percent rise in August personal spending, although personal incomes increased only 0.2 percent. After an hour of trading, the Dow was up 27 points, the NASDAQ rose 12. When a flurry of mid-morning selling ended abruptly, buyers returned with the semiconductors leading the way higher on news that worldwide chip sales rose 4 percent in August, the sixth straight month of gains. By mid- session, the Dow jumped to a 70-point gain and NASDAQ was up 21 points. End of quarter buying by institutions kept the market fairly buoyant for the rest of the day. So the Dow Industrial Average closed up 67.16 points at 9380.24. The NASDAQ Composite was up 32 1/2 points to 1824.56. And then the Standard & Poor`s Index, the 500, ended with a 9 3/4-point gain at 1006.58. Over in the bond market, weakness. The 10-year note fell 20/32 to 101 12/32, putting the yield at 4.08 percent. Topping the active list on the New York Exchange, AOL Time Warner (AOL) trading 19.4 million shares, down $0.20. Motorola (MOT) with a similar loss, down $0.23. Lucent Technologies (LU) showed no change on the day. But Nokia (NOK) was up $0.64. Goldman Sachs increased Nokia`s 2003 earnings estimate. And also this week`s "Barron`s" financial has an article that says the price of Nokia`s stock is reasonable at this level and also had complements on the company`s balance sheet. GE (GE) was up a half a dollar a share, fifth in volume. NorTel Networks (NT), a $0.17 gain. And there you see John Hancock (JHF), down $0.48. That deal worth, as you heard, $35, because Manulife (MFC) stock fell $1.02 today to $29.18. Pfizer (PFE), a $0.33 gain. Corning (GLW) was up $0.59. And tenth in volume, Citigroup (C), moved up $0.71. Advanced Micro Devices (AMD), a $0.33 gain. Up on that report, as I mentioned, Semiconductor Industry Association said worldwide chip sales up 4 percent in August. A reasonably good rise. Walgreen (WAG) down nearly a dollar. And the problem here, fourth quarter net income was up 12 percent. But on a share basis came in at $0.27, up from last year`s 24. That was just in-line with Wall Street estimates. And analysts weren`t particularly impressed, obviously. Computer Sciences (CSC) moved up $0.95. It had a high of $38.12. The company has received a $1.1 billion contract to provide simulator-based flight training at the U.S. Aviation Center in Fort Rucker, Alabama. Big gainer, Nam Tai Electronics (NTE) moving up nearly $5 a share. The company will boost production capacity for cell phone components by 100 percent because of strong demand for those components. PEP Boys (PBY) had a nice move, gaining $1.47. Goldman Sachs upgraded it from in-line to outperform. It sees the company`s same store sales next year rising somewhere around 4 percent. And then Donnelley, R.R. Donnelley & Sons (DNY) moving up $1.52. Morgan Stanley upgraded this stock from underweight to equal weight. And one of the big losers percentage-wise was Kingsway Financial Services (KFS), down $1.28. After the close Friday, the company said third-quarter profit will be reduced by 20 million dollars - that`s Canadian, due to provisions for unpaid claims. NASDAQ`s most active issue, Intel (INTC) up $1.10 on that semiconductor industry report of a 4 percent jump in worldwide sales. Microsoft (MSFT) rose $0.64. SINA Corp. (SINA), that`s a Chinese Internet portal company, up nearly $5, is very volatile. Cisco Systems (CSCO), $0.24 gain. Amgen (AMGN) was up $0.22, fifth in volume on a dollar basis. Netease.com (NTES), another Chinese Internet portal company, up $5 1/2 or nearly so. Followed by Qualcomm (QCOM), which gained $1.69. KLA-Tencor (KLAC) rose $1.16. Dell (DELL) a $0.09 gain. And tenth in dollar volume was Yahoo! (YHOO), rising $1.11 a share. NVIDIA (NVDA) fell $0.91. Merrill Lynch downgraded it from neutral to sell and also cut earnings estimates on the stock. Energy Conversion Devices (ENER) tumbling $4.12, over 27 percent drop. The company has delayed filing its annual report. And its auditors questioning whether the company can continue its going concern without new financing. Not good news on that issue. PDF Solutions (PDFS) up $2.29. Nice move there. The Adams Harkness brokerage upgraded it from market perform to a strong buy. And Sun Microsystems (SUNW) edged $0.02 higher. After the close, however, the company warned that it will have a fourth-quarter loss of over a billion dollars. That works out to $0.32 a share in the red. And it also predicted it`s going to have a first-quarter loss of $0.07 a share. In after hours trading, Sun Micro was down as low as $3.45. And finally, over on the American Stock Exchange, National Healthcare (NHC) plunged $2.81. The Associated Press reported that the company`s self-funded insurance may be inadequate to cover liabilities from the deadly fire in its Nashville, Tennessee, nursing home last Thursday evening. And those are the "Stocks in the News."
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. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/29/03:
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