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Program: Thursday, September 2, 2004

The Chips Are Down At Intel
Retailers Can't Seem To Rebound This Summer
The Airline Industry As A Whole Is In For Turbulent Times
"Road to the White House"-Our Economic Future
China Is Driving A New Auto Industry
Commentary: You Can't Manage Man Like Cats or Cattle
Paul Kangas' Stocks In The News
Market Stats

09/02/04: The Chips Are Down At Intel

PAUL KANGAS: Computer chip maker Intel surprised Wall Street late today by slashing its third quarter revenue and profit outlook. The stock tumbled about 8 percent in after hours trading as a result. Intel says revenue will come in between $8.3 and $8.6 billion for the quarter. That's down from the previous range of $8.6 billion to $9.2 billion. A drop in demand for flash memory is a main culprit, as well as customers' working off excess inventories of unsold components. After hours, Intel's stock fell as much as $1.74 to $19.89. It closed in regular trading at $21.63.

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) 2004 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.

09/02/04: Retailers Can't Seem To Rebound This Summer

SUSIE GHARIB: Many of the nation's retailers said today sales were sluggish in August. This was the third month in a row that sales fell short of expectations as consumers tightened their purse strings. As Suzanne Pratt reports, even Wal-Mart reported its smallest monthly sales gain in three and a half years.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Many of the nation's largest retailers rang up disappointing sales for August, blaming mother nature's hurricane Charley and the calendar. Because Labor Day falls late this year, some experts are speculating consumers have put off their back-to-school shopping. But others say Americans are also feeling pinched by higher energy prices and weak job growth.

MARK MANDEL, RETAIL ANALYST, FULCRUM GLOBAL PARTNERS: Gas prices is just one issue. Job formation or lack of job formation, personal income growth and so on, have made it a difficult environment for the discount store consumer. And all consumers of course are facing increases in areas like health care costs, property taxes and so on.

PRATT: Sears, Federated Limited and Gap all experienced a drop in their August same store sales, while high-end retailer Nordstrom was one of the few big winners. Wal-Mart reported a slim increase in sales and because of those sluggish numbers, the nation's largest retailer cut its third quarter forecast. Wal-Mart now expects sales growth of 2 to 4 percent rather than 3 to 5 percent and it expects third-quarter profits at the low end of its forecast range of $0.52 to $0.54 a share.

STEPHANIE HOFF, RETAIL ANALYST, EDWARD JONES: It's still a pretty good number. I mean, they are still going to produce earnings growth that's up double-digit year-over-yea, and for a company that size, we still think that that's a pretty good number for them.

PRATT: Nevertheless, many analysts are concerned about the future at other U.S. retailers. They say the current slump in sales suggests the crucial holiday shopping season could also be soft.

MANDEL: These forces that are in play now that are weighing on this consumer, that are weighing on retail sales are not likely to change overnight. We'd like to see a spike in the employment numbers. We'd like to see personal income growth accelerate further. But it's difficult to say with confidence that that's going to take place over the near-term.

PRATT: In the very near term, experts are also worried about hurricane Frances. They say if the storm hits with the force that's expected, it could do serious damage to September chain store sales. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.

09/02/04: The Airline Industry As A Whole Is In For Turbulent Times

PAUL KANGAS: The financial challenges all the nation's airlines are facing has experts predicting the entire industry is on the verge of a major restructuring. The end result is likely to be fewer carriers and Diane Eastabrook reports the shakeup could come very soon.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: A massive shakeup in the airline industry could begin shortly after the Labor Day holiday. Analysts say U.S. Airways could head back into bankruptcy if it doesn't dramatically cut costs. Delta Airlines could follow if it doesn't do the same. And UAL, the parent of United Airlines, faces a court-imposed deadline to come up with a plan to emerge from bankruptcy.

RAY NEIDL, INDEPENDENT AIRLINE ANALYST: In the case of United, they could do a slow death if they don't get their cost structure down, but in the shorter term, what is more important is they're not going to get outside financing unless they can further readjust their cost structure.

EASTABROOK: The airline industry is struggling to overcome a three-year downturn that experts call the worst in aviation history. It was triggered by a slowing economy, the 9/11 terrorist attacks and higher fuel prices. But experts say the industry is facing a stiffer headwind coming out of this downturn than it did in previous ones. That is because there's more competition from low cost carriers. Consumers are shopping around for cheap fares on the Internet, and many business travelers aren't buying higher-priced full fare tickets like they did in the late 1990s. As a result, yields -- the price passengers pay to fly one mile-- are still down 13 percent from their peak in 2000.

JOSEPH SCHWIETERMAN, TRANSPORTATION PROFESSOR, DEPAUL UNIVERSITY: The whole turnaround plan for the big airlines is based on the premise that they can extract a premium, maybe 15 or 20 percent higher fares, relative to their low cost competition. We're now realizing they only get half that, that the margins they can extract above and beyond the Jet Blues and Southwests of the world is razor thin.

EASTABROOK: Industry watchers says tighter profit margins will make it difficult for the major carriers to support their expensive hub and spoke systems and that could very likely result in a downsizing for the major airlines.

AUSTAN GOOLSBEE, ECONOMICS PROFESSOR, UNIVERSITY OF CHICAGO: Either one of the big legacy carriers is actually going to disappear or more likely I think some of the legacy carriers are just going to be further and further reduced so that they're just not going to be the big trunk carriers that we have seen in the past.

EASTABROOK: Analysts say once the industry restructures and weaker carriers are weeded out, airfares and airline profits will probably take off again, but they probably won't reach the lofty levels they hit in the late 1990s. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.

GHARIB: American Airlines has found a new revenue stream: ticket service fees. The carrier will begin charging an extra $5 for tickets bought through its U.S. reservation offices and $10 for tickets bought at airports. American says the move will add $25 million a year to its bottom line. The fees will take effect September 6, and come after a similar move by Northwest Airlines last week.

09/02/04: "Road to the White House"-Our Economic Future

SUSIE GHARIB:As George Bush accepts the Republican nomination for president tonight, he will highlight his record on the economy and offer an agenda for the next four years. But that record is being questioned by the Democrats who want to unseat him. Tonight we continue our examination of the candidates and the issues. Darren Gersh looks at the economy and the promises being made for its future.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: This afternoon, Mr. Bush toured the podium where tonight he will ask the American people to keep him on the job. In the days leading up to the convention, the president has talked up his record of economic accomplishment. In the last year, President Bush says 1.5 million Americans have found work.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Because we acted, the national unemployment rate is 5.5 percent, well below the national average of the 1970s, 1980s and 1990s.

GERSH: True, but there is another side to the economy and it was Democratic vice presidential candidate John Edwards' job to make another case. During the time George Bush has been president, five million Americans have lost their health care coverage and almost two million private sector jobs have been lost eliminated. Edwards calls it the worst record of the last 11 presidents.

SEN. JOHN EDWARDS, DEMOCRATIC VP NOMINEE: We had presidents who've led us through war, through war, through recession, through extraordinary difficult times. Every one of those presidents, Republican and Democrat, created jobs until this president.

GERSH: But look at the gains Mr. Bush points to: GDP growth is expected to come in at nearly 4 percent over the second half of the year; home ownership is at record levels and the president argues the economy has weathered terrorist attacks, corporate scandal and recession.

BUSH: We've overcome these obstacles because of well-timed tax cuts.

GERSH: Well-timed, but costly. The deficit is now projected at $2 trillion over the next decade. Critics blame those tax cuts, which they say went mostly to the wealthy.

ROBERT MCINTYRE, DIRECTOR, CITIZENS FOR TAX JUSTICE: So he gave us minimal possible stimulus and he put us in the whole pretty much forever unless we reverse these policies.

GERSH: But the president insists the tax cuts stimulated business hiring and are only partly to blame for the record deficits.

BUSH: Now remember the deficit again was caused by recession. We're coming out of that; we're out of it. Secondly it was caused by the war. We're still in the war. And thirdly, the tax relief helped us generate more revenues.

GERSH: Aides promise much of tonight's speech will focus on the future. Having passed his education reform program, cut taxes and added a prescription drug benefit to Medicare in his first term, the president is promising a bold agenda for his second term. Mr. Bush is expected to call for making his tax cuts permanent. Aides say expect a call for simplifying and reforming the tax code to encourage savings. But the centerpiece will be what the president calls his ownership society: health savings accounts and personal accounts for Social Security. The president argues ownership is the best security in a dynamic economy.

BUSH: We're going to continue to promote our ownership society in America, because it brings stability during changing times, but also because I understand when a person owns something, they have a vital stake in the future of our country.

GERSH: It's a crowded agenda, so crowded analysts say, plans to transform the tax code are likely to be pushed off the table.

ERIC ENGEN, ECONOMIST, AMERICAN ENTERPRISE INSTITUTE: It will be very difficult in a second term to do both Social Security and tax reform. I think at this point the most likely would be a serious attempt at Social Security reform.

GERSH: Don't expect a lot of new details in tonight's speech. In an election this close, neither side wants to give the other a lot of specifics that could be used in an attack ad. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.

09/02/04: China Is Driving A New Auto Industry

SUSIE GHARIB: China is now the world's fastest growing auto market and it's not showing any signs of a slowdown. Car companies are hoping to make their brands a household name, as many families choose their first car ever. But as Celia Hatton reports from Beijing, the race to gain market dominance is forcing auto makers to drop their prices.

CELIA HATTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: It's the new status symbol in a booming nation. With auto sales in China up 24 percent last year, a shiny new car is no longer just a dream for millions of first generation drivers. Almost every car company in the world is setting its sights on China, and with frenzied competition it's a buyer's market.

GEOFF LIU, AUTOMOTIVE RESOURCES ASIA: Consumers have more choice and also the price has been reduced significantly so that means consumers can buy cars at a lower price. Of course they are benefiting from it.

HATTON: Volkswagen slashed its prices more than 11 percent in order to keep up with a similar move by General Motors. The Volkswagen Golf now sells for just over 75,000 reminbi (ph) or $9,000 U.S. in comparison to a starting price of more than $15,500 in the U.S. Lower prices are good news for eager customers, who keep local dealerships busy. Dealer Victor Qin says customers often arrive with self-made charts comparing the prices of competing models.

VICTOR QIN, CHANGAN FORD: At this stage, I think Chinese customer, they don't have a very strong brand loyalty, but they will rely on the brand in five years, I think. At this moment, price is still the first priority to choose their vehicle.

HATTON: Despite the ongoing price war, foreign car companies are doing a roaring trade in China. Their joint ventures with Chinese partners now dominate sales, with a combined market share of 45 percent. It's no secret foreign auto makers are benefiting from China's love affair with the car, but now Chinese car companies are also starting to reap rewards. Chery, one of the biggest private auto manufacturers in China, has reason to put on a show. Sales of its low-cost vehicles doubled in the first quarter of this year.

UNIDENTIFIED MALE (THROUGH TRANSLATOR): The first thing I have to consider is my purchasing power.

UNIDENTIFIED FEMALE (THROUGH TRANSLATOR): I think price and service, especially after-sales service are rather important.

HATTON: With customers focused on cost, auto makers calculate that by reducing prices now, they'll ensure that future generations of Chinese drivers will want to sit behind the steering wheel of their cars. Celia Hatton, NIGHTLY BUSINESS REPORT, Beijing.

09/02/04: Commentary: You Can't Manage Man Like Cats or Cattle

SUSIE GHARIB: It has often been said that managing people is an art, not a science. Well, tonight's commentator has an interesting view on management. Here's Tom Stewart, editor of the "Harvard Business Review."

TOM STEWART, EDITOR, HARVARD BUSINESS REVIEW: If you're talking to a business audience, you're guaranteed a laugh if you talk about herding cats. You can say something like managing engineers is like herding cats or managing customers is like herding cats and you'll get a laugh because you can't herd cats. But that doesn't mean you're helpless. Herding isn't the same as managing. Cats can be managed. They just can't be managed the same way you'd manage sheep or cattle. In fact, the most interesting problems in business are cat-herding problems. Motivation and sharing, for example. You can't tell cats what to do. They look up at you, blink, and seem to ask, why should I care? Why should I care if someone in another department could use our help? We've got plenty to do here. What's in it for me if I take time to give someone else the benefit of my experience? Studies by Dorothy Leonard of Harvard Business School, and Walter Swap of Tufts University, have shown that you can't get people to share this kind of deep smarts by herding them into classrooms or by throwing money at them. Cats don't respond to simple motivational gimmicks. You motivate through relationships and by creating opportunities to learn by doing. Anyone can be a boss when you just have to work down a to-do list. But when problems are nuanced and projects are complex, when rules are murky, when there are options to be weighed and implications to be pondered, when what's needed is a judgment call, that's when you need real leadership and real leadership is rare. Any cat will tell you that, if it wants to. I'm Tom Stewart.

09/02/04: "'Paul Kangas' Stocks In The News

PAUL KANGAS: Wall Street opened on the upside led by retail stocks on the relief that although August sales were bad, they weren't as bad as expected. Also helping things, a stronger than expected 1.3 percent rise in July factory orders. By late morning, the Dow was up 25 points, NASDAQ up six. Hope for a strong employment report tomorrow kept investors very optimistic. So the Dow Jones Industrial Average rallied sharply to close with a 121 point gain at 10,290.28. The NASDAQ Composite jumped 23 points ending at 1873.43. Standard & Poor's 500 up 12.5 points at 1118.31. Those hopes for a strong employment report sent bond prices spiraling down. The 10-year note fell 26/32 to par and 9/32.

The most active New York exchange issue on 14 million shares, Lucent Technologies (LU) edging $0.03 higher. The company may get an $816 million income tax refund.

Then Pfizer (PFE) in there with a $0.35 gain.

The Gap (GPS) rose $1.08. As you heard earlier, August same store sales fell 1 percent but the Street was expecting a 2.7 percent drop.

General Electric (GE) moved up $0.24.

Nokia (NOK) $0.52 gain, fifth in big board volume.

Wal-Mart (WMT) stores up $0.39. August same store sales up only ½ percent as you heard. Street was looking for 1 ½ percent increase.

Qwest Communications (Q) rose a dime.

Bank of America (BAC) $0.20 gain there.

And Home Depot (HD) up $1.05. Hurricane Frances is certainly stirring up demand for plywood and all kinds of home repair items.

Texas Instruments (TXN), tenth in volume was a $0.36 gainer.

Best Buy (BBY) moved up $2.25 after reporting August same store sales up 4.3 percent, very respectable and the company also sees second quarter earnings at $0.52, $0.02 above the Street estimate.

Nordstrom (JWN) up $1.16. August same store sales up 7.2 percent, well above the Street estimate of 4.7 percent.

Then Abercrombie & Fitch (ANF) rose $2.75. August same store sales fell 5 percent, but the Street was expecting a drop of 6 ½ percent.

Chico's FAS (CHS) up $2.86. Its August same store sales were up 3.6 percent but nowhere near the expected rise of 7.7 percent.

PepsiCo (PEP) gained $0.88. The company has hired former Kraft senior executive Irene Rosenfeld to run its Frito-Lay unit. That's its largest unit and also the company reaffirmed its previous 2004 earnings guidance of $2.29 a share.

Trammell Crow (TCC), the real estate management firm, increased 2004 earnings guidance and also plans to buy back up to 4.4 million of its own common shares.

Polaris Industries (PII) up $2.53. The company will cease immediately manufacturing its money losing marine products. Company says that move will enhance shareholder value, which seems to make sense.

4Kids Entertainment (KDE) a $0.97 gain. Raymond James financial brokerage began covering the stock with a strong buy and a price target of $23.50 a share.

Intel (INTC) topped the active list on NASDAQ, up $0.20, but as we mentioned, after hours it dropped a bit below 20 after cutting revenue estimates.

Microsoft (MSFT), $0.23 gain.

eBay (EBAY) moved up $1.92.

Cisco Systems (CSCO), $0.21 gain.

Google (GOOG) rebounding $1.26, fifth in dollar volume.

TASER International (TASR) up $3.89. The company's had a steady stream of new orders.

$0.83 rise for Yahoo! (YHOO).

Dell (DELL) edged up $0.04.

And Oracle (ORCL) $0.24 gain.

Costco Wholesale (COST) fell $0.42, tenth in big board volume or on NASDAQ volume I should say.

Computer Access Technology (CATZ) look at that percentage gain, up $2 or 52 percent. LeCroy Corp will acquire it for $6 a share in cash.

Advanced Financial Bancorp (AFBC) up $7.65. Parkvale financial will acquire this firm for $26 a share in cash, nice move there.

And Children's Place (PLCE) moved up $2.68. Its August same store sales up a very respectable 21 percent and the company sees 2005 earnings coming in around $1.27, well above the Wall Street estimate of $1.21 a share.

And those are the stocks in the news tonight.

09/02/04: Market Stats

NET PERCENT CLOSE CHANGE CHANGE DOW CLOSE 10290.28 +121.82 + 1.2 HIGH 10301.49 LOW 10162.05 NASDAQ COMP. 1873.43 +23.02 +1.2 HIGH 1876.24 LOW 1846.95 VOLUME 1,118.4 PREVIOUS 1,142.0 UP VOLUME 931.1 DOWN VOLUME 166.2 DOW TRANSPORTS 3162.49 +55.96 + 1.8 DOW UTILITIES 293.03 +1.92 + .7 CLOSING TICK +649 S&P 500 1118.31 +12.40 + 1.1 S&P 100 544.15 +5.55 + 1.0 MIDCAP 400 586.57 +5.20 + .9 REUTERS/CRB 278.17 -1.68 - .6 NYSE COMPOSITE 6535.05 +65.19 + 1.0 VALUE LINE 355.19 +4.35 + 1.2 RUSSELL 2000 559.78 +7.32 + 1.3 DJW 5000 10865.46 +116.59 + 1.1 U.S. TREASURIES 5-YEAR NOTE 3.625% July 15,2009 100 16/32 -14/32 + 3.39 10-YEAR NOTE 4.75% May 15,2014 100 9/32 -26/32 + 4.22 30-YEAR NOTE 5.375% Feb. 15, 2031 105 15/32 -1 5/32 + 5.00 LEHMAN BROS. LONG BOND INDEX 1743.83 -10.93 DOW CLOSE 10290.28 +121.82 + 1.2 ADVANCES 2368 DECLINES 920 NEW HIGHS 161 NEW LOWS 12 NET PERCENT NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE LU Lucent Tech 3.11 +.03 +1.0 PFE Pfizer 32.70 +.35 +1.1 GPS Gap 20.08 +1.08 +5.7 GE GE 33.12 +.24 +.7 NOK Nokia 12.34 +.52 +4.4 WMT Wal-Mart Stores 53.02 +.39 +.7 Q Qwest Comms Intl 3.03 +.10 +3.4 BAC Bank of America 43.85 +.20 +.5 HD Home Depot 37.93 +1.05 +2.9 TXN Texas Instrument 20.13 +.36 +1.8 NASDAQ CLOSE 1873.43 + 23.02 + 1.2 VOLUME 1,211.4 PREVIOUS 1,430.4 ADVANCES 2019 DECLINES 1004 NASDAQ ACTIVES INTC Intel 21.63 +.20 +.9 MSFT Microsoft 27.62 +.23 +.8 EBAY eBay 89.55 +1.92 +2.2 CSCO Cisco Systems 19.30 +.21 +1.1 GOOG Google 101.51 +1.26 +1.3 TASR Taser Intl 31.64 +3.89 +14.0 YHOO Yahoo! 29.84 +.83 +2.8 DELL Dell Inc 35.51 +.04 +.1 ORCL Oracle 10.29 +.24 +2.4 COST Costco Wholesale 40.41 -.42 -1.0 AMEX CLOSE 1243.10 + 5.67 + .5 INDEX SHARES DIA DIAMONDS TRUST 103.16 +1.28 +1.3 QQQ NASDAQ 100 34.78 +.49 +1.4 SPY S&P DEP.RECEIPTS 112.58 +1.26 +1.1 STOCKS IN THE NEWS BBY Best Buy Co 49.00 +2.25 +4.8 JWN Nordstrom 38.58 +1.16 +3.1 ANF Abercrombie &Fit 30.99 +2.75 +9.7 CHS Chico's FAS 38.22 -2.86 -7.0 PEP PepsiCo 50.62 +.88 +1.8 TCC Trammell Crow Co 15.38 +1.96 +14.6 PII Polaris Inds 51.00 +2.53 +5.2 KDE 4Kids Entertain 18.39 +.97 +5.6 CATZ Computer Access 5.80 +2.00 +52.6 AFBC Advanced Financial 25.75 +7.65 +42.3 PLCE Children's Place 21.68 +2.68 +14.1

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