Marketplace: News Archives

Wednesday, October 25, 2000
(Jump to the rundown)

It's Wednesday October 25th. I'm David Brown sitting in for David Brancaccio.

First, the luster wore thin in the dot-com world…today investors showed their concerns with telecom equipment companies-the companies that connect the dot coms with fiber optics and the like.

The big market story of the day comes courtesy of the Nasdaq, which closed down more than 5.5 percent.

Jessica Smith reports that the bad news started with Nortel.

Smith: "Fiber-optic stocks have been the most sizzling part of the hot hi-tech stock market, says analyst Arnie Berman, at Wit Soundview investment bank. And Northern Telecom was a leader of the pack."

Berman: "Northern Telecom has been the biggest optical networking player on the planet. The optical stocks have had relatively insane valuations."

Smith: "Meaning investors paid unbelievable prices for what they thought would be a sizzling sales growth. Fiber-optic lines will carry the movies, music and other data-heavy information consumers are expected to, one day, regularly download into computers. Not that that won't happen but Nortel's warning of slower sales is only the latest of many hi-tech earnings warnings -- made investors jump and dump other optical-fiber makers as well, like Lucent, JDS, Uniphase and PMC Sierra."

Berman: "They were trashed today on the news."

Smith: "Nortel was the most heavily traded stock on the New York Stock Exchange today, and ended the day more than twenty eight percent lower. But it wasn't the only reason for the steep drop in the hi-tech stock average. The company's news comes at a time investors are already jittery, and more likely to sell shares than invest in new ones. Top hi-tech shares like Microsoft and Intel also lost ground, while safe havens like pharmaceutical stocks, gained. In New York, I'm Jessica Smith for Marketplace."

Some defensive buying buoyed the Dow a bit, but it, too, closed lower for the day. We'll have more details on the markets later in the program.

Turning our attention now to top news from the corporate world, AT&T made it official today, unveiling a plan to restructure into a family of four separate companies-a consumer business, one for business customers, one for broadband and another for wireless. It's far and away the biggest reorganization of Ma Bell since its 1984 breakup. At the same time, AT&T also announced a drop in third quarter profits of 12 percent thanks to price wars in the long-distance business. Those events are not unrelated, said AT&T Chair C. Michael Armstrong.

Armstrong: "The strategy of investing in growth businesses - of transforming the AT&T company from a point to point long distance business in voice to the businesses that we have built over the three years - that strategy is right, it's working, and this structure will deliver value to our shareholders because of it."

But Wall Street didn't seem to be buying it-literally and figuratively. In fact, AT&T share prices continued to slip through the day, closing down 13 percent. That's a continuation of a downward trend the company's trying to stop. The bigger story, of course, is whether this restructuring amounts to the company surrendering to the impatience of Wall Street and investors' demands for quick results. Armstrong strongly denies that, saying his strategy is right on track. But Ken McGee, an analyst with the Gartner Group was quoted as saying that today marks "the beginning of the end of an icon".

Now news from the Mideast-you've probably heard that peace negotiations have been suspended between the Israelis and the Palestinians…but today we were in touch with correspondent Steve McNally who tells us that despite increasing enmity-Israel continues to send money to the Palestinian Authority.

McNally: "Since 1993, when Israel and the Palestinians signed the historic Oslo Peace treaty on the White House lawn, the sides have reached several agreements designed to provide the Palestinian administration with income. Under one deal Israel agreed to transfer to the Palestinians levies it collects on goods and materials imported to Israel but destined for the Palestinian territories. For example Israeli port taxes on building materials headed for areas under exclusive Palestinian control – are refunded to Yasser Arafat's government. Under another pact recently reached, Israel agreed to hand over sales tax collected from the 100,000 Palestinian workers who, prior to the current crisis, were employed in Israel. Thanks to such arrangements, Israel deposits from 7 to 12 million dollars a month into the Palestinian government's bank accounts. Critics of the peace process say Israel is giving the Palestinians money to buy the guns which they've turned on Israel in recent weeks. But Israeli officials say they won't cut the purse strings, just yet. They say the "time out" in the peace process declared by Prime Minister Ehud Barak is not an abandonment of the Oslo treaty, just a re-assessment. But the threat to do so is there. Ehud Barak has ordered his officials to draw up a plan to separate the Israeli and Palestinian economies, if he concludes reaching a final treaty is impossible. In Jerusalem, this is Steve McNally for Marketplace."

From overseas, New research in the United Kingdom claims the British are "addicted to curry." A researcher at Nottingham University claims the British palate has been permanently changed by a passion for Indian food. Well, we have a resident Brit at Marketplace, Helen Palmer of the Health Desk, so we went to her for some verification.

Palmer: "So the Empire strikes back. Britain's love affair with India - that jewel in the Imperial crown - transformed us - giving us bungalows and jodhpurs and tiffin - and millions of immigrants, who set up curry houses on every British High Street. Chicken tikka, mushroom vindaloo, lamb korma, Rogan Josh - the most popular food to eat out or take-away in Britain is Indian."

Gray: "We seem to crave it - we're almost becoming addicted to curry."

Palmer: "Professor Stephen Gray of Nottingham Trent University designed the research - financied -incidentally, by the British food firm Sharwoods which makes - did you guess? - curries. The tests measured the subjects' blood pressure and heart rate, which reacted a little when offered traditional British food but shot up when faced with a spicy curry."

Gray: "It's like sex on a plate…people's pulse rate went up in anticipation of the curry, so there was an arousal phase…they thoroughly enjoyed it afterwards, and then the memory of it afterwards made you want to go back for more."

Palmer: "It wasn't a surprise - I did know it was addictive Social historian Shrabani Basu, author of 'Curry in the Crown.'"

Basu: "Chiles are supposed to be addictive - they release endorphins in the body - so they give you this feel-good factor."

Palmer: "It's a bit of a laugh,' she says, that India has now colonized the British dinner plate - and researcher Stephen Gray doesn't see it as payback either."

Gray: "Maybe it's not so much revenge - maybe it's a gift from the Empire."

Palmer: "From the Health Desk at WGBH Boston I'm Helen Palmer for Marketplace - gotta rush - need a curry."

And there we have it-the top of our news for this October 25th. A downer day for the Dow but especially for the Nasdaq. We'll bring you up to speed when we do the numbers.