Marketplace: News Archives

Tuesday, November 21, 2000
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It's Tuesday, November 21, 2000. I'm David Brancaccio.

Just when you thought the news couldn't get much worse from Lucent Technologies, the company that used to be AT&T's equipment business issued a enigmatic statement saying the sales numbers it reported last month were wrong - oh, by about $125 million. No further explanation was offered by company officials, except to say the error was discovered while preparing year-end financial reports. Lucent's stock tanked on the announcement, dropping 16 percent today. Marketplace's Michelle Brier has more from New York.

Brier: "With its stock down more than 75 percent this year, its profits down last quarter and major management upheaval last month, Lucent's admission of a 'revenue recognition issue' was the last thing investors wanted to hear."

Noll: "It means the losses are even bigger than what they announced earlier."

Brier: "USC professor Michael Noll follows the telecommunications industry."

Noll: "Investors should be deeply concerned about Lucent and the direction the company is going. The revenue don't seem to be there. It's enough to make you suspect that they've been overstating revenues in the past and are only now correcting the overstatement."

Brier: "Lucent previously reported a 22 percent drop in its revenues in the last quarter. Today's announcement probably means that figure will be further revised downward. But analysts are wondering how the error occurred. Was it new product losses or deals fallen through? Or, does lucent have a credit problem that is affecting its bottom line? Steve Levy, a telecom equipment analyst with Lehman Bros, says Lucent has about a billion dollars in so called 'vendor loans' outstanding that could be a problem."

Levy: "They were giving out money to carriers to build networks using Lucent equipment. They were acting like a bank. They are not a bank. Now on top of this you have an environment where these new emerging carriers - the ones that are gonna compete with AT&T and Bell companies - have been aggressively building networks. Some of those networks probably should not have been built. That group of companies is financially unstable right now and so there is a possibility that some of those notes that Lucent took for vendor financing will not be paid."

Brier: "Lucent officials say a full review of their revenue estimates is underway. In New York, I'm Michelle Brier for Marketplace."

In Washington today there were a lot of calls for fairness and leveling the playing field. But the topic wasn't counting Presidential ballots. It was an even more popular spectator sport: baseball. At the end of yet another baseball season dominated by one big city's teams with the highest paid players, many fans complain there's a self-perpetuating imbalance here. Teams in big markets make the most money and therefore can buy the best players to keep winning the most games. At a Senate hearing today, members of a Blue Ribbon Commission that looked into this aired some recommendations. Marketplace's John Dimsdale was there.

Dimsdale: "When you look at the bottom line box score, major league baseball has been very, very good for most managers and players. The sport set yet another attendance record this year selling more tickets than the NFL, NBA and NHL combined. Revenue from TV and cable is soaring. But not for every team. In fact, the gap between the richest and poorest teams has been steadily increasing and was $130 million in 1999. That disparity gives rich teams the ability to hire the best players thus perpetuating their dominance in division championships, according to the Commissioner's Blue Ribbon Panel on Baseball Economics. George Will, the author of Men At Work: The Craft of Baseball, is one panel member."

Will: "Baseball's gross revenues almost doubled between 1995 and 1999. But under the games current economic model, this prosperity exacerbated competitive balance. In 1995 top quartile teams spent about twice as much as bottom quartile teams. In 1999 they spent three times as much."

Dimsdale: "The team with the highest payroll, no surprise, is the New York Yankees, which has won the World Series four of the last five years. The Minnesota Twins paid their players the lowest salaries and finished this year last in their division. To avoid a big drop-off in fan support for smaller market teams, the Blue Ribbon panel recommends that rich teams be forced to share the wealth. The panel would also rein in skyrocketing player salaries with a tax on teams that exceed a certain payroll limit. That obviously doesn't sit well with the players union which did not send a representative to today's hearing. But NBC sportscaster Bob Costas told the committee that while he has always been a strong supporter of the players he's convinced its time to change."

Costas: "The evidence is so dramatic, so overwhelming, so indisputable over the past five or six years, that the arguments that used to compel, no longer compel. And new arguments do. Baseball needs a new paradigm."

Dimsdale: "Baseball's commissioner, Bud Selig has endorsed the findings of the Blue Ribbon Commission but says he'll have a tough time getting approval from all the team owners and players. In Washington, I'm John Dimsdale for Marketplace."

Like Ginger without Fred, like a hot dog without a bun, like spaghetti without sauce - what would Ben and Jerry's be without either Ben or Jerry? Josh Rogers reports.

Rogers: "The mystery continues surrounding Ben and Jerry's future at the company they founded twenty years ago. Yesterday the hirsute pair who sold out to Unilever last August criticized the appointment of Unilever's Yves Couette as CEO, and said they may quit. The two favored hiring a long-time member of their board of directors. But Ben and Jerry's spokesperson Christie Hymert says Couette's visit with employees last week inspired only positive feelings."

Hymert: "People were pretty impressed, both by his demeanor - he's pretty affable, and by his commitment to social mission and his background, his international experience and by his in-depth knowledge of ice cream."

Rogers: "Couette served four years as Head of Unilever's Mexican ice cream holding, Helados Holanda, and is credited with turning the business around. For Marketplace, I'm Jim Rogers."

One example of commerce that does not operate according to free market principles is air travel between the U.S. and China. Chinese officials say that American carriers can only have ten new routes and it was up to the Clinton Administration to pick who gets what. Late today the Department of Transportation announced that the freight company UPS will get six of those ten routes. United Airlines gets two and one each goes to Northwest and FedEx. American Airlines and Delta were shut out. Increasing trade between the two countries has caused an explosion of demand for these services.

If you're planning on traveling this Thanksgiving weekend, you won't lack for company. Record numbers of Americans are expected to fly or drive during the four-day weekend, the busiest travel period all year. As Marketplace's Sarah Gardner reports, the usual laws of economics don't apply when it comes to turkey, pumpkin pie and Grandma's house.

Gardner: "If the airline industry has its numbers right, a record 20.5 million Americans will fly this Thanksgiving holiday. Even more of us will drive. And that's despite these statistics: gas prices are up more than $0.25 from last year and airfares have risen about 13 percent. Rita Gilmore is vice president of Carlson Wagonlit Travel in Burlingame, California."

Gilmore: "Some of the fares are astronomical at this point. Please don't want to go from San Francisco to Boston. You could go to Europe practically for the same price."

Gardner: "And labor problems in the airline industry are threatening to turn this weekend into a turkey for passengers. Delta, United and Northwest recently had to delay and even cancel some flights because of contract disputes. But when the economy's good, long lines and higher prices don't affect travel when it comes to an American institution like Thanksgiving. Even soaring gas prices in the late 70's didn't deter Thanksgiving DRIVERS, according to Triple A. David Swierenga, the chief economist at the Air Transport Association, says consumers do make a calculation."

Swierenga: "If price isn't the main factor when you're doing holiday travel, visiting friends and relatives may overcome a 10 percent price increase."

Gardner: "A 10 percent price increase, maybe. But what about 20 percent? In that case, the pumpkin pie better be good. I'm Sarah Gardner for Marketplace."

And that's the top of our news for Tuesday, November 21, 2000. Today the Dow went up 31 points, 0.3 percent. The Nasdaq closed at 2871, a drop of 4 points or about 0.2 percent. More details when we do the numbers.