Marketplace: News Archives

Thursday, December 21, 2000
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It's Wednesday, the 21st of December. I'm David Brancaccio.

What Dwight D. Eisenhower called the military-industrial complex may be getting a little more integrated. After the market closed today, word came that Northrop Grumman wants to buy Litton for 5.1 billion dollars. Northrop makes the FA-18 for the Navy, and a lot of electronic gear, including sensors for air traffic and air defense. Litton also does military electronics, but with a focus on ships. Northrop proposes to pay 80 dollars for every Litton share. That's quiet a premium, given that Litton shares closed today at under 63 dollars.

Just when investors thought the news from a former darling of investors, Lucent Technologies, couldn't possibly get any worse, it did. Lucent's new CEO, Henry Schacht, said today the company's loss in the current quarter would be much greater than expected, and he announced a billion-dollar restructuring that could mean layoffs for more than ten thousand workers. Marketplace's Michelle Brier reports:

Brier: "Lucent says it will lose 25-30 cents a share in its fiscal first quarter, ending december 31, much higher than the one cent loss wall street was expecting. The company also admits revenues from the last quarter were 700 million dollars lower than previously reported. A plan to cut a billion dollars in costs including about 12 thousand jobs, did nothing to soothe investors who unceremoniously dumped lucent stock."

Wachtel: "Well, this is an ongoing saga."

Brier: "Prudential securities analyst Larry Wachtel."

Wachtel: "This is the fourth time in four quarters they have preannounced a poor quarter. I will say, this is a new management team that's come in in recent months and what they do, right down to the kitchen sink, is all the tough stuff. Of course they blame it on old management. And they get to go on wiith a clean slate for the new year."

Brier: "Accusations of fiscal mismanagement have plagued lucent for months. Just yesterday, the Wall Street Journal reported a Lucent executive was suing the company for allegedly forcing her to resign because she questioned their revenue projections. Lucent officials blame their troubles on slower spending on networking equipment, but Wachtel thinks the problems at Lucent are Lucent-specific..."

Wachtel: "The competitiors, like Nortel, are doing fairly well, they've been hurt by the overall market decline but their bottom lines are coming in excellent. Lucent, as they say, screwed up."

Brier: "Lucent shares have lost more than 80 percent of their value this year. In New York, I'm Michelle Brier for Marketplace."

Given the debate between the outgoing and incoming Presidential administrations about just which words about just how bad the economy is, the question becomes: What is the definition of a recession? As president Clinton and many others believe, it's two consecutive quarters - that is six months - in which the economy contracts. We not talking a slower rate of growth here, we're talking quarterly Gross Domestic Product figures preceded with a negative sign, once inflation is factored in. The state of the art on this at the moment is the revised GDP number for the three months that ended in September that came out today at 2.2 percent. Since I didn't say the word "negative" before I said 2.2 percent, it's still growth, meager as it is, and the third quarter can't mark the beginning of a recession. The current quarter-who knows-the data's not out until next year.

Now for the hair-raising part - bear with me, it'll only hurt for a second.

That dictionary definition of a recession isn't the gold standard. It turns out, many economists look to an outfit called the National Bureau of Economic Research. It's spokesperson, Donna Zerwitz, says the bureau has a committee that meets every once in a while to define when a recession starts and ends. Alan Levinson, the chief economist of the investment firm T. Rowe Price, says he's guessing the bureau's recession-defining, business cycle committee is probably already abuzz. But Donna Zerwitz, who's been working for the National Bureau of Economic Research for two decades, says all's quiet on her end so far.

You've heard the simpler definition of a recession, haven't you? One with particular poignance given the layoffs announced this week. A recession is when YOU'RE out of work. A depression is when I'M out of work.

And that's the top of our news for Thursday, December 21, 2000. Today the Dow Jones Industrial went up 168 points or one and two-thirds percent. The Nasdaq Composite went up a scant 7 points or a third of a percent. Details when we do the numbers.

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