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In The Money

Stocks Failing to Bounce Back from Friday's Beating; Another Day, More Republican Primaries; SBC Goes B2B; A Penny for Your Foolish Thoughts

Aired February 22, 2000 - 11:00 a.m. ET


BILL TUCKER, CNN ANCHOR: After taking a beating Friday, stocks and investors failing to bounce back today.

Another day, more Republican primaries. It's all on the line for John McCain in Michigan and Arizona, and he's not alone.


VICE PRES. AL GORE (D), PRESIDENTIAL CANDIDATE: You're sounding a little desperate because you're trying to build yourself up by tearing everybody else down.

BILL BRADLEY (D), PRESIDENTIAL CANDIDATE: What you've seen is an elaborate what I call Gore dance.


TUCKER: It was tough talk in Harlem.

SBC goes B2B. What does that mean? How might that deal affect the Internet and SBC's stock price? It's our "Stock of the Day."

And a penny for your thoughts: Advice on penny stocks from the Motley Fool you can't afford to miss.

ANNOUNCER: From CNN and CNNfn, this is IN THE MONEY with Bill Tucker, Terry Keenan and Daryn Kagan.

TUCKER: Good morning, and welcome to IN THE MONEY. My partner, Terry Keenan, has the day off today.

Stocks off to a weak start after a three-day weekend. The long, tall shadow of Federal Reserve Chairman Alan Greenspan falling heavily across the Street, as Greenspan goes back to Capitol Hill this week for part two of his testimony on the economy.

Microsoft and the government back in court as final arguments are heard, and we'll have an update from outside the courtroom.

But first, let's get right to the numbers this morning. The markets starting out in happy fashion. The Dow up as much as 70 points. In fact, in the early going that is definitely not the case today. We see the Dow currently down 82 points. Financials under pressure. Technology stocks under pressure. That's evidenced not only by the Dow but by the Nasdaq as well, the Nasdaq Composite falling nearly 80 points as well.

A quick check on the bond market shows that at least some of the money coming out of stocks is going over to the credit markets, long end getting back down near six percent. More importantly, though, look at the 10-year note. Remember, we've been hanging it out about 6 1/2 percent for a fairly study basis for a couple of weeks; that's not the case today. Nice rally there, nearly 3/4 of a point, and we have the yield dropping to 6.37 percent.

For more on what's moving Wall Street let's get the word from Rhonda Schaffler down at the New York Stock Exchange.

Rhonda, we've got a couple of deals that apparently are moving some stocks around today.

RHONDA SCHAFFLER, CNN CORRESPONDENT: Yes, you know, thank goodness for that, because we're seeing a pretty broad sell-off, here, so only scattered buying is out there, and one of them is deal related. It's Consolidated Paper. That stock is sharply higher. It is being acquired by a Finish-Swedish paper company, and that company's name is Stora Enso. It is about a $4.85-billion deal.

It continues its pattern of consolidation within that particular industry that we saw last week. There was a big deal last week involving International Paper and Shorewood Packaging, and also another company, UMP-Kymmene. So, there's a lot of international deal-making within that particular sector. Interestingly, even though we've got that stock sharply higher, paper stocks here are mixed. International Paper, a Dow stock, is higher, as is Louisiana Pacific. Georgia Pacific, though, and Champion, instance, are trading lower, so it's not enough to give the entire sector a lift.

TUCKER: It's very interesting. We mentioned tech stocks up at the top of the show. Most of them heading lower. Notable exception there is Texas Instruments. What's the news on them, Rhonda?

SCHAFFLER: That's right, you know. A big move for them. It's only a couple of dollars away from its 52-week high. Texas Instruments has got new products on tap. They are programmable digital signal processors, DSPs, and that's a fancy name that basically says these products let you get onto the Internet and move around much faster. And of course that has been a huge hallmark of the year on Wall Street, it's anything Internet related, anything that improves the access will give those stocks a boost. So, that's the case with Texas Instruments. It's managing a very, very strong gain even as we're seeing a little bit of erosion in those high-flying tech stocks today.

TUCKER: Yes, and we've got IBM and Nortel headed lower, right?

SCHAFFLER: That's right. They're both lower. And again, nothing fundamental with these companies. It's just we're seeing some tech losses across the board. Nortel, in fact, gained 18 since the beginning of the year, so it's had a pretty strong run-up.

IBM is one of many tech stocks falling today. There had been some talk last week about concerns about IBM's hardware business weighing on the stock, but overall what we're hearing is just that everyone is continuing to take profits in that particular group.

TUCKER: All right, Rhonda, thank you. Rhonda Schaffler reporting from the floor of the New York Stock Exchange.

Financials on the Big Board a bit mixed. We got J.P. Morgan headed down about two, but we had a big turnaround in American Express that's worth noting since it is a Dow 30 stock. It's up better than a buck a share.

Meanwhile, the Nasdaq is adding to Friday's steep losses. Some of the major players like Cisco, Intel, Dell, Microsoft, all down, but there are a few bright spots. So let's don't dwell on the negative, let's take a look at the positive.

Charles, what's up?

CHARLES MOLINEAUX, CNN CORRESPONDENT: Well, yes, I was just checking Global Crossing, which is still on the positive, actually. It's going to be buying IXNET and it's parent company, IPC Communications, for $3.38 billion in stock. The deal should close in the second quarter. And we have Merrill Lynch raising its rating on Global from near-term accumulate to near-term buy. And what do you know? Global's actually managed to swim upstream, and of course it's a pretty stuff stream it's swimming against. It has now gained a dollar and an eighth, or 2.1 percent. So, that's pretty good.

We also, by the way, have another deal pending over Travel Services, which is up by about -- look at that -- 43 percent, or 7.75, at 27.50. Travel agent service Travel Services being bought by Airtours for $385 million; Airtours is a British vacation company. So, that's -- we do have some good news associated with some of those companies. Of course, they are both involved in some potentially- very-big deals.

TUCKER: And while Microsoft is suffering some losses in the market today, Oracle is holding an analyst conference and it seems to be lifting the stock.

MOLINEAUX: Yes, actually, it is one of the few really big caps that is doing OK today. It's up, actually -- look at that -- by a dollar and 3/8, 2.5 percent at $16 a share. Yes, we're standing by. About 1:00 in the afternoon Eastern Time is going to be a big press conference from Oracle. The reps are going to meet with the analysts. The speculation is that they're going to be announcing the Oracle Light Database product or maybe an extension to Oracle's wireless applications, either of which, of course, rolling out of a new product line or a further extension to -- of its reach. Boding very well for the stock and offering it some opportunity going forward, so we're looking at a nice positive response. Even though just about everything else is down, we do see these names are managing to swim upstream despite the downdraft. And by the way, Bill, we just hit a new session low on the Nasdaq: 4320. We are now down by 91 points.

TUCKER: Yes, I noticed that while you were talking, Charles. Thanks for that report from the Nasdaq marketsite.

Well, part of Microsoft's main problem may be that closing arguments are under way in the antitrust case against the company. This as talks to settle the case have been progressing poorly.

Joining us now from outside the courthouse to tell us what's going on inside the courthouse and what it may mean for consumers and investors is antitrust attorney Harvey Saferstein.

And Harvey, thanks very much for being here.


TUCKER: What exactly is at stake? I thought they were trying to work this stuff out in Chicago and negotiate a settlement.

SAFERSTEIN: High stakes here. There doesn't seem to be any settlement from what we can tell in court, and they're going right to it, because both sides know there's a lot at stake here. Not only trying to impress the judge with what their legal arguments are and how he should conclude, but also trying to impress him that maybe they have the better side of the settlement and that he should go on and make whatever decision he's going to make right now.

TUCKER: There's some confusion that erupted around Microsoft last week: Did he or didn't he say, Bill Gates say that he would be willing to open the source code. Bloomberg saying he did, Microsoft later coming out saying, he never said anything like that. Did that come up in court today so far?

SAFERSTEIN: So far, nothing's come up in court like that. They have been incredibly fast, rapid, and some big initial body blows. The government, both the state government and the federal government with David Boies, come out swinging with some harsh words about Microsoft. Kevin O'Connor (ph) from the state of Wisconsin talked about Microsoft having a wrap sheet, bad acts as a monopolist, and David Boies coming on very strong, saying they've done a number of things wrong and that we shouldn't let anything go by.

TUCKER: Harvey, you're an antitrust attorney, you're not a judge, but I am interested: You've been sitting there, listening to the arguments this morning. Which way do you think the arguments are going right now?

SAFERSTEIN: Well, right now we've only heard the government's side. It looks like it's going to the government's way, and they've got the findings of fact on their side, and they've got the Judge Jackson on their side so far. So, right now it looks like it's going the government's way.

TUCKER: Well, then given all of that, why haven't they been able to settle this case before they come down to this?

SAFERSTEIN: The stakes are too high, and to some extent time is on Microsoft's side. If they can keep waiting this out and delaying it, the market may swing with them.

TUCKER: Any consumer impact from this case, Harvey?

SAFERSTEIN: That's what the government was trying to show this morning, that by virtue of what Microsoft has done there's been a marked drop in innovation and the stifling of innovation by Microsoft, and they're trying to show that consumers really have been hurt by this. But that has not been the highlight of the trial. The highlight of the trial has been basically the injury to competition.

TUCKER: All right, Harvey, thank you very much, Harvey Saferstein. He is an antitrust attorney with Fried, Frank, Harris, Shriver & Jacobson. Thanks for being here on IN THE MONEY.

SAFERSTEIN: Good seeing you.

TUCKER: All right, a little bit later in the program Steve Young is inside the courtroom, and we will be talking with him to find out how the morning in court went.

Well, just ahead on IN THE MONEY: it may be crunch time for Republican presidential hopeful John McCain as voters cast ballots in two state primaries.

And, how to protect your credit cards from unwanted swipes online. Visa's CEO will have tips on keeping your Internet purchases secure.


TUCKER: A "Wake-Up Call" to retailers: Customers are not happy. Retailers and financial services both showed drops in consumer satisfaction, according to the University of Michigan's study. Of the seven categories measured, only two, supermarkets and personal property insurance, had increases. Oh, it's got to be bad. Overall satisfaction increased slightly throughout 1999.

Personal property insurance?

It's time to check some other stories making news today, and Daryn's back in Atlanta with us, and she has the latest on those stories -- Good morning, Daryn.

DARYN KAGAN, CNN ANCHOR: Good morning, Bill. Good to see you.

Political eyes are on two states today. First we'll talk about Michigan where polls have been open for more than four hours. George W. Bush was among the early risers. He spoke on CNN this morning on our "MORNING NEWS" program, and he complained that John McCain supporters are calling him anti-Catholic. Bush says he is no bigot. Late opinion surveys suggest a tight race between Bush and John McCain in today's Republican presidential primary in Michigan. Well, speaking of Senator John McCain, he is home in Arizona, which also is holding a GOP primary today. He's favored to win in his home state. If he does, observers will be interested by how much McCain carries his home state. McCain says even if he loses to Bush in Michigan, he'll stay in the race at least until March 7 when several states vote in same-day primaries.

Stay with CNN, as well as, for the latest on today's Republican primaries. Our complete live coverage of the results from Michigan and Arizona will begin tonight on CNN at 8:00 Eastern, 5:00 Pacific.

On the Democratic side of things, Vice President Al Gore and former Senator Bill Bradley traded barbs in their latest debate. The two men appeared together last night on the stage of the Apollo Theater in New York. During that face-off in Harlem, Bradley accused Gore of being a closet conservative. Gore shot back, though, saying that Bradley, who trails in the polls, is getting desperate. Both men are focusing on the March 7 primaries, which include Democratic contests in 15 states, plus American Samoa.

In other news today, dozens of angry truck drivers took their big rigs on the road this morning and headed towards Washington, D.C. They're taking part in a protest against soaring fuel prices and they're hoping that Congress can do something about this growing problem.

CNN's Kathleen Koch joins us from Washington with more on the story -- Kathleen.

KATHLEEN KOCH, CNN CORRESPONDENT: Daryn, it's a sentiment that every American can relate to: frustration every time they pull up to the gas pump. Oil prices last month hit 30 -- last week -- hit $30 a barrel for the first time since 1991. Now, what that has meant to truckers is that the price of a fill-up has more than doubled.

So, now, a huge convoy three miles long, some 300 trucks strong, is putting the pedal to the metal, heading to Capitol Hill to tell lawmakers that they just can't take it any more. They're expected to snarl traffic and let Congress know that the price of commodities across the board could begin to creep up if truck divers can't afford to move the nation's goods. Some are slapping fuel surcharges on the loads that they carry, but most point out that a four- or five-cent-a- mile surcharge doesn't cover the fuel cost increases of 10 cents a mile.

So many have decided to just park their big rigs and wait for fuel prices to go up, hopefully before they go -- I mean fuel prices to go down, hopefully before they go belly-up. Now, truckers are asking Congress to eliminate the federal excise tax on diesel fuel and give them a 15-cent-per-gallon rebate until those fuel costs drop.

Now, just for some perspective, while Americans are moaning and groaning about the high price of gasoline, Europeans really have no remorse for us. They're paying $5 a gallon for gas.

Reporting live in Washington, I'm Kathleen Koch.

KAGAN: It's all relative, Kathleen. Thank you very much.

Now we want to show you a live picture from Phoenix, Arizona. There you see Senator John McCain and his wife Cindy taking up their ballots so that they can go ahead and vote in today's Arizona Republican primary.

They're voting in a facility, perhaps appropriately enough, that's called Veterans Memorial Coliseum & Exposition Center. The veteran theme would tie into John McCain's record as a POW and his service to the country. Also, for those of you who are sports fans, you might recognize Veterans Memorial Coliseum. This is the place where the Phoenix Suns used to play before they moved over to America West Arena.

So, we'll follow the senator. We understand that after he votes, he might be coming outside and have a few words. And when he does, you'll see that live here on CNN.

Meanwhile, one more bit of news for you: Major airlines are backing down from announced rate hikes on domestic fares that would have helped cover soaring fuel costs. The hike was on top of a recent fuel surcharge that airlines added to round-trip tickets. American, United, Delta and Continental all rescinding price boosts that were implemented last week. One analyst attributed the reversal to Northwest Airlines' refusal to raise its rates.

That's the news for now. We're keeping an eye on John McCain to see if he has something to say, especially after some strong remarks from Governor George Bush that we heard in the last hour here on CNN. If the senator speaks, you'll see it live here on CNN.

For now, Bill, you take it from here.

TUCKER: All right, Daryn, we'll stay tuned for those words.

Meanwhile, let's get back to talking about markets. Wireless stocks making a big connection on Wall Street. From Nextel to Ericsson, investors seem to like what they're hearing from the wireless companies.

Greg Clarkin is here to tell us why in the world Nextel is up $7.25.

Look at the corner of the screen. The Nasdaq's not looking good, Greg.

GREG CLARKIN, CNN CORRESPONDENT: The Nasdaq down 100 points; you have Nextel up. As you mentioned, a lot of little news coming out of the wireless business, but the most riveting has to be from Nextel. As you know, this is the company that really concentrates on high- spending business consumers, really not the mainstream consumers. Wireless phone company -- digital wireless phone company numbers this morning much better than expected. The Street was looking for them to lose about 97 cents a share. They lost 85 cents a share. At the same time, they just keep adding subscribers and very impressive rates. They added about 464,000 subscribers in the U.S. alone in the fourth quarter. That brings them up to almost 5 million subscribers worldwide. So the company doing very well.

Let's take a look at what the stock is doing, if we can, today. You can see Nextel, as Bill was mentioning. Keep in mind, this is a Nasdaq stock. The Nasdaq's down over 100 points. That stock up better than 7 bucks, 125 15/16.

Bill, last year at this time, it was trading around $30 a share. So look at the run it's had. And, again, it's Nextel out with their numbers; also, by the way, announcing a two-for-one stock split. Always good for a little boost in the share prices there.

Some of the other wireless stocks you see up there on the screen in the news this morning: Nokia, they are setting up a new venture to develop Internet appliances. Basically, they want to move the Internet from the phones and the PCs that folks are looking at and now onto appliances where they say you can look at it at your breakfast table. That stock rallying on that news, up better than 3. And Motorola gaining a quarter right now. Motorola's buying a relatively small company called Seaport. They're in the networking equipment business; basically the equipment to keep the Internet moving. Bought them for about $430 million in stock.

TUCKER: All right, we were going to talk wireless. We did. But for now, we got to run back and check in with Daryn.

You've got news for us, Daryn?

KAGAN: From Phoenix, from Veterans Memorial Coliseum, there's Senator John McCain on his way to vote. Of course, we won't take our camera and actually see who he votes for, but I think you have a pretty good idea. The senator is a strong favorite in is home state. Arizona having a primary today. The Republicans are having a primary. The Democrats in Arizona hold it later in the year. Michigan also having a strong -- also having a primary where it's a dead heat between John McCain and Texas Governor George W. Bush.

So, there you might think that there's two votes who have probably been cast for John McCain as the senator and his wife cast their ballot.

More in just a moment. Now back up to Bill.

TUCKER: All right, thank you, Daryn. That in a state where the governor's, of course, expected to vote against John McCain.

Coming up on IN THE MONEY: To be or not to be. Or how about B2B, as in business to business. We'll take you behind SBC's blockbuster B2B e-commerce deal. SBC is our "Stock of the Day." IN THE MONEY will be back in a moment.

(COMMERCIAL BREAK) TUCKER: All right, you are looking at a live shot of the New York Stock Exchange. We have the Dow up about 23 points off of its lows. However, the Nasdaq is not. The Nasdaq is setting session lows even as we look. Nasdaq composite down 119 points.

We do have a slight drift lower in oil prices, down 8 cents, $28.37 a barrel. And it is helping spark a rally in the transports and a little bit of selling in the oil stocks.

And we have Daryn now. If you're worried about credit card fraud, listen up, Daryn has some ways that you can avoid being taken on-line.

Daryn, down to you.

KAGAN: Bill, the nation's leading payment card system says that overall card fraud losses have actually dropped to an all-time low. Visa USA announces today that losses are down to 6/100 percent up total transaction volume. In English, that means that's just six cents for every $100.

Joining us from New York now is Carl Passcarella. He is president and chief executive officer of Visa USA.

Mr. Passcarella, welcome. Thanks for joining us.


KAGAN: To what do you attribute these encouraging numbers on credit card fraud?

PASSCARELLA: Well, we've spent a lot of time and effort over the past few years focusing on the fraud issues around the Visa credit card. And what we have come up with is predictive models, the latest in technological changes for networking, that have really reduced the fraud from 1992, when it was about 18 cents per $100, to the 6 cents per $100 as you mentioned earlier.

And, as a result, we felt that it was prudent to pass that savings along to consumers. So, effective April, we are announcing today that Visa card holders will no longer be liable for any fraud perpetrated against their Visa card whether it occurs...

KAGAN: That's good news, Mr. Passcarella. That's good news, and we want to know more about that in a second. But because it's CNN, we do have to follow the news, so we will ask you to stand by.

We are going to go to Phoenix, Arizona where Senator John McCain is speaking after he cast his ballot in the Arizona primary.


SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: ... going to Washington state tomorrow and continuing the campaign.

QUESTION: (OFF-MIKE) MCCAIN: I think it's kind of nice to be the first presidential candidate in this campaign to vote for himself. That is kind of a unique experience for me for a guy who finished 5th to the bottom of his class at the Naval Academy that is not too shabby.

QUESTION: Is Michigan do or die for you?

MCCAIN: Everything is do or die in this campaign. That is why we are having so much fun. Everyday is do or die. We are a high-wire act, an insurgency campaign, and we have had a great, great ride, and we're proud of the positive campaign we've been running, and we believe that that's the way the voters will finally come down.

QUESTION: Is there any scenario where you would pullout?

MCCAIN: No, I cannot imagine, I cannot imagine that.

QUESTION: Putting aside what George W. Bush may or may have done in Michigan, are you completely satisfied with the race that you ran in Michigan?

MCCAIN: I'm completely satisfied. If you read the exposes in "Time" magazine and "Newsweek" this week, you learn about the kind of campaign that the Bush campaign ran. But that's up to them. They have to live with it and we will be proud of ours for a long, long time. And I'm very proud.

In the state of Michigan, where supposedly its going to be very close today, we were 30 points behind three weeks ago. We are very happy with the traction that we gained in this campaign.

Thank you very much, OK, thanks a lot. Have a great day.

KAGAN: There we go. Microphone is open. OK, some quick comments there from Senator John McCain, as he stepped out of Veterans Memorial Coliseum in Phoenix, Arizona. Senator McCain making the point that he is the first presidential candidate in this election who has had the chance to vote for himself, since the Arizona primary happening today.

Also Michigan happening today, where it's considered a dead heat between Senator McCain and Texas Governor George W. Bush. More on that in a moment.

Let's get back to our guest, Mr. Passcarella from Visa.

I offer my apologies for that interruption, but that is kind of how we work around here.

PASSCARELLA: That is fine, Daryn.

KAGAN: And I interrupted you right in the middle of what could be some good news for consumers. Share that with us again, please.

PASSCARELLA: I was mentioning the fact that because of the efforts that we put forward in the fraud area, that we felt that it was prudent for us to pass along these savings to consumers. So that we're announcing today that we're going to allow consumers to effective immediately to be able to use their Visa cards and not be liable for any fraud that occurs either on the Internet or, in fact, in the physical world.

KAGAN: And that used to be $50 you had to cover as the consumer.

PASSCARELLA: That's right. The consumer would have had to cover normally about a $50 fee or lost Liability for a fraudulent transaction.

KAGAN: You mentioned the Internet, you feel confident with your customers using their Visa cards over the Internet?

PASSCARELLA: Very much so. We have found that fraud on the Internet is not any higher than it is, in fact, in the physical world. And normally, if card holders just use some, you know, prudent steps in the way they conduct their business, like making sure that their Web browser is safe and secure, knowing who the e-tailer is that they're doing business with, and making sure that in fact they understand what the policies are for returns, for delivery, et cetera, and also logging on to the Web site, where we continue to give good pointers to both the merchant community and the consumers.

I think that the Internet and e-commerce is certainly a very, very high potential for the future.

KAGAN: Do you expect other credit card companies will follow Visa's lead?

PASSCARELLA: I really don't know. We didn't do this from a competitive standpoint. We believe that when you have the technological changes that we have been able to use, and the breakthroughs in predictive modeling, that we should pass that along to consumers.

As the market leader, that's really our position to take and to make it safe and secure for consumers to use their Visa card every day.

KAGAN: Carl Passcarella with Visa USA, thanks for your time. And again, sorry for the interruption. We appreciate you stopping by today.

PASSCARELLA: Thank you, Daryn.

KAGAN: And now back up to Bill in New York.

TUCKER: All right, thanks, Daryn.

Just ahead on IN THE MONEY: The Fools give their two cents on penny stocks. How about buying some cheap stocks that will or could become an expensive mistake? And our "Stock of the Day": SBC. The company pays $4 billion for an e-commerce company. But how much would you pay for SBC's stock. That when IN THE MONEY returns.


TUCKER: It's spring time in New York. Temperatures climbing into the mid to upper 40s today. OK, so it is not that warm, but it is warm enough to thaw the snow in the city. And it is a beautiful day here in New York.

Welcome back to IN THE MONEY. I'm Bill Tucker. Terry has the day off. We have a very busy half hour for you, including considering where we should we be adding SBC Communications to our IN THE MONEY portfolio? Well, you get decide, and in just a moment, we will give you the arguments,

Plus, you may already have seen the movie, "The Boiler Room," but are you still tempted to invest in penny stocks? We'll be talking about the dangers with our Motley Fool, David Gardner.

First, though, an update of the markets. They are lower. How is that for an update? They are off their lows of the session. But the bounce from the bottom has not been enough to put them back in positive territory. The Dow down 62 points, the Nasdaq composite down 104.

Some of that money is going into the credit markets. Long into that market, rallying strongly today: 6.07 on the 30-year bond. But remember, we've been watching that 10-year note. And look at this: After two weeks of 6 1/2 percent, we got a one point rally in the 10- year note today, and the yield there 6.35 percent. Remember, a lot of home mortgages are pegged to that rate on the 10-year note. So it is worth taking note of, as it were.

In today's edition of "Stock of the Day": SBC Communications is getting down to business, the on-line business. SBC is buying Sterling Commerce, it is an on-line business-to-business software provider, paying nearly $4 billion in cash. And that was enough for us to make SBC our "Stock of the Day."


(voice-over): SBC hopes its mega cash deal will translate into some sterling on Wall Street. Nation's largest phone company operates wireless network in 19 of the top 30 markets in the country. But its stock hasn't been exactly communicating with investors lately.

The bears point out that SBC still doesn't have approval to sell long distance service even though it has a stake in a national fiber- optic network. They also say SBC is facing some heavy competition from local phone companies.

But the bulls are expecting SBC to be one of the fastest growing local phone companies over the next several years, and they like its top brass, describing SBC leaders as a strong management team.

So our question for you: Should we call for some SBC stock for our IN THE MONEY portfolio?

(END VIDEOTAPE) TUCKER: As you might expect, SBC Communications spending all of that money, it is trading down $2 a share. However, Sterling Commerce is trading up $11 a share.

Joining us now to talk more about whether we should be adding SBC to our IN THE MONEY portfolio is Bob Wilkes. He is the telecom analyst for Brown Brothers Harriman.

And Bob, welcome to IN THE MONEY.


TUCKER: Four billion dollars worth of cash, why is SBC going out and spending all that money for a company?

WILKES: Well, SBC is going to be seeing more competition in its markets in general. And one of the ways to compete successfully is going to be to provide a complete -- more complete portfolio of services, which, in addition to the transport services and the high- speed access services they currently provide, could include things like business-to-business e-commerce capability.

TUCKER: Well, the critics of this deal, though, Bob, could argue that they could have saved the cash maybe and done a contract with Sterling Commerce instead.

WILKES: Well, I think it makes more sense to be able to provide a single package from one vendor. And the other thing to keep in mind is that SBC has been more into doing acquisitions than they have been into doing alliances.

TUCKER: Is that why the stock is so depressed, well off of its 52-week high back in August?

WILKES: Clearly is. I think it has been a combination of concerns about regulation, concerns about competition, and in particular, when they did the Ameritech merger, they had to make some concessions that some of the other Bells didn't have to make.

TUCKER: All right, well, how do you rate this stock?

WILKES: I have SBC as short-term buy, long-term neutral. The long-term neutral reflection on-going competitive uncertainties. But I think that this deal is a step in the right direction. And at the end of the week, they are having a major analyst meeting, which potentially could give the stock a bit of a lift as well.

TUCKER: So you think it is a buy down here at $36?


TUCKER: All right, Bob, thank you. Bob Wilkes, telecom analyst, appreciate you being here.

WILKES: My pleasure. TUCKER: OK, now that you've heard the arguments for SBC Communications, log on to our Web site. Point your mouse down to the bottom of the page, cast your vote: yes, no. We add it in, not, into the portfolio.

As for Comcast, yesterday's "Stock of the Day": 59 percent of you gave it a thumbs-up, which means we buy $1,000 worth of the cable operator for our portfolio.

Just ahead on IN THE MONEY: The space shuttle Endeavour tries to head home, but Mother Nature may throw a wrench into the landing efforts. That story is up next.

DAVID GARDNER, CO-FOUNDER, THE MOTLEY FOOL: And I'm David Gardner, live from Motley Fool Headquarters. We will be talking penny stocks with you and other foolishness when IN THE MONEY continues.


TUCKER: All right, welcome back. Notice the Dow industrials are down about 60 points. They are up off their lows of the session. Tech stocks under pressure, that's pressuring the Dow and the Nasdaq, which is at session lows. But worth noting, the transports are up 21 points; that on an 8-cent dip in oil prices to just over $28 a barrel.

All right, let's check back in with Daryn on news of other stories making headlines today -- Daryn.

KAGAN: There's actually more news than just politics. Thank you, Bill.

We're going to start with a peaceful ending to a hostage crisis. Two inmates on death row in Livingston, Texas released a female prison guard unharmed today. Negotiators kept vigil while the prisoners held the guard for 13 hours. They surrendered this morning after being allowed to speak with a group of death penalty opponents. The two men had also participated in a much-publicized escape attempt more than a year ago.

Closing arguments started today in the trial of four white New York police officers accused of killing an unarmed black immigrant. All four say they are innocent of second-degree murder in last year's shooting death of Amadou Diallo. They said that Diallo ignored orders to stop for questioning and they thought that he pulled a gun before they fired 41 shots at him. Turned out what they thought was a gun actually was Diallo's wallet.

The case of 6-year-old Cuban immigrant Elian Gonzalez has a new judge and a new date. U.S. District Judge Michael Moore was selected by computer today. He will be replacing Judge William Hoeveler. Hoeveler suffered a mild stroke over the weekend. Court officials say that Moore will review all the filings in the boy's case and act on them during the week of March 6.

NASA might have to change its plans for the space shuttle Endeavour's return to Earth. Endeavour -- if you can follow this schedule -- is scheduled to land at Kennedy Space Center in Florida just before 5:00 p.m. Eastern, but high winds and clouds are in the forecast. Bad weather also is expected at the backup landing site; that's Edwards Air Force Base in Southern California. A third choice is to bring the Shuttle down tomorrow or Thursday at the White Sands Missile Range. Only one other shuttle landing has taken place at the New Mexico site, and that was 18 years ago.

Looking a bit thinner but otherwise healthy after heart surgery, David Letterman has returned to his "Late Show." Two pretend nurses helped him on stage. He says he's glad to be wearing clothes that open in the front, but he's not crazy about the decaffeinated coffee that he's had to switch to. Letterman will take it slow while recovering. He hosts again Wednesday and Friday, with Bill Cosby guest-hosting tonight. Kathy Lee Gifford will be filling in on Thursday.

Cartoonist Charles Schulz's wife says that her husband could not know the extent of the impact he had made on his fans.


CHOIR (singing): You're a good man Charlie Brown.


KAGAN: The creator of the "Peanuts" comic strip was remembered at a public memorial in Santa Rosa, California yesterday. About 4,000 friends, relatives and fans gathered to honor the man who gave us Charlie Brown, Snoopy and all the "Peanuts" characters for 50 years. British World War II-era fighter planes flew over in a missing-man formation. The crowd was served chocolate chip cookies and root beer, favorite refreshments for the "Peanuts" gang. Sounds like a celebration that many would have enjoyed.

That's the news for now. Back up to Bill in New York.

TUCKER: All right, thanks, Daryn.

Well, it is time now for our latest edition of "The Motley Fool." Today's episode: "Fools in the Boiler Room." In a timely fashion, we here on IN THE MONEY decided it's a good time to talk about penny stocks, the Internet and investors' gullibility.

Let's begin with an "IN THE MONEY 101" on penny stocks. What are they? you might ask. Well, penny stocks typically are stocks which trade under $2 a share. The stocks are not listed on a major exchange, trading instead in the bulletin board market or as "pink sheets." Financial disclosure among these stocks is minimal and these stocks do have little to no history in terms of financial history or assets, all of the above which qualifies them as very high-risk stocks.

Prompting us to look at penny stocks: the new movie,"The Boiler Room," a movie about scam artists playing on peoples' greed and pushing penny stocks on investors with their guards down. Our Fool in the boiler room today, Dave Gardner. And Dave will be joining in a moment, but Jay Perlman, the Fools' associate general counsel -- now I'm wondering if that makes him foolish counsel. But Jay used to investigate stock fraud for the SEC.

But first, let's turn to Dave.

And, Dave, before we damn all the penny stocks in one big group, some of them can be good investments. You just need to be aware of what the dangers of the pennies are, don't we.

GARDNER: Maybe some of them can be, Bill, but I have yet to really encounter one that is. They always sound exciting. You know, they sound exciting. They're the gold mining company in Zaire that you really can't verify, but they've got a big story.

And I think we have three basic points about penny stocks here at Fool HQ. The first one is that they're always easy to buy because they have that big story, but they're generally pretty hard to sale. There's not a lot of market for these companies. There's not liquidity there, so when you do try to sell, maybe it was at $1.37, but you end up getting out at 90 cents. So that's number one.

Number two is that scam artists, as they've been using boiler rooms and phones, they also use message boards on the Internet today. And they're generally trying to get you excited about it because they have the shares themselves and they're selling them to you.

And then point number three is that 75 percent of these companies over the course of the next 10 years will go to zero dollars a share. I think one of our Foolish points, we always encourage people to ask themselves: How did it get down to 37 cents in the first place?

TUCKER: And if it's 37 cents, is it really, really worth your time and attention? And, you know, that's probably one of the more disturbing aspects about penny stocks. One, they appeal to the greed factor, and, second, they utilize a medium which has really revolutionized stock investing for investors, and that's the Internet.

GARDNER: Yes, and, you know, the Internet cuts both ways because, early on, we saw, and we continue to see, some people out there talking up stocks at $2 a share. Fortunately on The Motley Fool on our message boards, we've never allowed any discussion for stocks under $5 a share because we like to try to curb that abuse. But, on the other hand, the Internet does offer a tremendous amount of free information. And whether it's CNNfn or or a whole punch of other sites out, the opportunity for you and me to get to know our money and to get to know how to invest right is unprecedented.

TUCKER: Well, let's bring Jay in on this conversation. Jay's sitting down there with you.

Jay, welcome to IN THE MONEY.

JAY PERLMAN, MOTLEY FOOL LAWYER: Thank you. TUCKER: You used to work with the SEC specializing both in Internet fraud and in penny stocks. Are there any practical lessons for investors that you can share with us?

PERLMAN: Well, I think the main practical lesson to share with investors is don't invest in penny stocks. Just like you were saying earlier, there's no reliable information in the marketplace about these stocks. Virtually all these companies, they're not required to file any periodic reports with the SEC, means there's no audited financial statements out there, there's no independent basis to make a good decision.

So, if you really want one of these companies, wait till it meets the filing requirements. And, in the meantime, just back off. Don't invest in penny stocks.

TUCKER: All right, gentlemen, thank you very much.

Jay Perlman, associate general counsel for The Motley Fool, and Dave Gardner, of course, our resident Fool for the week.

Thanks, Dave.

GARDNER: Fool on, Bill.

TUCKER: Fool on.

Coming up on IN THE MONEY, two Sotheby's executives quit as a price-fixing investigation continues. More on that story when IN THE MONEY returns.


TUCKER: All right, we're seeing a bit of a turnaround in the Dow, turnaround in the fortune of the financials stocks helping the Dow industrials at the moment. American Express, Citi and J.P. Morgan had been down better than three early on. American Express actually positive now, up 1 1/2. Tech stocks not recovering. Microsoft and Intel weighing on the Dow at the moment and weighing on that Nasdaq Composite, which remains down 78 points.

All right, up at the top of the show we told you Microsoft and the government went back to court today to present their final arguments. Our Steve Young was in the courtroom. The court is now in recess for lunch, and Steve is outside not eating lunch but ready to brief us on what went on inside the court today -- Steve.

STEVE YOUNG, CNN CORRESPONDENT: Actually, we're on a short break, and I've got to tell you, in the background you can hear a lot of horns from truckers conducting a protest all around the U.S. District Court and environs. They're protesting the higher cost of oil, nothing to do with Microsoft.

The states and the government this morning were saying all the ways in which they believe the judge has found that Microsoft has violated antitrust law, good, old fashion antitrust law. The government said that Microsoft would like to have the judge believe that you need some new kind of antitrust law to apply to software, but old fashioned antitrust law applies. David Boies, the hired gun who's been arguing the case for the government, was also taking a lot of time to try to show that a court of appeals argument that Microsoft has been leaning heavily on in which it hopes will relieve it of many of the responsibilities of the judge's very adverse findings don't apply.

The issue, of course, is the Sherman Antitrust Act. That's the basis of antitrust law. It has two parts. David Boies said that Microsoft's argument is half baked when it applies to the first part of Sherman Antitrust, and in a sense -- in essence Boies is saying that, you know, if it walks like a duck and quacks like a duck it's a duck, and Microsoft's actions, according to the judge's own findings, says David Boies, show that it excluded illegally, it violated its monopoly power and desktop operating systems and also, and perhaps damagingly, took the federal mediator out of context or misconstrued him. We'll have to see how that weighs with the judge, who ordered the parties to go before that federal judge in Chicago.

Back to you.

TUCKER: All right, Steve. I know that you're contending with what sounds like some kind of bizarre bagpipe back behind you, but I'm wondering, how long is this process expected to take, the final arguments?

YOUNG: Well, the judge has already surprised us. He's full of surprises. We thought he was going to break for lunch, but he's going to go back in and have the government continue. I think he hopes the government will finish this morning. We had been told in advance it would wrap today. We'll just have to see.

TUCKER: All right, Steve, thank you very much, Steve, reporting from the Microsoft trial down in Washington.

Meanwhile, let's talk art. There's a shakeup at Sotheby's. Two key executives stepping down as the Justice Department continues investigation into possible price fixing.

Andy Serwer is here with the full details.

Andy, welcome.

ANDY SERWER, EDITOR-AT-LARGE, "FORTUNE": Thanks. I love those truck horns, though, by the way.

TUCKER: Weren't they great?

SERWER: We need something like that right...

TUCKER: We need that -- we need that here, too.

SERWER: Right.

Actually, so the art world is reeling today following the announcement that Sotheby's is -- the two top executive at Sotheby's are stepping down: CEO D.D. Brooks and the chairman, Alfred Taubman. Of course, he's the Detroit-area billionaire who controls this company. And as you mentioned, Bill, there is a longstanding government investigation into price fixing by Sotheby's and its -- cough, cough -- arch rival Christie's. I don't know how you can have price fixing with an arch rival.

A couple lessons here for investors. The government doesn't like -- let's take a look at this chart here, because this is very interesting. You can see here -- this is one of the lessons: Government investigations do matter. This investigation began in 1997. You can see here the stock climbed nicely from there, from the teens all the way up to over $40 early this year; they had record numbers this year. And then, you know, the investigation really started to weigh in on this company, started to pick up steam. There were some other class-action suits filed by this -- against this company, the European Union started to get interested, and then late this year, Bill, Christie's turned on them and started to provide the government with details about this investigation, which I think really hurt. So, that's one lesson: Government investigations do matter, OK, and I think people should keep that in mind with regard to Microsoft, OK...

TUCKER: Exactly.

SERWER: ... which is very interesting.

Also, duopolies: The government doesn't just like monopolies, it doesn't like duopolies either. Christie's and Sotheby's control 95 percent of the art market, so you've got to look at that.

And the third thing I say: avoid art stocks, OK, because I think that anything to do with art, you know, there's -- it's very, very cyclical, dependent on the economy and wealthy investors sort of ponying for this stuff, and also, you know, it involves human emotion and I don't like that stuff with stocks.

TUCKER: Well, you know, art as an investment has always been an argument, do you buy art because you like it or not, but in a case at Christie's or Sotheby's you're buying a business. And you're right, I think the business there probably is very cyclical depending on the economy, correct?

SERWER: Right, right. Absolutely. You know, Sotheby's, you know, it went public in 1988. Taubman controls this thing. The ticker is BID, by the way; very cute, I like that.

TUCKER: Yes, I know.

SERWER: And, you know, Christie's went public in 1973, it's now controlled by Francois Pinot (ph), the French investor. Went private back in 1998. I mean, I think ultimately...

TUCKER: So they're more volatile than the rest of the stocks in the market. SERWER: Yes, exactly. I think Sotheby's could go private again, too. I mean, this is, you know, really a situation that as investors I would sit back and watch. It's kind of a thing for the society pages.

TUCKER: Let me ask you about a stock you talked about yesterday, Newport News. You came on the show and talked about the fact that Bill Gates diversified his portfolio, as it were.

SERWER: Right, right.

TUCKER: What can you tell us new about that?

SERWER: Well, his money manager, Michael Larsen, ended up filing a 13-D, which is -- it's a filing that says that an investor owns more than five percent of a company, so Cascade, which is Bill Gates' private money management firm, owns over five percent of Newport News Ship Building down in Virginia. That happened after the close on Friday, and so we're waiting to see what happened with the stock. And Bill, you might have a quote for us there. I predicted the stock would be up pretty hardily this morning, and I think it is. Is it not?

TUCKER: Yes, it is. As a matter of fact, we're nice. I was trying to get the quote up here but they stuck it up on the TV for us. It's up, 28 7/8, two dollars a share.

SERWER: Up a couple points in a down market and so, you know, could go up a little more but just a little Bill Gates factor, a little bit of a pop there.

TUCKER: All right, Andy, thanks very much. And if you listened to Andy yesterday, you could have scored that $2 gain.

SERWER: Right.

TUCKER: All right, tomorrow on IN THE MONEY: If you want to invest in Russian stocks, you'll want to watch our "Mutual Funds" segment. Richard Hisey -- is that correct? -- Richard Hisey of the Lexington Troika Fund will be with us.

And that will do it for today's edition of IN THE MONEY. For Daryn Kagan, I'm Bill Tucker. Terry Keenan will be back with us tomorrow.


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