Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Pete let's start with you. Viacom (VIA) and Sumner Redstone. What's the story?
Pete Newcomb, senior editor: It's no secret that Sumner Redstone and Mel Karmazin have had a falling out. Mel Karmazin's contract will not be renewed next year. The secret person who's going to take over when Sumner leaves is his daughter Shari.
David Asman: Now we should mention Sumner Redstone is about 80 years old. Is Sumner ever going to retire?
Pete Newcomb, senior editor: I think he's good for another twenty years or so.
Bruce Upbin, senior editor: He's going to die before he retires. And Wall Street will have a cow if Sumner's daughter just steps into his seat. She hasn't been trained. She's not seasoned.
Pete Newcomb, senior editor: Redstone always gets his way. He controls 68% of the voting stock. He's grooming her clearly.
David Asman: But you guys had Mel Karmazin on your cover a few months ago saying what a good guy he was. If he leaves, what will that do to the stock?
Pete Newcomb, senior editor: The stock is up about 45% since October. It's a strong stock.
David Asman: Okay, Scott Woolley, what do you have?
Scott Woolley, associate editor: Local phone companies have been the one good thing about telecoms, the baby bells. But if you look at the numbers, these guys have problems too. People are canceling their local phones and using wireless. Cable companies are even making a progress. Some companies that look to be in trouble are Verizon (VZ), SBC Communications (SBC), and BellSouth (BLS).
Bruce Upbin, senior editor: But if you are going to bet on telecom, the only way to play it is with these baby bells.
David Asman: Also, you've got Colin Powell's son as head of the FCC. He's for deregulation. That's helping telecom, right?
Scott Woolley, associate editor: It'll definitely make up some of this in long distance. Everytime someone cancels their service, it's about $25 off their bottom line.
David Asman: Okay, Bruce. You've got some news on Gateway.
Bruce Upbin, senior editor: Everyone has written off Gateway (GTW). I met with the CEO, Ted Waitt, and he says they're still in the game. They made a price cut to match Dell. They have about a billion and two in cash, which is about half their stock price.
Pete Newcomb, senior editor: My last three computers have been Gateway. I love their computers and I love their cow boxes.
Doug Donovan, staff writer: I'd rather buy my computer from the Dell guy than buy if from a middle-aged guy with a pony-tail who hangs out with a cow.
David Asman: Okay Doug. You've got some news on the Yugo.
Doug Donovan, staff writer: The Yugo was discontinued in 1992 because of the embargo on Yugoslavia and the war. The guy who imported it, the American entrepreneur Malcolm Bricklin is bringing in something new now called the ZMW, Zastava Motor Works. It costs about $7,000.
Bruce Upbin, senior editor: I'm not going to buy the Yugo when I can get a used Volvo for the same price.
Makers & Breakers
MBNA Corp. (KRB)
Meredith Whitney, Wachovia Securities: MAKER
MBNA Corp. is the second largest credit card company in the U.S. I like it because it targets the consumer market of the economy which has been the strongest part of the economy for the past 2 years. It's also delivered 20% EPS growth in the past 10 years.
Jim Michaels, editorial vice president: MAKER
This stock is a money machine. As long as they can borrow money at 3% and lend it to some consumers at 18%, it's going to be a money machine.
Bruce Upbin, senior editor: BREAKER
I'm not so sold. I like the sector but if you're going to play it I'd buy American Express, which has more exposure to money management and the travel services, which is going to come back when the economy comes back.
David Asman: Okay Meredith, let's move on to your second pick.
Lehman Brothers Holdings (LEH)
Meredith Whitney, Wachovia Securities: MAKER
Lehman Bros. Holdings has been the best performing broker for the past 5 years. It's been painted with a negative brush because of the attorney general's accusation against Merrill Lynch. But it's been the best for the past 5 years.
Bruce Upbin, senior editor: BREAKER
Again, I like the sector but I wouldn't go with Lehman. I would pick a company like Morgan Stanley, which is a better financial performer. It has more exposure to the equity and large cap markets.
Jim Michaels, editorial vice president: BREAKER
I don't like the sector. The lawyers are going after it and there's going to be a lot of turmoil.
Meredith Whitney, Wachovia Securities: The brokerage group is trading at post Sept 11th levels, so on valuation basis the group's really attractive. The stock is being lumped with the whole Merrill Lynch group but I think it's going to out perform here.
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