Moneyline News Hour

Dow Falls 8.48 to 10,804.27; Nasdaq Climbs 28.49 to 4,274.67; Diageo Agrees to Sell Pillsbury to General Mills

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

WILLOW BAY, CNN ANCHOR: Tonight on MONEYLINE, dog days of summer? Not for the Nasdaq. Today it scored the fourth winning session in a row, now up 35 percent in just eight weeks.

STUART VARNEY, CNN ANCHOR: A manic Monday for mergers that'll mean an all-out supermarket makeover. The "Doughboy" joins forces with Betty Crocker while Brawny teams up with Sparkle.

BAY: Tobacco stocks: burnt again. Wall Street wrestling with the $145 billion question: Can cigarette makers beat history's biggest damage award?

VARNEY: And you think the fight over Napster's been nasty? There's a new high-stakes battle over swapping movies over the Internet.

ANNOUNCER: This is the MONEYLINE NEWS HOUR, live from New York and Los Angeles.

BAY: Good evening, everyone. I'm Willow Bay.

VARNEY: And I'm Stuart Varney. Welcome to MONEYLINE.

Our top story tonight: just what a struggling tech investor likes to see, a Nasdaq winning streak. The Nasdaq gained ground for the fourth-straight session today. In fact, it's ended higher every day since Yahoo! wowed Wall Street last Tuesday night with a blowout profit report. And investors are hoping more blowout profit reports to come this week will help the index extend a much-needed comeback. It's now at its best level in more than three months.

Susan Lisovicz reports.

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SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): Technology stocks clocked a fourth-straight session of gains with investors pinning their hopes on a second week of stellar corporate earnings and a less aggressive Federal Reserve.

MICHAEL CARTY, NEW MILLENNIUM ADVISORS: We seem to be off to a roaring start. These are stocks that basically have been beaten down and now they're starting to turn around. We realize that the economy is not going to die. The Fed seems to have become less aggressive and hopefully won't be aggressive in the late August meeting. And now it seems that earnings are coming out very, very strongly.

LISOVICZ: On the strength of earnings expectations and actual results, the Nasdaq closed at 4,274, up 28 points. The composite index was lifted by JDS Uniphase. Shares of the fiber optic company rose after its competitor Corning, which trades on the NYSE, posted quarterly results that substantially beat "Street" estimates.

And shares of Qualcomm jumped on news that the European and Japanese patent offices had upheld three of Qualcomm's patents, making the company's technology more competitive overseas.

Investors also bought up semiconductor and biotech issues.

FRED SEARS, INVESTOR CAPITAL FUNDS: Well, I'm very happy to see that the estimates for the S&P are going up. I think that's mostly a result of what's happening in the technology today. And I think that by far the best place to be invested is the semis right now, because the earnings are -- are going to blow through expectations.

LISOVICZ: Over on the big board, attention focused on a flurry of merger announcements in the paper, consumer foods, and financial industries. But caution over tomorrow's Consumer Price Index, a key inflation indicator, kept the Dow virtually unchanged. The blue chip index closed at 10,804, down eight points.

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LISOVICZ: The majority of companies has yet to report second- quarter results, but analysts say profits are looking so strong that investors are expecting the momentum to carry over into the third quarter. If so, Wall Street could enjoy an Indian summer rally -- Stuart.

VARNEY: And wouldn't that be nice?

LISOVICZ: That's optimistic.

VARNEY: Got it. Thanks, Susan.

Taking a closer look at some of the biggest stock movers today: First off is BroadCom. That stock soared nearly 11 1/2, closing just under 261 1/2. That's a new 52-week high there.

Sycamore Networks soared almost 12 after jumping more than 10 points Friday. And Lycos gained more than eight. BroadVision and Brocade Communications both higher as well.

Check some of today's biggest losers -- they are there. Commerce One sank more than 5 1/2. Aetna down four and change. ING would not comment on reports that it was the leading bidder for Aetna's financial services unit.

Financial stocks also took it on the chin today after recent gains: Morgan Stanley, for example -- Morgan Stanley Dean Witter, that is, down four, and Merrill Lynch lost 3 1/2. Charles Schwab, by the way, down more than three points.

BAY: Two megadeals announced today that would bring together some of the best-known brands at the supermarket. Up first, a bid to create one of the world's largest food companies. General Mills said it will pay nearly $5 1/2 billion in stock for Diageo's Pillsbury unit, plus debt. But investors seemed less than enthused. Shares of General Mills fell nearly 2 3/4 today. In New York trading, Diageo shares gained more than a half.

Fred Katayama has more.

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UNIDENTIFIED ACTOR: Oh, I've always wanted to do that.

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FRED KATAYAMA, CNN CORRESPONDENT (voice-over): The Pillsbury Doughboy agreed to walk down the aisle with Betty Crocker, but shareholders on Betty's side of the aisle are not giggling. Her parent, General Mills, will pay $5.4 billion in stock and take on more than 5 billion in debt to buy Pillsbury from Britain's Diageo. Together General Mills and Pillsbury will boast sales of nearly $13 billion, making it the U.S.'s third-largest food company and a powerhouse in snacks and quick-prep foods.

STEVE SANGER, GENERAL MILLS: When you add together our product line and Pillsbury product line, you will have -- about 80 percent of those products will either be ready to eat or quick preparation. That's preparation of 15 minutes or less. And that is exactly what consumers today are looking for.

KATAYAMA: But shareholders didn't buy into the deal, sending the stock down nearly 8 percent.

(on camera): But General Mills says this deal will not add to earning per share for another four years, a point analysts say could be a sore point for shareholders.

(voice-over): This deal latest is the latest in a consolidation wave sweeping the food industry. Just last month, Unilever said it's buying Best Foods and Philip Morris announced it's acquiring Nabisco Holdings.

Analysts say the list of potential acquisition targets include Quaker Oats, Ralston-Purina, Keebler, and Hain Celestial. And despite its new heft, General Mills.

DAVID NELSON, CS FIRST BOSTON: This all was possible, the most obvious one because of a couple of joint ventures, is Nestle. But there is a standstill agreement with Nestle that prevents them from going hostile. Obviously, all agreements can be renegotiated.

KATAYAMA: General Mills plans to sell Pillsbury cake mix and frosting business to appease any antitrust concerns by regulators. But General Mills must also get the blessing of its shareholders.

Fred Katayama, CNN Financial News, New York.

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VARNEY: Today's other big deal will make a paper giant a tissue giant. Georgia Pacific said it's going to buy Fort James -- that's the maker of Quilted Northern -- for nearly $8 billion in stock and cash. That's a 51 percent premium over Friday's closing price.

The deal will make Georgia Pacific the world's largest manufacturer of tissue. It's all part of the company's new strategy, as the chief executive told CNNfn earlier today.

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A.D. "PETE" CORRELL, CEO, GEORGIA-PACIFIC: It adds value to out shareholders. It's accretive. It's a good deal. It grows us in a product that we wanted to grow in. And it continues the transformation of Georgia-Pacific from a commodity-based company to a custom -- company that sells brands directly to consumers.

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VARNEY: And those brands that it's picking up are from Fort James: Brawny, Mardi Gras, Quilted Northern, and Dixie. But investors didn't pick up the stock. Georgia Pacific stock fell more than 2 1/4 points. Today it also beat second-quarter profit estimates by four cents a share. But Fort James stock jumped almost 8 1/2. Today's deal is just the latest in the consolidating paper industry, including International Paper's planned merger with Champion International.

BAY: The deal-making didn't end there. Also today, AES, one of the world's leading independent power producers, announced plans to buy Ipalco Enterprises for more than $2 billion in stock. This is AES' eighth acquisition this year.

AES gained more than 3 1/2 today and Ipalco, based in Indiana, was up one.

And, back on Wall Street, Lehman Brothers is buying the private client business of rival SG Cowen. Financial terms of the deal were not disclosed, but under the agreement 130 SG Cowen brokers with 60,000 clients will come into Lehman's fold.

Shares of Lehman today gave back some of their recent gains, losing more than 4 1/2 to close at 111 1/4.

And a deal today for General Electric: It is buying railroad equipment maker Harmon Industries. The price tag: $342 million in stock.

GE was up 1 1/2 and Harmon soared nearly 16 1/2, or 124 percent, to close above 29 1/2.

VARNEY: Now, there's a rally, Willow. Just ahead on MONEYLINE, cracking down on one of the most controversial investment trends and on its head cheerleader. The man who practically invented day trading faces the wrath of regulators: Harvey Houtkin on the hot seat.

Plus, the Senate confronts another explosive tax debate: Should you pay higher taxes just for saying "I Do"?

And later, are you getting more than just a earful when you use your cell phone? An intriguing decision by the cell-phone industry to tell all.

Stay with us please.

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VARNEY: Regulators today brought the hammer down on a man who helped usher in this era of day trading. The NASD today slapped Harvey Houtkin and his firm, All-Tech Direct, with a complaint, charging a range of misconduct.

Greg Clarkin reports.

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GREG CLARKIN, CNN CORRESPONDENT (voice-over): He's been called the father of day-trading, but now regulators are going after Harvey Houtkin. Houtkin is CEO of day trading from All-Tech Direct. Regulators charged he and other All-Tech executives with a variety of offenses, including failing to supervise employees, who arranged more than $130 million in loans among All-Techs day traders in a single year, loans to help those clients meet margin calls.

Regulators also took exception with what they call misleading, exaggerated, and unsupported statements in some All-Tech advertising, adds touting the success of day trading with All-Tech's system. And the National Association of Securities Dealer charged All-Tech allowed one employee who had been barred from the securities business to take part in securities-related activity.

JOHN COFFEE, PROF., COLUMBIA LAW SCHOOL: I believe not only the NASD, but the SEC and state regulars, are concerned that this is an industry that's gotten in over its head and has sucked in a large number of basically middle-income investors with the promise that this was a low-risk way of making a great deal of money.

CLARKIN: A separate NASD complaint was filed against Stock USA, another trading firm. Both are part of a combined effort by regulators to keep up with the popularity of day trading.

BRIAN LANE, GIBSON, DUNN & CRUTCHER: If I was a day-trading agency, or firm, I would look at this complaint and I would look very carefully at what my marketing practices were in attracting customers to my account. I think this is a shot across the bow.

CLARKIN: The complaints come just days after the Securities and Exchange Commission approved a new rule for brokerage firms promoting day trading.

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CLARKIN: And those firms are now required to provide customers with a statement spelling out risks of day trading. And as for All- Tech, all it would say about the NASD's complaint, was that it was confident it would be vindicated -- Stuart.

VARNEY: Do you think day traders are back? I'm watching the market action on daily bases. Are they back?

CLARKIN: It does appear that way, Stuart. There's a lot of folks they believe, in the last few sessions, they been emboldened by the run of the Nasdaq and they're getting back into the market in a big way.

VARNEY: Interesting, Greg Clarkin, thanks very much. OK -- Willow.

BAY: Stuart, checking tonight's MONEYLINE "Movers," Anesta surged 10 1/2, setting a new 52-week high. Fellow drug-maker Cephalon is buying it in a $444 million stock deal. VerticalNet jumped nearly 11. The manager of B2B sites was upgraded to Goldman Sachs recommend list. Online employment agency, Career Builder gained almost 3 3/4 or 89 percent. Both Knight Ridder and Tribune are buying it together for eight dollars a share.

And Genentech lost eight on news that second-quarter sales of its breast cancer treatment drug, Herceptin, were lower than anticipated. But the biotech firm did meet Wall Street's profit forecasts today, earning 29 cents a share.

VARNEY: A slew of companies reported earnings today, and they include Bank of America. The nation's No. 1 bank said its profits rose seven percent to just over two billion dollars in the second quarter. That was in line with Wall Street estimates of $1.23 per share. And fiber-optics maker, Corning, surpassed Wall Street expectations. It earned 94 cents a share. The company's quarterly profits jumped 80 percent from a year ago, driven by strong sales of fiber-optic cable. Corning also said it expects to earn up to $3.25 a share for the year. That's more than what Wall Street had been expecting. The stock today surged at 12 1/4 points.

BAY: And a blow-out profit report from Go2Net in tonight's "Tech Watch." After the closing bell, the company reported third-quarter profits of 22 cents a share, its sixth consecutive quarter of increasing operating profits. Go2Net beat Wall Street estimates by seven cents a share. Revenue jumped more than 300 percent to $23 million. Go2Net runs a network of Internet sites, including Meta- Crawler. In light after-hours trading, its stock jumped seven dollars after gaining more than four dollars during the regular session.

But year-to-date, Go2Net shares are still off more than 33 percent. Joining us now from Seattle, Washington, the company's chairman and CEO, Russell Horowitz.

Russell, welcome back to MONEYLINE.

RUSSELL HOROWITZ, CHAIRMAN & CEO, GO2NET: Thanks, thanks for having me.

BAY: What part of your business allowed to you beat estimates by seven cents a share?

HOROWITZ: Well, our business is strong across the board. But the two areas that are showing the greatest strength is our licensing business -- where we license our applications and technologies to partners -- and also our transactions platform. We have one of the leading payment processing platforms in the industry. And we saw volume on our platform increase fairly significantly: $310 million dollar in the quarter, which is up more than 50 percent since the seasonly high December quarter of $190 million.

And we also saw an increase in the number of merchants that use our platform of 12,000 in the quarter to 82,000, which makes our payment processing platform the most widely used in the Internet industry.

BAY: Last time you joined us, you had just completed a licensing deal with Hasbro. Are you looking to add more of those licensing agreements, which are really contributing to your bottom line?

HOROWITZ: That's right. That's, you know, that's part of our licensing stream. And if you look at Go2Net core competency and our focus going forward, it's really looking at licensing our applications and technologies to all broadband device. It's TVs, PCs and wireless. We've got the relationship with Paul Allen, broadband distribution assets, charter communications, the fourth largest cable company, RCN. And that gives us 10 million homes, representing 30 million users.

And we'll be one of the first to market with interactive television. We've got the existing PC services. And we're also looking at wireless. We think one of the keys going forward is cross- platform distribution. When you look at analyst forecast of more than two billion devices being connected to the Internet in 2004 -- which is ten times what it is now -- our belief is more than a third of those will be broadband enabled, and that we will be able to be a leader in licensing our applications and technologies to the service providers for those broadband services.

BAY: Now, Russ, we keep hearing about the promise of broadband, but I get the sense that customers are getting a little frustrated that it's taking longer than they had anticipated. Is that something that concerns you?

HOROWITZ: Not really. People realize how exciting broadband is and they realize how much growth it will unlock. And if you look at competing technology platforms in terms of broadband -- whether it's the cable market, DSL, satellite, or wireless -- for us, the main thing is that having competition among different platforms for broadband accelerates the ultimate adoption. And since we provide our applications and technologies on top of that broadband pipe, the key is, as they compete -- and, as over the next 18 to 24 months, broadband connectivity for every device connected to the Internet comes together, then we're in a position to be in the highest-gross segment with a highly profitable and scalable business model.

BAY: Russell Horowitz, we'll let that be the last word. Thanks for joining us.

HOROWITZ: Thanks a lot -- Stuart.

VARNEY: Thanks, Willow.

Coming up on MONEYLINE, the Senate fight over a hot tax issue for the Republicans: the so-called marriage penalty. We'll have that story just ahead after this break.

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VARNEY: A tax-cut showdown taking place tonight in Washington. The Senate is expected to vote "yea" on phasing out the marriage penalty, and the White House is not expected to go along.

Bob Beard is on Capitol Hill, where the voting is underway -- Bob.

BOB BEARD, CNN CORRESPONDENT: Yes, hi, Stuart.

This is taking some time. What's happening now is the Senate is voting on 40 -- count them -- 40 separate amendments to a marriage penalty bill. This is going to take some time. We're expecting a final vote late tonight or tomorrow, whatever. It's going to pass. Bottom line, congressional Republicans and some Democrats want a 10- year $250 billion divorce from a tax code quirk.

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BEARD (voice-over): For millions of married couples, to love and honor means paying more to the IRS than single filers making the same income. The Senate bill calls for raising the standard deduction for married couples to $8,800, double that of individual taxpayers. Another proposed change: to trim the marginal rate.

Currently, two single people making $26,000 a year each are in the 15-percent tax bracket, but a married couple making the same amount filing jointly is taxed at a higher rate, some of their income at the 28-percent rate. The bill would put the married couple back in the 15-percent bracket -- all part of a GOP plan to resurrect piece by piece a massive tax cut bill vetoed by the president last year.

DAVID MITCHELL, HERITAGE FOUNDATION: There is no bushes to hide behind when you do individual pieces of legislation and I think whether or not Republicans were clever, or just lucky, they have stumbled across a better strategy this time around.

BEARD: President Clinton says he'll sign marriage tax relief if Congress agrees to his government-funded prescription drug plan for Medicare recipients.

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BEARD: So far, the GOP leadership is saying no deal, so a presidential veto now is likely. Republicans want to send this tax cut separately from a phase out in inheritance taxes -- that was passed last week -- to President Clinton's desk right during the GOP Convention in Philadelphia. And there is a lot more money now in this tax-cut debate. The CBO, the Congressional Budget Office is out with new budget estimates, $2.17 trillion now for 10 years, that's double the previous estimates.

Back to Willow in Los Angeles.

BAY: Bob Beard from Capitol Hill, thank you.

Israeli and Palestinian negotiators pick up the pace during today's round of peace talks at Camp David.

Jim Moret joins us now from Washington with more on that, in the MONEYLINE "News Digest" -- Jim.

JIM MORET, CNN ANCHOR: Thank you, Willow.

White House spokesman Joe Lockhart said the Israeli and Palestinian leaders have intensified the pace of their negotiations, with a Wednesday deadline looming, that's when President Clinton is set to leave for the G-8 economic summit in Japan.

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JOE LOCKHART, WHITE HOUSE PRESS SECRETARY: I think that the parties understand the schedule here and they understand that they're working toward that. So as I said earlier today, I think the pace and the intensity have both quickened.

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MORET: In the presidential race, a new CNN Gallup Poll shows Democrat Al Gore gaining support: 46 percent of the respondents said they would back Gore, that compares with 48 percent for Republican George W. Bush. Two weeks ago, the same poll gave Gore 41 percent and Bush 50 percent.

Also today, a former doctor accused of killing three patients at a veterans' hospital seven years ago has pleaded innocent. Prosecutors accused Michael Swango of administering lethal injections to those patients and then posting "do not resuscitate" on their charts.

In India, a passenger plane crashed during a landing attempt, killing 51 passengers and four people on the ground. That plane was delivered in June of 1980 and was slated to be grounded at the end of this year.

And today is the fourth anniversary of another crash: TWA Flight 800. Relatives of the victims held a private ceremony on Long Island near where the plane went down. All 230 people aboard were killed. Those are tonight's top stories outside the world of business. I'll have more coming up on "THE WORLD TODAY" along with Joie Chen, that's at 8:00 p.m. Eastern, 5:00 Pacific -- Willow.

BAY: Jim, thanks.

MONEYLINE will be back right after this.

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VARNEY: Still to come in the second half hour of MONEYLINE, earnings season picks up the pace tomorrow, including some big tech names like Apple, Intel and Microsoft. We'll have a preview.

BAY: Also, first it's music, now it's movies. Duplication downloading heads to Hollywood.

Those stories and more when MONEYLINE continues.

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ANNOUNCER: The MONEYLINE NEWS HOUR continues. Here again, Willow Bay in Los Angeles and Stuart Varney in New York.

VARNEY: In tonight's headlines, Wall Street gears up for a flood of corporate profit reports. We'll look at whether the best is yet to come for second-quarter earnings. And as the tobacco industry reels from a $145 billion damage award, we'll check out whether the industry's financial viability went up in smoke.

Plus, an issue close to the heart and head of millions of people: You may soon be able to learn how much radiation your cell phone gives off.

BAY: But first, more on tonight's top story. Tech stocks drive the Nasdaq to its fourth-straight winning session. The index is now up 35 percent from its low, hit in May. Today, the Nasdaq gained more than 28 to 4,274, with strong gains in the fiber-optics, chip and biotech sectors.

But it was a turbulent day for blue chips with the Dow closing off slightly, down eight to 10,804.

For the first time in a long time investors had some deals to chew over. The biggest: paper giant Georgia-Pacific in a deal with rival Fort James. Georgia-Pacific stock off more than 2 1/4 while Fort James jumped nearly 8 1/2.

In the food business, General Mills bought the Pillsbury unit of Britain's Diageo. General Mills slipped nearly 2 3/4 and Diageo shares in New York gained more than half a point.

VARNEY: Aside from the merger activity, the markets this week may well by dominated by a flood of earnings reports. Corporate profits have been growing at a very steady clip, thank you, but market watchers say some of the strongest results are still to come down the pike.

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CHUCK HILL, DIRECTOR OF RESEARCH, FIRST CALL: The technology and the energy area will be two areas that will beat the estimates by more than they normally do. And the reason I say that is that these are two areas where the analyst estimates have been going up during quarter.

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VARNEY: The oil companies won't be here until next week, but some major tech earnings are on the docket for tomorrow, headlined by Intel, Microsoft and Apple. Also on Tuesday's agenda: General Motors, Johnson & Johnson, these accompanied by Wall Street broker Merrill Lynch, Time Warner, the parent of CNN, plus Dow components, Pfizer, Honeywell and Philip Morris.

BAY: The Philip Morris results will have special currency in light of last week's blockbuster ruling by a Florida jury. The jurors held the cigarette industry liable for nearly $145 billion in punitive damages, but big tobacco remains confident it will overturn the verdict on appeal.

Allan Dodds Frank has the story.

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ALLAN DODDS FRANK, CNN CORRESPONDENT (voice-over): The jurors who returned the biggest punitive damages award in history are defending their verdict to assess cigarette companies nearly $145 billion.

LEIGHTON FINEGAN, JURY FOREMAN: I want people to get the money for the pain and suffering, the medical bills, the cost, the devastation to their families: not to reward them, not to make them rich, but to make the companies accountable.

JOHN MESTRE, JUROR: We started out -- everyone had a figure in mind and we took the average of it. And then we said, well, the best way to apportion it would be by market share.

FRANK: Judge Robert Kaye, back in court today, did not rule on possible reduction or rejection of the punitive damages. But he met with lawyers from both sides to schedule appeals.

DAN WEBB, PHILIP MORRIS ATTORNEY: We're extremely confident the case will be reversed on appeal, and we just take it one step at a time.

FRANK: Still hanging, the invitation to settle issued moments after Friday's verdict by Stanley Rosenblatt, the victorious plaintiffs' attorney, to Geoffrey Bible, the chairman of Philip Morris.

STANLEY ROSENBLATT, PLAINTIFFS' ATTORNEY: Mr. Bible, with all your shareholding meetings and all your stock and your $25 million bonuses, yes, and all your tough talk, Mr. Bible, call me next week. Yes. You want to call me. I'll take a payout, Mr. Bible.

FRANK: But settlement, at least now, is not part of Philip Morris game plan. Asked Monday whether Bible has responded, a top Philip Morris lawyer told CNN Financial News: "The answer is no. Don't hold your breath."

The tobacco industry has hung tough before, then settled.

(on camera): In the only other class-action case to go to trial, Rosenblatt in 1998 extracted a settlement of nearly $350 million on behalf of 60,000 flight attendants who claimed injury from secondhand smoke aboard airplanes.

Allan Dodds Frank, CNN Financial News, New York.

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VARNEY: Friday's ruling put a crimp on tobacco shares today as investors worried about the financial viability of the cigarette industry.

In today's activity, Philip Morris slipped more than a point. R.J. Reynolds down more than a half. British American Tobacco, which owns Brown & Williamson, down just a fraction. Loews, the parent of Lorillard, sank three. And the Vector Group, which owns Liggett, down just 1/8.

Allan Chernoff has more on tobacco's financial future.

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ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): Tobacco companies and the financial analysts who track them spend the day trying to reassure investors, arguing there's no chance the companies will have to pay anything close to the $145 billion award.

But many investors don't want to stick around to find out. They bailed out of tobacco stocks and bonds. The industry's loss in Florida is another hole in its legal dam. Analysts say such losses highlight future financial risk.

MARY ARONSON, ARONSON WASHINGTON RESEARCH: Additional cases are filed, lawyers and clients come out of the woodwork.

CHERNOFF: Already there are more than 500 pending lawsuits against the tobacco industry, including the U.S. Department of Justice, suing to recover money spent by federal health care programs to treat smokers; class-actions in Louisiana, Arizona, Illinois; and insurance companies suing for the cost of treating smoking-related illnesses. It's making state and municipal finance officials worry about their take of the $245 billion tobacco settlement with the states.

MONEYLINE has learned several states and counties are preparing to cash in on the settlement in coming months by floating bonds that will be paid off with proceeds from the tobacco settlement.

Louisiana, Alaska, Puerto Rico, Orange and Sacramento counties have been talking with investment bankers about the idea.

New York's Westchester County did it in December, raising $110 million.

ALAN SCHEINKMAN, WESTCHESTER COUNTY ATTORNEY: Although Philip Morris is a major presence here and they're a corporate citizen here, we had some concerns relative to their future fiscal health.

CHERNOFF: To be sure, legal battles are not about to send tobacco companies tumbling into bankruptcy.

NICOLE DELZ LYNCH, STANDARD & POOR'S: Our assumption is that bankruptcy is pretty remote and far removed from this process given the array of appeals that these companies have as their options.

CHERNOFF: In fact, tobacco firms are likely to report double- digit earnings gains this week, thanks in part to hikes in cigarette prices.

Philip Morris has huge tobacco profits overseas and a highly successful food business in Kraft, which is about to add Nabisco.

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CHERNOFF: R.J. Reynolds is most vulnerable among the major tobacco firms. It is heavily dependent on the domestic market. It is no longer a diversified company, and it has been losing market share. Already, the company has a junk bond credit rating -- Stuart.

VARNEY: You know, when you think of $145 billion damage award, I would have thought those stocks would have come down more than they did.

CHERNOFF: Well, clearly, Wall Street doesn't think the cigarette, tobacco companies are going to have to pay that full amount. Also this had been factored into the stocks. There was an anticipation that clearly the jury was going to come out way against the tobacco companies.

And consider what happened to Loews today, that stock off three points. I looked at the big owners there, and Larry and Preston Tisch, the Tisch family, they do hold quite a few shares. Together those brothers hold 30 million shares. There were out $90 million.

VARNEY: Well, that's financial hurt.

CHERNOFF: No question.

VARNEY: Allan Chernoff, thank you -- Willow.

BAY: Stuart, coming up, relief may be in site for those worried about cell-phone radiation. Soon the industry may tell you exactly what's being released when you press the send button. (COMMERCIAL BREAK)

BAY: In tonight's MONEYLINE "Focus," a look at cell phones and radiation. Though the mobile phone industry still says phones are safe, it's bowing to growing public pressure and will start releasing information on the amount of radiation specific models direct into a cell-phone users brain.

Steve Young has this special report.

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STEVE YOUNG, CNN CORRESPONDENT (voice-over): For years, the cell phone industry said, all the public needs to know is that mobile phones sold in U.S. meet government standard, so they're safe. But now the American cell phone industry, under pressure from the public and countries with a different view, is doing an about-face. MONEYLINE has learned that the U.S. mobile phone industry will start publishing information on the amount of microwave energies specific models release into human tissue.

Manufacturers will start providing the information to the Cellular Telecommunications Industry Association on a voluntary basis August 1st. Those that do will be able to say the phone is CTI- certified. Consumers can expect to see the radiation numbers on product literature with new phones in three to six months.

LOUIS SLESLIN, "MICROWAVE NEWS": A couple of months ago, a blue ribbon panel set up by the British government said outright this information should be on the box. So, there's growing pressure worldwide to make this information available to consumers.

YOUNG: Analysts say the industry is doing the smart thing -- if belatedly -- because, despite a number of studies, it's unclear whether cell phones are safe or could contribute to brain cancer or other health problems.

CHRIS LARSEN, PRUDENTIAL SECURITIES: Why not come out front and say, we don't know whether it's bad or not, but here's the information? We'll be as up front as possible; because, apparently, not being up front has hurt the tobacco companies.

JAY MAYESH, KAYE, SCHOLER: The old days of stonewalling the science and not sharing the results of science -- which may be ambiguous -- with the public are over. You're better off sharing it up front.

YOUNG: But there are still some problems for those consumers who want to choose a phone based on the lowest radiation numbers.

(END VIDEOTAPE)

YOUNG: Manufacturers do their own testing and they still haven't agreed on a common procedure. And the Wireless Trade Association, which could take a leadership role, has no plans to present all the information in one place to make it easier for consumers to comparison shop -- Willow.

BAY: So, Steve, let me get this straight. Consumers are just going to get a number without a scientific context, or even an industry-wide context to put it in?

YOUNG: That's right, but we can say that all the phones that are approved range in fashion that the highest radiation is four times as much as the lowest radiation in that whole body of approved phones.

BAY: Steve Young, thanks -- Stuart.

VARNEY: All right, thanks, Willow.

Next on MONEYLINE, a company that embodied the market promise -- and eventually peril -- of Wall Street's Internet frenzy: theglobe.com. Can the stock pull itself out of the abyss? We'll ask the new chief executive, Chuck Beck, coming up next.

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VARNEY: Topping tonight's MONEYLINE movers, Mercator Software plunged nearly 36 1/2 points. That's 58 percent. Several brokerages downgraded the software maker after it warned late Friday that it would miss second- quarter estimates by four cents a share. Qualcomm gained 6 3/4 on news that three of its CDMA technology patents were upheld in Japan and Europe, surviving challenges from Nokia, NTT and other companies.

Handspring jumped more than four. Piper Jaffrey initiated coverage of the palm competitor with a strong buy rating and a $90 price target. And American Home Products said today it will use the gene databases of Incyte Genomics and Celera Genomics in its research. A dollar amount was not disclosed, but investors were betting on the biotechs today. Celera Genomics gained more than 6 1/2. Incyte jumped more than 5 1/4. AHP gained nearly two points on the day.

BAY: One company, though, which won't be trading anytime soon, Workscape. It withdrew its estimated $115 million initial public offering today. Workscape, which makes Web-based human resources software, originally filed with the Securities and Exchange Commission to go public in March.

And there's been an executive shake-up at one company, which has had nothing but trouble since its market debut just over a year ago. The CFO and CEO of drkoop.com, the embattled Internet health care company, have resigned voluntarily. But they will both continue to serve in a consulting capacity. And in an SEC filing, drkoop.com said its second-quarter loss could be more than double what analysts had expected. Shares of the company fell more than 1/2 point today. The stock has collapsed since drkoop.com made its debut.

VARNEY: Another Net firm making management news today, at theglobe.com, which named Chuck Peck as CEO after a long search. He's a veteran of Simon & Schuster, among other companies. Peck was described today by the company's chairman as an energetic leader. He'll need all the energy he can get to help theglobe.com regain its market glory. The stock rocketed more than 600 percent on its debut day. That was back in the fall of 1998, shattering all the IPO records at that time. These days, theglobe.com is featured in articles like this one in the "Wall Street Journal," as a prime example of a bubble that "broke records, rules and bank accounts" -- end quote.

One look at the stock shows why: it is down a staggering 96 percent from its first-day high.

Chuck Peck joins us now with more on how he plans to regain Wall Street's confidence -- Chuck, welcome to the program.

CHARLES PECK, INCOMING CEO, THEGLOBE.COM: Thank you very much.

VARNEY: We frequently hear the expressed views on this program that a dot.com company that is losing money cannot survive as an independent company. Can theglobe.com survive as an independent company, do you think?

PECK: Absolutely. We've seen in the first quarter of last year -- if you compare it over the first quarter of the year before -- 119 percent growth in sales while the scalability is demonstrated by only 20 percent increase in GNA and product cost. So...

VARNEY: You've not been hired then to sell theglobe.com?

PECK: No, absolutely not.

VARNEY: You're not up for sale?

PECK: No.

VARNEY: You holding talks with anybody for a sale?

PECK: No.

VARNEY: What's your strategy then for moving towards profitability?

PECK: We're going to accelerate the move towards profitability that we're on right now, continuing to increase our advertising -- the number of advertisers that we've grown dramatically. We're going to continue to outsource for other providers, building their Web site communities, such as sportsline.com, and Deja, and, you know, other people like that. We'll also extend the games business that we're No. 1 in the country in.

VARNEY: All right. Well, when is a profit in sight? I know you cannot give me exact date, but are we talking several quarters or several years?

PECK: Well, I think we're a little ways out, but we could be seeing profitability next year.

VARNEY: Previously, you were at the American Institute of Certified Public Accountants.

PECK: Correct.

VARNEY: Sir, that is a long, long way from dot.com land.

PECK: It sure is. It is. And yet, the AICPA itself is coming out with a portal that they intend to take public. So, we have been working in the dot.com environment and thinking about it for a long time.

VARNEY: Forgive me for saying it, but, sir, you are well past your 20s. And we associate dot.com land with youngsters like Stephan Paternot and Todd Krizelman, the founders of theglobe.com. What can you bring to the table?

PECK: Oh, I think it's traditional business acumen in terms of marketing and sales that is really going to grow the revenue out of -- into profitability. I think the expenses have been contained effectively by our CFO and the management staff that we have on board.

VARNEY: What did your son say when you told him that you were going to be CEO of theglobe.com?

PECK: Actually, he was quite excited about it, and knew Steph and Todd quite well.

VARNEY: Forgive me one last question: When you signed on, you going to be paid in cash or stock?

PECK: No, it's a combination of cash and incentives.

VARNEY: We are glad to hear it. Chuck Peck, new CEO of theglobe.com. We thank you very much for being with us, sir.

PECK: Thank you. I appreciate it.

VARNEY: Good luck. OK -- Willow.

BAY: Stuart, still to come on MONEYLINE, first it was music, now Hollywood is fighting over its flicks: a new high-tech battle over swapping movies on the Internet, when MONEYLINE returns.

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VARNEY: He has already shattered all the records for spending in a Senate race, and now Jon Corzine may be able to spend a lot more in his quest for a New Jersey Senate seat. The former top executive at Goldman Sachs has filed to sell more than 411,000 Goldman shares, and that's nearly 10 percent of his total holdings, currently worth about $42 million. A campaign spokesman says that the motivation behind Corzine's move is to -- quote -- "diversify his financial risk." Corzine spent more than $36 million during the primary, winning the Democratic nomination. Goldman Sachs stock closed off more than 3 points today at 101 1/8.

BAY: The battle over downloadable music took a back seat to a different Web war today. Fearful of another Napster, Hollywood is trying to stop distribution of a software program that helps turn DVD movies into files that can be swapped. The dispute moved to U.S. District Court in Manhattan today.

Bruce Francis has more.

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BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): Meet Hollywood's newest bogey man. Sixteen-year-old Jon Johamsen wrote software that cracks the code that encrypts DVDs. The Norwegian teen says he did it so that he could watch movies on his Linux-based PC.

JON JOHAMSEN, SOFTWARE DEVELOPER: We wanted to add DVD support, playback support to unsupported operating systems. At that time, only Microsoft Windows could play DVDs.

FRANCIS: But when Internet hacker journal "2600" posted the software, Hollywood studios, including the entertainment division of Time Warner, the parent of CNN, sued the publisher. The goal: to avoid another Napster, which allows users to swap free music.

LEON GOLD, PLAINTIFF'S ATTORNEY: That's exactly one of the main things that we're worried about, because there are already up on the Internet file-swapping operations asking for people to swap movies, and that has already started and that will grow pretty quickly.

PROTESTERS (shouting): Save free speech!

FRANCIS: But the man behind "2600" says he has a right to publish the code.

EMMANUEL GOLDSTEIN, EDITOR, "2600" MAGAZINE: The right to publish is what we exist for. So when someone comes up to you and says, you don't have the right to publish this, you don't have the right to talk about this, you don't have the right to figure this out, that's something that all publishers feel very deeply.

FRANCIS: While the case invites comparison to the suit against Napster, it's far more difficult to get a DVD movie ready to swap. To Napsterize a movie you first have to obtain a copy of Jon Johamsen's DECSS software. You'll also need other programs, including Leech FTP 207 and MIRC 3.71.

Then, to get the file ready to swap, you have to convert it to another format called DIVX. You do that by stripping out the video signal, then the audio signal, and then resynchronize the sound and image. Point, click, and grab the popcorn, it's not.

(on camera): The first witness in the case, a Carnegie-Mellon University professor who, at the request of the film studios, tried to copy a movie from DVD and get it ready to swap over the Internet. It took him and his assistant some 20 hours.

At U.S. District Court, Bruce Francis, CNN Financial News, New York. (END VIDEOTAPE)

VARNEY: And up next, "Ahead of the Curve," some of what you need to know tonight before those markets open up again tomorrow.

You're watching MONEYLINE.

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BAY: Checking some of what could make news on Wall Street tomorrow, as we mentioned, second quarter earnings season heats up in earnest with Dow components Honeywell and Philip Morris expected to report a 12-percent profit jump over last year. General Motors is forecasted to post earnings of $2.80 a share. Tech heavyweights Microsoft and Intel are also on tap to report tomorrow. Investors expect Intel profits to nearly double. Also watch for results from Apple Computer.

On the economic front, the consumer price index for June is due out. Economists are forecasting a rise of .4 percent and expect the core rate, which excludes food and energy, to edge up .2 percent.

To stay a step ahead of the markets, tune into "AHEAD OF THE CURVE" every day at 5:00 a.m. Eastern on CNN.

VARNEY: And finally tonight, economic advice from the "Seven Million Dollar Man," at least that's what the publishing world is calling Jack Welch, the chief executive superstar of General Electric, who last week landed a record $7.1 million to chronicle his life and career.

This weekend, he gave "New York Times" columnist Maureen Dowd a sneak preview of some topics he might cover, even weighing in on the controversial debate over whether there is a new economy. Welch's answer? "There's no new economy. It's the same old economy with new technology." Not such a surprise considering that Welch has taken the oldest company on the Dow and souped up its business with Internet ventures.

Now, tomorrow on MONEYLINE, another legendary executive with a similar take on the new economy: an in-depth "Headliner" profile of Andy Grove, that on Intel's 32nd birthday.

BAY: That is MONEYLINE for this Monday. I'm Willow Bay in Los Angeles.

VARNEY: And I'm Stuart Varney. Good night from New York. "CROSSFIRE" is next.

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