The Los Angeles Times from Los Angeles, California • Page 25

NATIONAL EDITION TUESDAY, JUNE 19. 2001 LATIMES.COM BUSINESS SECTION Cos Angeles Simes BUSINESS Nasdaq Sinks Under 2,000 The technology-dominated Nasdaq composite stock index slumped 39.80 points, or 2, to 1,988.63 on Monday, its first close below 2,000 since April 17. Amid Wall St. Gloom, Oracle Beats Forecast Index, weekly close and latest Vacancies Are Up in South O.C. Offices Real estate: The cooling off of the once-hot rental market reflects a pullback by tech firms.

Monday: 1988.63, down 39.80 an average of 14 cents projected by First Call; analysts initially expected Oracle to earn 17 cents per share. In the same period a year ago, Oracle enjoyed a net profit of $4.9 billion due largely to a windfall from sales of shares in Please see TECH, C7 Solectron Hewlett-Packard Co. and Cisco Systems were hit with skeptical reports about their near-term prospects. Oracle's quarterly net income, after extraordinary gains and charges, was $855 million, or 15 cents per share, compared with 3.500 Nasdaq composite 3.000 2,500 2,000 1,500 Nov. Dec Jan.

A f. Outlook Remains Bleak for the Telecom Sector as Telecom Stocks Plunge Anew Telecom stocks have led the tech sector's latest slide amid fears that the glut of telecom equipment in the marketplace is worsening. Such former stars as JDS Uniphase and Nortel Networks fell Monday to two-year lows. Monthly closes and latest: I Monday: I $10.60, $8.52, down 80 A down $lM Markets: Inventory glut amid economic skid is hammering stock values. By JOSH FRIEDMAN TIMES STAFF WRITER The Los Angeles-based Common Cents Investment Club paid $97.60 a share for stock of JDS Uniphase, which now sells for $10.60.

Its holdings in Nortel Networks, Corning and ADC Telecommunications have been clobbered nearly as hard. $150 JDS Uniphase '99 2000 Source: Bloomberg News A I loo i 01 Markets Fall on Argentine Policy By DARYL STRICKLAND TIMES STAFF WRITER With an abundance of low-rise buildings in campus settings, south Orange County symbolized the Southland's booming office market of recent years. Now it is leading the region's commercial real estate slowdown. The vacancy rate for the area, which stretches from Irvine to San Clemente, has nearly doubled in the last year to 19.2 in the current quarter. That's tops among major markets in Southern California, even higher than downtown Los Angeles, according to estimates by CB Richard Ellis Services which tracks real estate trends.

While the office rental market has been cooling nationally as the economy has weakened, the dramatic change in south Orange County reflects the pullback of businesses, especially tech firms, in an area that has been rapidly adding new offices. Most of the buildings in south Orange County have gone up in the last 15 years, as the area has developed into a major residential and commercial center. With about 17 million square feet of commercial space, south Orange County's office market is roughly the size of the San Fernando Valley's, less Burbank and Glendale. But in recent months, technology companies including Gale-way Buy.com Future-Link Ethentica Inc. and FreeRealTime.com have emptied out of about half a million square feet of offices in south Orange County, dumping sublease space into the market.

The available sublease space alone added almost 3 percentage points to south Orange County's latest vacancy rate, said Steve Case, senior managing director at CB Richard Ellis in Anaheim. One of the subleases is a 2-year-old building in Lake Forest, which was occupied briefly by Open Bid Exchange, an Internet start-up. The company cleared out of the offices in Janu-Please see OFFICE, CI 0 INSIDE Dole Expects to Beat 2nd-Quarter Outlook Dole Food's second-quarter earnings will beat forecasts as the company gets higher prices for bananas and pineapples and cuts costs. C2 Honeywell Pledges Commitment to GE Deal Honeywell International reaffirms its full commitment to its troubled deal with General Electric, despite objections by EU regulators. C3 Level 3 to Cut MOO Jobs Level 3 Communications plans to slash the work force 27 in a move expected to bring savings of $403 million by the end of 2003.

C3 Farmers Market Plans to Open Retail Stores The $45-million project in Los Angeles' Fairfax district will offer specialty shops in tandem with the Grove's upscale retailers. C8 Feb. March April May June Associated Press Firestone Wilderness AT tire in a Ford Motor laboratory test shows tread separation. Last in Quality Ford's quality ratings have fallen to last place among the seven largest auto makers in the U.S. according to the J.D.

Power Associates annual Inital Quality Survey. Problems per 100 vehicle in the 2001 model yean I 100 Nortel Networks I Monday. -99 2000 '01 in 1 Tech: Software giant offers upbeat prospects as other firms are hit with skeptical reports. By CHARLES FILLER TIMES STAFF WRITER SAN FRANCISCO-Software giant Oracle Corp. offered a ray of light in an otherwise gloomy Monday for tech firms when the leading maker of database products modestly beat Wall Street's expectations and delivered a guardedly upbeat projection for the next quarter.

Oracle reported an operating profit of $1.3 billion on sales of $3.3 billion in its fourth quarter, which ended May 31, compared with an operating profit of $1.4 billion on sales of $3.4 billion in the same period a year earlier. Oracle Chief Financial Officer Jeff Henley called the last quarter "the low point." He added: "We are cautiously optimistic that things will swing upward" in the next quarter. This report came on a day when other mainstay tech companies, Agence France-Presse into why hundreds of Explorers careened out of control or flipped over after their Firestone tires shredded in scores of fatal accidents. The lagging performance in quality and efficiency, sagging morale at headquarters and rumors of rifts at the highest level in management are all coming down on Nasser's shoulders. Though analysts and industry experts don't think Nasser is in imminent danger of losing his job, it has fallen squarely on him to pull the Explorer, and indeed the company's very reputation, out of the morass of bad news and restore confidence in the Ford brand.

It has distracted from Nasser's primary mission: to transform Ford from an "old-economy" smokestack manufacturer to an agile, consumer-focused, e-business powerhouse. All this comes at a terrible time for Ford, with a slow economy taking a toll on car sales. And its market share in trucks, long a Ford bastion, is being eroded by imports and, perhaps most galling, by General Motors Corp. Two weeks ago, the Insurance Institute for Highway Safety came out with its crash tests of the country's five full-size pickup trucks, and Ford's F-series the country's best-selling vehicle-came in dead last, with a "poor" rating. The most recent bruise came last Thursday when the Harbour Report, a highly anticipated annual report on productivity, showed that Ford lost ground to archrival GM in assembly efficiency from 1991 to 2001, declining 2.8 while GM gained 9.4, Please see FORD, C10 Ford Motor Chief Jacques Nasser, left, with Chairman William Clay Ford Jr.

in May. Nasser testifies today before a congressional panel looking into the Ford-Firestone accidents. Nasser Faces a Tough Test in Restoring Ford's Reputation Now, the 14 members share a dilemma with millions of other investors in battered telecom shares: As club member Frances Hrobak put it, "Do we hold or do we fold? As a group, we're kind of split." Many telecom companies, including networking and equipment firms, have issued a fresh wave of profit warnings in recent days, and Wall Street has responded by hammering the stocks to new two-year lows. On Monday the telecom sector's latest plunge helped drag the Nasdaq composite index down 2 Please see LOWS, C7 international trading withyields rising on some issues by more than 2 percentage points. All eyes will be on Argentine banks when they reopen today to see if depositors try to protect their savings by withdrawing pesos while still convertible to dollars at an equal rate.

Damage was severe elsewhere in the hemisphere as Brazil's main stock index fell 4.2 and Mexico's stocks lost 2.7. The Brazilian currency, the real, fell to a record low 2.452 per dollar, down 26 so far this year, on fears that its economy will suffer along with Argentina's in a devaluation. Please see ARGENTINA, C10 Analysts See Life for AOL-Microsoft Deal: Despite claims from both sides that their talks have ended, observers say a partnership makes perfect sense. By EDMUND SANDERS TIMES STAFF WRITER WASHINGTON The on-again, off-again talks between America Online and Microsoft Corp. belie the simple truth that both companies still need each other, despite their public posturing.

"They are two gigantic companies that are both partners and competitors, but they're really more partners," said Henry Blod-get, an analyst at Merrill Lynch Global Securities in New York. Neither company, Blodget said, could afford simply to walk away from the other, regardless of the weekend breakdown in talks designed to extend their fragile alliance. Tapping into AOL's 29 million Internet users is critical to Microsoft's plan to shift its products-ranging from instant messaging to Windows Media Player to the Web. If AOL software doesn't work smoothly on the new Windows XP operating system, Microsoft probably will see sales skid. AOL, by contrast, still depends upon Microsoft's Internet Explorer browser, which many believe is superior to AOL's own Netscape Navigator.

And though the Dulles, Internet company, a unit of AOL Time Warner, has tried to play down the importance of bundling its software into Windows, such an arrangement would be a major source of future growth for Please see TALKS, C7 Latin America: Confidence erodes as linked indexes suffer in response to the exchange rate change. By CHRIS KRAUL TIMES STAFF WRITER MEXICO CITY Stocks across Latin America and in Spain plunged Monday after Argentina stunned the financial community with a new policy on exchange rates that some analysts saw as a de facto devaluation. The policy changes, announced over the weekend, obliterated much of the confidence earned when Argentina exchanged $29 billion in debt this month, a move that seemed to give the country some breathing room from worried creditors. But the nation's ongoing political turmoil and worsening economy apparently forced it to take drastic new steps. Effective immediately, the government said it would fix the peso's exchange rate for trade purposes at the mid-point between the U.S.

dollar and the euro. It amounts to a 7 devaluation in all such transactions, based on the euro's value Monday of 86 U.S. cents. Until the announcement, Argentina's peso was worth one U.S. dollar.

The switch is a partial abandonment of the dollar peg that Argentina adopted in the early 1990s in a successful bid to end hyperinflation that crippled the economy for much of the decade. Although Argentina has tamed the inflation beast, its goods and services have suffered in foreign and domestic markets. Argentina has opened its economy to foreign investment but it suffers from bloated government payrolls and inefficient health and pension systems that effectively drain income from government coffers. Despite a $40-billion international bail-out in December, Argentina has been hamstrung by a three-year recession and political resistance to further austerity measures demanded by the international community to stabilize the economy. The government presented the new plan as a package of economic and trade incentives designed to boost domestic consumption of home-grown products because imports are now more expensive.

But many economists weren't buying that, seeing it instead as a possible precursor to a general devaluation. 'This could be the first step in a more profound change in the currency regime," said Jose Carlos Faria, an economist with Deutsche Bank in Sao Paulo, Brazil. Argentina's stock market was closed for a national holiday Monday but its bonds were clobbered in Autos: CEO must deal with the Explorer roll-over probe, poor quality ratings and low productivity. By TERRILYUE JONES TIMES STAFF WRITER DETROIT It was an astonishing admission from the head of the world's second-largest auto manufacturer, one whose motto had long been "Quality is job one." Right after announcing a recall of 13 million Firestone tires late last month, Ford Motor Co. Chief Executive Jacques Nasser was asked about quality at the company.

Appearing flustered, he replied, "For quality, I'd say we're about average. It's not where we think we should be." He had good reason to be con cerned. Just five days earlier, the respected consulting firm J.D. Power Associates came out with its annual Initial Quality Study among new automobile owners, and the news was not good for Ford: The company came in last among the seven ma jor auto makers in the U.S., with the most defects per 100 vehicles. The low marks come after em barrassing and costly delays plagued Ford's launches of its Focus, Escape and redesigned Ex plorer.

Each had to be recalled, sometimes multiple times, to fix quality glitches. Those are among the many troubles that may be crowding Nasser's mind today as he testifies before a congressional panel in Washington that is looking MARKETS Qwrgc Qm A Dow indus. 21.74 10,645.38 500 1,208.43 Nasdaq comp. 1,988.63 A VS. bond 10-yr.

0.01 5.25 U.S. bill 1-yr. 3.37 A Gold per ounce 1.20 $272.40 00 per barrel $27.55 A Yen per dollar 0.28 123.36 Euro in dollars $0,861 Toyota 115 Honda 133 Nissan 145 GM 146 Industry average 147 DaimlerChrysler 154 Volkswagen 159 'Ford 162 Source: Reuters.