eBay-Skype Hype, Pulverized
Tech guru Jeff Pulver promotes combo as the next Reuters

1. Talk Is Cheap

The hyperbole was coming through loud and clear this week as

eBay

(EBAY) - Get Report

rolled out its

linkup with Internet phone company Skype.

eBay, the San Jose, Calif., Web auction site, said it would pay as much as $4.1 billion to acquire Luxembourg-based Skype.

That price tag may appear dubious, given Skype's 2004 revenue of just $7 million. But as is so often the case, big Internet deals spur people to think in bigger terms.

"Communications is at the heart of e-commerce and community," said eBay chief Meg Whitman.

"We feel we can really change the way that people communicate, shop and do business online," said Skype co-founder Janus Friis. Why, eBay even promised that the deal would "increase the velocity of trade on eBay" by allowing buyers and sellers to talk over the phone.

For the most penetrating analysis, though, we turn to technology entrepreneur Jeff Pulver, who humbly described himself in a recent press release as a voice-over-Internet-protocol "thought leader and industry pioneer."

Pulver, who was involved in the startup of Skype rival Vonage and has been promoting online phone service for a decade now, gushed at some length on how the eBay-Skype linkup is "transformational." But he also said something less predictable.

"If you take the elements of eBay, including the micro-payments capability of PayPal and, now, the IP-based communications capabilities of Skype," Pulver said Monday, "we may be seeing the formation of the next Reuters."

Hold on.

Reuters

(RTRSY)

, the financial services company that this summer reported its

first quarter of underlying growth in four years? The London-based publisher that has spent the past two years cutting 20% of its staff to bring costs in line with hard-hit revenue? The outfit whose shares have bounced sharply off their early 2003 lows but remain less than half their level of five years ago?

"I meant to say 'the next-generation Reuters,'" Pulver emails in response to a request for clarification. "I think that when you look at the convergence of the computing industry and the communications industry a lot of the 'could be' is now becoming possible. We need to open our minds beyond what we thought was traditional telecom and traditional computing and look at what the second derivative products from these combinations could be."

So eBay's spending $4.1 billion to become the new Reuters? Wow, anything really is possible.

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Dumb-o-Meter score: 90.
It's no coincidence that Skype rhymes with hype.

2. Turning the Page

Chapter 11 is turning into an awfully long entry in the airline history books.

Delta (DAL) - Get Report and Northwest (NWAC) this week joined the ranks of carriers seeking court help to slash their bloated cost structures.

For months, both Delta and Northwest cut costs and demanded concessions from hard-pressed workers in an effort to stay afloat. But Hurricane Katrina's effect on oil prices doomed them to an even deeper restructuring.

Delta and Northwest will find plenty of company in Chapter 11, where United parent UAL (UAL) - Get Report and US Airways (UAIRQ) have been operating for some time now and Continental (CAL) - Get Report has made a few trips in its own day.

But where Delta and Northwest may not find friends, judging from comments made Thursday, is at the U.S. company created to guarantee private-sector pension plans.

Though both Delta and Northwest have indicated that the pension overhang is one of the big factors pushing them into bankruptcy, Pension Benefit Guaranty Corp. chief Bradley Belt wants the carriers to know they can't take anything for granted.

"Northwest and Delta continue to be responsible under the law for making their pension contributions," Belt said in a statement Thursday on the organization's Web site. "The financial challenges facing the airline industry are significant, but nothing in the bankruptcy code requires companies to skip their pension funding payments.

"As long as companies remain in operation with ongoing pension plans, they have a legal obligation to meet their funding requirements," he said.

As much as we'd like to see pension plans fully funded, we're not sure what leverage the PBGC might have here. It can't exactly force the carriers into bankruptcy, after all.

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Dumb-o-Meter score: 85.
As Delta chief Gerald Grinstein said, "Ultimately, what we can afford in the future airline business environment, as well as the nature of any legislation, will determine what is possible." Right now, that's not much.

3. The Great Fade

The cracks in Hollywood's crystal ball keep getting bigger.

Just weeks after projecting a mediocre financial performance in its movie division, Disney (DIS) - Get Report acknowledged this week that its studio was actually spilling red ink everywhere. The turnabout puts Disney in league with animation studios Pixar (PIXR) and DreamWorks (DWA) in the financial-forecasting follies.

Mouse to Eat Hard Cheese
Disney's movie studio produces hits, of the financial variety

Burbank, Calif.-based Disney had already warned investors not to expect great things in the fourth quarter from its movie studio. Disney blamed a changing home video market and tough year-over-year comparisons, among other things.

"Given the results in Q3, and the other factors we've discussed, our studio profits are likely to be down for the year overall," finance chief Tom Staggs said Aug. 9 on the company's third-quarter conference call.

But nothing Staggs or CEO Bob Iger said in August prepared investors for what came Wednesday afternoon. "Current results are considerably worse than we anticipated," he told investors at the Merrill Lynch Media and Entertainment Conference. As a result, Staggs said, Disney now expects the studio to lose between $250 million and $300 million for the year.

To his credit, Staggs didn't waste anyone's time with finger-pointing. "In fairness, the difficult results at the studio have more to do with the performance of our titles than the marketplace as a whole," he said, noting the poor box-office showing of titles such as the Benjamin Bratt war vehicle

The Great Raid

.

But Staggs wasn't able to resist the temptation to fill everyone in on the challenges confronting the entertainment industry. "I mentioned at the outset that consumers have an increasing menu of choices in entertainment," Staggs said.

"That increased choice precludes taking a business-as-usual approach. We have to manage even more closely our production and marketing budgets. We have to adapt our marketing and release strategies to most effectively match consumer demand. Most importantly, we need to make compelling films and other products that cut through the clutter."

Yes, and one more thing: You need to keep track of the cash register a little better.

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Dumb-o-Meter score: 80.
Understatement seems to be all the rage in Hollywood, judging by the studios' recent antics.

4. Hitting for the Cycle

JDSU

(JDSU)

dropped part of its name this week, but apparently it's hanging on to its bad habits.

The San Jose, Calif.-based maker of optical networking components said on Tuesday that it would change its name to JDSU from JDS Uniphase, reflecting the usage of many customers and investors. The company said it would also roll out a new logo featuring the tag line "Enabling Broadband & Optical Innovation."

"The new logo provides a more modern look while leveraging the equity associated with our logo over the years," marketing vice president David Gudmundson said. "The new symbol was inspired by the cycle of innovation that starts and ends with the customer."

Unfortunately, the cycle of innovation doesn't seem to extend to the company's financials. On Wednesday, just a day after JDSU offered up the revamped logo in a bid to "communicate the company's commitment to enabling customer innovation in broadband and optical markets," the company said in a regulatory filing that it would be late in registering its 2005 annual report with regulators.

The delay is the second in as many months for JDSU. In August, the company postponed its quarterly earnings release for two weeks, citing "the quantity, complexity and accounting of a number of one-time transactions." This time around, JDSU said it needs more time to comply with Section 404 of Sarbanes-Oxley.

The good news, such as it is, is that JDSU doesn't believe the delay will lead to any significant changes in its reported fiscal 2005 numbers. On the other hand, with JDSU having posted a fourth-quarter loss of $145 million on revenue of $171 million, it's not clear how much worse the news could get.

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Dumb-o-Meter score: 78.
Maybe in the future it can better communicate a commitment to putting out its numbers on time.

5. Whistling Dixie

If you didn't know any better, you'd swear a big

Imperial Sugar

(IPSU)

shareholder has soured on the maker of Dixie Crystals and Holly sugar.

Schultze Asset Management has been circling the Sugar Land, Texas, company for the better part of a year. Schultze, a Purchase, N.Y., fund that

describes itself as specializing in "special situation investing in financially troubled and distressed credits," owns a 14% stake and now has bid three separate times for control of Imperial Sugar.

But this month's latest proposal suggests that managing member George Schultze may be having some second thoughts about getting into the sugar business.

To recap: In February, with Imperial stock trading in the midteens, Schultze offered to buy Imperial for $17 a share. Imperial ignored the proposal. Schultze resubmitted the bid in May, saying it believed the stock was undervalued. Schultze also criticized Imperial's management for failing to heed a shareholder vote to drop its poision pill. Imperial's silence continued.

Imperial appeared to soften a bit in August, indicating on a conference call that it was providing documents to Schultze. But the events of the last week seem to suggest the discussions have cooled for good.

In his latest proposal, Schultze -- who declined to comment beyond his filings -- emphasizes that he remains "very interested" in a deal. But he cut the offering price by 38%, saying the earlier, higher price "significantly overvalued" Imperial stock. The new bid, $10.50 a share, is 20% below the recent market price. And now Schultze wants to acquire just 80% of Imperial, not the whole sack. On top of everything else, he demanded a response by Sept. 22.

This time, he got one. Imperial rejected the bid this week, calling it "grossly inadequate." An Imperial spokesman declines to comment except to say no further talks are scheduled.

Yes, the whole thing seems to have left a bad taste in Imperial's mouth.

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Dumb-o-Meter score: 70.
We're sure Schultze was sitting anxiously by the phone waiting for Imperial's response to the take-under proposal.

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