The first question one of my editors asked me on Friday night when hearing that The New York Times Co threatened to shut down The Boston Globe was whether it was a negotiating tactic. That's an easy one, for sure. Unions causing you problems at your business? Need to cut costs? Threaten to kill the whole business. It helps your adversaries reorganize their priorities right quick (Though sometimes they really mean it. Look at Hearst in Seattle).

Here's a hypothetical recipe for how you could do it if you were running The New York Times:

• You spent $1.1 billion on a paper that, thanks to the sunset on the newspaper business, is worth far less now. In fact, it's dragging down the whole company, and you would rather let it rot than eat away at the fortunes of your flagship paper. The last time someone hinted that they would be willing to pay -- about half  of what you did -- you said "no."
• Oops. Now no one will buy it, even though you're also selling free tickets to see the Red Sox in the form of your stake in the company that owns the team.
• Tell the union reps that you need $20 million in cost cuts, that your loss on the paper will be $85 million this year and that you need it done pronto. If not, no more paper. To make it really crazy, do this on a day when the paper's editor is across the country in Oregon, delivering a lecture to journalism students that deals with the sorry state of affairs that the journalism world is in.
• Wait for someone in the union to leak the threat to the nearby alternative paper that follows the Globe's goings-on like white on rice (The Boston Phoenix in this case), then let the Globe's editors run their own story. (PS: I won't link to the Phoenix because it's throwing a pop-up ad at me whenever I visit the page that invites me to download anti-virus software. I won't inflict that pain on readers.)
• When other reporters call, decline comment.
• Watch the story go around the world. Watch a buyer emerge, someone who fulminates long and hard about civic responsibility and not letting a hallowed journalistic institution go to ground. Sell it to that buyer at a massive loss, which one of the in-house tax geniuses can find a way to write off in a way that's advantageous to the company.

I'm not saying that the Times wouldn't let the Globe die or that it wouldn't be a big loss to Boston. Still, The New York Times Co wants to protect one thing: The New York Times. That's what the Ochs-Sulzberger family's trust is all about. The shares in that family's trust control the company but it's really about the paper, and it's not certain that a huge offer to buy the company out could persuade the family to get rid of it (despite prior evidence). Heck, the Times even lists the trust as one of its risk factors in its securities filings.

As for the Globe? It really is a steal now.

Keep an eye on:

• Variety's longtime editor Peter Bart will no longer oversee day-to-day activities for the Hollywood trade paper (LA Times)

• Pixar Animation's "Up" is drawing scrutiny from both Wall Street and toy retailers (NY Times)

• Glam Media has raised $10 million in a fifth round of financing (paidContent)

(Photo: Reuters)

We sprinkled updates into this blog. We're highlighting them like this.

Thanks to TechCrunch, U.S. tech reporters are about to spend another weekend working instead of playing. UPDATE: Or maybe Kara Swisher at All Things D will save them!

Two sources told proprietor Michael Arrington that Google "is in late stage negotiations to acquire Twitter." He wrote:

We don't know the price but can assume its well, well north of the $250 million valuation that they saw in their recent funding.

Twitter turned down an offer to be bought by Facebook just a few months ago for half a billion dollars, although that was based partially on overvalued Facebook stock. Google would be paying in cash and/or publicly valued stock, which is equivalent to cash. So whatever the final acquisition value might be, it can't be compared apples-to-apples with the Facebook deal.

Why would Google want Twitter? We've been arguing for some time that Twitter's real value is in search. It holds the keys to the best real time database and search engine on the Internet, and Google doesn't even have a horse in the game.

Later, he updated his entry to say that another source told him talks are at an early stage and could amount to a deal to build a Google real-time search engine. Who knows how this one will shake out. Web operations like Twitter can't get popular without people starting to fit puzzle pieces together to see which company ought to buy them. That might be why The San Francisco Business Times picked up Wired and Industry Standard founder John Battelle's blog entry that Twitter would go to Rupert Murdoch's News Corp for $750 million. Turns out it was an April Fool's joke.

Then Swisher at All Things D said this:

While the "news" that Google was in "late-stage" talks to acquire Twitter, which TechCrunch reported last night, certainly sounds exciting, it isn't accurate in any way, according to a number of sources BoomTown spoke to close to the situation.

She also covered herself with a "to-be-sure graf," as hacks like me call them:

Google or anyone else could plunk down more than $1 billion in cash and I cannot imagine Twitter's investors would or could resist. Nor should they. And, what if, for example, Microsoft (MSFT) offered some huge cash payday for Twitter? In that case, I am certain Google would jump into the face-off, backing up a giant Brinks trunk to the door of Twitter's San Francisco offices.

Afterward, everyone scratched their heads and ruminated mightily about this very important situation. TechCrunch, meanwhile, stands by its story, a blogger there told us.

Will Google announce plans to buy Twitter in 2009?

Keep an eye on:

• MediaNews Group, the Denver-based newspaper publisher run by legendary hyper-acquirer "Lean Dean" Singleton, worked out a deal with creditors on paying off its heavy debt that Singleton put on the company as he bought and bought and bought newspapers (before slashing and slashing their budgets and staff). And he said bankruptcy wasn't an issue. (The New York Times)
• Some people who work with him have told me that New York Times Executive Editor Bill Keller comes off as arrogant, but he's actually shy. This is the same shy man who at Stanford University on Thursday said CNN's reporting has been replaced by juries of commentators who work on a set that looks like a parody of a Daily Show parody of a news set. He also said saving The New York Times ranks with saving Darfur as a high-minded cause. From my own interactions with Keller, I would conclude that he's a deadpan comic, not shy. (Politico)
• TMZ.com is devoting more money to reporting gossip from Washington, D.C. Why flack this now? Is it because parent company Time Warner is geeking out at the cable show in DC this week? Maybe TMZ's Harvey Levin bunked up with Time Warner Chief Executive Jeff Bewkes to save money in the downturn. OK, maybe not. (Reuters)
• In case you didn't know already, you should not get news for free online. Rupert said so. (Please ignore this free blog entry on this free website). It shouldn't work for online TV either, said Discovery Chief Executive David Zaslav. (PaidContent)

(Photo: Reuters)

What do you do if your company is reported to be involved in an $8 billion acquisition and you’re already scheduled to give a big speech?

If you’re Sun CEO Jonathan Schwartz, you honor the commitment and then make a swift exit.

The pony-tailed CEO took the lectern on Wednesday at the Open Source Business Conference at San Francisco’s Palace Hotel, his first public appearance since reports surfaced last week that IBM and Sun were in acquisition talks (reports that neither company has so far commented on).

While the putative deal has produced endless column inches of analysis and speculation in the business media, it had no place in Schwartz’s remarks. Instead, Schwartz spoke about Sun’s recently-released cloud computing service, largely rehashing talking points he made in an earlier series of blog posts.

The most intriguing nugget, for those running Schwartz’s comments through the filter of an IBM deal, was his characterization of Sun’s open source operating system as the “single most valuable” part of the company, as it represents the key building block for Sun to play in high-margin, adjacent markets like networking.

When his 30 minutes were up, Schwartz slipped behind a curtain and retreated backstage, conveniently avoiding any reporters in the audience eager for ask him about the IBM deal.

And when a couple of reporters greeted him at the hotel’s exit, Schwartz proved equally aloof - the surprised CEO was good-mannered enough to shake hands, but didn’t break his stride, or his silence, to answer a question about the progress of the IBM deal. Maybe next time...

Cisco's $590 million all-stock purchase of Flip video camera maker Pure Digital last week may sound like a nice price for the venture capital-backed company, especially given the non-existent exit market right now.

But Venture Capital Journal editor Larry Aragon writes in a PEHub blog post that the $590 million number doesn't sound that meaty when you calculate the return on investment for Pure Digital's venture capital backers. And that's especially true because some top-notch VC firms like Benchmark Capital and Sequoia Capital have invested in Pure Digital. (Venture Capital Journal and PEHub are part of Thomson Reuters.)

Aragon calculates that if Pure Digital's VC investors put in about $95 million, and assuming that they own about half the company (since it's a stock deal), "that's a return of just over 3x their money."

Now, Silicon Valley's brand-name venture capital firms have long been used to returns on investment that are several multiples higher than that, usually around 10 times the investment. We know the dotcom boom days are never coming back, but a selling price that brings back only three times the money invested -- that too, over a five-year period, according to Aragon -- is cause for concern about how profitable the VC model really is.

Surely, the VCs might have been tempted to hold out for a better return on their investment if the public markets showed any signs of life. But with IPOs of venture capital-backed companies remaining a dream in the current environment, guess the venture capitalists decided that Cisco's offer was one they couldn't refuse.

Photo: Pure Digital Website

It’s the kind of M&A battle that movies are made of … or is it the other way around? Lions Gate’s largest investor, Mark Rachesky, says he supports management in the film and television studio’s defense against Carl Icahn, who happens to be his former boss. Icahn, the king of shareholder agitation, has criticized the studio’s high expenses and its acquisition of the TV Guide cable channel. He has threatened to mount a proxy battle and may call a special shareholder meeting to elect board directors.

Rachesky’s MHR Fund Management controls a 19.999 percent stake in Lions Gate. Icahn controls 14.5 percent and is seeking to boost his influence by making a tender offer to buy $325 million worth of the company’s convertible notes.

If Icahn is successful in buying the debt and converting it all into equity, his stake would rise to around 29 percent. But that would be expensive because the conversion prices are far above Lions Gate’s share price.

MHR said it has had preliminary talks with Lions Gate about nominating a candidate to the studio’s board. Icahn’s side growled, rather than roared. “We expect our documents for the tender offer to become available to noteholders on Friday,” said Keith Schaitkin, an attorney for Icahn. He declined further comment. Rachesky was once Icahn’s investment chief.

Deals of the Day:

* Bahrain- and London-listed investment company Investcorp said they were leading a consortium to acquire a 70 percent stake in Saudi gold and jewellery maker L’azurde. Azmat Taufique, co-head of Investcorp’s private equity business in the Gulf Arab region, told Reuters the acquisition is based on an enterprise value of more than $300 million.

* Libya will acquire Canada’s Verenex Energy Inc, blocking China National Petroleum Corp’s bid, the head of Libya’s National Oil Company said on Thursday.

(PHOTO: A lion is seen passing in front of a zebra in Kenya’s national park Masai Mara in this March 2004 file photo.)

Not so fast Mr. Icahn. Lions Gate Entertainment is trying to defend itself against famed financier Carl Icahn by hiring an advisory team, including investment bank Morgan Stanley and the law firm Wachtell, Lipton, Rosen and Katz.

It also is in talks to offer a board seat to Mark Rachesky of MHR Fund Management, the studio's largest shareholder.

Icahn controls 14.5 percent of Lions Gate's shares and wants to increase his sway, seemingly because he's frustrated with things like costs and the company's decision to buy the TV Guide cable channel.

All this has set up a potential proxy fight -- perhaps a nasty one.

Who is the smart money on? Hard to tell. Icahn is an old hand at these things, but given Lions Gate's moves on Tuesday -- it also hired Joele Frank Wilkinson Brimmer Katcher, a public relations firm that built a reputation advising companies involved in hostile deals -- it looks like they aren't about to back down.

A showdown could be coming.

Keep an eye on:

• Discovery Communications  has sued Amazon.com, accusing the online retailer's Kindle of infringing its patent on electronic book technology (Reuters)
• Hollywood labor leaders are considering sending out strike-authorization ballots unless negotiations with advertisers on a new commercials contract improve quickly (The Hollywood Reporter)

(Photo: Reuters)

(Refiles to correct Donahoe's first name to John.)

To sell Skype, or not to sell Skype. That is the question for eBay, and Wall Street has diverging opinions on whether the San Jose company will or won't unload its Internet telephone service.
    
Skype was acquired under the reign of former CEO Meg Whitman (now a California gubernatorial hopeful) and touted as a nifty way for eBay's millions of sellers and buyers to connect. That reality never materialized, and current CEO John Donahoe has acknowledged that synergies between eBay and Skype are nonexistent.
    
Still, Skype is on a tear, growing at double digits and adding 350,000 global users a day. The five-year-old company logged $551 million in revenue in 2008 -- that number is expected to double by 2011 -- and is now a subject of great speculation by analysts, who wonder whether eBay plans to spin it off, or hold it close. 
                              
Cowan and Co's Jim Friedland, for one, thinks it's for sale. Writing in a note the day after eBay held an analyst presentation to outline the company's three-year plan, Friedland said it appeared "eBay was using the Skype discussion to trigger a bidding war between Google and Microsoft."
       
"We believe the asset would be attractive to both Google and Microsoft to enhance their web-based enterprise application services. In addition, Skype's user base of 405 million, which is particularly strong internationally, would likely strengthen Google's dominant position in the consumer web app market."

But Bernstein Research's Jeffrey Lindsay did not see it that way: "We think the dearth of buyers such as Google or Microsoft will mean that eBay is more likely to spin out part of Skype to the public (like Time Warner did initially with Time Warner Cable)."
    
Huh. Donahoe, incidentally, has said only that eBay will do what's best "to maximize Skype's potential and value."
    
Deutsche Bank's Jeetil Patel opined that, since Skype is performing well, "Management should hold on to this business model" and Credit Suisse's Spencer Wang said he did not see eBay rushing to sell.
    
"While we think the company would be open to parting with Skype at the right price (currently valued at $1.8 billion on eBay's balance sheet), a divestiture of Skype does not appear imminent," Wang wrote.

(Photo: Reuters)

Financial public relations firms, who elevated the honing of corporate messages to a highly profitable art form, are having to adapt their businesses and in some cases cut staff as the economic gloom intensifies.

With far fewer deals to publicize and lucrative “retainer” contracts under pressure, companies are cutting costs and are increasingly focusing on work thrown up by the crisis, such as capital-raising, restructuring and repairing tarnished images.”

So what exactly are they up to?

Some recent pr industry blogs and other web postings shine a light on some of the spinmeisters’ latest tactics.

Flacking firm Fishburn Hedges openly boasts about how a big capital-raising by a UK mortgage lender was kept off the front pages by presenting it as “a technical, esoteric story suitable for business sections”.

For former News of the World Editor Phil Hall, who advised former RBS boss Fred Goodwin on his parliamentary testimony a few weeks ago, there’s apparently no such thing as bad publicity.

Even amid the current financial wreckage, financial pr remains a fiercely contested field as shown by the fact that there’s even a dedicated M&A league table for PR advisers.

Deal-making in the U.S. media and entertainment sectors is going to be down this year, says a new PricewaterhouseCoopers survey (request a copy here). Now, that's not a new or startling conclusion given the state of the economy, but it's just another piece of evidence that when consumers and advertisers get thrifty, deal makers can end up become benchwarmers as companies struggle with cost cuts and other exigencies.

Here are some industry trends for 2009 from the PWC survey:

• Declining consumer spending is hitting many media and entertainment companies. What's more, these declines were exacerbated by technological convergence, as these firms adapt to and look for ways to make money off new Internet technologies.
• Overall U.S. advertising market is going to shrink as sponsors cut ad budgets across retail, consumer goods, automotive, financial and other sectors.
• Companies will continue to divest their non-core assets, but those that don't get a good price will prefer to hold on rather than sell at bargain prices.
• Bolt-on deals will likely be popular for risk-averse companies, so deals below $1 billion -- mostly small and mid-market companies -- will be a rising trend.
• Private equity will remain quiet since the debt markets aren't really healthy yet.
• Deal structures will change this year, given the difficulty of getting debt financing. The strategic rationale for doing a deal will be more important than getting a favorable capital structure.

But all hope is not lost, according to PWC's Transaction Services Entertainment & Media Leader Thomas Rooney:

With M&A activity ingrained in the DNA of so many companies and the ever growing presence of private equity, E&M deal activity might not be as quiet as many expect in 2009... History has shown the E&M industry to be one of the more active M&A sectors irrespective of market and economic conditions.

And there have been a couple of deals already this year, although no mega-transactions, as the PWC report suggests. Live Nation wants Ticketmaster and Sumner Redstone's National Amusements theater chain is being shopped to potential buyers. Could Lions Gate be next?

(Photo: Viacom chairman Sumner Redstone/REUTERS)

John Malone probably won’t lose much sleep over his $530 million loan to Sirius XM Radio. His media empire, Liberty Media, has a market cap of $12.4 billion, so Malone’s 40 percent stake in Sirius XM may be something of a punt. And in the satellite broadcasting industry, Malone certainly has a good leg.

Sirius XM has a big debt pile — $3.25 billion, with $171.6 million due today — but it also has a sexy subscriber base of 20 million users, which rivals the top cable operations in the country. Malone and rival Charles Ergan would have been looking at that number as a palliative for the exorbitant talent contracts Sirius boss Mel Karmazin has (Thanks, KB)  doled out to Howard Stern, Oprah Winfrey and Martha Stewart.

Liberty shareholders might have wanted Malone to wait for the bankruptcy to hit and bid for the satellites and other pieces. But Ergan, owner of EchoStar and Dish Network and holder of the Sirius XM debt coming due today, would have the pole position in an asset sale.

The satellite radio model banks heavily on a healthy U.S. auto market. U.S. automakers are in Washington today, where they may find a more sympathetic ear with a Democrat in the White House. Keeping satellite radio afloat is probably not among the points that GM and Chrysler will present in their case for more tax-funded support, but perhaps Malone is betting the bailout will ignite a recovery in satellite radio’s fortunes.

Deals News:

* The board of Italian power company Enel SpA meets today to approve buying Acciona’s 25 percent stake in Spain’s Endesa, a source close to the matter said. Other sources have put the value of the deal at about 11 billion euros. The purchase would lift Enel’s stake in Endesa to 92 percent.

* Vale, Xstrata and Rio Tinto are among the companies that have submitted proposals to develop Mongolia’s prized $2 billion Tavan Tolgoi coal mine, according to two sources with direct knowledge of the matter.

* Shares in Oz Minerals, the world’s second-largest zinc miner, jumped 29 percent after it agreed to a $1.7 billion takeover bid from Chinese state-owned trading group Minmetals.

* Britain’s BG Group raised its bid for Australian coal seam gas firm Pure Energy by 25 percent to nearly $650 million, trumping a rival offer by Royal Dutch Shell’s Australian partner Arrow Energy.

* The world’s fifth-biggest cement group Italcementi will bid for full control of its Paris-listed unit Ciments Francais in an all-paper deal, the companies said.

* U.S. fund Steel Partners said it had withdrawn its proposal to acquire 33.3 percent of Japanese brewer Sapporo Holdings, citing the firm’s performance and refusal to negotiate with it. Steel Partners, which has an 18.6 percent stake in Sapporo, had offered to buy the firm’s shares at 875 yen per share.

* Sanofi-Aventis has no comment on newspaper reports it is in takeover talks with Brazilian generic drugmaker Medley, the world’s third largest drugmaker said. French newspapers Les Echos and La Tribune, citing a report in Brazilian newspaper Valor Economico, said that Sanofi was interested in buying Brazil’s biggest generics drugmaker, which is valued at $220 million.

(PHOTO:Liberty Media Corporation Chairman John Malone returns to the Chancery court in Wilmington, Delaware, after a lunch break March 10, 2008. REUTERS/John Randolph)