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Recap of Saturday, February 15New York TimesFlorida East Coast Industries

Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:

David Asman: Pete Newcomb, what have you got for us on Dreamworks?

Pete Newcomb, senior editor: I interviewed the three founding principals a few weeks ago, David Geffen, Steven Spielberg and Jeffrey Katzenberg, who came over from Disney. These guys have refinanced the company, they’re armed with $1.5 billion in new debt financing.

David Asman: We should mention, first of all, that this is not a publicly traded company.

Pete Newcomb: You can’t buy Dreamworks, but what you can do is not buy Disney (DIS). These guys are really going. They’re ramping up production; they’re now going to release probably up to three animated hits a year. This is a market that Disney used to own, and now they’re getting all sorts of competition from Pixar and Viacom.

David Asman: So Dreamworks is going strong and it’s a reason not to buy Disney. Victoria, what do you think?

Victoria Murphy, senior reporter: I agree with Pete. Disney makes a lot of its money distributing Pixar films (this is the animation studio run by Steve Jobs, who is also the CEO of Apple.) And Jobs has hinted that he might break free from Disney, and I think that would be a huge blow to Disney.

David Asman: Pete, I’ve got to ask you. These guys have all this cash. Does it make them happy?

Pete Newcomb: They love it. They tell me it’s not about the cash, it’s about having fun.

David Asman: All right. Victoria, what do you think about software company Ariba (ARBAE)?

Victoria Murphy: I have a story in the current issue of Forbes Magazine about Ariba. I spent a lot of time with their CEO. They were kind of a dot-com high flyer in the B-to-B online marketplace space. And now they’re back to basics, peddling software that tracks corporate spending. They’ve got a lot of market customers like Merrill Lynch and AstraZeneca. Their new license revenues were up 30 percent in the last quarter, which is pretty big news. I have a caveat, though, and that is that it’s a pretty risk stock. They haven’t filed their annual report because of accounting issues. And that’s not profitable. But their CEO assures me that there are no more surprises.

Mike Ozanian, senior editor: I don’t like it at all, its balance sheet is a mess. They’re largest asset is something called goodwill which is nothing but an accounting entry. You remember AOL had to deduct a lot of goodwill from its earnings. The same thing, I think, is going to have to happen to this company before the year is out.

David Asman: All right, look at Ariba, but be very careful going into it. Mike, we talked about a new company, now General Motors (GM), what do you think of it?

Mike Ozanian: You talk about balance sheets being a mess; this one takes the cake. The stock is at 30. It will probably go down to 20 before the end of the year. It’s dividend it $2, it will probably be cut in half before the end of the year. It has a hundred billion dollars in debt due over the next five years, it has over $5 billion in un-funded pension liabilities, and it’s barely eeking out any cash. It’s practically giving away its cars, and its inventories are all backed up.

David Asman: That doesn’t sound too good. Well they say how GM goes, so goes the nation. What do you think, Bill?

Bill Baldwin, editor: Well, it is a depressing thought, but Mike is totally right about the pension liabilities, except that he may be understating them a bit. I think they’re virtually limitless once we get into post-retirement health costs. That’s just one big element.

David Asman: OK, now a company that you, Bill, should know more about, Gillette (G), they make razors. They also bought one of the battery companies, Duracell.

Bill Baldwin: Duracell is actually the leading battery company. Now there’s a very interesting development in the battery business, and it’s not just the people stocking up on flashlights for the war on terror. The second-tier battery company, Eveready, is buying the second-tier razor company, Schick. Now, what this means, I think, is that we’ve got a very veiled threat from Eveready to Duracell to knock of the price war at the retail counter. If this threat works, prices will go up in the battery business, and they’ll both make more money, and in that case I would be buying Gillette, which is the older of the companies.

David Asman: Older, more stable. Mike Ozanian, does that sound good to you?

Mike Ozanian: I love it. Warren Buffet owns 9 percent via Berkshire Hathaway, I’m a player.

Makers & Breakers

New York Times (NYT)

Bernadette Murphy, managing director of Kimelman & Baird: MAKER

The stock’s been going up since 1996. Despite all gyrations in the market, the stock pulls back but ends up at higher levels. Now, they’ve done an interesting thing. They’ve studied the demographics of their readers and have taken it national. It’s not just New York anymore. They have home delivery in 234 markets, as opposed to about 60, five years ago.

Jim Michaels, editorial vice president: BREAKER

It was a strong franchise, but you have to look at the product. I give the product three “B’s”: Bland, boring and biased. It won’t fly, long-term, as a national paper in competition with The Wall Street Journal and USA Today. I am a breaker.

Bill Baldwin, editor: MAKER

Here’s an interesting take on it. This is a leftist, pro-labor publication and it starves its workers, which is great for the owners. I want to be an owner. Own the stock.

Florida East Coast Industries (FLA)

Bernadette Murphy: MAKER

It is a value play. The stock has been within five points since last June. They own a lot of real estate down in Florida. They have the only railroad that services from Atlanta to the Miami port to Fort Lauderdale, Palm Beach. They have new management.

David Asman: And it’s basically industrial real estate. That’s what they’re banking on, right?

Bernadette Murphy: Yes, and the new management has dedicated itself to increasing shareholder value. We don’t hear that too often.

Bill Baldwin: MAKER

I am going to be a maker on this one as well. I tend not to like railroads; I like lands. These people own some of it, and you can own a piece of that land by owning the stock.

Jim Michaels: BREAKER

It’s a great stock if you like to watch grass grow. It pays a miserable dividend, and not in this market for my money.