>> this is a big day for skype and this is a big day for microsoft. we're adding a new division and a new promise to our customers, the promise of universal next generation communication. >> susie: microsoft buys internet phone firm skype, ratcheting up the battle to become a big player in the consumer market. but analysts say it's not a good call. you're watching "nightly business report" for tuesday, may 10. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. my colleague tom hudson will be along later in the program. microsoft is betting big on skype, making its largest acquisition ever. the software giant announced today it's paying $8.5 billion in cash for the world's most popular web-calling service. microsoft outbid rivals google and facebook, reportedly more than doubling their offers. still, even with skype's millions of users, investors are skeptical of the purchase. suzanne pratt takes a look at why microsoft's big bet isn't getting rave reviews.

>> reporter: this is the future of global communication, and microsoft wants in on the action. let's face it-- microsoft is still a huge laggard when it comes to the internet and the consumer market. not only is "skyping" so popular that it's a verb, but the deal gives microsoft access to skype's 170 million loyal web users. microsoft c.e.o. steve balmer explained it at a news conference, saying the plan is to put skype technology into microsoft products. >> microsoft and skype together will bring together hundreds of millions-- or as tony would say, billions-- of consumers, and empower them to communicate in new and interesting ways. >> reporter: those new and interesting ways are likely to include adding skype to window's mobile phones, outlook email, and even x-box game consoles. still, the news had many technology experts scratching their heads.

after all, skype is not profitable. its web users skype other users for free. skype only makes money off of group video conferences and old fashioned phone calls. but analyst ted shadler sees wisdom in the marriage. >> microsoft needs this kind of product to be successful in the future. it has to compete against google, it has to compete against other business competitors, and skype is a great product for that. >> reporter: most experts say the big problem with the purchase is the hefty price tag, even for a cash cow like microsoft. standard and poor's analyst jim yin is negative on the pairing because microsoft is shelling out ten times skype's annual revenue. >> this is not a cheap deal. normally, when company's give ten times revenue, it's usually for a small technology company that you can quickly expand it's user base. here, this is not quite a startup, but still it's a more mature product. >> reporter: others say never

mind the price, the real strategy is keeping skype out of the hands of google and facebook. for that reason, microsoft paid exactly the right amount. suzanne pratt, "nightly business report," new york >> susie: here are the stories in tonight's "n.b.r. newswheel." a broad market rally-- stocks got a lift, thanks to that microsoft deal with skype. the dow added 75 points, the nasdaq rose more than 28, and the s&p 500 up nearly 11. big board volume back above 800 million shares, while nasdaq volume topped two billion. high-level talks between u.s. and chinese officials have wrapped up in washington. china agreed to make it easier for american companies to win chinese government contracts. the u.s. wants china to let the yuan appreciate against the dollar and to let domestic interest rates rise. both could boost demand inside china, lowering america's trade deficit, which hit an all-time

high with the asian nation last year. those agreements come as china reported an unexpectedly large trade surplus-- $11 billion in april after a trade deficit the first three months of the year. but china's imports slowed as policymakers unveiled tightening measures in the banking and real estate sectors. >> tom: still to come tonight-- with gasoline over $4 a gallon, pumps like these are bringing in plenty of money for station owners. this last fill-up was just over $68. but its the use of these credit and debit cards that are also costing station owners a lot more. >> susie: google and apple were in the hot seat today on capitol hill, as company executives testified at a hearing on mobile privacy. lawmakers on the panel acknowledged that cell phones and location-based technology were useful for individuals and businesses. and as darren gersh reports, senators were also concerned about how much data was being shared with third party companies. >> reporter: your mobile phone

can help you find your way, tell you where the best pizza is, and it can tell an advertiser exactly where you are, even if you would rather they didn't know. which is why minnesota senator al franken is so concerned about protecting mobile privacy. what today is about is trying to find a balance between all of those wonderful benefits and the public's right to privacy. >> reporter: senators homed in on apple software that researchers say collects location data and stores it for up to a year on an iphone or ipad. apple says the data helps iphones find locations faster than using gps. apple software executive bud tribble adds the location data is also anonymous. >> apple was never tracking an individual's location from the information residing in that cache. furthermore, the location data that was seen on the iphone was not the past or present location of the iphone, but rather the location of wifi hotspots and

cell towers around the iphone's location. >> reporter: but franken also called as a witness consultant ashkan soltani, who says, if mobile phone data can be used to find criminals, it can find individual consumers, too. >> it's really difficult to call this stuff anonymous. making those claims is not really sincere. >> reporter: lawmakers were concerned about finding better ways to alert consumers when their location data is being shared with other companies. apple says it hasn't removed any apps from its store for location-related violations. instead, the company says it tries to make sure bad software is screened out before it makes it onto an iphone. google says it does not monitor apps in the android marketplace. instead, alan davidson, director of public policy for the search giant, says apps must ask for consumer permission before sharing location and other sensitive data. >> hopefully, a lot of people do this when you say, "why does my solitaire program need my contact database? it doesn't, and i should reject it." >> reporter: apple says it will

begin encrypting iphone location data with its next major software update. but senators did not leave the hearing reassured enough is being done to protect mobile privacy. darren gersh, "nightly business report," washington. >> susie: general motors will invest about $2 billion in 17 u.s. plants as the company shifts from recovery mode to investing in future products. that money will also be used to add or keep more than 4,000 jobs as it updates factories in eight states, primarily in the midwest. c.e.o. dan akerson told a crowd of auto workers the strategy is the best way for the company to keep its edge. >> these investments are key to our growth, they're key to our continued success, with a caveat, we need to stay focused on our mission, which you've all heard many times: to design, build, and sell the world's best vehicles. >> susie: as part of its upcoming wave of new hires,

general motors plans to expand its extended-range electric technology. g.m. executives said with more fuel efficient cars in its line- up, it will be better prepared for high gasoline prices. speaking of gasoline prices, they dropped a penny in the last 24 hours, according to triple-a. but at $3.95 a gallon, prices are still a dollar higher than a year ago. and don't count on them to drop any time soon. oil prices rose again today, settling at just under $104 in new york. tonight, we continue our series "pumped up prices" with a look at gas stations. you might think business is booming, but as tom hudson reports, station profits are being pinched by higher pump prices. >> tom: when you're in the gas station business, lots of traffic is a good thing. every car is a customer. but with the price of gasoline around $4 a gallon, not every customer is spending what they used to on other items.

>> gas is a driver, gas is a driver to bring in people. but at the end of the day, it's not going to make anybody rich. >> tom: michael mendez owns mendez fuel holdings. he runs four stations, including this mobil in coral gables, florida. his biggest profit margins aren't at the pump. they're not in his convenience store, either. they're in his car wash. gas station owners hope for a profit of 12 cents per gallon. as prices rise, competition from other stations keeps a lid on price increases. as gas prices have shot up, it's common for stations like this one with a convenience store to see sales inside the store drop off. as gasoline prices have moved higher, clearly, that has led to a higher cost of goods. obviously, the gasoline in the ground is a lot more expensive. but station owners tell us it's also more expensive to accept credit and debit cards. >> for the month of april, i think it was close to $14,000 in just credit card fees alone. >> tom: fees are based on the

amount of money being spent, so higher pump prices mean station owners spend a lot more on credit card fees. lee doucette owns doucette mobil in miami. in april, his customers used credit and debit cards to buy $719,000 worth of gasoline. it cost him more than 15 grand to accept those cards. >> let's say labor costs will run about $30,000... $20-something-thousand, give or take how many weeks we have in a month. >> tom: what's the second biggest cost for you? >> credit card costs are our second biggest costs. >> tom: even more than rent? >> more than rent. >> tom: as for profits? here's something that may surprise you. >> the bank will make more on a gallon of gas than i will via just the credit card costs. >> tom: a difficult feature of the gas station business, says brian hamilton, c.e.o. of financial data firm sageworks, is the lack of control over most expenses. >> there's fixed costs. they don't have a lot they can do to sort of vary those types

of costs and increase their profitability. >> i have a school of thought-- fast to go up, slow to go down. that is just basic good policy to maintain your margin. >> tom: drivers hate to hear that, though. >> they do, but we have to stay in business, too. >> tom: gas may be a commodity, but station owners look for ways to make sure their station's aren't, such as catering to local tastes in hopes of making up some of what they're not making at the pump. tom hudson, "nightly business report," miami. >> susie: we continue our series "pumped up prices" tomorrow. we'll look at how higher gas prices are having a big impact on small businesses.

>> susie: another positive day here on wall street-- investors were encouraged by that microsoft and skype deal, and more upbeat earnings news. lots to talk about in tonight's "market focus". speaking of earnings, after the bell, walt disney disappointed investors, posting quarterly numbers that missed expectations. disney earned 49 cents in its second fiscal quarter, eight cents below estimates. revenues rose 6% to $9 billion, but that was also below estimates. disney was hurt by lower revenues from its movie and

television studios. in after-hours trading, disney shares fell as much as 3%. in the regular session, disney closed at $43.91, gaining 81 cents, or almost 2%. looking at the year so far, shares in disney are up 24%. but a big question mark is what impact higher fuel costs will have on theme parks and resort attendance. also reporting earnings today-- dean foods. shares surged 12% on better than expected first quarter numbers. investors bought up the stock after the company said it will counter rising commodity prices with its own price hikes. it also announced more cost cutting measures and raised its outlook. d.f. is having a good year so far-- the stock is up 38%. wendy's/arby's is also increasing prices to cope with rising food costs, especially meat. shares jumped almost 5% as the fast food chain narrowed its

first-quarter loss. the company's c.e.o. also says it has several potential bidders interested in buying its arby's brand. turning now to microsoft-- the stock price showed little reaction to that $8.5 billion deal for skype. c.e.o. steve balmer wants to integrate the web phone company with microsoft's mobile software products. meanwhile, microsoft's stock is stuck in neutral, trading in the same range now that it was three years ago. investors with an eye for talent were applauding apollo management's move to buy ckx. it owns one of tv's popular "american idol" franchise. ckx share holders, including elvis presley's daughter lisa marie, get $5.50 per share. ckx owns a treasure trove of rights to legendary icons, including elvis and muhammad ali. the stock jumped almost 23% to a

nine-month high. finally, a final chapter in an illustrious career. shares in medical device maker boston scientific fell 9% after c.e.o. ray elliott surprised investors with plans to retire at the end of the year. that loss of a well respected leader made boston scientific's shares the most actively traded on the big board. and that's tonight's "market focus".

>> susie: the major stock averages continue to march back to their pre-recession levels. so, tonight, our word on the street is "recovery". joining us-- stephanie link, director of research at thestreetdot.com. >> hi, stephanie. >> hi, susie, how are you? >> susie: so let's talk about your theme, recovery. we're seeing some recover in the economy, and some recovery in the stock market. and you say people should factor it in their portfolio. >> right. it is clear the global economies have improved from the recession lows. if you look at industrial production, i.s.m., factory orders, all those numbers are improving and are at a high level. and you have a resilient consumer, and the job market is starting to see signs of life. still a long way to go there, but i think you want to own those stocks in a portfolio that have exposure to the global

economic recovery, by that, i mean economics, and financial. >> they all trade at the new york stock exchange. emerson electric, and what is it about this stock that you say looks right. >> it has a classic late cycle industrial. they have climate controls, industrial automation. what they do is make their clients more productive, smarter, more competitive, and their costumers are willing to pay more for these products, so they're higher margin products. and they have a good growth profile. so the stock is down about eight percent in the last week. and i think the price is right. and what is your target on the stock. right now it is $55. where do you see it going? >> i have a $65 target in the next six months, and i think the company is going to announce a restructuring in the next

six months, which may have it go higher. >> susie: the next stock, baker's hughes, trading around 72. how does this oil services company fit into your theme of recovery. >> i like the oil service stocks very much. that's because the integrated companies, companies like exxon and chevron are going to increase, because they're making a lot of money because the commodity prices are so high. they're going to spend more money. as demand improves, pricing for services will go higher. that means the oil services prices will go higher. baker's hughes will go higher, and i like the services acquisition. i think it will give the company a broader focus in terms of product as well as geography. >> susie: and you like it better than companies like slumberier and halliburton? >> i do. i think it has a stronger

margin expansion, and because this c.j. services acquisition really gives them cushion and really expands their product line. >> susie: let's move along. you are going to end with p.n.c., the sixth largest bank in the country based in pittsburgh. >> it really is a plain vanilla bank. their focus is the mid-west side, and the midwest is starting to recover because of the auto recovery. and the company has done a great job in terms of improving its balance sheet, lowering its credit costs, and they made a very positive acquisition of national city a few years ago. as they cross-sell their products into p.n.c.'s revenue base, you'll see higher revenue growth. >> susie: any disclosures you want to make? >> in the fund, we own these three stocks, but i don't own them personally.

>> susie: okay, three stocks for recovery in your portfolio. thank you so much, stephanie, nor coming on the program. our guest tonight, stephanie link with thestreet.com. and you can read stephanie's article at the thestreet.com, and there is a link also on our website. here's what we're watching for tomorrow: hilary kramer is our "street critique" guest. she's editor of gamechangerstocks.com. we'll also see quarterly results from cisco systems and macy's. also on the earnings calendar tomorrow-- toyota. we'll find out how much its production capacity was hurt by japan's earthquake and tsunami. looking for your favorite music? well, google it! the online firm is rolling out a new service that will let you store 20,000 songs on its servers. you can play them back on a cell phone, tablet, or computer. the service is called music beta

by google, and is by invitation only. for now, it's free. this space is getting crowded-- amazon has a similar cloud-based music service, and reports say apple is planning one as well. meanwhile, sony says its online playstation network is going to stay offline for a few more days. the system was the target of hackers who nabbed the personal data of more than 100 million users. it's been shut down since april 19, when sony realized something was wrong. the company doesn't know exactly when the service will be back up and running again.

>> susie: deficit reduction is topic "a" in washington, and one place lawmakers are looking to cut is charitable tax breaks. tonight's commentator thinks that's a bad idea. he's todd buchholz, author of "rush: why you need and love the rat race". >> giving to charity makes us feel better. even a prune-face like john d. rockefeller couldn't stop smiling when flicking dimes into the hands of children. how can governments get us to give more? by keeping tax rates low. the charities aid foundation examined why americans give more than french and germans-- way, way more; up to ten times as much. here's what they concluded-- when governments take in a lot of money in taxes and erect

massive social spending schemes, individuals feel as if they've already paid their dues. "why should i reach into my own pocket; the government has already picked mine clean," they reckon. in the 1930s, the new deal actually discouraged churches from passing the plate and passing on the spare change to soup kitchens. that's why i'm worried about president obama's plan to hike income taxes and cut back charitable deductions. there's an old w.c. fields scene where the stingy buffoon stumbles upon a tramp asking for help-- "sorry, my man, all my funds are tied up in cash." we don't want generous americans to think that all their cash is tied up in washington. i'm todd buchholz. >> susie: and finally tonight, it's always a good idea to have money in your bank account before you write a check, especially when it's an $8 million check. that's how much money perth amboy, new jersey, has to refund chevron for overpaid property taxes. the problem is, the city doesn't have the cash. so the city council is going to

have to borrow to pay up, getting state approval to sell bonds to gin up the $8 million. that's actually a good deal for perth amboy; chevron had originally asked for a $12 million refund and settled for the lower amount. that's "nightly business report" for this tuesday, may 10. i'm susie gharib. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt

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