The more time that passes without a new distribution deal between The Walt Disney Co. and Pixar Animation Studios, the greater the speculation, including a theory that Disney is angling to buy Pixar and install its chief executive, Steve Jobs, as Disney's chairman.
Analysts believe a new distribution deal is likely — and soon. But they dismiss the notion that Disney would buy Pixar. An outright purchase would be too expensive, analysts say, and would not be wise for either company in the long term.
"I think it's absurd," said David Miller, an analyst with Sanders Morris Harris. "It would have to be an enormously compelling offer to even have Mr. Jobs stop and consider it for maybe more than five seconds."
Still, guessing the terms of a deal has become a bit of a sport on Wall Street, with speculation pushing Pixar shares higher in recent days.
Most analysts who cover both companies believe Pixar will soon announce a new deal that has Disney distributing its highly popular — and profitable — animated films. It's current agreement with Disney expires later this year when Pixar delivers its latest film, "Cars."
During an earnings conference call last November, Jobs said of Disney: "We will know if we are going to continue our relationship with them by the end of this year."
That target date has come and gone with no elaboration from either side on the status of the talks, thus fueling the current rumors.
Renewed speculation about a deal helped drive up shares of Pixar nearly 8 percent to $58.16 last Wednesday. Another possible trigger for the sudden jump was the expansion of an earlier deal between Disney and Jobs' other company, Apple Computer Inc., to provide more entertainment for download on Apple's iPod.
Shares dropped back to $56 the next day and have been trading around that price since.
"Something has to happen soon," Marla Backer, an analyst at Research Associates Llc, wrote in a recent report.
The current Disney-Pixar deal expires with the June 9 release of "Cars." Marketing plans for Pixar's 2007 release, tentatively titled "Ratatouille," must be made soon.
"We continue to believe that a deal gets done with Disney that offers Pixar better economics and greater control of its characters," Backer wrote.
The most likely reason for the delay is that a new deal with Disney is complex, despite the mutual respect that has developed between Jobs and Disney CEO Robert Iger. Animosity between Jobs and former Disney CEO Michael Eisner led to the two sides breaking off talks in 2004.
"There are a lot of moving parts here," Miller said. "It's not as simple as slapping together an extension of the current agreement."
Under the existing deal, Disney co-finances each of Pixar's productions, and the two companies split the profits evenly after Disney takes a distribution fee. The two companies also share ownership of the films, and Disney has the right to make sequels on its own if Pixar refuses to participate.
That has led to some conflict, especially over Disney's announced plans to produce "Toy Story 3."
Pixar has said it wants to own 100 percent of its own films after "Cars" and wants to pay a straight distribution fee, without splitting any profits — an arrangement similar to the one George Lucas had with Twentieth Century Fox for his "Star Wars" films.
Pixar has more than $1 billion in cash, enough to finance its own films.
Analysts believe Pixar also wants to regain control of its film library from Disney and might also be pushing to keep more of the profits from "Cars" than the current deal allows.
Perhaps the most intriguing bit of speculation is that Disney will buy Pixar and make Jobs its chairman.
Not likely, several analysts say.
"We reaffirm our view that a Pixar acquisition by Disney makes no sense," Doug Mitchelson, an analyst with Deutsche Bank Securities Inc. wrote last month.
Disney would have to pay a hefty premium for Pixar, anywhere from $70 per share, or $8.4 billion, to $100 per share, or $12 billion, analysts believe.
Such a large deal would depress Disney's stock, saddling it with enormous debt and lowering its earnings, some analysts have said.
Jobs owns 50 percent of Pixar stock and would stand to make a fortune if he sells.
But Miller believes something more than money drives Jobs.
"He looks at Pixar like you and I look at our children," Miller said. "Our children aren't for sale."