At least one Coinstar, Inc. (NDAQ: CSTR) shareholder sick of being nickel and dimed has pushed the company to make several key changes. The Shamrock Activist Value Fund, which owns a 13.4% stake, demanded the board of directors be reformed and the poison pill be canceled. The move is seen by many as a precursor designed to make future actions to unlock shareholder value much easier.

Many investors are speculating that Shamrock, owned by Roy Disney and entertainment lawyer Stanley Gold, may be interested in eventually pushing the company to evaluate strategic alternatives. Some are expecting a rough 2008 after a plan was announced to remove cranes, bulkheads and kids' rides at Wal-Mart Stores (NYSE: WMT) and other retailers and install more Coinstar Redbox DVD kiosks and coin counting machines in a move that will lower revenues while increasing investment costs.

Coinstar, however, anticipates that the long-run implications of the Wal-Mart deal are worth it. The company projects that the projects could contribute between $165 and $195 million per year with EBITDA of between $36 and $45 million by mid-2009. This compares to a loss of entertainment dollars amounting to only $65 to $75 million in revenues and $15 to $20 million in EBITDA, which means that the company expects to realize incremental EBITDA gains of between $20 and $25 million when all is said and done.

While the Wal-Mart deal may be holding shares back these days, there are several potential areas in which value could be unlocked. Coinstar's $70 million majority ownership stake in their DVD rental kiosk business Redbox is one such area. The business will do revenues of between $250 and $270 million with an EBITDA of between $20 and $30 million in 2008. Even better, its EBITDA margins will approach 20% thanks to route density and economies of scale beginning at the end of 2009.

Coinstar could also try and divest its struggling entertainment business in order to focus more on its core money exchange businesses. The entertainment businesses have been losing steam while the DVD rental businesses could be easily divested to strategic buyers like Blockbuster (NYSE: BBI) and Netflix (NDAQ: NFLX) for a healthy premium. The move would free up cash that could then be used to establish a dividend or repurchase shares in order to unlock value for shareholders.

One final thing worth noting is Coinstar's cyclicality with the economy. This was brought up during the company's last conference call that showed there is a weak correlation between company and economic performance. The reason is because Coinstar's machines are used for relatively small transactions instead of big ticket items. This is also good news for investors since it makes this stock a relatively recession-proof one.

In the end, this is a stock that could benefit from some shareholder activism and Shamrock's attempt to remove key provisions could be the first step. Luckily for shareholders, the company is also doing well as a conglomerate so there is nothing to lose. Any activist move could substantially increase the share price, but a standalone company is also not such a bad proposition. Combined, these factors make CSTR a stock worth watching!

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