New York Times Company (NYSE:NYT) shares fell $0.37, or 1.55%, to $23.47 today after Morgan Stanley indicated their disappointment with the company's decision to retain their dual-class voting structure. Morgan Stanley's Schedule 13D filing with the SEC noted that "by excluding the proposal from the proxy, the company has left the Class A shareholders with limited avenues for expressing their dissatisfaction with the poor performance of the managers of their business." Investor concerns about this dual-class voting structure are not new; in fact, during last year's annual meeting 30% of the company's Class A votes were withheld in protest.

Why is this such a major concern? Well, Morgan Stanley insisted in its letter that many independent analysts believe NYT is worth 50% more than the current stock price suggests; moreover, they contend that the difference between the company's intrinsic value and share price is due to mismanagement and poor governance. As a result, Morgan Stanley said that after patiently holding the stock for more than ten years, they don't think that they would be best serving their clients interests if they sold their stake at such a substantial discount to fair value. The fund said that if the company failed to act they may consider withholding their votes in future annual meets in protest. If shareholders succeed in eventually correcting the mismanagement, it could mean significant share appreciation for NYT investors. This makes NYT a company worth watching over the next few months.

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Electro Scientific Industries, Inc. (NDAQ:ESIO) shares rose $0.45, or 2.19%, to $21.02 today after 11.6% holder Nierenberg Investment Management filed a Schedule 13D/A with the SEC that commented on Third Avenue Management's recent proposals along with the company's current actions. The hedge fund said that it was pleased with management's willingness to act on the proposals and was impressed by TAM's suggestion of a combined share repurchase and dividend program. Nierenberg also noted the fact that United Microelectronics Corp. (UMC) recently said that it would use its excess cash to retire 30% of its outstanding shares and pay shareholders a one-time cash dividend - actions similar to those proposed by the two hedge funds.

Nierenberg also offered an extension to TAM's plans:

"As Mr. Jensen's letter points out so powerfully, there are other perfectly acceptable ways to use excess cash to build shareholder value. If, for example, ESIO's Board and advisors were to conclude that the best way to improve ROE were to repurchase shares, we could support that decision with just two conditions. First, we would want the size of the repurchase program to be large enough that it would meaningfully boost both ROE and earnings per share, like we believe UMC's program will. And, second, we would like ESIO to make a continuing commitment to use excess cash flow to repurchase a significant percentage of shares on an ongoing basis. To illustrate the size of programs which could be acceptable to us, we could support a one time repurchase of six million shares, which is over 20% of the outstanding share count, succeeded by a continuing program to repurchase at least one million more shares annually."

Clearly, there are many ways in which the company could utilize its excess cash to benefit shareholders. The most important thing to watch, as Nierenberg pointed out, is the scale on which repurchases or dividends are handled. Many times companies will try and silence concerned shareholders by initiating insignificant share buybacks or small cash dividends, which ultimately do very little to deliver shareholder value. A program like UMC's, however, would significantly reduce the number of outstanding shares and consequently boost the company's EPS significantly. Moreover, the cash dividend would rid the company of its idle cash, which can actually be dangerous to have in some cases. Overall, this is definitely a stock to watch as management works to craft a meaningful response to these proposals.

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Altria Group, Inc. (NYSE:MO) shares rose $0.26, or 0.3%, to $88.02 in early morning trading after Merrill Lynch raised its price target from $92 to $98. This follows several other analyst recommendations, including Goldman Sachs who recommended buying the stock before the details of its Kraft spin-off are announced on January 31st. These analysts believe that Kraft spin-off combined with an improving international tobacco market will help propel the stock to new highs now that the company has cleared its legal plate.

But why is this such a great deal for shareholders? Well, the Kraft spin-off is expected to generate approximately $34 billion in cash, which the company could use to buyback a quarter of its outstanding shares, raise its dividends, or use to expand into international markets. Secondly, Altria shareholders will automatically receive shares in Kraft (NYSE:KFT), which have performed exceptionally well in 2006 moving up 22%. Finally, we know that Altria has always been a robust company; even in the face of several mega-lawsuits, the company has still managed to almost triple in value since 2000 while also paying a nice dividend. Combined, these factors make MO a stock worth keeping a close eye, especially on January 31st when the details of the spin-off are released.

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Air Products (NYSE:APD) reported Q4 EPS of $1.03, ten cents better than estimates. Revenues were $2.43 billion versus the consensus of $2.29 billion. The company currently anticipates fiscal Q2 EPS in the range of $.98 to $1.03 per share. The current consensus is $0.98.  

Corning Incorporated (NYSE:GLW) reported Q4 EPS of $0.31 Revenues were $1.37 billion versus $1.30 billion consensus. Corning said that it expects Q1 sales to be in the range of $1.26 billion to $1.31 billion and earnings per share in the range of $0.24 to $0.27. The current Q1 revenue consensus is $1.34 billion and EPS consensus is $0.28.  

AmerisourceBergen (NYSE:ABC) reported Q1 earnings of $0.65 per share, nine cents better than the estimates. Revenues came in at $15.7 billion. The company foresees FY07 EPS of $2.45-$2.60 versus prior guidance of $2.40-$2.55 and the consensus of $2.50.

Bank of America (NYSE:BAC) announced a 200 million share buyback.

Energen Corporation (NYSE:EGN) reported Q4 EPS of $1.31 versus the consensus of $0.72. Revenues were $380.8 million versus $326.68 million consensus. Energen reaffirmed its 2007 earnings guidance range of $3.80 to $4.20 per diluted share. The current FY07 EPS consensus is $3.94. 

Novellus (NDAQ:NVLS) reported Q4 EPS of $0.63, eight cents better than estimates. Revenues were $438.5 million versus $436.44 million consensus.

Symantec (NDAQ:SYMC) reported Q3 EPS of $0.26, one cent better than estimates. Revenues were $1.324 billion versus the $1.31 billion consensus. The company predicts Q4 Non-GAAP revenues of $1.25-$1.28 billion versus the consensus of $1.27 billion, with an EPS OF $0.18-$0.20 versus the consensus of $0.21. The company has also announced a $1 billion stock buyback plan.  

Ariba (NDAQ:ARBA) reported Q1 EPS of $0.13, four cents better than estimates. Revenues were $77.2 million versus the $75.92 million consensus.

eBay (NDAQ:EBAY) reported Q4 EPS of $0.31, three cents better than estimates. Revenues were $1.72 billion versus the $1.67 billion consensus. The company predicts a FY07 EPS of $1.25-$1.29 versus the consensus of $1.23.  

Textron (NYSE:TXT) reported Q4 EPS of $1.54, eight cents better than estimates. Revenues were $3.2 billion versus $3.10 billion consensus. The Q1 EPS  is below guidance with $1.15-$1.25 versus the consensus of $1.36 . The company foresees a FY07 EPS of $5.90-$6.10 versus the consensus of $6.28.

Intersil (NDAQ:ISIL) reported Q1 EPS of $0.34, two cents better than estimates. Revenues were $181.1 million versus the $185.02 million consensus. The company sees the guidance for Q1 EPS of $0.27-$0.29 versus the consensus of $0.30, with Q1 revenues of $162-$168 million versus the consensus of $183.2 million.

Varian Inc (NDAQ:VARI) reported Q1 EPS of $0.61, thirteen cents better than estimates. Revenues were $217.9 million versus $207.94 million consensus. Also, the company announced a $100 million buyback.

Polycom (NDAQ:PLCM) reported Q4 EPS of $0.36, six cents better than estimates. Revenues were $186.5 million versus $180.56 million consensus.

Bottomline Technologies (NDAQ:EPAY) reported Q1 EPS of $0.10, eight cents better than estimates. Revenues were $29.7 million versus the $27.16 million consensus.

Plexus (NDAQ:PLXS) reported Q4 EPS of $0.32, one cent worse than estimates. Revenues were $381 million versus $390.40 million consensus. The company foresees a Q2 EPS of $0.15-$0.19, versus the consensus of $0.35, with Q2 revenues of $345-$355 million versus the consensus of $403.14 million.

Semitool (NDAQ:SMTL) reported Q1 EPS of $0.18, six cents better than estimates.  Revenues were $68 million versus the $65.23 million consensus, while predicting a Q2 EPS of $0.02-$0.04 versus the consensus of $0.18. Q2 revs are to be $55-$57 million versus the consensus of $70.83 million.

AeroVironment, Inc. (NDAQ:AVAV) shares moved up $6.93, or 40.76%, to $23.93 on its first day of trading on the Nasdaq. This jump came after the stock priced at $17 per share, which was one dollar above the originally anticipated range of $14 to $16 per share. The company designs, develops, and produces advanced unmanned aircraft systems for the Department of Defense along with fast charge systems for industrial vehical batteries for commercial customers. AeroVironment believes that both of these markets are still in the early stages of development and have significant growth potential. Moreover, they insist that several other technologies that are in their research and development pipline will also emerge as new growth platforms in the future. Given their successful operation and impressive annual revenue growth rate of 71%, the company believes that they have proven their ability to invent and deliver advanced solutions to help government and commercial customers operate more effectively and efficiently. Whether or not this justifies the jump we saw today remains to be seen; however, this is definitely a stock to keep an eye on as it matures.

TNS Inc. (NYSE:TNS) shares moved up $0.19, or 0.98%, to $19.65 today after Shamrock Activist Value Fund disclosed a 5.02% stake in the company and urged the Board of Directors to consider a $6/share special dividend. This news comes after the company recently disclosed that there were several buyers interested in acquiring the company, including the founder and former CEO who has already made a $20/share offer for the company. To this end, the Schedule 13D filed with the SEC also contained a letter with several other requests directed towards the company's board.

These requests included:

1. Disclosure of Key Financial Targets: We propose that the Board disclose EBITDA, FCF (free cash flow: operating cash flow less maintenance capital expenditures) and ROIC (return-on-invested capital) targets for FY 2007 and FY 2008. With this critical information, shareholders can judge for themselves the performance of management and the Board and whether or not an offer for the Company is adequate.
2. Long-Term Incentive Compensation: A Board’s design and implementation of an overall compensation plan, particularly the long-term incentive elements, represent a vivid lens to its governance. We were disappointed that the most recent issuance of restricted stock had no alignment to internal financial metrics that, we believe, correlate to long-term shareholder value creation. I will send to you under separate cover a summary compensation “white paper” outlining a conceptual framework consistent with emerging best practices that seek to provide a meaningful relationship between pay and performance.
3. Capital Management Strategy: We urge the Board to consider distributing to shareholders approximately $150mm of cash or $6.00 per share. Because the Company has a solid customer base, and steady and recurring revenues, it should not require the current level of financial flexibility. We believe an overly capitalized balance sheet often results in poor capital allocation decisions and presents the opportunity for a financial buyer to capture value at the expense of the existing owners. Capital can be returned to shareholders through a variety of mechanisms: dividends, special dividends, share repurchase, etc. Importantly, the Board should seek to articulate a comprehensive capital management policy given the Company’s current corporate strategy.
4. Board Composition: We encourage the Board to recruit immediately two new independent directors. The directors should be selected through a disciplined process that specifies key skills and attributes that compliment those of the existing Board members and match well the strategic challenges and opportunities of the Company over the next several years. We also strongly suggest that you actively seek input in good faith from your shareholders during this process. Fresh perspectives seem vital and appropriate given the recent history at the Company.
   

Shamrock has clearly identified several key issues that need to be addressed before any M&A transactions. First, they noted that the company has an excess amount of cash that could be utilized by potential buyers at the expense of existing shareholders. To solve this issue, they recommended that the company issue a special cash dividend of $6/share to relieve the company of approximate $150 million worth of capital. Secondly, the activist hedge fund made requests aimed at increasing transparency and streamlining the company's costs in order to make it easier for investors to come up with a fair value for the company in the event that a buyer surfaces. Finally, Shamrock requested that two independent directors be found to assist the company in evaluating any strategic alternatives and actively represent shareholder interests in the future. Combined, these recommendations should help the company avoid low-ball offers while encouraging a fair valuation of the company's stock price. This makes TNS a stock worth keeping on the radar over the next few months!

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Electro Scientific Industries Inc. (NDAQ:ESIO) moved up $0.82, or 4.22%, to $20.26 this afternoon after the company's largest shareholder, Third Avenue Management LLC, changed their filing status from a Schedule 13G to a Schedule 13D. This more activist stance came as a result of the TAM's disappointment with the company's stock performance. Consequently, TAM recommended that the Board of Directors explore possible share repurchases and/or extraordinary dividends in order to unlock shareholder value. In a letter, the firm noted that "were the Board to consider a return of capital to shareholders, as I suggest it does, my sense is that some combination of a one-time dividend (say $2 per share) and a committed, long-term share repurchase program would effectively balance the needs of the corporation and those of the outside passive shareholders like TAM."

These demands come not long after Nierenberg Investment Management expressed similar beliefs in their Schedule 13D/A filing with the SEC. The hedge fund noted that ESIO shares could be worth as much as $40/share in three to four years if management took steps to unlock its value. In their analysis, they noted that ESIO has an additional $8 million of cash, not included in the cash and marketable securities lines of the balance sheet, $1 million from a subsequent insurance settlement and $7 million in a litigation bond in Taiwan, which increases cash per share to $7.73. Moreover they said that, if ESIO were to restore inventories and receivables to June 3, 2006 levels (and they believe both ultimately can be reduced even more), and if they were to add the above-mentioned $8 million cash, ESIO's total cash and marketable securities would be $8.21 per share, 43.2% of ESIO's share price at the close on January 9.

The fact is that ESIO is profitable, cash flow positive, and it has zero debt; however, its share price has dropped from a $25 high in 2006 to $19 before rebounding to its current levels. Consequently, two activist shareholders are now demanding that something be done to solve the problem, and this makes ESIO a stock that is definitely worth keeping an eye on over the new few months!

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Temple-Inland Inc. (NYSE:TIN) shares moved up $3.32, or 7.14%, to $49.82 in early trading today after Carl Icahn disclosed a 6.73% stake in the company in a Schedule 13D filing with the SEC. In the filing, Icahn said that stock is undervalued due to the conglomerate structure of the company. Consequently, he plans to recommend a divestiture or spin-off of one or more of the company's component businesses in a quant play could unlock millions in unrealized value for shareholders.

According to the Schedule 13D filing:

"The Reporting Persons acquired their positions in the Shares in the belief that they were undervalued due to, among other things, the conglomerate structure of the Issuer in which various disparate and non-complementary businesses are combined under one corporate umbrella. The Reporting Persons believe that this structure obfuscates the true value of the Issuer's assets and note that various analysts have issued sum of the parts analyses that imply a value for the Shares that is significantly higher than their current market price. The Reporting Persons intend to seek to have conversations with members of the Issuer's management to discuss ideas that management and the Reporting Persons may have to enhance shareholder value, which may include, among other things, the divestiture or spin-off of one or more of the Issuer's component businesses (which may include Guaranty Bank, the corrugated packaging business, timberland holdings, the building products business and/or the real estate division). The Reporting Persons may consider engaging in a proxy contest to attempt to replace one or more members of the Issuer's staggered board of directors with persons nominated by the Reporting Persons, but have as yet made no definite decision to do so."

Does this plan make sense? Well, we must first remember that spin offs in general tend to outperform the overall market due to the way in which they are structured. Often times, parent company shareholders tend to immediately sell shares they are granted in the new spin off. Consequently, there is unjustified downside pressure on the new company's stock, which creates value for the enterprising investor. The spin offs would also help the company raise a substantial amount of cash while unloading any debt that it may have (which is fairly common in these situations). Finally, given the fact that these businesses share very few synergies, it is likely that they will perform better as independently traded companies; therefore, spinning them off would unlock value for shareholders. Overall, these factors make TIN a stock definitely worth keeping an eye on over the next couple of months!

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EMC Corp (NYSE:EMC) reported Q4 earnings of $0.17 per share, one cent better than estimates. Meanwhile, revenues came in at $3.21 billion versus the consensus of $3.17 billion. The consolidated revenue for 2007 is expected to be at least $12.7 billion, versus the consensus of $12.65 billion. GAAP diluted earnings per share for 2007 are expected to be at least $0.64 versus a consensus of $0.63.

Tellabs (NDAQ:TLAB) reported Q4 non-GAAP EPS of $0.10, one cent better than estimates while revenues were down with $455 million versus the $463.7 million consensus. Tellabs expects the Q1 2007 revenue to be flat to slightly down from Q4 2006, in a range from $445 million to $455 million. The current consensus stands at $499.77 million.  

Radiation Therapy Services, Inc. (NDAQ:RTSX) said that it now expects that Q4 2006 revenues will be in the range of $76 to $78 million, an increase from its previously stated guidance of $74 to $77 million. The consensus is $76.85 million. The company expects a Q4 2006 net income of approximately $7.2 million, or $0.30 per share as compared to previously stated guidance of $0.36 per share to $0.38 per share. The consensus stands at $0.36.

BlueLinx Holdings Inc. (NYSE:BXC) said that it expects to report a Q4 net loss in the range of $0.16 to $0.22 per diluted share, with a consensus of a $0.03 loss) on revenue of approximately $945 million. The consensus stands at $1.09 billion.

Johnson & Johnson (NYSE:JNJ) reported Q4 EPS of $0.81, two cents better than estimates. Meanwhile, revenues were $13.68 billion, equal to the consensus.  

Energizer Holdings, Inc. (NYSE:ENR) reported Q1 EPS of $2.08 versus the consensus of $1.92. Meanwhile, revenues were $959.2 million versus $917.76 million consensus.

Avery Dennison (NYSE:AVY) reported Q4 earnings of $1.06 per share. Revenues came in at $1.41 billion versus the consensus of $1.4 billion. The company foresees FY07 EPS of $4.00 to $4.35 versus a consensus of $4.01.

Sun Microsystems, Inc. (NDAQ:SUNW) announced a $700 million private placement transaction with KKR Private Equity Investors, L.P., the publicly traded fund of Kohlberg Kravis Roberts & Co., one of the oldest and most experienced private equity firms. The investment will be in the form of $350 million of convertible senior notes due in 2012, and $350 million of convertible senior notes due in 2014. Closing of the investment is scheduled for January 26, 2007, and is subject to meeting customary closing conditions.

EZCORP (NDAQ:EZPW) reported Q1 EPS of $0.23, three cents better than estimates. Meanwhile, revenues were $91.7 million versus a $85.54 million consensus. For FY07, the company is raising their guidance to approximately $0.85 per share compared to $0.69 per share for fiscal 2006.

Hyperion Solutions (NDAQ:HYSL) reports Q2 EPS of $0.50, six cents better than estimates. Revenues were $222.9 million versus $212.35 million consensus. On a GAAP basis, the company currently expects total revenues in the range of $215 million to $220 million. The company also reported its updated outlook for fiscal year 2007. On a GAAP basis, the company currently expects total revenues in the range of $885 million to $895 million and diluted earnings per share in the range of $1.20 to $1.25, with the current FY revenue consensus at $859.18 million and the EPS consensus at $1.74.

Inter Parfums, Inc. (NDAQ:IPAR) said net sales for the final quarter of 2006 were approximately $90.3 million, or 37% ahead of the fourth quarter of 2005. The consensus is $76.43 million. The company is projecting 2007 net sales of approximately $365 million and net income of $20.4 million (2006 guidance is $16.9 million) or $1.00 per diluted share (the current consensus is $0.83).  

HOKU Scientific (NDAQ:HOKU) reported a non-GAAP Q3 loss of $0.06, four cents worse than estimates. Meanwhile, revenues were $1.1 million versus a $1.15 million consensus. The company expects revenue for the fourth quarter ending March 31, 2007 to be in the range of $1.0 to $1.2 million, while the current consensus stands at $1.15 million.  

Advanced Micro Devices Inc. (NYSE:AMD) reported Q4 loss of $0.04, versus a consensus $0.10 per share profit. Meanwhile, revenues came in at $1.77 billion versus the consensus of $1.73 billion. The company predicts Q1 revenues to be $1.6 to $1.7 billion versus a consensus of $1.82 billion.  

Candela (NDAQ:CLZR) reported Q2 EPS of $0.04, eleven cents worse than estimates. Meanwhile, revenues were $37.4 million versus the $42.9 million consensus.

Quanta Services, Inc. (NYSE:PWR) has increased its revenue for the fourth quarter ended December 31, 2006. Q4  revenues are expected to range between $590 million and $600 million compared to the prior guidance range of $500 million to $525 million. The current consensus is $518.65 million. Q4 adjusted earnings per share results are now expected to range between $0.19 and $0.20 per diluted share, compared to prior guidance of $0.11 to $0.14 per diluted share. The current consensus stands at $0.08.  

Yahoo! (NDAQ:YHOO) reported Q4 EPS of $0.16 (ex-items), three cents better than estimates. Revenues were $1.23 billion versus $1.22 billion consensus. The company predicts Q1 revenues between $1.12-1.23 billion versus $1.26 billion consensus, and  FY07 revenues between $4.95-5.45 billion versus $5.47 billion consensus.

Centex (NYSE:CTX) reported a Q3 loss of $1.96, four cents better than estimates. Revenues were $3.28 billion versus $3.12 billion consensus.

Digital Music Group, Inc. (NDAQ:DMGI) is higher in after-hours action after the comapny disclosed they entered into an agreement with Apple Computer, Inc. (NDAQ:AAPL), pursuant to which DMGI appointed Apple as a reseller of audio-visual files owned and/or controlled by DMGI, including television programs, feature length movies, shorts, and specialty content, within the relevant territory, and granted Apple certain rights to market and promote DMGI's Video Content. Shares of Digital Music Group are up 39% to $5.29 in AH action.

Cornell Companies Inc. (NYSE:CRN) shares moved up $0.31, or 1.61%, to $19.61 in today's afternoon trading session after Wynnefield Partners disclosed a 17.5% stake in the company Friday afternoon. This jump comes after Cornell agreed to be acquired by Veritas Capital for $18.25 per share in cash. The optimism was spurred when fund said that they "continue to believe that the shareholders would best be served if the company were to remain an independent entity and participate in the growth opportunities that exist in the private corrections industry". The fund also noted that Patrick Swindle of Avondale Partners stated in January that the company "appears to have meaningfully improved its position with what appears the addition of 500+ inmates based on our analysis ... these extra inmates could add $10.0 million in incremental revenue and $2.0 million to $2.5 million in incremental EBITDA at full capacity." Investors are betting the Wynnefield will be successful in blocking the company's merger with its 17.5% stake - a move which could result in a higher bid by Veritas. This makes CRN a stock worth watching closely over the next few months.

Cornell Companies Inc.'s principal activity is to provide correctional, treatment and educational services outsourced by federal, state and local government agencies. The Group provides a diversified portfolio of services for adults and juveniles through three operating divisions: adult secure institutional services, residential and community-based juvenile justice, educational and treatment services and adult community-based corrections and treatment services. The services of the Group include incarceration and detention, transition from incarceration, drug and alcohol treatment programs, behavioral rehabilitation and treatment and 3-12 education. The customers of the Group are Bureau of Prisons, U.S. Marshals Service, Department of Homeland Security, Bureau of Immigration and Customs Enforcement, county sheriffs, and city. As of 14-Feb-2005, the Group has 67 facilities in 16 states and the District of Columbia.

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