News Corporation (NYSE:NWS) shares moved up $0.44, or 1.78%, to $25.14 today after the company posted strong revenues supported by movie sales and MySpace. The company reported that MySpace’s sales had tripled from a year earlier as the company said profit margins should conservatively top 20% in fiscal 2008. President Peter Chernin also told analysts on a conference call that the company believes the segment would “over-deliver” on the $500 million in annual revenues projected three months ago. Meanwhile, operating profits in News Corp’s television business fell from $183 million to $112 million, hurt by both MyNetworkTV and Fox Broadcasting, where profits dropped 36%. The company did, however, experience great success in the hit movie “Borat” and expects the return of hit television series “24” and “American Idol” to boost future revenues in future quarters. Murdoch also said today that his company will launch their long awaited cable business news service this fall, built to rival CNBC. Combined, these factors make NWS a stock that is definitely worth watching - even if it has already moved over 50% this year.

Related Companies
Time Warner Inc. (TWX)
CBS Corporation (CBS)
The Walt Disney Corporation (DIS)

EMC Corporation (NYSE:EMC) shares moved up $1.06, or 7.79%, to $14.66 in early trading today after the company announced that it would spin off 10% of its VMWare unit. EMC acquired VMWare in 2004 for $625 million in cash and reported revenues of $709 million in 2006, up 83% year over year. EMC said it would retain ownership in the remaining 90% of VMWare and doesn't intend on divesting its share of the company. According to David Goulden, CFO, EMC plans to file a registration statement with the U.S. Securities and Exchange Commission in late March or early April for the planned IPO, and the shares could be available for sale sometime in the second quarter.

This is definitely a situation to keep a close eye on as spin offs can present great opportunities for investment. VMWare has posted very solid growth over the last three years that it has been held by EMC, and continues to outperform the market. It is also worth noting that statistically spin offs have outperformed the overall market by a wide margin during their first year. This is primarily attributable to the fact that spin offs are often companies that benefit from standing alone due to a lack of synergies with their parent company. Moreover, there is occasionally an opportunity to pick up spin off shares at a discount as parent company shareholders occasionally sell their stakes in a spin off immediately after receiving it. Combined, these factors make EMC a stock worth watching as their summer spin off approaches.

Related Companies
Hewlett-Packard (HPQ)
Dot Hill Systems Corp. (HILL)
Overland Storage, Inc. (OVRL)

Earlier this week, American Real Estate Partners, an affiliate of activist investor Carl Icahn made a $2.43 billion, or $36 a share, offer for Lear (NYSE:LEA). However, the company would not comment on what news is pending, or when it might be released. Lear shares were trading at $40.06, before they halted today after the company wouldn't release further information about the buyout. Lear shares surged 12% on the news that day, indicating that some investors expected either Icahn would raise his offer or another company might enter the bidding. Icahn's offer represented a 3.8% premium to Lear shares' closing price the day before the offer became known. However, the stock had climbed some 60% since Icahn disclosed in October he had increased his stake in the company to 16% of its shares outstanding.

Crude oil futures jumped more than $2 this afternoon, after a fire forced Occidental Petroleum to declare force majeure at one of the largest gas and oil fields in California. On the New York Mercantile Exchange, March crude settled up $2.00, or 3.5%, at $59.71 a barrel, the highest settlement price of the year.

U.S. movie theater advertiser National CineMedia opened up 21% in its market debut, a day after pricing above a forecast range. The centennial, Colorado-based company raised $798 million with a 38 million share initial public offering that sold for $21 a share compared with an $18 to $20 forecast.

Luxury home builder Toll Brothers (NYSE:TOL) expects to report a 19% drop in home-building revenue. The company said preliminary results showed that home-building revenue fell to $1.09 billion in its fiscal Q1. The value of the contracts Toll signed during the quarter fell 34% to $749 million, and the backlog of homes on order and waiting construction fell 30% to $4.15 billion.

Eastman Kodak (NYSE:EK) expects to complete their three-year restructuring program by the end of 2007, including additional job cuts, that will help it sustain profitability. Kodak is aiming for gross profit margins of 28% to 29%, with earnings from operations at 8% to 9% of revenue in 2009. Kodak expects total restructuring costs of $3.6 billion to $3.8 billion from the program, with job cuts of 28,000 to 30,000 positions. As of the Q4, Kodak had eliminated 23,400 jobs under the plan.

Weyerhaeuser (NYSE:WY) is expected to see earnings fall 21% to $0.75 a share on sales of $5.36 billion. In the year-ago period, the company reported a profit of $0.94 a share on revenue of $5.87 billion.

Walt Disney (NYSE:DIS) said that its Q1 earnings more than doubled from a year ago. Shares of Disney rose as much as 2.5% in after-hours trading Wednesday. Disney reported quarterly earnings of $0.50 a share, easily surpassing expectations. The company was expected to post fiscal Q1 earnings of $0.39 a share, up from $0.35 last year. Disney said net income rose to $1.7 billion, or $0.79 a share, from $734 million, or $0.37 a share in last year's Q1. Revenue rose 10% to $9.7 billion, topping the consensus of $9.5 billion.

PepsiCo's (NYSE:PEP) Q4 earnings rose 61%, fueled in part by strong sales gains at its international and Frito-Lay businesses. The company also raised its 2007 earnings forecast. The company's net income in the quarter ended Dec. 30 rose to $1.78 billion, or $1.06 a share, up from $1.11 billion, or $0.65 a share, a year ago. Revenue rose 2.8% to $10.38 billion from $10.01 billion a year ago. In the latest quarter, PepsiCo earned $0.72 a share, compared with earnings of $0.65 a year ago.

GlaxoSmithKline (NYSE:GSK), Europe's biggest drug maker, reported a 16% rise in annual profit. However, the company expects that 2007 growth will slow as it awaits pipeline renewal. Q4 profits before tax was $2.2 billion, up from $2.08 billion in the same three months ending December in 2005. Q4 sales rose to $7.79 billion from $7.66 billion, helped by strong U.S. demand.

Waste Management (NYSE:WMI), the nation's largest garbage hauler, reported that its Q4 earnings fell 15% from a year ago, when the company had heavy business from hurricane cleanups and one extra work day. Revenue in the most recent quarter fell to $3.28 billion from $3.37 billion a year ago.

Tribune (NYSE:TRB), which has been fielding offers for its newspaper and broadcastiong operations, experienced a Q4 profit surge of 81%, benefiting from multiple gains and higher revenue. Net income after paying preferred dividends jumped to $239.1 million or $0.99 a share, from $132.3 million, or $0.43 a share, during the same period a year ago. The company earned $0.68 a share in the latest period, higher than the consensus of $0.61.

Kintera, Inc. (NDAQ:KNTA) shares moved up $0.06, or 4.84%, to $1.30 today after Coghill Capital Management LLC voiced its support to an increasing clamor for change in control of the company. Steven Becker, a 5.8% shareholder, first expressed concern on January 26th over Chairman and CEO Harry Gruber's inability to move the company forward. Specifically, he was concerned over Kintera’s pattern of losses, progressively dilutive financings, inaccurate guidance, and plunging credibility within the investor community. Becker insisted that Gruber's inexperience with Wall Street and tendencies to run the company as more of a "family business than a value-maximizing public company" have led to steep losses for shareholders. After reaching a high of $17.29 during the months following the IPO, Kintera’s share price has plummeted to the $1.25 levels, which has caused serious concern in amongst shareholders. Consequently, Becker maintains that the company could achieve much higher returns if it were run by a compotent manager that is more experienced with Wall Street.

Coghill Capital Management LLC, a 9.9% holder, said today that it would support a CEO change in a Schedule 13D filing with the SEC. The hedge fund also voiced its concerns over company policies that forbid independent board members to hold talks with investors without the CEO's oversight. This policy along with the fact that Harry serves as both Chairman and CEO, leads to undue influence over the strategic and operational decisions without meaningful checks and balances. These decisions, Coghill contends, are what has been driving the stock price down. Consequently, they believe it necessary that Harry Gruber be replaced as head of the company by a professional manager in order to drive Kintera to sustainable profitability and deliver shareholder value.

A combined 15% of the outstanding shares have now voiced concern, which should be enough to warrant a response from the company. Despite the fact that Gruber has significant influence over the board of directors, the independent directors still have a fudiciary duty to act in the best interest of shareholders. It is likely that the company will at least respond to the dissident shareholders over the next few weeks, which should give some clues as to future actions. It is also worth noting that shareholders appear to support this directive as well, as shares rose almost 5% today on the news. Combined, these factors make KNTA a stock worth watching!

Related Companies
Penton Media, inc. (PTON)
Amdocs Limited (DOX)
VeriSign, inc. (VRSN)

Integral Systems, Inc. (NDAQ:ISYS) has recently come under fire by Fursa Alternative Strategies LLC, who demanded an immediate declassification of the board and a leveraged recapitalization of the company. The demands came after the company's failure to find a strategic buyer after over three months of searching, which has caused widespread frustration among shareholders. The hedge fund argued in their Schedule 13D/A filing with the SEC that the company's substantial amount of cash and unutilized debt capacity could be used to finance a stock repurchase as an alternative means to unlock shareholder value. Moreover, Fursa expressed concern over the company's treatment of ex-CEO Steven Chamberlain, who continues to receive pay from the company despite no longer working for the company! These concerns were unaddressed until the hedge fund began to take the preliminary steps necessary to partake in a proxy fight.

Finally, the company caved in yesterday by offering Mr. Harley (an associate of Fursa) a seat on the company's newly-declassified board of directors. Fursa said that they were pleased with the appointment and would begin exploring strategic alternatives to enhance shareholder value. It is likely that Harley will attempt to push for a recapitalization of the company along with a special dividend or share buyback program. Combined, these things will likely push up Integral Systems' stock price and distribute their excessive cash to shareholders. This makes ISYS a stock that is definitely worth watching over the next few months!

Related Companies
Northrop Grumman Corporation (NOC)
Lockheed Martin Corporation (LMT)
Raytheon Company (RTN)

Ceridian Corporation (NYSE:CEN) shares remained roughly even during the past two days after activist investors Bill Ackman's Pershing Square and Relational Partners LLC stepped up their efforts to convince the company to unlock value through a Comdata spin off and stronger focus on the company's grossly underperforming HR business. The most recent development began on January 18th when Ackman filed a DEF14A consent solicitation (the first step in a proxy battle) aimed at replacing the company's board during the next annual meeting. This came after Ackman held a three hour meeting with the new CEO in which she effectively shot down Ackman's proposal to spin-off Comdata and seemed unconcerned about the possible loss of Mr. Krow - a key figure in the company. Immediately after this DEF14A was filed, the company responded with a letter stating they were "very surprised" by the concerns in their letter and called the solicitation "unfounded and unwarranted". However, this appears to be too little, too late as Ackman continued to acquire substantial blocks of shares (revealed in a recent Form 4 filing with the SEC).

Relational Investors fired their own shots today in a letter saying that they had tried to contact management for over four months without success, and had begun selling their stake in the company as a result. The fund also voiced their support for Bill Ackman saying: "We want to make sure that the Board knows that we unequivocally support each of the points made in Pershing Square's letter. In particular, we think it was a major error to bring in a Chief Executive Officer who would stifle and frustrate the entrepreneurial and highly successful management team at Comdata instead of focusing on the woefully under performing HR business. We believe, as we have explained before, that Comdata should be liberated from the Ceridian business solution and that all focus, including the Board's, should be on restoring operational excellence to the HR business. We intend to vote our remaining shares in support of Pershing Square or other shareholders' efforts to correct these errors."

So where does it go from here? Well, sometimes activist hedge funds will make consent solicitations in order to get things accomplished faster than they would be through other meetings. An example of this strategy occurred today when Nussdorf acquired seats on Parlux's board without having to go through with a proxy battle. However, other times a proxy battle is the only way to get things done. Regardless, we will know whether or not Ackman successfully obtained board seats by the company's next annual meeting. If he is successful, we could very well see a spin off of Comdata as well as renewed focus on the company's HR division - developments which should increase CEN's shares substantially over the next year or two!

Related Companies
Paychex, Inc. (PAYX)
Automatic Data Processing (ADP)
TALX Corporation (TALX)

Parlux Fragrances Inc. (NDAQ:PARL) shares moved up $1.08, or 17.22%, to $7.35 today after the company issued a press release stating that it had reached an agreement with Glenn Nussdorf. The history between these dates back to last September when we noted that Glenn Nussdorf had acquired a 15% stake in the company. Shortly after, Nussdorf expressed interest in acquiring the company (most likely for his E Com Ventures). Later that year in November, the activist shareholder expressed interest in obtaining board seats in order to prevent the company from materially modifying the company (in case he decided to acquire it) and make "immediate" changes at both the board and management level. And finally, in December he filed preliminary consent forms aimed at actively replacing the board through a proxy battle.

Today, the company finally bent to meet Nussdorf's demands. Under the terms of the new agreement, all lawsuits would be dropped between the two parties, the consent solicitation would be abandoned, CEO Ilia Lekach would immediately resign, and Nussdorf's nominees would be appointed to the board of directors. Regarding the agreement, Nussdorf commented: "My consent solicitation was about performance at Parlux, and the value of the shares which I and every other Parlux stockholder own. It was never about me. With a reconstituted Board of Directors and with Neil Katz serving as interim CEO, I am satisfied that I have achieved our goals. Our settlement agreement demonstrates the commitment of the Parlux Board to addressing stockholder interests in a positive way."

Under new management and direction, shareholders are hoping that the company will be able to return to its prior highs after falling almost 50% this year alone. The possibility also remains open that Nussdorf could orchestrate the buyout that he has talked about so much in the past. Combined, these two factors make PARL a stock that is definitely worth watching over the next few months!

Related Companies
E Com Ventures, Inc. (ECMV)
Avon Products, Inc. (AVP)
Inter Parfums, Inc. (IPAR)

Lear Corporation (NYSE:LEA) shares rose $2.24, or 5.8%, to $40.88 in early trading today after Pzena Investment Management LLC voiced its opposition against Icahn's $36/share buyout offer, suggesting the stock's real value is closer to $60/share. Pzena sent a letter to the company's board of directors suggesting that earnings are likely to recover to more than $4.00 per share over the next few years from consensus analyst estimates of $2.00 per share for 2007, pegging the company's value closer to $60 per share.

The hedge fund also said that was concerned with the recent trend towards private equity firms teaming up with management to "steal" companies from their owners at the expense of shareholders. Consequently, Pzena reminded the board of its fiduciary obligation to shareholders and urged them to seek other offers for the company and exclude management from this process (since preserving their jobs and enriching themselves comes at the expense of shareholders). Combined, Pzena makes several valid points and shareholders seem to be applauding the idea as LEA shares are trading substantially higher than the buyout premium. Now that there could be additional offers for the company or a raised bid by Icahn, this is certainly a stock worth keeping an eye on over the next few weeks!

Related Companies
Visteon Corporation (VC)
Johnson Controls, Inc. (JCI)
Alcoa, Inc. (AA)

NetManage, Inc. (NDAQ:NETM) shares moved up $0.08, or 1.53%, to $5.32 after Riley Investment Management LLC expressed concerns with the company's operating and financial condition and recommended that the it immediately review a standing offer to acquire the company at $5.25 per share. The 6% shareholder believes that the company should no longer operate as a stand-alone public company, given their expensive public compliance costs relative its size and its operating performance over the last several years. Just how bad is it? Well, over the last 10 fiscal years NetManage’s revenues have shrunk by approximately 66% while net losses amounted to approximately $176 million. This caused the company’s stock to lose about 33% of its value throughout the last five years while the NASDAQ added 28%. Even more troubling was the fact that executive compensation rose 14% during this period, while the CEO received 486,393 options, or enough to cover around 5% of the shares during that period!

Riley Investment Management summarized the situation best in their letter attached to their Schedule 13D/A filing with the SEC:

We wish to conclude by reminding directors of their duty to maximize and realize shareholder value. All of NetManage’s directors, aside from one, have served on the board for more than 9 years and some have held seats for over 15 years. This group of directors oversaw the strategy that led to NetManage’s disappointing performance and endorsed management’s decisions during the deterioration of the last decade.  Furthermore, none of the directors aside from the CEO are major shareholders of NetManage. We therefore call on the board to change course and acknowledge that NetManage’s operational plan is not working for the benefit of its owners. We believe that the board of directors should move swiftly towards realizing the value that still exists in NetManage’s legacy customer base and recurring revenue sources, through a sale of the Company to a strategic or financial buyer. With an installed base of more than 10,000 customers, NetManage presents potential buyers with a strong stream of maintenance revenues that command an estimated gross margin in excess of 90%. Leveraging this customer base can offer strategic buyers a solid platform on which to grow additional products while utilizing a larger sales force and spreading the cost of research and development over an expanded revenue base. Alternatively, NetManage’s highly profitable recurring cash flows can offer financial and private buyers excellent returns as they eliminate the unnecessary costs of public filing, as well as what we view as excessive management compensation and under-scaled general and administration expenses currently incurred by NetManage.

Clearly, there is a strong argument for the company to put itself up for sale. A strategic buyer would be able to realize far more value than is currently reflected in the current share price. This makes NETM a stock worth keeping an eye on over the next few months!

Related Companies
Jacada Ltd (JCDA)
Novell, Inc. (NOVL)
Microsoft Corporation (MSFT)

Flow International Corporation (NYSE:FLOW) shares moved down $0.57, or 4.57%, to $11.90 today giving up Friday's gains after the company announced its financial results and announced that CEO Stephen Light would be retiring as soon as a successor has been found. The turnaround CEO was initially hired to help the company relieve its enormous debt load, reverse the declining sales, return the company to profitability, and restore investor confidence - goals which were all since accomplished. However, the CEO was so instrumental in the success of the company that many investors are beginning to question how well the company will be able to perform without him.

Among these is Daniel Loeb's Third Point, the company's largest shareholder, who expressed their disappointment with Stephen Light's decision to leave the company in a Schedule 13D/A filing with the SEC. The hedge fund noted that they began accumulating their stake two years ago, based on their view of the fundamental strength of the company's target market and technology, and their personal confidence in the leadership of Stephen Light as CEO, based on his record of success in his previous career with much larger companies, as well as his keen analytical ability and communication skills.

Now that Light has left, Third Point believes that the company should be sold rather than continue operating independently under new leadership. Why? Well, the relatively small scale of the company's operations and its disproportionate amount of general and operating expenses (due to being a public company) means that a strategic buyer or private equity fund may be able to unlock far more value than is reflected in the current share price. Based on recent conversations Third Point had with industry participants and a financial adviser, they believe a sale could be transacted at a "significant premium". Whether this happens or not remains to be seen, however this is definitely a stock to keep an eye on over the next few months.

Related Companies
Robbins & Myers, Inc. (RBN)
MFRI, Inc. (MFRI)
Nordson Corporation (NDSN)