Alltel Corporation (NYSE:AT) is reportedly seeking a buyer but may experience some difficulty, according to reports from the Wall Street Journal. The WSJ reported that Alltel had already approached AT&T, Verizon Communications, and Sprint-Nextel regarding a possible sale of the company. However, a potential deal-breaker lies in the company's high market valuation, which currently stands at around $22 billion. Some analysts think this number could get as high as $30 billion in the event of a buyout, which could be too much for any one buyer to pay. If the buyout efforts fail, many investors believe that the company's shares could trend towards a lower valuation.

What makes Alltel a potential buyout target? While the company only has about a fifth of the customers of AT&T and Verizon, they do operate the nation's largest wireless network geographically. As a result, the company has many "roaming" agreements that allow customers from larger carriers to roam beyond their coverage areas without incurring large roaming fees. As a result, if AT&T decides to pursue an Alltel deal it could spur a competition with Verizon, who would likely seek to prevent a deal. Why? Well, if AT&T purchased Alltel it would jeopardize the roaming agreements that Verizon has in place. This makes AT a stock worth keeping an eye on over the next couple of months.

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PDL BioPharma, Inc. (NDAQ:PDLI) shares moved up $0.73, or 4%, to $18.99 after Daniel Loeb's Third Point disclosed a 7.5% stake in the company and expressed disappointment and concern over the company's high rate of spending and significant underperformance. The Schedule 13D filing contained a letter urging the company to cut costs and not pursue additional acquisitions. Daniel Loeb also offered to work with the company to streamline the company's cost structure and asset base in an effort to allow the cash generating ability and value of the company to be developed and made apparent to shareholders.

Here's a sampling of what Daniel Loeb wrote in his lengthy letter to management:

We believe that the significant value inherent in the Company's product line, royalty revenues and R&D pipeline has been obscured by excessive overhead and apparently undisciplined research spending. We at Third Point have had substantial experience working strategically with healthcare companies to enhance value and we would welcome the opportunity to share our views and work constructively with you to help put the Company on the right track. We believe that, with our timely input, the Company should be able to reverse its significant underperformance.

I am certain that you and the Board share our consternation that since January 1, 2004, the Company's share price has remained flat versus a 50% increase in the biotech index (BTK). This is particularly troubling given that the Company has received approximately $400M of royalty revenues over this time period, largely attributable to several of biotech's fastest-growing products, including Genentech's Avastin and Herceptin. By comparison, Genentech shares have doubled over this time period.

Underlying our approach is our strongly held belief that PDLI's shares are significantly undervalued due to the market's worry that the Company is squandering valuable cash flow on undisciplined R&D spending as well as its concern that the Company will make another acquisition. We estimate that between now and the end of 2014, PDLI will generate close to $2.2B in revenues from its royalty stream. Discounting this back at the current cost of capital, we calculate that this revenue stream is worth $1.8B today, just slightly below PDLI's current market capitalization. In addition to these royalties, specialty pharmaceutical revenues should approximate $200M in 2007 and the Company has other valuable assets: an exciting, albeit slowly-progressing, product pipeline; undisclosed royalties that extend beyond 2014; approximately $430M in net operating loss carry-forwards; real estate and other assets that can be monetized; and a valuable antibody technology platform that should continue to generate new compounds over time ... Our preliminary analysis shows that PDLI should, with some cost-cutting, be able to earn $1.00 per share in 2008 and to increase that to $1.50 per share in 2009.

Many other investors have also expressed concern, recently recommending that the company put itself up for sale. This led to the company's implementation of a poison pill, preventing any hostile takeover of the company. Daniel Loeb said he understood the rationale behind the poison pill and reassured the company that he was not interested in pursuing a sale, but rather helping the company turn itself around through internal improvements. Third Point has a rich history of actively unlocking value in many of its investments, so this move makes PDLI a stock worth watching!

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New Century Financial Corporation (NYSE:NEW) shares moved down $8.26, or 56.38%, to $6.39 today after several analysts agreed that the nation's largest subprime mortgage lender would likely face liquidation or bankruptcy. The troubled company had already been experiencing a large increase in subprime defaults when it announced late Friday in a 12b-25 filing that it is technically in default with several lenders and that federal regulators have begun an investigation. While the company said it received waivers from six out of the eleven lenders, deals remain uncertain with others. Meanwhile, the company disclosed that the U.S. Attorney's Office was conducting a federal criminal inquiry into trading of NEW securities as well as accounting errors. Finally, the company revealed that it would be unable to file its 10-K annual report by the March 1, 2007 deadline because it needed to correct errors that it discovered relating to the financial reporting of loan repurchase losses.

Many analysts now believe that the company will likely face liquidation or bankruptcy. Consequently, investors must now attempt to evaluate how much they would receive in the event of a liquidation or bankruptcy. It is important to remember that common stock shareholders are at the end of the bankruptcy line; all lenders and preferred stock shareholders must be paid off in full before anything is distributed to common stock shareholders. Moreover, the company's primary assets are mortgage securities, which are notoriously difficult to value - especially with no guidance from the company. Despite this difficulty, some analysts have created an estimate. Bear Stearns analysts believe that the liquidation value should be close to $8 to $9 per share, down from their previous forecast of $10 to $11 per share.

Many traders are also watchful of the high short interest in the stock. When someone short sells a stock, they are essentially borrowing shares that they must buyback at a later time. Therefore, when there is a high short interest and the stock jumps up in value (generating a loss for those short selling) some are tempted to buyback their shares. This buyback adds even more steam to the bullish rally, potentially causing even more short sellers to cut their losses and buyback shares. This is known as a "short squeeze" among traders, and some consider it a possibility in this scenario.

Regardless, this is certainly a stock to watch. There are clearly problems with the company that carry a lot of risk; however, there may turn out to be opportunities to buy based on liquidation value and/or a potential short squeeze. While there isn't enough information to do anything but speculate now, there will be much more information available when the company is able to file their 10-K annual report with the SEC later next month.

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