KB Home (NYSE:KBH) shares moved up marginally on the day after the company filed its 8-K with the SEC. The document provided some additional information into just how hard these companies were hit with the subprime mortgage collapse. KB Home said that their first quarter results reflected a sharp downturn in the housing market that began in 2006 and that continues to pressure the sales and profit margins of domestic homebuilders. The company continued saying that their revenues and margins were being pressured by intense competition and pricing pressure among homebuilders and other participants in the marketplace. Moreover, they expect these conditions to continue through at least the remainder of 2007 adding that it would be hard to predict when the housing market will stabilize. Finally, commenting on the subprime collapse, the company noted that these recent problems in the subprime mortgage market combined with tightening credit requirements (now being discussed by lawmakers) could exacerbate the already-difficult conditions in the homebuilding industry. During a conference call, the company noted that about 13% of their mortgaes for the company's homes were financed with subprime loans. Meanwhile, the major concern is that many of the markets have a large overhang of resell inventory that hasn't cleared the market - these supply/demand issues have yet to be sorted out.

Federal regulators are just now cracking down on who's to blame for the subprime mess. Many people insist that while Federal regulators have tightened standards for making loans to subprime borrowers, standards still decline and the volume of loans has surged. Perhaps the main reason for this is the fact that approximately 52% of subprime mortgages originated from companies with no federal supervision - that is mortgage brokers and stand-alone finance companies. An additional 25% were made by finance companies that are units of bank holding companies, which are indirectly supervised by the Federal Reserve. In fact, only 23% of all subprime mortgages fall directly under Federal regulatory control.

Fed Reserve Governor Susan Bies told the Wall Street Journal, "What is really frustrating about this is [federal regulators] don't have enforcement authority to do anything with these state-licensed, stand-alone mortgage lenders." Meanwhile, industry supporters say that the system is working perfectly. Doug Duncan from the Mortgage Bankers Association commented, "Market discipline in this industry is swift, can be severe, and is more effective in changing lending practices than any potential changes in regulation." So, while this situation unfolds we'll have to wait and see exactly how subprime mortgage volume adjusts itself. But in the meantime, it appears as if housing companies will continue to suffer in the aftermath of these defaults.

Related Companies
Centex corporation (CTX)
D.R. horton, Inc. (DHI)
Pulte homes, Inc. (PHM)

Warwick Valley Telephone Company (NDAQ:WWVY) shares moved up $0.39, or 2.41%, to $16.59 in early trading today after Santa Monica Partners demanded that the company immediately put itself up for sale in a letter to the company's board of directors. The 2.4% shareholder had sent letters to the company in the past recommending a similar course of action since the company clearly cannot compete with other well-funded cable and internet competitors with enormous economies of scale. Meanwhile, the company's senior management have all resigned along with certain board members while more than 20% of its employees have been laid off. Compounding the problem is today's late K-1 filing which further highlights the company's declining margins as losses continue to mount. Not only is there no plan in place to turn the company around, but only interim management available to implement any such plans.

The hedge fund then points out why a sale may be in the best interest of shareholders. Hector Communications, one of the company's competitors, recognized the competitive threat it faced and decided to put itself up for sale in November 2006. The company ended up being sold for $36.40 in cash, a gain of 160% from the $14 per share level at which the company's stock was trading at in November 2003. Surely a sale at a premium like this would be preferrable to the steady decline we've been seeing at Warwick for several years now. Santa Monica then urged the board of directors to remember its fudiciary duty to shareholders, even though they personally do not have much at stake in the company. If the board of directors decides to consider the possibility of a sale, it could mean significant share appreciation for investors - this makes WWVY a stock worth watching!

Related Companies
Verizon Communications Inc. (VZ)
Sprint Nextel Corporation (S)
Citizens Communications (CZN)

Private equity giant Blackstone Group filed for a $4 billion IPO that would put a provide the company with new sources of permanent capital. While the firm hasn't yet disclosed ow many shares will become available or provide an estimated price range, they did say that public shareholders would have limited voting rights and will not elect the general partner or its directors. The hedge fund would be the second hedge fund ever to go through with an initial public offering.

Avery Dennison Corp (AVY) signed a definitive merger agreementw tith label and tag company Paxar Corp (PXR) for $30.50 per share in a transaction worth about $1.34 billion.

Bed Bath & Beyond Inc. (BBBY) acquired the privately held retailer buybuy BABY for about $67 million, net cash acquired, and repayment of debt of about $19 million. The company said that the acquisition allows it to provide merchandise to expectant parents and their friends, who are part of its current consumer base.

Activision Inc. (ATVI) said it has signed a multi-year agreement granting the company exclusive worldwide rights to develop and distribute video games on all platforms based on Live Nation's (LYV) Monster Jam Series. While financial terms of the deal were not disclosed, the first game in the series is expected to be available at retail stores this holiday season.

Capital City Bank Group Inc. (CCBG) said it has approved an additional buyback of up to 1 million shares.

IHS Inc. (IHS) said an existing shareholder has begun a secordary offering of 3.75 million shares; however, the company said it would not receive any proceeds from the offering.

Sauer-Danfoss Inc. (SHS) said it would be raising its quarterly dividend by 13% to 18 cents a share. The new dividend is payable to shareholders on record by April 2nd.

Pozen Inc. (POZN) said its amended reponse to an approvable letter for its migraine treatment Trexima has been accepted for review by the FDA. Pozen also said that the FDA notified the company that it expects a Class II review, which could result in a new deciison date of August 1, 2007. If approved, the drug could be available as soon as the second half of 2007.

Embarcadero Technologies Inc. (NDAQ:EMBT) founds itself in the cross hairs of Chapman Capital once again today as Robert Chapman demanded that Director Gary Haroian immediately resign from the company's board of directors. "Mr. Haroian has been compensated into the hundreds of thousands of dollars while acting out the part of a 'career director' on the boards of Embarcadero, Aspen Technology, Inc., Lightbridge, Inc., Network Engines, Inc., and Phase Forward Inc.," said Chapman in a press release. "In order to reinstate any semblance of obeying his responsibility to the owners of these public companies, Mr. Haroian should resign from whichever boards necessary to allow for his adequate attention and focus on the remaining issuers."

Chapman went on to say: "Public company directors hiding shamelessly and disingenuously behind a convenient but ignorant interpretation of Regulation Fair Disclosure, in order to shirk their fiduciary duties of due care and loyalty, are a plague being visited upon Wall Street. Instead of committing the time and effort to understand issuers' operations, financial condition, strategic positioning and management performance, these expensive substitutes for true corporate governors attempt to obfuscate their parasitic ineptitude behind the facade of Reg. FD compliance. There exists no section, guideline or other language within Reg. FD that restricts the discussion of material, public or immaterial, non-public information between public company directors and owners. At the risk of stating the obvious, the fact that public information being targeted for discussion had been disclosed previously makes Mr. Haroian's pretext for 'owner avoidance' patently absurd."

These harsh words come only days after the acitivist hedge fund demanded that Embarcadero immediately put itself up for sale. Further, Chapman said he would seek nominees to replace Class I directors Timothy C.K. Chou and Frank M. Polestra, and Class II directors Michael J. Roberts and Samuel T. Spadafora, should a sale of Embarcadero not be announced by March 30, 2007. This is a great stock to keep an eye on in the event that management folds to the pressure; after all, while proxy fights are rarely won by hedge funds, most companies bend under the pressure and institute at least a compromise.

Related Companies
Quest Software, Inc. (QSFT)
Borland Software Corp. (BORL)
Informatica Corporation (INFA)

Feldman Mall Properties, Inc. (NYSE:FMP) was contacted by Mercury Real Estate Advisors LLC again on Tuesday after it failed to respond to their initial demands made on January 30, 2007. The activist hedge fund demanded once more, in a Schedule 13D/A filing with the SEC, that the company immediately hire an investment banker to explore strategic alternatives given the company's steep discount to liquidation value and several interested third parties. Further, Mercury notes that the continued pattern of delays in SEC filings, downward adjustments in reported FFO by 16.6%, and a reduction of earnings guidance by approximately 40% is extremely troubling. The hedge fund also added several other factors to its growing list of reasons the company should be sold:

1. The corporation has failed to match returns reflected by certain industry benchmarks. Since going public on December 15, 2004, the corporation has posted a total return of negative 4.79%. The MSCI US REIT Index has achieved a total return of positive 55.77% over this same period. This reflects substantial underperformance of 60.53%.
2. The corporation lacks the sufficient size required to operate as a public company. In our view, shareholders’ equity is being wasted on general and administrative expenses that are not commensurate with the size of the company. General and administrative expenses at the corporation totaled 13.6% of revenues during fiscal 2005 while the ratio of G&A to revenues in the Corporation’s Peer Group average 4.3%.
3. The corporation has suffered a series of earnings misses and downward revisions to guidance. The first downward revision of guidance came in November 2005 with regards to third quarter 2005 results. The corporation lowered FFO/share guidance 17% from a range of $0.28-$0.30 to $0.23-$0.25. Fourth quarter 2005 FFO/share guidance was also lowered from a range of $0.25-$0.27 to $0.17-$0.18. This is a 32% decrease from the guidance that was offered just a few months prior. In our view, management has lost credibility with investors as a result of being overly optimistic and not realistic on a number of occasions.
4. The corporation is an attractive acquisition candidate for a national or regional mall owner/operator. While we believe that the corporation is too small to generate economies of scale with its widely dispersed portfolio, several of the national or regional owner/operators could achieve operating synergies through an acquisition of the corporation. Further, we believe the corporation is trading at a significant discount to its intrinsic or liquidation value.
5. The company failed to file in a timely manner periodic reports required by the SEC, including its current Form 10-K, 2004 10-K, and various quarterly reports throughout 2005. Moreover, the company was forced to reschedule conference calls as a result of their inability to file on time.
6. The company revised its earnings lower several times throughout 2005 and 2006 resulting in a total reduction over six months of over 40%! Moreover, in 2006, it revised its FFO from A4 2005 lower by over 16%! Since the company hasn't filed its current financials, who knows if this is a trend that will continue through 2006 and 2007.

Mercury said that it had received numerous inquiries from well known and established, national and regional mall owners and operations interested in exploring a purchase of the company and its assets. The hedge fund insists that the board should not continue to let the opinion of its seemingly conflicted chairman, Larry Feldman, determine the right course of action for achieving and maximizing shareholder value. Rather, the board should act immediately and hire an investment banker to explore strategic alternatives. Finally, Mercury said that it would call the company later this week to schedule a time to discuss this matter in person - a move that will hopefully spark some actual response from management. This makes FMP a stock worth watching!

Related Companies
Glimcher Realty Trust (GRT)
Cedar Shopping Centers Inc. (CDR)
General Growth Properties (GGP)

Acme Communications Inc. (ACME) reported a fourth-quarter net loss of $1.63 million, or 10 cents a share, compared with $5.64 million, or 13 cents a share, one year-ago period. The company expects first quarter 2007 revenue for its continuing television stations to decrease in the low single digits quarter over quarter.

Affiliated Computer Services (ACS) confirmed it has received a $59.25 per share offer from Chairman Darwin Deason and Cerberus Capital Management L.P. to take the company private. The deal would be worth over $8 billion, including the assumption of ACS debt. The company said that a special committee of independent directors has been formed to evaluate strategic alternatives, including the proposal from Deason and Cerberus, and will reach a decision in due course.

Chubb Corp.'s (CB) board increased the share buyback program by 20 million shares. The company said the purchases may be made in the open market or in privately negotiated transactions.

The Job Network LLC, owned by Lee Enterprises (LEE), entered into a strategic partnership with Yahoo Inc.'s (YHOO) HotJobs unit. Financial terms weren't disclosed, but the partnership will allow the Job Network's members to post employment ads on the HotJobs website.

Ligand Pharmaceuticals Inc. (LGND) said that it plans to pay a dividend of approximately $253 million, or $2.50 a share, on April 19 to shareholders of record April 5. Ligand's board also authorized up to $100 million in share repurchases over the next 12 months.

Wells Fargo & Co. (WFC) said it has authorized a stock buyback of up to 75 million shares of its roughly 3.4 billion shares outstanding. Wells Fargo shares rose 2.5% to close at $35.48 on the news.

eBay Inc. (EBAY) shares added 2.1% today after its PayPal unit said it has 35 million accounts in Europe. According to analysts at Forrester Research, nearly a quarter of all European online shoppers use PayPal.

Google Inc. (GOOG) shares gained 2.5% after the company said a small number of advertisers are now testing out a new payment scheme it's calling "pay-per-action." The new model would allow advertisers to only pay publishers if the visitors completed an action - such as fill out a form or request promotional materials.

Palm Inc. (NDAQ:PALM) shares moved up $0.73, or 4.02%, to $18.87 today after Unstrung.com said that a Palm buyout could be finalized by Thursday of this week, citing sources close to the situation. The popular technology news source said that Nokia was the leading vendor bidder with Palms' management said to be the preferred private equity buyer. The deal reportedly includes bids from two private equity firms, two vender companies, and would top $20 per share. Many are also quick to note that Motorola may attempt to block any bids from Nokia in an effort to increase their pricing power with Palm's successful Treo line and quiet Carl Icahn who recently complained that Motorola was not utilizing its cash. Finally, a Motorola buyout would also block Nokia from taking control of the enterprise market. So, while we do not have sure bids yet, it is almost certain that PALM will be bought out by someone in the very near future - the question just remains by whom and for how much?

Related Companies
Research In Motion Limited (RIMM)
Apple, Inc. (AAPL)
Dell Inc. (DELL)

Magic Software Enterprises Ltd. (NDAQ:MGIC) shares jumped 1.25% in early trading after the company announced that it has appointed Eitan Naor as its new President and CEO. Mr. Naor is an experienced turnaround CEO that previously assisted ECtel (NDAQ:ECTX) in its restructuring efforts. ECtel is a small cap telecom fraud prevention and revenue assurance company that fell dramatically between 2002 and 2004. Under his leadership, ECtel turned itself around and experienced nine consecutive quarters of revenue growth and improved financials while the stock priced soared from a low of around $2 per share to a high around $5 per share.

Magic Software is another small cap company that announced a major restructuring plan in the fourth quarter of 2006. Since then, the company has returned to profitability and now hopes that the Mr. Naor can help the company increase its profitability and make a complete turnaround. Given Mr. Naor's success at ECtel, MGIC may be a stock to keep an eye on as they continue forward with their plans.

Related Companies
Oracle Corporation (ORCL)
Compuware Corporation (CPWR)
Borland Software Corp. (BORL)

Lancaster Colony Corp. (NDAQ:LANC) shares moved up marginally after Barington Capital  disclosed an 5.2% stake in the company and expressed their concerns about the company's share price performance in a Schedule 13D filing with the SEC. Specifically, the hedge fund and its partners believe that the company should implement a number of measures to improve its profitability and share price performance, including:

1. The divesture of the company's Automotive, Glassware and Candles segments.
2. A reduction in corporate level expenses resulting from Lancaster's holding-company structure.
3. The implementation of several initiatives to return the Specialty Foods segment to historical levels of profitability with an operating income margin of at least 20%.
4. A debt-financed self-tender offer to repurchase at least $300 million of the company's outstanding common stock.

Barington noted that they have had discussions with members of the company's management team with respect to some of these measures which they believe will significantly improve shareholder value. The group now seeks to discuss these measures in further detail with the company's management team and independent members of the company's board of directors. If any of the above measures are implemented it could mean substantial upside for the company's shareholders. Specifically, a spin-off or sale of any or all of the above-mentioned divisions would provide the company with additional cash and (in the event of a spin-off) opportunities for shareholders to profit in a new issue. Meanwhile, a restructuring could save the company a lot of money which would provide a visible boost to the company's earnings. And finally, a $300 million share repurchase would represent about 20% of the company's outstanding shares - a substantial number by any measure. Combined, these factors make LANC a stock worth watching over the next few months!

Related Companies
H.J. Heinz Company (HNZ)
Libbey Inc. (LBY)
Campbell Soup Company (CPB)

Business software maker Oracle Corp. (NDAQ:ORCL) posted quarterly profit and revenue on Tuesday that topped Wall Street forecasts as new software license sales rose. Oracle's fiscal Q3 net profit rose to $1.03 billion, or $0.20 per share, from $765 million, or $0.14 per share, a year ago.  Revenue rose to $4.4 billion from $3.47 billion as Oracle sold more software that helps companies manage everything from accounting to human resources to inventory management. New license revenue rose to $1.39 billion from $1.1 billion in the Q3 ended February 28. Sales of new software applications, including acquisitions, rose 57% while new database and middleware software license sales increased 17%. Oracle shares rose more than 4% to $18.28 in extended trade from a Nasdaq close of $17.55.

The chairman and chief executive of struggling movie-rental company Blockbuster Inc. (NYSE:BBI) got the company's board to give him a slightly bigger bonus for 2006, but not without agreeing to give up his job. John Antioco, who has been the CEO for nearly a decade, will leave the company by the end of the year, Blockbuster announced Tuesday. Shares closed down $0.25, or 3.5%, to $6.86 in trading on the NYSE, then lost another $0.06 in after-hours trading. When he leaves, Antioco will recieve a lump sum payment of $5 million, considerably less than the $13.5 million he would have been entitled to receive if he had been terminated without cause or had resigned for good reason at year's end.

An investment group that includes the founder and chairman of Affiliated Computer Services (NYSE:ACS) is offering $5.93 billion in cash to take the information technology services company private. Affiliated Computer Services Inc. Chairman Darwin Deason said Tuesday he has teamed with investment partner Cerberus Capital Management to make the $59.25 per share bid. That represents a 15.5% premium to ACS's closing price Monday of $51.29 on the NYSE. ACS shares rose above the offered price Tuesday, climbing $8.69, or 17%, to close at $59.98 on the NYSE. They have traded in a 52-week range of $46.50 to $63.61.

Adobe Systems Inc. (NDAQ:ADBE) reported flat Q1 sales but easily exceeded Wall Street expectations with a 37% surge in profit, prompting bullish executives to raise guidance Tuesday as the software company prepares its biggest-ever product launch. Net income for the three months ended March 2 was $143.9 million, or $0.24 a share, up from $105.1 million, or $0.17 a share, in the same quarter of last year. Adobe said it expects to earn $0.23 to $0.26 per share on revenue of $700 million to $740 million in the second quarter. The San Jose-based company, which employs 6,100 people and makes graphic design, publishing and imaging software, reaffirmed its annual revenue growth target of 15%.

The printing for the final Harry Potter book will not only be the biggest, but also the greenest. Scholastic Inc. (NDAQ:SCHL) announced Tuesday that it had agreed with the Rainforest Alliance, a conservation organization that works with the business community, on tightened environmental standards for "Harry Potter and the Deathly Hallows," coming out July 21 with a first printing of 12 million.The paper used to write the 784-page book will contain a minimum of 30% post-consumer waste (pcw) fiber. A "deluxe" edition of the new book, which has a first printing of 100,000, will be printed on paper that contains 100% post-consumer waste fiber. Scholastic would not say at the time how much recycled paper it used, but said it did not use paper from ancient or endangered forests on the other HP books. Sales, apparently, were not affected: "Half-Blood Prince" sold 6.9 million copies in the first 24 hours.

Capital One Financial Corp. (NYSE:COF) Chairman and Chief Executive Richard Fairbank received compensation the company valued at more than $18.1 million in 2006, almost all of it in options awards and roughly the same amount as the past two years, according to a regulatory filing made Tuesday. Fairbank, 56, received options awards with an estimated value of $18 million at the time they were granted, but did not receive a salary, a bonus or any other cash and equity-based incentives. In November 2005, Capital One bought New Orleans-based Hibernia Corp., which had branches in Texas and Louisiana, for $4.9 billion. In December, the company completed its $13.2 billion acquisition of North Fork, which operates banks in New York, New Jersey and Connecticut. The deals, which make Capital One the 11th-largest bank in the U.S. by deposits, drew mixed responses from Wall Street. The stock was flat for the first half of 2006, then plunged in the summer because of credit concerns, especially in the United Kingdom. Shares in Capital One closed up 57 cents, or 0.75 percent, at $76.21 on the NYSE. In the past year, the company's shares have traded in a range of $69.30 to $87.50.

Wal-Mart Stores Inc. (NYSE:WMT) claims that with "plenty of room" to grow in Canada, it is on track to open 29 discount and supercenter stores in the country this year.

Claire's Stores (NYSE:CLE) became the latest US retailer to go private as it accepted a $3.1 billion takeover from Apollo Management, the US buy-out group run by Leon Black. The deal caps an auction for the Florida-based jewellery and female accessories store chain that lasted about three months and included Apax Partners, the British private equity group, in the final round. Private equity groups have found fertile ground for investments in all corners US retailing, from luxury department stores to discount chains and specialty stores.