eSpeed Inc. (NDAQ:ESPD) shares moved up $0.19, or 2.07%, to $9.38 after WC Capital disclosed a 6.4% in the company and expressed their concerns about the company's valuation. The activist hedge fund said that their analysis has led them to believe that the range of the company theoretical valuation could be considerably higher than the current share price, which could result in a value 28% to 70% greater ($12 to $16 per share) than the current valuation of $9.40 per share. The move comes after another large shareholder, Chapman Capital, disclosed a 9.3% stake and made similar demands that the company immediately put itself up for sale. The problem facing both shareholders is the fact that 88% of the company's voting power is controlled by Mr. Lutnick and his affiliates due to a classified share structure in which Class B shares have 10 votes each.

Problems began in early 2004 when several investors began to recognize a significant divergence between the performance of the company's common stock and its publicly traded peers. Specifically, in 2004 the company stock plummeted 47% while that of its peers remained flat, and in 2005 the company's stock dropped 37% while its peers added 49%. Then in January of 2006 there was a glimmer of hope when The Daily Telegraph reported that Cantor Fitzgerald was preparing a stock market float of BGC Partners, its London-based brokerage business, in a move that was expected to lead to a merger with eSpeed, the Nasdaq-quoted broker also controlled by Cantor, to create a company worth between $500 million and $1 billion. However, this deal never materialized. Then, in a highly questionable December 2006 Form 4 filing with the SEC, Mr. Lutnick was granted, free of cost, 800,000 Class A common stock options - representing 3% of the company's outstanding shares! This upset many investors who feared the potential dilutive effects of the options. Finally, the last straw came in February of this year when the company issued a press release that disclosed its FY2007 financial outlook. Investors were outraged to find out that company projected nearly break-even operating performance due to approximately $152 million of non-GAAP operating revenues being consumed by $146 to $148 million of non-GAAP operating expenses, a level of spending which investors have thought unacceptable.

Now, WC has suggested that the board of directors immediately review several strategic alternatives for the company:

1. Sale of the company
2. Conversion of Class B shares to Class A shares
3. Return of capital to shareholders (one-time dividend/share repurchases)
4. Initiation of procedures and structures increasing eSpeed autonomy

Clearly there are changes that need to be made to this company and with two shareholders now expressing concerns, maybe the company will institute some changes. Regardless, this is definitely a stock worth watching!

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Tower Automotive Inc. (OTC:TWRAQ) received a $1 billion buyout offer from Cerberus Capital Management to take it out of Chapter 11 bankruptcy protection. The company would be the latest in a series of automotive takeovers by private equity, which have included Delphi and DaimlerChrysler. The term sheet submitted to the U.S. Bankruptcy Court indicated that the Cerberus offer would pay off all of the outstanding obligations to debtors, pay off Tower's pensions, and provide "certain recovery" for unsecured creditors. These unsecured creditors would get $10 million in cash under a reorganization plan while Cerberus would put aside another $2 million in a liquidating trust for the unsecured creditors. The process would also allow for competitive bids; however, the bidding procedures would be $10 million above Cerberus' initial offer and will raise in $5 million increments, which is somewhat high for a bankruptcy auction. Consequently, it is likely that the Cerberus offer will be the final offer, especially considering the fact that many of the other large private equity firms that would compete have already taken stakes in other automotive companies.

Meanwhile, the company's common stock shareholders pushed the OTC shares up nearly 100% on the news until it settled at $0.06. It is uncertain as to whether or not common stock shareholders will be able to partake in the $10 million set aside for unsecured creditors. Remember, unsecured creditors include not only common stock shareholders but also preferred stock shareholders, trade creditors, and many others. Currently, the OTC shares price the company's common stock value at $3.92 million, indicating an assumption that almost 40% of the $10 million payout will be distributed to common stock shareholders. Will this happen? While nothing is certain, it is unlikely that this much will be set aside since there are many other unsecured creditors that must be paid off. Regardless, this development is certainly worth following as private equity continues to aggressively take over the auto sector.

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Electro Scientific Industries Inc. (NDAQ:ESIO) shares moved up $0.49, or 2.58%, to $19.51 today after Nierenberg Investment Management disclosed an 11.7% stake in the company and expressed their impacience with ESIO as its share price weakens. The activist hedge fund contends that the company continues to depress its return on equity (ROE) by failing to make its excess cash work harder and smarter for its shareholders. Nierenberg has communicated these concerns with the company in the past along with Third Avenue Management - another activist hedge fund pushing for changes. However, despite these communications, little seems to be changing despite the company's January 22nd press release affirming their commitment to shareholder value. Consequently, Nierenberg made an ultimatum saying that time is running out and the time for action is now. If management does not make some immediate changes, it is likely that Nierenberg will pursue board seats in what could become a proxy fight for contorl of the company. Given their large stake and support by Third Avenue Management and other shareholders, it is likely that they would succeed in such a battle.

Just how much cash is ESIO carrying? Well, in addition to to its cash reported on the cash and marketable securities lines of the balance sheet, they also have $1 million from an insurance settlement and $7 million in a litigation bond in Taiwan, which increases cash per shares to $7.73. If ESIO were to restore inventories and receivables to June 3, 2006 levels, and if the above-mentioned $8 million in cash were added, ESIO's total cash and marketable securities would be $8.21 per share - or over 40% of ESIO's share price! ESIO is profitable, cash flow positive, and debt-free... so why has it dropped through 2006 from $25 per share to $19 per share? This is the issue that the hedge funds are trying to address.

What measures is Nierenberg looking for to unlock value? Well, the hedge fund advocates a "tangible and substantial" boost to ROE via a (at minimum) six million shares repurchase with a plan in place to repurchase at least one million more shares annual from free cash flow, asset monetization, and cash reserves. Nierenberg said in a past filing that given the combination of organic growth, increased R&D investment, a number of promising new product releases, and possible acquisitions could enable ESIO to double its revenues over the next three to four years. Management has shared this goal with the public on sevearl occasions. Moreover, given the company's business model, such growth would drive earnings per share north of $2.00, and, in their view, ESIO's share price to $40, more than double its currently depressed level. This makes ESIO a stock worth watching!

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Online advertising firm DoubleClick Inc. is reportedly exploring a sale and is already in talks with Microsoft Corporation (NDAQ:MSFT) among others. The firm hired Morgan Stanley to help it explore strategic alternatives, including a possible sale or initial public offering. The company is majority owned by private equity firm Hellman & Friedman who purchased the business in 2005 for approximately $1.1 billion. The hedge fund hopes to get at least $2 billion for the company as potential bidders including Microsoft, IAC/Interactive Corp, and others. The acquisition could help Microsoft boost its edge in the competitive online advertising market dominated by Google's (NDAQ:GOOG) Adsense and Adwords programs and Yahoo!'s (NDAQ:YHOO) Overture. And with Microsoft's vast amounts of cash onhand, it could represent a new threat to Google's dominance in the online advertising market. This makes the situation one worth watching!

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The Blackstone Group recently announced its intentions to go public in what is quickly becoming a private equity rush to the public markets. Blackstone, the largest private equity firm in the world, is planning to offer 10% of its shares to the public for $4 billion in a move that is sure to spark interest on Wall Street. Many investors like the idea of a Blackstone IPO since the company has proven to be a cash machine. Since 1987 the firm has averaged an impressive 23% annualized return with its real estate division returning closer to 29%! Meanwhile, Blackstone's assets have grown from $14 billion to $78 billion in less than six years - that is, they have multiplied their assets more than five times in six years. These are impressive numbers that have many investors eager to put money in the private equity giant.

Some investors are speculating that this move indicates that the market may be overvalued. After all, if the market wouldn't assign a high enough premium to their shares why would they IPO? What concerns investors is the ease in which private equity and hedge funds are able to raise cash. Investors who know the market is fully valued are apparently willing to give their money to these firms that in turn feed the M&A mania. Moreover, is there a problem with the credit markets? The recent subprime fiasco combined with the fact that the credit markets have grown five times as fast as the GDP for the entire 21st century so far is certainly cause for hesitation. And what happens when the debt markets grow less desirable and equity is required to get deals done? It's simple, returns will fall. This makes the idea of investing in Blackstone less desirable. However, at least in the short-term, we can be sure that there will be plenty of interest in the IPO. Whether this is a sign of something more remains to be seen. Combined, these factors make Blackstone a company worth watching!

ASM International NV (NDAQ:ASMI) shares rose $0.48, or 2.21%, to $22.23 after Fursa Alternative Strategies disclosed a 8.9% stake in the company and requested clearance to purchase additional shares of the company's common stock. The request was mandated since, combined with their current holdings, the hedge fund's ownership would exceed the $100 million Heart-Scott-Rodino form notification threshold. This is good news for shareholders, as any further buying in open market transactions clearly provides a boost for the share price. While this is no guarantee, it certainly makes ASMI a stock worth watching!

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Crude oil prices surged above $66 a barrel Thursday, driven to a new six-month high by concerns that strained relations between Iran and the West could put oil exports in jeopardy as U.S. gasoline supplies wane and demand swells. 

Dealing a significant blow to Sprint Nextel (NYSE:S), the government on Thursday awarded the largest-ever federal telecommunications contract, a 10-year deal worth up to $48 billion, to its rivals AT&T, Qwest Communications and Verizon. The three contract winners will split $525 million, but beyond that they will have to compete with each other for the business of dozens of federal agencies needing to enhance the quality and security of voice, video and data technologies, the General Services Administration announced.

Shares of Qwest (NYSE:Q) rose $0.10 to close at $8.95, near the top of its 52-week trading range of $6.12-$9.22.

Shares of AT&T (NYSE:T) advanced $0.22 to end at $39.17, also close to the top of its 52-week trading range of $24.72-$39.86.

Verizon's (NYSE:VZ) stock price added $0.34 to finish at $37.57, just off the peak of its 52-week trading range of $30.10-$38.95.

Sprint (NYSE:S) climbed $0.49 to close at $19, settling in the lower half of its 52-week trading range of $15.92-$26.89.

United States Steel Corp. (NYSE:X) plans to buy Lone Star Technologies Inc., a maker of welded pipe used in oil fields, in a $2.1 billion cash deal that will make it North America's largest producer of tubular steel. Under the terms of the deal, U.S. Steel will pay $67.50 per Lone Star share, a total of about $2.1 billion and a roughly 39% premium over Lone Star's closing share price of $48.45 on Tuesday on the NYSE. Shares of Lone Star climbed $17.56, or 36%, to close at $66.01 after rising to a 52-week high of $66.50. U.S. Steel shares rose $3.61 to close at $101.22 on the NYSE after also setting a new 52-week high of $101.59.

RF Micro Devices Inc. (NDAQ:RFMD), which makes radio frequency components, warned that weaker demand from a major customer would hurt its first-quarter results. Shares fell $0.76, or 10.8%, to $6.31.

Circuit board maker Multi-Fineline Electronix Inc. (NDAQ:MFLX) said its Q2 sales and profit could decline from the Q1. The stock fell $1.95, or 11.2%, to $15.55.

Red Hat Inc. (NYSE:RHT) posted a profit decline of 25% and failed to meet analyst expectations for revenue Thursday, compounding earlier fears that larger competitors may bully the budding Linux provider. Red Hat earned $01.5 per share in the quarter ending Feb. 28, up from $0.14 last year, matching estimates from analysts polled by Thomson Financial. For the full year, Red Hat earned $59.9 million, or $0.29 per share, compared with the $79.7 million, or $0.41 per share, it earned in the last fiscal year. In part, that was due to higher operating expenses, particularly in sales and marketing. While the company was able to add at least 10,000 new customers and saw its revenue jump 41% to $111.1 million during the Q4, it fell short of analyst predictions of $112.5 million.

The electronics retailer Circuit City (NYSE:CC) plans to lay off about 3,400 store workers and replace them with lower-paid employees. The company also plans to eliminate 130 information-technology jobs at the corporate level. Circuit City Stores Inc. had shares up $0.35 at $19.23.

Beazer Homes USA Inc. (NYSE:BHZ) is under investigation by a host of government agencies for its mortgage-lending practices as well as other financial dealings. The company said it is complying with a request for documents from a federal prosecutor. The company’s shares were down $2.64 to close at $28.77.

Archer Daniels Midland Co. (NYSE:ADM), a producer of corn-based ethanol and corn syrup for foods, saw its shares up $0.91 at $36.84. The company is expected to benefit should corn prices fall amid an expected bump in supply.

Vyyo Inc. (NDAQ:VYYO), the maker of communications equipment, received $35 million in funding from Goldman Sachs & Co. Shares rose $0.97 to end at $8.44.

Syntax-Brillian Corp.’s (NDAQ:BRLC) shares rose $0.48 to $8.41. The maker of high-definition televisions sold 2.1 million shares for $15.5 million in a private transaction with two affiliates. The company plans to use proceeds in part to expand its manufacturing base and to market its Olevia brand televisions worldwide.

AtheroGenics Inc. (NDAQ:AGIX) had a decline in its shares, down $0.44 at $2.80. Analysts predict AstraZeneca PLC will end a partnership with the drug developer.

American Depositary Shares of eTelecare Global Solutions Inc. climbed Wednesday in their trading debut on the Nasdaq Stock Market. Shares of the Philippines-based outsourcing company rose $1.63, or 12%, to close Wednesday at $15.13. The IPO offering was priced at $13.50 per ADS for the 5.5 million of U.S.-traded shares. The IPO price was at the midpoint of the expected price range of $12.50 per ADS to $14.50 per ADS.

Programmable chip maker Altera (NDAQ:ALTR) lost $0.89, or 4.3%, to $20.05 after a Bear Stearns analyst lowered his 2007 earnings estimates for the company, partly based on weak business in Asia Network Appliance, a provider of network-attached storage systems, shed $1.60, or 4.2%, to $36.42.

Video game publisher Activision Inc. (NDAQ:ATVI) rose $0.88, or 4.9%, to $19.01 on the heels of a solid Q4 and full-year report from No. 1 game retailer GameStop Inc. Activision hit a 52-week high of $19.19 during the session.

Advancis Pharmaceutical Corporation (NDAQ:AVNC) shares dropped $0.16, or 6.32%, to $2.37 today after the company announced fourth quarter net losses of 44 cents per share on total revenue of $1.2 million in an 8K filing with the SEC. This compares to the company's four analysts who expected the company to report a loss of 39 cents per share on revenue of $2.31 million. The losses come as the company has been facing increased problems with its PULSYS approvals, having received a "refusal to file" letter from the FDA for its once-daily Amoxicillin PULSYS NDA last month. According to the company's CEO Edward Rudnic, "We achieved clinical and operational progress during 2006, and we look forward to continuing the advancement of our Amoxicillin PULSYS product following our NDA resubmission last week. However, as we look forward into 2007, completing a financing and providing necessary capital to fund our business is a primary focus."

Advancis also announced that it had authorized the company to evaluate various strategic alternatives to further enhance shareholder value. The company has since retained an investment bank focused on the life sciences industry to assist in the evaluation of a full range of strategic alternatives available to the company. These could include a possible sale of the company, execution of its existing strategies, partnering or other collaboration agreements, or a merger or other strategic transaction. Further, the company's policy is to not disclose and developments with respect to this process unless and until the evaluation of strategic alternatives has been completed. Given the company's difficulties obtaining financing and FDA approvals, the company may be forced to engage in some type of strategic transaction in order to finance their ongoing research. This is definitely a stock to watch as the company works to explore alternatives and get its products approved.

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Circuit City Stores, Inc. (NYSE:CC) shares moved up $0.59, or 3.13%, to $19.47 in early trading today after the company announced a broad restructuring plan to better position itself against rival Best Buy Co., Inc. (NYSE:BBY). The company said it would be dismissing about 3,400 store associates being paid well above the market-based salary range for their role and hire new employees that would be compensated at the current market range for the job. Circuit City also announced that its board authorized management to explore a possible sale of its InterTAN unit, which operates about 900 retail stores and dealer outlets in Canada. The company first purchased InterTAN in 2004 for about $284 million. Finally, the company said it will also outsource its information-technology infrastructure to International Business Machines Corp. (NYSE:IBM) in a move to cut about 16% of its IT expenses over the life of the seven-year contract.

The restructuring follows an unexpected loss of $16 million, or nine cents per share, incurred during the quarter ended November 30th. The loss was down from a year-earlier profit of $10.1 million, or six cents per share, and came as a result of a price war over flat-panel television sets. The company has already announced plans to close some stores and restructure its merchandising teams to improve financial performance; however, it believes that these new efforts will greatly enhance margins. However, the company is likely to record a pretax expense of about $144 million, including goodwill impairment, store closing and other restructuring costs. Clearly, Circuit City is in need of some restructuring efforts to improve its financials and clearly substantial reductions in employee compensation and IT expenses will contribute directly to the company's bottom line. Meanwhile, a sale of the InterTAN unit would provide the company with some spare cash to get the process rolling without substantially reducing earnings in the short-term. Overall, this is definitely a great stock to watch as they go through the restructuring process.

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