Adaptec Inc. (NDAQ:ADPT) is a struggling technology company that designs, manufactures and markets storage products and software. The company recently reported weak financials, including a 28% decline in year-over-year revenues and a bleak outlook for 2008. So, why is this company one worth a second look for investors?

The first thing worth noting about Adaptec is their cash stockpile. The company currently has approximately $572 million in cash, which amounts to $4.81 per share. Compare that to a stock price of $3.71 and it is easy to see why the cash is appealing! The problem is that the company has embarked on an acquisition-driven strategy that could burn through this cashpile. Luckily, there is an activist hedge fund that is hoping to prevent this from happening and unlock value for shareholders!

Late last month, Steel Partners disclosed a 12.7% stake in the company and demanded representation on the Board of Directors. The activist hedge fund conveyed its disappointment in the company's recent performance and insisted that the company's acquisition-driven strategy was illconceived. Steel Partners also threatened to nominate an entire slate of new directors at the 2007 annual meeting if they are not granted representation. Given Steel Partners' successful track record with activist investing, this is definitely good news for shareholders!

The final thing that Adaptec has going for it are it's restructuring efforts and net operating loss carryforwards. The company has been embarking on efforts to reduce its costs for the past several years. Recently, these efforts have resulted in the company's first net savings of $9 million beginning in the second quarter of 2007. These reductions in spending help preserve the cash stockpile that represent the real value in this investment. Also, thanks to the company's previous spending, they have built up significant net operating losses that can be carried forward to offset future tax on gains!

Overall, these factors make ADPT a stock worth watching closely over the next few months as Steel Partners works to unlock value!

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Sunrise Senior Living (NYSE:SRZ) management faced some harsh criticism from Millenium Partners today after the hedge fund disclosed a 2.5% stake in the company and a critical letter to the Board of Directors. The activist hedge fund demanded that the company either eliminate the current management team or immediately put the company up for sale.

Millenium Partners began their letter by stating that the current management does not belong as a participant in the public securities market. Accordingly, they petitioned the Board of Directors to take one of three actions: (1) sell or merge the company either in a public transaction or a going private transaction; (2) restructure the company in a transformative way so that its different elements - primarily real estate development and ownership on one hand and healthcare facility operation on the other - can be more readily appreciated and valued by the market or; (3) recruit new management that is more professionally compotent at successfully managing a public company.

The biggest problem facing these shareholders are the various defensive measures that the company has in place. These poison pills may have been useful in the past when the company was small, it now just impedes investors from forcing value-creating options for shareholders. But if Millenium Partners is successful, it could mean significant share appreciation for shareholders. So far the company has yet to respond, but this company is definitely one worth watching in the meantime.

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Ryerson (NYSE:RYI) may finally be forced to face the music today after 9.6% holder Harbinger Capital Management announced that they would be suing the company for failing to hold its annual meeting. The activist hedge fund had recently announced its own slate of directors when the company suddenly cancelled their annual meeting to "review strategic alternatives". Many shareholders are hoping that they can finally rid the company of poor management and unlock shareholder value.

This fight between Ryerson management and shareholders is nothing new. Harbinger and other investors have been unhappy with Ryerson's performance for some time and have been trying to change management or perhaps find a private equity buyer willing to pay a premium for the company. Ryerson management - realizing that they were in danger - have delayed their annual meeting as long as possible while searching for a buyer that would keep the current management in tact. This has proven to be quite the challenge, however, as the company has not yet found a buyer agreeing to such terms!

Now, Harbinger is trying to finally force a day of reckoning for management. Deleware law states that companies must hold their annual meeting no later than 13 months after their last. While there are few exceptions, Harbinger announced today that it is suing in hopes that they can force an annual meeting within the next 45 days. The company's Chief Financial Officer said that they are aware of the lawsuit and are consulting with their lawyers. Whether or not we will finally see an annual meeting remains to be seen, but this is definitely a situation to keep an eye on in the meantime!

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Midwest Airlines (AMEX:MEH) shares continue to trade near their 52-week highs despite an earnings warning as AirTran Holdings (NYSE:AAI) renewed its fight to force Midwest into merger talks. Shareholders are now beginning to seriously question whether or not the Wisconsin-based carrier can perform on its own or whether it would be better off merging with Airtrans.

Midwest executives have entrenched themselves with strong poison pill provisions that have prevented any possibility of a merger despite AirTran's 59% stake in the company. AirTran has already announced the nomination of three candidates to Midwest's Board of Directors and many industry analysts believe that they will successfully overtake the company.

The news also comes among many difficulties facing the airline industry. Midwest recently issued an earnings warning that hinted towards a decline in not only the company's quarterly earnings but also their yearly earnings amid weaker fares that "may continue for some time". Meanwhile, AirTran also faced an analyst downgrade after weaker company and industry financials.

So, what does this mean for shareholders? Well, clearly the airline industry is having issues that may not be resolved for some time. This makes the idea of a buyout sound rather favorable. The current deal would put AirTran's current offer of $389 million at around $15.89 per share - a 9.5% premium to today's stock price. The real value, however, would be seen if many shareholders rejected the offer and AirTran was forced to sweeten it. Unfortunately, given the negative earnings warning and AirTran's large holdings this may no longer be a likely situation. Regardless, this is definitely a stock worth watching!

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Ceridian Corporation's (NYSE:CEN) selling price may not be enough to satisfy one of Wall Street's best hedge funds. Bill Ackman's Pershing Square voiced its opposition to the bid today calling it low and suboptimal for Ceridian shareholders. The activist hedge fund also said it has hired financial and legal advisors as it intends to pursue one or more value-maximizing alternatives.

Ackman's hedge fund had been pushing for the company to either sell itself or divest its Comdata division for many months and recently went hostile a proxy contest. To avoid problems, the company quickly found a consortium of buyers willing to purchase the company for $36 per share. The activist hedge fund believes that this was an illsuited response to their proxy contest and that the price is simply too low.

Consequently, Pershing Square recommended a series of alternatives aimed at increasing shareholder value even if it does't equate to a direct sale of the company. First, Ackman suggested that the company continue to shop itself in an attempt to get a higher price. Secondly, he recommended that the company simply spin-off its Comdata unit. And if all else failed, he recommended that the company consider a recapitalization, dividend or self-tender transaction where significant value could be returned to shareholders.

So, what does this all mean for shareholders? Well, the worst case scenario is a sale of the company at $36 per share. Ceridian may have standstill orders on the table that it could consider at higher prices. Also, if the company took one of the other alternatives available to it, including a spin-off of Comdata or a recapitalization/dividend/buyback, significant long-term value could be unlocked for shareholders. A spin-off would also create great opportunities for investment in the new entity. Combined, these are all reasons why CEN is a stock worth following while this situation unfolds!

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Investment Technology Group (NYSE:ITG) shares moved up $2.86, or 7.25%, to $42.30 after D.E. Shaw disclosed a 6.2% stake in the company and urged the board to explore strategic alternatives for some or all of its operating segments. Shareholders are betting that any sale of the company would result in a substantial premium to the current market price.

The activist hedge fund believes that while the company´s management has done an exceptional job in building a market position, the stock price fails to reflect the intrinsic value of the company. This underperformance is apparent in that during the past year equity market volumes have increased 40% causing revenues to increase 34%, yet the stock´s price declined 17%. In fact, using the EBITDA multiples of its major competitors, ITG appears to be trading at a 30% to 40% discount.

Consequently, D.E. Shaw believes that the company should immediately put itself up for sale. The activist hedge fund maintains that the company could see significant interest from both strategic and financial buyers. Numerous large financial institutions may be interested due to the significant synergies they could realize from the integration of ITG´s trading products and services into their own platforms. These institutions could also realize significant cost savings by putting their current trading volume onto the ITG platform.

Meanwhile, D.E. Shaw could also see interest from financial buyers including private equity and hedge funds. There is not only a strong leveraged buyout market and a great track record of private equity investments in this sector but ITG would also have the ability to invest in long-term future expansion without being penalized in today´s markets. This is great news for many financial buyers who tend to take a company private, only to leverage it up an re-IPO it several months later at much higher prices.

Finally, D.E. Shaw recommended that the company institute a large scale share buyback program if they are unable to find a buyer. They insist that one of the major reasons for the discount in market value is the company´s large cash position amounting to nearly 10% of their market cap. After all, this large cash position depresses the company´s ROE. The activist hedge fund beliveves that the company should not only put all of this cash towards a buyout, but also leverage up and take on additional debt in order to improve its financial ratios.

Overall, D.E. Shaw is just interested in unlocking value and taking this stock to the level of its major competitors. If they are successful, this could mean a 40% appreciation in share price over the short term plus any buyout premium on top of that. This makes ITG a stock worth watching!

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Ford Motor Company (NYSE:F) shares moved up marginally today after the company announced that it would explore the possible sale of two of its luxury brands today. The company reportedly hired Goldman Sachs, HSBC Holdings and Morgan Stanley to explore strategic options for its LandRover and Jaguar segments. Many investors are hoping that the continued divestures will shake up the company's stagnant stock.

The number two auto retailer in the United States has been struggling for some time with its restructuring process aimed at turning around its North America operations. Ford has openly stated that they do not expect to be profitable until at least 2009 with the restructuring process costing the company more than $10 billion. These efforts include recently announced plans to close 16 manufacturing facilities and buyout over38,000 employees.

So, why should investors be looking at Ford? Well, the truth is that most of the bad news is already priced into the stock. The company has openly told investors that it doesn't expect to be profitable for some time and the future beyond that is very uncertain. More importantly, investors are only expecting more bad news from the automaker after its long history of disappointments - this further compounds the discount at which the stock is trading.

The new variable added to the equation is the proposed sale of the company's Jaguar and LandRover segments. We know that Ford already divested its Aston Martin division early this year in a sale to private equity that shocked many analysts - nobody expected the segment to attract so much interest. Therefore, it is not unreasonable to assume that the company's sale of Jaguar and LandRover may attract similar interest.

Some investors are also looking at Ford as a whole. The move to divest many of its assets provides the company with a significant amount of cash while making it substantially cheaper. This trend has fueled speculation that private equity may get involved if shares get too cheap - that is, if they don't rise upon the sale of these assets. This is all potentially good news for shareholders who stand to benefit significantly from these moves!

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Sprint Nextel (NYSE:S) may finally be ready to take the advice of activist investor Ralph Whitworth after a company webcast at a Bear Stearns conference in New York today hinted towards drastic changes in the future. Many investors are hoping that such changes could help turnaround the struggling telecom company.

Whitworth accumulated a $500 million stake in Sprint earlier this year through his hedge fund Relational Investors. Soon after he began pushing for the company to unlock value through a series of strategic transactions, including the sale of its long distance unit. Hints towards such transactions were given when CEO Gary Forsee noted its Embarq spin-off while saying, "It's something very important to continue to look at that structure ... if you look at our company as a sum-of-parts, we have to unlock value".

Buyout rumors have also surrounded the company ever since Alltel's successful auction earlier this year. There has been speculation since the telecoms' decline that the sector may be targeted for leveraged buyouts by private equity funds. Sprint's vast networks and market-leading position would make it an ideal candidate if properly priced. However, with Whitworth's talk of restructuring and the company's now-apparent support, the stock price may remain high enough to thwart any attempts in the near future.

All of this has some shareholders angered, however, as lackluster earnings have cut the stock's value by more than 20%. While some investors may understand the long-term value creation derived from a restructuring, many would likely opt for a quick sale if the opportunity presented itself. Regardless, Sprint is definitely a stock worth keeping an eye on while the company works to unlock value for shareholders.

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Tyco International (NYSE:TYC) gained necessary government approvals yesterday for the spin-off of its healthcare and electronics segments to shareholders. Shares in the manufacturing and service company rose to set a new 52-week high on the news as shareholders look forward to the divesture. Shareholders on record June 18th will be eligble to receive shares in the new companies that are expected to begin trading as early as July 2nd under the symbols COV and TEL.

Many shareholders have been looking forward this spin-off as the two business segments have long been considered undervalued. The spin-off will unlock this value by freeing the segments of an overburdening corporate structure. Many analysts estimate Tyco stock as trading at less than half of its eventual value that will be realized once the three businesses are operated independently. Others peg the value just shy of $40 per share. Regardless, most analysts agree that this spin-off is a long overdue effort to unlock value in Tyco's diversified businesses.

So, what does this mean for investors today? Well, many analysts peg the intrinsic value of Tyco post-breakup at a collective $40 per share. This represents a premium of more than 15% over today's close. We also know that spin-offs in general tend to outperform the overall market due to factors related to the structure of the deals. Often times, existing shareholders that receive shares in the new company will immediately sell them since they never intended on holding them. This causes unjustified selling pressure on the new spin-off companies, which can translate to opportunity for enterprising investors. Combined, these factors make TYC a stock worth watching!

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Northwest Airlines (NYSE:NWA) emerged from bankruptcy in late May after more than 20 months under protection. The domestic carrier is the last of the major airlines to emerge from bankruptcy protection and many analysts believe it is now in a strong competitive position relative to other carriers.

Northwest managed to reduce its cost structure by $2.4 billion annually, solve its pension problems, properly size its fleet and reduce its debt load by over $4 billion during its many months of bankruptcy protection. The carrier's operating statistics reported to the Department of Transportation are also promising: The company reduced its operating costs by nearly 11%, increased its yield (fare per mile) by 7% and increased its revenue per available seat mile by nearly 10%.

The turnaround isn't the only reason that investors should be looking at Northwest either. There also exists the potential for more deal-making in the industry. Just today Airtrans extended its takeover offer for Midwest Air while there are still rumors floating around that Northwest could become an eventual target. While Northwest certainly isn't the smallest airline anymore, it could still be considered the smallest of the larger airlines. And with less debt, improved operating margins and eventually a larger footprint, it could easily become a takeover target.

There is no free lunch, however, and many analysts are quick to point out that Northwest continues to face many challenges - the biggest being labor relations. The carrier has had widely publicized labor disputes in the past and just last week it had payment with its attendents. Also of concern is the carrier's plan to spend more than $6 billion to increase its fleet size and expand its footprint. While this is a plan to ultimately increase revenues, there is an inherent execution risk that could hurt shareholders.

So, should investors be looking to take a slice of Northwest for their portfolio? Well, post-bankrupt companies are often undervalued as investors are quick to remember the not-too-distant past. Other major domestic carriers that emerged from bankruptcy have also performed fairly well relative to the market as a whole. Overall, Northwest certainly makes for an interesting investment for investors looking to add a riskier stock to their portfolio.

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