Google Inc. (NDAQ:GOOG) shares rose to $650 today after the company reported strong earnings for yet another quarter, according to an 8-K filing with the SEC. Many analysts have now set price targets as high as $800 per share on the search giant. All of this commotion has many others wondering if it is sustainable...

Revenues at the search company rose 57 percent to $3 billion when costs of payments to traffic partners are subtracted. Meanwhile, the company announced that it had hired 2,100 new employees to bring their count up to almost 16,000 - most of its new hires being in Europe.

Many analysts remain bullish on the company despite the fact that there is likely to be at least a small recession during the next two quarters that should adversely affect earnings. The high end of the new ranges are $800 per share by Goldman Sachs and Credit Suisse while the low end is $690 by BMO Capital. It won't be along until some analysts start pegging the $1,000 point.

Many are banking on Google's new GPhone initiative as well as several other factors to help it weather the storm. However, it is important to note that online advertising still accounts for almost all of Google's revenues and may be very difficult to diversify away from easily. Another troubling trend is the fact that the company's expense growth is far exceeding revenue growth.

In the end, Google continues to be a strong company that is working to diversify its revenues away from just online advertising in order to give it a better chance at surviving a recession. It has done a great job of moving business internationally and is now making inroads to new products and services. Combined, these factors make GOOG a stock worth watching!

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A large Plains Exploratin & Production (NYSE:PXP) shareholder expressed concerns over the company's lack of a strategic plan for its proposed merger with Pogo Producing Company (NYSE:PPP), according to a Schedule 13D filing with the SEC. Shareholders are hoping that this larger player can help the company formulate a plan to unlock shareholder value.

Sandell Asset Management, which owns a 5.1 percent stake in the Houston-based company, said in a letter to the board that it supports the transaction but would like to see a strategic plan put in place for the company post-closing. The hedge fund urged a number of actions, including asset sales, MLP creations and aggressive share repurchases.

"As you probably know based on our recent meetings and conference calls, while we are inclined to support the Pogo transaction, we are concerned by your inability to provide a concrete plan for the combined company post-closing," Thomas Sandell said in a letter to the board.

To remedy this, Sandell wants to see the hedge fund sell oil reserves and use the proceeds to fund share repurchases. Simultaneously, the hedge fund wants to see the company form a master limited partnership for all of its reserves in California and the Piceance basin. Combined, these efforts would unlock millions in value for shareholders.

"We are confident that undertaking [these actions] will result in dramatic value creation for all shareholders of up to $90 per share (+80%)," said Thomas Sandell. "We believe the market unnecessarily discounts PXP’s value by using unrealistically low commodity price assumptions and giving little credit for unproved and non-core assets."

In the end, this is all great news for shareholders. Shares of PXP have seen very modest appreciation given the price of oil and shareholders are ready for a change. The lack of planning surrounding the acquisition of PPP has caused the share price to plummet and create buying opportunities for enterprising investors. Combined, these factors make PXP a stock worth watching!

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Delta Air Lines (NYSE:DAL) caught many investors and analysts offguard today after chief executive Richard Anderson hinted that the company may be interested in pursuing some deals during an earnings conference call earlier this week. The news caused widespread speculation on possible targets.

Anderson commented that consolidation "could make sense for Delta if it's done thoughtfully from a position of strength". The executive also made it clear that Delta "wants to be in control" as an acquirer as opposed to an acquisition target itself. The comments caught many by surprise given rising energy prices and pressure within the industry to increase profitability.

Interestingly, Delta recently emerged from bankruptcy itself after resisting a hostile takeover bid from US Airways Group. Many had speculated that Delta would sell itself during the bankruptcy process to settle with debtors; however, the airliner surprised many by emerging as an independent company.

Airline mergers are a traditionally difficult thing to make happen, but many industry analysts believe that Northwest Airlines may be the most likely target. Others suggest that the company may look into a more niche airline like JetBlue or Alaska Air Group. Smaller niche airlines may enhance certain routes, but larger acquisitions would offer more flexibility when it comes to supplier negotiations and leveraging economies of scale.

In the end, all of this speculation is just talk as of right now. However, any acquisitions in the airline industry would certainly make for an interesting strategy on behalf of Delta given its position. Combined, these factors make DAL a stock worth watching!

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Steven Madden (NDAQ:SHOO) may find itself in hot water after the Clinton Group disclosed a 5.1 percent stake in the company and suggested several ways in which to unlock shareholder value in a Schedule 13D/A filing with the SEC. Shareholders are hoping that the company will embrace these measures and restore the stock price to its rightful levels.

The activist hedge fund believes that the market has misunderstood the prospects for the business and that has resulted in a stock that is trading at just 5.1x 2007 EBITDA. This valuation is both historically low for the company and well below peer valuations seeing between 10x and 13x 2007 EBITDA. Clearly, there is a disconnect here that shareholders want fixed.

"We believe that the Steven Madden brand has never been stronger, and we believe that the management team and board share this view," said Clinton Group VP Joseph De Perio. "That strength,and the Company's balance sheet, makes this an optimal time to seize an opportunity to enhance shareholder value."

What measure might this include to unlock value? Well, the Clinton Group recommended a Dutch Tender of $180 million to repurchase the company's shares. The hedge fund reasons that the company's current cap structure is inefficient given its free cash flow, ongoing strong earnings and limited capital expenditures. As a result, the company could use $72 million of free cash combined with a $110 million senior debt financing to fund a Dutch Tender.

The share repurchase would result in approximately 40% of the shares being taken off the market if the buyback is executed at a range above $21 per shares - of a 13.5% premium to the current market prices. The extraordinary accretion from this transaction produces implied stock prices worth more than current levels and a premium to the hedge fund's proposed tender price of greater than 20 percent!

These suggestions may be moot; however, as the company today announced that it was evaluating several potential takeover offers as well as strategic alternatives. In the end, this is all great news for shareholders as it could mean a significant jump in the valuation of their stock. Combined, these factors make SHOO a stock worth watching!

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Orient-Express Hotels (NYSE:OEH) is finding itself under heavy pressure from a major shareholder to sell the company, according to a Schedule 13D filing with the SEC. The hotel chain rejected the $60 per share offer but the investment group appears to have its heart set on the company.

Dubai Investments disclosed a 9.2 percent stake in Orient-Express along with a letter indicating that they have been aggressively acquiring shares in the hotel chain after another group - Indian Hotels Company - disclosed that it holds a large stake in the company and was interested in a deal.

Dubai Investments noted that if Indian Hotels attempted to pursue a deal they may counter with a higher offer to acquire Oriental-Express. This news pushed shares in the hotel chain past their 52-week highs yesterday, even amid news that HSBC had sold their 5 percent stake.

In the end, this is mixed news for Oriental-Express shareholders. Clearly, there are many parties that are interested in acquiring the company but management appears to be resistant having recently issuing a press release saying they were not interested in pursuing any deals. Combined, these factors make OEH a stock worth watching!

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Daniel Loeb's Third Point nearly halved its stake in PDL BioPharma (NDAQ:PDLI) according to a Schedule 13D/A filing with the SEC. The move comes after the biopharmaceutical company bended to the demands of the activist shareholder by announcing that it would actively seek a sale of the entire company.

"We are encouraged by PDL's October 1st press release announcing that the Board will actively seek the sale of the entire Company or all of its component pieces," said Daniel Loeb in a letter to the board. "We are also pleased with the progress apparently being made by the Merrill Lynch investment bankers in spear heading this process and advancing it expeditiously to a successful conclusion."

Third Point, which now holds a 5.1% stake in the company, said in its letter to the board of directors that it was encouraged positive developments related to the company's intentions to conduct a sales process but expressed concern that the board doesn't include a Third Point representative and is being led by Mr. Gage as an interim chief executive.

"Despite these positive developments, we are disappointed that the sale process is still being led by a Board that does not include a Third Point representative, and that Patrick Gage remains the Company's CEO, despite having demonstrated his unsuitability," said Daniel Loeb. "Accordingly, although we remain convinced that PDLI shares are undervalued, and that a sale will maximize shareholder value, in light of your continuing refusal to provide us with a voice in the Company's affairs through a Board seat, we have reduced our position."

In the end, a sale process is great news for all shareholder but the fact that Third Point nearly halved its position in the company could prove to be a sign that a sale is not a gaurantee at this point. As a result, shareholders should be very prudent at this point and perhaps hedge their positions with options as we sit on this buyout premium. Combined, these factors make PDLI a stock worth watching!

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E.W. Scripps Co. (NYSE:SSP) is the latest newspaper and media company to undergo a facelift to better face challenges and opportunities online. The company proposed a spin-off that would allow investors to choose from the growth potential of new media or the dependable cash flow of old media.

The tax-free deal would create a new public entity containing the company's cable operations - including Food Network and HDTV - along with its internet operations - including Shopzilla and uSwitch. Meanwhile, SSP will retain the company's newspapers, television stations, licensing and syndication operations.

"It's our intention to create two publicly traded companies, each with a sharpened strategic focus that would foster continued growth, solid operating performance and a clear vision on how best to build on the specific strengths of our national and local media franchises," said chief executive Kenneth Lowe in a statement.

The past 24 months have been very difficult for old media companies as online publishers continue to eat into margins and reduce subscription rates. Companies like the Wall Street Journal and New York Times are even feeling the crunch and an industry shift has become all but inevitable.

Consequently, this move to divest new media from old media comes at the perfect time for shareholders and represents perhaps the company's only logical next step. Combined, these factors make SSP a stock worth watching closely!

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E-Z-EM, Inc. (NDAQ:EZEM) board members and executives may find themselves in hot water soon after a large shareholder expressed dissatisfaction with current management's desire and ability to take steps to maximize shareholder value. Shareholders are hoping that these moves could help unlock value in shares that have remained somewhat stagnant recently.

Albert Investment Strategies, which owns 7.5 percent of the company, said in a Schedule 13D/A filing with the SEC that the company should (1) implement a quarterly dividend program, (2) conduct a share repurchase, (3) evaluate a sale or spin-off of the company's RSDL division and/or (4) evaluate a sale of the company. The activist hedge fund also pointed out several other key issues dealing with the company's management.
 
"AIA established its initial position in E-Z-EM because we felt the company's prospects were not being adequately valued by the markets," said the hedge fund manager Ira Albert. "We were attracted by your meaningful market share of barium  imaging  products, your new  product pipeline, the strong macro trends in the healthcare industry, and later by the energy of new members of your senior management team coupled with the opportunity for meaningful gross profit and operating margin improvements.

"It is our intention to continue to discuss our ideas with management and hope to expand our dialogue to include the Board as well. We may also speak to other shareholders and build a strong consensus of opinion in support of our value creating ideas."

In the end, this is great news for shareholders as it means that significant value could be unlocked over the long or short term. If the company pursues a sale, it could mean rapid share appreciation in the very short term. Combined, these factors make EZEM a stock worth watching!

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Yahoo! Inc. (NDAQ:YHOO) shares are up sharply after the company announced a blowout quarter in its most recent 8-K filing with the SEC. The search giant surprised the market with a 12 percent jump in revenues on a 37 percent earnings surprise. The market loved the numbers as shares rose over eight percent in pre-market hours and continue to hold gains.

Many analysts saw the earnings numbers as a pleasant surprise but insist that Yahoo only delivered a solid quarter because expectations were so low. Analysts also question CEO Jerry Yang's strategy going forward because he hasn't proposed any new groundbreaking changes that would be a base for a robust turnaround. Instead, the chief executive simply reinforced his old adage to make Yahoo a premier destination website.

Yahoo has made several changes, however, aimed at improving its existing businesses. First, the company improved upon its email and search engine earlier this month. Secondly, the company acquired Right Media and BlueLithium in order to boost its advertising platform and expand its offerings. In the end, Yahoo's lack of technological ambition has kept it in the catch-up game with Google, who continues to dominate the market.

Overall, Jerry Yang's new strategy will likely help the company improve its existing offerings but it may take more to orchestrate a meaningful comeback and steal market share back from Google. Despite the company's recent acquisitions and strategic moves, investors are still waiting for improvements on the bottom line. However, YHOO is definitely a stock worth watching!

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Movie Gallery Inc. (NDAQ:MOVI) shares plummeted today after the rental chain finally declared bankruptcy just two and a half years after winning a takeover battle for a major rival. The news comes as no big surprise to shareholders who saw warning signs back in late June.

Movie Gallery filed for Chapter 11 bankruptcy today in hopes that it can slash its debt by $400 million and reorganize itself into a new public entity. The chain still operates nearly 4,500 stores after it acquired Hollywood Video in April 2005 for $1.25 billion and the assumption of $350 million in debt.

Many analysts remain skeptical as to whether or not the company can emerge from bankruptcy and remain a viable competitor in the increasingly difficult rental space. Tight competition from satellite and cable providers along with online rental services like Netflix and Blockbuster's new service. However, Movie Gallery did unveil plans in March to enter the online business.

Movie Gallery also has a lot of restructuring ahead of itself before it can go through with the Chapter 11 process. The company said it would close nearly 520 rental stores two weeks after it said it would miss interest payments on second-lien debt and 9.625% senior notes.

"Although the company has taken numerous steps to reduce its debt and strengthen its balance sheet through closing unprofitable stores, headcount reductions and other means, these actions were not sufficient to offset the significant shift in our business and the cost of our substantial debt obligations," said chief executive Joe Malugen.

In the end, common stock shareholders will likely end up losing all of their investment as shares in the new company will be distributed to creditors. However, the new public entity may be a good investment opportunity if it is priced correctly. Usually, creditors will begin selling their stock immediately and create a discount. Combined, these factors make MOVI a stock worth watching!

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