BEA Systems Inc. (NDAQ:BEAS) announced that it would postpone its annual shareholders’ meeting in a move that would sidestep a lawsuit by Carl Icahn and give the business software-maker more time to drum up bids closer to its $21/share target. The company now has more time to get itself out of this mess, but it is uncertain as to whether or not Icahn will attempt to install his own directors regardless. Shareholders are watching the situation closely as it could mean significant value being unlocked.

Carl Icahn launched his campaign to put the company up for sale a few months ago when he sued BEA’s board of directors and threatened to replace them with his own candidates. The activist investor hasn’t filed any of the necessary paperwork to nominate his own directors, but this delay may give him enough time to do so. This assumption has gained traction in light of the fact that Icahn supported this delay while criticizing past delays.

Carl Icahn has been critical of BEAS ever since it rejected a bid from Oracle at $17 per share, or $6.7 billion. The company insisted that it was worth more and suggested that future negotiations should start at $21 per share, which it is just now attempting to realize. So far, no other bidders have emerged and Oracle’s Larry Elison even suggested that the company wasn’t even worth the original $17 per share offer. Whether or not the company can drum up some bids remains to be seen, but with Carl Icahn’s support, this is a situation that is definitely worth watching!

Related Companies
Oracle Corporation (ORCL)
Sun Microsystems Inc. (JAVA)
Microsoft Corporation (MSFT)

Transmeta Corporation (NDAQ:TMTA) received a letter from its largest shareholder today expressing concern over yesterday’s staggering option grants and other recent developments that have bought serious questions to light regarding the company’s strategic direction. Riley Investment Management (RIM), which owns 6.4% of Transmeta, demanded several changes to protect shareholders.

The board of directors is tasked with prudently placing the interests of shareholders above their own and those of insiders. However, last night’s option grant totaling 725,000 shares to the company’s top four executives diluted shareholders by over 5% and almost doubled the company’s historical grants on a split-adjusted basis. The timing of the grant is also very disconcerting and ironic in that it was made at historically depressed levels – essentially giving executives $5 million of value at a great cost to shareholders. Obviously, RIM viewed this as a major issue and questioned the integrity of the board.

RIM also reiterated its belief that shareholders will be best rewarded through a distribution of cash and a monetization of the company’s intellectual property as opposed to management’s plan to fund business development and evaluating potential acquisitions. RIM believes that this strategy would result in proceeds in excess of $20 per share while management’s strategy would likely result in operating expenses that eat through the guaranteed $20 million per year revenue stream from Intel by lining the pockets of management and executives.

“In light of the failures of the management team and the Board, the company’s proposed strategy is especially disturbing,” said RIM in their letter. “Transmeta shareholders should ask a simple question –- would the current management team and board be able to raise $250 million from the public market to pursue a risky strategy with operating expenses of $25 million per year and no clear path to profitability? We believe the answer is unequivocally no.”

In the end, it will be interesting to see how the board responds to this letter as it makes several points that even average investors can identify with – most notably yesterday’s option grant. Combined, these factors make TMTA a stock worth watching!

Related Companies
Intel Corporation (INTC)
Advanced Micro Devices (AMD)
Texas Instruments Inc. (TXN)

ETrade (NDAQ:ETFC) announced an aggressive campaign today to win back customers as one component of its comprehensive turnaround plan following its dramatic fall. The turnaround plan was reportedly developed in conjunction with a thorough evaluation of ETrade’s core strategy along with an assessment of its organizational structure, operating expense base, and balance sheet. Shareholders are hoping that this plan can help revive the stock that has dropped substantially over the past few months.

The backbone of the turnaround plan is an effort to start attracting customers after the company saw a mass defection following liquidity rumors. The campaign began earlier this month and involves targeted engagement incentives and outreach initiatives to current and prospective customers. But just how effective has this been? Well, the brokerage said on Friday that its retail customer cash and deposit balances were up 14% from the end of October, reaching $33 billion.

ETrade also said that it would detail its formal turnaround plan after its fourth quarter and fiscal statements are released on January 24th. So, investors may have to wait a little longer to see how viable the company’s turnaround plan really is for the future. However, ETFC is definitely a stock worth watching in the meantime!

Related Companies
TD Ameritrade Holding Corp. (AMTD)
Empire Financial Holding Company (EFH)
TradeStation Group Inc. (TRAD)

Comforce Corporation (AMEX:CFS) may face some pressure in the near future after an activist hedge fund expressed frustration with the company’s board and management and urged its directors to explore strategic alternatives, including a possible sale of the company. Bruce Galloway’s Strategic Turnaround Equity Partners, which owns a 5 percent stake in the company, also threatened to take their suggestions to shareholders if the company didn’t respond.

“While we have been supportive of your efforts and progress in growing the sales of the company, reducing debt and improving earnings, this has not resulted in an improved stock price. Based on our internal research, and as I am sure you are aware, Comforce is trading at a significant discount to its larger market cap peers,” said Galloway. “More importantly, we don’t believe management has clearly defined to the shareholders how to achieve its targets to increase shareholder value.”

The news comes after Comforce recently reported strong third quarter results. The latest quarter represented its 17th consecutive quarter of improved year-over-year revenues on net income that rose 91% compared to the same quarter last year. The company also reported that its interest expenses continued to decline. However, no insiders have purchased any shares while the stock has remained stagnant.

“We are most pleased with our increase in revenues and net income for both the third quarter and nine months. The third quarter represented our 17th consecutive quarter of year-over-year increased revenue growth,” said CEO John Fanning. “We were also happy to have posted increases in revenues of $1.9 million in Staff Augmentation primarily as a result of increased sales to our Technical and Information Technology customers.”

In the end, it will be interesting to see if the company sees eye-to-eye with the activist hedge fund. Since management does not have a significant stake in the company, the hedge fund may find it difficult to push for a change of control transaction. However, this stock is definitely one worth watching in the meantime!

Related Companies
On Assignment Inc. (ASGN)
CDI Corp. (CDI)
Spherion Corporation (SFN)

CSX Corporation (NYSE:CSX) directors may be in for a battle after two long-standing foes nominated their own slate of candidates to the company’s board. The Children’s Investment Fund teamed up with 3G Capital Management to strengthen the railroad operator’s board by adding strong independent directors with a shareholder orientation, a broad range of railroad and other relevant experience, and a firm commitment to improving operating performance and corporate governance.

The hostile move comes after two months of feuding between the company and its dissident shareholders. Children’s Investment Fund sent a public letter to CSX two months ago raising concerns over the fact that they have been unable to hold substantive discussions about the company’s spending. The hedge fund also requested that the chairman and chief executive roles be split up, more independent directors with experience be added, and operating expenses be trimmed.

Last month, CSX’s board responded by stating that it maintained confidence in its chairman and chief executive. After all, the stock price has tripled over the last three years and shareholders have seen better returns than the rest of the railroad industry and 89 percent of all S&P companies. Obviously, any changes may be a hard sell to average shareholders who do not understand the additional value that can be unlocked through independence.

Shareholders can expect to see a heated proxy battle at the CSX’s next annual meeting. Combined, these two hedge funds hold around 11 percent of the company’s outstanding shares which makes them a viable contender. Many common shareholders, however, will need to receive more information detailing exactly how they plan on improving a stock that has already seen such great success under current leadership. After all, the saying goes: “If it ain’t broke, don’t fix it!”

Related Companies
Norfolk Southern Corp. (NSC)
Kansas City Southern (KSU)
Union Pacific Corporation (UNP)

Edge Petroleum Corporation (NDAQ:EPEX) announced yesterday that it has retained Merrill Lynch & Co. to explore strategic alternatives to enhance shareholder value, including a potential sale of the company. The move comes as many small cap energy companies, including Edge, trade at very low multiples despite strong earnings. Many shareholders are hoping that the company will be able to correct this value disconnect through a sale or merger.

“Merrill Lynch and Management will assist our Board in reviewing the strategic alternatives while the Company continues to execute its current business plan,” said CEO John Elias. “Although we have no specific time frame to complete the review, both Management and the Board of Directors have a sense of urgency about completing this process and increasing our shareholders’ value.”

So, how much might Edge fetch in a sale of the company? Edge currently has an enterprise value of $551 million, composed of $240 million in long-term debt, $143 million in preferred stock, and $168 million in market cap at $6 per share. The valuation of the company hinges largely on its reserves. Assuming that the company can retain current run rate, BOE/day, and reserve valuations, then shares could be worth between $10 and $12 or more per share based on low to mid range peer multiples.

It is likely that Edge already received several unsolicited offers for the company, which is why this process was put into motion. Clearly, the value disconnect is of great concern for all small cap energy companies in this arena. This is all good news for shareholders, but whether or not they will accept any of these offers remains to be seen. Regardless, this is definitely a stock worth watching!

Related Companies
Whiting Petroleum Corporation (WLL)
Abraxas Petroleum Corporation (ABP)
Clayton Williams Energy Inc. (CWEI)

Enzon Pharmaceuticals (NDAQ:ENZN) shareholders may soon be rewarded after a large shareholder expressed concerns regarding a “troubling disconnect” in the stock. DellaCamera Capital, which owns 5.2% of the company, requested that the company hire an advisor to analyze various financial and structural options and implement a cohesive financial plan of action that would deliver increased value to shareholders.

“In our opinion, Enzon’s current stock price of $9.75 represents a significant discount to the intrinsic value of the Company and in no way reflects the tremendous embedded optionality associated with Enzon’s R&D pipeline and technology platform,” said portfolio manager Richard Mansouri. “It is our belief that the corporate structure and operational complexity of Enzon have made it difficult for the investment community to accurately assess the inherent value of the Company.”

The activist hedge fund pointed out that a share price of $9.75 implies a shocking negative valuation of -$263.5 million for the company’s R&D operations that, in reality, show promise. Enzon has four products on the market that will generate an estimated $100 million in revenue in 2007. A reasonable sales multiple of 3.5x yields a value of $350 million for the marketed products alone. Add in the revenues from royalties and contracted manufacturing and you get an additional $440 million in value.

So, why is there such a value disconnect? Well, DellaCamera insists that it can be traced to the company’s complex structure. Currently, Enzon operates in two businesses: (1) a commercial business comprised of marketed products, royalties, and contract manufacturing; and (2)an R&D organization and technology platform. The profitability of the commercial operations is being completely obscured by the expenses associated with advancing the company’s clinical and pre-clinical trials. This complexity has also led to operating inefficiencies that have resulted in runaway expenses.

In the end, DellaCamera insists that the company should work to simplify its message to investors by consolidating its operations or taking other measures to unlock value. To this end, they requested that the company hire an advisor in order to explore the best options. Combined, these factors make ENZN a stock worth watching!

Related Companies
Amgen Inc. (AMGN)
Pfizer Inc. (PFE)
Merck & Co. (MRK)

The Cheesecake Factory (NDAQ:CAKE) shares spiked over ten percent today after Nelson Peltz's Star Trust revealed a ten percent stake in the company. The activist investor also requested and received early termination notice from the FTC, which is required under the Hart-Scott-Rodino antitrust law for the acquisition of stocks or assets greater than $50 million.

Nelson Peltz is well known for his activist involvement in companies like Wendy's International and H.J. Heinz Co., in which he was able to unlock substantial value for shareholders. The activist investor may see the Cheesecake Factory as a strong play in today's troubled markets. The company has shown consistent EPS growth with extremely strong financials.

So, is the Cheesecake Factory a bargain at these prices? Well, before today's move the stock was trading at just $22, which is about 17x next years estimated EPS. This is an extremely low P/E ratio that should stand around 25x, which would equate to a stock price of around $33 per share - or about 50% higher than it trades now.

In the end, this is a solid stock that is being acquired by an activist that has clearly indicated that he wants more. Whether or not Peltz plans on taking any actions to unlock value remains to be seen, but this is definitely a stock to watch in the meantime!

Related Companies
Grill Concepts, Inc. (GRIL)
Darden Restaurants Inc. (DRI)
Applebees International Inc. (APPB)

Total Systems Services, Inc. (NYSE:TSS) announced that its shareholders would receive $3.03 per share in connection with the company's nearly completed spin-off from parent Synovus Financial Corp. (NYSE:SNV). Shareholders applauded the spin-off and one-time dividend as effective methods for unlocking value in the company's hares.

Synovus shareholders will receive 0.484 shares of TSYS common stock for each share of Synovus stock in connection with the spin-off. Shareholders that hold fractional shares will receive cash for the fraction. TSYS shareholders on record as of December 17th will also receive a $3.03 all-cash one-time dividend on December 31st. Combined, these two actions will divest Synovus' 80.6% stake in TSYS and enable shareholders to realize value in both.

Spin-offs in general tend to outperform the overall market for several reasons. First, parent company shareholders are occasionally uninterested or unable to hold (mutual funds, for example) stock in the spin-off and therefore automatically sell. Secondly, the management team at a spin-off company are typically heavily incentivized to perform since it is a new company that is still well capitalized. And finally, pure-play assets are typically valued higher than conglomorate assets.

In the end, this is great news for Synovus shareholders and TSYS shareholders as they will likely see a significant appreciation in value over the next two years. Combined, these factors make TSS a stock worth watching closely!

Related Companies
Pegasystems Inc. (PEGA)
Fiserv Inc. (FISV)
Cash Technologies Inc. (TQ)

Copart Inc. (NDAQ:CPRT) executives and board members may be in for a shake up after Jana Partners disclosed a 5 percent stake in the company, according to a Schedule 13D filing with the SEC. Jana is well known in the hedge fund community as a constructive activist that works with management to improve operations and unlock shareholder value. Many investors are hoping that they can do the same at Copart.

Many analysts have been impressed with Copart's results recently as the company generated robust organic growth, gained market share and witnessed progress at its UK operations last quarter. The auto-seller hit a 52-week high last quarter after it announced results that beat Wall Street estimates by a wide margin. Now, estimates for next quarter are being raised even further.

Copart is a provider of vehicle remarketing services in the United States and United Kingdom. The company provides vehicle suppliers, like insurance companies, with a range of remarketing services aimed at helping them process and sell salvage vehicles primarily over the internet through the company's virtual bidding internet auction-style sales technology known as VB2.

So, how does the Copart look now? Well, the company is growing at a strong pace but is priced with a PEG ratio of 1.68, meaning that it may be slightly overvalued. However, the company also has no debt and $250 million in cash, meaning that there may be opportunities to leverage up and unlock value for shareholders. Additionally, insiders still hold over 30% of the company's stock, indicating a strong belief in the future. Combined, these factors make CPRT a stock worth watching!

Related Companies
Carmax Inc. (KMX)
LKQ Corporation (LKQX)
Sonic Automotive (SAH)