Starbucks Corporation (NYSE:SBUX) announced a broad restructuring plan aimed at turning around the specialty coffee maker. The company began by ousting CEO Jim Donald yesterday and handing the reins to current Chairman and founder Howard Schultz to bring investors some relief after a steep 48 percent decline in the share price during the last year. Shareholders applauded the news by sending shares up over 9 percent in today’s session.

Starbucks announced in a letter to employees that it had to shift focus away from bureaucracy and back to customers. Many argue that the firm’s rapid expansion forced it to cut down on aspects that made its cafes an exciting place with new products. Now, the company faces increased competition from fast food joints that are quickly adding premium coffee blends and a classier atmosphere to their own locations. Combined, these factors have put Starbucks in a tough spot.

However, shareholders are confident that Schultz is the right man to orchestrate a turnaround. He is well known as a fighter with tough standards and a strong desire to succeed. He stuck with the company as its chairman since stepping down and oversaw many side projects – such as Starbucks’ move into the music and film business. Schultz plans on restructuring the firm’s U.S. locations by giving employees better training and tools and launching new products, which he claims will have just as much of an impact as the Starbucks Card and its Frappuccino products.

In the end, this is all great news for shareholders. Schultz had what it takes to build up a billion dollar business behind coffee and now the same great leadership is again behind the company. Shareholders are hoping that he will be able to orchestrate a turnaround and make Starbucks a great brand once more, able to stand up to mounting competition. Combined, these factors make SBUX a stock worth watching!

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CNET Networks (NDAQ:CNET) moved higher this morning after a group of investors, led by Jana Partners, nominated seven candidates to the company’s board of directors. The investors are hoping to curb the stock’s continuing decline by assembling an experienced team of directors to orchestrate a turnaround. Shareholders are hoping to see some changes as shares sit off their 52-week lows but well below intrinsic value.

“This effort is about taking an underperforming company and increasing shareholder value by building on its top-notch editorial talent and premier internet assets,” said Barry Rosenstein, Manaing Partner at Jana Partners. “Together with Paul Gardi and Spark Capital, we have assembled a group of nominees we believe has the technical skills and business experience to reverse CNET’s ongoing underperformance and start delivering value for shareholders.”

Jana Partners noted that in addition to its 8 percent voting stake in CNET, it also has an 8 percent non-voting interest and recently enlisted Sandell Asset Management – which holds a 5 percent non-voting interest – as an ally. However, the investors may have run into a small problem with the company’s bylaws, which prevent any shareholders from nominating directors until they have held their stock for one year – a provision Jana calls “discriminatory”.

In the end, this is good news for shareholders as it could finally mean change in a company that has only seen problems for the last few years. The investor group’s nominations to the board have vast experience and would likely be able to bring some change. Combined, these factors make CNET a stock worth watching!

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Starbucks Corporation (NDAQ:SBUX) may be trading near its 52-week lows but many believe that it has nowhere to go but down. The coffee chain is facing increased competition from convenience-industry players like McDonalds, Dunkin Doughnuts, and regional coffee shops that threaten to slow the growth numbers to which investors have been accustomed.

McDonalds (NYSE:MCD) announced plans to take on Starbucks more directly today by installing premium coffee bars with baristas serving up cappuccinos, lattes, mochas, and frappes. Internal documents project that this program will add $1 billion to McDonald’s annual sales of $21.6 billion. The move marks another jump for a company that is already in its sixth year of a successful turnaround, while Starbucks has been struggling after years of strong growth numbers.

Starbucks has traditionally relied on the quality of its coffee to set it apart from fast food companies like McDonalds; however, the fast food chains recent switch to premium blends has many worried. It fact, the February issue of Consumer Reports even rated McDonald’s drip coffee as better-tasting than Starbucks! Since 80% of Starbucks customers do not drink in the store, quality may be the only thing keeping them coming back, which could present a problem.

Starbucks has taken actions of its own in order to combat the growing fast food threat. The coffee chain started serving lunch at many of its locations, offering customers a healthier alternative to fast food joints like McDonalds. The move has some worrying, however, that the chain may be eroding its good name by lowering itself to fast food standards. Starbucks also continues to boast the largest selection of specialty coffees, which should keep it ahead of McDonalds for serious drinkers.

Overall, Starbucks appears to be in danger of at least a significantly slowed growth with premium coffee blends expanding into fast food chains. Meanwhile, its own plans to introduce food has alienated some customers and has had very little impact on the company’s bottom line. It will be interesting to see how Starbucks responds to these threats as its shares continue to trend lower in the medium term.

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A large shareholder has demanded that 99 Cent Only Stores (NYSE:NDN) institute a plan to buy back its own shares, halt any expansion plans and close unprofitable divisions, according to a Schedule 13D filing with the Securities and Exchange Commission on Friday. Shareholders are hoping that the involvement of an activist hedge fund will help turn around the company’s stock, which has been underperforming as of recent times.

Akre Capital Management, which disclosed a 13.4% stake in the discount retailer, sent a letter to the company’s board expressing frustration with its current state. Akre noted that operating profits have declined each year and the company is now nearing breakeven. Meanwhile, management has also made several “misguided” decisions like staying in Texas, accelerating store growth and retaining excess cash. Combined, these decisions have resulted in a poorly performing stock.

“We believe that management is charged with two primary responsibilities: 1)restoring the company to a healthy level of profitability, and 2) making prudent capital investment decisions with the company’s existing asset base, operating cash flow, and balance sheet reserves,” said Akre in the letter. “So far, after nearly three years of tenure, management’s record is poor on both of these accounts.”

Akre them proposed a “conventional turnaround plan”, which prescribes halting all growth, exiting unprofitable products and divisions, and focusing full attention on restoring profitability to the remaining business. Balance sheet liquidity is deployed by repurchasing depressed stock, and growth resumes when it can be funded out of restored operating cash flow.

“This time-tested conventional plan seems ideal for the company, so management should have a compelling argument for why they have chosen an alternative and more speculative plan,” said Akre. “Despite repeated requests from investors, management is unable or unwilling to explain its reasoning in quantifiable terms.”

In the end, this is great news for shareholders as it means that they could finally see change in the company. If the activist hedge fund is successful in instituting this turnaround plan, we could see the share price increase significantly over the next few months as the company focuses in improving its margins while returning excess cash to shareholders through a buyback. Combined, these factors make NDN a stock worth watching!

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EchoStar Holding’s (NDAQ:SATS) spin-off from EchoStar Communications (NDAQ:DISH) made a spectacular debut this week as investors hope that the breakup will help Wall Street assign more accurate values to the newly divided companies, especially their non-satellite operations. The transaction should also allow for better incentivization for employees, greater operating efficiencies, and better access to financing. Shareholders are hoping that these factors will help boost the share price of the new companies.

The new spin-off SATS is poised to close out the week with a market cap of around $2.9 billion after jumping more than 70 percent on its debut. This would more than compensated for the 5.5 percent drop in DISH shares and create a combined market cap of around $18.6 billion, compared to $16.9 billion before the breakup. This illustrates that value has already been created for shareholders by the spin-off – in fact, substantial value of over 10 percent!

Rumors of a possible AT&T buyout of the Dish Network made its rounds this fall, but this new spin-off all but diminishes that possibility. However, the rumored buyout may have given investors an idea of pricing after some speculated AT&T would be willing to pay upwards of $56 per share for the combined company. This would have valued it at roughly where it is at now, suggesting that the spin-off was a success.

In the end, this is all great news for shareholders who have already realized a substantial gain in their investment through the spin-off. Meanwhile, spin-offs themselves have been shown to outperform the overall market during their first few years as a separate company, which is only good news. Combined, these factors make SATS a stock worth watching!

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Target Corporation (NYSE:TGT) is facing mounting pressure from investors to improve returns, but it could come at the expense of bond investors. William Ackman’s Pershing Square disclosed that it now holds a 10 percent stake in the discount retailer and hinted that it may take action to unlock value for shareholders. The likelihood that these actions could weigh on Target’s balance sheet spooked many credit investors who believe that this is the wrong course of action.

Many credit investors insist that Target is best off cutting costs and preserving its cash in the face of increased economic uncertainty and earnings misses. This pragmatic approach would preserve the company’s liquidity and integrity while slowly turning it around. William Ackman, however, is working against the clock with large option positions and will likely push for more aggressive financial policies in order to boost the share price in the short term.

Pershing Square has already pressured Target to sell off its credit card assets, but this sale is no longer likely given the financial firms that would be potential buyers are struggling themselves. Meanwhile, the company has already instituted a $10 billion share buyback program that caused Fitch to cut its credit rating. Many now believe that the activist may be interested in leveraging the balance sheet in order to obtain cash for an increased share buyback or special dividend.

Pershing Square’s investment in Target is already deep under water – down nearly 50% thanks to Target’s weak stock performance. Ackman assured his investors that the stock is significantly undervalued, saying the stock could go to $120 in three years if the company completes the stock buyback, sells the credit card unit and explores a potential real estate transaction. Combined, these factors make TGT a stock worth watching!

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Reddy Ice Holdings Inc. (NYSE:FRZ) may face problems with its proposed buyout after concerns surfaced that GSO Capital Partners may not be able to obtain the financial needed from Morgan Stanley to complete the $1.1 billion transaction. Perhaps equally troubling is the low $21 million breakup fee that would give GSO Capital little reason to try and salvage the deal if things went bad. Shareholders also remain divided on whether the company would best be sold or kept under current management.

The news only adds to other bad news that has already clouded the deal. The management of Reddy Ice was hit by shareholder protests against the price spearheaded by players like Noonday Asset Management and Shamrock Activist Value Fund. Meanwhile, GSO announced that it would need more time to secure the financing necessary to complete the transaction given the current market conditions. And problems only compounded as the company missed its July earnings targets as the CEO and COO announced that he was leaving the company.

Unfortunately, there is little left to support a $25 share price short of a merger actually being consummated. It will be interesting to see whether or not GSO and the company can complete the transaction, otherwise shareholders will be left with an underperforming company that can’t sell itself and lost its CEO and COO. There appears to be only problems left with this stock now…

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Kellwood Company (NYSE:KWD) directors may have to fight for their jobs after private equity fund Sun Capital Parnters announced that it is considering a renewed bid to take over the clothing company through a hostile conditional tender offer. Kellwood rebuffed a previous offer of around $544 million, calling it too low without even putting it to a vote. Many shareholders are hoping that the move will go through and help boost shares from $17.59 today to over $21 in the event of a success.

Sun Capital’s new offer is expected to come in at the same $21 per share, but would include a key condition – the removal of a poison pill in Kellwood’s shareholder rights plan that prevents any holder from owning more than 20 percent of the company. The offer is also likely to be conditioned on the acceptance of a substantial enough portion of shareholders, in order to reduce the risk to Sun Capital of holding useless shares in the event that the move is unsuccessful.

So, what are the chances of success? Well, as we mentioned earlier there is a huge poison pill in place to protect the incumbent board. A vote of at least 75 percent is required to remove a director while only half of the board comes up for election in a given year. However, even if the bid proves to be unsuccessful, a large portion of shareholders voting against the company should send a clear message to the board that shareholders are unhappy with the company.

Overall, this is definitely a situation that is worth watching. If the private equity fund, which holds a 9.9% stake now, is able to garner enough support to increase their stake through a tender offer, we could see substantial changes aimed at unlocking shareholder value even further. It will be interesting to see how this one plays out…

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State Street Corporation (NYSE:STT) shares jumped today after the company announced that it is setting aside $618 million to cover legal expenses and other costs stemming from its fixed-income strategies. State Street decided to set up these reserves after several customers complained that subprime investments were made inappropriately, which the company acknowledged to a certain extent. Shares rose as many assumed the fallout would be much worse than was revealed.

“Some of our customers that were invested in the active fixed-income strategies have raised concerns that we intend to address,” said CEO Ronald Logue in a statement. “Nevertheless, we will continue to defend ourselves vigorously against inappropriate claims, including those that seek recovery of investment losses arising solely from changes in market conditions.”

State Street also announced that the CEO of the firm’s investment management division, William Hunt, would be stepping down and replaced by interim CEO James Phalen. The company did not detail the problems that caused the blow-up, but many are speculating that it was a result of stretching their money in order to boost returns through investment in subprime securities, commercial papers, and other risky investment instruments.

Shareholders applauded the fact that the company was able to sidestep most of the damages. State Street said it was on track to earn between $3.42 and $3.45 per share in 2007, which shows revenue growth of 20 to 22 percent – well above the range the company forecasted on October 16th. Combined, these factors make this a stock worth watching!

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Luby’s Inc. (NYSE:LUB) board of directors may be in trouble after a proxy advisor recommended that shareholders vote for three board candidates backed by the company’s largest independent shareholder. Ramius Capital, which owns around 9.6% of the company’s shares, nominated four directors in its quest to unlock shareholder value but the proxy group noted that three should be sufficient to influence the board to consider the issues.

Ramius Capital, an activist hedge fund, suggested that the company consider strategic alternatives, including selling real estate and leasing back the sites for its restaurants. The move could provide the restaurant chain with a massive cash influx that could be used to enhance shareholder value through buybacks or dividends. The move could help boost shares substantially after they have been hit by poor performance during recent months.

Proxy Governance, a proxy advisory firm, said, “We believe that, even in the event that they brought no new operational ideas or business strategies to the table, the dissident’s nominees would still offer a significant opportunity to shareholders in their willingness to consider governance changes at the company, something the current board has been reluctant to allow.”

Meanwhile, the Luby’s board urged shareholders to reject the offer, arguing that Ramius is attempting to masquerade as a corporate governance and restaurant industry expert while really focusing on short-term strategies designed to rob the company of operating cash flows and kill future growth prospects. This thinking likely stemmed from the fact that the hedge fund initially requested that the company put itself up for sale; however, the hedge fund insists that it would not use its director control to influence the company. Regardless, this is definitely a stock worth watching!

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