Syms Corp. (OTC: SYM), which delisted its stock in mid-January and plans to deregister tits shares in April, may find itself in court with two activist shareholders as a result. Barington Capital and Esopus Creek Advisors, who collectively own 9.8 percent of the company, sued Syms alleging that its directors broke their fiduciary duty to investors by enabling the company to delist. The activists are also seeking a copy of the company’s shareholder list, presumably to see if others are interested in joining the lawsuit.

“The group believes that such actions will destroy shareholder value,” said Barington and Esopus in a letter to the board. “Since the Company announced on December 21, 2007 that it was delisting and deregistering its shares, the price of Syms’ stock has fallen by over 42%, destroying over $104 million in market capitalization.”

Syms countered the argument by saying that investors will still be able to buy and sell shares on the pink sheets, while the company will save $750,000 per year in costs associated with being a listed company. The company also indicated that management will be better able to focus its attention and resources on continuing to improve operations and enhance shareholder value.

Many shareholders, however, are convinced that the real motive behind the delisting is to lower the stock price enough so that management can complete a management-led buyout at an inexpensive valuation, leaving shareholders in the dust with nothing to say for their investment. There is speculation that this has long been a consideration of store founder Sy Sims.

Barington and Esopus have begun registering their shares in their own name in order to prevent this process. If the company has more than 300 shareholders on record, then it cannot deregister itself without approval from the shareholders. As a result, the two activists are encouraging other investors to do the same before it is too late and the value of their investment is lost.

In the end, this is an interesting story that is worth following. If the activist investors are able to hold off any deregistration, the company may decide that it is best to relist and deal with the costs rather than remain traded on the OTC markets. This may cause a jump in the share price if the stars align. Combined, these factors make SYM a stock worth watching!

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Mortgage insurance stocks have been a rollercoaster ride in recent days amid speculation that some may be going out of business while others would be poised to take over entire markets. Good news from bond insurers led to broad increases yesterday, but bad news beat PMI stocks back down to reality today. The mortgage meltdown is far from over and the future of these companies remains uncertain.

MGIC Investment Corporation (NYSE: MTG) shares hit a 15-year low after dropping more than 30 percent today. The nation’s largest mortgage insurance company announced that paid losses could reach $2 billion this year as it struggles to accurately forecast its losses amid the mortgage meltdown. The company is struggling with not only a dramatic increase in delinquencies, but also an increase in the cost of each claim as fewer delinquent homeowners are resuming payment.

Home buyers typically purchase mortgage insurance from companies like MGIC when they put down less than 20 percent of their home’s value, which makes most of their customers those with exotic mortgages (the ones that don’t require huge down payments). MGIC said it had 107,120 delinquent loans by the end of 2007, which is a 16,000 loan increase from the end of the third quarter. Clearly, there is still trouble in the housing market that is only likely to continue.

The PMI Group, Inc. (NYSE: PMI), another major provider of private mortgage insurance, also saw its shares decline more than 15 percent today after the bad news from MGIC. Interestingly, the stock soared yesterday after bond insurers Ambac and MBIA announced that they don’t expect to pay as much as they expected in claims and that the value of their assets is far higher than the market initially believed. Unfortunately, this may not ring so true for mortgage insurers as compared to bond insurers.

In the end, the mortgage markets are still in freefall as foreclosures continue to rise and delinquencies continue to increase. Mortgage insurance companies made the mistake of insuring risky loans with exotic mortgages, and that decision is likely to cost them going forward. Nobody knows the extent of the damage yet, but it may be wise to stay away from these companies for now!

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Motorola, Inc. (NYSE:MOT) shares fell over 20 percent today after the company posted a disappointing operating loss in the current quarter due to continued weakness in its cell phone business. The mobile device maker warned of further market share losses this quarter and backed off its forecast for its mobile devices division to return to profitability during 2008. Shareholders are now questioning whether the company will be able to pull itself out of its current downward spiral and turnaround its cell phone business at all.

The news is likely to disappoint activist investor Carl Icahn, who has amassed a four percent stake in the company. The billionaire investor continues to insist that Motorola shares are undervalued with the cell phone business showing no value at all. As a result, he contends that the company should spin-off the cell phone business from the rest of the businesses in order to unlock value for shareholders. Unfortunately, now may not be the best time as a turnaround is expected to take much longer.

However, Motorola’s cell phone business may prove difficult to turnaround. They are losing market share, which makes them smaller, which makes them less competitive on costs, which makes their phones less compelling, which loses more market share. In other words, the company is likely to see its margins on cell phones shrink, which may force it to raise prices. This will only cause problems, particularly in our current economic condition where consumers are pinching pennies.

Right now, Motorola executives say they are focused on cutting costs and getting the mobile devices business back to profitability. Meanwhile, shareholders may be beginning to regret not putting Carl Icahn on the board of directors when they had the chance not long ago. For now, they will have to remain content and deal with a dropping share price.

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Sprint Nextel Corporation (NYSE: S) shares dropped over 25 percent last week after the company announced major layoffs of 4,000 workers and the closing of approximately 125 stores in order to cut costs by $700 to $800 million per year. The telecom giant deemed these measures necessary in order to offset the loss of approximately 885,000 subscribers. Now, there is speculation that the company might be on the verge of a price war designed to win back some of its customers from rivals.

Sprint has already taken several steps towards repositioning itself for profitability. New chief executive Dan Hesse has already begun selecting a new management team and put a freeze on the company’s cash-drain WiMax initiative. The telecom giant is also reportedly considering a speed-up of the network migration of Nextel’s iDen users to CDMA in order to pave the way for a potential sale of the iDen Network itself. And finally, Sprint is also reportedly considering an overhaul of its pricing plans in an effort to win back customers that it had lost so quickly to rivals.

The cellular phone industry is a unique one in that it has never experienced price cutting in the past. Traditionally, companies have resorted to increasing minutes and features while keeping the price point extremely fixed. Now that more than 2/3 of all US citizens own a cell phone, competition has become a bit more stiff and price-cutting may be the only way left to win back customers. There is even some speculation that the company could adopt a fixed-rate unlimited-usage program similar to that of Leap Wireless or MetroPCS – a move that would surely upset other large telco players.

Sprint’s botched merger with Nextel has led to a mass exodus of its users to both AT&T (NYSE: T) and Verizon Wireless (NYSE: VZ), which have both shown substantial increases in subscribers over the past year and are expected to show the same later this month. Any price cutting could be as damaging to the cellular industry as it was to the movie rental business – but it may be the only option remaining…

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Getty Images, Inc. (NYSE: GYI) shares spiked nearly 15 percent today after the company announced that it would explore strategic alternatives, including a potential sale of the company. The digital photo service is reportedly asking for $1.5 billion – or $25 per share – and has many analysts speculating as to whether a potential buyer would even be able to obtain financing in this environment. Shareholders are hoping that the move could draw bids from two private equity firms that are reportedly interested.

Getty Images hired Goldman Sachs as its advisor in a process that is set to end by the end of the month. The move comes after the firm’s shares have declined more than 45 percent over the last year due to competition from low-cost rivals. Currently, Getty Images owes most of its growth to recent acquisitions like iStockPhoto.com, which is expected to bring in $83 million in 2008 alone – not bad for a company they bought for $50 million in 2006! The company has also engaged in cost-cutting measures designed to increase its attractiveness, including layoffs amounting to 5 percent of its workforce.

Interestingly, the $1.5 billion asking price would only be an 11 percent upside to the company’s $1.36 billion enterprise value (market cap plus debt less cash). This has some shareholders and analysts concerned that the company is not asking for enough. The attractive valuation has also apparently piqued the interest of Bain Capital – a firm founded by presidential candidate Mitt Romney – and the famous Kohlberg Kravis Roberts (KKR), who are reportedly mulling a bid.

Overall, this is a strong company that is waning slightly in today’s troubled markets. Whether or not any of the discussions will result in a bid remains to be seen, but this is definitely a stock worth following in the meantime!

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IncrediMail Ltd. (NDAQ: MAIL) shares jumped over 20 percent in early trading today after the company announced that Google Inc. (NDAQ: GOOG) agreed to reinstate the advertising agreement between the two companies. The e-mail company received notice that it was banned from Google’s AdSense program last week, which sent shares spiraling downwards. Now, the company said it is cooperating with Google with the goal of resolving any remaining compliance issues.

IncrediMail’s quarterly and yearly results are likely to be adversely affected by this Google AdSense downtime, but a reinstated contract is definitely good news after such a short time. In a previous article, we speculated that the company would either reinstate AdSense or find a similar advertising program very quickly as it is a very liquid marketplace. We suggested that the stock price would likely rebound once they had re-established this agreement as it did today.

Ultimately, shares dropped over 45% after this problem began and have only recovered around 20%. The earnings for next quarter may be hurt, but it is unlikely that the damage would justify a 25% reduction in the company’s market capitalization – especially since we know it is a short-term, one-time issue. While the argument to buy is not as strong now as it was before this announcement, it still appears as if IncrediMail is a stock that was made cheaper by a relatively non-material event. Combined, these factors may warrant a second look at this company!

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Zale Corporation (NYSE: ZLC) board members and management may be in for a shake up after former SEC chairman and activist investor Richard Breeden upped his stake in the company and announced his intent to make some changes at the jeweler. Many shareholders are hoping that the activist can help unlock value in a stock that has dropped from a high of $30 per share earlier this year to its current $14 per share.

“We believe that there are major opportunities for Zale to strengthen its profitability and its market value. We are excited to join with the board and the Zale management team in pursuing those opportunities with vigor and immediacy,” said Mr. Breeden in a statement.

Richard Breeden, who now owns more than 18% of Zale, also announced that he would take two seats on the board with a third one going towards an independent director. The move comes as Zale shares continue to fall after an ill-fated decision to convert Zale stores to upscale locations, which alienated many of its customers and suppliers.

Zale recently announced that it has approved several changes, including the sale of its high-end Baily Banks & Biddle stores and the closure of 60 underperforming stores in the next 90 days. Other believes that the company may be considering strategic alternatives such as a sale but it could be a far-fetched conclusion. Now, with Breeden’s involvement, these rumors have begun to surface yet again.

Overall, it remains unclear what Breeden’s plans for the company are, but we do know that he is an experienced activist investor that is more than capable of unlocking value in his investments. With an open management and board, along with two board seats, it will be interesting to see what actions he takes. Combined, these factors make ZLC a stock worth watching!

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Hewlett-Packard Company (NYSE: HPQ) shares are up marginally after Gartner and IDC released preliminary results for the fourth quarter showing HP and Dell Computers (NYSE: DELL) tied for the top market share. The computer manufacturer showed an overall growth of 14% with net revenues of $104.3 billion in fiscal 2007 with a large portion of its revenues coming from overseas. This has many investors and analysts believing that HP could be a recession-proof technology play.

HP has been very strong globally despite a slowing U.S. economy with 67% of its total revenues coming from outside the U.S. In the fourth quarter, the company saw Asia-Pacific revenues increase by 20%, EMEA by 19%, and Americas by 10%. Meanwhile, BRIC countries grew 37% year-over-year in the fourth quarter and accounted for 9% of total revenue.

The strongest revenues were seen in its personal systems group followed by its imaging and printing group and enterprise storage and services group. Meanwhile, the fastest growing group continues to be its software group, which saw growth of 74%; however, it only accounts for around 2% of total revenues. And HP’s service revenues came in second by growing around 12% to $2.3 billion.

CEO Mike Hurd is largely to credit for this huge turnaround for HP after cutting around 15,000 jobs and expanding into India and China. The strategy is expected to pay huge dividends this year as the U.S. economy is expected to grow just 1.9% versus 2.2% last year, according to the World Bank. Meanwhile, China is expecting to grow 10.8% and India is expected to grow around 8.4%.

Currently, HP’s stock is trading at around $44 per share with a market cap of around $112 billion. The drop in the stock is mostly due to macro-economic issues in the United States. This may be a great long-term buy-and-hold opportunity for value investors looking to take a position in a recession-proof company. In the end, HPQ is definitely a stock worth watching!

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Nintendo Co., Ltd’s (OTC: NTDOY) Wii consistently outperformed other major consoles in 2007 and is expected to do the same this year. The console-maker expects to sell more Wiis this year than it did in 2007 and has raised its production twice to 1.8 million units a month – still not enough to satisfy demand as they continue to sell out soon after hitting store shelves. Shareholders remain bullish on Nintendo stock, which has nearly doubled over the past year.

Video games remain the one bright spot in an otherwise rough retail sector. The success of Nintendo’s Wii along with Microsoft’s (NDAQ: MSFT) “Halo 3” title led to more video games being sold in 2007 than any other year, with sales hitting $17.94 billion. This number is up 43% from $12.53 billion in 2006. And December – the most disappointing month for traditional retail – saw sales up 28% year-over-year. It appears that video games sold well despite consumers cutting back on spending in other areas.

Nintendo’s most successful product last year was the Nintendo DS, which was the year’s best selling gaming system with over 8.5 million units sold. The Wii managed to sell 6.3 million units despite being in short supply all year. Interestingly, Nintendo has decided to hold the production on the Wii at 1.8 million units a month despite selling out nearly every run. Whether this is a good move or a bad one remains to b e seen.

Meanwhile, the two largest players in the industry continued to slide. Microsoft’s Xbox 360 sold only 4.6 million units in 2007 with the help of their blockbuster title “Halo 3”. Meanwhile, PlayStation lagged behind the rest by failing to break even a million sales despite its blockbuster franchise hit “Guitar Hero”. Sony recently announced a cheaper line of consoles in order to help them better compete in the market against the Xbox.

Overall, the video game industry appears to be immune to any slowdown in consumer spending. Right now, hardware sales are growing faster than software, but all companies in the sector are worth watching. Nintendo remains a pure-play that is experiencing the greatest success, so may definitely be worth a second look!

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Tiffany & Co. (NYSE: TIF) shares may be well off or their 52-week highs but that isn’t discouraging one large activist investor from building up a sizable stake and banking on a turnaround. Shares in the jeweler rose almost 3 percent today after Nelson Peltz’s Trian Fund Management raised its stake in Tiffany from 5.54% to 7.9%. Shareholders are hoping that the activist investor can take action to help the company turn itself around and restore confidence.

Nelson Peltz is well known for his involvement in companies like Wendy’s International (NYSE: WEN) and H.J. Heinz (NYSE: HNZ), which rose 38% and 22% respectively since his involvement. In both instances, he took actions designed to unlock value by shedding certain business units and improving operating efficiency. Many are hoping that the activist can do the same for Tiffany’s, which has been struggling in a tough retail environment with sinking margins.

Tiffany’s recently announced overseas sales that were more robust than domestic sales with an 18% increase in net income in Europe and a 30% increase in Asian-Pacific countries. However, these numbers failed to impress the market who were looking for something more – shares plunged from around $40 per share to below $34 per share earlier this week.

In the end, Tiffany’s is a stock that is clearly in need of some help. Nelson Peltz is well known for taking action to unlock hidden value within companies and many shareholders are hoping that he will do the same for this company and help shareholders turn around their investments in the company. Combined, these factors make TIF a stock worth watching!

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