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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