MBIA Inc. (NYSE: MBI) may now hold the record for the world’s longest conference call, which came in at something near four hours with more than 200 questions thrown at the troubled bond insurance company. Luckily, it paid big dividends as shares rose more than 30% from an opening level of $11.80 to $15.90. The marathon call came after activist investor William Ackman sent a long letter detailing problems facing bond insurers and MBIA and Ambac in general. Shareholders are now bullish on the stock once again, despite a negative credit watch from the S&P.

MBIA’s main point seemed to be that the credit-default swaps that they write don’t behave the same way that credit-default swaps that banks write. Notably, they cannot be accelerated, except by the firm, which means that any claims will trickle out rather than be all subjected to be paid at once. However, even if the have liquidity concerns under control, that doesn’t mean there won’t be problems with solvency. Many also saw the CFOs attempt to showing lots of excess capital unconvincing as he was forced to guess (like everyone else) at the level of capital that ratings agencies would require going forward. However, he did say (perhaps ironicaly), “It is virtually impossible to imagine a circumstance under which MBIA would become insolvent.”

Many continue to wonder how a company with a market cap of $2 billion that just announced that it lost $2.3 billion last quarter was able to have its share price soar as a result. Some are speculating that it could be a short squeeze while others. The CEO insisted that MBIA would not get taken over by New York State regulators because it would have to be insolvent and the company said it would show excess capital of billions above NYS’s capital requirements. However, the accuracy of these and other statements and the health of MBIA remain to be seen. Regardless, this is definitely a stock worth watching!

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Google Inc. (NDAQ: GOOG) shares fell today after the company announced disappointing fourth quarter earnings showing slower growth than analysts predicted. The search giant earned $4.43 per share on revenue of $3.39 billion compared to analyst expectations of $4.44 per share on revenues of $3.45 billion. The company continues to feel the heat from rising traffic acquisition costs and operating expenses that are putting pressure on its margins. Shareholders sold on the news sending shares down more than 9 percent in early trading.

Google’s traffic acquisition costs have been increasingly lately due to the rising guaranteed payments the company owes through advertising deals to MySpace, Ask.com and others and without operating leverage. There is also larger concern that online ad spending may be hurt by any recession in the United States and abroad. Since Google derives the vast majority of its revenues through Google AdWords, this could spell trouble for the company. And finally, there is also the rising concern over declining keyword costs that has affected the entire industry as it matures.

Google is taking some steps in the right direction, however. First, the search giant is finally starting to control its head count by hiring just 6% over the third quarter. This was a major problem last year that is one of the culprits behind its high operating expenses. Secondly, Google generated more than 50 percent of its traffic internationally and there has been substantial improvement in the international markets that should drive pay-per-click growth.

In the end, there are no short-term catalysts that will help Google so investors may want to shy away from the stock until things improve. It will also be interesting to see how a combined Microsoft-Yahoo will affect the search giant that currently commands a 58% market share. Combined, these are all factors that make Google a stock worth watching!

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Yahoo Inc. (NDAQ: YHOO) shares are up over 40 percent today after Microsoft Corporation (NDAQ: MSFT) revealed a $31 per share friendly takeover offer for the troubled web portal. The cash-or-stock proposal represents a 62% premium to the closing price of Yahoo shares yesterday - a compelling value by any financial measure. Microsoft believes that this combination would enable them to better capitalize on web and display advertising trends. Shareholders applauded the deal sending share substantially higher, but still left some room for opposition.

“Microsoft’s consistent belief has been that the combination of Microsoft and Yahoo clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers,” said Microsoft in their letter to Yahoo. “We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company with exceptional display and search advertising capabilities.”

The offer comes at an opportune time as Yahoo shares have been beaten down and many have lost faith in the company. Shareholders have been looking for an exit strategy that has clearly presented itself in the form of a cash-rich buyer like Microsoft. Meanwhile, employees have been looking for new direction and job security, and Microsoft has already promised “significant retention packages” to “engineers, key leaders and employees across all disciplines”. The offer is also a great deal for Microsoft as Yahoo shares are available at bargin basement prices!

A combined Microsoft and Yahoo would have revenues of $65 billion per year with net profits of around $17.6 billion per year and about 90,000 employees. Perhaps most importantly, it would command a 32.7% marketshare in the U.S. search industry. This is still behind Google’s 58.4% by a wide margin, but it does represent a substantial step in the right direction. Microsoft’s more organized culture, cash in the bank, and talented engineers may be just what Yahoo’s technologies need to get off the ground and compete.

In the end, there is still a lot of question as to whether this deal will even go through as planned. Yahoo’s Terry Semel stepped down from the board yesterday, presumably because of this deal taking place. Whether it was in protest or because he felt it was a “sure thing” remains to be seen, but many shareholders are also likely to oppose an acquisition at such historically low levels. However, many others are simply looking for an exit and may take up Microsoft stock to benefit from future growth. Regardless, this is definitely a situation worth watching!

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