Sybase, Inc. (NYSE: SY) shares rose marginally after the software-maker agreed to to boost its share buyback program as part of an agreement with one of its largest shareholders. The firm announced a $300 million self-tender offer at prices between $28 and $30 per share and will use its best efforts to complete approximately $82.9 million in additional open market repurchases prior to the completion of their 2009 annual meeting. The shareholder, Sandell Asset Management, will in turn drop its bid to takeover the board and limit its future acquisition of stock. So, should you ad some Sybase to your stock portfolio?

Sandell Asset Management had been concerned about the company’s large cash position. Sybase noted that it had about $735 million in worldwide cash, with between $225 million and $250 million of free cash. However, restricted cash and long-term investments reduce this amount to around $700 million in available cash balance. Looking ahead, the company estimated that it would need working capital in the United States of about $85 million and $115 million outside of the United States. Clearly, this is excess cash that could be leveraged elsewhere to deliver value for shareholders rather than sit in a bank account.

So, is this buyback a good deal for shareholders? The current agreement calls for purchasing at a significant premium to the current market price. The premium currently stands at around 9.5 percent and could rise higher, since the additional $82.9 million buyback is not tied to a specific price. There are also many other benefits brought on by a share buyback program given that it will reduce the number of outstanding shares by over 10 percent. Since it was financed out of cash on hand and not earnings, the reduction should boost the earnings per share. Some of this may be priced into the stock, but it is still a benefit worth mentioning.

Sybase is also quickly turning itself around after being left for dead not long ago. The software-maker announced record earnings in 2007 with a 17 percent increase in revenues and 26 percent increase in net income, which indicates that it has been improving its profit margins. Meanwhile, the company is continuing to take a larger portion of the database market from competitors like Sun Microsystems who had the opportunity to acquire the company on the cheap not long ago! In the end, these factors all make SY a stock worth watching closely over the next few months!

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Ford Motor Co. (NYSE: F) is expected to announce sometime next week that its Jaguar and Land Rover brands are being sold to India's Tata Motors Ltd. (NYSE: TTM), according to a British union.

Though Jaguar and Land Rover are both currently owned by Ford, the U.K.-based brands continue to be largely manufactured there. Unite union spokesperson Andrew Dodgshon, said in an interview today that a sale may happen as soon as March 5. Ford already said back in January that Tata was the preferred bidder for the units.

Ford, the world's third biggest automaker behind General Motors (NYSE: GM) and Toyota (NYSE: TM), is selling Jaguar and Land Rover to focus on its core brands after losses of $2.67 billion last year and a record $12.6 billion in 2006. India-based Tata would expand outside the Asian auto markets through the acquisition of such well recognized brands.

More than anything, this sale will help Ford stabilize its financial situation by not only getting a cash influx of around $1.5 billion from the sale but by shedding Jaguar, which Ford has admitted is losing money.

Tata Motors is part of Tata Group, India's biggest conglomerate which includes steel production and consulting services. Tata built the first Indian-designed car and plans to build a $2,500 car later this year. The real importance of this deal in long-run is probably not a milestone on Ford's turnaround but rather a milestone on Tata's path to becoming a major automotive player worldwide. Given the advantages the Indian company has in both the cost of design labor and manufacturing labor, investors in other car companies should be worried.

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Google Inc. (NDAQ: GOOG) shares are down sharply today after new data from comScore was released showing a decline in the number of web users clicking on ads. The news prompted many analysts to cut their price targets and issue warnings as the vast majority of Google’s revenues comes from its pay-per-click program. However, others insist that these concerns over overblown and that the technology giant will be able to quickly recover thanks to stronger pricing. So, is this a time to sell Google stock or simply a good entry point while shares are cheap?

Google’s AdWords program faces a variety of challenges going forward. comScore reported that Google’s paid clicks dropped 7 percent in January from the previous month and were relatively flat with the same period last year. This is the lowest click-through rate since comScore started reporting the data. Google had indicated some concerns about paid clicks back in the fourth quarter, but blamed the slowdown on technical changes designed to reduce the number of accidental and fraudulent clicks by users. Some analysts believe that these technical improvements should lift conversion rates and lead to stronger pricing.

Google also faces a variety of other issues related to its pay-per-click business. Businesses bidding on keywords are quickly finding that many of them are now priced so higher that they are just breaking even upon conversion. This peak in keyword pricing means that Google’s revenue growth will likely begin to slow as the revenue-per-click peaks. Since this program accounts for around 90%+ of the company’s revenues, this almost certainly will lead to slower growth. Slower growth means a lower multiple, which means a lower stock price despite the same earnings.

Google is also dealing with increasing fraudulent activity. Some businesses are clicking on competition ads in order to raise their marketing costs and reduce their conversions. A recent report by ClickForensics found that 28 percent of all clicks were fraudulent, which is up from 19.2 percent in 2006. This compares to an industry rate of 16.6 percent, which may prompt some advertisers to switch their campaigns to Yahoo Publisher or MSN Adcenter until Google can fix the problem. However, it can be a hard problem to fix and so far Google has just been refunding money to keep advertisers happy.

In the end, Google faces a variety of problems with its primary source of revenues. The recent slowdown in paid clicks may be attributable to a broader economic slowdown, but the reality is that its other businesses will inevitably slow down as well. The stock has already dropped substantially off of its high as investors slowly come to this realization, but it may face further declines unless the company finds a way to incease or diversify its revenues. Combined, these factors make GOOG a stock worth watching!

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TLC Vision Corporation (NDAQ: TLCV) woke up to an interesting note from the founder and former chief executive of its arch rival LCA-Vision Inc. (NDAQ: LCAV)- he purchased 5 percent of the company and wants to be CEO! Dr. Stephen Joffe blasted the company for the more than 60 percent drop in TLCV’s shares over the past year, which he called “a self-inflicted wound” and “a byproduct of bad decision-making by the board and management”. The LasikPlus founder then proposed joining the board as executive chairman or chief executive to implement strategic and business model changes for the troubled company. So, is this a development that makes this stock one worth watching for your portfolio?

Dr. Joffe was one of the founders of the laser vision correction industry and was reportedly already in talks about joining the company to implement his strategy and effect a turnaround to restore value in the troubled franchise. These talks ultimately fell through and now the large shareholder is just trying to protect his sizable investment from poor strategy and capital decisions being made by the company. For example, recent Dutch auctions offered unhappy shareholders securities worth roughly three times the price of shares trade at today. The board accomplished this with an enormous mountain of debt and interest costs that could eliminate profitability for many years ahead.

Dr. Joffe also makes several other arguments in his letter to the board. Here’s a complete copy:

Thank you for calling me back yesterday, I appreciate your time and your effort to explain away the more than 60 percent drop in TLC’s shares over the past year. Frankly that loss in value is a self-inflicted wound–a byproduct of bad decision-making by the board and management.

On top of the list of ill-conceived judgments is the board’s decision to buy off many of its critics with a disastrous Dutch auction that offered unhappy holders roughly three times the price the shares trade at today. To accomplish this, management and the board burdened the corporation with an enormous mountain of debt and interest costs that could sharply suppress, if not eliminate, profitability for many years to come.

TLC is part of an industry that is still in its infancy. As a matter of principle, I want to see TLC succeed and prosper because of the life-changing difference it can make in the lives of patients.

Yet we are already more than 40 days into calendar 2008, and I seriously question whether TLC has the right strategy, the right people, or the right business model to survive and succeed in the years ahead. I am not the only major shareholder who is deeply disturbed by these concerns.

Currently I am still a significant holder of TLC’s shares, but unlike other troubled shareholders, I understand the economics and challenges of the laser vision correction business from the standpoint of a manager and operator. I founded LCA-Vision, TLC’s largest competitor, and as chairman and CEO I was directly responsible for that company’s enormous success, until my departure in February 2006.

Right now, my intention is to protect my already sizeable investment in TLC. Before the board’s abrupt decision to initiate the disastrous Dutch auction, we were in serious discussions about my joining TLC to oversee the turnaround. Consider this letter a formal request to renew those discussions. I believe all shareholders stand to benefit from my extensive experience as one of the founders of the laser vision correction industry.

Please respond 5:00 pm (eastern) on Monday the 18th of February 2008, to discuss my joining the company as Executive Chairman or CEO to implement my strategic plan to turnaround and rebuild this formerly valuable franchise for the benefit of all shareholders. I am available to speak with you throughout the upcoming weekend and can be contacted via email at xxxxx or by cell phone on xxxxx or xxxxx.

While I would prefer not to take this effort public, your failure to move forward will force me to take whatever actions are necessary to protect my investment and ensure a timely turnaround of TLC’s business.

In the end, this is great news for TLCV shareholders as Mr. Joffe is an experienced executive that has a lot to offer. Clearly, his involvement with their main competitor will yield valuable information while his turnaround strategy likely will not harm the company any more than it has already harmed itself. Given the unrest of many existing shareholders, the likelihood of his election to the board in the event of a fight are also reasonable high. Combined, these factors make TLCV a stock worth watching over the next few months!

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Take-Two Interactive Software, Inc. (NDAQ: TTWO) shares soared today after Electronic Arts Inc. (NDAQ: ERTS) offered to acquire the company for $26 per share, or about $1.9 billion, which is a 64 percent premium over the stock’s prior closing price. The video game maker rejected the offer, calling it a “highly opportunistic” attempt to take advantage of the upcoming release of Grand Theft Auto IV set for April 29th. The company said that it would resume buyout talks after the game’s release, but EA fired back that there can be no certainty in the future that any buyer would pay the same high premium being offered today. So, is this a stock worth watching for your portfolio or is the stock now grossly overpriced?

Activist hedge funds have been pushing Take-Two towards a sale for some time now amid poor financial results, accounting problems, and controversy surrounding violent and sexual content in the company’s games. These hedge funds, which own a combined 46% of the company, were successful in forcing the company to evaluate a sale last March but nothing came of it. Then, billionaire activist Carl Icahn joined the fight back in November - a great invesment in today’s terms! These activists now likely own more than 50% of the company and will definitely vote in the best interests of shareholders if a serious offer is made for the company. They will also take action if the company decides to ignore great bids.

The other key point within this story is that the $26 per share offer was the second one made by EA. The first $25 bid was rejected and never presented to shareholders for reasons unknown (maybe it wasn’t material enough?). This is important because it could mean two things: (1) There are other unannounced potential bidders for the company, and (2) there is a good possibility that the company could hold out for another sweetened offer. Often times, initial offers are low-balled at first to gauge interest and then built up until it meets investor demands. Clearly, EA is interested in Take-Two’s hit titles and it will be interesting to see how much they are willing to pay for them.

Hank Greenburg also points out another interesting point to this story. Electronic Arts sent a letter to Take-Two not long ago arguing that it faces ongoing financial, legal and operating issues and a very intense competitive environment. In fact, EA even said that it would be increasingly difficult for the company to create sustainable shareholder value while it remaisn exposed to considerable risk of value loss. Just recently, EA also commented that once GTA IV ships, Take-Two will again be dependent on less-popular titles and face increasing challenges to compete with larger and better-capitalized competitors. So, all of this begs the question of why they are interested in the company at all?

In the end, it will be interesting to see how activist shareholders respond to this rejected offer given their new found wealth. Investors can bet that they will take action if they believe that the offer represents a fair price in order to unlock value. This is why shares are currently trading above the $26 per share buyout price and why many are so bullish on the stock. Combined, these factors make TTWO a stock worth watching!

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Reddy Ice Holding Corporation (NDAQ: FRZ) directors may be in for a fight after a large activist hedge fund has nominated its own slate of directors while quickly ramping up its stake in the company. The Shamrock Activist Value Fund announced its slate of candidates for the company’s board of director earlier this month while increasing its stake to more than 14.38 percent in recent days. Many investors are hoping that the activist hedge fund will take action to unlock value in the company, whose shares are trading well off of their 52-week highs and well below their intrinsic valuation. So, is Reddy Ice a stock worth watching for your portfolio given this activist involvement?

Reddy Ice announced at the end of January that its proposed acquisition by GSO Capital Partners had been cancelled due to the ongoing problems in the credit markets. Shamrock had called the $31.25 per share buyout price “grossly inadequate” and suggested a potential conflict of interest existing between the company executives, some board members, and the hedge fund. The company said it will continue to explore transactions with GSO and review other alternatives available to the company. It is unclear whether Shamrock’s attempt to takeover the board is an attempt to prevent a takeover or an attempt to sell the company to a higher bidder. However, shares continue to rise ahead of the anticipated proxy fight.

Reddy Ice is set to release its financial results on Wednesday, February 27th along with a conference call to discuss results. Many investors are expecting to see slightly lower results for the fourth quarter after the company guided lower three times since July of last year. Most recent estimates peg the full year revenues to be between $335 and $345 million and net income to be between $14.8 and $19.7 million or $0.66 to $0.90 per share. Adjusted EBITDA is seen to be between $85 and $90 million. Meanwhile, many analysts were expecting revenues of $351 million with net profit of $15.9 million and EBITDA of $86 million. It will be interesting to see how its actual results compare given the difficult market conditions.

In the end, this is all great news for Reddy Ice shareholders who stand nothing to lose and everything to gain from Shamrock’s involvement. If the hedge fund is able to install its own directors and conduct a real auction of the company, shareholders go see a substantially larger upside to this company. Obviously, there is value to be realized from this point given GSO’s valuation of $1.1 billion while the company is currently priced at just $541 million with no material change. Combined, these factors make FRZ a stock worth watching closely over the next few months!

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Apple Inc. (NDAQ: AAPL) shares fell sharply today amid increasing concerns that it will not meet its sales goal of 10 million iPhones this year. Meanwhile, reports also surfaced that a growing number of unlocked phones are being used on other carriers and hurting its revenue share with AT&T Inc. (NYSE: T). The new product only accounts for a small portion of the firm’s revenues this year, but analysts are predicting that it could account for upwards of a quarter of its revenues during the next four years. So, are these problems that Apple can overcome or are they in some serious trouble?

Apple is facing two large problems with its iPhones. First, there are reports of illegal shipments of exported iPhones returning to the United States and being sold for far less. It is believed that Apple generates approximately $100 per sale in the United States, but this development drops that number far lower. Secondly, there are an increasing number of unlocked iPhones that are causing the company to lose out on revenue from carrier partnerships. It is believed that Apple generates more than $200 in gross profit over the life of the phone through such arrangements. Reports have shown that over a million such unlocked iPhones have hit the market since the product was released.

The question shareholders have to ask is just how much the iPhone is worth to Apple. Shares began at around $85 per share when Steve Jobs first announced the new phone before dropping more than 40% of their value from their peak. This drop has many analysts believing that the stock is undervalued, especially given its strong free cash flow generation. Other suggest that negative news surrounding the iPhone and iPod will only make things worse before they get any better. And finally, there are some that are concerned about the rising cost of the iPhone as it could hurt sales of the legitimate copies while encouraging more consumers to seek illegal imports.

In the end, Apple shares will likely be volatile over the coming months as investors try and sort out the true impact that these events have on sales. It will be interesting to see if Apple decides to eventually drop its costs in order to encourage more buyers and take advantage of its lucrative carrier partnerships. Meanwhile, there seems to be no slowdown in unlocked iPhones. However, as the iPhone goes more mainstream, it will be consumed by less tech-savvy people that will be less likely to purchase and use an unlocked iPhone. Combined, these factors make AAPL a stock that is definitely worth watching over the coming months!

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Motorola Inc. (NYSE: MOT) shares are under pressure after few buyers appear to be interested in its handset business. The division has been on the auction block for three weeks and top vendors Nokia Corporation (NYSE: NOK), Samsung Electronics, and LG Electronics have all expressed zero interest. This has many investors concerned that the great Carl Icahn may have over-estimated the unit’s value. This has pushed the stock down below $11.50, a level not seen since Carl Icahn first took an interest in the company. So, is this a stock worth watching at these levels?

Motorola’s prospects may look bleak, but not everyone is convinced that the company is in trouble. Many long-term investors insist that one bad year on the design side doesn’t necessarily mean it is in serious trouble. Others believe that the company would still represent a great value for someone who wants to step into the wireless arena. And what about the lack of interest for the handset division? There are some that believe buyers are worried that the products may not be worth as much without the Motorola logo, which means that it is simply an “integration decision” rather than a “financial decision” not to buy.

Billionaire Carl Icahn also continues to count himself among the bulls on the stock. The activist investor insists that the handset division is worth $19 billion and needs to be separated in order to attract top management. This valuation is equal to the divisions sale’s last year and compares to Motorola’s total market value of $25.7 billion. The actual valuation of the unit can be debated. It produced one in every three cell phones within the U.S. market last year, but it did so with losses totalling $1.9 billion. Meanwhile, there are already signs that carriers are beginning to feature more phones from other competitors.

In the end, this is bad news for Motorola shareholders. A prolonged search process only further damages the prospects of the division as many more analysts are switching to a “sell” on the company. Shareholders can count Carl Icahn on their side, however, who may opt to take more drastic measures and call for a spin-off, private equity buyout, or other method to unlock the value in the unit. Regardless, this is definitely a stock that is worth watching over the next few months!

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Financier Carl Icahn, now worth more than $14 billion, disclosed in a 13G filing today that he now owns slightly more than 5% of the manufacturer Keystone Consolidated Industries, Inc. (OTC: KYCN). Though the nature of the filing indicates Icahn only has a "passive" investment in the company, news of his position sent the stock up over 5%.

Keystone is "a manufacturer of steel fabricated wire products, welded wire reinforcement, coiled rebar, industrial wire and wire rod for the agricultural, industrial, construction, original equipment manufacturer and retail consumer markets" in the U.S. The company is small, with a market capitalization of only $100 million, and its reputation hasn't fully recovered from filing for bankruptcy protection in 2004.

On paper, Keystone has been performing quite well recently with $57 million in net income for 2006 on $440 million in revenue - the company has a P/E of only 1.5 as the stock is hovering around its 52-week low price.

The company does have $360 million in total liabilities that are anchoring its stock price, but Keystone seems to be taking serious steps to become more robust. It just recently announced a reduction in its salaried workforce as well as $25 million in additional shares available to existing shareholders, the proceeds of which will be used to reduce the balance of its expensive revolving credit line.

Icahn certainly has a stellar track record, and his vote of confidence in Keystone, like his confidence in J.C. Penny, definitely makes it worth watching closely.

Icahn's Portfolio
BEA Systems (BEAS)
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J.C. Penney Company, Inc. (NYSE: JCP) reported a steep drop in its fourth-quarter net income yesterday, citing weaker consumer spending. The middle-market retailer was forced to increase its promotional levels and in-season clearance activities to retain revenues, but profits dropped on the lower margins. The company also projected first-quarter and fiscal-year earnings largely below analyst expectations. Luckily, the news came as little surprise to shareholders who were expecting heavily losses, and shares actually moved up on the day. So, with such low expectations, is J.C. Penney a company worth looking at going forward?

Retailers always suffer during cycles where consumer spending falls, but they quick jump back when things return to normal. The big question becomes when a return to normalcy will occur. Consumer spending was hit thanks to declining housing prices due to the subprime collapse. Many consumers were tapping their home equity line of credit to pay off credit card bills, so when that source of funds dried up spending began to slow. Meanwhile, foreclosures, defaults, and bankruptcies are continuing to rise as consumers have no way out of debt. This has caused the securities for these instruments to also fall dramatically in value. Combined, these factors have led to the tough market and low levels of consumer spending in recent months.

Billionaire activist investor Carl Icahn quietly amassed a huge stake in J.C. Penney that was revealed earlier this month. The exact size of the stake is unknown, but sources close to the situation say it is among his top five holdings. The activist investor is known for building stakes in undervalued companies and then taking action to unlock that value through sales, spin-offs, and restructurings. It is unclear what his plans are with J.C. Penney, but he clearly believes that the stock is undervalued. This follows similar rhetoric from other activists like Bill Ackman on Target Corporation (NYSE: TGT). It appears that many now believe that the retail sector is undervalued and are buying up substantial stakes.

It is impossible to deny that many retailers like J.C. Penney are trading at a substantial discount to their past valuations. J.C. Penney is trading at just 9.39x earnings and 13x forward earnings - a cheap stock by any account. In the past, this company has traded with a ratio upwards of 20x. This means that purely on a valuation basis, the stock is 50% undervalued! Many also insist that the breakup value of the company also exceeds its market price, which makes it a fail-safe investment. In the end, these factors make JCP a stock worth watching over the next year or so!

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