As reported here Wednesday, Take-Two Interactive Software's (NDAQ: TTWO) board rejected Electronic Art's (NDAQ: ERTS) most recent buyout offer, saying that it was not in the best interest of shareholders. Instead, the company also confirmed that it would explore strategic alternatives to maximize shareholder value in other ways that could deliver a higher value than the current $2 billion EA offer.

In a strange move today, however, EA extended its $2 billion, or $26 per share, offer by a week while adding that a “poison pill” provision adopted this week by Take-Two be canceled or at least not apply to its current takeover attempt. A poison pill is a mechanism whereby new shares are issued in the face of a hostile takeover, thus raising the price of a takeover or making a takeover simply unfeasible.

EA's announcement is odd because it is acting as if Take-Two was pursuing it, not the other way around. "The actions of the Take-Two board may increase the risk for their stockholders by delaying a potential transaction," EA's Senior VP of Corporate Development Owen Mahoney said in a statement. "We continue to believe that our $26 per share offer price is full and fair, and that a transaction between Take-Two and EA is the most compelling combination financially, strategically and operationally for all parties."

EA's offer was set to expire on April 11, but now will remain on the table until April 18. Even so, Take-Two has continually said the price is too low, especially with a new release of its immensely popular “Grand Theft Auto” game coming up.

Take-Two Chairman Strauss Zelnick said the poison pill provision was instituted to "ensure that the Take-Two board has adequate time to consider all strategic alternatives for maximizing value for Take-Two stockholders. The agreement will not, and is not intended to, prevent a takeover of the company on terms that are fair to and in the best interests of all stockholders." In other words: EA's offer is too low, so we are going to do everything in our power to kill it or drive the price up.

Today's announcement by EA really is nothing more than a PR ploy that does nothing to change the likelihood of a deal at the current $2 billion price. The announcement is good news from the perspective of a Take-Two shareholder because it is clear EA has continued interest in the deal, and if EA really wants to get a deal done it is going to have to be at a price above $26 per share.

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Captaris, Inc. (NDAQ: CAPA) may be able to efficiently manage business data, but a strategic review of its own company is another story. Private equity firm Vector Capital offered to acquire the software company for $4.75 per share just last week, but the deal fell through after the company failed to take any decisive action. Now many shareholders are left wondering whether any deal will be done at all.

The news of Vector's offer came just a day after Captaris announced that it received unsolicited inquires from multiple parties about a possible transaction. The company then worked to establish a special committee of independent directors to evaluate strategic alternatives. It also hired RBC Capital markets as its financial advisor to help explore its options.

The problem came when the Captaris refused to accept a generous offer from Vector. The private equity fund was willing to sign an acquisition agreement that would allow the company to continue shopping for other higher bids while reimbursing them up to a million dollars for any legal expenses. Since many auction processes fail, this would provide investors for a fail-safe premium.

Unfortunately, Captaris rejected the offer for some reason. Vector immediately came out saying that it was "extremely disappointed" by the company's refusal to engage in meaningful discussions over their offer. This is especially true since many other large investors, including hedge fund Emancipation Capital, came out in support of the generous acquisition agreement.

"Our offer represents immediate and certain value, does not preclude the continuation of [the company's] exploration of other strategic alternatives, and thus would clearly be in the best interests of all Captaris shareholders," Vector said.

Emancipation Capital supported this notion and urged the company to move forward in signing the acquisition agreement. The hedge fund noted that by entering into the agreement, shareholders are assured of a price premium and have a reasonable shot at a higher offer without the risk of a failed auction. It also suggested that the company seek a higher price from Vector as a condition of the agreement as well as a lengthened go-shop timeline.

Captaris responded blandly yesterday by encouraging Vector to participate in its process of reviewing strategic alternatives on a fair and equal basis with other potential bidders. It also noted that it would evaluate any offer from Vector "on an equal footing with proposals from other interested parties." Today, Vector announced that Captaris has gone ahead and rejected the bid.

The move has many shareholders wondering just what happened. The only justification could be a substantially higher offer in the works by another party interested in acquiring the company. But then, why would it refuse entering into what would essentially be a standby offer? And why wouldn't it seek a higher bid instead of simply rejecting the offer? These are all questions that many shareholders are now looking to have answered.

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Motorola Inc. (NYSE: MOT) may have agreed to Carl Icahn's proposed spin-off, but they are not out of the woods yet. The billionaire activist investor sent another letter to the board (via a Schedule 13D/A filing) earlier this week bringing up several concerns about the speed and manner in which a new management team is selected for the mobile devices division. He also questioned why the transaction will take so long and why it took the threat of a proxy fight to take action. Icahn believes that many of these problems could be solved if the board were to install one of his candidates.

Carl Icahn has faced some criticism for not dropping his proxy fight against the company despite the spin-off agreement. The board said in a conference call that they proposed two new board nominees to him, but he declined to accept them and pressed on with the campaign. However, Icahn insists that this is only half true:

"It is true that Sandy Warner, head of the Nominating Committee called me and offered seats to two of my Nominees if I would drop the proxy fight. However, you failed to mention in your conference call that I told Mr. Warner that I would gladly accept this offer if the Board would also accept Keith Meister. Mr. Warner replied summarily to this offer that Meister did not “qualify.” I asked Mr. Warner what does one have to do to qualify — lose $37 billion dollars? Mr. Warner then replied that the Board did not “know” Meister. My answer was that Meister would fly anywhere at any time to meet the Board so they could “know” him (I did mention that the situation at Motorola is too serious for the Board to remain a country club). My offer to Motorola stills stands ... having a highly intelligent, energetic individual like Keith, who has 145 million reasons to spend his time working toward the spin-off being accomplished, may well make [the promise of a spin-off] come true in a timely fashion."

Carl Ican also argued that his request for more information about what steps the board actually took to correct the problem was well justified:

"You have stated to the press that our request for information about what steps the Board actually took to correct the problem at Motorola is an unnecessary distraction. We disagree. In a political election when constituents believe their representatives’ performance was inadequate, they are certainly not denied information as to whether their representative acted in a grossly negligent fashion. Why should it be different in Corporate America?"

In the end, a proxy fight is something that nobody needs as it is costly and time consuming. All Icahn wants is Keith Meister to be installed on the board and he would be willing to drop the proxy contest. This move is necessary to help ensure that a successful spin-off takes place that it will successfully unlock value for shareholders.

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Bear Stearns (NYSE: BSC) shareholders hoping for a higher offer from J.P. Morgan (NYSE: JPM) might as well call it quits now. Chairman James Cayne sold his entire 5.66 million share stake at $10.84/share for a paltry $61.3 million just weeks after it was worth nearly $380 million. Despite the news, shares rallied to $11.23 before falling after hours to $10.70, which is still above the planned $10.00 per share offer.

A letter filed with the SEC also revealed several other provisions that put the proverbial nail in the coffin. Among them, a provision saying that enables the company to bypass shareholder approval because securing such approval would "seriously jeopardize" the financial viability of the company. Essentially the company is saying that the owners are not responsible enough to make a decision about the future of their own company.

Shares have been trading up recently on speculation that the unhappy James Cayne would try and assemble a competitive offer with billionaire financier Joseph Lewis - the company's second largest shareholder. However, any deal of that sort seems unlikely unless it was Joseph Lewis who received his shares in a private transaction. This possibility seems to be the only thing left keeping shares above the buyout price.

Traders remain divided on the idea of a higher bid. One camp argues that J.P. Morgan's large stake would make it nearly impossible for another bidder to successfully emerge. The other contends that the equity portion of the deal pales in comparison to the assumed debt, which means that a higher offer is entirely possible (as we've already seen with the $2 to $10 jump). However, in the end, the fact that the company has agreed to the $10 offer along with J.P. Morgan's large stake all but seals the deal for this one.

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American Express Co. (NYSE: AXP) announced today that it has agreed to purchase GE Money's Corporate Payment Services (CPS) from parent General Electric Co. (NYSE: GE) for $1.1 billion. CPS provides purchasing services and cards to large corporations.

American Express said in a press release that “today’s agreement is part of an ongoing strategy to focus on the payments sector” and that the acquisition is lucrative given that “Corporate Payment Services generated over $14 billion in 2007 global purchase volume and maintained $1.1 billion in receivables at year end 2007. Its billed business has grown at a compounded rate of 18% over the last five years.”
 
Interestingly, GE is CPS’s largest client, so the terms of the deal require GE to remain a client of American Express after the sale for a set number of years.

President of American Express’s Global Commercial Card & Services Anré Williams said in the press release that, “Corporate Payment Services is a terrific business with strong leadership and talented employees who have been generating impressive growth through a combination of excellent customer service and cutting edge technological innovation. Expanding our corporate purchasing and expense management services is a top priority for American Express. Acquiring Corporate Payment Services adds to our purchasing card capabilities and gives us the opportunity to accelerate our growth. In addition, Corporate Payment Services also has excellent credit metrics and a premium client base.”

When referring to credit metrics, CPS has an advantage compared to other forms of credit because accounts are usually paid-in-full at the close of each month because charges are typically travel expenses for employees of large companies. The deal also includes GE’s vPayment technology, a fraud detector technology.

American Express, not surprisingly, expects an immediate boost to revenue from the purchase – but earnings per share growth from the deal will not be seen for a few years. Overall, the deal makes sense for American Express but it is not something to get overly excited over. American Express shares are up slightly on the news while GE shares are down slightly.

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Citi Trends, Inc. (NDAQ: CTRN) hasn't had much of a trend the last few years as it has swung widely from profits to losses and back. However, the company is hoping to change that in 2008 with a series of changes designed to stabilize its earnings and unlock value for shareholders.

Citi announced a decrease in its earnings for 2007 as its earnings came in at $0.59 in the fourth quarter compared to $0.73 during the same time last year. The decline came as a result of negative same-store sales and a related need to increase clearance markdowns along with the inclusion of an extra week in 2006. Net income also took a hit as the company's profits dropped from $21.4 million in Q4 2006 to only $14.2 million in Q4 2007.

Sales increased 6.2% from $126.8 million to $134.6 million, but this can likely be attributed to the increase in clearance markdowns. Citi effectively sold more products at a discount, which boosted its sales at the expense of its net income and profit margin. Meanwhile, the 1% growth in same-stores sales suggests that the majority of any growth that did occur was at new stores - an unsustainable paradigm.

The sunny side of the story - and cause for today's celebration - was Citi's positive outlook. The company estimated 2008 earnings in the range of $1.10 to $1.15 per share, which crushed analyst estimates of only $1.00 per share. The strong guidance is based on estimated same-store sales growth of 2% to 3% due to a planned 15% increase in selling square footage. Same-store sales are an important measure for retailers since it measures revenue at existing stores rather than newly opened ones.

Some analysts are skeptical that Citi can pull off the gains, saying that the company has a history of unpredictable swings. As a result, many retained their ratings on the stock until the company could "prove" that it was able to make meaningful changes. Investors seem to be a different story, however, as the stock swung up some 25% on the news of a possible turnaround in 2008. Which side is right remains to be seen...

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ConAgra Foods, Inc. (NYSE: CAG) gave shareholders something to chew on today after announcing spectacular earnings along with a sale of its cash cow trading unit.

The company announced much higher-than-expected quarterly profits thanks to strong performance in its food and ingredients segment along with its extremely profitable trading unit that made a ton of money predicting the rise in food and energy prices. These helped to offset falling profit at the company's larger consumer foods unit, which has been hurt by soaring commodity costs.

The trading units at companies like ConAgra have been performing extremely well in today's economy. The lower U.S. dollar combined with higher demand abroad has sparked a long-lived rally in the commodity markets. The profits made on these hedges were so large that ConAgra's own trading unit was able to make 38% more money than its food and ingredients division by booking only half the revenues!

However, ConAgra recently agreed to sell its trading unit to Ospraie Management for an estimated $2.3 billion, including $1.6 billion in cash, $525 million in debt securities, and a portion of the unit's earnings for the remainder of the calendar year. The company wanted to exit the business to focus more on its core strategic food platforms and felt the time was right given the boom in commodities.

The divesture will also mean lower and more predictable working capital requirements in the future, since commodities trading can be a somewhat volatile game. The commodity markets can change rapidly and directly affect the cost of raw materials for the company. The divesture of this business will result in more consistent operating cash flows over time and much easier sleep for shareholders.

ConAgra announced that it would use the proceeds of this sale to fund share repurchases, which should help boost the company's stock price. Share buybacks reduce the number of outstanding shares while earnings remain the same, which causes the earnings per share number to increase. This higher earnings per share number means that the share price must go up if the price-earnings multiple is to remain the same.

ConAgra also sees good times ahead. The company boosted its fiscal year forecast for earnings from continued operates to $1.80 to $1.85 a share from $1.55 with fiscal 2009 earnings still slated at a minimum of $1.55 a share. This compares to analyst estimates of $1.60 and $1.61 a shares, respectively. Executives also said that they expect future annual earnings growth of 8% to 10% on 4% sales growth.

In the end, this is all good news for shareholders who stand to exit the commodities boom at just the right time and see the money spent on a program to unlock value. Meanwhile, the company is continuing to back a strong forecast despite some increased competition from private label brands. What more could an investor ask for?

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Oracle Corporation (NDAQ: ORCL) is seen by many as a barometer for the technology sector and its most recent earnings suggests that a slowdown may be on the horizon. The tech giant reported a 30% jump in profits and a 21% jump in revenues, but sparked concern among investors that its many acquisitions hadn't insulated it from the larger economic crisis facing the United States.

Oracle's revenue projections in particular is what failed to impress the street and ignited concerns about a technology spending cuts. The revenue slowdown can be traced back to a reduction in the number of new licenses for software, which grew only 16% when its projected range was 15% to 25%. This is a closely watched indicator since it shows how much companies are spending to buy new software rather than simply just pay to maintain old software.

Narrowing it down even further, Oracle's weakest spot was the 7% growth in sales of new license for business applications. These are programs used by accounting and human resources divisions when companies embark on new projects or expand their businesses. The slowdown in this particular area told many investors that companies were being a lot more conservative with their money and may cut technology spending.

Many investors had hoped that Oracle's string of acquisitions would insulate the company from any major slowdown, since they brought in many new customers. The moves also diversified the firm to such an extent that just 13% of its revenues came from the troubled financial sector. However, the fact that these acquisitions still did nothing to curb the slowdown is what caused the major reaction in Oracle's stock today.

Oracle also caused ripples across the larger technology sector. The move also comes after networking company Cisco Systems (NDAQ: CSCO) posted its results that suggested a potentially weaker year for corporate technology spending. And with companies like Intel Corporation (NDAQ: INTC) and IBM (NYSE: IBM) reporting earnings within the next week, the sector is on edge with concerns of a slowdown.

In the end, Oracle is the latest in a series of bearish announcements in the tech sector suggesting that spending will begin to slowdown. Investors are slowly realizing that even technology may not be immune to the problems in the financial sector despite a lack of direct exposure. Bad news all around.

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Motorola, Inc. (NYSE: MOT) announced today that after an extensive analysis of its businesses that it will split into two distinct companies by spinning off its mobile phone unit.
 
Motorola, best known by consumers for its Razr phone, has been under significant pressure from activist Carl Icahn who has been pressuring the company to take action on its unprofitable cellular phone division. Motorola’s cell phone production had nearly $19 billion in sales in 2007 – which was a significant fall from 2006 but still made it the largest division in the company. Motorola’s communication equipment and “set-top box” unit are the actual profit drivers of the company.
 
The company plans to achieve the split by next year through “a tax-free distribution to [its] shareholders.”
 
In a press release, Motorola CEO Greg Brown said:
 
"Our decision to separate our Mobile Devices and Broadband & Mobility Solutions businesses follows a review process undertaken by our management team and Board of Directors, together with independent advisors. Creating two industry-leading companies will provide improved flexibility, more tailored capital structures, and increased management focus - as well as more targeted investment opportunities for our shareholders."
 
The real question is whether Motorola’s cell phone business is an “industry-leading” company. Despite the success of the Razr, cell phones have become a cut-throat business with razor-thin margins – no pun intended.
 
Regardless of how things play-out, it appears like Carl Icahn has scored another victory. Last year, Icahn basically forced then CEO Edward Zander from the company. Now, it appears as if Motorola, through the split, will become more aggressive about making its cell phone division profitable.
 
This saga probably isn’t near complete yet as Icahn will almost certainly be vocal about the exact manner of the split and the management choices for each new entity which definitely makes Motorola a stock worth watching.
 
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WiMax has been the talk of the technology sector for a long time as the promise of a nationwide high-speed wireless network has many druling at the mouth. The companies behind the project are just as excited as the new network would provide them with licensing opportunities that could make them billions of dollars in the future. The only thing standing in the way is a $3 billion bill that needs to be paid to roll out the initiative. Luckily, cable companies are beginning to step in as the new backers.

The WiMax initiative began as a cooperation between Sprint Nextel Corporation (NYSE: S) and Clearwire Corporation (NDAQ: CLWR) to create a nationwide wireless network using WiMax technology. The network is designed to provide high-speed web access from laptops, cellphones and other mobile devices as well as high-quality mobile video. The two were forced to explore other financing options after Sprint shareholders were unwilling to fully fund the venture, calling it excessively risky and expensive.

Cable companies have now stepped in to fill the void by taking partial ownership in the new venture. Comcast Corporation (NDAQ: CMCSA), the nation's largest cable operator, agreed to contribute as much as $1 billion into the venture alongside rival Time Warner Cable (NYSE: TWC) who would add $500 million. Bright House Networks, the sixth largest cable operator, would also contribute between $100 million and $200 million, according to the WSJ.

Other potential investors include Intel Corporation (NDAQ: INTC) - who could contribute up to a billion dollars - and Google Inc. (NDAQ: GOOG) who may provide hundreds of millions of dollars. However, it is still possible that the entire deal could fall through if all these parties do not agree and the partnership is unable to raise the $3 billion that it needs to make the project happen.

The deal also has widespread implications for shareholders of all the companies. Sprint's shareholders have been the most vocal against the deal after the company told Wall Street that it expects the venture to cost $5 billion by 2010. This prompted many to propose that the initiative be spun off and funded by someone else entirely. Meanwhile, a move by cable companies into the fray would escalate the rivalries by throwing them into a whole new arena.

In the end, the WiMax initiative looks very promising for consumers and like a great future investment for the companies involved, but it comes at a great cost in the near term. This is a cost that many Sprint shareholders believe is too high while many other companies may not be willing to put forth as much capital as the partnership would like to see. Regardless, this is definitely a situation worth watching closely.

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