Circuit City (NYSE: CC) is taking the first steps towards a potential $1 billion merger bid with Blockbuster (NYSE: BBI) by allowing the video rental chain to conduct due diligence. The electronics retailer also received a letter from activist investor Carl Icahn saying that he is prepared to buy the company if Blockbuster cannot secure its own financing on its own or get shareholder approval. The move sent shares more than 5% higher on the day.

This news is music to the ears of Circuit City shareholders. Blockbuster pledged to purchase the company for no less than $6 per share, subject to due diligence. The fact that a standby offer is now in place by Carl Icahn makes a $5+ bid nearly certain. Speculations are now waiting to hear the results of the due diligence. If no problems are found, shares could rally significantly higher to the $6 per share minimum offer.

Blockbuster's move to acquire Circuit City comes amid a continued turmoil in the movie rental business. Competitor Movie Gallery recently filed for Chapter 11 bankruptcy amid increasing competition from video-on-demand and mail-order services like NetFlix (NDAQ: NFLX). Meanwhile, movie piracy continues to rise at a shocking rate and further eat into margins. Blockbuster is hoping that this diversification into electronics would change things.

In the end, it appears that a deal is relatively certain now given the due diligence agreement and Carl Icahn's standby offer. The price of the deal remains at the top of the list of concerns for shareholders, but this won't be determined until due diligence is completed successfully. Combined, these factors make CC a stock worth watching closely!

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Citigroup Inc. (NYSE: C) CEO Vikram Pandit made the long overdue announcement that he wants to make the bank “fit” by trimming $400 billion in assets. Currently, Citi reigns as the world's largest bank by assets with more than $2.1 trillion on the books compared to Bank of America Corp.'s (NYSE: BAC) $1.74 trillion.

With Citi's shares losing more than half their value over the past year, it is about time that management starts paying attention to who's biggest by market capitalization – not assets on the books. With a market capitalization of about $123 billion, Citi is dwarfed by both Bank of America, at more than $164 billion, and J.P. Morgan Chase (NYSE: JPM), at nearly $158 billion.

In all fairness, current CEO Pandit isn't to blame for Citi's bloated state. When he took over this last December, he inherited the boneheaded legacies of CEOs Sanford Weill and Charles Prince. Pandit has already begun cutting the fat by getting rid of CitiCapital and its $13 billion in assets, selling office buildings, and unloading more than $12 billion of leveraged loans.

Despite these efforts, the total assets sold so far amount to not even $30 billion – to get to $400 billion, he has a long way to go.

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After pulling its offer to purchase Yahoo! Inc. (NASDAQ: YHOO), Microsoft Corporation (NASDAQ: MSFT) not only finds itself with about $40 billion in previously tied-up funds but also needs a new strategy to have a better online presence.

Well, according to the Wall Street Journal, that new strategy might just be purchasing an even hotter Internet property, Facebook. Though neither Facebook nor Microsoft have officially commented on the rumor, the WSJ reported that Microsoft bankers have sent subtle message to see if Facebook would be open to an outright acquisition.

Microsoft already has a small interest in Facebook, purchasing less than 2% of the company last October for a staggering $240 million. Using these multiples, Facebook would be worth at least $15 billion.

Facebook is considered one of the most valuable destinations on the Internet for not only its user growth rates but the time each user spends on the site. With social network, chat, photo sharing and games, Facebook's 70 million active users are incredibly loyal.

Facebook founder Mark Zuckerberg, already one of the youngest self-made billionaires in history according to Forbes, has proven himself a very savvy player – refusing to sell the company in the early stages in favor of building it organically first.

At all of 23 years-old, however, a multi-billion dollar payday might just persuade Zuckerberg to sell.

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