Abercrombie and Fitch Co. (NYSE: ANF) shares jumped in early trading before settling down to its opening levels after the company released missed estimates. The high-end clothing manufacturer may not have hit targets, but it did show improved top and bottom line performance during its first quarter. The conflicted data ended up evening out the stock today.

Abercrombie said it earned $62.1 million, or 69 cents per share, in the first quarter. This was on a three percent increase in same-store sales but a drop in receipts for all other company nameplates. The company said that it plans to trim its expansion plans domestically in order to cut costs during the down economy.

Currently, Abercrombie runs 353 flagship stores and 687 others under various nameplates. It expects to open up 104 new stores as a result of its planned expansion. Currently, its revenues stand at $3.75 billion with $475.7 million in profits. The company is hoping that European operations next year along with new stores in the UK will boost sales and increase profitability.

Shares of Abercrombie & Fitch Co. rose $0.06, or 0.08%, on the earnings news.

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CNET Networks, Inc. (NDAQ: CNET) owns perhaps the most valuable, but underutilized, domain portfolio in the world. CBS Corporation (NYSE: CBS) acquired it at a steep discount today, paying only $1.8 billion for the struggling technology company. The acquisition extend CBS's internet presence and gives it access to some of the most valuable entertainment and news domains in the world - including News.com and TV.com.

"When you can combine the entertainment assets, the news assets, the platforms that are available with technology, the cross advertising opportunities, it just gives us great scale," CBS Chief Executive Leslie Moonves said on a conference call.

The $1.8 billion deal, announced this morning, values CNET at $11.50 per share and represents a 45% premium over yesterday's close. The technology company posted $406 million in revenues for 2007, which means CBS paid about 4.4x revenues for the acquisition. However, the domain portfolio contains the majority of the value. Domains like Cool.com have attracted offers of upwards of $38 million, which means domains like News.com may be worth substantially more.

The acquisition would also help boost CBS's earnings and expects its combined internet unit to reach $1 billion in revenue by 2010 or 2011. Obviously, the cross-advertising between television and internet would be a huge driver of traffic to the newly acquired domains. The move may have surprised many, but it looks to many like a great play at just the right time!

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Wal-Mart Stores (NYSE: WMT) scared Wall Street Tuesday with its cautious predictions for the second quarter, but what is bad for everyone else just might be good for Wal-Mart. This certainly seems to have been true with first quarter results – Wal-Mart had strong sales as a tough economic environment drove consumers on a budget to the company's low-priced megastores.

Though there is justified debate about how far this logic can hold true: at a certain point, consumers are so strapped for cash that their spending on non-essential items will slow to a point that it outbalances the increased purchase of necessities at Wal-Mart. But, despite the doom and gloom on the evening news, it appears that Americans are nowhere near ready to curb their spending or their debt.

For instance, Wal-Mart actually had exceptionally strong consumer electronic sales for the first three months of the year. If anything has changed from then, it is the perception and price of gas. A gallon of gasoline has edged towards or passed $4.00 a gallon, and this symbolic shift may cause consumers to finally put their money where their mouth is by actually controlling spending habits.

If this happens, it will indeed be bad news for Wal-Mart. In the meantime, it seems as if the economy has not changed what people buy but just where they buy it... which is very good news for Wal-Mart.

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New York cable company Cablevision Systems Corp. (NYSE: CVC) beat an offer from Rupert Murdoch’s News Corp. (NYSE: NWS) to buy the newspaper Newsday from Tribune Co. – in a deal that has Cablevision almost certainly overpaying.

Tribune will get $612 million in exchange for Cablevision acquiring a 97% stake in Newsday plus an additional $18 million in prepaid rent. Tribune will keep a remaining 3% stake in Newsday worth $20 million. The deal values the newspaper at $632 million minus the value of the rent included in the deal.

Newsday had a circulation of 379,613 in the six months through March 31 – nearly 5% less than a year earlier, though the newspaper still had EBITDA of $80 million last year.

Cablevision hopes to use Newsday to increase its ability to advertise in the greater New York City area. Tribune is happy to sell because the company carries $13 billion in debt on the books.

The real question is if Murdoch walked away from the deal last week at $580 million because the economics no longer made sense, what makes Cablevision think they can make the deal work at a higher price tag - $50 million higher?

In the statement announcing the deal, Cablevision said it will generate substantial cash flow from the deal as they leverage Newsday for more local ads and subscriptions – Cablevision shareholders better hope such promises come true.

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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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Berkshire Hathaway, Inc.'s (NYSE: BRK.A) famous leader Warren Buffett and his second-in-command Charlie Munger spoke at length to reporters this last weekend at the the company's annual shareholder meeting, below are some of the highlights as reported by Money Magazine's Jason Zweig:

In response to a question from Barbara Kiviat of Time on how he and Munger control their emotions, Buffett replied: "[It] comes about from having an investment philosophy grounded in the idea that a stock is a piece of a business. If you look at it that way, there's no reason to get excited whether some analyst is recommending it or the company is splitting the shares two-for-one, or whatever. The only way to drive the extraneous thoughts out of your mind is to have a philosophy. And for us that philosophy comes from Benjamin Graham and The Intelligent Investor, especially chapters 8 and 20. It's not very complicated stuff."

"You have to have the right temperament. I tell the students who come visit me that if you have more than 120 or 130 I.Q. points, you can afford to give the rest away. You don't need extraordinary intelligence to succeed as an investor. You need a philosophy and the ability to think independently...It doesn't make any difference what other people think of a stock. What matters is whether you know enough to evaluate the business," he opined.

"You should be able to write down on a yellow sheet of paper, 'I'm buying General Motors at $22, and GM has [566] million shares for a total market value of $13 billion, and GM is worth a lot more than $13 billion because _______________." And if you can't finish that sentence, then you don't buy the stock. [Note: Buffett mentioned GM for illustrative purposes only.] All this requires some temperamental detachment from other people's behavior. Both Charlie and I have a natural instinct in that direction. We value our opinions more than others' -- perhaps to an extreme!"

Kiviat followed up by asking whether they mind being regarded as "a bastion of calm" by others. Buffett simply stated, "I think they're probably right," while Munger was more loquacious: "Not only are they right, but it's a huge advantage to us to get the reputation of being wiser and stronger than other places. Would any of you object to being considered wiser and stronger when you're trying to get anything in life? The key is not to be seduced by crazy ideas, but instead just stick to the fundamentals year after year. Academia doesn't get too interested in us -- we're too simple. What would the professors do? A great many of the formulas [they use to analyze securities and markets] are dead wrong. They exist purely to give the intellectual class something to do. We don't do anything just exercise our intellectual proclivity for mathematical formulas."

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After trying for months to complete a much publicized merger, Microsoft Corporation (NASDAQ: MSFT) officially dropped its bid for Yahoo! Inc. (NASDAQ: YHOO), for now at least. Microsoft released the full text of CEO Steve Ballmer's letter to Yahoo CEO Jerry Yang announcing its decision:

May 3, 2008

Mr. Jerry Yang
CEO and Chief Yahoo
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089


Dear Jerry:


After over three months, we have reached the conclusion of the process regarding a possible combination of Microsoft and Yahoo!.

I first want to convey my personal thanks to you, your management team, and Yahoo!’s Board of Directors for your consideration of our proposal. I appreciate the time and attention all of you have given to this matter, and I especially appreciate the time that you have invested personally. I feel that our discussions this week have been particularly useful, providing me for the first time with real clarity on what is and is not possible.

I am disappointed that Yahoo! has not moved towards accepting our offer. I first called you with our offer on January 31 because I believed that a combination of our two companies would have created real value for our respective shareholders and would have provided consumers, publishers, and advertisers with greater innovation and choice in the marketplace. Our decision to offer a 62 percent premium at that time reflected the strength of these convictions.

In our conversations this week, we conveyed our willingness to raise our offer to $33.00 per share, reflecting again our belief in this collective opportunity. This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70 percent compared to the price at which your stock closed on January 31. Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer.

Also, after giving this week’s conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft.

We regard with particular concern your apparent planning to respond to a “hostile” bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo! today. In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us for a number of reasons:    

First, it would fundamentally undermine Yahoo!’s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system. This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth.

Given this, it would impair Yahoo’s ability to retain the talented engineers working on advertising systems that are important to our interest in a combination of our companies.    

In addition, it would raise a host of regulatory and legal problems that no acquirer, including Microsoft, would want to inherit. Among other things, this would consolidate market share with the already-dominant paid search provider in a manner that would reduce competition and choice in the marketplace.    

This would also effectively enable Google to set the prices for key search terms on both their and your search platforms and, in the process, raise prices charged to advertisers on Yahoo. In addition to whatever resulting legal problems, this seems unwise from a business perspective unless in fact one simply wishes to use this as a vehicle to exit the paid search business in favor of Google.

It could foreclose any chance of a combination with any other search provider that is not already relying on Google’s search services.

Accordingly, your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path. Instead, I hereby formally withdraw Microsoft’s proposal to acquire Yahoo!.

We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.

I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table.

But clearly a deal is not to be.

Thank you again for the time we have spent together discussing this.

Sincerely yours,

Steven A. Ballmer
Chief Executive Officer
Microsoft Corporation

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