Yahoo Inc. (NDAQ: YHOO) has bigger problems than Microsoft Corporation (NDAQ: MSFT) these days. The search giant is now trying to fend off activist investor Carl Icahn who has began his own campaign to force the Microsoft deal. So, what does Yahoo plan to do? Delay the inevitable of course! The company decided to put off its annual shareholders meeting until the end of July to give it more time to think.

Yahoo CEO Jerry Yang will now have to work to prove that he can win back investors after rejecting an offer from Microsoft. If not, Carl Icahn has promised a proxy battle to takeover the board and force an acquisition by Microsoft in order to unlock shareholder value. Currently, Yahoo shares are trading 17% below Microsoft's latest $33 per share takeover offer. However, Microsoft did say that it was pursuing a new transaction with Yahoo that didn't involve a takeover, but that it would reconsider a Yahoo bid at some point.

Icahn also has widespread support for his plans to force a Microsoft bid. He owns 10 million shares himself and has an option to purchase an additional 49 million. Furthermore, he has won support from investors including New York hedge fund Paulson & Co., BP Capital LLC Chairman T. Boone Pickens and Third Point LLC's Daniel Loeb. This represents a substantial amount of outstanding shares that would nearly guarantee a successful acquisition.

Meanwhile, Google is continuing is smear campaign against the merger. Larry Page came out saying that the combination would harm innovation by giving the combined company too much control over web communications. All of this complaining may pique the interest of anti-trust judges that are already on shaky grounds with Microsoft after their battle back in the late 90s and early new millennium.

In the end, the Microsoft buyout represents a huge premium for Yahoo shareholders that could take years to realize as an independent company. As a result, Carl Icahn and many others are pushing towards a sale. Whether or not Jerry Yang can successfully convince the rest that independence is the best route remains to be seen. But this stock is definitely one worth watching over the next few months!

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The soaring price of oil may be hitting the airline industry hard, but some airlines are starting to take actions that they may regret. American Airlines (NYSE: AMR) is one such airline that recently decided to start charging $15 for the FIRST check-in bag and eliminate about 12 percent of its flights by the end of the year. These moves put American at the forefront of a growing tide of resentment by customers.

Most U.S. carriers are already charging customers $25 for their second checked bag, breaking a longstanding policy of allowing two checked bags for free. Meanwhile, six airlines are raising the cost of checking a third bag to a whopping $100! These fees come at a time when airlines are still facing a growing number of lost baggage (note: there are no refunds of your fee for lost baggage either).

Southwest remains the only major U.S.carrier to allow travelers to continue to check two pieces of luggage without charge. Previously, these customers have been able to check three, but now the airline has begun to charge $25 for the third piece of luggage. Ironically, Southwest is also one of the few airlines that (at least for now) remains profitable.

In the end, soaring jet fuel prices in the United States have made it extremely expensive for airlines to operate. However, taking measures to alienate customers may not be the best way to recoup costs. Rather, simple increases in fare prices to those by other airlines may be the best option.

Shares of AMR Corporation jumped more than 10% on the news today as investors are hoping that the move will provide a short-term turnaround.

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In a slight break from news about Microsoft Corporation (NASDAQ: MSFT) and Yahoo! Inc. (NASDAQ: YHOO) possibly merging, Microsoft has announced it is going to try, at least for now, an angle to get at Google Inc.'s (NASDAQ: GOOG) search dominance other than simply trying to buy a company that can't compete with Google on its own (meaning Yahoo).

According to WSJ, Microsoft is preparing to launch “Live Search cash back” - a service where consumers would literally get cash for using Live.com's internet search. Though the information was leaked through an unnamed source with little detail, presumably the plan is to leverage Microsoft's pile o' cash to effectively bribe search users into choosing its (arguably but probably... or definitely if one believes the markets have spoken) inferior search engine... sign me up!

The mechanics of the offer would involve search users getting cash-back on purchases of items found via Live.com, a modified version of customers getting cash-back on credit card purchases. Some analysts seem happy with the idea only because it is a fresh angle to challenge Google's dominance – and anything seems better than nothing... or does it?

This may be a fresh angle on drawing search users, but hasn't this been Microsoft's strategy in various markets for years? Netscape is the dominant browser – release Internet Explorer for free because we have tons of operating system and office suite cash, who cares about making money! PlayStation is the dominant video game console - dump huge sums into Xbox development and sell the unit at a loss to muscle our way into the market, we have billions in cash! Search the internet... what a novel idea, let's start MSN.com and Live.com late in the game (and base them on inferior technology) and bleed money forever until we can compete (Microsoft's search divisions lost money last quarter, just imagine how much money it can lose now! Yeah!).

Throwing money at problems is a perfectly good strategy, so long as it is a long-term strategy and not a desperate move for attention and a few new users at uneconomical prices.

Time Warner Inc. (NYSE: TWX) announced that it would spin-off its majority stake in Time Warner Cable Inc. (NYSE: TWC) in a $9.25 billion deal. The widely anticipated transaction comes as Time Warner is attempting to lean down to improve its efficiency and focus on its core businesses. Meanwhile, a separate cable entity may very well attract potential investors or even suitors in the near future.

The deal will involve Time Warner exchanging its 12.4 percent interest in TW NY Cable Holdings Inc., a Time Warner Cable subsidiary, for 80 million newly issued shares of Time Warner Cable's Class A stock. This will increase its ownership to 85.2% from 84%. Time Warner Cable will then issue a $10.9 billion dividend to shareholders, of which Time Warner will receive $9.25 billion.

"After the transaction, each company will have greater strategic, financial and operational flexibility and will be better positioned to compete," says Jeff Bewkes, chief executive of Time Warner. "Separating the two companies will help their management teams focus on realizing the full potential of the respective businesses and will provide investors with greater choice in how they own this portfolio of assets."

The widely anticipated transaction is slated to close in the fourth quarter.

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From the desk of Thom Buschman:

Maybe I shouldn’t be saying this as a financial writer that needs business news as well as people caring about business news – but every time I see a Microsoft Corp. (NASDAQ: MSFT)/ Yahoo! Inc. (NASDAQ: YHOO) / Carl Icahn (if he had a ticker it would be PROXY) story I want to throw-up.

Yes, I know that Microsoft is an important company (after all, I am typing this article on a laptop running Windows, though in the interest of full disclosure my desktop runs Linux) – it has a market capitalization of $275 billion thanks to its stronghold on the desktop environment and office suites, while maintaining impressive footholds in the video game console market and internet search (speaking of internet search, yes Microsoft is getting clobbered by Google Inc. (NASDAQ: GOOG) and has long been an also ran at third place by market share – but third place is still third place, and we are talking about searching the bloody internet, not third place in home blender sales).

I also know the interesting synergies/hopes to actually compete effectively in the internet sector’ raised by Microsoft combining with Yahoo (which is also getting clobbered by Google, the difference is that Yahoo doesn’t have an operating system or other software to fall-back on).

What annoys me to no end in the coverage of this strange dance – which seemed dead until every Bloomberg/WSJ/MSN Money/CNNMoney/MarketWatch reporter’s wet dream came true and billionaire trouble-maker Carl Icahn got involved and injected new life into the story (I mean deal… well, actually I mean story) – is the endless repetitive coverage and analysis of events from every angle and non-angle.

A simple search of Google News (which, incidentally, shows how Microsoft and Yahoo are getting clobbered by Google in search) lists 2,524 recent news articles on the possibility of a deal – everything ranging from the shareholder pressure, the likelihood of the recent pact turning into a full-blown merger, to Icahn’s trackrecord, to Microsoft CEO Steve Ballmer’s trackrecord, to the always slightly annoying (even if true – and yes I recognize the irony of me calling this annoying even though I have done it repeatedly in this article) reminders that Google makes a Microsoft/Yahoo combination irrelevant, to Google’s glee at the lack of success/distraction so far.

Every reporter needs to take a breath and stop reporting on the ‘maybe merger’ until an actual merger occurs (which it probably will) – and then they can begin the endless process of analyzing the terms of the deal, the synergies, the challenges ahead, Google’s response/dominance, Icahn’s reaction, Ballmer’s negotiating style, Yahoo CEO Jerry Wang’s legacy, and the new interior decorating of Yahoo’s former headqauarters, to name just a few stories.

Pacific Ethanol Inc. (NDAQ: PEIX) shares more than doubled over the past two days after releasing an extremely bullish earnings report. Analysts had predicted that the company would lose about 9 cents per share, but after a 96 cent noncash charge it actually made 6 cents per share. Obviously, these results surprised shareholders and caused the sharp rise we've seen over the last two days.

Pacific Ethanol producers and sells ethanol and its co-products and provides transportation, storage, and delivery of ethanol through third party service providers in the western United States. Many of the company's customers are integrated oil companies and gasoline marketers who blend ethanol into gasoline. It also supplies ethanol to its customers through its own facilities or with ethanol produced in bulk form other producers.

The ethanol industry has exploded recently as the government continues to incentivize the usage of ethanol in gasoline. The idea is to eventually reduce dependence on foreign oil by using a greater amount of alternative biofuels. However, the move has also drawn sharp criticism as food prices have risen sharply with no slowdown in oil prices. The reality is that this move is a result of the dollar decline and not ethanol.

Among the highlights for the quarter was a 63% increase in net sales, a 58% increase in gallons sold, reduced SG&A as a percentage of net sales, 159% EBITDA growth, and the startup of its Burley, Idaho plant. The company also announced that it was able to partially offset the rise in corn prices through a $2.2 million gain in derivatives trading. However, its gross margin still declined to 9.7% from 15.4% during the same period last quarter.

In the end, the results handily beat shareholder expectations and sent shares far higher on the week.

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Lowe's Companies, Inc. (NYSE: LOW) shares moved sharply lower after the home improvement retailer announced lower profits on a dip in sales. The company said its first quarter profits fell 18% and it forecasts more declines amid a continued slump that has significantly slowed consumer spending.

The Home Depot (NYSE: HD) also fell sharply on the news as they also announced that they expect a fall in profits as the housing slump continues. However, improvements in international operations for the company, particularly in Mexico, may help absorb some of the impact.

The earnings numbers are bad news for the home building industry that many were hoping would begin to show signs of a recovery. Sales of previously-owned homes, which is about 85% of the housing market, dropped in march for the seventh time in eight months. These are homes that typically trigger home-improvement spending.

The housing market itself continues to suffer from the effects of foreclosures. Tighter consumer spending and lower valuations have led to a spike in foreclosures. Unfortunately, these foreclosures end up lowering the value of surrounding properties in a vicious cycle.

Government aid has been relatively ineffective to date as it tries to bailout homeowners by encouraging lenders to renegotiate mortgages. Many of these homeowners are paying mortgages that are far higher than the value of their home warrants. As a result, they are not necessarily adverse to having their home go into foreclosure.

In the end, it could be awhile before the housing crisis is sorted out and home building companies like Home Depot and Lowe's can return to sustained growth. Investors should keep a close eye on economic numbers for any hints of a turnaround...

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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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