Petroleo Brasileiro SA (NYSE: PBR), known as Petrobras, announced a discovery in the Gulf of Mexico today. The diversified oil and gas company confirmed the discovery of hydrocarbons in ultra-deep waters in the Central Gulf of Mexico. The Stones #3 well, located in Block WR 508, found oil in multiple sandy lower tertiary reservoirs and is 25% owned by Petrobras. Future drilling and assessment activities are planned to define size and viability.

These results confirm the potential of significant oil reserves in these reservoir in the Gulf of Mexico, where Petrobras operates the Cascade and Chinook fields which at the present are in the production development and facility construction phase. Petrobras will be the pioneer company, both in ultra-deep waters in Lower Tertiary reservoirs and in using an FPSO type platform in the region, the production of which is slated to go online in June 2010.

In this same area, Petrobras also holds 25% stakes in the Saint Malo field. This field is operated by Chevron and is in the assessment and extension exploratory drilling phase. Also, studies are being done to select the production development project for Saint Malo. These discoveries help the company diversify its holdings and enhances the value of its Exploration and Production project portfolio in deep waters in the Gulf of Mexico.

Petrobras also announced its first quarter results today, which came in ahead of expectations. Consolidated net income rose 68% year-on-year thanks to a decline in operating expenses and the reduced appreciation of the Brazilian Real currency. The increase in oil and gas production and the upturn in oil and oil product prices also contributed to the improved performance. EBITDA climbed 26% year-on-year as production edged up 2%.

Meanwhile, Petrobras also saw its market cap increase 69% year-on-year due to oil and gas discoveries in the pre-salt layer, the new exploratory frontier, and potential production growth. Ironically, one of its biggest problems was obtaining offshore support vessels from companies like Transocean Inc. (NYSE: RIG), which have been booked for years in advance following the rapid run-up in oil prices in recent months - a bullish sign for these companies.

Interestingly, Petrobras also saw a significant decline in its US volume as the economic crisis worsens. This caused a sharp drop of 14.96% in its international sales volume, but was also helped down by the sale of its Bolivian refineries. This means that domestic refiners in the US are likely to continue to see problems in the near future. Luckily, Petrobras was able to offset this with strong growth in domestic sales volume.

Lehman Brothers analyst, Paul Cheng, also raised his price target for Petrobras to $62 per share. He maintains his "equal weight" rating on the company, saying also that he expencts the first quarter to come in at $1.02 and full year 2008 to come in at $5.10.

Dell Inc. (NDAQ: DELL) shares surged higher today on stronger than expected earnings. The PC-maker announced sales of $16.1 billion, which exceeded analyst estimates of $15.7 billion. Revenues in Asia jumped 19% as overseas sales finally topped those in the U.S. for the first time. The only unit that didn't see an advance in sales was the desktop PC market, which continues to struggle.

Michael Dell has attributed the gain to a new turnaround fueled by a retail-driven sales strategy. The company has added 13,000 retail outlets in the world's 20 largest economies over the past year to help it expand beyond the United States. Dell abandoned its strategy of selling only over the phone and internet, which led to its recent recapture of market share from competitor Hewlett Packard.

Dell is also targeted developing countries with cheaper machines. The PC maker is aggressively entering these markets with lower-priced products, which is driving the company's average price down but increasing its overall revenues. The effect on the bottom-line may be somewhat negative, but it appears to be a trade off that many investors are willing to accept.

Finally, Dell has also taken many cost-cutting measures. The company cut 1,000 jobs in the first quarter and plans to trim its expenses by $3 billion annually over the next three years. This will be accomplished through a combination of workforce reductions and a move to lower-cost manufacturers.

"We still have much work to do to restore our competitive position," said Dell on a conference call. "I am encouraged by the acceleration in our growth - you will see much more."

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UAL Corporation (NYSE: UAUA) and US Airways Group (NYSE: LCC) have decided not to merge, according to the chief executives of both airlines. The executives noted that certain issues could significantly dilute the benefits of a merger transaction right now. They admitted that consolidation was necessary in the industry, but is unlikely to happen in 2008. The comments conclude months of merger talks in hopes of combating rising fuel costs.

Rising jet fuel prices have put substantial pressure on airlines, who were already in a fragile financial state. In fact, several airlines had just recently emerged from bankruptcy last year. Since then, several more have entered into bankruptcy. Mostly, these have been regional players like Frontier Airlines and Honolulu Airlines. However, rising fuel costs threaten to put the major carriers at risk if they cannot find a solution.

Mergers are considered healthy in these situations because a larger company is able to realize better economies of scale. That is, one entity purchasing more jet fuel at one time can get a better deal due to the greater quantity. Additionally, the transportation costs and other associated costs are also lowered for the same reason. Combined with rising fares, this could be enough to save many of the airlines now experiencing problems.

The problem is that the pilot unions are often unwilling to work together or accept steep pay cuts. The strong airline unions have been the culprit behind many of the failed talks, including those involving Northwest. UAL and US Airways did not cite these reasons, but media reports have said that opposition from labor unions and the costs of integration were the two key factors behind the decision not to merge.

Ultimately, the decision not to merger could cost both airlines a lot of money if jet fuel prices continue to rise at their current rates.

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To recap the last two-months in a few lines, Microsoft Corporation (NASDAQ: MSFT) was courting Yahoo! Inc. (NASDAQ: YHOO), but the reality is Microsoft doesn’t want Yahoo so much as it just wants to be able to compete online – which basically means competing with Google Inc. (NASDAQ: GOOG). Well, besides an imminent partnership with Yahoo, Microsoft has long been rumored to want to make a play for Facebook beyond the 1.6% it already bought for $240 million last October.

Bloomberg has released a tiny item saying “Facebook Inc. Chief Executive Officer Mark Zuckerberg has no plans to sell the social-networking site, even if Microsoft Corp. offered $15 billion.” This is based on Zuckerberg’s comments at All Things Digital that, “the goal of the company is to execute on the things we talked about before,'' meaning share information about themselves and their lives more easily.

Despite this, many people have said similar things before about selling – but money talks. News site IDG.NO speculates in “What if Microsoft Bought Facebook?”

“An interesting rumor has surfaced: Microsoft would buy Yahoo Search, then spend a further US$20 billion to buy Facebook. Despite what Mark Zuckerberg says about Facebook remaining independent, it would be difficult to forego that rich an exit.

Facebook is one of several social networks, second only to MySpace and growing rapidly. But while MySpace is still larger, it is the flow of information through Facebook, and the social engagement of its members that makes it important.

Purchasing Facebook would give Microsoft access to over 60 million captive, and very social users, who could potentially be used to drive the growth of Live Search -- as well as access to all of their information, and in some cases their entire social lives.

Robert Scoble suggests that this would allow Microsoft to lock Google out of a huge chunk of internet information.

Buying Facebook might give Microsoft a small temporary boost. On the other hand, more than 140 million copies of Windows Vista with an Internet Explorer search box directed right to Microsoft Live Search haven't helped much. And Microsoft hasn't really been able to capitalize on user volume of existing services such as Hotmail or MSN instant messaging.

But let's step back a little. Microsoft hasn't detailed its plans yet, and a talk of its plans relating to Facebook is mostly rumor and conjecture. Still, if I were Google, I wouldn't worry too much just yet.”

Microsoft Corp. (NASDAQ: MSFT) co-founder, former CEO, recent “Chief Software Architect,” and world’s richest person for 13 years Bill Gates is not known for his investing so much as his business leadership – he didn’t invest in Microsoft, he built it. Nonetheless, Bill Gates is a pretty savvy guy, and he presumably has very savvy guys managing his investments (with a best friend like Warren Buffett, one would hope at least).

Obviously Gates’ wealth comes from Microsoft, but he has made a significant effort over the years to diversify his holdings through his private fund Cascade Investment LLC. In a recent The Motley Fool piece, some of Cascade’s holdings were examined:

•    Berkshire Hathaway (NYSE: BRK.A)
•    Canadian National Railway (NYSE: CNI)
•    Otter Trail (NASDAQ: OTTR)
•    Republic Services (NYSE: RSG)
•    Six Flags (NYSE: SIX)

Berkshire Hathaway is not surprising, given Gates’ relationship with Buffett, and the good sense for anyone, regardless of whether you personally know the Oracle, of investing in the company.

Cascade also seems to have a penchant for unglamorous businesses like railroads, Canadian National Railway, and trash disposal, Republic Services – both of which have done well for Cascade over the last 12 months, returning 7% and 13% respectively.

To investigate Cascade yourself, look for its 13-F filing with the SEC.

Barron's recently ran an interesting story on an activist hedge fund we follow called The Chilren's Investment Fund. The article interviewed founder Christopher Hohn, who unveiled some very interesting points and gave unparalleled insight into one of the most profound activist hedge funds in today's markets.

Hohn acts very similar to Warren Buffett in that he purchases hard-asset companies that are well-positioned and enjoy a near-monopoly, where there is a high barrier to entry, and which are under-researched and undervalued. The difference is that this investor likes to look for situations where poor management is undervaluing the firm.

The Children's Fund is well known for pushing management to pursue shareholder-friendly activities like share buybacks and special dividends designed to unlock value. Indeed, he has also seen great success by saving companies like Deutsche Borse from bad takeover attempts that undervalue the company.

Another important question answered in the interview was how such an innocent name - The Children's Fund - was assigned to such an aggressive hedge fund. It turns out that Hohn's wife wanted a fund that could help the poor, so this fund donates a portion of its profits to a non-profit organization that helps children in developing nations.

The rest of the interview can be read here.

But the big question is then: What stocks does the Chilren's Investment Fund own now? A quick look at their recent Schedule 13F-HR filing with the SEC shows a portfolio of just nine stocks - some popular and some unknown. The hedge fund's largest holding - not surprisingly - is in Union Pacific Corp., while CSX Corporation comes in second place. However, there are also many unknown names like Martin Marietta Matls on the list.

Here is the complete list:
1. Transalta Corporation (TAC)
2. Sterlite Inds India Ltd (SLT)
3. CSX Corporation (CSX)
4. CME Group, Inc. (CME)
5. Martin Marietta Matls Inc. (MLM)
6. Mastercard Inc. (MA)
7. Nymex Holdings Inc. (NMX)
8. Union Pacific Corp. (UNP)
9. Vulcan Materials Co. (VMC)

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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