Yahoo Inc. (NDAQ: YHOO) shares dropped off a cliff today after the search company shunned Microsoft Corporation (NYSE: MSFT) completely in favor of a deal with Google Inc. (NDAQ: GOOG) instead. Management may have finally found a way out of the situation, but shareholders clearly disapproved of the new deal. Shares plummeted nearly 5 percent on the news as a Microsoft deal is now completely out of the picture.

The only hope remaining for some shareholders is Carl Icahn's continued involvement. The activist shareholder had been pushing for a deal with Microsoft and even nominated his own directors to the board in order to effect change. The aging investor isn't known for giving up either, so it should be a fight until the end. Investors don't have to look back too far to see that fact- he had to try twice to effect change in Motorola!

However, the fact remains that most proxy contests end up failing. Moreover, Microsoft has not indicated that it would still be interested in a deal even if Icahn did take over the company. The only thing that is for certain is that the Google deal would be voided if Icahn does win control over the search giant. This fact could put a strain on his popularity with institutional investors as a loss of a Google and Microsoft deal would put Yahoo back to step 1.

In the end, it is no secret that Yahoo needs to change something in order to get itself out of its current lull. Management believes that a partnership with Google would help increase its revenues. Shareholders believe that a sale to Microsoft represents the bet immediate solution. Overall, it looks like Google is the only clear winner as it has now secured a deal with Yahoo while also eliminating any deal with Microsoft that could boost its competition.

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Citigroup Inc. (NYSE: C) chief executive Vikram Pandit announced plans today to shut down Old Lane Partners. This was a hedge fund group that he co-founded and sold to the bank last year for more than $800 million. A regulatory filing showed that the bank took a first-quarter charge of $202 million to write-down the value of its investment in Old Lane, which contributed to its $509 million hedge fund unit loss during the quarter.

Ousted chief executive, Charles Prince, called the transaction "an investment as much as it is an acquisition" last April when the deal was completed. Many saw the deal as a way to recruit Pandit as well as John Havens, who was promoted in March to head of investment banking, trading and hedge funds. It turns out that the deal wasn't a great investment or acquisition as Citigroup took a dive as a result of hedge fund losses.

At least shareholders can be sure they weren't scammed. Pandit may have received $165.2 million last year for his stake in Old Lane, but he reinvested $100.3 million, after tax, into the fund, according to a regulatory filing. This means that he is on the hook for just as much of the losses as many of the other investors. It appears that this was simply a case of poor timing for Citigroup and poor asset investment choices by Old Lane.

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Krispy Kreme Doughnuts (NYSE: KKD) has been beaten up since its heyday and remains 75% off of its 52-week high. However, the troubled company reported strong earnings on Monday that sent its shares substantially higher and gave investors renewed hope for the future. The question is: Is this a real recovery or just a temporary blip on the radar screen before more declines hit the stock?

Krispy Kreme shares spiked nearly 8% yesterday after the company announced first quarter earnings of 6 cents per share compared to a loss of 12 cents per share during the same quarter last year. However,revenue for the first quarter fell 6.6% to $103.6 million, which is down from $110.9 million a year earlier. The decrease was due to a 10.3% drop in company stores revenues and a 2% drop in supply chain sales.

The increase in earnings is only due to a large write-down last year due to the refinancing on some debt. As a result, shareholders should not take this as any kind of major improvement in cost savings or other measures. Rather, the decline in revenues makes its quite clear that the company continues to face significant problems ahead that may erode shareholder value.

Krispy Kreme continues to feel the pressure from the industry slowdown. The chain opened 28 new stores during the first quarter while seven franchises closed. The company said it expects more franchises to close in the future and "the number of such closures may be significant". However, investors again shrugged off these comments and sent the stock higher after the announcement.

The chain also warned against the effects of higher raw material costs. The jump in food prices has led to a sharp increase in costs that the company may have trouble passing on to its consumers without hurting revenues. The result could be further margin pressures that could adversely effect shareholder value. In the end, it could be another couple of quarters before investors see any real signs of improvement for this company.

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