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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Yahoo Inc. (NDAQ: YHOO) is facing more heat today after Carl Icahn sent another letter to the Board of Directors today expressing disappointment in their lack of a response to his concerns. The activist investor's previous letter had demanded that the troubled search company immediately sell itself to Microsoft in order to best serve shareholder interests. It will be interesting to see how Yahoo responds to this letter:

Dear Roy:

After reading Yahoo!'s press release put out on Friday in response to my letter of that morning, I cannot help but wonder if you even read my letter.

Again, Yahoo! keeps repeating misstatements in the hope it will convince its shareholders that these misstatements are valid. I cannot understand why the Yahoo! board feels so strongly about its "poison pill" severance plan and why it continues to refuse to rescind it. How can you continue to repeat that your severance plan is in the best interests of shareholders and employees? Indeed, Yahoo!'s own compensation advisor called the severance plan "nuts." Is it not true, as the shareholder complaint stated, that Microsoft's CEO earmarked $1.5 billion for employee retention (a benefit you neglected to tell your employees about)? Is it not better to incentivize employees to stay in their jobs than to quit? Instead of just continuing to repeat the mantra that we have made an inaccurate interpretation of your severance plan, why do you refuse to go into detail as to why our interpretation is incorrect? Additionally, a New York paper reported this weekend that "sources close to Microsoft said the severance plan was a 'big issue' when deciding what price they could pay for Yahoo!"

In your press release from Friday, you stated again that I do not have a credible plan for Yahoo! Did you even bother to read my letter, which went into great detail on what measures I would ask the new board to take? Ironically, while you keep inquiring about my plans, it is interesting to note that Yahoo!'s board has been busy reaping great compensation benefits. Indeed, you made approximately $10,000 per week last year -- not bad for a board member. I believe most of your shareholders would be interested in seeing your time sheets -- especially in light of the fact that, in my estimation, most of your so-called "plans" over the last few years have been failures. Remember the old adage -- those who live in glass houses should not throw stones. Perhaps most importantly, under my plan, I would ask the Board to bring in a talented and experienced CEO to replace Jerry Yang and return Jerry to his role as "Chief Yahoo!" It is extremely important to note that Google hired a great operator as a CEO who helped to transform the Company into a giant at the expense of Yahoo! According to publicly available financial information, while Google's income from operations grew 59% per year over the last two years, Yahoo!'s income from operations shrank 21%. What was the board doing over this period? Where was their great "plan"? I believe a new CEO with operating experience might well have had and might still have a very salutary impact on Yahoo! I ask again what your great "plan" has been over the last few years. Why did you permit Google to leave you in the dust?

I outlined a number of questions in Friday's letter. Why don't you do me the courtesy of answering my questions as I have answered yours?

Sincerely yours, CARL C. ICAHN

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Inspire Pharmaceuticals, Inc. (NDAQ: ISPH) shares jumped more than 50% in early trading after its new drug to treat cystic fibrosis met its primary goal for a Phase III trial. The 352-patient, double-blind, 24-week placebo-controlled study demonstrated statistical significance for its primary efficacy endpoint. Secondary endpoints were also evaluated in the trial, which is great news for the company.

“The data from this Phase 3 trial with denufosol are encouraging for the cystic fibrosis community because it brings us one step closer to a novel treatment that addresses the basic cystic fibrosis defect," said Robert Beall of the Cystic Fibrosis Foundation. "There remains a high unmet medical need in the area of CF treatments and denufosol could be an important addition to the treatment regimen."

The drug, denufosol, was well-tolerated and had a favorable safety profile in the trial. Patient retention rates were high and similar etween treatments groups with approximately 90% of patients completing the 24-week placebo-controlled portion. The incidence of adverse events in the group was comparable to the placebo. As in previous trials, the problems were minor - coughing.

“The results from this trial are exciting because they demonstrate that denufosol’s novel mechanism of action, activation of an alternative chloride channel that is treating the underlying defect, had a clinically-meaningful impact on lung function that progressively increased over time," said Frank Accurso. "The improvement in FEV1 was achieved on top of aggressive use of multiple concomitant medications."

In the end, this announcement definitely makes Inspire Pharmaceuticals a stock worth watching as successful drug candidates often become takeover targets once all the risk is gone. The completion of this Phase III trial means one giant leap forward in this process.

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The nation's largest cellular telephone provider was born today after Verizon Communications (NYSE: VZ) agreed to purchase Alltel for approximately $28.1 billion. The deal will help Verizon's wireless business surpass that of AT&T Wireless to take a strong lead.

The deal also represents one of the quickest flips in history as Alltel's private equity owners just completed buying the company last fall for about $27.5 billion. The result was a fast $600 million profit in just about a year. The consortium had reportedly been sitting on huge debt-related losses and were pushing hard to sell.

Under the terms of the deal, Verizon will acquire the equity of Alltel for $5.9 billion and assume $22.2 billion in debt. The transaction is slated to be completed by the end of the year. The move caught investors by surprise given the fact that it was rejected in the past due to Vodafone's resistance - a parter with Verizon Wireless.

The move also positions Verizon increasingly as a wireless business as opposed to a wireline business and is a logical fit. Both companies share the same cellular technology, CDMA, and Alltel services areas that are not serviced by Verizon. This positive spin helped push shares of Verizon up some five percent on the day.

In the end, this move underscores that the wireless industry is no place for independent telecom providers. It is the giants that thrive in this arena and even private equity funds are starting to realize that they cannot compete. It will be interesting to see how this affects others in the sector.

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Yahoo Inc. (NDAQ: YHOO) has suddenly turned into one of the most active dealmakers in its bid to reduce the pressure from shareholders. A whirlwind of new deals were announced today with advertising partners ranging from Wal-Mart Stores (NYSE: WMT) to CBS Corporation (NYSE: CBS). Meanwhile, the company is desperately trying to strike a deal with Microsoft in leiu of an outright acquisition.

Shareholders like Carl Icahn are still not satisfied and are demanding a sale of the company. Many are not impressed that it took Yahoo this long to "rewrite" the company and turn it around. After all, if management was so confident in the company then why has the stock been stagnant for so long? To many investors, it comes down to a vote of confidence. Management still faces a lot of opposition that could prove difficult to qwell without a sale.

According to many shareholders, Yahoo must overcome a large (and growing) gap with Google in the search market in order to win back investors. And that might take a little longer than most shareholders are willing to wait...

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Yahoo Inc. (NDAQ: YHOO) leaders continue to contradict themselves as shareholders become increasingly fed up. Court documents revealed today that Yahoo had rebuffed a partnership with Google Inc. (NDAQ: GOOG) just one day before Microsoft Corporation's (NDAQ: MSFT) bid on anti-trust concerns.

"We are focused on long-term value creation rather than short-term gains," read a statement prepared for Yahoo executives. "Short-term analysis of the revenue for potential of outsourcing monetization may not take into account the longer term impact on the competitive market if search becomes an effective monopoly."

These comments come in sharp contrast to Yahoo's later position, during Microsoft talks, that it was conducting a test with rival Google to sell its search ads. The 180 was part of a strategy by Yahoo to seek alternatives for its business rather than selling out at Microsoft's $31 per share offer.

Now, shareholders are increasingly wondering whether or not Yahoo executives were honestly ever considering the Microsoft offer, or whether they simply will not sell out at any price. The news also comes just after several lawsuits aimed at pushing the transaction through by law or overtaking the board.

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Wachovia Crop.’s (NYSE: WB) poor results combined with the ouster of CEO Ken Thompson is fueling speculation that the firm could be for sale very soon, with analysts tagging JP Morgan Chase & Co. (NYSE: JPM) as the most likely suitor.

Charlotte-based Wachovia is facing some major trouble due to its mortgage market exposure, largely a result of its ill-timed 2006 acquisition of specialty ARM lender Golden West Financial Corp. Though the deal was designed to expand Wachovia into more of the West, its real result was Wachovia buying a huge amount of mortgages at the peak of the housing market. Even Thompson eventually admitted the purchase of Golden West was a bad move given its timing – though by citing only the timing, Thompson seems to ignore the underlying risk of the mortgage debt even without the “mortgage meltdown.”

In the wake of the acquisition, Wachovia has cut its dividend by 41% while being forced to dilute equity by issuing $8 billion worth of new shares.

Several analysts, including those at Merrill Lynch and Deutsche Bank, see JP Morgan as having an interest in buying the faltering bank because Wachovia has a strong presence in the Southeast – an area JP Morgan CEO James Dimon has expressed an interest expanding in.

Even so, there have been no known material talks of a sale by anyone at Wachovia with anyone at JP Morgan, leaving some analysts saying a deal remains unlikely – at least for now.

Regardless of a sale, expect more executive heads to roll at Wachovia – which, given the stock’s performance, seems a long-time coming.

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