ADESA, Inc. (NYSE:KAR) shares moved up $0.76, or 2.69%, to $29.00 today after Royce Associates LLC voiced their concerns about the company's current merger plans in a Schedule 13D filing with the SEC. The company recently agreed to be acquired for $27.85 per share in a multi-sided deal worth approximately $3 billion. Royce Associates, however, believes that the company's shares are worth more than the buyout price and questioned the company's accountability to shareholders. This notion was then supported today by Gabelli & Company, Inc., who said in a press release that they agreed with Royce Associates' analysis of the company. With shares currently trading around $29.00, investors are betting that this opposition will be enough for the company to reconsider its plans.

Just how much are KAR shares worth? Well, Royce Associates provided us with an excellent analysis in their Schedule 13D filing with the SEC:

On a valuation basis (Enterprise Value/TTM EBIT), the company is being acquired at a 24% discount to a "peer group" of publicly-traded comparables (including Copart [CPRT] and Ritchie Brothers [RBA]), and a 37.5% discount to the private equity purchase multiple of Insurance Auto Auction, Inc (IAAI) which was announced in February 2005. Using another valuation methodology (EV/TTM EBITDA), a similar disparity results, with the company being acquired at a 26% discount to the same group of comparables, and a 13.7% discount to the IAAI deal. More distressing is the fact that IAAI's EBIT margins and returns were well below KAR's, yet IAAI still commanded a higher take-out valuation from private equity investors.

On a Sum-of-the-Parts basis, if you apply the public company comparable multiple average (15.8x TTM EBIT) to KAR's Auction Services TTM EBIT (of $164.7m = $2,602m) and 8x TTM EBIT to the Dealer Services segment EBIT (of $86.1m = $689m), subtract SG&A ($23.4m), add back Cash ($211m) and subtract Long Term Debt ($330m), divided by shares outstanding (90.2m), we arrive at a target price of $35.00.

Royce Associates also brought up some other major problems with the transaction. Why, for example, didn't an auction process begin with strategic buyers, as opposed to financial buyers? Furthermore, why was the one strategic buyer, which had expressed an interest earlier, not included in the bidding process? These concerns are supplemented by a host of other issues brought up by the hedge fund, including:

1. Adesa, Inc has agreed to indemnify officers and directors against "any personal liability that may result from this transaction "
2. Adesa, Inc entered into Change of Control agreements with members of senior management as recently as 12/21/06, to pay lump sums in cash of up to 3x the base pay and annual bonus, if these employees are terminated after this deal. We already know (press release dated 1/16/07) that several members of existing management are likely to be terminated. Are these recent Change of Control agreements a meaningful incentive to enter into this sub-par transaction?
3. One of the acquiring private equity investors also happens to be one of the largest public shareholders at 9/06. Common sense suggests that one would only go to the trouble of "taking private" an existing holding, if he believed it was meaningfully undervalued.

Adesa shares have significantly underperformed its peers since going public, rising only 7.1% annualized. Now, management wants to hand over the business to financial buyers at a mere 16% premium to its IPO price, instead of extracting maximum value by either breaking up the company into its three components or making the investment decisions that should have been made years ago to help the stock's price reach that of its peers. Royce Associates' said it best: "We urge the board, as part of its fiduciary duty, to revisit the price as well as the process by which Adesa will be acquired, in order to obtain a more equitable price for all current shareholders. Based on our calculations outlined above, using a sum-of-the-parts methodology, a price of $35.00 per share would be more in line with industry comparables, excluding any strategic acquisition premium." If the company decides to listen to this advice, it could mean significant share appreciation for savvy investors - this is definitely a stock worth watching!

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Copart, Inc. (CPRT)
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Cost-U-Less, Inc. (NDAQ:CULS) responded to requests made by two activist hedge funds yesterday in an 8-K filing with the SEC. The two hedge funds had pointed out the many problems with Cost-U-Less operations and suggested that the company consider putting itself up for sale in order to unlock shareholder value. They suggested that shares of CULS could be worth in excess of $12 per share in the event of a buyout. After not receiving any communication from the company, they threatened a proxy contest in order to more actively generate a response or action.

This worked today as the company finally issued a press release explaining its position. The company explained that its board of directors had contacted investment banks and other advisers in several instances in order to help them evaluate strategic alternatives and increase shareholder value/liquidity. Clearly, most of these evaluations did not result in anything material; however, their most recent financial adviser proves to be quite interesting. The company revealed that in November 2006, it engaged its current financial adviser, Cascadia Capital, LLC, to assist the board in exploring a range of strategic alternatives.

This could prove to be interesting because Cascadia Capital is a Seattle-based investment bank is a nationally recognized M&A advisory practice, which suggests that they may be exploring an M&A transaction. This could include a possible sale of the company or perhaps an acquisition or merger of their own. Unfortunately, the company has a policy in place that prevents it from commenting publicly on the nature or content of their ongoing deliberations, so it's impossible to tell which options they are exploring. However, given Delafield's offer to purchase the company and other interest, we can hope that a sale of the company is at least being considered. This makes CULS a stock that is worth following over the next few months!

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Feldman Mall Properties, Inc. (NYSE:FMP) shares moved down $0.14, or 1.18%, to $11.69 in today's trading after Mercury Real Estate Advisors LLC again demanded that the company immediately hire an investment banker and put itself up for sale in a Schedule 13D/A filing with the SEC. In December, the hedge fund filed their initial Schedule 13D with the SEC requesting inclusion in the company's next proxy statement and recommending that the company's consider putting itself up for sale. They supported this request with the following:

1. The corporation has failed to match returns reflected by certain industry benchmarks. Since going public on December 15, 2004, the corporation has posted a total return of negative 4.79%. The MSCI US REIT Index has achieved a total return of positive 55.77% over this same period. This reflects substantial underperformance of 60.53%.
2. The corporation lacks the sufficient size required to operate as a public company. In our view, shareholders’ equity is being wasted on general and administrative expenses that are not commensurate with the size of the company. General and administrative expenses at the corporation totaled 13.6% of revenues during fiscal 2005 while the ratio of G&A to revenues in the Corporation’s Peer Group average 4.3%.
3. The corporation has suffered a series of earnings misses and downward revisions to guidance. The first downward revision of guidance came in November 2005 with regards to third quarter 2005 results. The corporation lowered FFO/share guidance 17% from a range of $0.28-$0.30 to $0.23-$0.25. Fourth quarter 2005 FFO/share guidance was also lowered from a range of $0.25-$0.27 to $0.17-$0.18. This is a 32% decrease from the guidance that was offered just a few months prior. In our view, management has lost credibility with investors as a result of being overly optimistic and not realistic on a number of occasions.
4. The corporation is an attractive acquisition candidate for a national or regional mall owner/operator. While we believe that the corporation is too small to generate economies of scale with its widely dispersed portfolio, several of the national or regional owner/operators could achieve operating synergies through an acquisition of the corporation. Further, we believe the corporation is trading at a significant discount to its intrinsic or liquidation value.
   

Since then, the hedge fund said that it had received numerous inquiries from well known and established, national and regional mall owners and operations interested in exploring a purchase of the company and its assets. Given that the company trades at a significant discount to its liquidation value, Mercury Real Estate Advisors continues to insist that a sale of company is the best course of action to maximize shareholder value. Moreover, Mercury Real Estate Advisors' willingness to put itself on the next proxy statement illustrates their motivation to make this happen. Combined, these factors make this a great stock to watch for opportunistic investors!

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Pogo Producting Company (NYSE:PPP) shares moved up $1.77, or 3.37%, to $49.55 today after Third Avenue Management LLC voiced their concerns about the company in a Schedule 13D filing with the SEC. This news follows previous concerns about the company's underperformance and valuation voiced by Daniel Loeb's Third Point. Combined, the two activist investors now control roughly 14% of the company's outstanding shares and have both pledged to take further action if necessary to unlock shareholder value. The significant stake in the company along with the threat of a proxy battle may finally warrant a meaningful response from the company's management and board of directors.

What issues do these hedge funds have with the company? Well, Daniel Loeb pointed out in December that the company's stock has appreciated less than half the rate of its peers for every time period in the past decade (on a cumulative basis)! Moreover, he questioned the company's Northrock Resources acquisition in Canada in which spent over $350 million (approximately 20% of the purchase price) in capital trying to improve; however, production in this segment has actually declined 10% from 30,000 barrels of oil equivalents per day to 27,000! Given these failures by management, Third Point recommended that the company immediately put itself up for sale or they would pursue a proxy battle to do it themselves.

Third Avenue Management expressed similar concerns today over the company's mismanagement and poor valuation. The hedge fund pointed out that the company's 2003 net debt has increased by more than six times and net debt per MCFE of proved reserves has increased by more than five times. While this amount of debt may be manageable, TAM pointed out that levering up during a period of historically high commodity prices could cause some major problems in the future. Next, TAM noted that company's production per share has dropped by more than 20% while, on a unit of production basis, lease operating expense has increased by 178% and G&A has tripled. The hedge fund insisted that this combination of higher debt, lower production, higher operating costs, and the underwhelming results from the company's recent acquisition of Northrock Resources were the main factors behind the poor relative performance of Pogo's stock over the last three years. And to top it all off, despite Pogo's poor performance over the past several years, the TAM noted that the company's compensation has been rising! In fact, company executives received an 11.8% increase in their base salary with a bonus that grew by 25% in 2005! The company also issued a restricted stock award valued at approximately $2 million to executives, up a staggering 55% compared to 2004! As a result of all of this, Third Avenue Management said that they would begin talks with other shareholders or take actions on their own in order to solve these problems and unlock shareholder value.

Clearly, if Third Avenue Management and/or Third Point are able to take convince the company to put itself up for sale, it could mean significant share appreciation for investors in a relatively short period of time. While we were not able to get a response yet from either of the two hedge funds, we will keep SECInvestor updated on any new information we receive. Overall, this is definitely a stock worth watching!

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Brooks Automation Inc. (NDAQ:BRKS) shares moved up $0.17, or 1.22%, to $14.08 today after Nierenberg Investment Management said that they strongly disagree with the decision made by Institutional Shareholder Services and Glass Lewis to withhold their votes from several incumbent BRKS directors. Details regarding this proxy vote were disclosed in the company's recent Schedule 14A proxy filing with the SEC. While the company's shares have stalled somewhat during recent years, the stock is trading 32% higher than its 2006 lows.

In their Schedule 13D filing with the SEC, Nierenberg noted:

"We believe that the Board of Directors of BRKS has improved dramatically the quality of its corporate governance in the past year. First, the Board announced that former Chairman and CEO Robert Therrien would not be re-nominated for another term on the Board.  Second, when the Wall Street Journal broke the story last March about the appearance of  back-dated stock option grants made to Mr. Therrien, the Board immediately appointed a special committee  of  newer, independent  directors to examine the matter and empowered the special committee to engage independent legal and accounting counsel. Later, after several months of intensive examination of the Therrien and other suspect stock option grants, the two board  members who had been the Board's compensation committee  at the time the Therrien grants were made resigned from the Board of Directors. Now BRKS' Board has a capable new Chair; the former Lead Director is no longer on the Board; and BRKS' compensation committee and its nominating and governance committee also have new Chairs. The company is publicly committed to cooperating fully with federal examinations of past option practices and to never repeating the unfortunate practices of the past. Fundamentally, we believe that BRKS has a strong balance sheet, a sensible corporate strategy, and excellent management to execute the strategy ... We believe that the formulaic approach taken by ISS and GL would, if followed in this case, cause shareholders  to withhold votes from directors who have been doing difficult work exceptionally well. We believe that doing the right thing should be rewarded, not punished."

Overall, this shareholders meeting will be one to watch closely as many large shareholders are beginning to question the company's leadership. Meanwhile, the company's stock continues to perform well into 2007 and is definitely one to keep an eye on over the next few months.

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Motorola Inc. (NYSE:MOT) shares moved up $0.16, or 6.39%, to $19.47 in early trading today after the company confirmed that it had received notice of Carl Icahn's intent to nominate himself to the board of directors at the next annual meeting. The Schedule 14A filing with the SEC offered no additional information regarding his intentions; however, we know that Carl Icahn is an activist investor that is not afraid to take action to unlock shareholder value. He currently holds a 1.39% stake in the company, which is below the reporting threshold (so no Schedule 13Ds have been filed). We believe, however, that Icahn may intend to take advantage of the company's large cash position (currently standing at around $6 per share). It is not uncommon for activist shareholders to request special dividends, share buybacks, or other measures designed to utilize extra cash to increase the stock's price. Motorola told us that all they are unaware of Mr. Icahn's intentions as stated in the filing, and would not comment on any past communications between the two. However, this is definitely a stock worth keeping an eye on!

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News and Events

Motorola, Inc. (NYSE:MOT) shares moved up today after Carl Icahn disclosed a small stake in the company and said that he wanted a seat on the company's board of directors. Mr. Icahn is well known for his shareholder activism in company's as large as Time Warner. Many expect him to institute a share buyback or special dividend if he attains a seat.

NYSE Group, Inc. (NYSE:NYX) is set to announce a strategic alliance with the Tokyo Stock Exchange tomorrow morning. NYSE Group Chief Executive John Thain and Tokyo Stock Exchange Chief Executive Taizo Nishimuro will attend a briefing to discuss the alliance; however, the company offered no additional comments on any specifics.

Altria Group, Inc. (NYSE:MO) is expected to report higher fourth-quarter results, but news of its plans to spin off its majority stake in Kraft Foods, Inc. (NYSE:KFT) is expected to overshadow these announcements. Some are concerned that Kraft's shares could experience some downside pressure as uninterested MO shareholders immediately sell off their stakes. Meanwhile, even though investors are widely expecting the Kraft news, it is likely to provide a further boost to Altria's share price.

Man Group plc (LON:EMG) said that it would be spinning off its brokerage arm through an initial public offering that could be one of the largest in Wall Street history. According to CNBC, the company has been interviewing investment banking firms to serve as underwriter for an IPO that could take place by the middle of this year, possibly as early as late spring.

US Airways Group Inc. (NYSE:LCC) said that it would stand by its Delta Airlines (OTC:DARLQ) deadline for its $9.87 billion takeover bid. Meanwhile, an unofficial group of Delta Air Lines creditors wants to postpone a February 7th bankruptcy hearing so that creditors can take a closer look at the offer.

Earnings Announcements
69 Positive, 0 Neutral, 40 Negative Expected

Axcelis Technologies, Inc. (NDAQ:ACLS) is expected to report earnings of $0.12 up 1,100% from last quarter's $0.01. The company's stock is up over 2% after-hours today prior to the announcement.

The Allstate Corporation (NYSE:ALL) said that its fourth quarter earnings rose 16.5%, but missed analyst estimates. The insurance company reported earnings of $1.78 per share, slightly less than the analyst consensus of $1.84 per share. The stock fell 2% after-hours.

SanDisk Corporation (NYSE:SNDK) reported higher than expected earnings of 87 cents per share, beating analyst estimates of 72 cents per share. The stock closed up 1.4% on the news today.

Novelis Inc. (NYSE:NVL) shares are up over 24% since last week on reports that Aditya Birla Group could make an offer for the company. The reports cited a $5 to $6 billion offer that would include the assumption of $2.4 billion in debt, which would would put a potential offer at $35 to $49 share. Analysts at Davenport also suggested that there could be other bidders for the company and maintain their belief that NVL shares could be worth around $68 per share on a takeover basis, based on the NPV of free cash flows through 2010. Officially, the company said it was "in discussions with various parties that could lead to a potential sale of the company". Meanwhile, the company's shares moved down today on reports that the company was interested in acquiring Hindalco. While the company has yet to comment, the acquisition would not make much sense for NVL on the surface, as the two would have very few synergies. Overall, this is definitely a stock to keep an eye on as the company continues its discussions with interested parties!

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PYR Energy Corp. (AMEX:PYR) shares moved up $0.13, or 14%, to $1.06 in mid-day trading today after Samson Investment Company made a $1.23 per share offer for the company. The Schedule 13D filing noted that the fund had attempted to contact the company's board several times without receiving a response and therefore decided to make their offer public. Samson said they would acquire 100% of the outstanding common shares at a cash price of $1.23 per share, which represents a 30% premium over Friday's $0.94 share price. Moreover, the investment company said that the buyout would be funded with cash on hand, so no financing would be required. Consequently, Samson said that it could quickly finalize an acquisition agreement and proceed without delay. Finally, they requested a response to the proposal no later than 4:00PM CST on February 1, 2007. Overall, this would be a smooth transaction for both the company and its shareholders. Given the substantial premium of the stock's current market price, the company will likely be forced to at least respond to the offer or risk alienating many of their shareholders. We could not reach the company for comment yet, but we will update this page if and when we hear back from them. Until then PYR is definitely a stock worth keeping an eye on as this situation unfolds!

UPDATE: The company's IR informed us that the they are currently reviewing the offer and offered no further comment.

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Bristol-Myers Squibb Co. (NYSE:BMY) shares moved up $1.72, or 6.56%, to $27.93 in early trading today after rumors surfaced that the company could be acquired by Sanofi-Aventis (NYSE:SNY). La Lettre de l'Expansion - a French newspaper - reported that a pre-merger memorandum has even been signed last week. Meanwhile, both Sanofi-Aventis and Bristol-Myers declined to comment on the speculation.

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News and Events

NYSE Group, Inc. (NYSE:NYX) and the Tokyo Stock Exchange are expected to announce an alliance as early as Tuesday, according to media reports. The alliance would represent a preliminary step to creating the first stock exchange spanning North America, Asia, and Europe.

Prudential Financial, Inc. (NYSE:PRU) finally decided to unload its internet bank, Egg, to Citigroup for £575m. The sale marks an end to a long saga dating back to 2004 when the company attempted to sell the ailing division to both Royal Bank of Scotland and Citigroup.

Merrill Lynch & Co. Inc. (NYSE:MER) said that it had agreed to purchase First Republic Bank (NYSE:FRC) yesterday in a deal worth $1.8 billion - a 44% premium to stock's the prior close. Merrill Lynch said the move was intended to add wealthy clients to its member base. First Republic operates 43 branches and specializes in mortgages for luxury homes.

Verizon Communications, Inc. (NYSE:VZ) announced lower profits, saying that it would continue its aggressive strategy to sign-up more customers to its fiber-television service despite its high costs. Capital expenditures are expected to be approximately $1 billion more than expected as a result of the new strategy; however, the company is already seeing strong penetration into the video markets as a result.

Tesoro Petroleum Corporation (NYSE:TSO) announced a $1.63 billion acquisition of Royal Dutch Shell PLC's Los Angeles refinery in a deal that clearly pleased investors today. Analysts suggest that this acquisition will help boost its flagship presence in Los Angeles and add raise the quality of its asset base. The refinery is also expected to immediately and significantly increase its earnings.

Earnings Highlights
68 Companies Reporting: 28 Negative, 3 Neutral, 37 Positive

Stratex Networks, Inc. (NDAQ:STXN) is expected to report a 500% growth in earnings tomorrow with a consensus at $0.06 up from $0.01 last quarter.

O'Charley's Inc. (NDAQ:CHUX) is expcted to report a 271% growth in earnings tomorrow with a consensus at $0.26 up from $0.07 last quarter.

Con-way Inc. (NYSE:CNW) announced higher profits, supported by the sale of one of its business units. Earnings were down 23% from last quarter, however, as the company said its results are "not up to the standards our shareholders and employees have come to expect".

Sterling Bank Corp. (NYSE:STL) is expected to report a 22% decline in earnings growth with a consensus at $0.24 down from $0.31 last quarter.

Phelps Dodge Corporation (NYSE:PD) reported strong earnings growth of 173% but failed to surprise investors as their stock moved down 2.27% today. The copper producer noted that it was continuing to benefit from strong prices for copper and molybdenum, each of which reflects solid market fundamentals

Eagle Hospitality Properties Trust, Inc. (NYSE:EHP) shares moved up $0.20, or 2.17%, to $9.40 today after the company said that it may put the company up for sale in an 8-K filing with the SEC. According to the associated press release, the Board of Directors has established a Special Committee of independent directors to explore strategic alternatives to enhance shareholder value, which could include a possible sale of the company. The company also said that it has retained Morgan Stanley as its financial adviser.

Eagle Hospitality itself is an REIT focused on acquiring, developing and managing full-service and all-suites hotels. The company's property portfolio consists of nine hotels including Embassy Suites Hotels, Marriott, Hyatt and Hilton. And as of September 2005, the company owned 100% interest in nine hotels and 49% interest in one other hotel within the United States. Financially, the company currently trades below book value (which stands at $10.02) with a debt-to-equity ratio of just 1.4x (below the industry average). And while the company is somewhat inefficiently run (with low ROA and ROIC), it did show vast improvements in several key hotel metrics including its occupancy rates, average daily rates (ADRs), and RevPAR (revenues per room available).

What could be expected in the event of a sale? Well, REITs typically grow through acquisitions of undervalued and mismanaged properties which they utilize their economies of scale to improve. Clearly this makes EHP a great target as it is both undervalued and somewhat inefficiently run but yet improving. Moreover, the company's low market cap, low debt, and decent cash on hand would make it a relatively easy transaction. Valuations themselves come in two flavors: intrinsic valuation and peer valuation. Intrinsically, the company is trading well below its enterprise value with low debt and decent fundamentals. Eagle Hospitality also has a lower valuation compared to its peers, in an industry where buyout premiums typically come between 20% and 30% of the 90 day moving average. Combined, this puts a conservative buyout number somewhere in the area of $11.50 - of course, this is assuming that the Board decides to even put the company up for sale. Overall, EHP is a stock that is definitely worth watching as the Board decides how to best unlock shareholder value.

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Applebees, Inc. (NDAQ:APPB) shares moved down $0.08, or 0.32%, to $24.74 today after Breeden Partners criticized the company's performance and governance and made several recommendations to the company's board of directors in a Schedule 13D/A filing with the SEC. This is not the first time that Breeden has become involved with Applebees either; back in December, the 5% holder pointed out similar problems with the company and threatened to nominate its own candidates to the company's board of directors.

The hedge fund began its letter by pointing out APPB's chronic under-performance compared to other company's in its peer group. They noted Applebee’s performance was 113.3% worse than Darden, 51.7% worse than the S&P 500, and 47.4% worse than the 75th percentile of the casual dining peer group. Next, Breeden pointed out the company's deteriorating fundamentals by showing declining same-store sales (5.2% to -1.0%), declining operating margins (16% to 12.4%), and declining return on capital invested (16% to 10%). The hedge fund noted that many of these problems stemmed from:

1. A fundamentally flawed growth strategy
2. Ineffective leadership during several years prior to Dave Goebel becoming CEO
3. Serious ongoing internal weaknesses in marketing and finance
4. Poor capital allocation policies
5. Excessive overhead costs
6. An ineffective board
7. Poor governance practices of various types
   
8. Inability to make timely decisions of consequence

The letter then moved into an area that is generating an increasing amount of press coverage - executive compensation. Breeden noted that even while the company has lost million in value over the past few years, executives were still granted over $30 million in bonuses! They also uncovered some other highly questionable executive perks, including personal use of corporate aircraft and even the use of shareholder funds to pay executives' personal income taxes. Perhaps the hedge fund said it best:

"We do not believe that shareholder interests are served by turning corporate aircraft into flying limousines for senior executives’ personal vacations. Just as importantly, this practice is inconsistent with the wholesome “neighborhood values” that Applebee’s claims to embody as a company. I am quite certain that most Applebee’s customers would be shocked to find out that a portion of the cost of their meal goes to fly the former CEO back and forth to his beach house aboard a corporate plane ... In addition to not requiring executives to pay any of the costs for their personal travel, the Committee has taken the extraordinary step of requiring shareholders to pay the income taxes owed by the CEO and other senior executives for their aerial vacation tours."

Clearly, there is a disconnect here between management and shareholders that the board is failing to correct. To address these issues, Breeden made several recommendations to the company's board of directors:

1. There should be a moratorium on any incentive compensation for any tier one executives so long as TSR remains negative. Similarly, incentive compensation should be zero if the company remains in the fourth quartile of relative performance in generating TSR.
2. A large proportion of incentive compensation (such as 50-75%) should be based on relative measures of performance compared to the company’s publicly traded casual dining competitors shown on page two of this letter.
3. Growth in average per restaurant royalty fees from franchise operations should be included as an incentive target for relevant executives (including the CEO and CFO), since franchisees represent 73% of the company’s system.
4. The level of free cash flow would be a healthy measure for some portion of incentive opportunities, especially for the CEO and CFO.
5. Minimum relative performance in generating TSR or EVA (such as being in the top 20%) should be a significant part of every executive’s target incentive eligibility. All executives should have a vital stake in the company outperforming its peers.
6. Personal use of corporate aircraft should be banned. Tax gross-up payments made during the last three years should be repaid to the company.
   

In a past filing, the hedge fund also made several recommendations on how to improve the company's performance:

1. Significantly reduce the number of company-owned restaurants by re-franchising a substantial number of restaurants in a multi-year program
2. Cease all further capital expenditures to open new company-owned restaurants, and minimize capital expenditures to renovate company-owned restaurants pending their sale
3. Reduce overall expense levels, especially in corporate level overhead, and dispose of non-core assets
4. Use excess cash generated from these steps and improved performance to increase the return of free cash flow to shareholders
5. Improve various governance practices, including reducing the number of insiders on the company's board, precluding former CEOs from continued board service strengthening independence requirements, eliminating the personal use of corporate aircraft and abolishing your staggered board

Combined, hopefully these changes will be implemented by the company's board of directors and management in order to protect the company's integrity and restore shareholder confidence in the company. The changes could also help the Applebees boost their performance and better motivate management to deliver shareholder value. This makes APPB a stock worth watching closely over the next few months.

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Nasdaq Stock Market Inc. (NDAQ:NDAQ) shares moved down $0.13, or 0.38%, to $33.94 today after the company said that they have not been contacted by the London Stock Exchange and do not have enough time to revise its $5.3 billion offer, which is due to expire on Saturday. Even after the Nasdaq threatened to sell off its nearly 30% stake in the exchange, the LSE still maintained that it was worth more than $5.3 billion even on a standalone basis. Meanwhile, LSE shareholders remain unconcerned as the stock trades at roughly even, retaining the buyout premium.

While the exchange has the ability to extend the offer until February 11th, it is more likely that they will simply attempt to gain control of the LSE by continuing to purchase shares. The Nasdaq currently owns approximately 30% of the company, while several hedge funds have also upped their stake. These hedge funds are hoping to accumulate a stake that they could later sell to the Nasdaq at a premium to help them quickly obtain a controlling stake. Among them is U.S. corporate raider Samuel Heyman who recently announced a 10.44% stake in the LSE.

If the Nasdaq is able to successfully acquire the LSE, it would create a trans-Atlantic exchange comprising over 6,400 companies with a total market capitalization of $11.8 trillion. Meanwhile, NYSE Group, Inc. (NYSE:NYX) has already agreed to a merger with Euronext and said it was working towards and agreement with the Tokyo Stock Exchange. Given the NYSE's successful transition abroad, it is becoming increasingly critical for the Nasdaq to establish itself. This situation is definitely one worth watching...

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Chicago Merchantile Exchange Holdings (CME)

Cost-U-Less Inc. (NDAQ:CULS) shares continued their rise today after Delafield Hambrecht demanded that the company immediately put itself up for sale in a letter attached to their Schedule 13D filing with the SEC. These demands come after Monarch Activist Partners - a 5.4% holder in the company - made similar demands for the company to put itself up for sale in order to deliver value back to shareholders.  They both argue that the company would be better off being private as it is incurring heavy costs associated with being a public company while failing to realize the benefits with an illiquid, under-performing stock.

Just how much is Cost-U-Less actually worth in their eyes? Well, Delafield Hambretch reasons that given the company's current enterprise value of $30 million, and using EBITDA estimates of $7 million for 2006 and $7.5 million for 2007, pro-forma EBITDA for a prospective buyer should be $8.5 million (after adding back public company expenses). If this assumption is correct, then the company currently trades at only 3.5x EBITDA. What does all of this mean? Well, Monarch Activist Partners noted that Pricesmart (the company's self-acknowledged closest competitor) trades at a multiple of almost 16x. This means that even after taking an extremely conservative approach and valuing the company with a 40% discount from the industry mean, CULS is worth in excess of $12 per share. This translates into a 40% or greater premium to today's stock price!

Delafield Hambrecht also indicated that while a strategic buyer would likely pay more for the company, financial buyers would still pay a significant premium to the current market rates. On that note, the hedge fund said that it would likely participate as such a bidder if the company were put up for sale. Many investors also insist that there could be other strategic buyers, given the company's low market cap and deep discount to its peers.

But will any of this materialize? Well, given the nearly 15% combined stake in company by these two hedge funds, management may decide to respond to shareholders rather than risk a confrontation with the two hedge funds. Indeed, both hedge funds said that if they did not hear back from management, they may seek to replace members of the board in a proxy contest, which should set off some alarms at company headquarters. Unfortunately, the company's Investor Relations personnel were unavailable for comment today when we called; however, we will follow-up and post any developments here at SECInvestor.com. Meanwhile, this is definitely a stock to keep a close eye on as this situation unfolds, especially given the deep discount in the company's share price.

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Equity Office Properties Trust (NYSE:EOP) shares moved up $1.67, or 3.16%, to $54.36 today after the Blackstone Group raised their bid by 11%, from $48.50 per share to $54 per share. This new bid is now that highest on the table after a consortium of investors led by REIT Vornado Realty Trust (NYSE:VNO) had the previous high bid of $52 per share. The board of trustees continues to recommend the Blackstone deal and will hold a special shareholder meeting scheduled for February 5th to vote on the merger agreement. The company said it can close the Blackstone deal on or about Feb. 8.

Equity Office also noted that Blackstone's termination fee has been raised to $500 million from $200 million; however, the company said it would continue to provide diligence information to the Vornado group so that it can submit a definitive counteroffer, if it desires, by January 31st for consideration. The company was also quick to point out that the $500 million termination fee represented just 2.1% of the offer, and therefore would not significantly discourage any future bids for the company. Meanwhile, shareholders remain cautiously optimistic as shares of EOP current trade at $54.36 - above the $54 high offer. The final price of this highly irregular bidding war remains to be seen; however, this is definitely a stock to keep an eye on over the next couple of weeks.

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eBay Inc. (NDAQ:EBAY) share rose $3.20, or 10.67%, to $33.12 today after the company surprised investors with a strong finish to a mixed year. The company's 8-K filing with the SEC revealed record net revenues of $1.7 billion with a net income of $346 million, or $0.24 per share. eBay also announced that it had repurchased $1 billion worth of stock and planned to expand its program to an additional $2 billion.

Meg Whitman, President and CEO of eBay, commented, "Q4 was an excellent quarter for eBay, bringing 2006 to a very good close. All three of the company’s business units delivered impressive results this quarter, including record net revenues from our Marketplaces business, strong total payment volume on PayPal, and a triple-digit increase in the number of Skype users." Specifically, eBay saw a 24% growth in net revenues from its Marketplaces business, a 57% increase in total payment volume for its PayPal segment, and a 129% increase in the number of Skype users.

Meanwhile, Bob Swam, Chief Financial Officer, stated, "Overall, Q4 was a great quarter, with strong results across all of our businesses. The $1 billion share repurchase we executed this quarter, in addition to expanding the program for another $2 billion, further underscores our confidence in the long-term outlook of the business." These share repurchases will continue to increase the company's earnings per share, as it now expects to make between $0.28 to $0.30 for Q1 2007 and $1.25 to $1.29 for FY2007. Combined, these aspects make eBay a stock worth taking a look at over the next few months.

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Bristol-Myers Squibb Co. (NYSE:BMY) reported Q4 EPS of $0.19, three cents better than estimate. The company foresees a FY07 EPS of $1.20-$1.30, versus the consensus of $1.22.

Baxter International Inc. (NYSE:BAX) reported a Q4 EPS of $0.66, five cents better than estimates. Revenues were $2.8 billion versus the $2.72 billion consensus. For the first quarter 2007, the company expects organic sales to grow five to six percent, and earnings of $0.54 to $0.56 per diluted share. The current consensus is $0.53. The company expects earnings for full-year 2007 to be $2.47 to $2.53 per diluted share versus the consensus of $2.48.

Lockheed Martin (NYSE:LMT) reported Q4 earnings of $1.64 per share, eighteen cents better than the consensus. Revenues came in at $10.84 billion versus the consensus of $10.77 billion. The company predicts a FY07 EPS of $5.80-$6.00, versus prior guidance of $5.60-$5.80, with the consensus at $5.87.

AT&T Inc. (NYSE:T) reported a Q4 EPS of $0.61, two cents better than estimates. Revenues came in at $15.9 billion. The outlook was reaffirmed for continued double-digit adjusted earnings per share growth with growing free cash flow after dividends in 2007 and 2008; expected BellSouth merger synergies revised upward, estimated net present value increased from approximately $18 billion to approximately $22 billion.

Quest Diagnostics (NYSE:DGX) reported a Q4 EPS of $0.77, three cents better than estimates. Revenues were $1.5 billion versus the $1.57 billion consensus. For the full year 2007, the company expects results from continuing operations as follows: earnings per diluted share of between $2.70 and $3.00; and revenues of $6 billion to $6.2 billion. The current FY07 EPS consensus is $3.21 and the revenue consensus is $6.41 billion.

Lear (NYSE:LEA) reported a Q4 loss of $8.90 per share, which does not compare to the consensus of a $0.19 loss. Revenues came in at $4.28 billion versus the consensus of $4.14 billion. The company foresees FY07 revenues to be $15 billion versus the consensus of $16.3 billion.

SunPower Corporation (NDAQ:SPWR) reported a Q4 EPS of $0.18, one cent better than estimates. Revenues came in higher at $74.5 million versus the consensus of $71.85 million. The company predicts a Q1 EPS of $0.18-$0.20, and Q1 revenues to be $125 to $135 million.  The guidance for the FY07 EPS is $0.90-$1.00 and FY07 revenues to be $640 to $670 million.

Nucor Corporation (NYSE:NUE) reported a Q4 EPS of $1.35 versus the consensus of $1.13. Revenues were $3.47 billion versus the $3.34 billion consensus.

Midwest Air Group, Inc. (AMEX:MEH) reported a Q4 EPS of $0.16, five cents better than estimates. Revenues were $168.3 million versus the $168.35 million consensus. For the full year of 2007, Midwest is projecting non-GAAP net earnings per diluted share to be in excess of $1.70. The current consensus is $0.89. Midwest is also projecting that 2007 revenues will exceed $825 million, with the current consensus of $746.6 million.

Brunswick Corporation (NYSE:BC) reported a Q4 EPS of $0.47 versus the consensus of $0.38. Revenues were $1.37 billion versus the $1.35 billion consensus. For 2007, the company is estimating earnings to be lower, in the range of $1.65 to $2.00 per share, with the current consensus at $2.11.  

McKesson (NYSE:MCK) reported a Q3 EPS of $0.79, eleven cents better than estimates. The company foresees the FY07 EPS to be between $2.75-2.85 versus the $2.74 consensus.

MEMC Electronic (NYSE:WFR) reported a Q4 EPS of $0.68, nine cents better than estimates. Revenues were $420.5 million versus the $416.09 million consensus. The company predicts FY revenues of $1.9 billion and an EPS over $3.00 per share. The FY revenue consensus is $1.84 billion and the EPS consensus is $2.55.

Microsoft (NDAQ:MSFT) reported a Q2 EPS of $0.26, three cents better than estimates. Revenues were $12.54 billion versus the $12.08 billion consensus.

Callidus Software (NDAQ:CALD) reported a Q4 EPS of $0.00, five cents better than estimates. Revenues were $24.1 million versus the $20.4 million consensus. The company predicts Q1 revenues between $20.5 and $22 million, versus the $18.2 million consensus.

Synaptics (NDAQ:SYNA) reported a Q2 EPS of $0.32, three cents below the consensus of $0.35. Revenues were $76.1 million versus the $71.22 million consensus. The company foresees Q3 revenues between $58 and $61 million versus the $55 million consensus.

Columbia Sportswear (NDAQ:COLM) reported a Q4 EPS of $1.06, eight cents better than estimates. Revenues were $361.8 million versus the $357.20 million consensus.

New York Times Company (NYSE:NYT) shares fell $0.37, or 1.55%, to $23.47 today after Morgan Stanley indicated their disappointment with the company's decision to retain their dual-class voting structure. Morgan Stanley's Schedule 13D filing with the SEC noted that "by excluding the proposal from the proxy, the company has left the Class A shareholders with limited avenues for expressing their dissatisfaction with the poor performance of the managers of their business." Investor concerns about this dual-class voting structure are not new; in fact, during last year's annual meeting 30% of the company's Class A votes were withheld in protest.

Why is this such a major concern? Well, Morgan Stanley insisted in its letter that many independent analysts believe NYT is worth 50% more than the current stock price suggests; moreover, they contend that the difference between the company's intrinsic value and share price is due to mismanagement and poor governance. As a result, Morgan Stanley said that after patiently holding the stock for more than ten years, they don't think that they would be best serving their clients interests if they sold their stake at such a substantial discount to fair value. The fund said that if the company failed to act they may consider withholding their votes in future annual meets in protest. If shareholders succeed in eventually correcting the mismanagement, it could mean significant share appreciation for NYT investors. This makes NYT a company worth watching over the next few months.

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Electro Scientific Industries, Inc. (NDAQ:ESIO) shares rose $0.45, or 2.19%, to $21.02 today after 11.6% holder Nierenberg Investment Management filed a Schedule 13D/A with the SEC that commented on Third Avenue Management's recent proposals along with the company's current actions. The hedge fund said that it was pleased with management's willingness to act on the proposals and was impressed by TAM's suggestion of a combined share repurchase and dividend program. Nierenberg also noted the fact that United Microelectronics Corp. (UMC) recently said that it would use its excess cash to retire 30% of its outstanding shares and pay shareholders a one-time cash dividend - actions similar to those proposed by the two hedge funds.

Nierenberg also offered an extension to TAM's plans:

"As Mr. Jensen's letter points out so powerfully, there are other perfectly acceptable ways to use excess cash to build shareholder value. If, for example, ESIO's Board and advisors were to conclude that the best way to improve ROE were to repurchase shares, we could support that decision with just two conditions. First, we would want the size of the repurchase program to be large enough that it would meaningfully boost both ROE and earnings per share, like we believe UMC's program will. And, second, we would like ESIO to make a continuing commitment to use excess cash flow to repurchase a significant percentage of shares on an ongoing basis. To illustrate the size of programs which could be acceptable to us, we could support a one time repurchase of six million shares, which is over 20% of the outstanding share count, succeeded by a continuing program to repurchase at least one million more shares annually."

Clearly, there are many ways in which the company could utilize its excess cash to benefit shareholders. The most important thing to watch, as Nierenberg pointed out, is the scale on which repurchases or dividends are handled. Many times companies will try and silence concerned shareholders by initiating insignificant share buybacks or small cash dividends, which ultimately do very little to deliver shareholder value. A program like UMC's, however, would significantly reduce the number of outstanding shares and consequently boost the company's EPS significantly. Moreover, the cash dividend would rid the company of its idle cash, which can actually be dangerous to have in some cases. Overall, this is definitely a stock to watch as management works to craft a meaningful response to these proposals.

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Altria Group, Inc. (NYSE:MO) shares rose $0.26, or 0.3%, to $88.02 in early morning trading after Merrill Lynch raised its price target from $92 to $98. This follows several other analyst recommendations, including Goldman Sachs who recommended buying the stock before the details of its Kraft spin-off are announced on January 31st. These analysts believe that Kraft spin-off combined with an improving international tobacco market will help propel the stock to new highs now that the company has cleared its legal plate.

But why is this such a great deal for shareholders? Well, the Kraft spin-off is expected to generate approximately $34 billion in cash, which the company could use to buyback a quarter of its outstanding shares, raise its dividends, or use to expand into international markets. Secondly, Altria shareholders will automatically receive shares in Kraft (NYSE:KFT), which have performed exceptionally well in 2006 moving up 22%. Finally, we know that Altria has always been a robust company; even in the face of several mega-lawsuits, the company has still managed to almost triple in value since 2000 while also paying a nice dividend. Combined, these factors make MO a stock worth keeping a close eye, especially on January 31st when the details of the spin-off are released.

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Air Products (NYSE:APD) reported Q4 EPS of $1.03, ten cents better than estimates. Revenues were $2.43 billion versus the consensus of $2.29 billion. The company currently anticipates fiscal Q2 EPS in the range of $.98 to $1.03 per share. The current consensus is $0.98.  

Corning Incorporated (NYSE:GLW) reported Q4 EPS of $0.31 Revenues were $1.37 billion versus $1.30 billion consensus. Corning said that it expects Q1 sales to be in the range of $1.26 billion to $1.31 billion and earnings per share in the range of $0.24 to $0.27. The current Q1 revenue consensus is $1.34 billion and EPS consensus is $0.28.  

AmerisourceBergen (NYSE:ABC) reported Q1 earnings of $0.65 per share, nine cents better than the estimates. Revenues came in at $15.7 billion. The company foresees FY07 EPS of $2.45-$2.60 versus prior guidance of $2.40-$2.55 and the consensus of $2.50.

Bank of America (NYSE:BAC) announced a 200 million share buyback.

Energen Corporation (NYSE:EGN) reported Q4 EPS of $1.31 versus the consensus of $0.72. Revenues were $380.8 million versus $326.68 million consensus. Energen reaffirmed its 2007 earnings guidance range of $3.80 to $4.20 per diluted share. The current FY07 EPS consensus is $3.94. 

Novellus (NDAQ:NVLS) reported Q4 EPS of $0.63, eight cents better than estimates. Revenues were $438.5 million versus $436.44 million consensus.

Symantec (NDAQ:SYMC) reported Q3 EPS of $0.26, one cent better than estimates. Revenues were $1.324 billion versus the $1.31 billion consensus. The company predicts Q4 Non-GAAP revenues of $1.25-$1.28 billion versus the consensus of $1.27 billion, with an EPS OF $0.18-$0.20 versus the consensus of $0.21. The company has also announced a $1 billion stock buyback plan.  

Ariba (NDAQ:ARBA) reported Q1 EPS of $0.13, four cents better than estimates. Revenues were $77.2 million versus the $75.92 million consensus.

eBay (NDAQ:EBAY) reported Q4 EPS of $0.31, three cents better than estimates. Revenues were $1.72 billion versus the $1.67 billion consensus. The company predicts a FY07 EPS of $1.25-$1.29 versus the consensus of $1.23.  

Textron (NYSE:TXT) reported Q4 EPS of $1.54, eight cents better than estimates. Revenues were $3.2 billion versus $3.10 billion consensus. The Q1 EPS  is below guidance with $1.15-$1.25 versus the consensus of $1.36 . The company foresees a FY07 EPS of $5.90-$6.10 versus the consensus of $6.28.

Intersil (NDAQ:ISIL) reported Q1 EPS of $0.34, two cents better than estimates. Revenues were $181.1 million versus the $185.02 million consensus. The company sees the guidance for Q1 EPS of $0.27-$0.29 versus the consensus of $0.30, with Q1 revenues of $162-$168 million versus the consensus of $183.2 million.

Varian Inc (NDAQ:VARI) reported Q1 EPS of $0.61, thirteen cents better than estimates. Revenues were $217.9 million versus $207.94 million consensus. Also, the company announced a $100 million buyback.

Polycom (NDAQ:PLCM) reported Q4 EPS of $0.36, six cents better than estimates. Revenues were $186.5 million versus $180.56 million consensus.

Bottomline Technologies (NDAQ:EPAY) reported Q1 EPS of $0.10, eight cents better than estimates. Revenues were $29.7 million versus the $27.16 million consensus.

Plexus (NDAQ:PLXS) reported Q4 EPS of $0.32, one cent worse than estimates. Revenues were $381 million versus $390.40 million consensus. The company foresees a Q2 EPS of $0.15-$0.19, versus the consensus of $0.35, with Q2 revenues of $345-$355 million versus the consensus of $403.14 million.

Semitool (NDAQ:SMTL) reported Q1 EPS of $0.18, six cents better than estimates.  Revenues were $68 million versus the $65.23 million consensus, while predicting a Q2 EPS of $0.02-$0.04 versus the consensus of $0.18. Q2 revs are to be $55-$57 million versus the consensus of $70.83 million.

AeroVironment, Inc. (NDAQ:AVAV) shares moved up $6.93, or 40.76%, to $23.93 on its first day of trading on the Nasdaq. This jump came after the stock priced at $17 per share, which was one dollar above the originally anticipated range of $14 to $16 per share. The company designs, develops, and produces advanced unmanned aircraft systems for the Department of Defense along with fast charge systems for industrial vehical batteries for commercial customers. AeroVironment believes that both of these markets are still in the early stages of development and have significant growth potential. Moreover, they insist that several other technologies that are in their research and development pipline will also emerge as new growth platforms in the future. Given their successful operation and impressive annual revenue growth rate of 71%, the company believes that they have proven their ability to invent and deliver advanced solutions to help government and commercial customers operate more effectively and efficiently. Whether or not this justifies the jump we saw today remains to be seen; however, this is definitely a stock to keep an eye on as it matures.

TNS Inc. (NYSE:TNS) shares moved up $0.19, or 0.98%, to $19.65 today after Shamrock Activist Value Fund disclosed a 5.02% stake in the company and urged the Board of Directors to consider a $6/share special dividend. This news comes after the company recently disclosed that there were several buyers interested in acquiring the company, including the founder and former CEO who has already made a $20/share offer for the company. To this end, the Schedule 13D filed with the SEC also contained a letter with several other requests directed towards the company's board.

These requests included:

1. Disclosure of Key Financial Targets: We propose that the Board disclose EBITDA, FCF (free cash flow: operating cash flow less maintenance capital expenditures) and ROIC (return-on-invested capital) targets for FY 2007 and FY 2008. With this critical information, shareholders can judge for themselves the performance of management and the Board and whether or not an offer for the Company is adequate.
2. Long-Term Incentive Compensation: A Board’s design and implementation of an overall compensation plan, particularly the long-term incentive elements, represent a vivid lens to its governance. We were disappointed that the most recent issuance of restricted stock had no alignment to internal financial metrics that, we believe, correlate to long-term shareholder value creation. I will send to you under separate cover a summary compensation “white paper” outlining a conceptual framework consistent with emerging best practices that seek to provide a meaningful relationship between pay and performance.
3. Capital Management Strategy: We urge the Board to consider distributing to shareholders approximately $150mm of cash or $6.00 per share. Because the Company has a solid customer base, and steady and recurring revenues, it should not require the current level of financial flexibility. We believe an overly capitalized balance sheet often results in poor capital allocation decisions and presents the opportunity for a financial buyer to capture value at the expense of the existing owners. Capital can be returned to shareholders through a variety of mechanisms: dividends, special dividends, share repurchase, etc. Importantly, the Board should seek to articulate a comprehensive capital management policy given the Company’s current corporate strategy.
4. Board Composition: We encourage the Board to recruit immediately two new independent directors. The directors should be selected through a disciplined process that specifies key skills and attributes that compliment those of the existing Board members and match well the strategic challenges and opportunities of the Company over the next several years. We also strongly suggest that you actively seek input in good faith from your shareholders during this process. Fresh perspectives seem vital and appropriate given the recent history at the Company.
   

Shamrock has clearly identified several key issues that need to be addressed before any M&A transactions. First, they noted that the company has an excess amount of cash that could be utilized by potential buyers at the expense of existing shareholders. To solve this issue, they recommended that the company issue a special cash dividend of $6/share to relieve the company of approximate $150 million worth of capital. Secondly, the activist hedge fund made requests aimed at increasing transparency and streamlining the company's costs in order to make it easier for investors to come up with a fair value for the company in the event that a buyer surfaces. Finally, Shamrock requested that two independent directors be found to assist the company in evaluating any strategic alternatives and actively represent shareholder interests in the future. Combined, these recommendations should help the company avoid low-ball offers while encouraging a fair valuation of the company's stock price. This makes TNS a stock worth keeping on the radar over the next few months!

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Electro Scientific Industries Inc. (NDAQ:ESIO) moved up $0.82, or 4.22%, to $20.26 this afternoon after the company's largest shareholder, Third Avenue Management LLC, changed their filing status from a Schedule 13G to a Schedule 13D. This more activist stance came as a result of the TAM's disappointment with the company's stock performance. Consequently, TAM recommended that the Board of Directors explore possible share repurchases and/or extraordinary dividends in order to unlock shareholder value. In a letter, the firm noted that "were the Board to consider a return of capital to shareholders, as I suggest it does, my sense is that some combination of a one-time dividend (say $2 per share) and a committed, long-term share repurchase program would effectively balance the needs of the corporation and those of the outside passive shareholders like TAM."

These demands come not long after Nierenberg Investment Management expressed similar beliefs in their Schedule 13D/A filing with the SEC. The hedge fund noted that ESIO shares could be worth as much as $40/share in three to four years if management took steps to unlock its value. In their analysis, they noted that ESIO has an additional $8 million of cash, not included in the cash and marketable securities lines of the balance sheet, $1 million from a subsequent insurance settlement and $7 million in a litigation bond in Taiwan, which increases cash per share to $7.73. Moreover they said that, if ESIO were to restore inventories and receivables to June 3, 2006 levels (and they believe both ultimately can be reduced even more), and if they were to add the above-mentioned $8 million cash, ESIO's total cash and marketable securities would be $8.21 per share, 43.2% of ESIO's share price at the close on January 9.

The fact is that ESIO is profitable, cash flow positive, and it has zero debt; however, its share price has dropped from a $25 high in 2006 to $19 before rebounding to its current levels. Consequently, two activist shareholders are now demanding that something be done to solve the problem, and this makes ESIO a stock that is definitely worth keeping an eye on over the new few months!

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Temple-Inland Inc. (NYSE:TIN) shares moved up $3.32, or 7.14%, to $49.82 in early trading today after Carl Icahn disclosed a 6.73% stake in the company in a Schedule 13D filing with the SEC. In the filing, Icahn said that stock is undervalued due to the conglomerate structure of the company. Consequently, he plans to recommend a divestiture or spin-off of one or more of the company's component businesses in a quant play could unlock millions in unrealized value for shareholders.

According to the Schedule 13D filing:

"The Reporting Persons acquired their positions in the Shares in the belief that they were undervalued due to, among other things, the conglomerate structure of the Issuer in which various disparate and non-complementary businesses are combined under one corporate umbrella. The Reporting Persons believe that this structure obfuscates the true value of the Issuer's assets and note that various analysts have issued sum of the parts analyses that imply a value for the Shares that is significantly higher than their current market price. The Reporting Persons intend to seek to have conversations with members of the Issuer's management to discuss ideas that management and the Reporting Persons may have to enhance shareholder value, which may include, among other things, the divestiture or spin-off of one or more of the Issuer's component businesses (which may include Guaranty Bank, the corrugated packaging business, timberland holdings, the building products business and/or the real estate division). The Reporting Persons may consider engaging in a proxy contest to attempt to replace one or more members of the Issuer's staggered board of directors with persons nominated by the Reporting Persons, but have as yet made no definite decision to do so."

Does this plan make sense? Well, we must first remember that spin offs in general tend to outperform the overall market due to the way in which they are structured. Often times, parent company shareholders tend to immediately sell shares they are granted in the new spin off. Consequently, there is unjustified downside pressure on the new company's stock, which creates value for the enterprising investor. The spin offs would also help the company raise a substantial amount of cash while unloading any debt that it may have (which is fairly common in these situations). Finally, given the fact that these businesses share very few synergies, it is likely that they will perform better as independently traded companies; therefore, spinning them off would unlock value for shareholders. Overall, these factors make TIN a stock definitely worth keeping an eye on over the next couple of months!

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EMC Corp (NYSE:EMC) reported Q4 earnings of $0.17 per share, one cent better than estimates. Meanwhile, revenues came in at $3.21 billion versus the consensus of $3.17 billion. The consolidated revenue for 2007 is expected to be at least $12.7 billion, versus the consensus of $12.65 billion. GAAP diluted earnings per share for 2007 are expected to be at least $0.64 versus a consensus of $0.63.

Tellabs (NDAQ:TLAB) reported Q4 non-GAAP EPS of $0.10, one cent better than estimates while revenues were down with $455 million versus the $463.7 million consensus. Tellabs expects the Q1 2007 revenue to be flat to slightly down from Q4 2006, in a range from $445 million to $455 million. The current consensus stands at $499.77 million.  

Radiation Therapy Services, Inc. (NDAQ:RTSX) said that it now expects that Q4 2006 revenues will be in the range of $76 to $78 million, an increase from its previously stated guidance of $74 to $77 million. The consensus is $76.85 million. The company expects a Q4 2006 net income of approximately $7.2 million, or $0.30 per share as compared to previously stated guidance of $0.36 per share to $0.38 per share. The consensus stands at $0.36.

BlueLinx Holdings Inc. (NYSE:BXC) said that it expects to report a Q4 net loss in the range of $0.16 to $0.22 per diluted share, with a consensus of a $0.03 loss) on revenue of approximately $945 million. The consensus stands at $1.09 billion.

Johnson & Johnson (NYSE:JNJ) reported Q4 EPS of $0.81, two cents better than estimates. Meanwhile, revenues were $13.68 billion, equal to the consensus.  

Energizer Holdings, Inc. (NYSE:ENR) reported Q1 EPS of $2.08 versus the consensus of $1.92. Meanwhile, revenues were $959.2 million versus $917.76 million consensus.

Avery Dennison (NYSE:AVY) reported Q4 earnings of $1.06 per share. Revenues came in at $1.41 billion versus the consensus of $1.4 billion. The company foresees FY07 EPS of $4.00 to $4.35 versus a consensus of $4.01.

Sun Microsystems, Inc. (NDAQ:SUNW) announced a $700 million private placement transaction with KKR Private Equity Investors, L.P., the publicly traded fund of Kohlberg Kravis Roberts & Co., one of the oldest and most experienced private equity firms. The investment will be in the form of $350 million of convertible senior notes due in 2012, and $350 million of convertible senior notes due in 2014. Closing of the investment is scheduled for January 26, 2007, and is subject to meeting customary closing conditions.

EZCORP (NDAQ:EZPW) reported Q1 EPS of $0.23, three cents better than estimates. Meanwhile, revenues were $91.7 million versus a $85.54 million consensus. For FY07, the company is raising their guidance to approximately $0.85 per share compared to $0.69 per share for fiscal 2006.

Hyperion Solutions (NDAQ:HYSL) reports Q2 EPS of $0.50, six cents better than estimates. Revenues were $222.9 million versus $212.35 million consensus. On a GAAP basis, the company currently expects total revenues in the range of $215 million to $220 million. The company also reported its updated outlook for fiscal year 2007. On a GAAP basis, the company currently expects total revenues in the range of $885 million to $895 million and diluted earnings per share in the range of $1.20 to $1.25, with the current FY revenue consensus at $859.18 million and the EPS consensus at $1.74.

Inter Parfums, Inc. (NDAQ:IPAR) said net sales for the final quarter of 2006 were approximately $90.3 million, or 37% ahead of the fourth quarter of 2005. The consensus is $76.43 million. The company is projecting 2007 net sales of approximately $365 million and net income of $20.4 million (2006 guidance is $16.9 million) or $1.00 per diluted share (the current consensus is $0.83).  

HOKU Scientific (NDAQ:HOKU) reported a non-GAAP Q3 loss of $0.06, four cents worse than estimates. Meanwhile, revenues were $1.1 million versus a $1.15 million consensus. The company expects revenue for the fourth quarter ending March 31, 2007 to be in the range of $1.0 to $1.2 million, while the current consensus stands at $1.15 million.  

Advanced Micro Devices Inc. (NYSE:AMD) reported Q4 loss of $0.04, versus a consensus $0.10 per share profit. Meanwhile, revenues came in at $1.77 billion versus the consensus of $1.73 billion. The company predicts Q1 revenues to be $1.6 to $1.7 billion versus a consensus of $1.82 billion.  

Candela (NDAQ:CLZR) reported Q2 EPS of $0.04, eleven cents worse than estimates. Meanwhile, revenues were $37.4 million versus the $42.9 million consensus.

Quanta Services, Inc. (NYSE:PWR) has increased its revenue for the fourth quarter ended December 31, 2006. Q4  revenues are expected to range between $590 million and $600 million compared to the prior guidance range of $500 million to $525 million. The current consensus is $518.65 million. Q4 adjusted earnings per share results are now expected to range between $0.19 and $0.20 per diluted share, compared to prior guidance of $0.11 to $0.14 per diluted share. The current consensus stands at $0.08.  

Yahoo! (NDAQ:YHOO) reported Q4 EPS of $0.16 (ex-items), three cents better than estimates. Revenues were $1.23 billion versus $1.22 billion consensus. The company predicts Q1 revenues between $1.12-1.23 billion versus $1.26 billion consensus, and  FY07 revenues between $4.95-5.45 billion versus $5.47 billion consensus.

Centex (NYSE:CTX) reported a Q3 loss of $1.96, four cents better than estimates. Revenues were $3.28 billion versus $3.12 billion consensus.

Digital Music Group, Inc. (NDAQ:DMGI) is higher in after-hours action after the comapny disclosed they entered into an agreement with Apple Computer, Inc. (NDAQ:AAPL), pursuant to which DMGI appointed Apple as a reseller of audio-visual files owned and/or controlled by DMGI, including television programs, feature length movies, shorts, and specialty content, within the relevant territory, and granted Apple certain rights to market and promote DMGI's Video Content. Shares of Digital Music Group are up 39% to $5.29 in AH action.

Cornell Companies Inc. (NYSE:CRN) shares moved up $0.31, or 1.61%, to $19.61 in today's afternoon trading session after Wynnefield Partners disclosed a 17.5% stake in the company Friday afternoon. This jump comes after Cornell agreed to be acquired by Veritas Capital for $18.25 per share in cash. The optimism was spurred when fund said that they "continue to believe that the shareholders would best be served if the company were to remain an independent entity and participate in the growth opportunities that exist in the private corrections industry". The fund also noted that Patrick Swindle of Avondale Partners stated in January that the company "appears to have meaningfully improved its position with what appears the addition of 500+ inmates based on our analysis ... these extra inmates could add $10.0 million in incremental revenue and $2.0 million to $2.5 million in incremental EBITDA at full capacity." Investors are betting the Wynnefield will be successful in blocking the company's merger with its 17.5% stake - a move which could result in a higher bid by Veritas. This makes CRN a stock worth watching closely over the next few months.

Cornell Companies Inc.'s principal activity is to provide correctional, treatment and educational services outsourced by federal, state and local government agencies. The Group provides a diversified portfolio of services for adults and juveniles through three operating divisions: adult secure institutional services, residential and community-based juvenile justice, educational and treatment services and adult community-based corrections and treatment services. The services of the Group include incarceration and detention, transition from incarceration, drug and alcohol treatment programs, behavioral rehabilitation and treatment and 3-12 education. The customers of the Group are Bureau of Prisons, U.S. Marshals Service, Department of Homeland Security, Bureau of Immigration and Customs Enforcement, county sheriffs, and city. As of 14-Feb-2005, the Group has 67 facilities in 16 states and the District of Columbia.

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Tribune Company (NYSE:TRB) shares moved down $0.33, or 1.08%, to $30.19 after the company hinted on Saturday that it might not go through with a sale of the company. William Osborn, chairman of the special committee to explore strategic alternatives, sparked the controversy by saying that the company was currently exploring its options which include "potential transactions involving third parties as well as actions the company may take alone". According to an article in the Chicago Tribune, these actions could include assuming a substantial amount of debt to issue a special dividend to shareholders, selling or spinning off broadcast assets, or assembling a smaller leveraged buyout than originally expected to take the company private.

This news comes after shares rose more than 4% last week when the company received a $31.70 per share offer disclosed by the Chandler Trusts - the company's largest shareholder. The offer - which remains the best on the table - involves $19.30 per share in cash combined with stock from a spin off of the company's broadcast and entertainment business. The Board of Directors is also reviewing two other bids, including a $500 million bid for 34% of the company by two billionaire investors as well as the Carlyle Group's bid for the company's broadcast assets. Regardless, this is definitely a stock to keep on the radar as many people have a keen interest in the company.

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Lodgian, Inc. (AMEX:LGN) moved up $1.15, or 9.6%, to $13.13 in early trading today after the company announced that it has initiated a review of possible strategic alternatives aimed at unlocking shareholder value. The company said it has retained Goldman, Sachs & Co. and Genesis Capital, L.L.C., to assist in the review. Lodgian also noted that they would not be providing updates on this process until it is completed and approved by the Board of Directors.

What can shareholders expect? Well, Lodgian is one of the largest independent owners and operators of full-service hotels in the United States. In December of last year, the company announced plans to reduce its portfolio to 43 core properties and said that it aims to sell 75% of its saleable properties by the end of the year. The sale of its 27 properties currently on the market is expected to generate between $115 and $122 million. This leaves the company with significantly reduced operating cash flows and a significant amount of extra cash. Typically, companies in this situation will approve measures to distribute this extra cash to shareholders - like instituting a dividend. Another possibility is spinning off the company's property holdings into an REIT, shielding them from a lot of taxes and unlocking the properties' true value. Finally, there is always the possibility that the company will put itself up for sale in a market ripe with acquisitions. Regardless, this is definitely a company to keep an eye on as it moves to adopt measures to unlock shareholder value.

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Interstate Hotels & Resorts, Inc. (IHR)
Avis Budget Group, Inc. (CAR)

The controversy surrounding Compania Anonima Nacional Telefonos de Venezuela CANTV (NYSE:VNT) reached a high this weekend after Hugo Chavez cast further doubts as to whether the company's shareholders would be fairly compensated. The Venezuelan president announced in earlier this month that he would nationalize CANTV as well as the country's private power companies by the end of the year. While analysts believe that the country has sufficient funds to complete the $4 billion buyout, Chavez was quoted as saying: "So I don't want to hear stories about how I have to pay at such and such price, at the international price, no, no, no, CANTV was given away." Moreover, the government also noted that they would subtract monies owed to employee pensions from the final purchase amount. Combined, this news has caused CANTV stock to fall about 30% on the U.S. ADR market and 19% in the Venezuelan stock market, as investors continue to question just how much the country will pay.

Verizon Communications Inc. (NYSE:VZ) owns a controlling stake in the foreign company and stands to lose millions on its investment if Venezuela fails to properly value the company. This is further complicated by the fact that Chavez said his drive towards nationalization is intended to recover control of CANTV from U.S. interests and enhance service for neglected communities. In the end, it is unlikely that Verizon will be able to recoup the full value of its investment in CANTV and underscores the dangerous level of volatility involved with investing in emerging markets.

Swift Transportation Co., Inc. (NDAQ:SWFT) entered into a definitive merger agreement with an entity formed by Jerry Moyes, the company's largest shareholder, a current Director, and former Chairman of the Board and CEO of Swift, pursuant to which Mr. Moyes and certain of his family members will acquire Swift in an all-cash transaction valued at approximately $2.74 billion. This includes the assumption of approximately $332 million of net debt. Under the terms of the agreement, Swift stockholders will receive $31.55 in cash for each outstanding share of Swift common stock.

Simtek Corporation (NDAQ:SMTK) announced that total revenue for the year ended December 31, 2006, is expected to be approximately $30.6 million, up 194%, compared to revenues of $10.4 million in 2005; meanwhile, the current FY revenue consensus is $29.94 million.

Central Garden & Pet Company (NDAQ:CENT) announced preliminary results for its FY Q1 with a net loss of twelve to fourteen cents per fully diluted share on sales of approximately $320 million. This compares to the previous guidance of approximately breakeven for the quarter; the current consensus stands at $0.00 and $335.78 million.  

Pfizer (NYSE:PFE) plans to maximize revenues from its current in-line portfolio and new products. To expand future revenues, Pfizer will generate cost savings through site rationalization in research and manufacturing, streamlined organizational structures, staff function reductions, increased outsourcing and procurement savings. The company's cost reduction initiatives will result in the elimination of about 10,000 positions or about ten percent of Pfizer's total worldwide workforce by the end of next year. For 2007, Pfizer sees revenues comparable to 2006. The company is seeing an adjusted EPS of $2.18 to $2.25, up to $10B in common stock purchases. For 2008, Pfizer sees revenues comparable to 2006, with an adjusted EPS of $2.31 to $2.45.  

StarTek, Inc. (NYSE:SRT) said total revenues are expected to be approximately $238 million for FY06, versus the consensus $243 million. Q4 revenues are expected to be approximately $59 million, versus the consensus of $64 million. The company expects fully diluted earnings per share in the range of $0.07 to $0.09 per share for the Q4 2006, versus the consensus of $0.16 and $0.38 to $0.40 per share for the full year, versus the consensus of $0.47.

Texas Instruments (NYSE:TXN) reports Q4 EPS of $0.39, one cent better than estimates.  The company's revenues were $3.46 billion versus $3.43 billion consensus. They predict a Q1 EPS of $0.28 to $0.34, versus the consensus of $0.35, with a Q1 revenue of $3.01 to 3.28 billion versus the $3.30 billion consensus.

The board of directors of Gap Inc. (NYSE:GPS) and Paul Pressler announced today that they have mutually agreed that Mr. Pressler will step down from his position as president and CEO of the company, as well as resign his seat on the company's board, effective immediately. Robert J. Fisher, the company's current non-executive chairman of the board of directors, will also serve as president and CEO on an interim basis, effective immediately.

Carl Icahn discloses 6.73% stake in Temple-Inland Inc. (NYSE:TIN).  

ViroPharma Inc. (NDAQ:VPHM) will replace Per-Se Technologies Inc. (NDAQ:PSTI) in the S&P SmallCap 600 after the close of trading on Thursday, January 25. Per-Se is being acquired by S&P 500 constituent McKesson Corp. (NYSE:MCK) in a deal expected to close on or about that date, pending final approvals.

Agree Realty Corp. (NYSE:ADC) will replace CentraCore Properties Trust (NYSE:CPV) in the S&P REIT Composite after the close of trading on Wednesday, January 24. CentraCore is being acquired by The Geo Group, Inc. (NYSE:GEO) in a deal expected to close on or about that date, pending final approvals.

Strategic Hotels & Resorts, Inc. (NYSE:BEE) will replace Reckson Associates Realty Corp. (NYSE:RA) in the S&P REIT Composite after the close of trading on Thursday, January 25. Reckson is being acquired by S&P REIT Composite constituent SL Green Realty Corp. (NYSE:SLG) in a deal expected to close on or about that date, pending final approvals.

Nutrition 21, Inc. (NDAQ:NXXI) announced that daily supplementation with Selenomax, the company's high selenium yeast product, suppressed progression of the human immunodeficiency virus (HIV-1) and improved immune cell CD4 counts in HIV-1 seropositive men and women. These findings are significant because boosting the immune system's CD4 cell count and suppressing viral loads (co-measurements of HIV progression and the goals of HIV treatment), can decrease the likelihood of developing complication of HIV disease and prolong life. Selenomax will be available first at CVS/pharmacy (NYSE:CVS) in all its 6,200 retail stores across the country, including PharmaCare Specialty Pharmacy locations.  

Nitches, Inc. (NDAQ:NICH) reports Q1 EPS of $0.27 compared to $0.14 for the same period last year. Consolidated net sales for the Q1 FY07 increased 141% to $35.4 million versus $14.7 million for the first quarter of 2006.

Clear Channel Communications (NYSE:CCU) may find its deal with private equity firms Thomas H. Lee Partners and Bain Capital Partners in danger after reports surfaced today that Fidelity Invesments may oppose the merger. A person familiar with the situation said that Clear Channel's largest shareholder believes that the $37.60 takeover offer is too low and that the mutual fund giant would be seeking a higher price. Fred Moran, an analyst at Stanford Group, said that "to feel comfortable supporting the buyout, the shareholders are looking for a sweetener, but whether Bain and Lee will consider doing so is a real question". According to a regulatory filing, the company needs a 2/3 shareholder approval in order for the deal to go through. Moreover, if a higher price is demanded, it could put the entire deal in jeopardy. This is definitely a stock to keep an eye on as the deal draws closer.

Clear Channel's principal activities are carried out through three business segments: Radio Broadcasting, International Outdoor Advertising and Americas Outdoor Advertising. As of Dec 2005, the Group owned 1,182 domestic radio stations and owned a national radio network. In addition, the Group held equity interests in various domestic and international radio broadcasting companies. Outdoor advertising comprises an inventory of both domestic and international display faces. As of December 31, 2005, they owned and operated 164,634 Americas Outdoor Advertising and 710,638 International Outdoor Advertising. They also own or program 41 television stations, a media representation firm, in the Internet industry. On December 21, 2005, the Group Spun-off their live entertainment segment and sports representation business.

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Viacom, Inc. (VIA)

Workstream Inc. (NDAQ:WSTM) shares moved up $0.09, or 8.18%, to $1.19 today after CEO Michael Mullarkey disclosed a 25,000 share purchase at $1.12 per share in a form 4 filing with the SEC, bringing his overall stake to over 4.3 million shares. The web-based software provider announced earlier this month that it would remain listed on the Nasdaq after the stock dropped below $1 for over 30 consecutive days - which violates Nasdaq listing requirements of a $1 or greater share price. Currently the company is trading below enterprise value and is slowly making its way back to profitability; however, the company does have $14.11m in debt with only $5.53m in cash. The CEO's 25k share purchase illustrates confidence in the company, but whether or not a successful turnaround can be orchestrated remains to be seen. Regardless, this is a great stock to keep on the radar over the next year.

Workstream Inc.'s s principal activity is to provide a range of employment services and web-based software services for Human Capital Management. The Group operates through two segments: Enterprise Workforce Services and Career Transition Services. Enterprise Workforce Services include recruiting systems, recruitment services, applicant sourcing and exchange and employee portal, recruitment research, online exchange, and employee management and retention services. Career Transition Services include career marketing and outplacement services. The operations are conducted mainly in Canada and the United States.

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Blair Corporation (AMEX:BL) shares moved up $1.70, or 4.71%, to $37.80 after 8.1% holder Golden Gate Capital delivered a preliminary acquisition proposal to acquire all of the outstanding shares of Blair $37.50 per share in cash. Blair's chairman, Craig Johnson, said, "Since receiving the letter we have been in discussions with this group. Although it is premature to comment further, I do want to emphasize that we will continue to act in the best interest of the company and its stakeholders." Currently, the company is trading above enterprise value with $4.22 per share in cash and no debt. Given these favorable buyout conditions and the fact that the company's shares are down 12% so far this year (even after today's move), shareholders may demand a higher premium. This sentiment was also clearly conveyed today as shares are currently trading $0.30 above the buyout offer's price. Regardless, this is definitely a stock to watch as this situation unfolds.

Blair Corporation's principal activity is to market fashion apparel for men and women, as well as home furnishings, primarily through mail and the Internet. Catalogs and letters depicting the current styles of women and men's wear and home products are mailed directly to existing and prospective customers in the United States. The apparel line consists of coordinates, dresses, tops, pants, skirts, lingerie, sportswear, suits and shoes for women and suits, shirts, outerwear and active wear for men. Home products include linen, furniture, bath accessories, kitchenware, gifts and personal care items. Popular brands include the Crossing Pointe line and the Jane Seymour Signature Collection. The Group also operates three retail stores, two in Pennsylvania and one in Delaware. The Group markets products manufactured by domestic, as well as international suppliers that are sourced through international trade offices located in Singapore, Hong Kong, Taiwan, India, Korea and China.

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MV Oil Trust (NYSE:MVO) shares moved up $1.87, or 9.35%, to $21.87 in their first day of trading, after IPOing at $21.50. The 7.5 million unit offering was priced at $20, which was the mid-point of the expected $19 to $21 range. The company engages in the acquisition of oil and natural gas properties located in the Mid-Continent region in the States of Kansas and Colorado.

What do you need to know about this investment? Here's a summary of important factors found within the company's S-1 filing with the SEC:

Strong Oil Pricing Fundamentals.    Substantially all of the production from the underlying properties consists of crude oil. Crude oil prices have increased substantially during the last several years, primarily due to increased demand for crude oil on a worldwide basis without a corresponding increase in crude oil production. In addition, geopolitical instability and military conflicts in certain significant oil producing nations have led to supply interruptions and increased uncertainty regarding the levels of future supplies of crude oil. MV Partners has entered into hedge contracts with respect to a large portion of its total estimated oil production from the underlying properties during 2006 through 2010 which hedge contracts are intended to provide returns to unitholders and reduce the fluctuations in cash distributions to unitholders resulting from fluctuations in crude oil prices. As these hedge contracts cease to exist thereafter, unitholders' exposure to fluctuations in commodity prices, particularly fluctuations in crude oil prices, will increase. Under the terms of the conveyance, MV Partners will be prohibited from entering into hedging arrangements covering the oil and natural gas production from the underlying properties following the completion of this offering.

Long-Lived Oil-Producing Properties.    Oil-producing properties in the Mid-Continent region have historically had stable production profiles and generally had long-lived production, often with total economic lives in excess of 100 years. Since MV Partners acquired the underlying properties in 1998 and 1999, proved reserves attributable to the underlying properties have remained relatively stable, ranging from approximately 24.3 MMBoe as of December 31, 1999, to approximately 18.7 MMBoe as of June 30, 2006. Based on the reserve report, production from the underlying properties is expected to decline at an average annual rate of approximately 3.5% over the next 20 years assuming no additional development drilling or other capital expenditures are made after 2010 on the underlying properties.

Substantial Proved Developed Producing Reserves.    Proved developed producing reserves are the most valuable and lowest risk category of reserves because production has already commenced and the reserves do not require significant future development costs. Proved developed producing reserves attributable to the underlying properties represent approximately 88% of the discounted present value of estimated future net revenues from the underlying properties.

Ongoing Development Activities.    MV Partners has identified multiple locations on the underlying properties where it intends to drill new infill wells and recomplete existing wells into new horizons in the future. See "—Planned Development and Workover Program" for a summary of MV Partners' development plans. These locations are currently classified as proved undeveloped reserves on the reserve report. If these wells are successfully completed, the additional production from these wells could help reduce the natural decline in production from the underlying properties. Any additional revenue received by MV Partners from this additional production could have the effect of increasing future distributions to the trust unitholders. In addition, because many of these wells are drilled to a shallow depth or involve the use of existing wellbores, the cost of drilling these wells is generally less than the cost of a typical development well.

Operational Control.    The right to operate an oil and natural gas lease is important because the operator can control the timing and amount of discretionary expenditures for operational and development activities. MV Partners is designated as the operator of approximately 96% of the underlying properties, based on the discounted present value of estimated future net revenues. Vess Oil and Murfin Drilling, each of which is an affiliate of MV Partners, operate, on a contract basis, the underlying properties for which MV Partners is designated as the operator.

Aligned Interests of Sponsor.    Following the closing of this offering, MV Partners and its members will be entitled to receive 48% of the net proceeds attributable to the sale of oil, natural gas and natural gas liquids produced from the underlying properties, assuming no exercise of the underwriters' option to purchase additional trust units. This 48% interest will consist of (1) the 20% of the net proceeds from the sale of production of oil, natural gas and natural gas liquids attributable to the underlying properties that is retained by MV Partners after transferring to the trust the net profits interest and (2) the ownership by the members of MV Partners of approximately 35% of the trust units following the closing of this offering, assuming no exercise of the underwriters' option to purchase additional trust units.

Downside Oil Price Protection During the First Five Years of the Trust.    The gross proceeds will be based on the market prices realized for oil, natural gas and natural gas liquids produced from the underlying properties net of all payments made by MV Partners to hedge contract counterparties upon monthly settlements of the hedge contracts that relate to a portion of the anticipated oil production attributable to the underlying properties. In addition, the trust will be entitled to receive 80% of all amounts payable to MV Partners from hedge contract counterparties upon monthly settlements of the hedge contracts. For the years 2006, 2007 and 2008, MV Partners has entered into swap contracts and costless collars at prices ranging from $56 to $68 per barrel of oil that hedge approximately 82% to 86% of expected production from the proved developed producing reserves attributable to the underlying properties in the reserve report. For the years 2009 and 2010, MV Partners has entered into swap contracts at prices ranging from $63 to $71 per barrel of oil that hedge approximately 80% of expected production from the proved developed producing reserves attributable to underlying properties in the reserve report. These hedge contracts should reduce the commodity price-related risks inherent in holding interests in oil, a commodity that has historically been characterized by significant price volatility, during the term of the hedge contracts.

Diversified Well Locations.    The proved reserves attributable to the underlying properties are allocated among approximately 985 producing wells located in 20 counties in Kansas and Colorado. As a result, the loss of production from any one well or group of wells is not likely to have a material adverse effect on the net proceeds from the sale of production that are allocable to the trust.

While there are many pros and cons to this investment, there is clearly a lot of interest as investors rush into the stock. Oil prices have increased substantially during the past few years; however, OPEC has recently failed to protect the $50 price level. Regardless, this is definitely a stock to keep an eye on over the next few months.

Whittier Energy Corporation (NDAQ:WHIT) entered into a definitive merger agreement with Sterling Energy plc under which Sterling will acquire all of the outstanding shares of Whittier for $11.00 per share in cash.

Internet Commerce Corporation (NDAQ:ICCA) confirmed that it has sent a letter to Easylink Services Corporation (NDAQ:EASY) proposing to acquire all of the outstanding Class A common stock of Easylink for $5.00 per share in ICC stock and/or cash.

M/I Homes, Inc. (NYSE:MHO) reduced its annual earnings estimate to $2.50 to $3.00 per share after pre-tax impairment charges of between $65 and $75 million recordeded in the fourth quarter, in addition to the $2 million impairment recorded in the third quarter. The company also sees an additional $3 million write-off for Q4 and $7 million for the FY.

Capstone Turbine Corporation (NDAQ:CPST) said that it expects its fiscal third quarter 2007 revenue to exceed analysts' consensus. The company said it expects revenue for the quarter of approximately $5.7 million, exceeding analysts' consensus estimate of $3.6 million.

Brandes Investment Partners, L.P. announced it had reviewed the terms of the investment in the Scottish Re Group Limited (NYSE:SCT) recently proposed by Cerberus Capital Management, L.P. and MassMutual Capital Partners, LLC and agreed to by the board of directors of Scottish Re. In light of objections to the investment transaction, on January 11, 2006, Brandes, on behalf of its clients who own approximately 2.63% of Scottish Re shares, sent a letter to Scottish Re asking its Board to consider an alternative shareholder-backed rights offering.

Interpool, Inc. (NYSE:IPX) announced that the Special Committee of its Board of Directors has retained The Blackstone Group as the Special Committee's independent financial advisor in connection with the proposal from Martin Tuchman, its Chief Executive Officer and Chairman, supported by other significant Interpool stockholders and an investment fund affiliated with Fortis Merchant Banking, a division of Fortis, to acquire all of the outstanding common stock of the Company for $24.00 per share in cash. In addition, the Special Committee retained White & Case LLP to serve as independent legal counsel to the Special Committee.

EasyLink Services (NDAQ:EASY) announced that its Board of Directors has formed a committee of independent directors to evaluate strategic alternatives for EasyLink, which could include a potential business combination transaction. On December 22, the Company hired Americas Growth Capital as its financial advisor. As part of this process, numerous parties have expressed interest in potentially acquiring the business.

Glenn H. Nussdorf, a 12% stockholder in Parlux Fragrances, Inc. (NDAQ:PARL), announced that he had begun mailing materials to Parlux shareholders seeking their consent to the removal of all current Parlux directors and the election of himself and five other nominees in their place.

E*Trade Financial Corporation (NDAQ:ETFC) announced that its quarterly net income jumped 37% to a record $176.7 million in an 8K filing with the SEC today. The news comes after many other players in the brokerage industry have experienced similar successes, along with widespread gains in the overall financial industry. The company also reported revenues of $627 million with a profit margin of 43% - in line with last year. Chief Operating Office Jarrett Lilien commented on the results, saying that "all parts of the model performed well, with organic customer growth, more assets and cash coming in and more trading". The company said that it wants to attract more mass-affluent customers and expand internationally, opening the door to possible M&A activity. While the company's current forecasts of $1.65 to $1.80 are based on purely organic growth, they did not discount the possibility of utilizing acquisitions to reach its targets more quickly.

E*Trade Financial Corporation's principal activities are to provide differentiated trading, investing, banking and lending products, primarily through the Internet and other electronic media. It operates in two segments: The Brokerage segment provides services including automated order placement, execution of market and limit equity orders. It also includes access to nearly 5,000 non-proprietary and proprietary mutual funds; futures; bond trading and proprietary bond funds. It provides individual retirement accounts; college savings plan products; real-time market commentary and stock option plan administration products and services. The Banking segment provides consumer banking products and services. The lending services include first and second mortgage, refinance of existing mortgage and home equity loan.

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Ceridian Corporation (NYSE:CEN) shares moved up $1.36, or 4.85%, to $29.42 today on news that Bill Ackman's Pershing Square has taken a more activist stance in its investment. The 11.3% holder also disclosed a letter in their Schedule 13D filing with the SEC that expressed concern about a number of recent developments, particularly the departure of key Comdata personnel and a change in the company's strategic direction. Consequently, the hedge fund recommended that the company spin off Comdata to shareholders and focus on improving Ceridian's remarkably low margins, lackluster customer service, weak sales force, and poor technological infrastructure. Finally, Pershing Square announced their intention to nominate their own slate of directors to the company's board in order to enforce these changes and deliver shareholder value.

Why does a spin off of Comdata make sense for shareholders? Well, we must first remember that spin offs in general tend to outperform the overall market due to the way in which they are structured. Often times, parent company shareholders tend to immediately sell shares they are granted in the new spin off. Consequently, there is unjustified downside pressure on the new company's stock, which creates value for the enterprising investor. Aside from this fact, the separation of Comdata from Ceridian also makes a lot of sense. The two businesses share almost no synergies and are even located in different geographical locations. Moreover, Ceridian's poor performance has been a drag on Comdata's exemplary performance - a major contributing factor to Comdata's managements' possible departure from the company.

The spin off of Comdata would also provide Ceridian with a pile of cash that they could use to improve their own operations. The transaction would also allow Ceridian to unload some of its long-term debt on to the new entity (a common practice in spin off scenarios). Combined, the cash and savings generated from this transaction would allow Ceridian to institute changes aimed at improving the company's low margins, customer service, sales force, and technological infrastructure. Also, given Bill Ackman's history, he may decide to petition to the company to issue a special dividend to return some of this money to shareholders.

Overall, this is a great opportunity for investors to catch a ride with Bill Ackman, who is one of the most successful activist investors of our time; CEN is definitely a stock to watch as the January 23rd proxy deadline approaches.

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TALX Corporation (TALX)

Pearson Plc (NYSE:PSO) moved up $0.79, or 5%, to $16.46 during the past two days on speculation that the company could be the target of a leveraged buyout. "The Business" fueled this speculation after reporting that private equity firm Kohlberg Kravis Roberts (KKR) was considering a $13.7 billion bid for the publishing company - a 4% premium to yesterday's close. However, Stifel Nicolaus discredited this rumor by stating: "Our SOTP analysis suggests the company can do better. Based on purchase price multiples involving comparable assets in recent transactions, we derive a fair value ranging from $17 at the low end to $23 at the high end. We would also note that according to the report, KKR has yet to make contact with Pearson, and thus Ј7 billion is merely a number at this point". Currently the company is trading below enterprise value with $1.59 per share in cash and very little debt. While this makes PSO an attractive takeover target, the company's PEG of 2.15 makes it somewhat overvalued. Regardless, this is definitely a stock worth watching.

Pearson plc. The Group's principal activity is providing information for the educational sector, consumer publishing and business information. It operates through its five business segments, School, Penguin, Higher Education, FT Publishing and IDC. Also, it has a business group, Professional. It brings together a number of education publishing, testing and services businesses.

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InFocus Corporation (NDAQ:INFS) may now face shareholder retribution after failing to demands made by 11.2% holder Caxton Associates. In a Schedule 13D filed yesterday, Caxton said that "as a result of the concerns previously expressed by the reporting persons in this Schedule 13D, and in light of the unsatisfactory conversations in the fourth quarter of 2006 between representatives of the reporting persons and members of the board and the company's operating management, the reporting persons now intend to call a special meeting of the company's shareholders and to seek to replace a majority of the current members of the board". The fund subsequently filed a Schedule 14A, indicating that it would be soliciting materials from the company in order to conduct a proxy battle.

What are these past concerns? Well according to prior Schedule 13D filing:

"The Reporting Persons believe that the intrinsic value of the Company, and the amount a strategic or financial buyer would pay to acquire the Company, is significantly greater than the current market value of the Common Stock.  The Reporting Persons believe that this gap in value has resulted from the implementation by the Company's Board of Directors (the "Board") of a flawed business plan that has been detrimental to shareholder value. The Reporting Persons accordingly believe that the following steps should be taken promptly in order to preserve and maximize shareholder value:

1. The Reporting Persons believe that the Company's poor performance is the result of mistakes made by management and the Board's failure to grasp the strategic realities of the environment in which the Company operates.  At this time, we believe that the Company's operating management is capable of effectively executing the Board's strategic vision should it be given adequate guidance and oversight.  We do not, however, believe that the Board, as currently constituted, is providing the necessary strategic thinking.  Therefore, we believe that, unless significant changes are made promptly, changes in the Board are in the best interests of all shareholders.

2. The Board should include individuals with strong ties to large shareholders, as well as industry, legal and/or financial markets expertise, which have a firm grasp of the realities of the markets in which the Company operates.  Unless significant changes are made, the Board should be restructured to consist of Mr. Ranson, at least two individuals drawn from among the Company's largest shareholders, and other independent directors with relevant industry backgrounds.

3. As part of the Company's announced exploration of strategic alternatives, the Board should develop an operating strategy that not only protects and enhances the hard asset value of the Company, but also will allow the Company to be cash flow positive under any foreseeable circumstances.  The Board should immediately work with management to develop a business plan that, among other things, permits revenue growth only at a reasonable cost, fixes or exits money-losing operations, and leverages the Company's valuable brand name franchise and considerable intellectual property assets.  This new business plan should be assessed against other available alternatives, including the possibilities of a sale or restructuring of the Company.

The Reporting Persons continue to examine all of their options with respect to the possibility of taking actions that they believe will enhance shareholder value, including the option of actively seeking to replace members of the Board."

Clearly Caxton and other shareholders have reason for concern, especially after the company failed to reply to the fund's demands. This move to solicit information and replace members of the board indicates the hedge fund's conviction in enforcing necessary changes. If the fund is successful, INFS could see significant upside. This makes Infocus a stock worth watching over the next few months as this situation unfolds.

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Corus Bankshares Inc. (NDAQ:CORS) will replace Digitas Inc. (NDAQ:DTAS) in the S&P SmallCap 600 index after the close of trading on January 24th. This comes after Digitas was acquired by S&P Global 1200 constituent Publicis Groupe SA in a deal expected to close on or about that same date, pending final approvals.

JDS Uniphase Corp. (NDAQ:JDSU) said that it sees Q2 revenues between $360 and $365 million, above their prior estimates ranging from $332 to $352 million and the consensus of $341.98 million.

Xilinx Inc. (NDAQ:XLNX) reported Q3 EPS of $0.26, which was 3 cents better than estimates. Meanwhile, revenues came in at $450.7 million versus a consensus of $451.17 million. The company said it sees Q4 revenues unchanged to down 5% versus Q3, which would be below the consensus of $472 million.

Corel (NDAQ:CREL) reported Q3 GAAP EPS of $0.37 (non-GAAP EPS is $0.52) versus a consensus of $0.43. Meanwhile, revenues in the fourth quarter of fiscal 2006 were $47.4 million, an increase of 4% over revenues of $45.6 million in the fourth quarter fiscal 2005.

IBM (NYSE:IBM) reported Q4 EPS of $2.26 versus a consensus of $2.19. Meanwhile, revenues were $26.26 billion versus a $25.67 billion consensus.

Capital One (NYSE:COF) reported Q4 EPS of $1.14 versus a consensus of $1.24. The company said it sees FY07 EPS between $7.40 and $7.80 versus an $8.11 consensus.

General Electric Company (NYSE:GE) and Abbott (NYSE:ABT) entered into a definitive agreement for GE to acquire Abbott's primary in vitro diagnostics businesses and Abbott Point-of-Care diagnostics business (formerly known as i-STAT) for $8.13 billion in cash.

Guess?, Inc. (NYSE:GES) raised its earnings per share guidance for the fourth quarter ended December 31, 2006 to a range of $0.91 to $0.93, versus previous guidance of $0.65 to $0.67 (consensus stands at $0.72). Meanwhile, the company raised its earnings per share guidance for the fiscal year ended December 31, 2006 to a range of $2.60 to $2.62, versus previous guidance of $2.34 to $2.36 (consensus stands at $2.41).

Briggs & Stratton Corporation (NYSE:BGG) reported a Q2 loss of $0.12, which was 7 cents worse than estimates. Meanwhile, revenues were $423.1 million versus a $466.46 million consensus.

Hastings Entertainment, Inc. (NDAQ:HAST) reported sales results for the two month holiday period ended December 31, 2006. At $127.7 million, total sales increased 2.0% over the same period in the prior year, but were lower than the company's internal projections.

Merrill Lynch & Co. Inc. (NYSE:MER) reported Q4 EPS of $2.41, above the consensus of $1.91. Meanwhile, revenues came in at $8.6 billion versus a consensus of $7.73 billion.

Equity Office Properties' (NYSE:EOP) future remains uncertain after private equity groups and competitors continue to circle the largest commercial renter in the U.S. CNBC reported today that a consortium consisting of Vornado (NYSE:VNO), Barry Sternlicht's Starwood Capital, and Leon Bluhm's Walton Street Capital are planning to make an acquisition bid within the next 24 hours. Meanwhile, the Financial Times is reporting that Cerberus Capital Management dropped out of the consortium dropped out after a weekend of talks but could still come back at a later stage, although that is not likely. Many others familiar with the situation said the enormous amount of liquidity in the marketplace meant another investor could still be found to replace Cerberus. This stock is definitely one worth watching closely as the February 18th deadline for additional bids draws closer. The current offer from Blackstone stands at $48.50 per share, while the stock trades at $50.69, up 1.69% in today's trading.

Equity Office Properties Trust (Equity Office) is a real estate investment trust (REIT) that owns and manages of office properties. At December 31, 2005, Equity Office owned buildings in 22 markets and 101 submarkets, including its 17 core markets, which are Atlanta, Austin, Boston, Chicago, Denver, Los Angeles, Oakland/East Bay, Orange County, New York, Portland, Sacramento, San Diego, San Francisco, San Jose, Seattle, Stamford and Washington, D.C. Equity Office owns substantially all of its assets and conducts substantially all its operations through EOP Operating Limited Partnership (EOP Partnership). As of December 31, 2005, Equity Office owned 89.7% of EOP Partnership through its ownership of partnership units in EOP Partnership.

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IntercontinentalExchange, Inc. (NYSE:ICE) moved up $2.59, or 2%, to $131.78 today after conflicting analyst reports put pressure on the stock. The ordeal began when Wachovia downgraded ICE from "outperform" to "market perform", citing a stock priced with high expectations which could disappoint and lead the stock down in the near term. However the firm also raised their 2007 and 2008 estimates to $3.37 and $4.50 per share, accounting for full accretion of the NYBOT deal and far more robust oil futures trading. All in all, Wachovia believes the shares should trade between $135 and $140, or 29-30x 2008 earnings estimate. Meanwhile, Goldman Sachs retains a more optimistic outlook saying that the market continues to underestimate the growth potential of the exchanges volumes. The firm set their new 2008 earnings estimates at $5.50, which is 43% above consensus and 10% above the next highest estimate. Moreover, GS believes that the risk reward trade-off remains favorable on ICE, with a 2:1 ratio of upside to downside based on bull case 2008 EPS of $7.00 and bear case EPS of $3.85. Consequently, the firm said that it believes the shares should trade around $165, or 30x its 2008 estimates.

Both of these analysts make good point: Oil contract volume has been on the increase during the past few weeks as hedge funds have embraced short trades after OPEC failed to react to a $50/barrel price point. This, combined with strong existing futures volumes, should help ICE's EPS significantly. However, many are quick to note that there also may be some downside pressure on Friday after trading restrictions are lifted for NYBOT insiders. Whether or not the stock will reach $160 remains to be seen; however, this is definitely a stock worth watching over the next few months.

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Encore Acquisition Company (NYSE:EAC) moved up $1.15, or 5.13%, to $23.70 today after the company announced that it would offer shares of its limited partnership interests in an initial public offering. The new entity is expected to own certain Wyoming oil and natural gas properties to be acquired from subsidiaries of Anadarko Petroleum Corporation and certain legacy oil and gas properties currently owned by Encore. This acquisition of Anadarko properties is valued at $400 million to be paid in cash, subject to customary purchase price adjustments. Encore said that the net proceeds from the initial public offering are expected to be used to repay indebtedness incurred in connection with the acquired properties.

Encore Acquisition Company (Encore) is an independent energy company engaged in the acquisition, development, exploitation, exploration and production of onshore North American oil and natural gas reserves. The Company's properties and oil and natural gas reserves are located in four core areas: the Cedar Creek Anticline (CCA) in the Williston Basin of Montana and North Dakota; the Permian Basin of West Texas and Southeastern New Mexico; the Mid-Continent area, which includes the Arkoma and Anadarko Basins of Oklahoma, the North Louisiana Salt Basin, the East Texas Basin and the Barnett Shale of north Texas, and the Rockies, which includes non-CCA assets in the Williston and Powder River Basins of Montana and North Dakota, and the Paradox Basin of southeastern Utah.

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Telik, Inc. (NDAQ:TELK) moved up $0.15, or 2.45%, to $6.26 this morning after Carl Icahn disclosed a 9.92% stake in a Schedule 13D filing with the SEC. The activist investor said that he believed the company's stock was undervalued and represented an attractive investment opportunity. Moreover, he said that his fund may engage management in discussions regarding the company's plans and prospects. Icahn is best known for orchestrating spin-offs and forcing special dividends in order to unlock shareholder value.

Telik, Inc., a biopharmaceutical company, engages in the discovery, development, and commercialization of small molecule drugs for the treatment of cancer and inflammatory diseases. Its lead product candidate TELCYTA is a small molecule cancer drug product designed to be activated in cancer cells that is currently in phase 3 clinical trials. While the company has no significant revenues at this point (since their product is still in development), they do have $146 million - or $2.79 per share - in cash with almost no debt. Consequently, the stock may be a risky buy at this point, but Icahn likely sees some value in the company's products or cash reserves. Regardless, this is definitely a stock worth watching over the next few months.

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Emergency Medical Services Corporation (NYSE:EMS) announced earnings guidance for the 2007 fiscal year ending December 31, 2007. The company expects full year diluted earnings per share between $1.11 and $1.18 versus a consensus of $1.09.

Charming Shoppes, Inc. (NDAQ:CHRS) said consolidated net sales for the nine weeks ended December 30, 2006 increased 3% to $654.4 million. Meanwhile, consolidated comparable store sales for the company's retail store brands decreased 2% during the nine weeks ended December 30, 2006.

CACI International Inc (NYSE:CAI) expects revenue for FY07 to range between $1.875 billion and $1.950 billion versus a consensus of $2.02 billion. Meanwhile, diluted earnings per share is now expected to range between $2.45 and $2.65 versus a consensus of $3.00.

RIDEX Corporation (NDAQ:IRIX) said it completed the acquisition of the aesthetics business of Laserscope pursuant to the terms of the definitive agreement.

The Mills Corporation (NYSE:MLS) and Brookfield Asset Management Inc. (NYSE:BAM) announced today that The Mills has entered into a definitive agreement pursuant to which Brookfield will acquire The Mills for cash at a price of $21 per share, representing a total transaction value of approximately $1.35 billion for all of the outstanding common stock of The Mills and common units of The Mills Limited Partnership, and approximately $7.5 billion including assumed debt and preferred stock.

Quanex Corporation (NYSE:NX) expects to report fiscal first quarter 2007 diluted earnings per share from continuing operations in a range of $0.45 to $0.50 when it reports results on February 27, 2007. The current consensus stands at $0.42.

Parker-Hannifin (NYSE:PH) reports Q2 earnings of $1.55 per share, ex-items, above the consensus of $1.40. Meanwhile, revenues came in at $2.51 billion versus the consensus of $2.46 billion. Sees FY07 EPS of $6.35 to $6.75 versus prior guidance of $6.05-6.45 and the consensus of $6.38.

TD Ameritrade Holding Corp. (NDAQ:AMTD) moved up $0.85, or 4.9%, to $18.21 today after releasing its operating results and financial condition in an 8K filing with the SEC. The company reported its best quarter ever, as growing fees and increased retail trading helped lift the company's net income by 60% year over year. Ameritrade also experienced success in many other measures, including:

• Record net income of $146 million, or $0.24 per diluted share
• Record non-GAAP net income of $173 million, or $0.28 per diluted share
• Record pre-tax income of $239 million, or 45 percent of net revenues
• Operating margin of $278 million, or 52 percent
• Record EBITDA of $291 million, or 54 percent
• Net revenues of $535 million
• Average client trades per day of approximately 238,000
• Annualized return on equity of 34 percent for the quarter
• Client assets of approximately $278.2 billion, including $39.8 billion of client cash and money market funds
• Liquid assets of $499 million; cash and cash equivalents of $441 million
• 109,000 new accounts at an average cost per account of $360; 40,000 closed accounts; 6,260,000 Total Accounts; 3,255,000 Qualified Accounts
• Average client margin balances of approximately $7.3 billion. On Dec. 31, 2006, client margin balances were approximately $7.6 billion

The company also said that, like its competitors, it will be attempting to lean itself off of mostly commission-based income to more of an "asset gatherer". CEO Joe Moglia said, "By the end of this year, we talk about being able to move from a firm that was almost totally based on transactions to one that's becoming more and more of an 'asset gatherer' ... By the end of 2007, we will be generating more revenues based on our assets alone than 100% of all of our expenses. And that includes our advertising numbers." Moglia also told CNBC that he believes there may be consolidation within the sector, but maintained that he didn't want to insinuate that the Ameritrade was currently involved in any such transaction. Regardless, AMTD is definitely a stock worth watching over the next few months.

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Lawson Software Inc. (NDAQ:LWSN) CEO Harry Debes disclosed an 80,000 share purchase at prices ranging from $6.64 to $6.90 in a transaction valued at more than $530,000, bringing his his overall stake to 128,674 shares. The transaction, disclosed in a Form 4 filing with the SEC, helped move LWSN up $0.11, or 1.63%, to $6.87 so far in today's session.

The company provides business application software, services and maintenance to customers primarily in the services sector, trade industries and manufacturing/distribution sectors specializing in specific markets, including health care, public services, retail, financial services, food and beverage, and wholesale distribution. While the company is currently trading above enterprise value with a high PEG of 2.59, it does have $1.41/share in cash and very little debt. This makes the company a potential acquisition target in an increasingly active M&A market, and new contracts should help the company prop up its falling earnings in future quarters. Combined, these factors make LWSN a stock worth watching over the next few months.

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SulphCo, Inc. (AMEX:SUF) Chairman and CEO Dr. Rudolph Gunnerman was dismissed from the company's board today after a misunderstanding that stemmed from questionable amendments he requested be made to the company's bylaws. These proposed changes would have restricted the board's ability to act on shareholders' behalf while further entrenching management. Dr. Gunnerman currently holds approximately 39% of the company's stock and revealed his proposals in a Schedule 13D filing with the SEC.

According to the filing:

"On January 12, 2007, Dr. Gunnerman delivered to the Company a written consent purporting to be executed by the holders of a majority of the Company’s outstanding shares of Common Stock (the Written Consent), which was signed by, among others, the Reporting Persons ... The Bylaw Amendments include, among others, (a) the requirement that an Annual Meeting of the stockholders be held on the first Tuesday in April at 850 Spice Islands Drive, Sparks, Nevada; (b) modifications to the procedures for stockholder nominations of directors to serve on the Company’s Board of Directors; (c) the fixing of the number of Board members at six; (d) the elimination of "cause" as a requirement for the removal of directors; (e) the inability of the Board to remove any officer of the Company until the first annual Board meeting to be held following the next annual meeting of stockholders following January 11, 2007; (f) the inability of the Board of Directors to issue, prior to the next annual meeting of stockholders (i) any shares of capital stock of the Company entitled to more than one vote per share, and (ii) in the aggregate, in excess of 10% of the outstanding shares of capital stock of the Company; and (g) that the Amended and Restated Bylaws may be amended only by stockholders holding a majority of the Company’s voting stock.

Subsequent to their delivery of the Written Consent, the Reporting Persons became aware of a miscalculation in the number of shares of Common Stock held by the persons that had executed the Written Consent, including the Reporting Persons. The miscalculation resulted from the reliance by the Reporting Persons on information included in a Share Holder Report issued by the Company’s transfer agent with respect to the number of shares of Common Stock held by the Company’s stockholders. The Share Holder Report purported to be current, but was in fact outdated. Based on the correct number of shares of Common Stock actually held by the stockholders executing the Written Consent, including the Reporting Persons, the Written Consent was not executed by the holders of a majority of the outstanding shares of Common Stock.

Prior to the date hereof, in accordance with the federal securities laws, the Reporting Persons have contacted a limited number of stockholders of the Company believed by the Reporting Persons to hold, together with the Reporting Persons, a majority of the outstanding shares of Common Stock. The Reporting Persons are continuing their efforts to obtain the consent of the stockholders previously contacted by them, but no other stockholders, to the Bylaw Amendments. If the Reporting Persons are not successful in these efforts, the Reporting Persons will continue to explore their legal options as stockholders of the Company, and may as stockholders of the Company call a special meeting of the Company’s stockholders to consider amendments to the Company’s Amended and Restated Bylaws similar to the Bylaw Amendments.

The Reporting Persons may in addition (whether or not the Bylaw Amendments are adopted) propose their own slate of nominees for election at the Company’s next annual meeting of stockholders."

Shortly after this Schedule 13D was released this morning, the company's board of directors dismissed Dr. Gunnerman from his post as Chairman and CEO of the company. While he will continue to serve as a director of the company, Larry Ryan has been named the new Chief Executive Officer and Robert H. C. van Maasdijk has been appointed chairman of the board. These actions may prompt him to explore other legal options or even propose his own slate of nominees to the company's board of directors. Shares of SUF are trading even on the day; however, if Gunnerman is successful in instituting the changes, the stock could see some downside.

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Verizon Communications, Inc. (NYSE:VZ) said that it would be spinning off its phone operations in less populated portions of New England and combine the assets with FairPoint Communications, Inc. (NYSE:FRP) in a deal worth around $2.7 billion. Under the agreement, Verizon would spin off its phone operations in Vermont, Maine, and New Hampshire and then merge the new entity with FairPoint. Ownership in the new entity would be divided between the two companies, with VZ maintaining a 60% stake and FRP holding a 40% stake. Meanwhile, the new entity would also take on about $1.7 billion of Verizon debt.

FairPoint shares moved up $2.15, or 11.6%, to $20.69 in early trading on the news. CEO Eugene Johnson said in an interview on CNBC that he believed the transaction would strengthen the company's presence in rural areas. In a statement, FairPoint said it would invest more money in its New England operations and expand high-speed Internet access to more customers. Meanwhile, Verizon said that it would use the money to strengthen their balance sheet and pay off some of its outstanding debt.

Spin offs also represent a great opportunity for shareholders to make money. On the average, spin-offs outperform the overall market, a phenomena so popular that there is now an ETF focusing on this exact strategy! This occurs because parent company shareholders tend to sell their shares immediately after receiving their distribution, thereby creating a downside pressure that has no fundamental justification.

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WCI Communities, Inc. (NYSE:WCI) moved up $2.59, or 12.32%, to $23.61 in early trading today after Carl Icahn disclosed a 14.57% stake in the company in a Schedule 13D filing with the SEC. Icahn said that he believed the company's shares were undervalued and that he intends to seek the company's views on how to unlock the inherent value of the shares. The news comes after Hotchkis and Wiley Capital Management LLC, a 16% holder of the company, said that they intend on engaging in talks "about its business and affairs which may include discussing the structure of management and the board of directors" earlier this month.

The company is trading well below enterprise value with a PEG of just 0.38, which makes the company appear extremely undervalued on the surface. But in reality, WCI continues to face difficulties with its land and projects; its Oceanside project is dead while the company is still struggling with business in the Miami condo market. And with only 140 orders last quarter, many investors are questioning whether a turnaround is possible, even with one of the best marketing forces in the business. However, Icahn is certainly one of the best in the business, which is evidenced the stock's sharp move today. Whether or not he is successful in turning around the company - or even something more drastic like forcing a sale - depends on many factors; but regardless, this is certainly a stock to keep on the radar as we learn more.

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The Special Transaction Committee of the Board of Directors of Cablevision Systems Corporation (NYSE:CVC) rejected the $30 per share offer by the Dolan Family, calling the offer inadequate.

Spherion Corporation (NYSE:SFN) updated its previously issued revenue and earnings guidance for the fourth quarter of 2006. The company estimates revenue of approximately $501 million and earnings from continuing operations between $0.16 and $0.18 per share. The current Q4 revenue consensus is $508.42 million while the EPS consensus stands at $0.12.

Rackable Systems Inc. (NDAQ:RACK) announced their results for the fourth quarter ended December 30, 2006, with otal revenue for the fourth quarter of 2006 expected to be in the range of $105.5 to $106.8 million. The current consensus is $106.11 million. The GAAP net income for the period is expected to range from a net loss of $683,000 to net income of $194,000, or two cents to one cent per diluted share. Non-GAAP net income is expected to be in the range of $4.8 to $5.3 million, or $0.17 to $0.18 per diluted share. The current Q4 EPS consensus stands at $0.27.

Total System Services (NYSE:TSS) reported Q4 EPS of $0.44, better than estimates of $0.26. Revenues were $503.9 million versus a $439.50 million consensus. The total revenues for 2007 are expected to be between $1.691 and $1.725 billion versus a $1.7 billion consensus.

Intel Corp (NDAQ:INTC) reported Q4 EPS of $0.26 versus the consensus of $0.25. Revenues were $9.7 billion versus $9.44 billion consensus. Q1 revenues are expected to be $8.7 to $9.3 billion versus a $8.93 billion consensus.

Genesis HealthCare (NDAQ:GHCI) has entered into a definitive agreement to be acquired, in an all-cash transaction for $63.00 per share, by a joint venture between affiliates of Formation Capital, LLC and JER Partners. The per share price represents a premium of approximately 31% over the average closing price for GHC common stock over the past 30 trading days. The aggregate transaction value, including the assumption of approximately $450 million of debt, is approximately $1.7 billion.

Shares of InnerWorkings (NDAQ:INWK) are trading down over 10% after a negative article from Barron's this past weekend. However, InnerWorkings believes the column contains numerous factual errors and mischaracterizes our technology and business. Consequently, the company issued a press release last night to dispute the Barron's article.

Point Therapeutics, Inc. (NDAQ:POTP) provided preliminary results from the company's Phase 2 trial of talabostat plus gemcitabine in patients with metastatic pancreatic cancer who have not received prior chemotherapy. The promising results jumped the stock's price 21% to close at $1.03 per share.

AsiaInfo Holdings, Inc. (NDAQ:ASIA) announced it has recently signed a contract with China Unicom (NYSE:CHU) to develop its national CDMA push mail platform. The news moved ASIA up over 8% in today's trading.

Advancis Pharmaceutical Corporation (NDAQ:AVNC) announced total revenue for 2006 from sales of Keflex products was approximately $5 million, lower than prior expectations of $7 million to $10 million. Meanwhile, the current FY06 revenue consensus stands at $7.38 million.

AOL (NYSE:TWX) and Napster (NDAQ:NAPS), announced that Napster will become the exclusive music subscription provider integrated into AOL Music, replacing AOL Music Now. The news moved NAPS up over 7.8% in today's trading session.

BP (NYSE:BP) announced today that after more than a decade in the CEO role Lord Browne has decided to retire as chief executive at the end of June 2007.

Rogers Corporation (NYSE:ROG) projects fourth quarter net sales of approximately $122 million with guidance range of $122 to $126 million. Earnings for the fourth quarter are now projected to be $0.68 to $0.72 per diluted share, while the previous guidance was for earnings of $0.90 to $0.93 per diluted share. Meanwhile, the current consensus stands at $0.92 per share.

The IPO for Legacy Reserves LP (NDAQ:LGCY) opened for trading today at $19 before closing at $20.39.

ZEVEX International, Inc. (NDAQ:ZVXI) has executed a definitive merger agreement with Moog Inc. (NYSE:MOG.A) (NYSE:MOG.B). Upon the closing of the merger, each share of ZEVEX common stock that is issued and outstanding immediately prior to the closing, and each outstanding restricted stock unit that is convertible into shares of ZEVEX common stock, will be converted into the right to receive $13.00 in cash from Moog.

Stantec (NYSE:SXC) has signed a letter of intent to acquire Vollmer Associates LLP, a 650-person firm headquartered in New York City. Vollmer provides engineering, architecture, planning, landscape architecture, and survey services focused on the transportation sector, from offices throughout the northeast United States.

Owens-Illinois, Inc. (NYSE:OI) has retained advisors to review strategic options for its plastics packaging business, including a possible sale. For the twelve months ended September 30, 2006, O-I Plastics had revenues of approximately $770 million. OI stock moved up 7% on the news.

Metavante Corporation, the financial technology subsidiary of Marshall & Ilsley Corporation (NYSE:MI) announced the acquisition of Valutec Card Solutions, Inc., of Franklin, Tenn. The company will continue to operate under the Valutec name, and will become a Metavante company.

Avaya Inc. (NYSE:AV) announced a tender offer to acquire Ubiquity Software Corporation plc (LSE:UBQ.L). The offer price is 37.3 pence in cash for each Ubiquity share. This values the entire issued and to be issued share capital of Ubiquity at approximately GBP 74.3 million (or approximately $144 million USD) after adjusting for the assumed proceeds from the exercise of options over Ubiquity shares.

Kimberly-Clark Corporation (NYSE:KMB) remains right around its 52-week high today, after speculation that KC could be a potential buyout candidate continues to resonate in the marketplace. The rumors began after unusual options activity a few months ago sparked investor interest. More recently, an internal e-mail from KC Chairman and CEO Thomas J. Falk reported discussed why the company would be a good takeover target. KC executives based in the Fox Cities, who asked not to be named, told a local newspaper that bonus-eligible executives received Falk's e-mail Wednesday morning. While the letter did not confirm the rumors definitively, they most definitely did not dispel the speculation. The e-mail noted that KC's successful global business operations and strong financial success were the key reasons supporting a buyout.

Many analysts on the street also acknowledge the possibility, citing KC's strong portfolio of brand names, including Kleenex, Huggies, Pull-Ups, Depends, Kotex, and Scott. One of the more prominent analysts, B. Craig Hutson, noted that "While we are unable to substantiate the [leveraged buyout] rumors, we believe Kimberly has characteristics that might make it an attractive LBO candidate". If such a buyout did occur, it would be one of the largest deals ever, with KC's market capitalization currently standing at about $31.6 billion. Regardless, this stock is definitely one worth watching over the next few months.

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McDonald's Corporation (NYSE:MCD) may be putting its Boston Market restaurant chain up for sale in an effort to further consolidate its operations after its recent spin-off of Chipotle Mexican Grill, Inc. (NYSE:CMG). The rumors stem from a Chicago Tribute article that cites an annual state-of-the-company meeting in which management said that they plan to sell the business segment. McDonald's purchased the company seven years ago in bankruptcy court for $173.5 million as a diversification move.

Obviously, any sale or spin-off of Boston Market would result in extra cash for the company, but it is not clear how this cash would be used. It is worth noting, however, that Bill Ackman still holds a substantial stake in the company, and he is well known for his shareholder activism. His hedge fund, Perishing Square, also has a long history with McDonalds, after pressuring them in 2005 to spin-off 65% of their owned restaurants before settling for a $1 billion share buyback program along with other measures to increase shareholder value. Perhaps now their interests are aligned as McDonald's looks to streamline their operations by selling off non-core businesses and deliver value to shareholders. While nothing is certain yet, this is certainly a stock worth watching over the next few months.

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Ultratech Inc. (NDAQ:UTEK) found itself under pressure today from Thales Fund Management, who disclosed an 11% stake in the company and recommended that the company explore strategic alternatives to maximize shareholder value. The activist fund said that the company's unique, market-leading technologies are severely undervalued at the stock's current market price. They believe this is due to management's chronic underperformance of the business relative to management's expectations, which has resulted in surprising to the downside during past earnings announcements. Moreover, Thales noted that the company failed to accurately disclose operating trends, thereby creating a false sense of security for investors before blindsiding them with lower-than-expected earnings.

According to a letter attached to the fund's Schedule 13D filing with the SEC:

"These repeated operating disappointments have led to a disconnect between the high strategic value of Ultratech's technology and the price of Ultratech stock. Both Advanced Packaging and Laser Spike Annealing have significant growth prospects, and if the current underperformance continues into 2007 we will have to conclude that these opportunities can be better monetized as part of a larger organization. To that end, we hope that the board as well as senior management will be open-minded and proactive in contemplating a sale of the company as a way to maximize shareholder value."

Clearly, management's ability to capitalize on their unique technology is limited at best. After all, UTEK shares have dropped from a of $25.03 this year to their current level of $12.22, angering many long-term shareholders. A new management team would be able to maximize shareholder value by providing more transparent and accurate guidance in order to better connect with Wall Street analysts and general shareholders. The company has approximately $3.39 per share in cash with a book value of $7.77 per share and almost no debt. This makes it an attractive buyout target since the company's own cash could be used to finance a leveraged buyout. Combined, these things make Ultratech a stock worth watching over the next few months as management considers its options.

Read Full Letter to the Company

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SAP AG (NYSE:SAP) said Q4 software revenue rose 7% to EUR 1.26 billion versus a consensus of EUR 1.35 billion. The company sees FY06 software revenue of EUR 3.1 billion, up 11% YoY. The total revenue for Q4 is expected to be EUR 2.95 billion, up 7% YoY, with a total revenue for 2006 to be EUR 9.43 billion, up 11% YoY. Meanwhile, the company sees 2006 Adjusted EPS of a least EUR 1.59.

Digirad Corporation (NDAQ:DRAD) anticipates consolidated revenues at the high end of the previously announced range of $70.7 million to $71.5 million, consisting of DIS revenue between $49.1 million and $49.5 million and product revenue between $21.6 million and $22.0 million. The current consensus stands at $71.2 million.

BorgWarner Inc. (NYSE:BWA) provided 2007 earnings guidance of $4.60 to $4.80 per diluted share on a US GAAP basis. Earnings growth is expected to be in line with BorgWarner historical growth rates of greater than 10%. The current FY07 EPS consensus stands at $4.58.

JDA Software Group (NDAQ:JDAS) anticipates total Q4 revenues of approximately $89 million, versus the consensus of $93.86 million.

Zions Bancorporation (NDAQ:ZION) expects fully diluted earnings per common share for the quarter ended December 31, 2006 of approximately $1.31 to $1.33. The current consensus stands at $1.44.

Amerigon Incorporated (NDAQ:ARGN) expects to report revenue of approximately $50 million for the year ended December 31, 2006, up more than 40% YoY, with strong YoY growth in profitability. The current FY revenue consensus sits at $48.62 million.

Amdocs Limited (NYSE:DOX) said it expects to report results in-line with guidance for its fiscal Q1, which ended December 31, 2006. The company now expects that revenue in FY07 will be between $2.83 to $2.91 billion, slightly lower than the company's previous guidance. The consensus stands at $2.93 billion.

RC2 Corporation (NDAQ:RCRC) announced lower than expected preliminary net sales. Net sales from continuing operations for the Q4 2006 were flat to slightly down versus the prior year fourth quarter net sales from continuing operations of approximately $154 million, which compares to the consensus of $169.3 million. Current estimates of 2006 diluted earnings per share from continuing operations are now expected to be below the company's previously announced range of $2.52 to $2.62.

Murphy Oil Corporation (NYSE:MUR) expects income for Q4 2006 to be between $0.40 to $0.45 per diluted share. The current consensus stands at $0.65.

Restoration Hardware, Inc. (NDAQ:RSTO) said comparable store sales for the nine-week holiday period increased more than ten percent.  The company reiterated its guidance for diluted earnings per share toward the lower end of the previous range of between $0.34 and $0.44 per share against last year's loss per share of $0.52. The consensus is $0.41.

C-COR Incorporated (NDAQ:CCBL) anticipates its second quarter revenue and net earnings per share will exceed the top end of guidance provided in its October 26, 2006 news release on its financial results for the first quarter of fiscal year 2007. C-COR also expects to report a positive book-to-bill ratio for the second quarter of fiscal year 2007.

SupportSoft, Inc. (NDAQ:SPRT) expects a Q4 revenue of approximately $14 million, ahead of the $12 million to $13 million range previously forecasted by the company. The consensus is $12.57 million.

Infosys (NDAQ:INFY) reports Q3 earnings of $0.39 per share, two cents better than estimates. Revenues came in at $821 million versus the consensus of $797.3 million. The Q4 EPS is expected to be $0.40, versus the consensus of $0.39, with Q4 revenues of $859-$861 million versus the consensus of $837 million.

Foreign banking stocks moved sharply to the upside today after the Bank of England announced rate hikes that took investors by surprise. While many economists expected the BOE to keep rates steady until February, the Bank of England stated that it needed to raise rates in order to keep inflation at its target 2%. Stocks affected by this announcement included Deutsche Bank (DB) up 0.8%, Credit Suisse Group (CS) up 0.5%, and Banco Bilbao Vizcaya Argentaria (BBV) up 1.1%. Meanwhile, the Bank of New York Composite ADR Index moved up 0.9%.

Equity Office Properties (NYSE:EOP) could receive a higher bid from Cerberus Capital Management, according to reports from the Financial Times. Just when we thought that the company's $36 billion deal with Blackstone was written in stone, there is now speculation that Barry Sternlicht of Starwood Capital Group Global LLC, Neil Bluhm of Walton Street Capital, and Cerberus Capital Management could top their offer. While it is highly unusual for private equity firms to compete over such a takeover, the stakes in this deal are high with Class A properties expected to perform extremely well in the future. EOP's strong existing capacity, along with new regulations making it more difficult to build new capacity, make this deal important for players in the commercial real estate market.

Despite a $200 million termination fee and Blackstone matching rights, shareholders are already anticipating higher bids as its shares are trading at $49.30 - above Blackstone's $48.50 buyout price. Regardless, this is definitely a stock to keep an eye on as this situation unfolds.

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Parlux Fragrances Inc.'s (NDAQ:PARL) recent share repurchase is drawing criticism from several large investors, including Glenn Nussdorf. The company authorized stock repurchases of up to 10 million shares of the Company's common stock - an extraordinarily large stock repurchase, covering almost 55% of the company's 18,430,000 outstanding shares. But why complain about a stock repurchase of any kind, especially a large one? Well, according to Nussdorf's Schedule 13D/A filing today:

"In light of the fact that my consent solicitation will be commencing very shortly, that the record date is one week from today, and that the Board has just authorized massive stock repurchases, I am understandably concerned that the stock repurchases may be made for the purpose of, and in a manner designed to, entrench the Company's current management and Board of Directors. I believe that any use of corporate funds for such purpose would constitute an unconscionable breach of fiduciary duty and misuse of corporate assets and, in such event, I intend to hold you responsible. I demand that the Company make immediate, full and clear public disclosure of the purposes of the massive stock repurchase authorization and how it is intended that any shares repurchased by the Company, whether prior to, on, or after the record date, will be treated for purposes of my consent solicitation."

The conflict between Nussdorf and the board began in December when Nussdorf disclosed his concerns about the company and threatened a proxy battle in a Schedule 13D/A filing on December 22nd with the SEC:

"As the beneficial owner of a substantial percentage of the outstanding shares of Parlux, I believe that much can be done to increase shareholder value and that it is time for immediate change at both the Board and management levels. The decline in the Company's share price from a high closing price of $18.96 earlier this year (after adjusting for a 2-for-1 split in June 2006) to the current $6.26 level (a decrease in shareholder value of 67%), the Company's recent disclosure of decreased sales and earnings for the quarter ended September 30, 2006, and the allegations in the recently amended class action lawsuit that the Company improperly recognized revenues on sales to related parties, have led me to conclude that the Board of Directors is failing to act in the best interests of the Company's shareholders and is not exercising appropriate oversight of management. I am convinced that a continuation of the status quo risks a further destruction of shareholder value and, accordingly, I intend to protect the value of my significant investment in the Company through a consent solicitation to replace members of the Board of Directors.

As I have publicly disclosed in my Schedule 13D filing, I am exploring the possibility of making an acquisition proposal to acquire the Company in a business combination transaction. While I have not made a decision at this time whether to pursue such a proposal, I strongly urge the Board not to take any action (such as the previously announced and subsequently abandoned sale of the Perry Ellis brand) which would materially modify or impact the Company's business, products or assets and could adversely effect the Company's value. In addition, the consent solicitation will present Parlux shareholders with a unique opportunity to express their views on the future direction of the Company."

Clearly, Nussdorf has a good reason for concern. Parlux's past failures to act in the best interest of shareholders, or even grant board seats to Nussdorf, illustrate their lack of conern for shareholders. If Nussdorf is successful in garnering significant shareholder approval in his proxy contest, there is a good possibility that he could take further actions to benefit shareholders. This makes PARL a stock worth watching over the next few months.

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Friendly Ice Cream Corp's (NYSE:FRN) battle with The Lion Fund escalated recently, after yet another series of letters were exchanged. The two have been in conflict for some time now, with The Lion Fund attempting to obtain board seats after expressing concern with the company's "classified board" and failure to implement strategies to enhace the company's share price.

In the company's recent letter, they noted:

"Friendly Ice Cream Corporation (AMEX: FRN) today announced that Sardar Biglari rejected the Company's offer of two seats on its Board of Directors for Mr. Biglari and his colleague, Phillip Cooley. The Company's offer contained only one condition - that they agree not to solicit any proxies for additional board seats or other matters not recommended by the Board. The Board's offer was intended to respond favorably to a significant shareholder's request for a voice on the Board, while avoiding the unnecessary expense and distraction of a proxy contest.

In rejecting the Company's offer, Mr. Biglari increased his demands to include the submission of a proposal to Friendly's shareholders to remove the Company's three classes of directors. Donald N. Smith, Chairman of the Board, said, '(W)e gave Mr. Biglari what he asked for. Now he wants more. What does he really want? His demands, together with his actions at the publicly traded Western Sizzlin Corporation ("WSC"), raise concerns regarding his true intentions. It appears that he isn't interested in just a voice on the Board - he wants to control the Board.'

In a letter to shareholders dated January 2, 2007, Smith stated, '(t)he results of WSC suggest that it would not be in the best interests of our shareholders to allow Mr. Biglari to control the Friendly's Board. After Mr. Biglari took control of WSC, rather than reinvesting in the restaurant business of WSC, Mr. Biglari used WSC's surplus cash, its bank credit facilities and a brokerage margin account to purchase Friendly's stock. It appears that Mr. Biglari is leveraging the credit of WSC and his hedge fund to purchase our stock.'

Smith added, 'Under Mr. Biglari's leadership, WSC's operating cash has dwindled, year to year earnings from operations have declined, franchised restaurants continue to be closed, and its stock price has declined significantly. While he continues to offer criticisms of our company, he hasn't offered any plan, vision or strategy for increasing Friendly's shareholder value. If Mr. Biglari gains control of your Board, he could change the Company's financial agreements to allow him to invest Friendly's cash in other companies, like he has done at WSC. We believe that Mr. Biglari wants to gain control of the Board in order to redirect corporate assets for purposes other than the continued growth of Friendly's. The Friendly's Board will take all actions necessary to prevent this from happening. Friendly's is a restaurant company not a hedge fund or investment company.'" (Read More)

Then today, The Lion Fund fired back with their response in their recent Schedule 13D/A filing with the SEC:

"On January 2, 2007, Donald Smith, Chairman of Friendly Ice Cream Corp., issued another letter that we believe was intended to misinform you. I am not surprised: Mr. Smith and the board will take any action necessary that would divert your attention from the company's dismal performance. Mr. Smith, along with the board, has failed to create shareholder value since Friendly's went public a decade ago at $18 per share.

In his letter, Mr. Smith neglects to tell shareholders that we recently proposed just one change to Friendly's corporate governance -- to declassify the staggered board -- but the board rejected our idea of putting the suggestion to shareholder vote; instead it opted to protect its interests, not yours. Shareholders are the true owners of Friendly's; consequently, they should decide whether or not an entrenched board is good policy. Clearly, the board does not want to be held accountable.

We believe the board will continue to make decisions to protect its own best interests at the expense of the shareholders' well-being. The cost of an entrenched board imposes a heavy burden on Friendly's value. Since we disclosed our large ownership in the company, its stock price has risen to a level reflecting the expectation that positive change is in the offing. While we cannot promise future returns, we can guarantee we will do our best to create shareholder value by seeking to institute corporate governance reform, improved operational performance, and improved financial performance -- all revisions which promote the right behavior -- thereby putting the shareholders first.

Furthermore, we are seeking just two board seats to serve the best interests of all shareholders. We don't want unequal footing with other shareholders. Mr. Smith does. For instance, he is permitted to purchase more than 15% of the company without triggering the company's "poison pill" rights plan. We will continue to share with you other decisions made by the board designed to provide immunity not accountability, and in the process to disenfranchise us shareholders.

We lack confidence in the current board but have confidence that you will support our position when we seek your votes to bring much needed independent
thought and demanding, impartial financial discipline." (Read More)

Both of these parties have a point: The company did try to avoid an expensive proxy contest by offering two seats that were rejected by The Lion Fund; however, they failed to address other critical issues, including the "classified board" issue. Even if the hedge fund would have taken two seats on the board, they could have been marginalized by the fact that it was a classified board. Now, the hedge fund will be soliciting proxies in an attempt to take over the company. Whether or not they are successful depends on how shareholders respond to these letters. This is definitely a stock to watch as this situation unfolds.

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Kenexa Corporation (NDAQ:KNXA) said it expects to meet or slightly exceed its previously issued guidance for the quarter ended December 31, 2006, relating to the company's revenues and non-GAAP operating income. Kenexa also announced that it intends to file a prospectus supplement with the SEC relating to an underwritten public offering of 3.75 million shares of its common stock under an effective shelf registration statement.

LeCroy Corporation (NDAQ:LCRY) said for the FY07 Q2, they expect to report revenues of approximately $38 million, versus the consensus of $42.85 million. They will expect orders in the second half of the year to increase by ten to seventeen percent to the range of $80 to $85 million. This should translate into total revenues in the range of $155 to $160 million for full year fiscal 2007.

Ultralife Batteries, Inc. (NDAQ:ULBI) expects to report Q4 revenue of approximately $31 million. These results are in range with the previous guidance, which estimated revenue of approximately $35 million for the fourth quarter. The consensus is $33.8 million.

Guitar Center, Inc. (NDAQ:GTRC) said consolidated net sales for the fourth quarter increased nearly twelve percent to $628.5 million, below the consensus of $643 million. The Company anticipates net income for the fourth quarter will be below its previous guidance range of $34 million to $36 million, or $1.14 to $1.20 per diluted share. The consensus is $1.16.

Perficient, Inc. (NDAQ:PRFT) is raising its revenue guidance for the fourth quarter of 2006. The Company expects its fourth quarter services and software revenue to be in the range of $48.4 million to $49.6 million, versus previous guidance range of $42.4 million to $45.1 million. The consensus is $44.57 million.

Merix Corporation (NDAQ:MERX) announced that Mark Hollinger has stepped down as Chairman and Chief Executive Officer, and will be leaving the Company. The Board has formed a search committee to find a successor. William C. McCormick, the Board's Lead Director, has been named Chairman and Interim Chief Executive Officer to serve while the Company conducts a search for a successor CEO. McCormick has been a director of Merix since 1997.

Sciele Pharma, Inc. (NDAQ:SCRX) raised revenue guidance for full-year 2006 to between $290 million and $292 million from the previously announced range of $287 million to $290 million, and raised the earnings guidance to between $1.18 and $1.20 per share from the previously announced range of $1.16 to $1.19 per share. The current FY06 revenue consensus is $290.57 million and EPS consensus is $1.19. The company also foresees their full-year 2007 revenue guidance to be $335 million to $350 million and diluted earnings per share guidance of $1.53 to $1.62. The current FY07 revenue consensus is $343.19 million and EPS consensus is $1.57.

California Pizza Kitchen, Inc. (NDAQ:CPKI) announced today that revenues increased 16.4% to $146.0 million for the fourth quarter, which compares to the consensus of $143.6 million. Comparable restaurant sales increased approximately seven percent. Management is increasing its earnings per diluted share guidance to $0.15-$0.17, versus prior guidance of $0.13-$0.15. The consensus is $0.15.

Eaton (NYSE:ETN) is increasing its guidance for fourth quarter earnings by approximately five cents per share. The EPS is between $1.55 and $1.65, while the current consensus is $1.57.

Electro Scientific Industries Inc. (NDAQ:ESIO) found its stock being accumulated again by Nierenberg Investment Management, who disclosed a 10.8% stake in a Schedule 13D/A filed with the SEC. Nierenberg first got involved with the company not long ago when they asked the company's board to cure the its excessive capitalization by instituting a one-time $4.00 dividend. With this request currently under consideration, the hedge fund is now presenting additional analysis reasoning that the company could be worth as much as $40 per share in three or four years.

According to the filing:

"ESIO has an additional $8 million of cash, not included in the cash and marketable securities lines of the balance sheet, $1 million from a subsequent insurance settlement and $7 million in a litigation bond in Taiwan, which increases cash per share to $7.73 ... If ESIO were to restore inventories and receivables to June 3, 2006 levels (we believe both ultimately can be reduced even more), and if we were to add the above-mentioned $8 million cash, ESIO's total cash and marketable securities would be $8.21 per share, 43.2% of ESIO's share price at the close on January 9. ESIO is profitable, cash flow positive, and it has zero debt."

The hedge fund also laid out its reasoning behind increasing its stake in the company:

1. We believe that ESIO has excellent management.
2. ESIO enjoys world leading market shares in its three major product lines, which give it the potential to earn an attractive return on equity.
3. The combination of organic growth, increased R&D investment, a number of promising new product releases, and possible acquisitions could enable ESIO to double its revenues over the next three to four years. Management has shared this goal with the public on several occasions. Given the company's business model, such growth would drive earnings per share north of $2.00, and, in our view, ESIO's share price to $40, more than double its current depressed level.
4. ESIO continues to have a fortress balance sheet, fed by free operating cash flow from profitable operations.

Many are skeptical, however, as the company's share price has dropped through 2006 from around $25 per share to settle at its current level of $19 per share. Moreover, while the hedge fund presents many valid arguments for a higher share price, much of it is contingent upon the company's ability to execute and other investors' confidence in management. However, this company is definitely one worth watching over the next few months and years as the company works to implement strategies to unlock shareholder value.

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Delta Air Lines, Inc. (OTC:DARLQ) moved up $0.08, or 6.15%, to $1.38 this morning on news that the company has received an increased unsolicited bid from U.S. Airways. The new offer is for 89.5 million shares of U.S. Airways stock and $5 billion in cash, compared to the original offer of 78.5 million in stock and $4 billion in cash. Obviously, the overall value of the deal depends largely on the value of U.S. Airways stock; however, they estimated the new bid at between $12.7 billion to $15.4 billion.

While Delta has already disclosed their five year plan to emerge from bankruptcy, there are many investors and debt-holders that are looking to get their money back sooner through a merger or sale of the company. However, in an official response, Delta said, "Delta's Board of Directors will fulfill its fiduciary duty to review the revised unsolicited merger proposal announced today by US Airways. On its face, the revised proposal does not address significant concerns that have been raised about the initial U.S. Airways proposal and, in fact, would increase the debt burden of the combined company by yet another $1 billion." Clearly, this bid is an improvement; however, without management approval it is unlikely that the bid will go through. But, with the possibility for further dialogue between U.S. Airways and Delta, there is a possibility that an agreement could be reached. This makes Delta a stock worth watching over the next few months.

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Greenbrier Companies (NYSE:GBX) reported Q1 earnings of $0.12 per share, in-line with estimates. Revenues came in at $246.6 million versus the consensus of $228.4 million. They foresee the FY07 EPS to be $2.15 to $2.40 versus the consensus of $2.92.

New York & Company, Inc. (NYSE:NWY) currently expects fourth quarter diluted earnings per share at the low end of the earnings guidance range provided on November 16, 2006 of $0.37 to $0.46. The current consensus is $0.40.

The Talbots, Inc. (NYSE:TLB) announced that earnings per share on a reported basis for the fourth quarter ending February 3, 2007 is expected to breakeven with an adjusted EPS of $0.04. This reflects a $0.07 decline in the Talbots brand performance versus the same quarter last year, a higher than anticipated loss at the J. Jill brand. The current consensus stands at $0.30.  The company sees Q1 of 2007 GAAP EPS between $0.36 to 0.43; the current consensus is $0.56.

Helen of Troy Limited (NDAQ:HELE) reported Q3 EPS of $0.72, versus the consensus of $0.85. Revenues came in at $213.4 million versus the consensus of $203.97 million, with a Q4 EPS of $0.25-$0.30 versus the consensus of $0.36 and an EPS of $1.53-$1.58 versus previous guidance of $1.70 to $1.80 and the consensus of $1.77. There are estimated FY07 revenues of $626-$631 million versus the consensus of $621.05 million. For the fiscal year beginning March, the company is providing guidance of annual sales in excess of $660 million and annual earnings in excess of $2.00 per diluted share. The consensus stands at $652.7 million and $2.01, respectively.

Volt Information Sciences, Inc. (NYSE:VOL) reported Q4 EPS of $0.86, twenty-four cents better than estimates. Revenues were $610.2 million versus $615.96 million consensus. VOL reported the FY06 EPS of $1.97 and revenues of $2.3 billion, with the current FY EPS consensus of $1.73 and the revenue consensus of $2.34 billion.

Audiovox Corp. (NDAQ:VOXX) reported a Q3 EPS of $0.17, two cents better than estimates of $0.15. Meanwhile revenues came in at $151.83 million versus the consensus of $148.77 million.

Oxford Industries Inc. (NYSE:OXM) reported a Q2 EPS of $0.68, versus the consensus of $0.69. Consolidated net sales increased nearly five percent to $291.0 million, versus the consensus of $290.35 million. They foresee the Q3 EPS to be $0.52-$0.60 versus the consensus of $0.86 and the FY07 EPS to be $3.00 to $3.15 versus the consensus of $3.33. The FY07 sales are estimated to be between $1.14 billion and $1.16 billion compared to initial full year guidance of $1.16 billion to $1.18 billion and the consensus of $1.17 billion.

Ramtron International Corporation (NDAQ:RMTR) expects to report product revenue of approximately $9.1 to $9.2 million. This result compares to the outlook management provided in its Q3 earnings which estimated product revenue between $10.2 million and $11.2 million.

Alcoa (NYSE:AA) reported Q4 EPS of $0.74, nine cents better than estimates while revenues were $7.8 billion versus $7.63 billion.

Apple Computers, Inc. (NYSE:AAPL) shares set new highs today after moving up $7.10, or 8.31%, to close at $92.57. The move was driven by the company's introduction of its much-anticipated iPhone device, which will be able to play music and take pictures, among other things. Investors are hoping that this new device will be able to disrupt the cell phone market in the same way that the iPod has dominated the MP3 player market shortly after its introduction. Moreover, the device's ties to several other key Apple services - most notably its iTunes music service - could help boost earnings in other areas. Jobs, not adverse to a little hyperbole, boldly stated, "We are all born with the ultimate pointing device - our fingers - and iPhone uses them to create the most revolutionary user interface since the mouse" calling the new device "revolutionary and magical". While the device won't be available in the states until June, the company did reveal their pricing at $499 for the 4gb model and $599 for the 8gb model.

The company also announced that it would be changing its name from "Apple Computers, Inc" to a much simpler "Apple, Inc", marking its move from strictly computers to consumer electronics.

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The London Stock Exchange reported excellent results, just a day after the Nasdaq (NDAQ:NDAQ) stepped up its attempt to win over LSE shareholders. The LSE reported a 9.9% rise in third quarter fiscal profits, while operating profits excluding one-time expenses increased 50% with revenues increasing 11.1%. The LSE attributed the growth to a 57% growth daily trading volume to 342,000, which came in significantly above the company's prior estimates. "The exchange is confident of an excellent outcome for the current financial year and continuing strong business fundamentals should ensure a strong performance for the financial year ending March 31, 2008," the exchange said in a statement. "This excellent performance supports the board's rejection of Nasdaq's offer, which significantly undervalues the business and the exchange's unique strategic position." The LSE also said the number of IPOs on its main market rose 39% to 50% during the quarter, along with a 68% increase in the average size of each new issue.

Clearly, this development puts increased pressure on Nasdaq, who argued that the exchange would experience difficulty competing in the future. Specifically, the Nasdaq said that the exchange would have to lower its costs in order to maintain market share; however, this recent development illustrates that this may not be true. Combined, these factors may make LSE shareholders think twice before approving a merger, despite the NDAQ's significant stake in the LSE that it threatened to sell off if the transaction fell through. Regardless, these stocks are two that are certainly worth watching during the next few months.

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The Gap Inc. (NYSE:GPS) shares jumped more than 7% during yesterday's trading session to settle around $20.25. The move comes after several sources noted that the troubled company has hired Goldman Sachs to look at possible strategic alternatives, which may include a sale of the company. It is unclear whether there is substance to this story; however, the company did admit that it had a relationship with Goldman Sachs, but not necessarily in that regard.

The rumor of a Gap buyout has been alive for more than two years, with our most recent coverage taking place on December 7th. Since then, investors have continued to be disappointed with the company's lackluster performance during the holiday season, after the company said the poor sales would "severely" affect earnings. Then came the comment from Pressler that caused the speculation, "Given that we did not gain the traction that we had expected, the management team, with the active involvement of our board of directors, is currently reviewing Gap's and Old Navy's brand strategies." Moreover, investors continue to be upset over the CEO's 100% raise last year, while the company's stock continues to suffer losses.

There are, however, a few barriers to any leveraged buyout. First, the company's founder, Donald Fisher, and his family still own approximately 36% of the company, and they are not exactly keen on selling it. Secondly, many investors note that this acquisition would be a huge one, amounting to around $20 billion, which may put it out of the league for many private equity players. And finally, with the company's disappointing performance, it could take awhile for any suitor to turn around the company and make money on the deal. Rather, many believe that the CEO will be fired before any drastic strategic alternatives are implemented. Regardless, this is definitely a company to keep an eye on during the next few months.

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Fossil, Inc. (FOSL)

Advanced Medical Optics, Inc. (NYSE:EYE) and IntraLase Corp. (NDAQ:ILSE) announced that the two companies have entered into a definitive agreement whereby AMO will acquire IntraLase for approximately $808 million in cash. Under terms of the agreement, AMO will pay $25 in cash per share of IntraLase stock and the individually determined cash value per share of outstanding stock options.

KLA-Tencor Corporation (NDAQ:KLAC) has agreed to acquire Therma-Wave (NDAQ:TWAV) via a tender offer for $1.65 per share in cash, in a deal worth $75 million.

Syntax-Brillian Corporation (NDAQ:BRLC) said that consolidated revenue for the quarter will be above $240 million with LCD TV shipments in excess of 350,000 units. The consensus stands at $189.23 million. The company also said gross margins will be in the top half of the range of 15% to 17% that was previously forecasted.

Delta Apparel, Inc. (AMEX:DLA) said that it expects second quarter revenues to be approximately $72 to $73 million versus its prior expectation of $74 to $78 million. Earnings are now expected to be in the range of $0.05 to $0.07 per diluted share versus its prior guidance of $0.14 to $0.18. The full fiscal year will show the company lowered sales expectations of $315 to $330 million from its prior guidance of $325 to $340 million. The company now expects diluted earnings per share to be in the range of $1.33 to $1.46 per diluted share for the 2007 fiscal year versus its prior guidance of $1.81 to $2.00 per diluted share.

The Houston Exploration Company (NYSE:THX) entered into a definitive agreement with Forest Oil Corporation (NYSE:FST), under which Forest will acquire all of the outstanding shares of Houston Exploration for approximately $1.5 billion in cash and Forest common stock. Forest will also assume approximately $100 million of Houston Exploration net debt. Under the terms of the agreement, Houston Exploration shareholders will receive total consideration equal to 0.84 shares of Forest common stock and $26.25 in cash for each outstanding share of Houston Exploration common stock.

Tellabs (NDAQ:TLAB) said that it sees Q4 revenue of $455 million to $470 million, versus the consensus of $534.2 million. Non-GAAP earnings per share, assuming dilution, are expected to range from ten cents to twelve cents, versus the consensus of fourteen cents.

MarineMax, Inc. (NYSE:HZO) expects its earnings per share for its fiscal year ending September 30, 2007 to range from $1.40 to $1.50 on a fully diluted basis from the previous range of $2.05 to $2.15. The company expects a Q1 revenue of approximately $235 million driven by same-store sales growth of approximately 14% and approximately $29 million from stores that were opened or acquired that are not eligible for inclusion in the same-store sales base. Due to additional team member and product incentives, higher marketing and promotional costs which were necessary to drive the company's sales, operating margins were negatively impacted, which is expected to result in a first quarter loss per share ranging from $0.20 to $0.25 per diluted share.

United Surgical Partners International, Inc. (NDAQ:USPI) said that they signed an agreement to merge with UNCN Acquisition Corporation. Under the terms of the merger agreement, the holders of USPI common stock will receive $31.05 per share in cash for their shares, in a transaction valued at approximately $1.8 billion. The company expects Q4 revenues to be in the range of $295 million to $300 million, which is above the high-end of the company's previous guidance of $255 million to $265 million. The company now expects diluted earnings per share for the fourth quarter to be $0.28 to $0.31, exceeding the company's previous guidance for the fourth quarter of $0.22 to $0.27. The consensus is $262.3 million and $0.27, respectively.

SKECHERS USA (SKX) now expects revenue for FY06 to be in the range of $1.196 to $1.201 billion, above its previous guidance of $1.156 to $1.166 billion, and diluted earnings per share for the full year are expected to be between $1.55 and $1.58, exceeding the company's previous guidance of $1.49 to $1.54. The consensus is $1.16 billion and $1.51, respectively.

LSI Industries Inc. (NDAQ:LYTS) said that it expects net sales of approximately $80 million and diluted earnings per share between $0.19 and $0.22 for Q2. Current analyst estimates range between $0.25 and $0.29 per share with a consensus of $0.26. Management now expects diluted earnings per share to be between $0.88 and $0.93 for the fiscal year ending June 30, 2007. This compares to management's previous guidance of $0.94 to $1.03 per share and analyst estimates of $0.95 to $1.12 per share with a  consensus of $1.00.

Venezuela's Chavez is calling for the nationalizing of the electricity and telecom sectors. Consequently, Compania Anonima Nacional Telefonos de Venezuela (NYSE:VNT) was halted for trading.

Integral Systems Inc. (NDAQ:ISIS) found itself under pressure from 12% holder Fursa Alternative Strategies, after the fund announced that it would be nominating two of its own members to the company's board of directors at the next annual shareholders meeting. These nominees include their Chief Investment Officer William F. Harley and director William F. Leimkuhler. The move to replace members of the board comes as a result of the company's inability to execute strategic alternatives to unlock shareholder value, which the fund said it finds "troubling". The company hasn't made any progress since last October when they noted that they were seeking strategic alternatives, which could include a possible sale of the company.

According to the fund's Schedule 13D filing with the SEC:

"As the Company's largest shareholder, we would like to see the Company's corporate governance significantly improved. The Company's Board and Management seem to require regular reminding of the need to significantly increase shareholder value. To better understand and act more in accordance with owner interests, we now believe the Board must include institutional investor representation. To that end, Fursa Alternative Strategies hereby nominates William F. Harley, III to the Company's Board for election as a Director at the Company's next Shareholder meeting. Fursa also nominates for election as Director at the next Shareholder meeting William F. Leimkuhler, who presently serves as a Director of the Company." (Read More)

If Fursa is successful in obtaining two seats on the company's board, it could result in the company adopting strategic alternatives to unlock shareholder value. The stock is currently off its highs of around $33 in September to its current level of $23.29.

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Nasdaq Stock Market, Inc. (NDAQ:NDAQ) stepped up their efforts to acquire the London Stock Exchange (LSE) by foregoing an unresponsive board and taking their case directly to shareholders. The Nasdaq said that their $5.2 billion offer not only represented a fair price, but also argued that such an acquisition was necessary both companies in order to effectively compete with NYSE/EuroNext's transatlantic exchange.

Nasdaq also increased the pressure on shareholders and the board by noting that they could unload their entire 29% stake in the company without suffering a loss. Such actions would put heavy pressure on LSE shares, likely bringing them down to 1,100 pence or lower. Alternatively, they noted that there is significant overlap between NDAQ customers and LSE customers, which means they could choose to compete directly with the exchange if the offer falls through. Combined, these factors put significant pressure on LSE's board to act in favor of the deal, or face heavy shareholder criticism.

Nasdaq shares moved up $0.65 or 2% to $33.75 in mid-day trading on the news.

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NCR Corporation (NYSE:NCR) announced its plans to spin-off 100% of its Teradata Data Warehouse business in six to nine months. Teradata currently generates $1.5 billion in revenues with operating income amounting to $309 million. The division's award-winning solutions enable organizations worldwide to gain a single, integrated enterprise view of their business to enhance decision-making, customer relationships and profitability. The spin-off should provide NCR with significant amounts of cash that it could use to fund other acquisitions or return to shareholders.

In a press release, Bill Nuti, President and CEO of NCR said, "This separation is a logical strategic step for NCR. We believe it will benefit our customers, business partners, employees and shareholders. Teradata and the new NCR operate in different markets each with solid prospects for the future, but they have markedly different business models. Both new companies should benefit from sharper management focus on their unique business opportunities. Each new entity should be able to more effectively pursue their specific growth and research and development agendas, while designing employee incentive plans that are more directly aligned with their own performance and growth objectives. In addition, NCR investors should benefit from increased transparency and clarity, which will allow them to more appropriately value the merits, performance and future prospects of both companies."

While the company has not yet filed a 10-12b detailing the stock distribution, this move does represent a great opportunity for shareholders. On the average, spin-offs outperform the overall market, a phenomena so popular that there is now an ETF focusing on this exact strategy! This occurs because parent company shareholders tend to sell their shares immediately after receiving their distribution, thereby creating a downside pressure that has no fundamental justification. This makes NCR a stock worth watching closely.

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Motorola, Inc.'s (NYSE:MOT) Q4 sales are now expected to be between $11.6 to $11.8 billion, versus the guidance of $11.8 to $12.1 billion. Meanwhile, Q4 GAAP earnings per share are expected to be between $0.13 to $0.16, or $0.23-$0.26 ex-items. The consensus stands at $11.99 billion or $0.39 per share.
 
Tractor Supply Company (NDAQ:TSCO) said that its Q4 sales were weaker than expected primarily due to unseasonably warm weather in the northern regions of the country, which resulted in decreased demand for winter related merchandise and lower store traffic. The company now anticipates sales for the full fiscal year to be around $2,369 million. The company anticipates net income of $2.20 to $2.22 per diluted share. This compares to the company's previous full year expectations for sales of between $2,370 and $2,390 million and earnings per diluted share in the range of $2.29 to $2.30. The consensus stands at $2.38 billion and $2.27, respectively.
 
AZZ, Inc. (NYSE:AZZ) reported Q3 EPS of $0.88, eighteen cents better than estimates. Revenues were $65.4 million compared to $44.3 million for the same period last year.  Backlog at the end of the third quarter was $101.0 million versus $83.1 million in November 2005, an increase of 22%. Their earnings are estimated to be within the range of $3.15 and $3.25 per diluted share and revenues to be within the range of $250 million to $260 million. The FY07 EPS consensus remains at $2.84.
 
Spansion Inc. (NDAQ:SPSN) anticipates Q4 net sales in the range of $680 million to $690 million compared to the company's prior net sales guidance range of $710 million to $740 million. The consensus stands at $722.8 million. The change in revenue guidance is due in large part to a late December delay in customer demand for certain high-density custom Flash memory devices. As a result of the revenue shortfall, the company does not expect to reach its goal of breakeven on a net income basis in the fourth quarter of 2006.
 
Silicon Image, Inc. (NDAQ:SIMG) intends to provide guidance regarding revenue for fiscal year 2007, which the company expects will range between $340 million and $360 million (reflecting the sci-worx acquisition and the settlement with Genesis Microchip Inc.). The FY07 revenue consensus remains at $335.04 million.

Tvia, Inc. (NDAQ:TVIA) anticipates that revenues for Q3 will be much lower than expected, with numbers in the range of approximately $1.2 to $1.4 million. The consensus stands at $3.25 million.

Network Equipment Technologies, Inc. (NYSE:NWK) anticipates revenues for Q3 to be in the range of $21.6 to $22.1 million. The current revenue consensus is $20.7 million.  As a result of strong sales activity in the third fiscal quarter, the company expects 2007 fiscal year revenues to reflect 17% to 20% year-over-year growth. The company had previously guided for full fiscal year 2007 revenues to be more than 10% higher year over year
 
American Medical Systems Holdings, Inc. (NDAQ:AMMD) reported preliminary sales of $114.8 million for the fourth quarter of 2006, a 57% increase over sales of $73.1 million in the comparable quarter of 2005. The current Q4 revenue consensus is $108.1 million. Preliminary sales for the year 2006 were reported at $357.7 million, a 36% increase over sales of $262.6 million for the year 2005. The current FY consensus is $351 million. The expected revenue for 2007 has been adjusted from $490 to $515 million from its previously guided revenue range of $505 to $530 million. The company reaffirms previous guidance on 2007 reported earnings per share at $0.76 to $0.81. The current FY07 revenue consensus is $500.35 million with an EPS consensus is $0.75.

Northwest Airlines Corporation (OTC:NWACQ) shareholders suffered yet another setback today after the United States Trustee rejected Owl Creek's requests for an equity committee to represent common stock shareholders in bankruptcy court. This comes after Northwest shares have risen from around $0.55 in mid-2006 to a high of $4.88 on speculation of a possible buyout or deal that would result in common stock retaining their value.

The hedge fund first petitioned the U.S. Trustee back in November of 2006, arguing that such a committee could be justified because:

• the Debtors' cases are large and complex;
• the Northwest stock is widely held and actively traded;
• the interests of Northwest's shareholders are not otherwise adequately represented;
• the Debtors do not, under reasonable (non-strategic) valuations, appear to be "hopelessly" insolvent;
• Owl Creek's request is appropriately timed based on the status of the Debtors' cases; and
• the necessary costs do not significantly outweigh the concerns for adequate representation.

The U.S. Trustee responded to the requests in a letter today, saying:

"In considering your request, as noted above, the United States Trustee sought, and received, input from counsel to the Debtors and counsel to the Committee regarding the solvency of the Debtors and the propriety of the appointment of an equity committee in these cases. Courts in this district have held that the appointment of an equity committee should be the rare exception, and should not be appointed unless equity holders establish that (i) strict application of the absolute priority rule, and (ii) they are unable to represent their interest in the bankruptcy case without an official committee. Accordingly, after careful consideration and ana1ys of your request, the United States Trustee declines to appoint an equity committee at this time." (Read More)

Owl Creek acknowledged this in their Schedule 13D/A filing today, which noted:

"The Reporting Persons sent a letter on November 21, 2006 to the Acting United States Trustee ("UST") requesting the appointment of an official committee of
equity security holders to represent shareholder interests in the Issuer's bankruptcy case ("Northwest Equity Committee"). A copy of that letter was attached to the Reporting Persons original 13D. On December 8, 2006 the Reporting Persons sent a second letter to the UST further requesting appointment of the Northwest Equity Committee. A copy of that letter was attached to the Reporting Persons' Amended 13D. By letter dated December 21, 2006, the UST advised the Reporting Persons that she declined to appoint the Northwest Equity Committee. A copy of that letter is attached as Exhibit 4. The Reporting Persons have become a member of an unofficial Northwest Equity Committee with other entities that own shares of Common Stock for the purpose of requesting that the court overseeing the Issuer's bankruptcy case appoint a Northwest Equity Committee as an official committee in such case. The unofficial Northwest Equity Committee has retained legal and financial advisors to assist in such request and the Reporting Person expects that this request will be made in the near future. The Investment Manager intends to work to protect shareholders' economic interests and is interested in serving on an official Northwest Equity Committee, if recognized by the bankruptcy court." (Read More)

While this is certainly a setback for shareholders, the unofficial committee will likely continue to work to gain representation in court. If they are successful, it could mean significant gains for shareholders if they are able to orchestrate a way to debt-holders to be paid off with cash left over (per Owl Creek's plan). This makes Northwest Airlines a stock worth watching closely over the next few months.

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MetroPCS Communications, Inc. filed for an initial public offering again today after delaying its 2004 IPO due to accounting complications. MetroPCS is a wireless broadband provider for personal communication devices that offers unlimited usage at a flat-rate with no long-term contracts. Since their launch in 2002, the company has experienced great success as the fastest growing broadband PCS provider in terms of both subscriber base and revenue growth.

MetroPCS noted that it has licenses covering approximately 140 million people in 14 of the top 25 metropolitan areas in the United States. As of September 2006, the company had 2.6 million subscribers with a licensed population of 36 million in seven major metropolitan areas in the United States, representing a 7.2% market share in these areas. Assuming the same adoption rates in its other licensed areas, this puts its potential subscriber base at approximately 10.1 million. The company's two major core markets (San Francisco, Miami, Atlanta, and Sacramento) have also seen subscriber growth rates of 50% year over year. This illustrates even more potential if the company chooses to expand into other markets. And with lowering costs per user and a low 4.4% churn rate, the company is in a great position to capitalize on an under-served market.

While the company has not yet disclosed the number of shares that it plans to offer, the ticker symbol it plans to use, nor the exchange it plans to trade on, this is definitely a company to keep an eye on during the next few months as it moves closer to an IPO.

InFocus Corporation (NDAQ:INFS) may find itself under increased pressure during the next few months as Caxton Associates disclosed a 11.2% stake in the company in a Schedule 13D/A filing with the SEC; this is up from the 9.9% stake that it first disclosed in October of 2006. While the activist hedge fund offered no additional insight in this filing, they did provide a detailed overview of their plans in their initial Schedule 13D filing in October in which they said:

"The Reporting Persons believe that the intrinsic value of the Company, and the amount a strategic or financial buyer would pay to acquire the Company, is significantly greater than the current market value of the Common Stock.  The Reporting Persons believe that this gap in value has resulted from the implementation by the Company's Board of Directors (the "Board") of a flawed business plan that has been detrimental to shareholder value. The Reporting Persons accordingly believe that the following steps should be taken promptly in order to preserve and maximize shareholder value:

1. The Reporting Persons believe that the Company's poor performance is the result of mistakes made by management and the Board's failure to grasp the strategic realities of the environment in which the Company operates.  At this time, we believe that the Company's operating management is capable of effectively executing the Board's strategic vision should it be given adequate guidance and oversight.  We do not, however, believe that the Board, as currently constituted, is providing the necessary strategic thinking.  Therefore, we believe that, unless significant changes are made promptly, changes in the Board are in the best interests of all shareholders.

2. The Board should include individuals with strong ties to large shareholders, as well as industry, legal and/or financial markets expertise, which have a firm grasp of the realities of the markets in which the Company operates.  Unless significant changes are made, the Board should be restructured to consist of Mr. Ranson, at least two individuals drawn from among the Company's largest shareholders, and other independent directors with relevant industry backgrounds.

3. As part of the Company's announced exploration of strategic alternatives, the Board should develop an operating strategy that not only protects and enhances the hard asset value of the Company, but also will allow the Company to be cash flow positive under any foreseeable circumstances.  The Board should immediately work with management to develop a business plan that, among other things, permits revenue growth only at a reasonable cost, fixes or exits money-losing operations, and leverages the Company's valuable brand name franchise and considerable intellectual property assets.  This new business plan should be assessed against other available alternatives, including the possibilities of a sale or restructuring of the Company.

The Reporting Persons continue to examine all of their options with respect to the possibility of taking actions that they believe will enhance shareholder value, including the option of actively seeking to replace members of the Board."

This increased stake illustrates Caxton's continued committment to enhance shareholder value. And with an 11% stake in the company, they are in a better position to force management to make changes - even if it comes down to a proxy battle. Currently, the stock is off of its $3.00 October highs sitting at right around $2.70 per share. While much uncertainty remains, Caxton's actions may foreshadow further pressure being put on the company in the future. This makes INFS a stock worth watching over the next few months.

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BEA Systems, Inc. (NDAQ:BEAS) moved higher today on renewed speculation that the company could be a takeover target. Suntrust analysts said today that Hewlet-Packard Co. (NYSE:HPQ) could buy the company. Despite the fact that the stock has a PEG of 1.65 (above the industry average 1.39) and trades well above enterprise value, buyout rumors continue to surround the enterprise software provider.

Past speculation has centered around a deal with Oracle Corporation (NDAQ:ORCL), which is perhaps one of the most logical suitors. BEA's market cap of just over $5 billion represents only 5.4% of Oracle's market cap, while the acquisition would add new product lines and synergistic customers to Oracle's existing infrastructure. Moreover, we already know that Oracle is not adverse to buying companies, after their laundry list of recent acquisitions.  Either way, BEA is definitely a stock to keep an eye on as the possibility of a buyout remains.

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The Brinks Company (NYSE:BCO) may see some changes made to its board and company direction in the near future after Pirate Capital LLC sent yet another letter, in a Schedule 13D/A filing, to the company expressing its interest in obtaining two seats on the company's board. The activist hedge fund also reiterated the their requests that the company retain an investment bank to examine strategic alternatives, and questioned the company's stated plans to pursue acquisitions.

Pirate Capital also threatened a proxy contest if the board did not act on its requests immediately, saying in their letter that "unless the board acts with a renewed sense of duty, we will not be able to avoid an expensive and lengthy proxy contest." The 8.5% holder then validated their threat by filing a Schedule 14A proxy statement, nominating two of its own candidates to the company's board of directors in the next annual shareholders meeting. Currently, Brink's board consists of eleven members with four of them up for re-election at the next annual meeting. Pirate Capital is targeting two of these four seats, which are held by directors who will not be seeking re-election at the next annual meeting.

Finally, Pirate Capital commended MMI Investments detailed analysis of possible strategic alternatives for the company, which included an LBO, sale to a strategic suitor, tax-free split-up of the company, leveraged recapitalization, or another significant stock repurchase. MMI also noted that their analysis put the intrinsic value of Brinks at around $70 per share or higher. Combined, these two dissident shareholders account for nearly 20% of the company's outstanding shares - giving them significant leverage in any proxy contest. Consequently, Brinks will probably be forced to give up two board seats to Pirate, which would likely result in at least some measures to increase shareholder value.

Pirate Capital's letter says it best: "We do not understand how the Board remains so determined to pursue an acquisition when two of Brink's largest shareholders have independently questioned that course and requested the retention of an investment bank to explore alternatives. The Board's concern should be the interests of its shareholders ... We would welcome an invitation by the Board to meet our two nominees, and we hope that a proxy contest can be avoided so that the Board can remain focused on what is most important; finally putting to rest the enduring undervaluation of BCO shares." Clearly there is a disconnect here between management interests and shareholder interests. And with a combined ~20% stake in the company, these two activist hedge funds have a good chance at enforcing changes to unlock shareholder value and help BCO back up into the $70 range. This makes Brinks a stock worth watching over the next few months.

Read Pirate Capital's Letter to The Brinks Company

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Franklin Templeton Investments announced that they decreased their stake in Taro Pharmaceuticals Ltd. (OTC:TAROF) today from 13% to 11.9% in a 13D/A filing with the Securities and Exchange Commission. The investment fund said it was concerned with the effect on the value of its investment management clients’ investment in TARO, along with the failure of the company to timely file its financial statements for the fiscal year ended December 31, 2005 and the consequential delisting of the ordinary shares from The Nasdaq Global Select Market (formerly "TARO").

Templeton also said that they have met with other shareholders to discuss ways in which they could recoup their losses through conventional or legal means. On October 18, 2006, lawyers for this group sent a letter to the company demanding that it immediately setup a shareholders' meeting to discuss the situation. On December 24, 2006, the group's lawyers sent another letter to the company demanding that they exercise all of their rights against officers of the company, against members of the audit committee, against the company’s internal auditor, against members of the board of directors and against any other person in order to recover their damages and losses incurred by their acts and omissions that fall under any contract or law. Specifically, the fund noted the following:

• Breach of duty of care pursuant to section 252 of the Companies Law.
• Breach of duty to act with proficiency and in a reasonable manner pursuant to section 253 of the Companies Law.
• Breach of fiduciary duty pursuant to section 254 of the Companies Law.
• Breach of the duty to act upon discovery of a deficiency pursuant to section 257 of the Companies Law.
• Breach of statutory duties pursuant to section 63 of the Civil Wrongs Ordinance.
• Breach of the employment agreements with Mr. Kevin Conley and the other employee who was a member of the Company's financial team.

Under section 196 of the company law, Taro has 45 days to respond to this request. If these actions result in a successful lawsuit, it could provide grounds for a larger class action lawsuit that would help recoup losses for the larger investment community. Read more about the issue here. Meanwhile, the stock's delisting and low price has led to speculation that Taro may be a buyout target by a larger pharmaceutical player looking to get into the OTC pharma and API markets. Although this is a long-shot given the company's lack of financials, it remains a possibility in the medium to long term.

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The Home Depot, Inc. (NYSE:HD) surprised investors this morning by announcing the resignation of Chief Executive Officer Robert Nardelli. The "mutually-agreed" resignation comes after many dissident shareholders voiced concerns over the company's stock performance and corporate transparency. These concerns peaked during the company's last annual meeting, in which Nardelli angered investors by monotonously reading a written statement and then refusing to answer any shareholder questions. Meanwhile, there was also disappointment with the company's lackluster performance, especially in comparison to Lowe's Companies, Inc. (NYSE:LOW). Investors noted that LOW's revenues grew by 130% compared to HD's 78%, while LOW's ROA increased 52% compared to HD's nearly flat increase. On a more fundamental level, Lowe's customer service rating also rose to 78 from 75, while HD's decreased to 67 from 75 during the same time period. Combined, the company's performance and lack of corporate transparency ultimately caused the uproar that led to this resignation.

Investors are still concerned, however, over the CEO's estimated $210 million retirement package which includes a cash severance payment of $20 million, deferred stock awards valued at about $77 million and options with an intrinsic value of about $7 million; earned bonuses and long-term incentive awards of about $9 million; 401(k) and other benefit programs currently valued at roughly $2 million; previously earned and vested deferred shares with a value of $44 million; the present value of retirement benefits currently valued at about $32 million; and the payment of $18 million for other entitlements under his contract, which will be paid over a four year period. The company said that Vice Chairman Frank Blake will replace Nardelli.

Home Depot's stock rose $1.32, or 3.29%, to $41.49 on the news in today's trading session.

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MIVA, Inc. (NDAQ:MIVA) announced a deal with Google Inc. (NDAQ:GOOG) today in an 8-K filing with the SEC. The search marketing company said it reached an agreement with Google on December 28th in which they agreed to exclusively utilize Google’s WebSearch and AdSense Services for approved websites and applications. MIVA is well known for the search engine marketing, pay-per-click service, e-commerce offerings, and whitelabel toolbars. This new agreement with Google replaces an existing one with Yahoo! Inc. (NDAQ:YHOO), which will be terminated on January 27th. Although no specific financial details were disclosed in the 8-K filing, the deal presumably offers better terms than the Yahoo! deal. MIVA's stock rose $0.42, or 11.8%, to $3.80 on high volume today after the 8-K filing was released.

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Carrier Access Corporation (NDAQ:CACS) said revenue for the fourth quarter is expected to range from $12.3 million to $12.5 million, versus the consensus of $16.2 million.

Con-way Inc. (NYSE:CNW) said Q4 earnings from continuing operations are expected to be between 72 cents and 76 cents per diluted share. The company had previously provided earnings guidance for the 2006 fourth quarter of between 81 cents and 87 cents per diluted share. The consensus is $0.79.

Witness Systems (NDAQ:WITS) announced preliminary revenue estimates for the fourth quarter and year ending December 31, 2006. Revenue is estimated to approximate $63 million for the fourth quarter and $220 million for the year 2006. The consensus is $58.24 million and $211.8 million. For 2007, the company expects adjusted revenue, excluding hardware sales, to be in the range of $250-$255 million, versus the consensus of $246.8 million.
 
AngioDynamics Inc. (NDAQ:ANGO) reports Q2 EPS of $0.15, two cents above the consensus. Revenues came in at $24.4 million versus the consensus of $24 million. They foresee a FY07 EPS of $0.65, versus the consensus of $0.61, with FY07 revenues of $103 million versus the consensus of $106.7 million.

Immucor Inc. (NDAQ:BLUD) reports Q2 EPS of $0.20, two cents better than estimates. Revenues came in higher at $54.4 million versus the consensus of $51.4 million. They foresee the FY07 EPS of $0.75 to $0.78 versus prior guidance of $0.69 to $0.74 and the consensus of $0.76, and FY07 revenues of $214 to $218 million versus prior guidance of $204 to $212 million versus the consensus of $215 million.
 
Hot Topic Inc. (NDAQ:HOTT) said December sales fell more than five percent. The company announced that as a result of the lower than expected December sales performance, it now estimates net income for the fourth quarter of 2006 will be in the range of approximately $0.20 to $0.22 per diluted share versus previous guidance of $0.33 to $0.38 per diluted share. The consensus is $0.33.