eSpeed Inc. (NDAQ:ESPD) shares moved up $0.19, or 2.07%, to $9.38 after WC Capital disclosed a 6.4% in the company and expressed their concerns about the company's valuation. The activist hedge fund said that their analysis has led them to believe that the range of the company theoretical valuation could be considerably higher than the current share price, which could result in a value 28% to 70% greater ($12 to $16 per share) than the current valuation of $9.40 per share. The move comes after another large shareholder, Chapman Capital, disclosed a 9.3% stake and made similar demands that the company immediately put itself up for sale. The problem facing both shareholders is the fact that 88% of the company's voting power is controlled by Mr. Lutnick and his affiliates due to a classified share structure in which Class B shares have 10 votes each.

Problems began in early 2004 when several investors began to recognize a significant divergence between the performance of the company's common stock and its publicly traded peers. Specifically, in 2004 the company stock plummeted 47% while that of its peers remained flat, and in 2005 the company's stock dropped 37% while its peers added 49%. Then in January of 2006 there was a glimmer of hope when The Daily Telegraph reported that Cantor Fitzgerald was preparing a stock market float of BGC Partners, its London-based brokerage business, in a move that was expected to lead to a merger with eSpeed, the Nasdaq-quoted broker also controlled by Cantor, to create a company worth between $500 million and $1 billion. However, this deal never materialized. Then, in a highly questionable December 2006 Form 4 filing with the SEC, Mr. Lutnick was granted, free of cost, 800,000 Class A common stock options - representing 3% of the company's outstanding shares! This upset many investors who feared the potential dilutive effects of the options. Finally, the last straw came in February of this year when the company issued a press release that disclosed its FY2007 financial outlook. Investors were outraged to find out that company projected nearly break-even operating performance due to approximately $152 million of non-GAAP operating revenues being consumed by $146 to $148 million of non-GAAP operating expenses, a level of spending which investors have thought unacceptable.

Now, WC has suggested that the board of directors immediately review several strategic alternatives for the company:

1. Sale of the company
2. Conversion of Class B shares to Class A shares
3. Return of capital to shareholders (one-time dividend/share repurchases)
4. Initiation of procedures and structures increasing eSpeed autonomy

Clearly there are changes that need to be made to this company and with two shareholders now expressing concerns, maybe the company will institute some changes. Regardless, this is definitely a stock worth watching!

Related Companies
Global Payments Inc. (GPN)
Fidelity National Information Services (FIS)
MoneyGram International Inc. (MGI)

Tower Automotive Inc. (OTC:TWRAQ) received a $1 billion buyout offer from Cerberus Capital Management to take it out of Chapter 11 bankruptcy protection. The company would be the latest in a series of automotive takeovers by private equity, which have included Delphi and DaimlerChrysler. The term sheet submitted to the U.S. Bankruptcy Court indicated that the Cerberus offer would pay off all of the outstanding obligations to debtors, pay off Tower's pensions, and provide "certain recovery" for unsecured creditors. These unsecured creditors would get $10 million in cash under a reorganization plan while Cerberus would put aside another $2 million in a liquidating trust for the unsecured creditors. The process would also allow for competitive bids; however, the bidding procedures would be $10 million above Cerberus' initial offer and will raise in $5 million increments, which is somewhat high for a bankruptcy auction. Consequently, it is likely that the Cerberus offer will be the final offer, especially considering the fact that many of the other large private equity firms that would compete have already taken stakes in other automotive companies.

Meanwhile, the company's common stock shareholders pushed the OTC shares up nearly 100% on the news until it settled at $0.06. It is uncertain as to whether or not common stock shareholders will be able to partake in the $10 million set aside for unsecured creditors. Remember, unsecured creditors include not only common stock shareholders but also preferred stock shareholders, trade creditors, and many others. Currently, the OTC shares price the company's common stock value at $3.92 million, indicating an assumption that almost 40% of the $10 million payout will be distributed to common stock shareholders. Will this happen? While nothing is certain, it is unlikely that this much will be set aside since there are many other unsecured creditors that must be paid off. Regardless, this development is certainly worth following as private equity continues to aggressively take over the auto sector.

Related Companies
Productivity Technologies Corp. (PRAC)

Electro Scientific Industries Inc. (NDAQ:ESIO) shares moved up $0.49, or 2.58%, to $19.51 today after Nierenberg Investment Management disclosed an 11.7% stake in the company and expressed their impacience with ESIO as its share price weakens. The activist hedge fund contends that the company continues to depress its return on equity (ROE) by failing to make its excess cash work harder and smarter for its shareholders. Nierenberg has communicated these concerns with the company in the past along with Third Avenue Management - another activist hedge fund pushing for changes. However, despite these communications, little seems to be changing despite the company's January 22nd press release affirming their commitment to shareholder value. Consequently, Nierenberg made an ultimatum saying that time is running out and the time for action is now. If management does not make some immediate changes, it is likely that Nierenberg will pursue board seats in what could become a proxy fight for contorl of the company. Given their large stake and support by Third Avenue Management and other shareholders, it is likely that they would succeed in such a battle.

Just how much cash is ESIO carrying? Well, in addition to to its cash reported on the cash and marketable securities lines of the balance sheet, they also have $1 million from an insurance settlement and $7 million in a litigation bond in Taiwan, which increases cash per shares to $7.73. If ESIO were to restore inventories and receivables to June 3, 2006 levels, and if the above-mentioned $8 million in cash were added, ESIO's total cash and marketable securities would be $8.21 per share - or over 40% of ESIO's share price! ESIO is profitable, cash flow positive, and debt-free... so why has it dropped through 2006 from $25 per share to $19 per share? This is the issue that the hedge funds are trying to address.

What measures is Nierenberg looking for to unlock value? Well, the hedge fund advocates a "tangible and substantial" boost to ROE via a (at minimum) six million shares repurchase with a plan in place to repurchase at least one million more shares annual from free cash flow, asset monetization, and cash reserves. Nierenberg said in a past filing that given 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 sevearl occasions. Moreover, given the company's business model, such growth would drive earnings per share north of $2.00, and, in their view, ESIO's share price to $40, more than double its currently depressed level. This makes ESIO a stock worth watching!

Related Companies
GSI Group, Inc. (GSIG)
CyberOptics Corporation (CYBE)
Cognex Corporation (CGNX)

Online advertising firm DoubleClick Inc. is reportedly exploring a sale and is already in talks with Microsoft Corporation (NDAQ:MSFT) among others. The firm hired Morgan Stanley to help it explore strategic alternatives, including a possible sale or initial public offering. The company is majority owned by private equity firm Hellman & Friedman who purchased the business in 2005 for approximately $1.1 billion. The hedge fund hopes to get at least $2 billion for the company as potential bidders including Microsoft, IAC/Interactive Corp, and others. The acquisition could help Microsoft boost its edge in the competitive online advertising market dominated by Google's (NDAQ:GOOG) Adsense and Adwords programs and Yahoo!'s (NDAQ:YHOO) Overture. And with Microsoft's vast amounts of cash onhand, it could represent a new threat to Google's dominance in the online advertising market. This makes the situation one worth watching!

Related Companies
Microsoft Corporation (MSFT)
Google Inc. (GOOG)
Yahoo! Inc. (YHOO)

The Blackstone Group recently announced its intentions to go public in what is quickly becoming a private equity rush to the public markets. Blackstone, the largest private equity firm in the world, is planning to offer 10% of its shares to the public for $4 billion in a move that is sure to spark interest on Wall Street. Many investors like the idea of a Blackstone IPO since the company has proven to be a cash machine. Since 1987 the firm has averaged an impressive 23% annualized return with its real estate division returning closer to 29%! Meanwhile, Blackstone's assets have grown from $14 billion to $78 billion in less than six years - that is, they have multiplied their assets more than five times in six years. These are impressive numbers that have many investors eager to put money in the private equity giant.

Some investors are speculating that this move indicates that the market may be overvalued. After all, if the market wouldn't assign a high enough premium to their shares why would they IPO? What concerns investors is the ease in which private equity and hedge funds are able to raise cash. Investors who know the market is fully valued are apparently willing to give their money to these firms that in turn feed the M&A mania. Moreover, is there a problem with the credit markets? The recent subprime fiasco combined with the fact that the credit markets have grown five times as fast as the GDP for the entire 21st century so far is certainly cause for hesitation. And what happens when the debt markets grow less desirable and equity is required to get deals done? It's simple, returns will fall. This makes the idea of investing in Blackstone less desirable. However, at least in the short-term, we can be sure that there will be plenty of interest in the IPO. Whether this is a sign of something more remains to be seen. Combined, these factors make Blackstone a company worth watching!

ASM International NV (NDAQ:ASMI) shares rose $0.48, or 2.21%, to $22.23 after Fursa Alternative Strategies disclosed a 8.9% stake in the company and requested clearance to purchase additional shares of the company's common stock. The request was mandated since, combined with their current holdings, the hedge fund's ownership would exceed the $100 million Heart-Scott-Rodino form notification threshold. This is good news for shareholders, as any further buying in open market transactions clearly provides a boost for the share price. While this is no guarantee, it certainly makes ASMI a stock worth watching!

Related Companies
Novellus Systems, Inc. (NVLS)
Applied Materials, Inc. (AMAT)
Kulicke and Soffa Industries, Inc. (KLIC)

Crude oil prices surged above $66 a barrel Thursday, driven to a new six-month high by concerns that strained relations between Iran and the West could put oil exports in jeopardy as U.S. gasoline supplies wane and demand swells. 

Dealing a significant blow to Sprint Nextel (NYSE:S), the government on Thursday awarded the largest-ever federal telecommunications contract, a 10-year deal worth up to $48 billion, to its rivals AT&T, Qwest Communications and Verizon. The three contract winners will split $525 million, but beyond that they will have to compete with each other for the business of dozens of federal agencies needing to enhance the quality and security of voice, video and data technologies, the General Services Administration announced.

Shares of Qwest (NYSE:Q) rose $0.10 to close at $8.95, near the top of its 52-week trading range of $6.12-$9.22.

Shares of AT&T (NYSE:T) advanced $0.22 to end at $39.17, also close to the top of its 52-week trading range of $24.72-$39.86.

Verizon's (NYSE:VZ) stock price added $0.34 to finish at $37.57, just off the peak of its 52-week trading range of $30.10-$38.95.

Sprint (NYSE:S) climbed $0.49 to close at $19, settling in the lower half of its 52-week trading range of $15.92-$26.89.

United States Steel Corp. (NYSE:X) plans to buy Lone Star Technologies Inc., a maker of welded pipe used in oil fields, in a $2.1 billion cash deal that will make it North America's largest producer of tubular steel. Under the terms of the deal, U.S. Steel will pay $67.50 per Lone Star share, a total of about $2.1 billion and a roughly 39% premium over Lone Star's closing share price of $48.45 on Tuesday on the NYSE. Shares of Lone Star climbed $17.56, or 36%, to close at $66.01 after rising to a 52-week high of $66.50. U.S. Steel shares rose $3.61 to close at $101.22 on the NYSE after also setting a new 52-week high of $101.59.

RF Micro Devices Inc. (NDAQ:RFMD), which makes radio frequency components, warned that weaker demand from a major customer would hurt its first-quarter results. Shares fell $0.76, or 10.8%, to $6.31.

Circuit board maker Multi-Fineline Electronix Inc. (NDAQ:MFLX) said its Q2 sales and profit could decline from the Q1. The stock fell $1.95, or 11.2%, to $15.55.

Red Hat Inc. (NYSE:RHT) posted a profit decline of 25% and failed to meet analyst expectations for revenue Thursday, compounding earlier fears that larger competitors may bully the budding Linux provider. Red Hat earned $01.5 per share in the quarter ending Feb. 28, up from $0.14 last year, matching estimates from analysts polled by Thomson Financial. For the full year, Red Hat earned $59.9 million, or $0.29 per share, compared with the $79.7 million, or $0.41 per share, it earned in the last fiscal year. In part, that was due to higher operating expenses, particularly in sales and marketing. While the company was able to add at least 10,000 new customers and saw its revenue jump 41% to $111.1 million during the Q4, it fell short of analyst predictions of $112.5 million.

The electronics retailer Circuit City (NYSE:CC) plans to lay off about 3,400 store workers and replace them with lower-paid employees. The company also plans to eliminate 130 information-technology jobs at the corporate level. Circuit City Stores Inc. had shares up $0.35 at $19.23.

Beazer Homes USA Inc. (NYSE:BHZ) is under investigation by a host of government agencies for its mortgage-lending practices as well as other financial dealings. The company said it is complying with a request for documents from a federal prosecutor. The company’s shares were down $2.64 to close at $28.77.

Archer Daniels Midland Co. (NYSE:ADM), a producer of corn-based ethanol and corn syrup for foods, saw its shares up $0.91 at $36.84. The company is expected to benefit should corn prices fall amid an expected bump in supply.

Vyyo Inc. (NDAQ:VYYO), the maker of communications equipment, received $35 million in funding from Goldman Sachs & Co. Shares rose $0.97 to end at $8.44.

Syntax-Brillian Corp.’s (NDAQ:BRLC) shares rose $0.48 to $8.41. The maker of high-definition televisions sold 2.1 million shares for $15.5 million in a private transaction with two affiliates. The company plans to use proceeds in part to expand its manufacturing base and to market its Olevia brand televisions worldwide.

AtheroGenics Inc. (NDAQ:AGIX) had a decline in its shares, down $0.44 at $2.80. Analysts predict AstraZeneca PLC will end a partnership with the drug developer.

American Depositary Shares of eTelecare Global Solutions Inc. climbed Wednesday in their trading debut on the Nasdaq Stock Market. Shares of the Philippines-based outsourcing company rose $1.63, or 12%, to close Wednesday at $15.13. The IPO offering was priced at $13.50 per ADS for the 5.5 million of U.S.-traded shares. The IPO price was at the midpoint of the expected price range of $12.50 per ADS to $14.50 per ADS.

Programmable chip maker Altera (NDAQ:ALTR) lost $0.89, or 4.3%, to $20.05 after a Bear Stearns analyst lowered his 2007 earnings estimates for the company, partly based on weak business in Asia Network Appliance, a provider of network-attached storage systems, shed $1.60, or 4.2%, to $36.42.

Video game publisher Activision Inc. (NDAQ:ATVI) rose $0.88, or 4.9%, to $19.01 on the heels of a solid Q4 and full-year report from No. 1 game retailer GameStop Inc. Activision hit a 52-week high of $19.19 during the session.

Advancis Pharmaceutical Corporation (NDAQ:AVNC) shares dropped $0.16, or 6.32%, to $2.37 today after the company announced fourth quarter net losses of 44 cents per share on total revenue of $1.2 million in an 8K filing with the SEC. This compares to the company's four analysts who expected the company to report a loss of 39 cents per share on revenue of $2.31 million. The losses come as the company has been facing increased problems with its PULSYS approvals, having received a "refusal to file" letter from the FDA for its once-daily Amoxicillin PULSYS NDA last month. According to the company's CEO Edward Rudnic, "We achieved clinical and operational progress during 2006, and we look forward to continuing the advancement of our Amoxicillin PULSYS product following our NDA resubmission last week. However, as we look forward into 2007, completing a financing and providing necessary capital to fund our business is a primary focus."

Advancis also announced that it had authorized the company to evaluate various strategic alternatives to further enhance shareholder value. The company has since retained an investment bank focused on the life sciences industry to assist in the evaluation of a full range of strategic alternatives available to the company. These could include a possible sale of the company, execution of its existing strategies, partnering or other collaboration agreements, or a merger or other strategic transaction. Further, the company's policy is to not disclose and developments with respect to this process unless and until the evaluation of strategic alternatives has been completed. Given the company's difficulties obtaining financing and FDA approvals, the company may be forced to engage in some type of strategic transaction in order to finance their ongoing research. This is definitely a stock to watch as the company works to explore alternatives and get its products approved.

Related Companies
Pfizer Inc. (PFE)
Wyeth (WYE)
Merck & Co. Inc. (MRK)

Circuit City Stores, Inc. (NYSE:CC) shares moved up $0.59, or 3.13%, to $19.47 in early trading today after the company announced a broad restructuring plan to better position itself against rival Best Buy Co., Inc. (NYSE:BBY). The company said it would be dismissing about 3,400 store associates being paid well above the market-based salary range for their role and hire new employees that would be compensated at the current market range for the job. Circuit City also announced that its board authorized management to explore a possible sale of its InterTAN unit, which operates about 900 retail stores and dealer outlets in Canada. The company first purchased InterTAN in 2004 for about $284 million. Finally, the company said it will also outsource its information-technology infrastructure to International Business Machines Corp. (NYSE:IBM) in a move to cut about 16% of its IT expenses over the life of the seven-year contract.

The restructuring follows an unexpected loss of $16 million, or nine cents per share, incurred during the quarter ended November 30th. The loss was down from a year-earlier profit of $10.1 million, or six cents per share, and came as a result of a price war over flat-panel television sets. The company has already announced plans to close some stores and restructure its merchandising teams to improve financial performance; however, it believes that these new efforts will greatly enhance margins. However, the company is likely to record a pretax expense of about $144 million, including goodwill impairment, store closing and other restructuring costs. Clearly, Circuit City is in need of some restructuring efforts to improve its financials and clearly substantial reductions in employee compensation and IT expenses will contribute directly to the company's bottom line. Meanwhile, a sale of the InterTAN unit would provide the company with some spare cash to get the process rolling without substantially reducing earnings in the short-term. Overall, this is definitely a great stock to watch as they go through the restructuring process.

Related Companies
RadioShack Corporation (RSH)
Best Buy Co., Inc. (BBY)
Harvey Electronics, Inc. (HRVE)

Time Warner Inc. (NYSE:TWX) shares jumped Monday after there was speculation that the media giant may be able to unlock more value through restructuring and possible selling off its publishing unit. The speculation began after Bear Stearns analyst Spencer Wang upgraded Time Warner to "outperform" from "peer perform" explaining that the company could improve share value by speeding up its restructuring efforts over the next 12 to 18 months. One possible catalyst, according to the analyst, is a divesture or major restructuring of Time Warner's publishing division. This is a possibility since the company has already sold a number of its magazine and publishing assets recently. Wang believes that this move makes sense for the company since the division lacks synergies with other Time Warner business, which are video-centric. Moreover, the division has been somewhat of a drag on the company's growth rates and future prospects.

A leveraged spin-off of the publishing division would provide cash for Time Warner while giving shareholders a stake in the new entity - all through a presumably tax-free transaction. The transaction would not only result in an increased cash stockpile for Time Warner, but also a potential vehicle to unload some debt. It is also important to remember that spin-offs themselves tend to outperform the overall market in the first year or two after the separation. Combined, these factors make a potential TWX spin-off something worth following closely!

Related Companies
Yahoo! Inc. (YHOO)
CBS Corporation (CBS)
Google Inc. (GOOG)

Delta Air Lines Inc. (OTC:DARLQ) forecast an operating profit of $816 million this year and said that it would exit bankruptcy and re-list its stock in May after more than a year and a half in Chapter 11 bankruptcy reorganization. The deadline for creditors to vote on the company's reorganization plan is April 9th, with the bankruptcy court confirmation hearing set for April 25th. Meanwhile, a stock listing could come in the first week of May pending a decision on which exchange the shares would be listed on, which Delta is holding off on announcing publicly. This is good news for the company and its creditors as the company could finally put the bankruptcy case behind them and focus on improving its core operations.

Many analysts are also saying that the company could become a takeover target due to its largest asset - approximately $7.8 billion in net operating losses that it could carry forward to offset its taxable income in years ahead. Some are speculating that the airline industry consolidation will be one of the top issues for discussions by Delta's board once the bankruptcy case is behind them. Earlier this year, Delta fought off a hostile $9.75 billion bid from U.S. Airways Group, which definitely shows an interest in the company. This makes Delta a stock worth following.

Related Companies
AMR Corporation (AMR)
UAL Corporation (UAUA)
Continental Airlines (CAL)

The BISYS Group (NYSE:BSG) shares moved down marginally after Mr. Ahmet Okumus disclosed a 10.14% stake in the company and expressed his interest in obtaining a seat on the company's board of directors in a Schedule 13D filing with the SEC. The Okumus Capital LLC President said that while he has the utmost confidence in the ability and intentions of the current board and management, he believes that his perspective as a financial professional and representative of a significant shareholder on the board would provide the board with practical insight and guidance in considering the company's strategic alternatives. Moreover, he believes that his experience in identifying undervalued assets, along with his knowledge of financial engineering and capital allocation could make an immediate positive impact to the board during this critical period.

This news followed speculation back in February that the company could be the target of a takeover bid. BISYS said in August that it had hired investment bank Bear Stearns to help it explore strategic alternatives, including a possible sale of the company. Since then, the company has resolved several of its problems with the SEC and other accounting issues. Then Murali Gupta, an analyst at investment bank Keefe, Bruyette & Woods, said that the company would likely be sold, adding that it would likely be to a private equity fund through a leveraged buyout. The valuation is estimated as being between $11 and $14 per share. Whether there is any substance to this rumor remains to be seen; but perhaps with the guidance of Mr. Ahmet Okumus, perhaps the company will have a better chance. This makes BSG a stock worth watching!

Related Companies
National Financial Partners Corp (NFP)
Automatic Data Processing (ADP)
SEI Investments Company (SEIC)

Lennar Corp. (NYSE:LEN) found themselves with a 73% plunge in their Q1 earnings, following the trends of a slumping housing market. The company predicts that it is going to fall short of 2007 earnings goals. Since the start of February, homebuilders KB Homes, Hovanian Enterprises Inc. and Toll Brothers Inc. all reported falling profits. Miami-based Lennar reported that net income for the quarter ended Feb. 28 fell to $68.6 million, or $0.43 per share, from $258.1 million, or $1.58 per share, a year earlier. The results were in line with expectations of analysts. Revenue declined 14% to $2.79 billion from $3.24 billion a year ago, topping Wall Street's estimate of $2.49 billion.

Delta Air Lines Inc. (OTC:DARLQ) expects to emerge from bankruptcy protection April 30 with an eye on improving customer service and selling more assets to build shareholder value, it said Tuesday, raising the possibility it could shed feeder carrier Comair. Delta is projecting a pretax profit, excluding special and reorganization items, of $816 million in 2007. Delta is forecasting a narrower loss of $25 million to $50 million in the first quarter, which ends Saturday. He said Delta expects to get a positive vote of creditors on the airline's reorganization plan, which he said should be approved by the bankruptcy court after a hearing April 25.

Amylin Pharmaceuticals Inc. (NDAQ:AMLN) shares jumped off of a negative Wall Street outlook for possible future competitor ConjuChem Biotechnologies Inc. That company's diabetes drug candidate PC-DAC was not more effective than Amylin and partner Eli Lilly's Byetta in a recent study. Amylin shares gained $1.75, or 4.8%, to close at $38.27 on heavy trading volume. The stock has traded between $35.55 and $51.54 over the last 52 weeks.

Shares of GTX Inc. (NDAQ:GTXI) fell $1.12, or 5.4%, to $19.78, having traded between $7.70 and $23.40 over the last 52 weeks. Shares of Altus Pharmaceuticals Inc. shed $0.68, or 4.4%, to close at $14.94, having traded between $10.75 and $23.59 over the last year.

Three San Antonio area oil refiners won contracts with the Department of Defense totaling $339 million. Refinery Associates of Texas is a petroleum products trading company based in New Braunfels. The company has won a $172 million contract to supply the government with naval distillate from a refinery in Pasadena, Texas. The Defense Energy Support Center in Fort Belvoir, Va., is managing all the supply contracts, which will not expire until April 30, 2008. AGE Refining in San Antonio won a $92 million contract to supply the military with jet fuel. Tesoro Refining and Marketing Co., a subsidiary of Tesoro Corp., also won a $75 million contract for jet fuel. Tesoro will supply the government with jet fuel from its refinery in Mandan, N.D. A week ago, a Valero Energy Corp. subsidiary won a separate $499 million fuel contract from the government.

The U.S. Navy on Tuesday awarded an $8.9 million delivery order to General Electric Co. (NYSE:GE) for work on H-53 helicopter engines. Shares of General Electric fell $0.21 to close at $35.79 on the NYSE.

Shares of FuelCell Energy Inc. (NDAQ:FCEL) surged Tuesday after the company announced a lucrative deal to supply fuel cell power products to Connecticut. The deal is valued at $200 million, if all projects are approved. Shares of FuelCell surged $1.40, or 19.4%, to $8.60 on the Nasdaq Stock Market in midday trading. The stock spent most of 2006 in decline since hitting a 52-week high of $15 in April. However, shares have climbed 12% so far in 2007.

Morgan Stanley (NYSE:MS) offered additional details regarding its pending Discover Financial Services spin-off in a Form 10-12B filing with the SEC. The spin-off is expected to be a tax-free distribution of its common shares to Morgan Stanley shareholders. The new entity is expected to be listed on the New York Stock Exchange under the ticker symbol "DFS" in the third quarter of this year. The already-approved spin-off would follow Mastercard's successful recent IPO and come in just before Visa's anticipated IPO later this year.

Discover itself is a leading credit card issuer and electronic payment services company with one of the most recognized brands in the U.S. financial services. Since its inception in 1986, the company has grown to become one of the largest card issuers in the United States, with more than 50 million cardmembers and $45.7 billion in managed receivables as of November 30, 2006. They are also a leader in payment processing, as they are only one of two credit card issuers with its own U.S. payments network and the only issuer whose wholly-owned network operations include both credit and debit functionality. In 2006, the company processed mroe than 3 billion transactions through their own network and the PULSE network. Overall, Discover's revenues (net interest income plus other income) have increased over the last three years, from $4.5 billion in 2004 to $5.1 billion in 2006, making them a substantial player in their market.

Typically, investors look for several criteria when selecting stocks. Given Discover's market leadership, strong growth, solid entrenchment, and excellent prospects, many investors will likely be interested in this new spin-off. Moreover, spin-offs themselves offer unique opportunities due to their inherent structuring. Often times, parent company shareholders do not want shares in the new entity, so they immediately sell them. This selling pressure creates a temporary mis-valuation, which can be a great opportunity for enterprising investors to take early positions. The spin-off's proceeds will also generate a significant amount of cash for Morgan Stanley - but an amount that has yet to be announced. These are two great stocks to watch as the spin-off draws closer.

Related Companies
Merrill Lynch & Co, Inc. (MER)
Lazard Ltd (LAZ)
Capital One Financial Corp (COF)

Tribune Company (NYSE:TRB) shares moved up $0.46, or 1.5%, to $30.99 after the company's board of directors is said to be favoring a buyout offer from real estate mogul Sam Zell for $33 per share or $8 billion. Meanwhile, billionaires Ron Burkle and Eli Broad are saying that Tribune did not treat them fairly during the auction process. In particular, the two said they were not privy to information given to Sam Zell back in September when they made their bid for the company. The special committee of Tribune's board that is evaluating its strategic options has reportedly turned down several offers and is also reportedly looking at a "self-help" plan that would include a spinoff of its television stations, and borrowing enough money to pay a substantial dividend to shareholders. Currently, Zell's offer remains the highest at a nearly 8% premium to the company's current market price if approved. Either way, this is a great company to keep an eye on as the company mulls its options.

Related Companies
Washington Post Co. (WPO)
Gannett Co., Inc. (GCI)
CBS Corporation (CBS)

Riviera Holdings (AMEX:RIV) shares moved up $2.46, or 9.66%, to $27.93 after an investor group led by Mr. Kanavos, Robert Sillerman, Brett Torino and Barry Sternlicht offered to acquire the company for $27 per share. The group said they are prepared to immediately enter into a merger agreement with Riviera on substantially the same terms as the April 5, 2006 merger agreement between their acquisition vehicles and Riviera. The offer represents a 13.5x 2006 EBITDA multiple, which the investment group believes is a substantial premium. They also said that their proposal has the support of other large stockholders who have reportedly contacted the company directly to confirm the same. Whether or not this transaction goes through depends on whether the board lifts several restrictions in order to make it possible - for this, the investor group has set a 5:00PM PST on March 30th. Given that the stock is currently trading above the buyout price, it appears that some investors may believe that the company is worth more. Regardless, this is definitely a stock to watch as this situation unfolds!

Related Companies
Las Vegas Sands corp. (LVS)
Pinnacle Entertainment, Inc. (PNK)
Trump Entertainment Reports, Inc. (TRMP)

Citigroup Inc. (NYSE:C) expects to have completed its corporate cost review by mid-April, company officials said Monday, as published reports suggested the nation's largest bank was considering cutting about 15,000 jobs. It is said that the cuts could result in a charge of more than $1 billion against earnings. Citigroup shares fell $0.18 to close at $51.54 on the NYSE.

Oil prices settled Monday at their highest level so far this year on tensions between Iran and the West following Tehran's detention of British naval personnel. Gasoline futures prices climbed above $2 a gallon to their highest level since last September as a new driving season nears. On the New York Mercantile Exchange, light, sweet crude for May delivery rose $0.63 to settle at $62.91 a barrel, the highest settlement for the front-month contract since Dec. 20. Earlier, the contract rose as high as $63.30 a barrel.

Northwest Airlines (OTC:NWACQ) can begin seeking creditor approval of a plan to exit bankruptcy that values the company at an estimated $7 billion, a judge ruled Monday. The decision puts the airline in the last stages of bankruptcy before it can emerge from court protection. Eagan, Minn.-based Northwest Airlines Corp. wants to cancel all existing shares in the company and issue 272 million new ones, with a stock offering to sell 27.78 million shares at $27 a piece.

Robust prescription drug sales helped drugstore chain Walgreen Co. (NYSE:WAG) earnings increase nearly 25% in the Q2. The nation's biggest drugstore chain by revenue earned $651.9 million, or $0.65 per share, for the three months ended Feb. 28. That's up from $523.5 million, or $0.51 per share, during the same period last year.

Upscale jewelry retailer Tiffany & Co. (NYSE:TIF) on Monday said Q4 net income was nearly flat, weighed by an impairment charge, flat sales in Japan and higher cost of metals. Earnings for the quarter ended Jan. 31 were nearly unchanged at $140.5 million, or $1.02 per share, from $140.3 million, or $0.97 per share, during the same period last year. Revenue grew 15% to $986.4 million from $858.4 million in the year-ago quarter. Analysts expected net income of $1.05 per share on revenue of $979.1 million.

Dell (NDAQ:DELL) shares rose 3.5%, or $0.79, to $23.62 on the Nasdaq after Goldman Sachs upgraded the computer maker's stock to "buy" from "neutral" amid calls on Wall Street for the company to cut jobs and improve profit margins.

Internet auctioneer eBay Inc. (NDAQ:EBAY) stock rose 4.4%, or $1.39, to $33.22 on the Nasdaq.

3M Company (NYSE:MMM) shares were the biggest drag on the Dow on Monday, down 0.76%, or $0.59, at $77.38 on the NYSE.

Microsoft Corp. (NDAQ:MSFT) said Monday it sold 20 million consumer copies of the new Windows Vista operating system worldwide in February, but analysts said the data shed little light on the program's popularity during its first month on the market. The analyst said 51 million PCs were sold to consumers worldwide in 2002; this year, the research group predicts 96 million consumers will buy a computer. Shares of Microsoft rose $0.20 to close at $28.22 on the Nasdaq.
 
Officials of Safeway Inc. are reportedly interested in buying additional stores. Safeway officials, along with officials from other nationwide supermarket giants like The Kroger Co. of Cincinnati and SuperValu Inc. of Edina, Minn., are said to have expressed an interest in buying stores operated by Roundy's Supermarket Inc., a Milwaukee-based company that owns and operates 155 retail grocery stores in Wisconsin, Minnesota and Illinois under the Pick 'n Save, Copps Food Center, and Rainbow Foods banners. It had sales of nearly $4 billion during fiscal 2006 and employs 22,000 workers. Pleasanton-based Safeway had fiscal 2006 sales of $38.4 billion and currently operates 1,761 supermarkets throughout the United States and Canada. That includes the Dominick's chain in the Chicago area, just to the south of Milwaukee, which Safeway purchased in 1998, and then tried unsuccessfully to sell off several years later when Dominick's was struggling in the nation's third-largest metropolitan area.

Raytheon Co. (NYSE:RTN), the world's fifth-largest defense company, closed on the sale of its aircraft operations Monday to Hawker Beechcraft Inc., with the new owners planning to bolster its international sales and service, the company said. The $3.3 billion dollar sale of Wichita-based Raytheon Aircraft to Hawker Beechcraft was first announced in December.

Redhook Ale Brewery Inc. (NYSE:HOOK) rose $0.10 to $7.52 in extended session trading after closing at $7.42 earlier on the Nasdaq.

First Solar Inc. (NDAQ:FSLR) added $0.99, or 2%, to $58 in the late session after a Banc of America analyst began coverage of the solar cell maker with a "Buy" rating in a client note released after the closing bell.

Vonage Holdings Corp. (NYSE:VG) said Monday the market had overreacted to a federal judge's decision that would bar the Internet telephone company from using technology covered by Verizon Communications Inc.'s patents. New York Stock Exchange-listed Vonage shares shed $1.05, or 26%, Friday to close at $3. On Monday, the shares rose $0.38, or 13%. The shares were first sold to the public in May for $17 each.

New Century Financial Corporation (OTC:NEWC) shares moved down $0.44, or 22%, to $1.56 after two of the company's major bank lenders took possession of loans previously used to secure their financing. The company disclosed in a regulatory filing Thursday that it had agreed to transfer is outstanding loans with both Barclays Plc and Morgan Stanley. Many analysts interpreted this move by the banks as a last-second attempt to salvage at least some value in these loans by auctioning them off themselves. While the company refuses to comment on the situation, many analysts are surprised that the company has not already filed for bankruptcy.

New Century first disclosed that bank lenders were pulling their funding two weeks ago when they received notices of default from Barclays, Bank of America, Citigroup, Credit Suisse Group, Goldman Sachs and Morgan Stanley. The problems themselves first arose after firms that purchased subprime mortgage loans from these lenders became more aggressive in kicking back dud loans stemming from poor underwriting practices. These actions forced them to repurchase loans, which have severely impacted their ability to keep lines of credit open. Whether or not this will result in an official bankruptcy filing for New Century remains to be seen; however, many people believe there may be no other way out. NEWC stock, however, continues to trade at $1.56.

Related Companies
Fannie Mae (FNM)
Fieldstone Investment Corporation (FICC)
Annaly Capital Management, Inc. (NLY)

Tarragon Corporation (NDAQ:TARR) announced earlier this week that it would be spinning off its core homebuilding and real estate development divisions in order to shift its focus on the rental market - an area poised for steady growth as prospective home buyers wait out the residential real estate collapse. The company develops and owns multi-family housing in Florida, New York, Tennessee, and Texas. The spin-off, which is slated for mid-2007, would provide the company with additional funds and enable it to focus more strongly on its multi-family rental business. Tarragon will continue to operate its real estate services business, which provides asset and property management, leasing and renovation services to residential and commercial properties. Following the spin off, Tarragon will change its name to Sage Residential, Inc. while Tarragon's homebuilding and development business will be renamed Tarragon Corporation.

The company believes that the spin off will, among other things, provide both businesses with direct and differentiated access to financing and the capital markets, allow each company to grow through acquisitions appropriate to its business and provide each company with the opportunity to align management incentives with the performance of its business. Moreover, given the current weakness in the sector, the new spin-off may end up being severely undervalued when it makes its debut as an independent entity - creating a great opportunity for enterprising investors to get in at low prices. Regardless, this is definitely a company to watch as it attempts to rid itself of underperforming divisions and turn itself around!

Related Companies
Colonial Properties Trust (CLP)
Developers Diversified Realty Corp (DDR)
Washington Real Estate Investment Trust (WRE)

Bulldog Investors is a hedge fund founded by Philip Goldstein that specializes in activist situations. Mr. Goldstein is well regarded among activist hedge funds after he recent argued against the SEC's required 13F filings, which require a complete list of the hedge funds holdings. He argued that hedge funds' holdings should be considered trade secrets, as the primary activity of a hedge fund is to uncover undervalued companies that are not in the public's sight. Meanwhile, the hedge fund has also been subjected to a lawsuit by the State of Massachusetts after it allegedly offer unregistered securities to the public. Regardless of their current state, however, the hedge fund seems to be focusing on an interesting strategy during the last few months.

Specifically, Bulldog Investors seems to be focusing on closed-end mutual funds that are trading well below net asset value, seeking to unlock value through a restructuring. Simply put, closed-end mutual funds are publicly traded portfolios that do not trade on par with their assets. Rather, they can be overvalued or undervalued just like stocks. Bulldog Investors has recently targeted such funds trading significantly below NAV - such as MFS Government Markets Income Trust, AEW Real Estate Income Fund, Franklin Universal Trust, RMR Hospitality Real Estate Fund, and several other. The idea is that by converting these closed-end funds to open-end mutual funds (which are required to trade at NAV), they can immediately unlock a significant amount of value. Whether or not this strategy actually works remains to be seen; however, Bulldog Investors is certainly a hedge fund worth tracking!

KB Home (NYSE:KBH) shares moved up marginally on the day after the company filed its 8-K with the SEC. The document provided some additional information into just how hard these companies were hit with the subprime mortgage collapse. KB Home said that their first quarter results reflected a sharp downturn in the housing market that began in 2006 and that continues to pressure the sales and profit margins of domestic homebuilders. The company continued saying that their revenues and margins were being pressured by intense competition and pricing pressure among homebuilders and other participants in the marketplace. Moreover, they expect these conditions to continue through at least the remainder of 2007 adding that it would be hard to predict when the housing market will stabilize. Finally, commenting on the subprime collapse, the company noted that these recent problems in the subprime mortgage market combined with tightening credit requirements (now being discussed by lawmakers) could exacerbate the already-difficult conditions in the homebuilding industry. During a conference call, the company noted that about 13% of their mortgaes for the company's homes were financed with subprime loans. Meanwhile, the major concern is that many of the markets have a large overhang of resell inventory that hasn't cleared the market - these supply/demand issues have yet to be sorted out.

Federal regulators are just now cracking down on who's to blame for the subprime mess. Many people insist that while Federal regulators have tightened standards for making loans to subprime borrowers, standards still decline and the volume of loans has surged. Perhaps the main reason for this is the fact that approximately 52% of subprime mortgages originated from companies with no federal supervision - that is mortgage brokers and stand-alone finance companies. An additional 25% were made by finance companies that are units of bank holding companies, which are indirectly supervised by the Federal Reserve. In fact, only 23% of all subprime mortgages fall directly under Federal regulatory control.

Fed Reserve Governor Susan Bies told the Wall Street Journal, "What is really frustrating about this is [federal regulators] don't have enforcement authority to do anything with these state-licensed, stand-alone mortgage lenders." Meanwhile, industry supporters say that the system is working perfectly. Doug Duncan from the Mortgage Bankers Association commented, "Market discipline in this industry is swift, can be severe, and is more effective in changing lending practices than any potential changes in regulation." So, while this situation unfolds we'll have to wait and see exactly how subprime mortgage volume adjusts itself. But in the meantime, it appears as if housing companies will continue to suffer in the aftermath of these defaults.

Related Companies
Centex corporation (CTX)
D.R. horton, Inc. (DHI)
Pulte homes, Inc. (PHM)

Warwick Valley Telephone Company (NDAQ:WWVY) shares moved up $0.39, or 2.41%, to $16.59 in early trading today after Santa Monica Partners demanded that the company immediately put itself up for sale in a letter to the company's board of directors. The 2.4% shareholder had sent letters to the company in the past recommending a similar course of action since the company clearly cannot compete with other well-funded cable and internet competitors with enormous economies of scale. Meanwhile, the company's senior management have all resigned along with certain board members while more than 20% of its employees have been laid off. Compounding the problem is today's late K-1 filing which further highlights the company's declining margins as losses continue to mount. Not only is there no plan in place to turn the company around, but only interim management available to implement any such plans.

The hedge fund then points out why a sale may be in the best interest of shareholders. Hector Communications, one of the company's competitors, recognized the competitive threat it faced and decided to put itself up for sale in November 2006. The company ended up being sold for $36.40 in cash, a gain of 160% from the $14 per share level at which the company's stock was trading at in November 2003. Surely a sale at a premium like this would be preferrable to the steady decline we've been seeing at Warwick for several years now. Santa Monica then urged the board of directors to remember its fudiciary duty to shareholders, even though they personally do not have much at stake in the company. If the board of directors decides to consider the possibility of a sale, it could mean significant share appreciation for investors - this makes WWVY a stock worth watching!

Related Companies
Verizon Communications Inc. (VZ)
Sprint Nextel Corporation (S)
Citizens Communications (CZN)

Private equity giant Blackstone Group filed for a $4 billion IPO that would put a provide the company with new sources of permanent capital. While the firm hasn't yet disclosed ow many shares will become available or provide an estimated price range, they did say that public shareholders would have limited voting rights and will not elect the general partner or its directors. The hedge fund would be the second hedge fund ever to go through with an initial public offering.

Avery Dennison Corp (AVY) signed a definitive merger agreementw tith label and tag company Paxar Corp (PXR) for $30.50 per share in a transaction worth about $1.34 billion.

Bed Bath & Beyond Inc. (BBBY) acquired the privately held retailer buybuy BABY for about $67 million, net cash acquired, and repayment of debt of about $19 million. The company said that the acquisition allows it to provide merchandise to expectant parents and their friends, who are part of its current consumer base.

Activision Inc. (ATVI) said it has signed a multi-year agreement granting the company exclusive worldwide rights to develop and distribute video games on all platforms based on Live Nation's (LYV) Monster Jam Series. While financial terms of the deal were not disclosed, the first game in the series is expected to be available at retail stores this holiday season.

Capital City Bank Group Inc. (CCBG) said it has approved an additional buyback of up to 1 million shares.

IHS Inc. (IHS) said an existing shareholder has begun a secordary offering of 3.75 million shares; however, the company said it would not receive any proceeds from the offering.

Sauer-Danfoss Inc. (SHS) said it would be raising its quarterly dividend by 13% to 18 cents a share. The new dividend is payable to shareholders on record by April 2nd.

Pozen Inc. (POZN) said its amended reponse to an approvable letter for its migraine treatment Trexima has been accepted for review by the FDA. Pozen also said that the FDA notified the company that it expects a Class II review, which could result in a new deciison date of August 1, 2007. If approved, the drug could be available as soon as the second half of 2007.

Embarcadero Technologies Inc. (NDAQ:EMBT) founds itself in the cross hairs of Chapman Capital once again today as Robert Chapman demanded that Director Gary Haroian immediately resign from the company's board of directors. "Mr. Haroian has been compensated into the hundreds of thousands of dollars while acting out the part of a 'career director' on the boards of Embarcadero, Aspen Technology, Inc., Lightbridge, Inc., Network Engines, Inc., and Phase Forward Inc.," said Chapman in a press release. "In order to reinstate any semblance of obeying his responsibility to the owners of these public companies, Mr. Haroian should resign from whichever boards necessary to allow for his adequate attention and focus on the remaining issuers."

Chapman went on to say: "Public company directors hiding shamelessly and disingenuously behind a convenient but ignorant interpretation of Regulation Fair Disclosure, in order to shirk their fiduciary duties of due care and loyalty, are a plague being visited upon Wall Street. Instead of committing the time and effort to understand issuers' operations, financial condition, strategic positioning and management performance, these expensive substitutes for true corporate governors attempt to obfuscate their parasitic ineptitude behind the facade of Reg. FD compliance. There exists no section, guideline or other language within Reg. FD that restricts the discussion of material, public or immaterial, non-public information between public company directors and owners. At the risk of stating the obvious, the fact that public information being targeted for discussion had been disclosed previously makes Mr. Haroian's pretext for 'owner avoidance' patently absurd."

These harsh words come only days after the acitivist hedge fund demanded that Embarcadero immediately put itself up for sale. Further, Chapman said he would seek nominees to replace Class I directors Timothy C.K. Chou and Frank M. Polestra, and Class II directors Michael J. Roberts and Samuel T. Spadafora, should a sale of Embarcadero not be announced by March 30, 2007. This is a great stock to keep an eye on in the event that management folds to the pressure; after all, while proxy fights are rarely won by hedge funds, most companies bend under the pressure and institute at least a compromise.

Related Companies
Quest Software, Inc. (QSFT)
Borland Software Corp. (BORL)
Informatica Corporation (INFA)

Feldman Mall Properties, Inc. (NYSE:FMP) was contacted by Mercury Real Estate Advisors LLC again on Tuesday after it failed to respond to their initial demands made on January 30, 2007. The activist hedge fund demanded once more, in a Schedule 13D/A filing with the SEC, that the company immediately hire an investment banker to explore strategic alternatives given the company's steep discount to liquidation value and several interested third parties. Further, Mercury notes that the continued pattern of delays in SEC filings, downward adjustments in reported FFO by 16.6%, and a reduction of earnings guidance by approximately 40% is extremely troubling. The hedge fund also added several other factors to its growing list of reasons the company should be sold:

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 siz