Point Blank Solutions Inc. (OTC:DHBT) shares spiked nearly 20 percent earlier this week after it received an unsolicited buyout offer for $5.50 per share over a year after the company began exploring strategic alternatives. New York hedge fund Steel Partners initially approached the company two months ago but made the offer public after a lack of response from the company.

“We are confident that our proposal represents the best strategic alternative available to immediately maximize shareholder value for the Company and its public shareholders,” Warren G. Lichtenstein, Managing Member of Steel Partners stated in the letter. The hedge fund also stressed its extensive experience working with and maximizing the value of other public companies in the defense industry.

Steel Partners' offer comes just a week after its former CEO David Brooks was indicted on various fraud charges along with two other top officials. Brooks pleaded not guilty to sercurities, tax and accounting fraud charges. However, the entire ordeal has left the board in a difficult position trying to overcome the stigma associated with a criminal investigation and several arrests of key officers. This may make it difficult for management to keep the company.

Many shareholders believe, however, that Steel Partners may have to raise its offer to $6.50 to $7.00 in order to attract enough shareholders to make the deal happen. The hedge fund itself also noted that it would be willing to upwardly adjust the offer price to reflect any additional value that it may find through due diligence, so we know that such an adjustment is not out of the question.

Overall, this is great news for shareholders as it could provide them with a windfall of cash along with an escape from the criminal problems facing the company. While Point Blank has been rather keen on a turnaround, it may be difficult to convince shareholders that this turnaround is a better alternative than such a high buyout premium. Combined, these factors make DHBT a stock worth watching!

Related Companies
Escalade Inc. (ESCA)
Arotech Corporation (ARTX)
Brunswick Corporation (BC)

Pacific Sunwear of California (NDAQ:PSUN) announced that it has hired Financo Inc. as its financial advisor to explore strategic alternatives for its demo chain of stores. The company said that it would explore alternatives for its demo stores, which sells urban-inspired clothing, and close its One Thousand Steps shoe boutiques. Shares in the company have risen more than eight percent since the original announcement as shareholders applauded the move.

Wall Street has complained for years that the demo stores were a drain on profits at Pacific Sunwear. The 154 demo stores and 9 One Thousand Steps stores combined for form a pre-tax operating loss of $21 million in the first three quarters of fiscal 2007. The demo stores saw its same-store sales decline more than 15% on top of a 17% drop last month. Many investors and analysts believed it was time just to dump the chain.

Pacific Sunwear is now looking to focus on turning around its PacSun change instead of trying to half-heartedly enter any new markets. The PacSun stores posted a 2.7% same-store growth number that outperformed many other teen-orientated retailers like American Eagle and Gap, which reported negative same-store sales for the quarter. The sale of these two chains should provide the company with ample cash to fund a turnaround to boost profitability even more.

Pacific Sunwear may also be a bargain with a price-to-sales ratio of just 0.76, which is less than half that of its competitors. The company's 2.26x book value is also an attractive valuation given that management has taken action to unlock value through the sale of these two chains. If the company can work to turn itself around and swing to a profit on stronger earnings, then this stock could be worth substantially more than it is now - and the sale of these two chains is a step in the right direction.

In the end, Pacific Sunwear still has a long way to go before it can become a successful apparel retailer. Its operating performance is has been very poor while its weak cash situation raises concerns about its outlook. Meanwhile, the company is experiencing very poor top and bottom line growth. This has created a relatively low valuation for the company that could become attractive if it is able to successfully turnaround its PacSun business. Combined, these factors make PSUN a stock worth watching!

Related Companies
Aeropostale Inc. (ARO)
American Eagle Outfitters (AEO)
Ambercombie & Fitch Co. (ANF)

Northwest Airlines Corporation (NYSE:NWA) announced its first results following its exit from bankruptcy and swung to quick profit as it kept fuel and other costs under control. The airliner reported profit of $244 million, or 93 cents per share, compared to an analyst estimate of just 76 cents per share. Shares on the NYSE rose over two percent in early trading.

Northwest also said it was considering spinning off its frequent flier program in a move that would mirror those being considered by other major airlines including US Airways, AMR Corp, and UAL. Northwest CEO Doug Steenland said in a conference call that separating WorldPerks from the parent company "has the potential for significant value creation".

Many industry analysts believe that any move to spin-off frequent flier programs will come after a much-anticipated wave of airline mergers. Executives are worried bout giving up control over a business that has such close ties to their most loyal and active customers. Delta CEO Richard Anderson said, "Frequent flyer candidly needs to be a post-consolidation sort of decision."

In the end, Northwest has announced great earnings and already returned to profitability. The upcoming wave of consolidation should be nice to Northwest shareholders (assuming they are on the selling end) given this growth while any move to spin-off its frequent flier program could provide a windfall for existing shareholders. Combined, these factors make NWA a stock worth watching!

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

A large Cape Fear Bank Corp. (NDAQ:CAPE) shareholder expressed his concerns regarding the company's belief that its long-term plan for success trumps any short-term sale of the company. The activist shareholder believes that there is little the company could do, short of a sale, to maximize shareholder value in a company that has been among the worst bank stocks of the de novo banks started in North Carolina over the past nine years.

Maurice Koury, who owns a 5.8 percent stake in the company, said that he believes there is little investor confidence in the struggling Cape Fear. The bank recently retained an investment banking firm that found it is "premature to abandon the bank's long-term plan for success". Arguable, the "long-term plan for success" will need to be dramatically different from the past nine years' lack of success measured by shareholder returns.

Cape Fear also told a newspaper that "the bank's recent returns reflect substantial investment in expanding its ability to serve customers and expand its customer base and create long-term shareholder value". However, shareholders and the market don't appear to be buying this and there is little confidence reflected in the stock price, according to Mr. Koury.

The activist investor also pointed out another problem: The company reduced its second quarter provisions and added a modest provision for the first quarter of 2007. This could be an attempt to artificially boost the company's earnings in order to convince shareholders that it is on the right track when it is really simply pushing numbers around on the balance sheet.

"A skeptic might wonder if the second quarter provision was reduced in order that the Company might show quarter to quarter comparisons that, just by happenstance, were equal to one another," said Koury in a letter to the board. "It also makes a shareholder wonder if perhaps the loan loss provision was being 'managed' in order to boost earnings and hence impact management compensation."

In the end, it will be interesting to see what becomes of this situation. Any sale of the company could result in a windfall for shareholders while a board that continues to ignore shareholders could be detrimental. Overall, this stock is definitely one worth watching in case any actions take place that would increase the likelihood of a sale.

Related Companies
Hawthorn Bancshares Inc. (HWBK)
Eagle Bancorp Inc. (EGBN)
Heritage Oaks Bancorp (HEOP)

Chiquita Brands International (NYSE:CQB) announced a broad restructuring plan that involves the elimination of 160 managment positions and business model alterations designed to accelerate its previously announced strategy to improve profitability and efficiency. Shareholders are hoping that these moves can help pump life into a stock that has traded sideways for a year.

"While we have already taken various actions to strengthen our balance sheet, improve our risk profile and diversify the company, we continue to endure rising industry costs, punitive European banana import regulations, and a slower-than-expected recovery in the value-added salads category," Chief Executive Fernando Aguirre said in a statement.

The distributor and marketer of bananas and farm products said it expects annual cost savings to come through reductions in the company's operating and corporate overhead structure including elimination of management positions and business model changes by planned exit from non-profitable businesses. This is expected to yield sustainable savings of $60 to $80 million anually after a one-time charge of $25 million in the fourth quarter.

"With these changes, however, we will need to redefine our growth targets, since the negative impacts of rising industry costs, the EU tariff regime and the E. coli event have slowed down our strategic growth plan considerably, such that reaching our goals will take us longer than we originally estimated," Aguirre said.

In the end, this is great news for shareholders as any cost savings are a direct boost to the company's bottom line. However, cost cutting can only boost margins so much - unless the company's sales start improving, there may be more trouble on the horizon Combined, these factors make CQB a stock worth watching!

Related Companies
Smart Balance, Inc. (SMBL)
Fresh Del Monte Produce (FDP)

A large shareholder in Penn Treaty American (NYSE:PTA) demanded that the company immediately hire an investment banker in order to explore strategic alternatives including a possible sale of the company, according to a Schedule 13D filing with the SEC. Shareholders are hoping that the company will heed this advice and unlock value in the troubled company.

Monarch Activist Partners, which owns less than a five percent stake in the company, believes that the company's shares are worth upwards of $10 per share and the only way for investors to realize this value is through a sale of the company. In conversations with other shareholders and professionals, they believe that the company is current in its statutory filings, a sale of the company would not be dependent on GAAP financials.

"We believe PTA's Directors are in breach of their fiduciary responsibility by letting the financial reporting issues persist indefinitely without pursuing strategic alternatives," said Monarch's James Chadwick. "If PTA does not hire an investment banking firm to pursue alternatives and add shareholder representatives to the board immediately we intend to take action to unseat the board in the next shareholders' meeting."

All in all, this is great news for shareholders as it means that PTA shares may finally come to value. The activist hedge fund is likely to see support from other institutional investors too - making their campaign for changes likely to result in something. Combined, these factors make PTA a stock worth watching!

Related Companies
KMG America Corporation (KMA)
Conseco Inc. (CNO)
FBL Financial Group (FFG)

A. Schulman Inc. (NDAQ:SHLM) may be finding itself in the crosshairs of activist investor James Mitarotonda or Barington after the hedge fund request copies of financial statements and other records from the paint and platics company in a Schedule 13D/A filing with the SEC. The move comes just a week after another activist called for the sale of the company's Akron unit.

According to the filing with the SEC: "On October 25, 2007, Barington and Barington Companies Offshore Fund, Ltd. delivered a letter to the Company demanding ... a listing of the Company’s stockholders and copies of certain books and records of the Company in order to enable [the hedge fund] to investigate and communicate with the Company’s stockholders regarding matters relating to their mutual interests as stockholders."

The purpose is reportedly to evaluate "the use of corporate assets, the levels and types of compensation, perquisites and benefits provided to directors and executive officers of the Company, the nature of any family, business or personal relationships between the Company’s executive officers and directors, and certain decisions by the Board or its committees regarding the foregoing matters or otherwise affecting Board oversight, the management of the Company or other interests of stockholders."

The move comes just a week after Ramius Capital disclosed a 7.6 percent stake and nominated four directors to the company's board while pressing for an auction of the company. According to that activist, "Ramius' nominees can prove valuable in helping the company fully explore strategic alternatives and to focus on improving profitability."

In the end, this is all great news for shareholders. Any efforts to unlock value over the short-term through a sale would likely be a windfall for shareholders and investors willing to take a risk in the company. Combined, these factors make SHLM a stock worth watching!

Related Companies
PolyOne Corporation (POL)
Wellman Inc. (WLM)
Ferro Corporation (FOE)

Google Inc. (NDAQ:GOOG) is rumored to be developing its own social network to compete directly against Facebook just days after losing its bid for a piece of the pie, according to TechCrunch. The new social networking platform will reportedly allow developers to build applications and focus on the U.S. marketplace as opposed to the foreign users attracted by its Orkut project.

The new project, code named Maka-Maka, is Google's attempt to build a social layer across all of its applications. The tech giant is reportedly planning to unveil this project in stages beginning in November. The new project is being built to combine all of Google's apps and services, which many people already use. Contacts are in Gmail, feeds are in Google Reader, IM buddies are in Gtalk, upcoming events are in Google Calendar, and even search history.

Google, however, has had problems converting its past projects into sustainable businesses. Its search business continues to be its largest by a long shot while adoption to Gmail, Gtalk and other new services has been somewhat slow. And let's not forget Google's existing foray into social networking through its Orkut network. This has been wildly successful outside of the states with over 24 million users but failed to penetrate the US market other than 500,000 users.

Social networking sites like Facebook have also experienced problems converting pageviews into profits. It turns out that these users tend to click ads far less than traditional web properties, making them substantially less valuable unless companies can figure out how to get money through more traditional methods.

In the end, this is good news for shareholders if Google can actually convert this into a profitable network for ads. Otherwise, this project could simply be another capital intensive spend for Google's shareholders who have already forked out countless dollars towards other projects. Regardless, GOOG is definitely going to be in the spotlight ahead of this project release.

Related Companies
Microsoft Corp. (MSFT)
Sun Microsystems (JAVA)
International Business Machines (IBM)

Yahoo Inc. (NDAQ:YHOO) shares were up over eight percent on Friday after shareholders got wind of Alibaba's substantial initial offering prices of which the search portal company already owns 40 percent. However, shares came crashing down today after the company said it plans on purchasing an additional 10 percent of the company post-IPO.

Yahoo's stake in Alibaba should be worth around $3.5 billion if the initial offering prices as expected at the top of its range. This stake would be close to 10 percent of Yahoo's market cap, which does not factor in any gains in share price giong forward. And given the fact that the average Chinese IPO gains over a hundred percent in the first day - those numbers could be substantial.

So, why are Yahoo shares down today? Well, the company announced that it intends to purchase an additional $100 million stake in Alibaba instead of sell its shares at the inflated IPO prices. Many analysts expect that the Chinese market is overheated and a drawback is almost imminent. Given that Yahoo doesn't intend on selling, its stake in Alibaba could suffer in the future when the Chinese market finally retraces back to reasonable levels.

However, in the long-run, this partnership could be great news for the portal giant. Alibaba's strength in the Chinese import/export business is substantial and the portal is one of the largest online trading platforms in existence for B2B commerce. A majority stake in the company at these prices would allow Yahoo to take advantage of growing export opportunities in China and import opportunities in the US. Combined, these factors make YHOO a stock worth watching!

Related Companies
Google Inc. (GOOG)
Microsoft Corp. (MSFT)
Time Warner (TWX)

Oracle Corporation's (NDAQ:ORCL) bid for BEA Systems Inc. (NDAQ:BEAS) expired on Sunday after the two companies couldn't come to an agreement on a fair buyout price. BEA Systems said it believed its shares were worth $21 each while Oracle called that multiple unreasonable. Many shareholders, like Carl Icahn, believe that shareholders should be the ones deciding - not the company.

After letting the offer expire on Sunday, Oracle said in a statement that, "Over the last 20 days the BEA board has repeatedly rejected our offer and refused to meet with us, even though we offered to meet without any preconditions. We asked the BEA board to allow their shareholders to vote on our $17 per share proposal. They chose not to. If the BEA shareholders are unhappy with the behavior of the BEA board it is up to those shareholders, not Oracle, to take the appropriate action."

Icahn did just this via a letter submitted to BEA Systems' board of directors. The billionaire activist noted in the letter that BEA's public declaration of a $21 per share "take it or leave it" price was a management entrenchment tactic, not a negotiating tactic. According to Icahn, "If a topping bid arises, then all the better. But if no topping bid arises it should be up to the BEA shareholders to decide whether to take the Oracle bid or remain as an independent company." 

Subsequently, Carl Icahn demanded that BEA should allow its shareholders to decide the fate of the company by conducting an auction sale process and allowing shareholders to accept or reject the proposal made by the highest bidder. To that end, the activist commenced a lawsuit demanding that the company hold an annual meeting before any "scorched earth" transactions that would allow shareholders to vote.

The board responded to this letter today by saying that it will not sell the business at $17 per share but would be perfectly willing at $21. According to the board, "It is important that there be no misunderstanding of the Board's position. We are opposed to selling the company at $17 per share. We are not opposed to selling the company."

In the end, it will be interesting to see what becomes of this fight. Oracle clearly has interest in the company at $17 per share while many BEA shareholders are willing to be sellers - including Carl Icahn. Whether or not a sale actually goes through remains to be seen, but this is definitely a stock worth watching!

Related Companies
Oracle Corporation (ORCL)
Sun Microsystems (JAVA)
Tibco Software (TIBX)

CNET Networks (NDAQ:CNET) finally began to heed the advice of former president Barry Briggs by undergoing a sort of restructuring that some are speculating could be a precursor to a sale of the company. Investors are hoping that old media companies may take advantage of this opportunity to add a strong online presence to their existing portfolio.

CNET picked up Stephen Colvin from Maxim as executive vice president of the company's entertainment and lifestyle brands. Then the interactive media company announced that it sold its photo-sharing service, Webshots, to American Greetings for $45 million, a price that is $25 million less than what it paid in 2004. The company appears to be making a move towards adding valuable content onto its premium domain portfolio.

"Steven is a dynamic, experienced, and respected media executive who has an impressive track-record of bulding highly successful lifestyle media brands in the U.S. and international markets," said chief executive Neil Ashe. "We're extremely pleased to have him join our executive management team."

In the end, CNET is making a genuine attempt to restructure itself and in the process may become a great target for an old media company. Combined, these factors make CNET a stock worth watching!

Related Companies
Yahoo Inc. (YHOO)
Google Inc. (GOOG)
Time Warner Inc. (TWX)

Merrill Lynch (NYSE:MER) may be headed for some turbulent waters after its recent derivatives fiasco that sent earnings plummeting. The investment firm is reportedly ousting CEO Stan O'Neal in a matter of days. Further, there is also speculation that the company is considering a merger with Wachovia. The news sent shares up today after today's steep loss.

The shares rallied on the news despite the fact that even more writedowns are expected during the next quarter. Merrill Lynch reportedly owns $20.9 billion in collateralized debt obligations and subprime mortgages - two markets that are continuing to deteriorate. The $8.4 billion writedown may have been a hit, but some analysts are expecting an additional $4.5 billion in the near future.

Merrill Lynch also has many investors confused after it refused to disclose what happened to $11 billion in CDO exposure - a position that was open in the second quarter but suddenly disappeared, neither written down nor on the firm's books. Events like this lead many to wonder how well the firm really is able to value these securities in the first place.

In the end, the ousting of this chief executive may result in a more conservative pick during the next round. The board will also likely step up their oversight into risk management policies and procedures. Moreover, a potential merger with Wachovia or investment by a large investor like Warren Buffet would certainly prove to be a windfall. Combined, these things make MER a stock worth watching!

Related Companies
Morgan Stanley (MS)
Lazard Ltd. (LAZ)
BlackRock Inc. (BLK)

Charter Communication (NDAQ:CHTR) shares dropped around 20 percent yesterday before rebounding slightly today. Things are looking bad for the $800 million company with an astounding $19 billion in debt. The cable company's operating income of $200 million is hardly enough to service its debt while it struggles to compete with others in the industry.

Shares in the company fell around 20 percent after competitor Comcast Corporation (NDAQ:CMCSA) announced earnings that showed a slowdown in the growth of digital cable subscribers. Many are speculating that this could be the end of the "triple play" boom as countless other telecom companies are entering the fray.

This is a big problem for Charter, who is quickly running out of time to ramp up its offerings to match the triple-play offerings seen at other companies. These triple offerings include phone, cable and internet services over newer and faster fiber optic networks. The company also has yey to embrace the HDTV wave to the same extent as others in the industry.

Unfortunately, Charter does not have enough money to move into the triple play market and continue to service is debt. This is bad news for shareholders who are likely to see their money erode in value unless the company takes action soon to unlock value and return it to shareholders. Combined, these factors make CHTR a stock worth watching!

Related Companies
EchoStar Communications (DISH)
DIRECTV Group Inc. (DTV)
Comcast Corporation (CMCSA)

Countrywide Financial Corporation (NYSE:CFC) shares spiked over fifteen percent today after troubled realestate firm posted better than expected earnings. The company reported a net loss of $1.2 billion, or $2.85 per diluted share, compared to net income of $1.03 per diluted share in the third quarter of 2006.

"Countrywide's results for the third quarter of 2007 reflect the impact of unprecedented disruptions in the U.S. mortgage market and the global capital markets, as well as continued weakening in the housing market," said Angelo R. Mozilo, Chairman and Chief Executive Officer. "However, during the period we also laid the foundation for a return to profitability in the fourth quarter. Countrywide has responded decisively and taken the steps we believe are necessary to address the current challenging market environment."

Countrywide's guidance was the most carefully watched area of its earnings. The company expects weakness in the housing market to continue in the near-term and absent declining interest rates, lower mortgage market origination volumes are anticipated through 2008. However, the company said it expects to be profitable in the fourth quarter of 2007 and in 2008.

"We view the third quarter of 2007 as an earnings trough, and anticipate that the Company will be profitable in the fourth quarter and in 2008," said David Sambol, President and Chief Operating Officer. "Over the longer term, we believe that prospects for the U.S. housing and mortgage markets, as well as for Countrywide, remain very attractive."

In the end, this is great news for Countrywide shareholders. The company's problems aren't nearly as bad as many people once believed, as the real estate firm looks to return to profitability before the year is over. The company also noted that it wss taking advantage of the industry consolidation to bolster its future prospects even further. Combined, these factors make CFC a stock worth watching!

Related Companies
Principal Financial Group (PFG)
Torchmark Corporation (TMK)
PHH Corporation (PHH)

Fidelity National Information Services (NYSE:FIS) announced today that it would spin off its lender processing division into a new publicly traded company. The decision comes just weeks after the company bolstered its transaction services business with the $1.8 billion acquisition of eFunds.

"We believe the proposed separation will provide more company flexibility and dedicated management focus with respect to product development, capital investment and strategic initiatives, which should ultimately drive higher value to our customers and shareholders," Foley said.

The split will let Fidelity National focus on transaction processing services for banks and thrifts, which sell processing, electronic payment and credit card processing services. Meanwhile, the new spin-off will handle the mortgage end of the business which sells data processing and other technology to mortgage lenders.

Fidelity expects the spin-off to be completed by the middle of 2008, pending approval by the Securities and Exchange Commission and a ruling from the IRS related to the tax-free nature of the transaction. Shares rose over three percent today on the news before falling marginally. Combined, these factors make FIS a stock worth watching!

Related Companies
Global Payments Inc. (GPN)
Total System Services (TSS)
Cash Systems Inc. (CKNN)

WellCare Health Plans (NYSE:WCG) shares plunged after the FBI showed up with search warrants for documents and files at the company's headquarters. The company offered no further details, but are cooperating with the investigation and keeping core services running. Shares were trading at $115 before being halted and are now set to trade around $40.

The investigation is likely related to an abuse of government subsidies for healthcare since any accounting fraud is usually handled by the SEC and IRS. Similar FBI raids took place in the online education industry not long ago, when the government alleged that they were misappropriating subsidized government loans. The case against those companies was eventually dropped after the allegations turned out to be false.

Currently, shares in the company appear to be priced for the worse case scenario. The stock is trading at around $41 per share, which is just a few dollars above the company's $39 per share in cash. Assuming that the company will not be forced to pay any huge fees, a profitable company trading at cash value is definitely something you don't see every day.

In the end, investors do not yet have enough information about the situation to pass judgment. If the investigation goes the way of online education companies not long ago, then the shares will likely return to their previous levels. Meanwhile, even if the investigation finds some issue, a company trading at cash value is certainly a great deal assuming there are no huge fees levied. Combined, these factors make WCG a stock worth watching!

Related Companies
Humana Inc. (HUM)
Centene Corporation (CNC)
UnitedHealth Group Inc. (UNH)

Nintendo (OTC:NTDOY) continues to woo investors after announcing yet another record quarter. The video game company reported net profits of $1.16 billion on sales that more than doubled and operating profit that rose 181 percent. Shareholders are hoping that the company can continue this streak of impressive growth and deliver value to investors.

Nintendo shares have nearly doubled this year with the success of its innovative Wii gaming console and continued strength in its handheld gaming businesses. Since the Wii's launch in November, the company has sold 13.17 million units and now expects to sell 17.5 million during this fiscal year. Meanwhile, the company also raised its sales forecast on handheld units by 61 percent.

The Wii continues to outsell the Sony Playstation and it wasn't until only recently that Microsoft's Xbox was able to beat out the console. The Wii relies on price and a unique controller in order to drive gamers despite a lack of big-name software titles. This is the opposite of Microsoft and Sony who rely on huge titles like Halo and Final Fantasy to drive sales.

In the end, Nintendo continues to impress shareholders and investors with astounding numbers. The only big problem in the near-term is a strengthening Yen that may end up affecting the price of its units. It's shares have been on a steady increase since 2006 - up over 350 percent. Clearly, this makes NTDOY a stock worth watching!

Related Companies
Atari Inc. (ATAR)
Sony Corporation (SNE)
Microsoft Corp. (MSFT)

Oracle Corporation (NDAQ:ORCL) will have to increase  its offer for BEA Systems (NDAQ:BEAS) by more than 23 percent if it wants to continue negotiations to buy the company. BEA rejected Oracles prior bid of $17 per share made two weeks ago that was set to expire this Sunday. The company, along with its shareholders, are still looking for a sale but at a better price.

BEA believed that Oracle's previous bid significantly undervalues BEA and therefore is not in the best interest of BEA shareholders. The new $21 per share valuation was derived with help from Goldman Sachs and based on analyst estimates of synergies in prior acquisitions by Oracle. The investment banking firm believes that BEA could achieve earnings accretion in a BEA acquisition at levels well in excess of $21 per share.

A valuation of $21 per share would set the company's market cap at $8.15 billion. The company believes it can justify this valuation because it has an exceptionally strong balance sheet with over $1 billion in cash and no debt. Moreover, the business support software industry is booming and Oracle is finding itself under pressure to purchase after SAP acquired Business Objects earlier this month.

In the end, with investors like Carl Icahn pushing for a sale of BEA, it is likely that the company will continue to find ways to unlock value. Whether or not Oracle will negotiate at $21 per share remains to be seen, but this is definitely a stock that is worth watching!

Related Companies
Sun Microsystems (JAVA)
Tibco Sofware (TIBX)
Microsoft Corporation (MSFT)

Microsoft Corporation (NDAQ:MSFT) reportedly beat out Google (NDAQ:GOOG) in securing a minority stake in social networking giant Facebook. The software maker agreed to invest $240 million for a minority stake that values the site at $15 billion. The two companies also expanded their existing advertising agreement.

The agreement comes after substantial lobbying by both Microsoft and Google for a prized stake in the very closely held Facebook. The company will use Microsoft's existing advertising platforms in order to handle deals in new markets as well as the U.S. market. The software maker recently scaled up its technology investment and owns several new technologies aimed at brokering advertising over the web.

There is some concern that the valuation of Facebook is far to great to justify; however, it is important to remember that Microsoft is only buying a stake - not the whole company. Microsoft may be willing to overpay for a variety of reasons - chiefly, the commercial implications of a relationship with the social networking giant. Others believe that Facebook may go the way of Friendster who went bust due to difficulties monetizing its audience.

In the end, this is good news for Microsoft shareholders as it is a deal with one of the fastest growing and largest social networks in the world. This makes MSFT a stock worth watching!

Related Companies
Yahoo Inc. (YHOO)
Google Inc. (GOOG)
Apple Inc. (AAPL)

Merrill Lynch (NYSE:MER) shocked investors today after it announced a steep loss in the third quarter resulting from a $7.9 billion writedown on its fixed-income trading business. The investment company's first quarterly net loss since 2001 totalled $2.24 billion and sparked concerns about the company's risk management policies.

The losses stemmed from collateralized debt obligations (CDOs), subprime mortgages and management's misvaluation of the assets. The big surprise was the firm's $32 billion exposure to CDOs at the end of the second quarter - am amount that is much higher than expected. The firm also wrote down losses from its corporate restructuring business, although they were not nearly as severe.

Standard & Poor's cut Merrill's credit rating on notch to A+ calling the net loss "startling" and the scale of the writedowns "staggering". The company also experienced downgrades from Moody's Investors Service and Fitch. Combined, these cuts may increase the firms cost of capital and ipact its earnings.

Meanwhile, Merrill insists that it is financially secure and comfortable with its liquidity but the bank warned that conditions could become even more secure in the future due to liquidity. It is worth noting, however, that Merrill was the only one of the five biggest investment banks to swing to a quarterly loss - all the others were able to better weather the storm.

These losses have led to speculation that the bank could even become a buyout target for someone like Warren Buffet - who was rumored to have an interest in Bear Stearns not long ago. The firm's stock is certainly cheap at these levels while the brand and reputation is still relatively in tact. Combined, these factors make MER a stock worth watching!

Related Companies
Morgan Stanley (MS)
Lazard Ltd (LAZ)
BlackRock Inc. (BLK)

Transmeta Corporation (NDAQ:TMTA) shares are up over 200 percent today on news that the company finally struck a deal with Intel (NDAQ:INTC) to settle all claims between them and to license its patent portfolio for use in current and future Intel products. The move follows several years of patent disputes between the two companies related to processor design.

"We are very pleased to have reached this agreement with Intel," said Les Crudele, president and CEO of Transmeta. "We believe that this arrangement will create value for Transmeta stockholders both by realizing immediate financial value for our intellectual property rights and by supporting our technology development and licensing business going forward."

The agreement grants Intel a perpetual non-exclusive license to all Transmeta patents and applications now and during the next ten years. Transmeta will also transfer technology and grant Intel a non-exclusive license to its LongRun and LongRun2 technologies along with any future improvements. However, Intel will not be able to sue Transmeta for developing and licensing these technologies to third parties.

So, why are shares up so much today? Well, the new agreement calls for Intel to make an initial $150 million payment to Transmeta as well as to pay Transmeta an annual license fee of $20 million for each of the next five years. Given the fact that the company's current market cap (even after today's jump) is $140 million, this is great news for shareholders and investors. The move also removes any concerns about selling its microprocessors and technologies in the future.

In the end, Transmeta is potentially still undervalued given the magnitude of this deal that promises to result in a payment greater than its existing market cap plus ongoing royalties for ten years. It also removes a legal cloud that has been impacting the company's shares for some time now. Combined, these factors make TMTA a stock worth watching!

Related Companies
Advanced Micro Devices (AMD)
Texas Instruments Inc. (TXN)
Broadcom Corporation (BRCM)

Children's Place Retail Stores Inc. (NDAQ:PLCE) announced that they have hired Lehman to explore strategic alternatives, according to a press release put out by the company. The move comes after the company lost more than half of its value amid accounting problems and falling same-store sales. Shareholders are hoping that this review will result in a transaction that will jump the shares.

"The Board of Directors and management team are focused on strengthening the organization and positioning the Company to take advantage of long-term growth opportunities through its Children's Place and Disney Store brands," said chief executive Chuck Crovitz in a statement. "We believe it is in the best interest of the company, our shareholders, and employees to initiate a comprehensive review of strategic alternatives."

Children's Place disclosed last August that its quarterly losses nearly doubled and that its full year profits would fall far below analyst estimates, which led to shares plunging more than 50 percent. Now the company has no long-term debt and is expected to end the year with at least $160 million in cash with a market cap of around $682 million.

In the end, it is likely that the company will at least institute a share buyback or special dividend to rid itself of this spare cash while also perhaps taking on some debt or selling some stores. Many shareholders, however, are hoping that the company will take another route and sell itself entirely, which could easily result in a substantial windfall for shareholders and investors. Either way, PLCE is definitely a stock worth watching!

Related Companies
Wal-Mart Stores Inc. (WMT)
The Gap Inc. (GPS)
Carter's Inc. (CRI)

The Boeing Company (NYSE:BA) announced third quarter earnings of $1.44 which came in 20 cents better than estimates, according to an 8-K filing with the SEC. Shares moved down, however, on news that the aerospace company's 787 delivery schedule was being pushed back yet again due to parts shortages and production problems.

The aerospace company also revised its 2007 guidance up from $4.95 to $5.15. The improvement came from core business improvements and lower corporate costs. These improvements are also expected to positively impact future quarters and offset the change in delivery schedule. 

"Our focus on growth and productivity is driving strong financial performance across our company," said Boeing Chairman, President and CEO Jim McNerney. "With our record backlog and healthy, growing markets, the tasks at hand are to execute our programs, continue expanding our business base, and become more efficient every day."

Meanwhile, the Airbus vs. Boeing rivalry recently extended into airforce contracts. A key $40 billion contract for a tanker aircraft is up in the air amid a WTO dispute about aerospace subsidies. Airbus products are increasingly in demand by the U.S. government as alternatives to an increasingly limited pool of U.S. aircraft designs.

Overall, Boeings earnings cast additional doubt on the company's ability to carry forward with the 787 delivery schedule without further delays. However, the company has reduced its costs which led to an earnings surprise this quarter and should keep the net about even in the next. Combined, these factors make BA a stock worth watching!

Related Companies
Lockheed Martin Corporation (LMT)
Raytheon Company (RTN)
United Industrial Corp. (UIC)

Amazon.com, Inc. (NDAQ:AMZN) is continuing to party like it's 1999 with shares nearly tripling off of their 52-week lows ahead of their earnings report today. Shares are already up in anticipation of strong earnings after Google, Apple and RIM all reported blowout quarters.

Amazon's two previous quarters showcased blockbuster earnings growth, which has led to high expectations for this quarter leading into the holiday shopping season. Sales in the third quarter benefited from the blockbuster release of the last Harry Potter, which drew many readers to the store.

The majority of today's move, however, appears to be shorts covering before the earnings announcement. The online retailer showed 36.8 million shares sold short at the end of September and this could clearly be crippling if Amazon's earnings turn out to be along the lines of Apple or Google.

In the end, strong revenue growth coupled with improving margins as a result of lower costs and higher third-party mixes have resulted in a strong stock during  the past few months. Whether or not this success is already priced in remains to be seen, but this is definitely a stock worth following!

Related Companies
eBay Inc. (EBAY)
Barnes & Noble Inc. (BKS)
Overstock.com Inc. (OSTK)

Netflix Inc. (NDAQ:NFLX) shares rose more than eight percent today after the company's earnings won over shareholders on Wall Street. The surprisingly strong results eased worries that the company's profits were suffering from a lengthy battle with competitor Blockbuster and as a result of a shrewd price cutting strategy that revived subscriber growth.

Revenue for the third quarter rose 15% from $256 million to $294 million while net income rose to $15.7 million from $12.8 million a year earlier. These numbers were validated by free cash flow growth from $22.3 million to $36.1 million. And last but not least, the online rental company managed to increase its subscriber base a whopping 24% year over year and even raised its guidance for next year to include revenues of $1.2 billion on 7.5 million subcribers.

The online rental space has experienced a lot of competition recently that has caused some concern for Netflix investors. Three months ago, Netflix suffered its first quarterly decrease in subscribers while Blockbuster enlisted 600,000 new online customers. Netflix responded by lowering their price by $1 per month, which expanded its sign-ups without damanging profits as the company was able to spend less on advertising.

Analysts also increased their price targets on the company. Lehman Brothers' Douglas Anmuth increased his target to $24 per share while Banc of America's Brian Pitz kept his target steady at $22 per share. Some analysts are concerned that Netflix's upcoming R&D costs along with signs that the company's growth is sustainable and not just the beginning of another damaging price war.

In the end, this is great news for shareholders but whether or not Netflix can build a sustainable strategy around its price cuts remains to be seen. Regardless, this is definitely a stock to watch over the next few quarters!

Related Companies
Blockbuster Inc. (BBI)
Movie Gallery Inc. (MOVI)
Time Warner Inc. (TWX)

Delphi Corporation (OTC:DPHIQ) announced that it's emergence from bankruptcy would be postponed until 2008, according to an 8-K filing with the SEC. The bankrupt auto parts maker said it wants to push back the continued hearing on its disclosure statement two weeks so that it can incorporate potential plan changes.

"Delphi is continuing to work toward emergence as soon as possible and anticipates that the schedule will facilitate emergence during the first quarter of 2008," the company said in the SEC filing. The delay is reportedly due to longer-than-expected negotiations with former parent General Motors as well as several of its key investors including Appaloosa Management.

Delphi filed its reorganization plan on September 6th after much negotiation following its October 2005 bankruptcy. The plan calls for the funding consortium to purchase $800 million in convertible preferred shares and approximately $175 million in common stock of the reorganized company. The investors also are committed to purchasing any unsubscribed common shares after a $1.575 billion rights offering that will be made availale to shareholders.

Delphi's common stock shareholders will be able to get a pro-rata share of 1.48 million shares of new common stock; transferrable rights to buy 45.6 million of the 147.62 million total shares for $1.75 billion; five year warrants to purchase an additional 5% of common shares; and nontransferrable rights to buy about $572 million of shares at $45 per share.

In the end, many are looking forward to seeing Delphi emerge from bankruptcy as it could mean great opportunities to profit. The interesting provisions in this bankruptcy plan also make it very interesting for institutional investors who want a piece of the action. Combined, these factors make Delphi a stock worth watching!

Related Companies
Visteon Corporation (VC)
Autoliv Inc. (ALV)
ArvinMeritor Inc. (ARM)

A majority holder in Ameristar Casinos Inc. (NDAQ:ASCA) announced yesterday that they would undertake and continue to evaluate strategic alternatives that may become available with respect to their holding in the company, according to a Schedule 13D/A filing with the SEC. Shareholders are hoping that these alternatives will unlock value in the company and jump the somewhat stagnant stock price.

The Estate of Craig H. Neilsen, which now ows a 55.2 percent stake in the company, said that since the passing of Craig Neilson they have begun evaluating strategic alternatives for their holdings. These could including a merger or business combination, a transfer or disposition of a material amount of assets, or an open market transaction in the company's common stock.

Currently, nothing is set in stone as the group continues to evaluate its strategic alternatives. According to the filing, "There is no assurance whether or when any transaction may result from the Co-Representatives' ongoing review and evaluation." Fortunately, however, it sounds like the shareholder will not be simply selling its shares en masse on the open market.

In the end, there are a lot of possibilities here with the shareholder that now holds a majority stake in the company. Selling all of its shares on the open market would not be a prudent move, so it is likely that the group will attempt a private placement or a strategic transaction that would unlock value in the company's shares (like a merger). Regardless, this is definitely a stock worth watching while this situation unfolds!

Related Companies
Nevada Gold & Casinos (UWN)
Harrah's Entertainment Inc. (HET)
Pinnacle Entertainment Inc. (PNK)

A large Magellan Health Services (NDAQ:MGLN) shareholder demanded that the heathcare company authorize a special one-time dividend of $478 million or $12 per share, according to a press release put out by the activist hedge fund. Shareholders are hoping that the activist hedge fund can unlock value and jump the company's somewhat stagnant shares.

Shamrock Activist Value Fund, which owns a 4.6 percent stake in the company, said in a letter to the board that they believe a return of excess capital at this time would be well received by at least half of the shareholders they surveyed. All surveyed believe that the current balance sheet is sub-optimal and is suppressing shareholder value although they differ on preferred methods of returning capital (namely, special dividends vs. share repurchase).

"We believe that the Board has the opportunity to dramatically improve shareholder value by taking immediate action to optimize the Company's balance sheet," said fund manager Arik Ahitou. "The Company's current forecast projects $12 million of debt and approximately $315 million of unrestricted cash at year end."

Magellan does not agree, saying, "We believe it is prudent to maintain our current capital position. In addition, our cash needs for the business are fairly significant in '07. Given the current incremental usage of cash for a new business and our active acquisition review, we have decided at this point in time not to implement any capital deployment strategies this quarter but we will continue to review and assess this possibility on an ongoing basis as we have stated to you previously."

In the end, the company has access to $1.25 to $1.5 billion in capital from cash on hand and available debt capacity which gives it the financial flexibility to leverage its balance sheet and return some of this capital to shareholders. Clearly, the company will then have enough left over from its credit lines to pursue acquisitions and keep costs under wraps. Whether or not the activist hedge fund pushes this further remains to be seen, but this is definitely a stock worth watching!

Related Companies
Psychiatric Solutions Inc. (PSYS)
Comprehensive Care Corporation (CHCR)
OptimumCare Corporation (OPMC)

Merck & Co. (NYSE:MRK) shares jumped today after the company announced third quarter proits that soared 62% on improved sales of asthma and diabetes drugs and a lower reserve for product liability litigation. The move marks a continued turnaround for the once-struggling drug company.

"The momentum Merck began to build last year continues, as proven by the strong performance this last quarter," said chief executive Richard Clark during a conference call Monday. "In an increasingly difficult health-care environment, our company has been resilient."

Merck's revenues jumped to $6.07 billion from $5.41 billion a year ago while the company's net earnings came in at 75 cents per share compared to 51 cents a share a year earlier. The company's strongest drug is its asthma treating drug Singulair, which is expected to earn at least $4 billion in 2007.

The big surprise was Gardasil - a vaccine to prevent cervical cancer that was introduced last year. The drug experienced sales of $418 million compared with $70 million a year earlier with year-to-date sales exceeding $1.1 billion. This sets the drug on track to be a blockbuster after only nine months - a great achievement in drug development.

In the end, this is all great news for Merck shareholders. The future success of the company will depend on their ability to launch successful drugs in a harder market while losing some of their key drugs that are expiring. Combined, these factors make MRK a stock worth watching!

Related Companies
Pfizer Inc. (PFE)
Alcon Inc. (ACL)
Celgene Corporation (CELG)

Citrix Systems (NDAQ:CTXS) announced this morning that it has closed its acquisition of XenSource for $500 million which was first announced in August. The move makes Citrix the first company to offer end-to-end virtualization, including application, desktop and server virtualization solutions. The news sent Citrix shares up more than three percent so far today.

"Citrix is now positioned to be a key provider of server, desktop and application virtualization technologies, a market which IDC expects to be worth in excess of $3.4 billion by 2011," said John Humphreys, program vice president, IDC. "Citrix's new end-to-end virtualization offerings augments the company's application delivery strategy and represents the foundational components of the future application delivery environment."

The new virtualization portfolio includes server virtualization with Citrix XenServer, application virtualization with Citrix Presentation Server and desktop virtualization with Citrix XenDesktop. Combined, these solutions enable businesses to essentially run their entire computing platform from one remote server and have computers "dial-in" to the server every time they require access to key programs and applications.

Many investors are bullish on this news as the stock may start to move the same way as VMware, which has exploded in value recently. Citrix shares are trading near their 52-week highs of $42.90 and well off their lows around $26.10. The company trades at a 36x earnings multiple, however, which is substantially lower than VMware's 270x valuation.

In the end, Citrix is definitely a stock to keep an eye on as it will likely become a key player in the extremely hot virtualization market. Some traders are even considering a pairs trade between the overvalued VMware and the undervalued Citrix given that they are now in the same market. Combined, these factors make CTXS a stock worth watching!

Related Companies
VMware INc. (VMW)
Unica Corporation (UNCA)
Raining Data Corp (RDTA)

A large Building Materials Holding Corporation (NYSE:BLG) shareholder is stepping up its pressure on the company to rid itself of chief executive Robert Mellor and promote Sanley Wilson, according to a Schedule 13D/A filing with the SEC. Many shareholders are hoping that the activist can take action to clean up corporate governance practices and unlock value in the struggling company.

Chapman Capital, which controls over 9 percent of the company, demanded the resignation of chief executive Robert Mellor and his replacement with Stanley Wilson. The activist hedge fund insists that the executive's total compensation over the last three years is excessive given today's market conditions. Meanwhile, an insignificant stake in the company only indicates a lack of conviction.

"BMHC’s owners obviously should hold Mr. Mellor neither commendable for yesterday’s homebuilding boom that enriched him, nor accountable for today’s bust that perversely continues to enrich him," said Chapman Capital in a statement. "BMHC’s holding company structure, with Mr. Mellor serving as the Company’s '$6 Million Man' in personal total compensation over the past three fiscal years, is out-of-date and untenable in today’s challenging homebuilding environment."

Problems compounded recently after Standard & Poor's placed BHCM's ratings on "Credit Watch with negative implications" as a result of the board's "corporate governance lapse". Interestingly, the S&P cited the current battle between Chapman Capital and the company in determining this lapse in corporate governance. Clearly, there is an issue that needs to be addressed very soon before shareholders suffer even more.

In the end, the problems facing BMHC is one that can no longer be ignored. The imbalance between the ownership and governance of the company has resulted in a stock price that has declined nearly 60 percent to 2004 levels. The extraordinarily low valuation, trading around tangible book value, should send the board a very clear message of Wall Street's distrust and diffidence in BMHC's management and board members.

Related Companies
The Home Depot (HD)
Lowe's Companies (LOW)
USG Corporation (USG)

Toyota Motors' (NYSE:TM) lead in the auto market may be in jeopardy after it announced it sold 2.34 million vehicles globally last quarter falling short of General Motors' (NYSE:GM) 2.38 million vehicle sales. The news comes after Toyota shares were already trading near their 52-week lows amid a car recall and a declining spot in the Consumer Reports reliability survey.

General Motors saw most of its growth in South America and China - two hot spots that promise to show a continued growth in auto consumption. The U.S. automaker also saw greatly reduced expenses that came as a result of the company's new UAW contract. And finally, small sedans are starting to sell better in the U.S. leading to higher sales than previous quarters.

In the end, Toyota has the higher hand if you look past the number of sales. GM's profitability falls far short of Toyota, which has mountains of cash to invest in R&D and new model development. In fact, a recent study showed that GM made $2,123 per vehicle less than Toyota in 2006. Meanwhile, Toyota's profit per vehicle increased $1,175 in 2005 to $1,977 in 2006.

Overall, Toyota is still the most profitable car company in the world but continues to face several hurdles. Recent recalls and declining ratings may force it to look into its quality assurances practices and make some changes. Meanwhile, competition from GM for customers is certainly heating up and promises to make for an uphill battle. Regardless, TM is definitely a stock to watch at these low levels!

Related Companies
General Motors (GM)
Ford Motors (F)
Honda Motors (HMC)

Bear Stearns (NYSE:BSC) and China's CITIC Securities agreed to swap $1 billion stakes in each other in a deal that opens doors for business partnerships in both the United States and the hot Chinese market. The news comes after Bear Stearns shares have been punished from a slumping mortgage market, trading nearly 30 percent off of their 2007 highs.

There has been speculation for several weeks that a large investor was going to step up and take a stake in the troubled company. Warren Buffet dispelled rumors that he was considering taking a large stake in the company last week, but many speculated that another large equity investor may get involved with the company. Many investors are disappointed because they were looking for a capital infusion, not simply a breakeven business partnership.

"We are confident that combining our operations in Asia with CITIC Securities will greatly benefit Bear Stearns' global client base and generate substantial new revenues and growth opportunities for the firm," Bear Stearns Chairman and Chief Executive James Cayne said in a statement.

The move does promise to give Bear Stearns a larger foothold in the hot Chinese market that continues to grow at a breakneck pace; however, there has been much talk recently of a bubble in the Chinese market. State-backed CITIC is the largest brokerage in China (and Asia in general) - so it is not likely to experience problems - but IPOs in China are likely to cool down. 

In the end, this is good news for Bear Stearns as it means a much-needed expansion outside of the United States and into a market that is growing extremely fast these days. Any joint ventures in Asia are likely to produce returns that should help shareholder regain confidence in a troubled BSC. Combined, these factors make BSC a stock worth watching!

Related Companies
Lazard Ltd. (LAZ)
Morgan Stanley (MS)
Goldman Sachs (GS)

Vonage Holdings (NYSE:VG) was hit by a third patent infringement lawsuit today after AT&T (NYSE:T) filed suit against the company, according to an 8-K filing with the SEC. The new lawsuit follows two others by Sprint (NYSE:S) and Verizon (NYSE:VZ). Many believe that this latest move may finally signal the end for the Internet phone service provider.

A&T is reportedly seeking injunctive relief, compensatory damages and treble damanges and attorney fees in unspecified amounts. The move follows an earlier attempt by the telecom giant to enter a license agreement. The patent in question is one in 1996 that broadly describes the idea of routing telephone calls over data networks like the Internet.

Vonage settled its two previous lawsuits for over $100 million plus royalties that are sure to cut into the company's gross margins. AT&T is likely to be no different with a lump sum payment and future royalties. Many analysts believe that this third lawsuit may be just too much to handle for the struggling company that has already faced a capital crisis in the past.

Vonage currently has $250 million left in the bank and is operating at a $33 million per quarter loss (at least in the second quarter). The lawsuit settlements are not only eating into its cash pile (lump sum payments) but also promise to cut substantially into the company's gross margins (royalty payments). This latest AT&T suit is likely to push these problems even further and put the company's future into jeopardy.

Vonage shares are currently trading just above a dollar after taking yet another hit today. It may be time for the company to explore the possibility of selling itself to a company interested in acquiring its customers and perhaps shareholders can leave with something. Otherwise, there is a possibility that the company could simply be forced to declare bankruptcy.

Related Companies
Google Inc. (GOOG)
AT&T Inc. (T)
Sprint-Nextel Corp (S)

Google Inc. (NDAQ:GOOG) shares rose to $650 today after the company reported strong earnings for yet another quarter, according to an 8-K filing with the SEC. Many analysts have now set price targets as high as $800 per share on the search giant. All of this commotion has many others wondering if it is sustainable...

Revenues at the search company rose 57 percent to $3 billion when costs of payments to traffic partners are subtracted. Meanwhile, the company announced that it had hired 2,100 new employees to bring their count up to almost 16,000 - most of its new hires being in Europe.

Many analysts remain bullish on the company despite the fact that there is likely to be at least a small recession during the next two quarters that should adversely affect earnings. The high end of the new ranges are $800 per share by Goldman Sachs and Credit Suisse while the low end is $690 by BMO Capital. It won't be along until some analysts start pegging the $1,000 point.

Many are banking on Google's new GPhone initiative as well as several other factors to help it weather the storm. However, it is important to note that online advertising still accounts for almost all of Google's revenues and may be very difficult to diversify away from easily. Another troubling trend is the fact that the company's expense growth is far exceeding revenue growth.

In the end, Google continues to be a strong company that is working to diversify its revenues away from just online advertising in order to give it a better chance at surviving a recession. It has done a great job of moving business internationally and is now making inroads to new products and services. Combined, these factors make GOOG a stock worth watching!

Related Companies
Yahoo Corp. (YHOO)
Microsoft Corp. (MSFT)
LookSmart Inc. (LOOK)

A large Plains Exploratin & Production (NYSE:PXP) shareholder expressed concerns over the company's lack of a strategic plan for its proposed merger with Pogo Producing Company (NYSE:PPP), according to a Schedule 13D filing with the SEC. Shareholders are hoping that this larger player can help the company formulate a plan to unlock shareholder value.

Sandell Asset Management, which owns a 5.1 percent stake in the Houston-based company, said in a letter to the board that it supports the transaction but would like to see a strategic plan put in place for the company post-closing. The hedge fund urged a number of actions, including asset sales, MLP creations and aggressive share repurchases.

"As you probably know based on our recent meetings and conference calls, while we are inclined to support the Pogo transaction, we are concerned by your inability to provide a concrete plan for the combined company post-closing," Thomas Sandell said in a letter to the board.

To remedy this, Sandell wants to see the hedge fund sell oil reserves and use the proceeds to fund share repurchases. Simultaneously, the hedge fund wants to see the company form a master limited partnership for all of its reserves in California and the Piceance basin. Combined, these efforts would unlock millions in value for shareholders.

"We are confident that undertaking [these actions] will result in dramatic value creation for all shareholders of up to $90 per share (+80%)," said Thomas Sandell. "We believe the market unnecessarily discounts PXP’s value by using unrealistically low commodity price assumptions and giving little credit for unproved and non-core assets."

In the end, this is all great news for shareholders. Shares of PXP have seen very modest appreciation given the price of oil and shareholders are ready for a change. The lack of planning surrounding the acquisition of PPP has caused the share price to plummet and create buying opportunities for enterprising investors. Combined, these factors make PXP a stock worth watching!

Related Companies
Cimarex Energy Co. (XEC)
Energy Partners (EPL)
EOG Resources Inc. (EOG)

Delta Air Lines (NYSE:DAL) caught many investors and analysts offguard today after chief executive Richard Anderson hinted that the company may be interested in pursuing some deals during an earnings conference call earlier this week. The news caused widespread speculation on possible targets.

Anderson commented that consolidation "could make sense for Delta if it's done thoughtfully from a position of strength". The executive also made it clear that Delta "wants to be in control" as an acquirer as opposed to an acquisition target itself. The comments caught many by surprise given rising energy prices and pressure within the industry to increase profitability.

Interestingly, Delta recently emerged from bankruptcy itself after resisting a hostile takeover bid from US Airways Group. Many had speculated that Delta would sell itself during the bankruptcy process to settle with debtors; however, the airliner surprised many by emerging as an independent company.

Airline mergers are a traditionally difficult thing to make happen, but many industry analysts believe that Northwest Airlines may be the most likely target. Others suggest that the company may look into a more niche airline like JetBlue or Alaska Air Group. Smaller niche airlines may enhance certain routes, but larger acquisitions would offer more flexibility when it comes to supplier negotiations and leveraging economies of scale.

In the end, all of this speculation is just talk as of right now. However, any acquisitions in the airline industry would certainly make for an interesting strategy on behalf of Delta given its position. Combined, these factors make DAL a stock worth watching!

Related Companies
JetBlue Airways Corporation (JBLU)
AMR Corporation (AMR)
UAL Corporation (UAUA)

Steven Madden (NDAQ:SHOO) may find itself in hot water after the Clinton Group disclosed a 5.1 percent stake in the company and suggested several ways in which to unlock shareholder value in a Schedule 13D/A filing with the SEC. Shareholders are hoping that the company will embrace these measures and restore the stock price to its rightful levels.

The activist hedge fund believes that the market has misunderstood the prospects for the business and that has resulted in a stock that is trading at just 5.1x 2007 EBITDA. This valuation is both historically low for the company and well below peer valuations seeing between 10x and 13x 2007 EBITDA. Clearly, there is a disconnect here that shareholders want fixed.

"We believe that the Steven Madden brand has never been stronger, and we believe that the management team and board share this view," said Clinton Group VP Joseph De Perio. "That strength,and the Company's balance sheet, makes this an optimal time to seize an opportunity to enhance shareholder value."

What measure might this include to unlock value? Well, the Clinton Group recommended a Dutch Tender of $180 million to repurchase the company's shares. The hedge fund reasons that the company's current cap structure is inefficient given its free cash flow, ongoing strong earnings and limited capital expenditures. As a result, the company could use $72 million of free cash combined with a $110 million senior debt financing to fund a Dutch Tender.

The share repurchase would result in approximately 40% of the shares being taken off the market if the buyback is executed at a range above $21 per shares - of a 13.5% premium to the current market prices. The extraordinary accretion from this transaction produces implied stock prices worth more than current levels and a premium to the hedge fund's proposed tender price of greater than 20 percent!

These suggestions may be moot; however, as the company today announced that it was evaluating several potential takeover offers as well as strategic alternatives. In the end, this is all great news for shareholders as it could mean a significant jump in the valuation of their stock. Combined, these factors make SHOO a stock worth watching!

Related Companies
Skechers USA (SKX)
NIKE Inc. (NKE)
Bakers Footwear Group Inc. (BKRS)

Orient-Express Hotels (NYSE:OEH) is finding itself under heavy pressure from a major shareholder to sell the company, according to a Schedule 13D filing with the SEC. The hotel chain rejected the $60 per share offer but the investment group appears to have its heart set on the company.

Dubai Investments disclosed a 9.2 percent stake in Orient-Express along with a letter indicating that they have been aggressively acquiring shares in the hotel chain after another group - Indian Hotels Company - disclosed that it holds a large stake in the company and was interested in a deal.

Dubai Investments noted that if Indian Hotels attempted to pursue a deal they may counter with a higher offer to acquire Oriental-Express. This news pushed shares in the hotel chain past their 52-week highs yesterday, even amid news that HSBC had sold their 5 percent stake.

In the end, this is mixed news for Oriental-Express shareholders. Clearly, there are many parties that are interested in acquiring the company but management appears to be resistant having recently issuing a press release saying they were not interested in pursuing any deals. Combined, these factors make OEH a stock worth watching!

Related Companies
Sea Containers Ltd (SCRA)

Daniel Loeb's Third Point nearly halved its stake in PDL BioPharma (NDAQ:PDLI) according to a Schedule 13D/A filing with the SEC. The move comes after the biopharmaceutical company bended to the demands of the activist shareholder by announcing that it would actively seek a sale of the entire company.

"We are encouraged by PDL's October 1st press release announcing that the Board will actively seek the sale of the entire Company or all of its component pieces," said Daniel Loeb in a letter to the board. "We are also pleased with the progress apparently being made by the Merrill Lynch investment bankers in spear heading this process and advancing it expeditiously to a successful conclusion."

Third Point, which now holds a 5.1% stake in the company, said in its letter to the board of directors that it was encouraged positive developments related to the company's intentions to conduct a sales process but expressed concern that the board doesn't include a Third Point representative and is being led by Mr. Gage as an interim chief executive.

"Despite these positive developments, we are disappointed that the sale process is still being led by a Board that does not include a Third Point representative, and that Patrick Gage remains the Company's CEO, despite having demonstrated his unsuitability," said Daniel Loeb. "Accordingly, although we remain convinced that PDLI shares are undervalued, and that a sale will maximize shareholder value, in light of your continuing refusal to provide us with a voice in the Company's affairs through a Board seat, we have reduced our position."

In the end, a sale process is great news for all shareholder but the fact that Third Point nearly halved its position in the company could prove to be a sign that a sale is not a gaurantee at this point. As a result, shareholders should be very prudent at this point and perhaps hedge their positions with options as we sit on this buyout premium. Combined, these factors make PDLI a stock worth watching!

Related Companies
Genentech Inc. (DNA)
Medarex Inc. (MEDX)
Dyax Corp (DYAX)

E.W. Scripps Co. (NYSE:SSP) is the latest newspaper and media company to undergo a facelift to better face challenges and opportunities online. The company proposed a spin-off that would allow investors to choose from the growth potential of new media or the dependable cash flow of old media.

The tax-free deal would create a new public entity containing the company's cable operations - including Food Network and HDTV - along with its internet operations - including Shopzilla and uSwitch. Meanwhile, SSP will retain the company's newspapers, television stations, licensing and syndication operations.

"It's our intention to create two publicly traded companies, each with a sharpened strategic focus that would foster continued growth, solid operating performance and a clear vision on how best to build on the specific strengths of our national and local media franchises," said chief executive Kenneth Lowe in a statement.

The past 24 months have been very difficult for old media companies as online publishers continue to eat into margins and reduce subscription rates. Companies like the Wall Street Journal and New York Times are even feeling the crunch and an industry shift has become all but inevitable.

Consequently, this move to divest new media from old media comes at the perfect time for shareholders and represents perhaps the company's only logical next step. Combined, these factors make SSP a stock worth watching closely!

Related Companies
IAC/InterActiveCorp (IACI)
ValueVision Media Inc. (VVTV)
News Corporation (NWS)

E-Z-EM, Inc. (NDAQ:EZEM) board members and executives may find themselves in hot water soon after a large shareholder expressed dissatisfaction with current management's desire and ability to take steps to maximize shareholder value. Shareholders are hoping that these moves could help unlock value in shares that have remained somewhat stagnant recently.

Albert Investment Strategies, which owns 7.5 percent of the company, said in a Schedule 13D/A filing with the SEC that the company should (1) implement a quarterly dividend program, (2) conduct a share repurchase, (3) evaluate a sale or spin-off of the company's RSDL division and/or (4) evaluate a sale of the company. The activist hedge fund also pointed out several other key issues dealing with the company's management.
 
"AIA established its initial position in E-Z-EM because we felt the company's prospects were not being adequately valued by the markets," said the hedge fund manager Ira Albert. "We were attracted by your meaningful market share of barium  imaging  products, your new  product pipeline, the strong macro trends in the healthcare industry, and later by the energy of new members of your senior management team coupled with the opportunity for meaningful gross profit and operating margin improvements.

"It is our intention to continue to discuss our ideas with management and hope to expand our dialogue to include the Board as well. We may also speak to other shareholders and build a strong consensus of opinion in support of our value creating ideas."

In the end, this is great news for shareholders as it means that significant value could be unlocked over the long or short term. If the company pursues a sale, it could mean rapid share appreciation in the very short term. Combined, these factors make EZEM a stock worth watching!

Related Companies
General Electric Company (GE)
Baxter International (BAX)
Diomed Holdings Inc. (DIO)

Yahoo! Inc. (NDAQ:YHOO) shares are up sharply after the company announced a blowout quarter in its most recent 8-K filing with the SEC. The search giant surprised the market with a 12 percent jump in revenues on a 37 percent earnings surprise. The market loved the numbers as shares rose over eight percent in pre-market hours and continue to hold gains.

Many analysts saw the earnings numbers as a pleasant surprise but insist that Yahoo only delivered a solid quarter because expectations were so low. Analysts also question CEO Jerry Yang's strategy going forward because he hasn't proposed any new groundbreaking changes that would be a base for a robust turnaround. Instead, the chief executive simply reinforced his old adage to make Yahoo a premier destination website.

Yahoo has made several changes, however, aimed at improving its existing businesses. First, the company improved upon its email and search engine earlier this month. Secondly, the company acquired Right Media and BlueLithium in order to boost its advertising platform and expand its offerings. In the end, Yahoo's lack of technological ambition has kept it in the catch-up game with Google, who continues to dominate the market.

Overall, Jerry Yang's new strategy will likely help the company improve its existing offerings but it may take more to orchestrate a meaningful comeback and steal market share back from Google. Despite the company's recent acquisitions and strategic moves, investors are still waiting for improvements on the bottom line. However, YHOO is definitely a stock worth watching!

Related Companies
Google Inc. (GOOG)
Microsoft Corporation (MSFT)
LookSmart Ltd. (LOOK)

Movie Gallery Inc. (NDAQ:MOVI) shares plummeted today after the rental chain finally declared bankruptcy just two and a half years after winning a takeover battle for a major rival. The news comes as no big surprise to shareholders who saw warning signs back in late June.

Movie Gallery filed for Chapter 11 bankruptcy today in hopes that it can slash its debt by $400 million and reorganize itself into a new public entity. The chain still operates nearly 4,500 stores after it acquired Hollywood Video in April 2005 for $1.25 billion and the assumption of $350 million in debt.

Many analysts remain skeptical as to whether or not the company can emerge from bankruptcy and remain a viable competitor in the increasingly difficult rental space. Tight competition from satellite and cable providers along with online rental services like Netflix and Blockbuster's new service. However, Movie Gallery did unveil plans in March to enter the online business.

Movie Gallery also has a lot of restructuring ahead of itself before it can go through with the Chapter 11 process. The company said it would close nearly 520 rental stores two weeks after it said it would miss interest payments on second-lien debt and 9.625% senior notes.

"Although the company has taken numerous steps to reduce its debt and strengthen its balance sheet through closing unprofitable stores, headcount reductions and other means, these actions were not sufficient to offset the significant shift in our business and the cost of our substantial debt obligations," said chief executive Joe Malugen.

In the end, common stock shareholders will likely end up losing all of their investment as shares in the new company will be distributed to creditors. However, the new public entity may be a good investment opportunity if it is priced correctly. Usually, creditors will begin selling their stock immediately and create a discount. Combined, these factors make MOVI a stock worth watching!

Related Companies
Blockbuster Inc. (BBI)
Netflix Inc. (NFLX)
GameStop Corp. (GME)

Mace Security International (NDAQ:MACE) finally agreed to expand its board of directors today in order to avoid a proxy fight with a major shareholder, according to a Schedule 13D/A filing with the SEC. Shareholders are hoping that this move will help unlock value in a stock that has remained stagnant during the past few months.

Lawndale Capital Management, which owns 9.6% of the company, indicated in the past that it believes the problems with Mace's board of directors has contributed to the company's poor operating performance and the decline in its stock price. Mace did not respond until recently when it agreed to hold discussions with the hedge fund and expand its board in order to prevent a proxy fight.

According to a joint press release, "The corporate governance enhancements to be adopted are intended to increase the independent composition and functioning of Mace's Board. As a result of the plan, Mace will migrate to a six-person Board, consisting of five Independent directors, three who are not presently on Mace's Board plus two continuing Independent directors."

In the end, this is great news for shareholders. Greater board independence means that more shareholder proposals to unlock value will be considered while compensation and other board-determined things will be kept under control. Combined, these factors make MACE a stock worth watching!

Related Companies
Napco Security Systems (NSSC)
FFP Marketing Company (FFPM)
Axcess International (AXSI)

Billionaire investor Warren Buffet appears to have changed his sentiment on the railroad industry after cutting down his holdings in Union Pacific (NYSE:UNP) and Norfolk (NYSE:NSC). There is no mention of his Santa Fe Corporation (NYSE:BNI), however, which means he may be holding onto that one for now.

Buffet's Berkshire Hathaway (NYSE:BRK) sold 10.5 million shares of Union Pacific bringing his holdings down to 7.41 million shares. Meanwhile, he sold off around 2.6 million shares of Norfolk bringing his stake down to right around 3.75 million shares. These are significant reductions in his exposure to the sector.

Many are speculating that higher energy prices may hit railroads more dramatically than initially expected. The transportation sector is typically the first to be hit and railroads are particularly vulnerable these days considering the plethora of other problems that they are facing.

In the end, Warren Buffet typically knows what he is doing when investing. His moves are definitely worth watching via Berkshire's 13F filings with the SEC. In this case, it may be a time to reduce exposure to railroads and other transportation companies as energy prices continue to rise.

Sybase Inc. (NYSE:SY) is starting to feel the heat from shareholders demanding that the company evaluate strategic alternatives. Sandell Asset Management indicated in a Schedule 13D filing with the SEC that they want the software maker to consider a buyback, spin-off or sale of the company.

Thomas Sandell argued that Sybase could create $33 per share in value through a $500 million share repurchase over three years. Alternatively, the hedge fund manager suggested that Sandell cold spin-off its mobility segment and generate $31 to $33 per share in value. And finally, in an outright sale of the company, Sandall believes shares could go for as much as $41.39 in a leveraged buyout.

Sybase responded to the requests yesterday indicating that they would review recommendations from shareholders to boost its stock price in the context of the regular reviews it makes of its business. Given that Sandell owns a six percent stake in the company, it is likely that these proposals will receive at least some real consideration.

"Our Board of Directors regularly reviews the subjects in your letter, including use of cash, configuration of the business, and other strategic opportunities to drive shareholder value," said Sybase chief executive. "Sybase welcomes the views of its shareholders, and the Board will consider your letter in that regard."

In the end, shareholders are hoping that the company will take at least some of these proposals to heart and unlock value in shares that have not seen much movement. Whether or not this happens remains to be seen, but this is definitely a stock worth watching!

Related Companies
Pervasive Software Inc. (PVSW)
Microsoft Corporation (MSFT)
BMC Software Inc. (BMC)

AMR Corporation (NYSE:AMR) is carrying a lot of hidden value, according to many analysts. The American Airlines parent has a low price/earnings multiple, improving balance sheet, developed route network and many valuable non-airline assets that could eventually be spun-off.

AMR is trading well off of its 52-week highs around $41/share due to higher fuel costs and an all-around tough year for airlines. These non-company specific factors have led to a stock that is trading at just 11x its 2007 earnings and 7x its projected 2008 earnings. After dropping over 50% since January, many are starting to look at this stock as a bargain stock.

FL Group, a $6 billion Icelandic hedge fund, is one of these investors and requested last month that the company consider spinning off some of its assets to unlock value for shareholders. Specifically, the hedge fund urged the company to spin off its AAdvantage frequent-flier program.
 
The move would follow similar actions by Air Canada parent ACE along with others considering the option like Australia's Quantas and United parent UAL. FL Group believes that segment is worth close to $6 billion - nearly as much as the company's $7.5 billion market capitalization. AMR also has other assets that could be spun off including its American Eagle regional airline and its investment arm American Beacon.

"It's a no-brainer," said Hannes Smarason, chief executive of FL. "It's a tough environment for the airlines now, and it's incumbent on the management and the board to find avenues where value can be created."

In the end, the company announced that it was considering such moves but has not made a decision yet. In the meantime, this stock is definitely one worth watching closely as this situation unfolds!

Related Companies
Delta Air Lines Inc. (DAL)
UAL Corporation (UAUA)
Southwest Airlines Co. (LUV)

Biogen Idec (NDAQ:BIIB) shares jumped almost 20 percent this morning after the company announced that several firms had expressed interest after it put itself on the auction block on Friday. The news comes after billionaire activist Carl Icahn had pressured the company to unlock value for shareholders.

Many analysts believe that Biogen may have a difficult time selling itself given that it is trading at around 8x earnings in a difficult credit environment. Moreover, the biopharmaceutical industry is a risky one where the FDA can halt trials and block sales on a moments notice. Specifically, there are safety concerns about the company's multiple sclerosis drug Tysabri.

Others believe that the company could fit well with a large pharmaceutical company looking to fill its pipeline and drive top and bottom line growth. Billionaire investor Carl Icahn - who initially pressured the company to sell - made this argument and insists that there would be substantial interest.

These bullish analysts and investors peg the fair value of the company at around $70 to $90 per share. The numbers are in part based on the enormous valuation given to MedImmune when it was acquired earlier this year for 11x annual sales. This is a clear indicator of big pharma's appetite for padding their drug pipelines with strong potential blockbusters.

Rumors today surfaced that Pfizer, Sanofi and J&J may be among the companies interested in making an acquisition. Meanwhile, many are discounting AstraZeneca and Roche since they already have biological capacity and the price is a little on the high end. Regardless, this is definitely a stock worth watching over the next few months!

Related Companies
Genentech Inc. (DNA)
Amgen Inc. (AMGN)
Pfizer Inc. (PFE)

Broad indexes are up 120% this year; the average IPO makes 192% in its first day; even blue chip stocks are nearly doubling every year; and there are more IPOs than ever before in history. Sound familiar? No, it's not the dot-com boom of 1999. Rather it's the manufacturing boom being seen in China right now... and it's the next big bubble.

Just how crazy has it become? Well, China Shenhua Energy recently IPO'd and rose 87% in its debut to which its chairman said he "was not totally satisfied". Low floats, spectacular valuations, investment restrictions, and a greedy market has made China the next big bubble and many say is approaching critical mass.

Bullish investors insist that the Chinese bubble differs greatly from the dot-com boom in the United States. After all, these companies are actually generating real profits with real businesses supported by a robust economy. However, bears are quick to point out that the valuations are still just as bad with some companies like Baidu trading at more than 70x earnings!

In the end, China is an extremely hot market that shares a lot in common with the dot-com boom of the 90s in the United States. Investors in this space should be careful to hedge their positions and limit their exposure as these valuations can come crashing down at any time. However, until then, the Chinese market indexes and ETFs - like FXI - are definitely worth watching!

A large Crown Crafts Inc. (NDAQ:CRWS) holder requested that the company form an independent committee to evaluate strategic alternatives to maximize shareholder value in a Schedule 13D/A filing made with the SEC. Shareholders are hoping that the activist can work to unlock value in shares that have remained stagnant for almost a year.

Wynnefield Partners, a 14.6% stockholder in the company, disclosed a letter to the company's board of directors outlining how it should proceed and their expectations with regards to governance and the creation and release of shareholder value. The hedge fund first demanded that the company take action to unlock shareholder value through a possible sale or merger.

"Crown Crafts Inc. should take prompt action to form a truly independent SAC and, consistent with this notion, employ a competent outside "arm's length" firm to undertake an analysis of all the options available to the Company," said general partner Nelson Obus. "This analysis must include a sale or merger of the Company to be undertaken in the event that adequate risk adjusted returns on invested capital for new initiatives can not be identified."

Secondly, the hedge fund demanded that the company immediately act to clean up its corporate governance: "We are also concerned about the governance of CRWS and, as Wynnefield articulated in the proxy materials, request that you promptly unstagger the Board, articulate and implement a succession plan for yourself and other senior executives and orient Board compensation away from cash and toward equity participation in the form of a combination of option grants at market and restricted stock."

The hedge fund insisted that if these demands were not met they may be forced into another proxy battle to make the changes themselves. Combined, these factors make CRWS a stock worth watching closely over the next few weeks!

Related Companies
Albany International (AIN)
Polymer Group (POLGA)
Culp Inc. (CFI)

Denny's Corporation (NDAQ:DENN) may quickly become yet another activist target after a hedge fund disclosed a large stake and indicated it would like to have a talk with management, according to a Schedule 13D filing with the SEC. Shareholders are hoping that strong quarterly results earlier this month coupled with activist involvement will help reignite the struggling restaurant chain.

Olstein Capital Management, who owns a 9.5% stake in the company, indicated their belief that the stock is undervalued and that steps should be taken to increase the market valuation. To this end, Olstein plans to communicate with the company on alternatives for realizing the unrecognized value and provide suggestions for improving the company's financial strength.

Denny's reported strong earnings earlier this month with same-store sales rising 1.3% on stronger customer spending despite a decline in guest traffic. Income per customer at the casual dining chain increased 6% while guest count fell 4.5%in its 468 company restaurants and 1,071 franchised locations.

Denny's stock remains down over 10% so far in 2007 but has begun to mount a turnaround since September - helped substantially by purchasing by Olstein, which moved up the stock over 10% alone since Friday. Denny's stronger results combined with the involvement of an activist shareholder make DENN a stock worth watching!

Related Companies
IHOP Corp. (IHP)
ELXSI Corp. (ELXS)
Wendy's International (WEN)

Costco Wholesale Corporation (NDAQ:COST) shares rallied more than ten percent today after the company announced stronger-than-expected fourth quarter earnings in a 8K filing with the SEC. Shareholders were cautious going into this quarters earnings after a disappointing hiccup in August; however, it appears that the bulk retailer has fully recovered this quarter.

Costco announced a 4.7% increase in net income from 75 cents per share last year to 83 cents per share this year. Meanwhile, this quarter's same-store sales - a key measure in retailing - rose five percent. The largest gain was seen internationally where the company saw a nine percent gain.

Interestingly, the latest quarter's results also included an eight cent charge reflecting a change from monthly membership revenues to daily membership revenues used for accounting purposes. This makes the jump in revenue even more impressive.

Costco's success took many investors by surprise given last quarter's dismal 2% same-store sales and the losses reported by many others in the industry including Target stores. The company has also surprised analysts in terms of same-store sales in May, June and July.

In the end, Costco continues to outperform despite a troubling economic environment. Whether or not this continues remains to be seen, but this is definitely a stock worth watching!

Related Companies
Wal-Mart Stores Inc. (WMT)
Target Corporation (TGT)
Cost-U-Less Inc. (CULS)

Cadbury Schweppes (NYSE:CSG) announced today that it plans to spin-off its beverages group into a new company and abandon its efforts to auction the business off amid credit market concerns. The American beverages unit will become the world's third largest softdrink company with Dr. Pepper and 7-UP among its brands.

"While the board continues to be committed to the principle of maximizing share owner value, it does not believe current market conditions will facilitate an acceptable sale process in the foreseeable future. Accordingly, our focus is now on demerging our Americas Beverages business," said the company in a statement.

The move to spin-off comes after the company rejected a large offer from an investor consortium including Blackstone, Lion Capital and KKR because the firms wanted the seller to help with financing. Another consortium consisting of Bain Capital , TGP and Thomas Lee also failed at their attempts to purchase the drinks business from Cadbury.

Morgan Stanley and Goldman Sachs advised Cadbury to separate the business segments after evaluating the other offers. Given the fact that spin-offs tend to outperform the larger market during their first two years and the fact that this spin-off will create a major competitor in the softdrinks business - this stock is definitely one worth watching!

Related Companies
The Coca-Cola Company (KO)
The Hershey Company (HSY)
PepsiCo Inc. (PEP)

VMWare Inc. (NYSE:VMW) shares closed above $100/share on Tuesday marking a new milestone in its short life as a public company. There is little doubt that the company is the leader in virtualization but many investors are concerned about the company's low float, which can exaggerate its price moves - in both directions!

The VMWare IPO shares several similarities with companies that went public during the dot-com boom. First, they kept the stock at a low float in order to spur large price movements and attract investors. Secondly, they were in a sector that was pumped up by cheerleaders who continued to talk up the stocks until the end. And finally, there was obviously a large valuation assigned to companies that simply couldn't be justified once growth slows.

VMWare is currently trading with a P/E of 156x, which would require it to grow substantially in order to be justified. According to Jon Ogg at 247WallSt, "The stock is trading anywhere from 3-times to 5-times the sales of the entire virtualization market industry-wide to 2010." Clearly, the stock is trading at a lofty valuation and a low float is helping to keep shorts away.

It is also interesting to note that EMC Corporation (NYSE:EMC) doesn't appear to share the enthusiam exhibited by VMWare shareholders. After all, the company owns 86% of VMWare and current valuations put the company's EV at $33.45 billion compared to EMC's EV of $45.7 billion. EMC shares only saw a 50% run-up following the spin-off announcement.

In the end, analysts will eventually be forced to bail on this stock but it could take awhile before reality kicks in. VMWare is definitely in a hot market, but the company's current valuation surpasses that of the industry itself. Despite any reasonable growth estimates, it is impossible to keep running. Combined, these factors make VMW a stock worth watching!

Related Companies
Ninetowns Internet (NINE)
Formula Systems (FORTY)
QuadraMed Corporation (QD)

Pershing Square's Bill Ackman changed his status in Borders Group (NYSE:BGP) from passive to active, according to a Schedule 13D filing with the SEC today. The stock surged over 3 percent in response as investors hope the famous activist investor will work to unlock value for shareholders.

Bill Ackman reportedly discussed corporate governance issues with board members upon request by Borders representatives. The activist investor also reported a slight increase in his stake in the company, but noted that he does not believe the discussions will constitute an attempt to change or influence control of the company.

Ackman is well known for his activist involvement in Wendy's, McDonalds, and Target, in which he worked to unlock value through spin-offs and other strategic transactions. The activist is famous for his occasionally harsh letters to management and board members expressing dissatisfaction.

Pershing Square now owns 6.9 million shares, or 11.7 percent, of the company compared to 6.8 million shares, or 11.6 percent of the company, reported in March. Clearly, the hedge fund has confidence in the company but has not yet decided to take a fully activist stance - opting to let management continue as they have in the past. Combined, these factors make BGP a stock worth watching!

Related Companies
Hastings Entertainment (HAST)
Amazon.com Inc. (AMZN)
Barnes & Noble Inc. (BKS)

LDK Solar (NYSE:LDK) shares rose $3.95, or 10.53%, to $41.45 today after the solar wafer maker raised its revenue forecast and reiterated that it saw no problems in its inventory reporting. Investors jumped on the news sending shares up as much as 23 percent during today's session.

The news comes after LDK's stock plunged 45 percent off its 52-week high of $76.75 over the past four trading days due to a former executive that said the company had problems with its silicon inventories. The former financial controller had reportedly left the company over a dispute regarding the company's inventory controls, which sent shares in a downward spiral.

LDK now boosted its third quarter revenue outlook to a range of $140 million to $150 million from its earlier estimates of $115 million to $125 million. Preliminary data showed that it had exceeded its original forecasts and shipped about 75 megawatts of solar wafers during the third quarter, beating analyst estimates by a significant margin.

 "As we previously indicated, we believe that there is no merit in the allegations made about our inventory accounting practices, our business operations are normal and we continue making shipments to fulfill our customers' orders," Chief Executive Xiaofeng Peng said in a statement.

In the end, this is great news for shareholders but we will have to wait until LDK files its financials to get a good look at the inventory numbers. Sales numbers like these should mean that the company won't have to writedown any inventory assuming that they had too much when the controller left. And if there are no problems, this stock still has a lot of upside. Combined, these factors make LDK a stock worth watching!

Related Companies
United Microelectronics (UMC)
Photon Dynamics (PHTN)
Catalyst Semiconductors (CATS)

Sprint Nextel (NYSE:S) is being pressured to field shareholder questions about the future strategic and operational direction of the telecom provider following Ralph Whitman's growing impatience with CEO Gary Forsee. Many analysts are now looking at a wide range of strategic options that the company could consider to unlock value and narrow its focus.

Sprint Nextel continues to work on integrating issues from its $35 billion 2005 merger while focusing on building a new generation broadband network that has proven to be a significant cash drain to date. The so-called WiMax project is not expected to contribute to the company's profitability for several years and has many investors questioning management's moves.

Sprint does have some strategic options that it could consider, according to those familiar with the situation. The company could put its long-distance division up for sale, which serves large corporate and government clients. However, the company would then have to factor in the fact that they use some of the fiber networks to carry wireless traffic. This sale could generate $4.8 billion in after-tax proceeds.

Other suggest that the company should abandon its new venture and sell the 2.5 Ghz spectrum license that Sprint has reserved for WiMax. Such a deal could net the company $3.4 billion after-tax while eliminating further cash burn. However, the company argued that this project is critical to the success of the company in the future and will begin to gain momentum in 2009.

In the end, Sprint investors may have to remain patient for now as the company works to improve its WiMax project and streamline other businesses. Whether or not the company will shop any of its divisions remains to be seen; however, it is definitely a situation worth watching!

Related Companies
Verizon Communications (VZ)
Alltel Corporation (AT)
Cincinnati Bell Inc. (CBB)

A large HealthSpring Inc. (NYSE:HS) shareholder expressed its belief that the healthcare company should undergo a share repurchase to unlock value, according to a Schedule 13D/A filing with the SEC. Shareholders are hoping that the hedge fund can force management to take action and help the company's fledging stock price.

The Clinton Group, which owns 4.9 percent of the company, indicated their belief that HealthSpring should take on additional debt or investigate a range of other options to ramp up their share repurchase program. Moreover, despite the hedge funds reduction in its position in the company, it still continues to support the management team.

"Despite (i) the strong Q2 financial  performance and the surpassing of analyst expectations, (ii) the increase in 2007 EPS guidance, (iii)  positive legislative developments and (iv) the completion of the accretive acquisition of Leon Medical Centers Health Plans, Inc., HealthSpring stock continues to languish at a valuation below its peers," said the hedge fund in a letter to the board.

The hedge fund then reiterated its belief that the company has additional debt capacity to repurchase shares to unlock this value, and that management should either (i) investigate upsizing its pending debt raise or adding another tranche to execute a Dutch Auction repurchase of the Issuer's shares or (ii) employ its unrestricted parent cash and $100 mm undrawn revolver to aggressively execute open market purchases of the stock.

In the end, any actions taken by HealthSpring could go a long way to unlock value in a company that is clearly undervalued. Combined, these factors make HS a stock that is definitely worth watching!

Related Companies
Humana Inc. (HUM)
Aetna Inc. (AET)
WellPoint Inc. (WLP)

Vonage (NYSE:VG) shares jumped $0.47, or 40.88%, to $1.62 after the company announced that it settled its patent dispute with Sprint Nextel (NYSE:S) in a press release. The deal will include a $35 million payment for past use, $40 million for future use, and a $5 million prepayment for services.

"We are pleased to resolve our dispute with Sprint and enter into a productive future relationship," said Sharon O'Leary, General Counsel for Vonage. "We believe this deal is good news for Vonage, our customers and our shareholders. It allows us to put this litigation behind us and continue to focus on our core business by removing the uncertainty of legal reviews and long term court action."

Vonage shares have been suffering ever since a Kansas jury handed down a verdict on September 25th finding that the company had infringed on six Sprint patents. Many shareholders and analysts were concerned that the company would not be able to fight the legal battle and be forced into bankruptcy. Shares are now trading close to the levels they were before the verdict was announced.

Vonage still faces an uphill legal battle with Verizon Communications (NYSE:VZ), however, which was awarded $58 million in damages in March plus 5.5 percent royalties on future revenues after finding that the company violated three Verizon patents. Vonage executives vowed to fight this ruling but the company may be forced into another large settlement.

In the end, this is good news for shareholders but Vonage still faces an uphill battle. Not only do more legal battles remain on the horizon, but the company must also face the problem it had before all of this started - convincing people to switch to VOIP phone services. Despite all of tihs, VG is definitely a company worth watching!

Related Companies
Verizon Communications Inc. (VZ)
AT&T Inc. (T)
Qwest Communications International Inc. (Q)

A large Cablevision Systems Corporation (NYSE:CVC) shareholder may exercise his rights to have the value of his shares appraised in connection with the cable company's proposed buyout deal, according to a Schedule 13D/A filing with the SEC.

Mario Gabelli, who owns an 8.3% stake in the company, said he is carefully considering the buyout offer that he believes is too low. Many shareholders and analysts are carefully watching his moves as his stake may be a key voting block in during the company's upcoming proxy.

"Part of us says take the money and run because of what the world's going through with regard to the [lending market] crisis," said Gabelli in an interview with The New Post. "But it could be worth $65 to $70 a share in five years."

The Dolan family, which controls Cablevision, has proposed to take the company private in a deal worth $10.6 billion - or $36.26 per share. The company's shareholders will vote on the deal on October 24th, while the transaction has already been approved by Cablevision's board.

In the end, a buyout is probably the best option for shareholder given the troubles in the credit market and risks over the next five years. However, whether the transaction gets consummated remains to be seen. We could possibly see a higher buyout price if the appraisal puts a significantly increased valuation on the company. Combined, these factors make this stock one worth watching!

Related Companies
DIRECTTV Group, Inc. (DTV)
EchoStar Communications (DISH)
Verizon Communications (VZ)

Carl Icahn revealed an increased stake in BEA Systems, Inc. (NDAQ:BEAS) in a Schedule 13D/A filing with the SEC today. The news comes amid a push from the activist investor towards a sale of the company, despite hefty opposition from executives.

Icahn increased his holdings to 43.3 million shares, or 11.05%, from 38.72 million, or 9.88% in September. His holdings also include call options to purchase BEA shares, which are presumably reserved incase a proxy battle results from this conflict when he could exercise the shares for increased voting control.

Mr. Icahn said in past filings that he believes that a sale of the company to a strategic acquirer will maximize the price of the shares. The billionaire investor also said he was seeking talks with management to discuss possibilities of a deal and said he may seek to nominate members for election to the Board of Directors.

In the end, this is great news for shareholders as any sale of the company would likely result in a substantial premium being paid. Icahn also has an impressive trackrecord of success with all the companies that he has been involved with. Combined, these factors make BEAS a stock worth watching!

Related Companies
Oracle Corporation (ORCL)
Sun Microsystems (JAVA)
Microsoft Corporation (MSFT)

Sprint Nextel Corp. (NYSE:S) shares rose $0.79, or 4.21%, to $19.55 during today's session on news that activist investor Ralph Whitworth is turning up the heat on chief executive Gary Forsee and other directors. Shareholders are hoping that the activist can help implement change in the nation's third largest wireless carrier, which has both lost customers and seen its shares drop 27% since its 2005 acquisition of Nextel.

Ralph Whitworth said in an interview that he has "lost confidence in Gary Forsee ... primarily because of management's inability to forecast the company's results and their apparent inability to address the fundamental issues surrounding the core business." Those close to the situation say Whitworth has been pushing for a meeting with the board before the company's annual strategic-planning weekend early next month.

Many of these investors have concerns over the company's WiMax initiative in which the Sprint plans to dump over $5 billion into by 2010. While the company hopes to realize $2 billion in revenue by that time, many are skeptical and have expressed concerns about such a large investment in an emerging technology and platform.

Meanwhile, Sprint claims that it is ontrack for a turnaround with a small 16,000 increase in "post-pay" subscribers, which are its highest valued segment. But many investors and analysts are not convinced that the company is back on track - at least enough to justify the giant new WiMax project. In the end, an activist like Whitworth may be able to talk some sense into the company and ensure that shareholder value is preserved. This makes S a stock worth watching!

Related Companies
Verizon Communications (VZ)
AT&T Inc. (T)
Qwest Communications (Q)

A large Inksure Technologies (OTC:INKS) shareholder demanded that the software company immediately work to unlock shareholder value through a sale, merger or restructuring, according to a Schedule 13D/A filing with the SEC. Shareholders are hoping that the activist investor can convince the company to unlock value in the short-term.

James E. Lineberger Jr., who owns 8.2% of the company, said in a letter to the board that a strategic buyer for Inksure is in the best interest of all stakeholders given the company's lackluster growth and undervaluation. Moreover, action should be taken now while the company still has some momentum, a credible customer base, newly introduced technology, and cash balances to support its operations.

"As we consider the Company’s future based on its past operating and financial history and contrast it with its capital requirements, it is evident to us that immediate action is required by the directors to protect shareholder value," said Lineberger. "It is not in the best interest of stockholders (or for that matter any other stakeholders) for Inksure to remain independent."

Currently, Inksure is running an accumulated deficit of $17 million due to expenses related to its RFID project research and development. With no clear end in sight for the continuing development expenses and the uncertainty of the viability of the RFID project, the cash drain is likely to only continue.

There is also question as to management's integrity, "Further, it is clear to us that a substantial number of shareholders and other stakeholders of the Company have lost faith in the Chairman/CEO of the Company and believe that he has no credibility in the marketplace."

In the end, a sale process could generate substantial returns for shareholders and is probably the best available solution for the company. It will be interesting to see if the board agrees with the activist investor and hires and investment bank to explore its options. Meanwhile, this is definitely a stock worth watching!

Related Companies
Oracle Corporation (ORCL)
Microsoft Corporation (MSFT)
SalesForce.com Inc. (CRM)

Bristol-Myers Squibb Co. (NYSE:BMY) shares continued their climb today amid speculation that the company could be a takeover target for a larger un-named pharmaceutical company. Implied volatility jumped over 5% during the past week indicating an increased bet on bullish price action.

The pharmaceutical company has been the target of takeover rumors for some time now, specifically with France's Sanofi-Aventis who was previously rumored to be interested in the company. Options activity looked similar to yesterday's before it died down along with the rumors.

Bristol-Myers does not comment on market speculation, but with 26,700 call options trading hands yesterday compared to only 2,800 puts, this is definitely a stock to keep an eye on. It seems that many traders are betting on the November $30 call options, meaning they expect the price of the stock to exceed $30 in about a month.

Related Companies
Pfizer Inc. (PFE)
Barr Pharmaceuticals (BRL)
Genentech Inc. (DNA)

SunAmerica Focused Alpha Growth Fund Inc. (NYSE:FGF) is a successful non-diversified, closed-end managment investment company that is starting to catch the attention of hedge funds given its somewhat cheap valuation and growth prospects. The fund has moved up over 23% since mid-2006 and recently declared a dividend in August. 

Karpus Management, which owns 4.34% of the company, disclosed a Schedule 13D filing yesterday indicating that it acquired shares in the company for investment purposes but reserve the right to contact management with regard to concerns they have with the fund - presumably the growing valuation gap. This is especially interesting given Karpus' specialty focus in closed-end funds.

Many activist shareholders have targeted undervalued closed-end funds seeking to convert them to open-ended funds or forcing them to liquidate their undervalued positions and return the proceeds to shareholders via a special dividend or share buyback. Real estate closed-end funds in particular have been pressured to convert to REIT structures in order to unlock value.

In the end, we still do not know whether Karpus intends to do anything with its investment in SunAmerica. However, activist hedge funds have been increasingly looking into this sector, making this a situation that is definitely worth watching!

Related Companies
None

PDL BioPharma, Inc. (NDAQ:PDLI) finally bowed to the demands of activist shareholders by announcing that it will seek offers for the sale of the company as a whole or of its key assets, according to a press release put out by the company yesterday.

The pharmaceutical company announced that it has completed its review of strategic alternatives and decided to pursue a sale of some or all of the company's assets. To this end, PDL has retained Merrill Lynch to help it shop itself and maximize shareholder value.

"Following a comprehensive review of available options, the PDL board has concluded that seeking offers for the sale of the company as a whole or of its key assets is our primary strategic focus," said Ms. Dawes, chairperson of the board. "We look forward to working with our advisors and interested parties to maximize stockholder value."

The company also announced that Mark McDade has stepped down from his position as chief executive and director effective immediately. Shareholders have been pushing for such a move for some time arguing that it was McDade who mismanaged the company and destroyed shareholder value. Patrick Gage has stepped in as interrim CEO until a suitable candidate can be found.

 "I look forward to leading the talented and dedicated employees of PDL during this time of transition to build stockholder value through increasing our operational efficiency and driving our business forward," said Dr. Gage, interim CEO.

In the end, this is great news for shareholders who have been struggling with lackluster performance for years. It also marks another success for Daniel Loeb's Third Point LLC and Steven Cohen's SAC Capital who have both pushed (albeit passive for SAC) for McDade to step down and the company to act to unlock shareholder value. Combined, these factors make PDLI a stock worth watching!

Related Companies
Genentech Inc. (DNA)
Medarex Inc. (MEDX)
DOR BioPharma Inc. (DORB)

AMR Corporation (NYSE:AMR) announced a plan today to reduce its interest expense amid pressure from activist shareholders to improve its financial results. The plan calls for the American Airlines parent company to prepay $545 million in aircraft debt in the forth quarter and should cut annual interest expenses by $25 million, according to their press release.

"With our improving financial performance, we have bolstered our liquidity position and we have opportunistically strengthened our balance sheet by reducing debt," said Thomas W. Horton, Executive Vice President of Finance and Planning and Chief Financial Officer of AMR. "While we have more work to do, our recent decisions not only improve our balance sheet, but also reduce our interest burden going forward and give us more financial flexibility for the future."

This new plan supplements existing actions taken by the company in the first half of 2007, including debt prepayments, bond refinancings and the lowering of interest rates on a credit facility. Combined, these actions eliminated an incremental $27 million of annual net interest expense, in additional to the net interest expense savings from AMR's scheduled debt amortizations. In the end, the company expects its net interest expenses to be $130 million lower than its expenses for the same period in 2006.

Clearly, AMR is doing what it can to reduce its expenses and improve its balance sheet to help unlock value for shareholders. Shareholders also applauded the move as AMR stock rose over 10% during the past two days. In the end, this is great news that makes AMR a stock worth watching over the next few months!

Related Companies
Continental Airlines, Inc. (CAL)
Delta Air Lines, Inc. (DAL)
Northwest Airlines Corporation (NWA)

Furniture Brands International, Inc. (NYSE:FBN) shares rallied for a second day after Samson Holding revealed a business combination proposal that the company declined to pursue in a Schedule 13D filing with the SEC. Shareholders are clearly excited about the interest as shares jumped almost 30% yesterday and another 7% in early trading today.

"[We] presented a proposal to the Issuer in July this year with respect to a possible business combination transaction, which the Issuer declined to pursue," said Samson in a statement. "The Issuer is a major customer of Samson Holding and in a business that is complementary to the Reporting Persons’ businesses and/or investments."

The Samson group said that it "may consider various alternative courses of action and take any action deemed appropriate" including seeking to acquire control of the company or pursuing board representation. This hardliner stance is the main reason shares in the company have risen to greatly.

In the end, any business combination is great news for shareholders as it would mean a significant premium to the company's current market price. Obviously, shareholders are very interested in such a deal as the share price has spiked on the news while the company seems like it may be resistant. Overall, this is a great stock to watch as this situation unfolds!

Related Companies
La-Z-Boy Incorporated (LZB)
Ethan Allen Interiors Inc. (ETH)
Stanley Furniture Co. (STLY)

A large shareholder of Duckwall ALCO Stores Inc. (NDAQ:DUCK) recommended several strategic changes for the company in a recent telephone conversation with Chairman Warren Gfeller, according to a Schedule 13D/A filing with the SEC. Shareholders and analysts are hoping that this could be a turning point for the company.

Strongbow Capital, which owns 14.2 percent of the company, suggested that the company expand the size of the board by one member and create an executive committee of the board that would be authorized to exercise all powers and authority of the board in the management of the business.

The hedge fund suggested that this executive committee work to reduce average inventory levels, reduce SG&A expenses and reduce losses from shrinkage. Strongbow also recommended that its own representatives occupy the additional board seat and be appointed to the executive committee.

Shareholders are hoping that this move can help bring accountability back to management and help the retailer improve its balance sheet and cash positions. It will be interesting to see if the company agrees with Strongbow and implements these changes. If so, this is definitely a stock worth watching!

Related Companies
Family Dollar Stores, Inc. (FDO)
Dollar Tree Stores, Inc. (DLTR)
Big Lots, Inc. (BIG)

Bioenvision Inc. (NDAQ:BIVN) may have trouble pushing through its proposed merger with Genzyme after a major shareholder reiterated its intentions to vote against it in the company's upcoming annual meeting. Shareholders are divided on the issue that promises to be a close call on October 14th.

SCO, which owns 13.1% of Biovision, called the $5.60 offer extremely inadequate and the result of a poorly managed and ill-timed sale process. The activist hedge fund believes that the company should instead work on behalf of shareholders to maximize value over the near term through alternative strategies.

"We remain highly confident that clofarabine will be approved in the European Union for the treatment of adult AML in 2008," said SCO in a letter to the board. "We believe that Bioenvision will be well positioned, within a 3 to 6 month timeframe, to engage an independent investment bank to do a well-run process to market the company to possible acquirors, and that there will be considerable interest in clorfarabine. We believe that this type of processs could lead to an offer price well in excess of the current offer price, leading to a success for all common shareholders including Genzyme."

SCO also announced that it intends to propose a new slate of directors for the next annual shareholders meeting that would work to this end and unlock value for common shareholders. Combined, these factors make BIVN a stock worth watching!

Related Companies
BioCryst Pharma (BCRX)
Peregrine Pharma (PPHM)
Coley Pharma (COLY)

Microsoft Corporation (NDAQ:MSFT) and Google Inc. (NDAQ:GOOG) have reportedly offered to invest anywhere between $300 million and $500 million for a 5% stake in the social networking giant Facebook. Many investors are carefully watching this deal as it could open the door to many opportunities.

First, there is speculation that the social networking website will use some of the money to build out its own advertising platform that could help boost its somewhat lackluster $150 million per year in revenues. Specifically, the company may use the cash infusion to buy a behavioral advertising company.

Many also insist that Facebook may have an interest in going public. After all, with its own stock it would be able to quickly make acquisitions and ramp up its operations. Obviously, any initial offering in this sector would be a hot IPO that is definitely worth watching closely.

In the end, Facebook will no longer have the time to invent new addons and services for its company. It will likely be forced to hire new engineers or acquire companies with products to fill their void to maintain strong growth. However, it is still uncertain as to whether the company will remain private, pursue a buyout or go public. Combined, these factors make Facebook and other players like MSFT and GOOG stocks worth watching!

Related Companies
International Business Machines (IBM)
Sun Microsystems (JAVA)
Cisco Systems (CSCO)