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!

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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!

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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!

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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.

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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!

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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!

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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!

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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.

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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!

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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