New research data shows that online advertising is beginning to run out of steam at what could become a turning point for the industry. Many analysts have been concerned that such trends would continue as the industry began to mature, but the decline in consumer spending could expedite the process as fewer consumers click on ads while more publishers are looking to fill ad inventory. The big question is whether or not this trend will be permanent.

Citigroup's Mark Mahaney is one such concerned analyst and reduced his price target on Google Inc. (NDAQ: GOOG) this morning amid concern that there is deterioration on paid click growth. The reason? ComScore, which measures online trends, released its January 2008 qSearch paid click report that showed a 7 percent sequential decline versus December 2007 and a flat annual growth in paid clicks for Google. More, the number of paid clicks per Google search query declined by 8 percent. This is clearly bad news for intermediaries like Google that rely on transaction volume to drive revenues.

Meanwhile, a recent report put out by the Newspaper Association of America showed that publishers are being hit equally hard - especially newspapers advertising online. The report showed that such advertising had slowed down from a 30 percent growth rate during the past three years to just 18 percent now. Unfortunately, the move downward comes at a critical time for newspapers that are under pressure to increase their online revenues as subscription and print advertising numbers decline.

The trend is a disturbing one that could last some time. Consumers that have no money are less likely to click on advertisers and spend money. This means that advertisers are going to pay less per click or banner impression. Given that the supply of publishers is unchanged, this means that there is a lot of inventory with few buyers. Unfortunately, this spells lower payouts for publishers like newspapers and less money for intermediaries like Google. It could end when the consumer situation recovers, but whether or not it will see the 30 percent a year remains to be seen.

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Ansys Inc. (NDAQ: ANSS) announced today that it agreed to buy Ansoft Corporation (NDAQ: ANST) for $832 million in the form of both cash and stock.

The deal will put both simulation-software companies under one roof while giving Ansys access to Ansoft’s valuable electronic-design automation software – software “used to simulate high-performance electronics designs found in mobile communication and internet devices, broadband networking components and systems, integrated circuits, printed circuit boards and electromechanical systems” according to the press release on the deal.

Under the terms, Ansoft shareholders get $16.25 in cash and 0.431882 share of Ansys stock for each share of Ansoft they currently own – which values Ansoft at a 39% premium to Friday’s closing price.

Ansys will fund the deal by issuing 11.1 million shares of new stock and using $346 million of a credit line with Bank of America (NYSE: BAC). In other words, this acquisition is funded by diluting current shareholders and debt.

Ansys President and CEO James E. Cashman III said, "Both companies have a strong commitment to their customers and employees, and share a passion for the development of innovative products and services and a history of world-class execution. This combination will further strengthen these values and will allow us to better serve our customers by accelerating the delivery of comprehensive, customer-driven engineering simulation solutions and by enabling us to provide high quality support throughout the world.”

Though the deal may better serve customers, in the short-term Ansys expects the deal will only “modestly” help earnings per share but raise revenues to nearly $500 million annually. Only time will tell how Ansys balance the advantages of this acquisition with the dilution and debt that are making it possible.

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The newspaper industry is making the news, but not in a good way. The Newspaper Association of America reported that ad revenues in the industry have fallen by 9.5 percent in the biggest drop in any year since 1950. The decline comes at the heels of an economic slowdown and an increase in online advertising that together have put a damper on the fourth quarter - a peak period for ad sales.

The nation's largest newspaper company, Gannett Company (NYSE: GCI), was one of those hardest hit with a 7.2 percent drop in revenues. The numbers reflect a growing trend in the daily newspaper industry, as more readers flock to the Internet for news. This has led to a decrease in circulation and revenues in print publications around the country that has sent many newspaper companies to 52-week lows.

Many newspapers have relied on their online news services to at least partially offset losses in their print division. These online newspapers have seen revenue growth of 30 percent over the past three years, but the economic slowdown dropped this rate of just 18.8 percent during the fourth quarter. Meanwhile, online advertising revenues for newspapers still only account for around 7.5 percent of total revenues.

One of the solutions to this problem is being offered by Yahoo Inc. (NDAQ: YHOO) of all companies. The search giant plans to roll out a new set of online ad tools for 600+ newspapers that have joined its consortium. Reports have indicated that Yahoo has some 572 people working full-time on the project that could help newspapers successfully syndicate and monetize their content online to offset declining print revenues.

The Yahoo newspaper consortium was formed in November of 2006 and initially involved a combination of its HotJobs help-wanted site with local newspapers. Many saw great success with this program and are looking forward to the company's next beta testing of a platform that will help publishers target behaviorally and geographically across its growing network of newspaper sites. Few details of the new program have been leaked, but newspaper executives are uniformly impressed.

This potential for online advertising in the newspaper industry has prompted some investors to push for a separation of online and print publications via a spin-off of the online divisions. The theory as that this would allow investors to assign a higher multiple to the online segment and allow investors to unlock value. Unfortunately, this would leave the print publication to die a slow death or survive on razor-thin margins.

In the end, the newspaper industry continues to struggle with both an economic decline as well as a move from print advertising to online advertising. The solution to this problem is to embrace online advertising and Yahoo may be the answer for the industry. Meanwhile, many investors are insisting on a series of spin-offs to unlock value for shareholders and enable the online segments to growth.

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Citigroup Inc. (NYSE: C) investors are looking for change and new chief executive Vikram Pandit is ready to act. The bank announced a broad restructuring move after the banking giant loss half of its market value in six months thanks to the sub-prime crisis. The new additions to the larger restructuring plan involve breaking up the consumer banking group into regional divisions and separating its credit card division.

The consumer banking business saw a 35 percent decline in profits last quarter due to consumer mortgage defaults and credit concerns. The performance of the division is important as it accounts for nearly 70 percent of Citigroup's revenues. Previously, the unit was ran by two people but now it will have five bosses as new blood is brought in to change things up.

The move to split the consumer banking business comes amid a larger restructuring that has taken Vikram Pandit across the world slashing more than 6,000 jobs. The executive also worked to reduce loans and securities on the company's books in order to shrink its balance sheet and reduce risk. This is a huge move given that the company's balance sheet is the largest in the world with over $2.2 trillion of assets.

Shareholders remain divided on whether or not the Citigroup will be able to pull itself out of this mess. Some see this new management shake-up as irrelevant. After all, changing who reports to whom makes very little difference after the fact when everyone knows where the problems lie. Others like Oppenheimer analyst Meredith Whitney are predicting steeper additional write-downs for the troubled firm.

In the end, Vikram Pandit must work to prove to shareholders that he can enforce change. He may have worked to make the organization much leaner, but it will take more than that to solve its problems. In particular, it will need to work to setup better risk control measures as well as work to reduce the amount of bad assets on its balance sheet to limit further losses. Whether or not this can be accomplished in the near term remains to be seen.

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As reported here Wednesday, Take-Two Interactive Software's (NDAQ: TTWO) board rejected Electronic Art's (NDAQ: ERTS) most recent buyout offer, saying that it was not in the best interest of shareholders. Instead, the company also confirmed that it would explore strategic alternatives to maximize shareholder value in other ways that could deliver a higher value than the current $2 billion EA offer.

In a strange move today, however, EA extended its $2 billion, or $26 per share, offer by a week while adding that a “poison pill” provision adopted this week by Take-Two be canceled or at least not apply to its current takeover attempt. A poison pill is a mechanism whereby new shares are issued in the face of a hostile takeover, thus raising the price of a takeover or making a takeover simply unfeasible.

EA's announcement is odd because it is acting as if Take-Two was pursuing it, not the other way around. "The actions of the Take-Two board may increase the risk for their stockholders by delaying a potential transaction," EA's Senior VP of Corporate Development Owen Mahoney said in a statement. "We continue to believe that our $26 per share offer price is full and fair, and that a transaction between Take-Two and EA is the most compelling combination financially, strategically and operationally for all parties."

EA's offer was set to expire on April 11, but now will remain on the table until April 18. Even so, Take-Two has continually said the price is too low, especially with a new release of its immensely popular “Grand Theft Auto” game coming up.

Take-Two Chairman Strauss Zelnick said the poison pill provision was instituted to "ensure that the Take-Two board has adequate time to consider all strategic alternatives for maximizing value for Take-Two stockholders. The agreement will not, and is not intended to, prevent a takeover of the company on terms that are fair to and in the best interests of all stockholders." In other words: EA's offer is too low, so we are going to do everything in our power to kill it or drive the price up.

Today's announcement by EA really is nothing more than a PR ploy that does nothing to change the likelihood of a deal at the current $2 billion price. The announcement is good news from the perspective of a Take-Two shareholder because it is clear EA has continued interest in the deal, and if EA really wants to get a deal done it is going to have to be at a price above $26 per share.

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Captaris, Inc. (NDAQ: CAPA) may be able to efficiently manage business data, but a strategic review of its own company is another story. Private equity firm Vector Capital offered to acquire the software company for $4.75 per share just last week, but the deal fell through after the company failed to take any decisive action. Now many shareholders are left wondering whether any deal will be done at all.

The news of Vector's offer came just a day after Captaris announced that it received unsolicited inquires from multiple parties about a possible transaction. The company then worked to establish a special committee of independent directors to evaluate strategic alternatives. It also hired RBC Capital markets as its financial advisor to help explore its options.

The problem came when the Captaris refused to accept a generous offer from Vector. The private equity fund was willing to sign an acquisition agreement that would allow the company to continue shopping for other higher bids while reimbursing them up to a million dollars for any legal expenses. Since many auction processes fail, this would provide investors for a fail-safe premium.

Unfortunately, Captaris rejected the offer for some reason. Vector immediately came out saying that it was "extremely disappointed" by the company's refusal to engage in meaningful discussions over their offer. This is especially true since many other large investors, including hedge fund Emancipation Capital, came out in support of the generous acquisition agreement.

"Our offer represents immediate and certain value, does not preclude the continuation of [the company's] exploration of other strategic alternatives, and thus would clearly be in the best interests of all Captaris shareholders," Vector said.

Emancipation Capital supported this notion and urged the company to move forward in signing the acquisition agreement. The hedge fund noted that by entering into the agreement, shareholders are assured of a price premium and have a reasonable shot at a higher offer without the risk of a failed auction. It also suggested that the company seek a higher price from Vector as a condition of the agreement as well as a lengthened go-shop timeline.

Captaris responded blandly yesterday by encouraging Vector to participate in its process of reviewing strategic alternatives on a fair and equal basis with other potential bidders. It also noted that it would evaluate any offer from Vector "on an equal footing with proposals from other interested parties." Today, Vector announced that Captaris has gone ahead and rejected the bid.

The move has many shareholders wondering just what happened. The only justification could be a substantially higher offer in the works by another party interested in acquiring the company. But then, why would it refuse entering into what would essentially be a standby offer? And why wouldn't it seek a higher bid instead of simply rejecting the offer? These are all questions that many shareholders are now looking to have answered.

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Motorola Inc. (NYSE: MOT) may have agreed to Carl Icahn's proposed spin-off, but they are not out of the woods yet. The billionaire activist investor sent another letter to the board (via a Schedule 13D/A filing) earlier this week bringing up several concerns about the speed and manner in which a new management team is selected for the mobile devices division. He also questioned why the transaction will take so long and why it took the threat of a proxy fight to take action. Icahn believes that many of these problems could be solved if the board were to install one of his candidates.

Carl Icahn has faced some criticism for not dropping his proxy fight against the company despite the spin-off agreement. The board said in a conference call that they proposed two new board nominees to him, but he declined to accept them and pressed on with the campaign. However, Icahn insists that this is only half true:

"It is true that Sandy Warner, head of the Nominating Committee called me and offered seats to two of my Nominees if I would drop the proxy fight. However, you failed to mention in your conference call that I told Mr. Warner that I would gladly accept this offer if the Board would also accept Keith Meister. Mr. Warner replied summarily to this offer that Meister did not “qualify.” I asked Mr. Warner what does one have to do to qualify — lose $37 billion dollars? Mr. Warner then replied that the Board did not “know” Meister. My answer was that Meister would fly anywhere at any time to meet the Board so they could “know” him (I did mention that the situation at Motorola is too serious for the Board to remain a country club). My offer to Motorola stills stands ... having a highly intelligent, energetic individual like Keith, who has 145 million reasons to spend his time working toward the spin-off being accomplished, may well make [the promise of a spin-off] come true in a timely fashion."

Carl Ican also argued that his request for more information about what steps the board actually took to correct the problem was well justified:

"You have stated to the press that our request for information about what steps the Board actually took to correct the problem at Motorola is an unnecessary distraction. We disagree. In a political election when constituents believe their representatives’ performance was inadequate, they are certainly not denied information as to whether their representative acted in a grossly negligent fashion. Why should it be different in Corporate America?"

In the end, a proxy fight is something that nobody needs as it is costly and time consuming. All Icahn wants is Keith Meister to be installed on the board and he would be willing to drop the proxy contest. This move is necessary to help ensure that a successful spin-off takes place that it will successfully unlock value for shareholders.

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Bear Stearns (NYSE: BSC) shareholders hoping for a higher offer from J.P. Morgan (NYSE: JPM) might as well call it quits now. Chairman James Cayne sold his entire 5.66 million share stake at $10.84/share for a paltry $61.3 million just weeks after it was worth nearly $380 million. Despite the news, shares rallied to $11.23 before falling after hours to $10.70, which is still above the planned $10.00 per share offer.

A letter filed with the SEC also revealed several other provisions that put the proverbial nail in the coffin. Among them, a provision saying that enables the company to bypass shareholder approval because securing such approval would "seriously jeopardize" the financial viability of the company. Essentially the company is saying that the owners are not responsible enough to make a decision about the future of their own company.

Shares have been trading up recently on speculation that the unhappy James Cayne would try and assemble a competitive offer with billionaire financier Joseph Lewis - the company's second largest shareholder. However, any deal of that sort seems unlikely unless it was Joseph Lewis who received his shares in a private transaction. This possibility seems to be the only thing left keeping shares above the buyout price.

Traders remain divided on the idea of a higher bid. One camp argues that J.P. Morgan's large stake would make it nearly impossible for another bidder to successfully emerge. The other contends that the equity portion of the deal pales in comparison to the assumed debt, which means that a higher offer is entirely possible (as we've already seen with the $2 to $10 jump). However, in the end, the fact that the company has agreed to the $10 offer along with J.P. Morgan's large stake all but seals the deal for this one.

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American Express Co. (NYSE: AXP) announced today that it has agreed to purchase GE Money's Corporate Payment Services (CPS) from parent General Electric Co. (NYSE: GE) for $1.1 billion. CPS provides purchasing services and cards to large corporations.

American Express said in a press release that “today’s agreement is part of an ongoing strategy to focus on the payments sector” and that the acquisition is lucrative given that “Corporate Payment Services generated over $14 billion in 2007 global purchase volume and maintained $1.1 billion in receivables at year end 2007. Its billed business has grown at a compounded rate of 18% over the last five years.”
 
Interestingly, GE is CPS’s largest client, so the terms of the deal require GE to remain a client of American Express after the sale for a set number of years.

President of American Express’s Global Commercial Card & Services Anré Williams said in the press release that, “Corporate Payment Services is a terrific business with strong leadership and talented employees who have been generating impressive growth through a combination of excellent customer service and cutting edge technological innovation. Expanding our corporate purchasing and expense management services is a top priority for American Express. Acquiring Corporate Payment Services adds to our purchasing card capabilities and gives us the opportunity to accelerate our growth. In addition, Corporate Payment Services also has excellent credit metrics and a premium client base.”

When referring to credit metrics, CPS has an advantage compared to other forms of credit because accounts are usually paid-in-full at the close of each month because charges are typically travel expenses for employees of large companies. The deal also includes GE’s vPayment technology, a fraud detector technology.

American Express, not surprisingly, expects an immediate boost to revenue from the purchase – but earnings per share growth from the deal will not be seen for a few years. Overall, the deal makes sense for American Express but it is not something to get overly excited over. American Express shares are up slightly on the news while GE shares are down slightly.

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Citi Trends, Inc. (NDAQ: CTRN) hasn't had much of a trend the last few years as it has swung widely from profits to losses and back. However, the company is hoping to change that in 2008 with a series of changes designed to stabilize its earnings and unlock value for shareholders.

Citi announced a decrease in its earnings for 2007 as its earnings came in at $0.59 in the fourth quarter compared to $0.73 during the same time last year. The decline came as a result of negative same-store sales and a related need to increase clearance markdowns along with the inclusion of an extra week in 2006. Net income also took a hit as the company's profits dropped from $21.4 million in Q4 2006 to only $14.2 million in Q4 2007.

Sales increased 6.2% from $126.8 million to $134.6 million, but this can likely be attributed to the increase in clearance markdowns. Citi effectively sold more products at a discount, which boosted its sales at the expense of its net income and profit margin. Meanwhile, the 1% growth in same-stores sales suggests that the majority of any growth that did occur was at new stores - an unsustainable paradigm.

The sunny side of the story - and cause for today's celebration - was Citi's positive outlook. The company estimated 2008 earnings in the range of $1.10 to $1.15 per share, which crushed analyst estimates of only $1.00 per share. The strong guidance is based on estimated same-store sales growth of 2% to 3% due to a planned 15% increase in selling square footage. Same-store sales are an important measure for retailers since it measures revenue at existing stores rather than newly opened ones.

Some analysts are skeptical that Citi can pull off the gains, saying that the company has a history of unpredictable swings. As a result, many retained their ratings on the stock until the company could "prove" that it was able to make meaningful changes. Investors seem to be a different story, however, as the stock swung up some 25% on the news of a possible turnaround in 2008. Which side is right remains to be seen...

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ConAgra Foods, Inc. (NYSE: CAG) gave shareholders something to chew on today after announcing spectacular earnings along with a sale of its cash cow trading unit.

The company announced much higher-than-expected quarterly profits thanks to strong performance in its food and ingredients segment along with its extremely profitable trading unit that made a ton of money predicting the rise in food and energy prices. These helped to offset falling profit at the company's larger consumer foods unit, which has been hurt by soaring commodity costs.

The trading units at companies like ConAgra have been performing extremely well in today's economy. The lower U.S. dollar combined with higher demand abroad has sparked a long-lived rally in the commodity markets. The profits made on these hedges were so large that ConAgra's own trading unit was able to make 38% more money than its food and ingredients division by booking only half the revenues!

However, ConAgra recently agreed to sell its trading unit to Ospraie Management for an estimated $2.3 billion, including $1.6 billion in cash, $525 million in debt securities, and a portion of the unit's earnings for the remainder of the calendar year. The company wanted to exit the business to focus more on its core strategic food platforms and felt the time was right given the boom in commodities.

The divesture will also mean lower and more predictable working capital requirements in the future, since commodities trading can be a somewhat volatile game. The commodity markets can change rapidly and directly affect the cost of raw materials for the company. The divesture of this business will result in more consistent operating cash flows over time and much easier sleep for shareholders.

ConAgra announced that it would use the proceeds of this sale to fund share repurchases, which should help boost the company's stock price. Share buybacks reduce the number of outstanding shares while earnings remain the same, which causes the earnings per share number to increase. This higher earnings per share number means that the share price must go up if the price-earnings multiple is to remain the same.

ConAgra also sees good times ahead. The company boosted its fiscal year forecast for earnings from continued operates to $1.80 to $1.85 a share from $1.55 with fiscal 2009 earnings still slated at a minimum of $1.55 a share. This compares to analyst estimates of $1.60 and $1.61 a shares, respectively. Executives also said that they expect future annual earnings growth of 8% to 10% on 4% sales growth.

In the end, this is all good news for shareholders who stand to exit the commodities boom at just the right time and see the money spent on a program to unlock value. Meanwhile, the company is continuing to back a strong forecast despite some increased competition from private label brands. What more could an investor ask for?

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Oracle Corporation (NDAQ: ORCL) is seen by many as a barometer for the technology sector and its most recent earnings suggests that a slowdown may be on the horizon. The tech giant reported a 30% jump in profits and a 21% jump in revenues, but sparked concern among investors that its many acquisitions hadn't insulated it from the larger economic crisis facing the United States.

Oracle's revenue projections in particular is what failed to impress the street and ignited concerns about a technology spending cuts. The revenue slowdown can be traced back to a reduction in the number of new licenses for software, which grew only 16% when its projected range was 15% to 25%. This is a closely watched indicator since it shows how much companies are spending to buy new software rather than simply just pay to maintain old software.

Narrowing it down even further, Oracle's weakest spot was the 7% growth in sales of new license for business applications. These are programs used by accounting and human resources divisions when companies embark on new projects or expand their businesses. The slowdown in this particular area told many investors that companies were being a lot more conservative with their money and may cut technology spending.

Many investors had hoped that Oracle's string of acquisitions would insulate the company from any major slowdown, since they brought in many new customers. The moves also diversified the firm to such an extent that just 13% of its revenues came from the troubled financial sector. However, the fact that these acquisitions still did nothing to curb the slowdown is what caused the major reaction in Oracle's stock today.

Oracle also caused ripples across the larger technology sector. The move also comes after networking company Cisco Systems (NDAQ: CSCO) posted its results that suggested a potentially weaker year for corporate technology spending. And with companies like Intel Corporation (NDAQ: INTC) and IBM (NYSE: IBM) reporting earnings within the next week, the sector is on edge with concerns of a slowdown.

In the end, Oracle is the latest in a series of bearish announcements in the tech sector suggesting that spending will begin to slowdown. Investors are slowly realizing that even technology may not be immune to the problems in the financial sector despite a lack of direct exposure. Bad news all around.

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Motorola, Inc. (NYSE: MOT) announced today that after an extensive analysis of its businesses that it will split into two distinct companies by spinning off its mobile phone unit.
 
Motorola, best known by consumers for its Razr phone, has been under significant pressure from activist Carl Icahn who has been pressuring the company to take action on its unprofitable cellular phone division. Motorola’s cell phone production had nearly $19 billion in sales in 2007 – which was a significant fall from 2006 but still made it the largest division in the company. Motorola’s communication equipment and “set-top box” unit are the actual profit drivers of the company.
 
The company plans to achieve the split by next year through “a tax-free distribution to [its] shareholders.”
 
In a press release, Motorola CEO Greg Brown said:
 
"Our decision to separate our Mobile Devices and Broadband & Mobility Solutions businesses follows a review process undertaken by our management team and Board of Directors, together with independent advisors. Creating two industry-leading companies will provide improved flexibility, more tailored capital structures, and increased management focus - as well as more targeted investment opportunities for our shareholders."
 
The real question is whether Motorola’s cell phone business is an “industry-leading” company. Despite the success of the Razr, cell phones have become a cut-throat business with razor-thin margins – no pun intended.
 
Regardless of how things play-out, it appears like Carl Icahn has scored another victory. Last year, Icahn basically forced then CEO Edward Zander from the company. Now, it appears as if Motorola, through the split, will become more aggressive about making its cell phone division profitable.
 
This saga probably isn’t near complete yet as Icahn will almost certainly be vocal about the exact manner of the split and the management choices for each new entity which definitely makes Motorola a stock worth watching.
 
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WiMax has been the talk of the technology sector for a long time as the promise of a nationwide high-speed wireless network has many druling at the mouth. The companies behind the project are just as excited as the new network would provide them with licensing opportunities that could make them billions of dollars in the future. The only thing standing in the way is a $3 billion bill that needs to be paid to roll out the initiative. Luckily, cable companies are beginning to step in as the new backers.

The WiMax initiative began as a cooperation between Sprint Nextel Corporation (NYSE: S) and Clearwire Corporation (NDAQ: CLWR) to create a nationwide wireless network using WiMax technology. The network is designed to provide high-speed web access from laptops, cellphones and other mobile devices as well as high-quality mobile video. The two were forced to explore other financing options after Sprint shareholders were unwilling to fully fund the venture, calling it excessively risky and expensive.

Cable companies have now stepped in to fill the void by taking partial ownership in the new venture. Comcast Corporation (NDAQ: CMCSA), the nation's largest cable operator, agreed to contribute as much as $1 billion into the venture alongside rival Time Warner Cable (NYSE: TWC) who would add $500 million. Bright House Networks, the sixth largest cable operator, would also contribute between $100 million and $200 million, according to the WSJ.

Other potential investors include Intel Corporation (NDAQ: INTC) - who could contribute up to a billion dollars - and Google Inc. (NDAQ: GOOG) who may provide hundreds of millions of dollars. However, it is still possible that the entire deal could fall through if all these parties do not agree and the partnership is unable to raise the $3 billion that it needs to make the project happen.

The deal also has widespread implications for shareholders of all the companies. Sprint's shareholders have been the most vocal against the deal after the company told Wall Street that it expects the venture to cost $5 billion by 2010. This prompted many to propose that the initiative be spun off and funded by someone else entirely. Meanwhile, a move by cable companies into the fray would escalate the rivalries by throwing them into a whole new arena.

In the end, the WiMax initiative looks very promising for consumers and like a great future investment for the companies involved, but it comes at a great cost in the near term. This is a cost that many Sprint shareholders believe is too high while many other companies may not be willing to put forth as much capital as the partnership would like to see. Regardless, this is definitely a situation worth watching closely.

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Clear Channel Communications (NYSE: CCU) shareholders are hearing a little static on the rumor airwaves and fleeing towards the nearest exit. Shares plummeted today after private equity firms and banks backing the $19 billion privatization of the nation's largest radio broadcaster failed to resolve their differences over final financing terms. Shareholders now have almost no confidence in the deal, which was slated to take place at $39.20. Instead, many analysts are now predicting shares to fall into the $20s.

The banks financing the deal were unable to create a credit agreement that satisfied all sides of the transaction. In particular, banks are concerned that if they lend the $22 billion needed to fund the deal, they would need to immediately write down the value of the loans as soon as the deal closes and book the losses. Since such debt has been typically marked down by 15%, this would equate to a $2.7 billion loss the moment the deal closes.  

Those involved insisted that there was still a chance that the deal could be salvaged, but the consensus remains that the deal looks unlikely to consummate. The bright side is that Clear Channel could then sue the private equity firms for breach of contract if the deal falls apart since it was not contingent on securing financing. This would help recoup some money, but do very little in the long run.

Clear Channel's business has also significantly deteriorated since the deal was first struck in November 2006. Bad news has been steadily rolling in since the buyout price was raised in the first quarter of 2007. Growth in its radio operations began to slow and then shrink as the firm's downward spiral became clear. Unfortunately for the buyers, the deal was already approved by shareholders so nothing could be done. Now, this burden may be shifted back to the shareholders.

In the end, a failed Clear Channel buyout would be the latest casualty in a series of high-profile busts since the credit market began to deteriorate. The banks and private equity firms at this point are likely still in the negotiations only to protect themselves from litigation by saying they put forth a noble effort. However, the potential losses from being sued for breach of contract still give shareholders some hope that a deal could take place. If not, shareholders could easily see their stock back in the $20s.

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Take-Two Interactive Software's (NDAQ: TTWO) board rejected Electronic Art's (NDAQ: ERTS) most recent buyout offer, saying that it was not in the best interest of shareholders. Instead, the company also confirmed that it would explore strategic alternatives to maximize shareholder value in other ways that could deliver a higher value than the current EA offer. So, what is the best move for shareholders at this point?

Electronic Arts, the world's largest video-game publisher, offered to purchase Take-Two for $2 billion in a hostile bid after management refused to negotiate before the released of its "Grand Theft Auto IV" on April 29th. EA wants to purchase the company now in order to obtain upside from the holiday sales of the game, but Take-Two management sees the buyout is opportunistically timed to capture the value of the upcoming game at the expense of shareholders.

Take-Two's board also insists that it has received indications of interest from third parties interested in purchasing the company since EA's bid, but that no substantive discussions have yet taken place. The company is intent on waiting until after the game is released to being discussions, but it did begin to assemble the materials necessary for interested parties to conduct due diligence. Any auction process would likely unlock additional value for shareholders above and beyond $26 per share.

Finally, Electronic Art's tender offer itself may no longer be viable. Take-Two adopted a Stockholders Rights Agreement (ie. poison pill) that would dilute the stock if EA acquired more than 20% of it. This would make such a hostile acquisition extremely expensive and unlikely to occur. Now, EA would be forced to launch a proxy contest to replace directors and remove the poison pill if it wanted to continue its pursuit.

In the end, Take-Two has rejected EA's offer because it has many other offers on the table that it would like to explore after the April 29th launch of its latest installment in the Grand Theft Auto series. It will be interesting to see EA's next move after the board installed a poison pill that put a fork in their plans. Regardless, this is all good news for shareholders that may now see more than $26 per share.

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Farming may not seem like the hottest industry on Wall Street, but Monsanto Company (NYSE: MON) shareholders would disagree. The global provider of agricultural products raised its outlook for the third time in three months on stronger demand for seeds. The company's stock has more than double during the past year as a result while it is now looking for ways to spend its extra cash.

Farmers are paying top dollar these days for genetically modified corn, soybeans and cotton seeds as a result of a bullish commodities market boosted by a rapidly declining U.S. dollar and stronger ethanol demand. In fact, business is so good that Monsanto announced that it would reach its long-term margin target of 52 to 54 percent this year- a full two years ahead of schedule.

These events prompted Monsanto to also raise its EPS guidance for the fiscal year to $3.15-$3.25 from $2.70-$2.80. The company is due to report its fiscal second quarter results on April 2nd, which are expected to be seasonally strong as farmers in the Northern hemisphere begin planting. Free cash flow also reached a new record of $1.4 billion, which means shareholders are likely to begin the common "use it or lose it" campaign.

Monsanto foresaw this rhetoric, however, and said it will look for ways to invest in acquisitions that further growth, projects that support the current business's growth and dividend, and share repurchase programs that return value to shareholders. Many believe that these future acquisitions may take place in quickly growing markets in India and China as an increasing acceptance of genetically modified seeds would mean more demand.

In the end, the demand for seeds will likely continue as long as the demand for corn and soybeans remains strong. Given the weakness in the U.S. dollar combined with continued demand for ethanol, this is a definite possibility and shares of MON should continue to see upside. The real question is then: Will the company use the excess cash to the benefit of shareholders or squander it on poor acquisitions?

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Market research firm Gartner Inc. reduced its 2008 forecast for personal computer shipments and warned that the estimate could drop further if the economy takes another turn for the worst. The firm now sees growth of 10.9%, or 293 million shipments, versus its forecast late last year of an 11.6% increase. Moreover, the firm warned that those numbers could drop to the single digits. This is bad news for pure-play PC manufacturers along with their component providers.

Gartner sees a healthy PC market right now, but several challenges in the near future. A deepening U.S. recession, the rising possibility of a slowdown in China's economy following the Beijing Olympics and higher oil prices could all put a damper on PC shipments this year. However, the firm also noted that PC sales should be boosted late this year through 2010 thanks to a desktop replacement cycle. Garnter predicted that strength in the emerging markets - which accounted for 60% of global growth in the fourth quarter - would also play a critical role.

This is bad news for pure-play PC-makers like Dell Inc. (NDAQ: DELL) that have already been having a bad year. The PC manufacturer has seen its domestic sales drop off a cliff and has been reliant on strong international growth and cost-cutting to drive revenues and improve its profitability. A slower domestic situation will only require additional international growth while cost-cutting can only be a temporary solution to a long-term problem. The reality is that PC sales are declining while the real money-maker - laptops - are quickly falling in price.

Struggling chip-makers like Advanced Micro Devices (NDAQ: AMD) may also find themselves in trouble. The company relied heavily on new product shipments to break-even last quarter and any slowdown could quickly send them back into the red despite plans to return to profitability by the end of 2008. Luckily they still have a chance at it if the replacement cycle begins as strongly as expected at the end of the year, as they are one of only two major chip manufacturers for PCs and laptops.

The reduced forecast could also affect many other companies to a lesser extent. PC manufacturers like Hewlett-Packard (NYSE: HPQ), Apple Inc. (NDAQ: AAPL), and International Business Machines (NYSE: IBM) may also feel some heat, but their diversified product lines should bar any major losses sustained. In the end, the PC business was thought to be relatively recession-proof, but these new predictions could change the story.

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At least one Coinstar, Inc. (NDAQ: CSTR) shareholder sick of being nickel and dimed has pushed the company to make several key changes. The Shamrock Activist Value Fund, which owns a 13.4% stake, demanded the board of directors be reformed and the poison pill be canceled. The move is seen by many as a precursor designed to make future actions to unlock shareholder value much easier.

Many investors are speculating that Shamrock, owned by Roy Disney and entertainment lawyer Stanley Gold, may be interested in eventually pushing the company to evaluate strategic alternatives. Some are expecting a rough 2008 after a plan was announced to remove cranes, bulkheads and kids' rides at Wal-Mart Stores (NYSE: WMT) and other retailers and install more Coinstar Redbox DVD kiosks and coin counting machines in a move that will lower revenues while increasing investment costs.

Coinstar, however, anticipates that the long-run implications of the Wal-Mart deal are worth it. The company projects that the projects could contribute between $165 and $195 million per year with EBITDA of between $36 and $45 million by mid-2009. This compares to a loss of entertainment dollars amounting to only $65 to $75 million in revenues and $15 to $20 million in EBITDA, which means that the company expects to realize incremental EBITDA gains of between $20 and $25 million when all is said and done.

While the Wal-Mart deal may be holding shares back these days, there are several potential areas in which value could be unlocked. Coinstar's $70 million majority ownership stake in their DVD rental kiosk business Redbox is one such area. The business will do revenues of between $250 and $270 million with an EBITDA of between $20 and $30 million in 2008. Even better, its EBITDA margins will approach 20% thanks to route density and economies of scale beginning at the end of 2009.

Coinstar could also try and divest its struggling entertainment business in order to focus more on its core money exchange businesses. The entertainment businesses have been losing steam while the DVD rental businesses could be easily divested to strategic buyers like Blockbuster (NYSE: BBI) and Netflix (NDAQ: NFLX) for a healthy premium. The move would free up cash that could then be used to establish a dividend or repurchase shares in order to unlock value for shareholders.

One final thing worth noting is Coinstar's cyclicality with the economy. This was brought up during the company's last conference call that showed there is a weak correlation between company and economic performance. The reason is because Coinstar's machines are used for relatively small transactions instead of big ticket items. This is also good news for investors since it makes this stock a relatively recession-proof one.

In the end, this is a stock that could benefit from some shareholder activism and Shamrock's attempt to remove key provisions could be the first step. Luckily for shareholders, the company is also doing well as a conglomerate so there is nothing to lose. Any activist move could substantially increase the share price, but a standalone company is also not such a bad proposition. Combined, these factors make CSTR a stock worth watching!

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Sirius Satellite Radio (NASDAQ: SIRI) received Justice Department approval yesterday for its $4.59 billion purchase of rival XM Satellite Radio (NASDAQ: XMSR). The controversial decision to give antitrust clearance to the deal was based on rapidly expanding technological options for audio media such as mobile phones and internet radio.

Justice Department antitrust chief Thomas Barnett said in a conference call with reporters that, "Competition in the marketplace generally protects consumers and I have no reason to believe that this won't happen here."

This is obviously good news for investors in both companies, though the deal still requires FCC approval. The Federal Communications Commission may prove an even more difficult audience for Sirius CEO Mel Karmazin who lobbied the Justice Department intensely for the deal. The FCC is seen as more susceptible to the outrage of groups like the National Association of Broadcasters that views this purchase as creating a monopoly.

The FCC currently has a policy based on a 1997 decision that prevents the combination of the two satellite radio companies. At this point, rumors from inside the FCC say that no decision has been made but that the Justice Department conclusion makes it more difficult for the FCC to flatly block it.

Though FCC approval is far from a given, the real question for investors remains - is there real upside in the combination of Sirius and XM? Here's what the Justice Department had to say in their statement allowing the deal:

"Because XM and Sirius would no longer compete with one another in the retail channel following the merger, the Division examined what alternatives, if any, were available to consumers interested in purchasing satellite radio service, and specifically whether the relevant market was limited to the two satellite radio providers, such that their combination would create a monopoly. The parties contended that they compete with a variety of other sources of audio entertainment, including traditional AM/FM radio, HD Radio, MP3 players (e.g., iPods®), and audio offerings delivered through wireless telephones. Those options, used individually or in combination, offer many consumers attributes of satellite radio service that they may find attractive. The parties further contended that these audio entertainment alternatives were sufficient to prevent the merged company from profitably raising prices to consumers in the retail channel – for example, through less discounting of equipment prices, increased subscription prices, or reductions in the quality of equipment or service."

The statement also say there are "substantial" cost savings to be had, but overall tone speaks to the reality that satellite radio seems almost like old media in the face of iPods and streaming, high quality internet radio. Sirius and XM possibly warrant investment with total approval now more likely, but the companies certainly don't warrant unbridled enthusiasm.

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Tiffany & Co. (NYSE: TIF) shares rose sharply today after its profits slipped but still topped estimates. The diamond retailer also issued a bullish outlook, saying that it expects "robust" growth in the non-U.S. markets that should drive earnings 10.5% higher than previously expected. However, it still expects a slight decline in U.S. same-store sales as the poor economic climate shows no signs of letting up.

The share price has been so volatile because many investors expected luxury retailers to take a hit amid weak U.S. consumer spending. Many like Tiffany's quickly expanded during the last decade into non-metropolitan markets that are now suffering with weaker consumer spending. However, strong international spending has driven results and led to a substantial increase in earnings that caught many off-guard.

The rise also spurred a rise in other luxury retailers including Zale Corp. (NYSE: ZLC), Blue Nile Inc. (NDAQ: NILE), and Harry Winston Diamond Corp. (NYSE: HWD). Many investors are now bullish on these companies, but it is worth noting that many of them have a lot more U.S. exposure than Tiffany's that has been able to rely on robust international growth to curb losses from lower U.S. consumer spending.

The reality is that Tiffany's saw 40 percent of its sales come from foreign markets with a 20 percent increase in sales volume from abroad, which is substantially higher international exposure than other luxury retailers that could still be hit hard from a U.S. slowdown. This international exposure has been the hallmark of companies that have been able to weather the storm so far this year.

In the end, Tiffany's is definitely still seeing a slowdown in the U.S., but is being helped by strong demand internationally. Investors should look to invest in companies with similar exposure in order to recession-proof their portfolio and prevent any significant losses from a slowdown in the United States.

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Capital Senior Living Corporation (NYSE: CSU) may sound like a boring business but not for shareholders! The company's shares moved sharply higher today after the company announced that it has appointed two new board members and agreed to explore a possible sale. The news comes amid substantial pressure from several activist shareholders that saw unrealized value in the country's largest operator of senior living communities.

The dissident shareholders behind the push included Boston Avenue Management (7.3% owners), West Creek Capital (6.4% owners), and Matthes Capital Management (1.7% owners). New directors from the latter two hedge funds will serve on a committee to explore strategic alternatives, including whether or not to sell Capital Senior Living. Whether or not a sale will actually happen remains to be seen, but the number of activist shareholders and board seats tilts the odds more than usual.

Capital Sen