With the proposed Microsoft (NASDAQ: MSFT) and Yahoo! (NASDAQ: YHOO) merger grabbing headlines, for investors looking at the next internet company that may be put in play, have a look at CNET Networks (NASDAQ: CNET). CNET shares a lot of similarities with Yahoo!, the most glaring being the continued underperformance of both the stock price and the company in general.

About two weeks ago, federal antitrust regulators cleared hedge fund Jana Partners LLC's increased stake in online media company. Jana Partners leads an investment group that said last week it now owns 10.6% of CNET's voting stock, up from 8.1%. Antitrust law requires companies and other investors to seek antitrust approval when they cross certain ownership thresholds.

The timing is interesting. If you are trying to profit from M&A in the internet space, take a look at CNET. It may be the next company to be acquired.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has no positions in any stock mentioned as of 2/3/08.

Like just about everyone else, before I buy any kind of tech device, I always do some research online. One of the best sites for reviews is CNet, which goes to great lengths to analyze and compare everything from digital cameras and MP3 players to laptops and audio speakers. Despite the great service, though, the company has had a lot of trouble staying in the black.

Today, DealBook is reporting that Jana Partners is leading a consortium which has taken major stake in CNet Networks (NASDAQ: CNET). The consortium is trying to replace CNet's directors and take control of the company's board. Jana Partners is a $5 billion hedge fund founded by Wharton grad Barry Rosenstein in 2001. The consortium focused on CNet includes Sandell Asset Management and Spark Capital, a venture capital firm.

CNet has performed poorly over the last several years, and is currently in the red. Despite the impressive growth of online advertising, especially at tech-related sites, CNet has experienced falling revenues. One problem may be that it is simply too big. The 15-year old company has over 2,500 employees, and finds itself competing with similar sites that have only a few dozen people behind the scenes. No doubt that will be something the activists focus on as they seek control of the company.

E*Trade (NASDAQ: ETFC) closed at $14.21.

• ETFC lowered its EPS guidance, increased its provision for loan losses. ETFC will take additional security impairments and exit and restructure some non-core business.
  
• Goldman Sachs (NYSE-GS) lowered its 12-month price target to $16 and removed ETFC from its Americas Buy list. Smith Barney says: "If its bank regulators took a more holistic view of ETFC's regulatory capital, it could result in a forced deleveraging."
  
• The Wall Street Journal reported on 8/22 that TD AmeriTrade (NASDAQ: AMTD) is in merger talks with ETFC. Jana Partners & SAC Capital Advisors LLC in late May encouraged ETFC and AmeriTrade or Schwab (NASDAQ: SCHW) to consider a combination.
  
• ETFC overall option implied volatility of 60 was above its 26-week average of 44, according to Track Data, suggesting larger price fluctuations.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

There is no holiday break for the rumor mill as word of many a company's activity is bantered about.



BUILD-A-BEAR WORKSHOP INC (NYSE: BBW)

As the stock shot up 14% the other day, it was revealed that the warm and fuzzy big bear hired Lehman Brothers to "explore strategic alternatives." Some analysts think an LBO is what will happen, and range the valuation at from $34 to $36. Very recently the company reduced its second quarter per share profit expectations to 7 cents to 10 cents, down from 15 cents to 19 cents, because of slow sales at stores that have been opened for at least a year. Here's a bear to be bullish on.


COUNTRYWIDE FINANCIAL CORPORATION (NYSE: CFC)

It's troubled times for the nation's largest mortgage lender. Earlier in the week the shares began to fall when it was revealed that they may be a part of a government investigation into subprime loans. It certainly doesn't help that three former company executives pleaded guilty to conducting insider trading in shares of Countrywide. The heat is on.


THE STEAK N SHAKE COMPANY (NYSE: SNS)

Two Texas investment groups, HBK Investments and Lone Star Funds, who between them own about 9.5% of the company, are said to be interested in digesting the whole dang thing. The 490 restaurant chain that has operations in 20 states just saw their most recent quarterly profit drop 30% from the previous year, as same store sales fell 4.7%. Gentlemen that they are though, they'll only pursue the sizzle if the board cooks it up with them.



STILL FLYING AROUND


WENDY'S INTERNATIONAL INC (NYSE: WEN)

They say they may want to sell the company, and the latest firm to gobble up shares is Tudor Investment, purchasing a 6.1% stake.


TD AMERITRADE HOLDING CORPORATION (NASDAQ: AMTD)

Jana Partners and S.A.C. Capital Advisors, who have about an 8.4% combined ownership of AMTD, are keeping the pressure on for the firm to partner up with another brokerage firm, and have now formalized their demands.



BUZZ


DJO INCORPORATED (NYSE: DJO): MMI Investments purchased 9.4% of the company's shares. When they buy in, they usually see the company acquired...Pride International Inc (NYSE: PDE): Spin off of foreign assets, or a possible takeover, has attracted interest...Legg Mason Inc (NYSE: LM): Pershing Square Capital, whose activist leader William Ackman has tried to push around McDonald's Corporation (NYSE: MCD) and Wendy's, has taken a 1.5% share of the company.

A pair of hedge funds is pushing TD Ameritrade Holding Corp. (NASDAQ: AMTD) to merge with one of its peers. Their rationale? Cost savings and increased sales. The AP reports that Jana Partners and SAC Capital Advisors, who combined own 8.4% of AMTD, are seeking to substantially increase their position -- driving AMTD up 9% after hours.

I envy the hedge funds' ability to put their mouth where their money is. I have all sorts of ideas I would love to see companies follow but I don't have their power to make them happen. If Jana and SAC are right that mergers will improve industry profitability then shareholders will benefit because the current stock market has not attracted enough individual trading volume to support three independent online brokers.

Jana and SAC accuse AMTD parent and 40% owner, The Toronto-Dominion Bank (TSE: TD), of blocking a merger with E Trade Financial Corp. (NASDAQ: ETFC) but TD says it only controls five of AMTD's 12 board seats. Jana and SAC think a merger could yield as much as $500 million in annual cost savings, from moves such as combining assets on one platform, and more than $100 million in yearly revenue benefits.

If Jana and SAC are right, TD, EFTC and The Charles Schwab Corp. (NYSE: SCHW) could be in play.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned in this post.