Sirius XM (NASDAQ: SIRI) has been fighting off an attempt by EchoStar (NASDAQ: DISH) to take over the troubled satellite radio firm. Now Sirius has turned to another company in the hopes of avoiding a hostile buy-out. According to The Wall Street Journal, Liberty Media may be the savior. "The talks set the stage for a battle between the leading U.S. satellite-television providers -- Liberty-controlled DirectTV Group Inc. and Mr. Ergen's Dish Network Corp. -- for control of the country's sole satellite-radio operator."

MAJOR PAPERS:

• Warren Buffett's Berkshire Hathaway Inc (NYSE: BRK.A) and Mars are in talks to purchase Wm. Wrigley Jr. Co. (NYSE: WWY) for over $22B, the Wall Street Journal reported. An announcement may come as soon as today.
• The Royal Bank of Scotland Group Plc (NYSE: RBS) will start the integration of ABN Amro Holding's (NYSE: ABN) investment bank into its global markets division, the Financial Times reported. This process will most likely result in the paring of 7,000 jobs.

• According to the New York Post, IAC/InterActiveCorp. (NASDAQ: IACI) Chairman Barry Diller is expected to meet with his board this week to restart the process of breaking up his company into five separate pieces, sources said. At the same time, Diller and Liberty Media Corporation (NASDAQ: LMDIA) Chairman John Malone are continuing to talk about a deal that would trade one or more of IAC's assets for Liberty's ownership stake in IAC.
• The UK Times has learned that Numis Securities, the stockbroking group headed by Michael Spencer, is in "advanced talks" to buy the UK equities business of The Bear Stearns Companies Inc (NYSE: BSC). Numis may look to hire a team of 25 from Bear.

MOST NOTEWORTHY:

• Banc of America upgraded PetSmart (NASDAQ:PETM) to Buy from Neutral on valuation, as they believe the market is overly negative on the company's cyclicality.
  
• Keefe Bruyette upgraded shares of Marsh & McLennan (NYSE:MMC) to Outperform from Market Perform on increased confidence management will be able to improve margins.
  
• JP Morgan upgraded Pinnacle Airlines (NASDAQ:PNCL) to Overweight from Underweight citing the company's FCF and contract certainty.

• Hasbro (NYSE:HAS) was upgraded to Buy from Hold at Needham.
  
• Calyon raised Airtran Holdings (AAI) to Add from Neutral.
  
• Liberty Entertainment (LMDIA) was raised at Merrill to Buy from Neutral.

InterActiveCorp (NASDAQ:IACI) and Liberty Media (NASDAQ:LINTA) have sued each other over IACI's planned breakup into five separate businesses. A Delaware Chancery Court Judge is expected to issue a ruling soon. IACI announced the plan to separate IACI into five publicly traded companies on November 5, 2007:

1) HSN, will include business comprising IACI's retailing segment;
2) Ticketmaster;
3) Interval International, which will include CondoDirect, Resort Quest Hawaii and VacationSource;
4) LendingTree, which will include RealEstate.com Domania, GetSmart, Home Loan Center and iNest; and
5) IAC media & advertising, Ask.com, Bloglines, City Search, Cursor Mania, Evite, Excite, insiderpages, iWon, My Fun cards, Black Web Enterprises Shoebuy.com, Match.com.

IACI April option implied volatility of 47 is above its 26-week average of 38 according to Track Data, suggesting larger risk.

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

Whomever buys The Weather Channel will probably see nothing but blue skies.ss

MAJOR PAPERS:

• According to people familiar with the matter, the Wall Street Journal reported that an investor group that includes Harbinger Capital Partners is expected to report a raised stake in The New York Times Company (NYSE: NYT). The raised stake is expected to be close to matching the 19% stake owned by the Sulzberger family.
• The Goldman Sachs Group Inc (NYSE: GS) has been spared many of the problems of the subprime mortgage crisis, but other areas where it's involved, such as investment banking and leveraged loans, are hurting the firms profitability, the Wall Street Journal reported.

• Cablevision Systems Corporation (NYSE: CVC) is seeking to put a valuation on its Rainbow Media unit, in order to possibly sell it, sources say. In the past, the unit, which consists of several cable channels, has been valued at $3B, but the Dolan family is hoping to obtain a higher price, according to the New York Post. Possible buyers include Liberty Media Corporation (NASDAQ: LCAPA) and News Corporation (NYSE: NWS).
• Elan Corporation (NYSE: ELN) is considering splitting its biopharmaceuticals arm, which markets Tysabri, from its drug technology division, the Sunday Times noted. The potential spin-off could unlock up to $1.5B to share holders.

MOST NOTEWORTHY:

• Merriman believes OptionXpress Holdings (NASDAQ: OXPS) has lost market share, and remains vulnerable on many fronts. They expect the competitive landscape will continue to intensify, pressuring margins and growth rates. The firm initiated shares with a Sell rating.
• Morgan Keegan started Supertex (NASDAQ: SUPX) with a Market Perform rating, citing lack of near-term catalysts.
• Syngenta (NYSE: SYT) was initiated with an Outperform rating at Bear, as they are positive on the company's defensive growth profile and valuation.

• HSBC initiated FedEx (NYSE: FDX) with a Neutral rating and $102 target and United Parcel Service (NYSE: UPS) with an Overweight rating and $86 target.
• Credit Suisse started Liberty Media (NASDAQ: LCAPA) with an Outperform rating and $140 target.

MAJOR PAPERS:

• With regulators, politicians and rating firms biting at their heels, Countrywide Financial Corporation (NYSE: CFC) believed that it had no choice but to approach Bank of America Corporation (NYSE: BAC) last month about a merger, reported the Wall Street Journal. That fear led to BAC's $4B takeover of Countrywide, the Wall Street Journal reported.
• The Wall Street Journal reported that John Malone's Liberty Media Corporation (NASDAQ: LCAPA) moved to take control of IAC/InterActiveCorp (NASDAQ: IACI) from Barry Diller, nominating a series of directors for board members it is looking to replace.
• According to the Financial Times, European public health specialists have found "significant resistance" to Roche Holding Ltd's (OTC: RHHBY) widely purchased influenza antiviral medicine Tamiflu.

• Shares of Britain's third-largest drug maker, Shire Plc (NASDAQ: SHPGY) plummeted yesterday to a two-year low on concerns about demand for its attention deficit hyperactivity disorder treatment for children, Vyvanse, the Telegraph reported.

IAC/InterActiveCorp (NASDAQ: IACI) and Liberty Media (NASDAQ: LINTA) have sued each other over IACI's planned breakup into five separate businesses.

IACI is recently up 20 cents to $24.60; shares near three-year low into company break up.

IACI is expected to report EPS on February 6.

IACI announced the plan to separate IACI into five publicly traded companies on November 5, 2007:

1. HSN, will include business comprising IACI's retailing segment.
   
2. Ticketmaster.
   
3. Interval International, which will include CondoDirect, Resort Quest Hawaii and VacationSource.
   
4. LendingTree, which will include RealEstate.com Domania, GetSmart, Home Loan Center and iNest, and
   
5. IAC media & advertising, Ask.com, Bloglines, City Search, Cursor Mania, Evite, Excite, insiderpages, iWon, My Fun cards, Black Web Enterprises Shoebuy.com, Match.com.
   

IACI February option implied volatility of 47 is above its 26-week average of 33 according to Track Data, suggesting larger risk.

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

MAJOR PAPERS:

• Liberty Media Corporation (NASDAQ: LCAPA) filed a lawsuit in Delaware against IAC/InterActiveCorp's (NASDAQ: IACI) Barry Diller in an attempt to block Mr. Diller from completing the spinoffs of several units on terms that could dilute Liberty's voting power; the suit follows a suit filed by IAC against Liberty seeking to complete the divestiture on its own terms, the Wall Street Journal said.

• The Evening Standard learned that billionaire Wilbur Ross is in takeover talks with AMBAC Financial Group Inc (NYSE: ABK) and that a deal could come within the next two weeks.

• According to analysts, TheDeal.com's Dealscape blog reported that the troubles at WellCare Health Plans Inc (NYSE: WCG) could lead to a sale of the company after the departure of the company's three executives.
• Citing a source close to Advanced Micro Devices Inc (NYSE: AMD), CRN.com reported that rumors of a merger between the company and International Business Machines Corporation (NYSE: IBM) "is nothing but speculation." A rumor in Mergermarket, which caused AMD's share price to spike almost 11% on Wednesday, said IBM's microelectronics division could merge with AMD "possibly in the near term."

MOST NOTEWORTHY:

• LYON initiated shares of aerospace stocks including Goodrich Corporation (NYSE: GR), TransDigm Group Inc (NYSE: TDG) and Triumph Group Incorporated (NYSE: TGI) with Add ratings and a $74 target, $45 target and $90 target, respectively.
  
• WuXi Pharmatech (NYSE: WX) was started with a Hold rating and $29 target at Jefferies on valuation. JP Morgan started shares with a Neutral rating and Credit Suisse initiated shares with an Outperform rating.
  
• Myriad Genetics Inc (NASDAQ: MYGN) was started with a Hold rating and $50 target at Citigroup, as the firm is cautious on the Phase III Flurizan results and does not recommend putting new money here at these levels.
  
• Citigroup also initiated shares of Cypress Biosciences Inc (NASDAQ: CYPB) with a Buy rating and $22 target as the firm believes Milnacipran has sufficient database for approval and is capable of gaining meaningful market share as firstline therapy.
  
• Knology Inc (NASDAQ: KNOL) was initiated with a Buy rating and $25 target at BWS Financial, as the firm believes the company's growth potential is greater than other cable companies through a business plan that allows it to have operations in all regions of the U.S.

• Wachovia resumed coverage of Liberty Media Corporation (NASDAQ: LCAPA) with an Outperform rating.
  
• Northwest Airlines Corporation (NYSE: NWA) and Delta Air Lines Inc (NYSE: DAL) were initiated with Overweight ratings at JP Morgan.
  
• Thomas Weisel started shares of Tyco Electronics (NYSE: TEL) with a Market Weight rating.
  
• Goldman initiated shares of Electronic Arts Inc (NASDAQ: ERTS) and Activision Inc (NASDAQ: ATVI) with Buy ratings and THQ Inc (NASDAQ: THQI) with a Neutral rating.