Sallie Mae (NYSE: SLM) is up 6% on news of a $31 billion financing supported by major banks.

Alliance Data (NYSE: ADS) is down 41% on news that its buy-out by Blackstone (NYSE: BX) could fall apart.

Shares in Restoration Hardware (NASDAQ: RSTO) are trading up 6% on news that a private equity offer for the company is likely to close.

Corning (NYSE: GLW) is up over 5% on better than expected earnings.

McDonald's (NYSE: MCD) is down almost 3% despite good 4th quarter earnings.

Stocks may trade differently in the pre-market than they do in the regular session.

Douglas A. McIntyre is an editor at 247wallst.com.

Specialty retailer Restoration Hardware (NASDAQ: RSTO) was supposed to be sold to private equity firm Catterton Partners for $6.70 a share. But, so much for the "done deal," the "sure thing." Late yesterday, Sears Holdings (NASDAQ: SHLD) bought 13.9% of the smaller company's shares.

According to CNN Money, "Sears said it may make a tender offer for all of Restoration Hardware's shares or raise its stake by buying additional shares on the open market." RSTO shares rose to $7.46 after hours.

But with Sears in such deep trouble of its own, why is it fooling around with buying a small retailer with a $250 million market cap, $800 million in sales, and shaky profitability?

Why, indeed? Shareholders in Sears would have a right to be upset. Head man Eddie Lampert would have people believe that his retail giant, which combines Sears and K-Mart, is the picture of efficiency and smart merchandising. Why then, are its shares at a 52-week low of just above $114 a share?

Sears can't waste its time buying little companies. It has too many big problems of its own.

Douglas A. McIntyre is an editor at 247wallst.com.

With the pain of the real estate plunge, Restoration Hardware (NASDAQ: RSTO) has had a hard time (the company is a specialty retailer of bath ware, furniture and so on). But is it really a good time to sell out?

Well, the company's management thinks so. Late last week, Restoration Hardware announced a going-private transaction for $267 million or $6.70 per share. The buyer is Catterton Partners, which has quite a bit of experience with retail deals.

The premium comes to about 150%, which is nothing to sneer at. Yet, keep in mind that a variety of institutional investors are keeping their shares (yes, they are betting there could be a nice turnaround).

In fact, Restoration Hardware has already been making some restructuring moves (such as cutting jobs). But, as a private company, I suspect the actions will be even more substantial.

More importantly, this may be a sign that other specialty retailers may seek an exit, such as Pier 1 Imports Inc. (NYSE: PIR). And if so, I think managements will point to the super premium on Restoration Hardware's deal.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

MOST NOTEWORTHY: Video Game-makers and Apple (APPL) top today's list of initiations:

• Oppenheimer initiated THQ Inc. (NASDAQ:THQI) and Activision Inc. (NASDAQ:ATVI) with Buy ratings and Electronics Arts Inc. (NASDAQ:ERTS) with a Neutral rating and $60 target.
• Caris initiated Apple Computer Inc. (NASDAQ:AAPL) with an Above Average rating and $100 target; the firm considers Apple "a winner" in the consumer electronics space and sees two key catalysts for 2007: the iPhone and a wider-screen video iPod.

OTHER INITIATIONS:

• American Tech initiated Endo Pharmaceuticals Holdings Inc. (NASDAQ:ENDP) with a Buy, and believes that Endo is positioned to benefit from both market share gains and overall market growth.
• RBC capital Markets initiated Restoration Hardware Inc. (NASDAQ:RSTO) with an Outperform rating and $12 target, saying that Restoration has reinvented its core brand and has multiple revenue growth opportunities.
• Jefferies believes Lamar Advertising Co. (NASDAQ:LAMR) digital transformation is driving higher revenues and expanding margins and initiated it with a Buy rating and $73 target.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: Notable companies from today's upgrade list include Verizon (VZ) and Qwest (Q).

• A.G. Edwards upgraded Verizon Communications, Inc. (NYSE:VZ) to Buy from Hold, as they believe the recent pullback has provided a buying opportunity; driven by FiOS deployment and MCI (MCIP) merger synergies, they also expect wireline performance to improve.
• Goldman Sachs removed shares of Qwest Communications International, Inc. (NYSE:Q) from their America's Conviction Sell List and Least Favorite List, citing valuation.

OTHER UPGRADES:

• BB&T upgraded shares of Restoration Hardware Inc. (NASDAQ:RSTO) to Buy from Hold, citing third-quarter sales growth and progress in the company's turnaround plans.
• JP Morgan upgraded Shanda Interactive Entertainment Ltd. ADS (NASDAQ:SNDA) to Overweight from Underweight, citing the shift in the industry to free-to-play from pay-to-play paying model, the strong marketing capability and operating platform, as well as upcoming game launches, for the upgrade.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).