Electronic Arts (NASDAQ: ERTS) closed at $54.27 Monday.

ERTS is scheduled to report Q1 EPS after the market close today.

ERTS unsolicited $2 billion buyout offer for Take Two (NASDAQ: TTWO) expires on May 16.

ERTS May 55 straddle is priced at $3.55. ERTS June option implied volatility of 36 is near its 26-week average according to Track Data, suggesting non-directional price fluctuations after EPS & TTWO offer expiration.

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

MAJOR PAPERS:

• Once thought to be extremely safe, action rate securities have proved difficult to sell in this credit crisis. Tech companies are big holders of them and are taking charges left and right, including MetroPCS Communications Inc (NYSE: PCS), Palm Inc (NASDAQ: PALM) and Earthlink Inc (NASDAQ: ELNK), according to the Wall Street Journal.
• Electronic Arts Inc (NASDAQ: ERTS) is again urging Take-Two Interactive Software Inc (NASDAQ: TTWO) to negotiate after it recommended that its stockholders not sell any of its shares to EA and help its $2B takeover bid, the Financial Times reported.

OTHER PAPERS:

• NYSE Euronext Inc (NYSE: NYX) will look to increase its stakes in India's National Stock Exchange and the country's Multi Commodity Exchange, the Business Standard reported, once foreign ownership rules are eased. NYSE Euronext also intends to partner with the two Indian exchanges in order to help them develop their business.

WEB SITES:

• Business Week reported that Brian Marckx of Zacks Investment Research said Bristol Myers Squibb Company (NYSE: BMY) may be an attractive takeover candidate for a larger pharma such as Pfizer Inc (NYSE: PFE) or France's Sanofi-Aventis SA (NYSE: SNY), both of which have been partners with Bristol on some of its products.

Electronic Arts (NASDAQ-ERTS) made an offer of $26 a share for Take Two Interactive (NASDAQ: TTWO), a publisher of Grand Theft Auto videogames.

ERTS is recenlty trading down $1.54 to $48.21.

Smith Barney: "We believe ERTS views TTWO as a strategic asset and may be willing to pay slightly, but not materially higher than its current offer."

ERTS has as market cap of $15.7 billion with zero long term debt. ERTS had 2007 total revenue of $3 billion. TTWO had 2007 total revenue of $981 million.

ERTS March option implied volatility of 35 is near its 26-week average according to Track Data, suggesting non-directional price fluctuations.

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

Shares in Take Two (NASDAQ:TTWO) fell almost 3% after hours and could do worse at the open. The company offered such weak guidance that investors are trying to find out what killed the firm's big turnaround.

Net revenue for the fourth quarter was $292.6 million, compared to $266.6 million for the same period of fiscal 2006, which was in line with expectations. Net loss for the fourth quarter was $7.1 million or $0.10 per share, compared to a net loss of $14.0 million or $0.20 per share in the fourth quarter of fiscal 2006. Revenue in the quarter was driven by by BioShock, NBA 2K8 and Carnival Games, all of which were new titles released last quarter, as well as Grand Theft Auto catalog titles.

But, the company's next quarter will be much worse than expected. Barron's reports that "for the fiscal first quarter ending January 31, the company sees revenue of $175 million to $225 million, with a non-GAAP loss of 50-60 cents a share. The Street has been looking for $278 million and a loss of 16 cents."

After years of accounting problems and management turnover new investors brought in a top management team to fix the company. It seemed to be working, at least until today. The shares traded just above $12 in August, but signs that things were improving moved the stock to over $19 in early October. After hours today, the price dropped to $17.55.

Take Two is not likely to move up for at least a quarter, and if guidance is light then shareholders may lose what patience they have left.

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

Hot Topic Inc (NASDAQ: HOTT), the trendy retailer with a downward trending stock price, announced last night that it is buying back $40 million of stock, roughly 11% of the company's value.

As we blogged in early July, the retailer is way off from its $30 high and is now selling for $8.15. The sagging stock price has attracted SAC Capital, which accumulated 5.1% of Hot Topic stock, or 2.3 million shares.

We blogged about the merits of bottom fishing in this retailer, but proved a bit early as investors dumped retail stocks on weak economic data and concerns about the subprime market hit the headlines. Hot Topic also got hit due to Take-Two Interactive Software Inc (NASDAQ: TTWO) delaying the launch of Grand Theft Auto 4, as the introduction of new game consoles is thought to have boosted Hot Topic's results in the past.

Hot Topic has a clean balance sheet and a second concept, Torrid, which provides plus-size fashion-forward apparel and accessories that target young women principally between the ages of 15 and 29, that is doing alright.

Last night's announcement can be credited to SAC Capital. SAC likes the management of overcapitalized balance sheet to put any excess money to work quickly. The combination of a large share repurchase in addition to a potential turn around of the Hot Topic concept could drive this stock considerably higher in 2008.

I have already blogging about the E3 conference twice this past month. But now, long-time media investor Larry Haverty has given Barron's Magazine his thoughts on video games, saying that Best Buy Incorporated (NYSE: BBY) may be a good way to profit from the business.

Haverty believes the combination of an upgraded cycle in the video game business and the transition to digital broadcasting will mean good times ahead for Best Buy shareholders. Forecasts for a 12% growth in the video game business for this upgrade cycle is way off with 25% industry growth being more likely as Take Two Interactive Software Inc's (NASDAQ: TTWO) Grand Theft Auto and Microsoft' Corporation's (NADSAQ: MSFT) Halo 3 hit the market, according to Haverty. I have noticed the same thing, that investors are underestimating the potential of this upcycle.

Best Buy has $2.5 billion in net cash, a $5 billion share repurchase program in place, and its competition is in trouble. The stock has been dead money for a while, but Haverty's argument is compelling. Best Buy is most definitely worth looking into here.

Take Two Interactive's (NASDAQ: TTWO) Rockstar Games was expected to release its latest game, Manhunt 2, on July 10 for Nintendo's (OTC: NTDOY) Wii and Sony Corporation's (NYSE: SNE) PlayStation 2 consoles. However, Britain, America's friendly Democratic neighbor, has banned sales for -- get this -- "unremitting bleakness and callousness of tone."

I think that is how my mother referred to my dress code back in high school.

The banning comes after a 14-year old British schoolboy was murdered by a friend, Warren Leglanc, age 17. The parents of the schoolboy blamed a video game for their son's death. Patric Pakeerah, the father of the murdered boy, welcomed the decision, saying "It's a video instruction on how to murder somebody; it just shows how you kill people and what weapons you use."

I'd hate to see if Mr. Pakeerah ever watched prime-time television. Or the news, for that matter.

MAJOR PAPERS:

• The Wall Street Journal reported that Toyota Motor Corporation (NYSE: TM), which launched a factory-building blitz five years ago, is now being urged by senior members of the founding family to stop building factories in the United States on fears it will hurt the company's efficiency.
• Kirk Kerkorian, who controls MGM Mirage (NYSE: MGM), had planned to buy the Bellagio Hotel and Casino and the $7.4B Project City Center from MGM. But that deal now appears to be off, according to the Wall Street Journal.

OTHER PAPERS:

• The U.K. Times reported that News Corporation (NYSE: NWS) has had preliminary talks with Yahoo Inc (NASDAQ: YHOO) about giving its social networking site MySpace to the online search company, in exchange for a 25% stake in Yahoo!.
• The New York Times reported that NYC Mayor Michael Bloomberg will leave the Republican Party and register as an Independent.
• The New York Times also reported that Microsoft Corporation (NASDAQ: MSFT) will pay Take-Two Interactive Software (NASDAQ: TTWO) $50M for two exclusive downloadable episodes of Grand Theft Auto for the Xbox 360.

MAJOR PAPERS:

• According to the Wall Street Journal, Take-Two Interactive Software's (NASDAQ: TTWO) announcement that it is considering a sale is being considered a "ploy" by the company to hold off a shareholder revolt, according to analysts.
• The Wall Street Journal reported that Deutsche Bank AG (NYSE: DB) has agreed to buy Maher Terminals, the owner of the largest container operation at the Port of New York and New Jersey.
• The Financial Times reported that FedEx Corporation (NYSE: FDX) will launch guaranteed next day deliveries within China beginning in May.

OTHER PAPERS:

• The New York Post is reporting that Apollo Management is near a deal to acquire Claire's Stores Inc (NYSE: CLE) for $3B, according to sources familiar with the situation.
• The New York Times reported that two Home Depot Inc (NYSE: HD) directors will not seek re-election at the company's annual meeting in May.
• Investor's Business Daily's "New Issue America" column highlighted ETelecare Global Solutions (which will trade under the symbol ETEL on the NASDAQ), which is expected to price the week of March 26 with an offering price of $12.50-$14.50.

WEBSITES:

• A Palm Inc (NASDAQ: PALM) buyout could be finalized by Thursday at $20 a share, with Nokia Corporation (NYSE: NOK) as the leading bidder, reported Unstrung.com.
• CNet.com reported that Google Inc (NASDAQ: GOOG) will offer themes for its personalized homepages.

MOST NOTEWORTHY: Pfizer and Flextronics Int'l topped today's list of initiations.

• Goldman reinstated Pfizer Inc (NYSE: PFE) with a Buy rating and $30 target; they are positive on Pfizer's valuation, low binary risk, high dividend yield and potential new initiatives.

• UBS started Flextronics Int'l (NASDAQ: FLEX) with a Buy rating and $14 target; the firm said Flextronics's RoIC expansion potential is under appreciated by the Street.

OTHER INITIATIONS:

• JP Morgan initiated VCA Antech (NASDAQ: WOOF) with an Overweight rating; the firm said pet demographic trends are positive and that upside potential will come from its strong acquisition pipeline.

• Bank of America initiated aQuantive Inc (NASDAQ: AQNT) with a Neutral rating and $25 target on valuation.

• Nollenberger started four video game companies: Activision Inc (NASDAQ: ATVI), Electronic Arts (NASDAQ: ERTS) and THQ Inc. (NASDAQ: THQI) with Buy ratings and Take-Two Interactive Software (NASDAQ: TTWO) with a Neutral rating.

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

MOST NOTEWORTHY: Interactive Entertainment, Nokia (NOK) and Motorola (MOT) top today's small list of initiations.

• Bear Stearns re-initiated the Interactive Entertainment sector with a Market Weight rating.
  • The firm re-initiated Electronic Arts, Inc. (NASDAQ:ERTS), Activision, Inc. (NASDAQ:ATVI) and THQ Inc. (NASDAQ:THQI) with Peer Perform ratings
  • and Take Two Interactive Software, Inc. (NASDAQ:TTWO) with an Underperform rating.
  Bear Stearns is cautious on the sector given valuations and cost increases.
• Nokia Corp. (NYSE:NOK) and Motorola, Inc. (NYSE:MOT) were initiated with Hold ratings at Lazard. The firm's reason for the Hold rating at Motorola was the slowing RAZR platform and slowing American market. The Hold at Nokia is due to increasing dependence on riskier emerging markets for growth and the expectation of industry margin remaining as an overhang.

OTHER INITIATIONS:

• JP Morgan initiated Ruby Tuesday, Inc. (NYSE:RI) with a Neutral rating.
• W.R. Hambrecht initiated Baidu.com, Inc. (ADS) (NASDAQ:BIDU) with a Buy and $130 target. The firm said Baidu.com is well positioned to benefit from positive search trends, the adoption of paid search by SME's and brand advertisers, e-commerce growth and the emergence of user-generated content.

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

MOST NOTEWORTHY: Shutterfly (SFLY) tops today's list of initiations. JP Morgan, Jefferies and Piper Jaffray initiated Shutterfly today.

• The group of firms believe Shutterfly, Inc. (NASDAQ:SFLY) is positioned to be the dominant play in the photo-based personal publishing space, which allows for premium pricing.

OTHER INITIATIONS:

• Bank of America initiated Leisure stocks today:
  • Bank of America would buy cruise line stocks as they believe the worst is over. As such, the broker initiated Royal Caribbean Cruises (NYSE:RCL) and Carnival Corp. (NYSE:CCL) with Buy ratings.
  • The firm is also bullish on the video game cycle and initiated Activision, Inc. (NASDAQ:ATVI) and THQ Inc. (NASDAQ:THQI) with Buy ratings, Electronic Arts (NASDAQ:ERTS) and Take Two (NASDAQ:TTWO) with Neutral ratings, and recommends buying Activision and THQ Inc today.
  • Bank of America would stay out of toy stocks at current levels due to valuation, and initiated Hasbro, Inc. (NYSE:HAS) and Mattel, Inc. (NYSE:MAT) with Neutral ratings.
  • They are also cautious on powersport companies and initiated Harley-Davidson (NYSE:HOG) and Brunswick Corp. (NYSE:BC) with Neutral ratings. The bank also started Polaris Industries (NYSE:PII) with a Sell rating.

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

MOST NOTEWORTHY: IBM Corp (IBM), Take Two (TTWO) and Johnson & Johnson (JNJ) top today's list of upgrades.

• IBM Corp (NYSE: IBM) was upgraded to Buy from Neutral at Goldman Sachs based on strength in the software segment. They also raised IBM's target to $100 from $92.
• Citigroup upgraded Take Two Interactive Software Inc. (NASDAQ: TTWO) to Hold from Sell following the resignation of the founder, Ryan Brant, which the firm believes removes an overhang.
• Prudential upgraded Johnson & Johnson (NYSE: JNJ) to Neutral from Underweight based on the improved outlook of their pharma division, lower risk business model and valuation. Prudential also raised JNJ's target to $70 from $59.

OTHER UPGRADES:

• J.P. Morgan upgraded Dreamworks Animation Inc. (NYSE: DWA) to Neutral from Underweight, expecting interest in the company to increase next-year ahead of the Shrek movie launch and the company's long-term merger potential.
• Matrix USA upgraded Tibco Software, Inc. (TIBX) to Hold from Sell based on the company's positive fundamentals.
• UAL Corp (NASDAQ: UAUA) was upgraded at Prudential to Overweight from Underweight, citing lower fuel costs. In addition, the firm raised UAL Corp.'s target to $59 from $32.

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