MAJOR PAPERS:

• Merger talks between UAL Corporation's (NASDAQ: UAUA) United Airlines and US Airways Group Inc (NYSE: LCC) have been put off for now, the Wall Street Journal reported. United is reportedly close to an alliance with Continental Airlines Inc (NYSE: CAL).
• Harris Corporation (NYSE: HRS) is for sale and the company has begun to hear from interested parties, the Wall Street Journal also reported. Harris is looking for $75 to $80 per share. Speculation about the bidders includes General Dynamics Corporation (NYSE: GD) and Northrop Grumman Corporation (NYSE: NOC).

OTHER PAPERS:

• The Charleston Gazette reported that Chesapeake Energy Corporation (NYSE: CHK) has decided not to build its Eastern Division headquarters in Charleston, West Virginia in the wake of a West Virginia Supreme Court ruling on May 22.

WEB SITES:

• AppleInsider reported that Apple Inc (NASDAQ: AAPL) is expected to announce a back-to-school deal soon that will encourage students to buy new Macs by offering some of the largest incentives in the history of the company.

MAJOR PAPERS:

• H.J. Heinz Co. (NYSE: HNZ) is today expected to increase its sales and profit projections for the next two years, as it reports results of its fiscal year ended April 30. The Wall Street Journal reported that sales are to grow 6% or higher from 4%, while earnings per share growth for the next two years is projected to grow between 8% and 11% from the earlier projection of 7% to 9%.
• It appears that Vistaprint Limited (NASDAQ: VPRT), a graphic design services and printed products company, counts on referral fees from pop up rewards programs on it website for a certain amount of its revenue and profit and also relies on the referral of its customers to outside firms offering rewards programs, which turns out to be a monthly fee for services such as discounts on movies and amusement parks, according to the Wall Street Journal's "Heard on the Street". Some believe the stock, whose shares have plummeted over concerns of slowing revenue and slimmer gross margins, may be trading too high for its own good.
• According to people familiar with their plans, the Financial Times reported that the CEOs of UAL Corporation's (NASDAQ: UAUA) United Airlines and US Airways Group (NYSE: LCC) will today meet to discuss the carriers' potential merger agreement.

OTHER PAPERS:

• The Independent reported that for the second time this month, Barclays Plc (NYSE: BCS) revised lower its calculation of analysts' consensus for its full-year profit, cutting its 2008 figure by nearly 8% to GBP5.876B pre-tax; Barclays cut the calculation 15% two weeks ago.

Higher oil prices and the surging aviation fuel costs they imply may reduce the benefits of an airliner merger, such as the potential deal between United Airlines and U.S. Airways, but they don't eliminate a merger's long-term positives, an analyst argued Tuesday.

Further, C. Leonard Bauer, independent stock analyst, told BloggingStocks Tuesday the potential United-US Airways union would benefit the sector in that it would be the second merger this year among major airlines in the United States, also known as the legacy carriers.

Shares of UAL Corp. (NYSE: UAUA), parent of United Airlines, are down 88 cents to $14.10, while US Airways (NYSE: LCC) are down 55 cents to $7.79 in Tuesday trading.

Sector right-sizing

"The deal would take another legacy carrier off the table, after the Delta-Northwest merger, and that can only help the sector from an earnings standpoint," Bauer said. "The United States airline sector leads the league in airline route redundancy and duplicate hubs. This second deal would further tighten the sector."

UAL Corp. (NASDAQ: UAUA) opened today at $43.89. So far today the stock has hit a low of $43.55 and a high of $44.67. UAUA is now trading at $44.35, up $0.80 (1.8%).

After hitting a one-year high of $51.57 two weeks ago, the stock has tumbled recently after a bad earnings release and downgrades in the sector. With crude oil slumping this morning and U.S. Airways Group (NYSE:LCC) raising its bid for Delta, airline stocks in general are rising a bit. The technicals for UAUA have been bullish but deteriorating recently and S&P gives the stock a 3 STAR hold rating.

For a bullish hedged play on this stock, I would consider a March bull-put credit spread below the $35 range.

Brent Archer is an analyst on the move at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about.

MOST NOTEWORTHY: In addition to Palm Inc. (PALM) and Research in Motion (RIMM), four prominent Airlines topped today's list of downgrades.

• Merrill Lynch downgraded shares of Palm, Inc. (NASDAQ:PALM) to Neutral from Buy following the company's reduced second-quarter outlook.
• BMO Capital Markets downgraded Research in Motion Ltd. (NASDAQ:RIMM) to Market Perform from Outperform, citing valuation.
• Benchmark, a boutique firm, downgraded Continental Airlines (NYSE:CAL), JetBlue Airways Corp (NASDAQ:JBLU), US Airways Grp (NYSE:LCC) and UAL Corp (NASDAQ:UAUA) to Hold from Buy, citing valuation.

OTHER DOWNGRADES:

• Quest Software, Inc. (NASDAQ:QSFT) was downgraded at Pacific Crest to Sector Perform from Outperform based on poor visibility and option concerns.
• Finally, Citigroup said shares of Cox Radio (NYSE:CXR) and Cumulus Media, Inc. (NASDAQ:CMLS) have rallied on LBO speculation that is unlikely to prove out in the near-to-intermediate term and that 2007 growth expectations could prove to be optimistic; Citigroup downgraded both companies to Sell from Hold.

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