Carl Icahn just got more bad news. His bid for Yahoo! (NASDAQ: YHOO) seems to be losing it momentum, and it should. Legg Mason, which owns 4.4% of the portal company, will support the current board.
According to The Wall Street Journal (subscription required), "We believe the current board acted with care and diligence when evaluating Microsoft's offers," Legg Mason Chairman Bill Miller said.
Other large investors may decide to back the status quo ahead of the Yahoo! Annual Meeting on August 1.
Icahn has made two significant mistakes. The first is that he overplayed his hand with Microsoft (NASDAQ: MSFT) by saying that he had more support from Steve Ballmer for a deal to takeover Yahoo!'s search business than he actually had.
The more profound problem is the Icahn has not taken the time or the effort to show Yahoo! shareholders how he would operate the company if he cannot strike a deal with Redmond. In essence, he has not made it clear how he can make Yahoo!'s shares rise from their current level if the company has to be run as a standalone business.
Icahn will lose his proxy fight for Yahoo!. He has not offered anything beyond a break-up or M&A event. Why would anyone support something so thin?
Douglas A. McIntyre is an editor at 247wallst.com.
According to people familiar with the matter, the Wall Street Journal reported that Federal Hole Loan Mortgage Corporation (NYSE: FRE) --Freddie Mac -- is considering raising capital by selling up to $10B in new shares to investors. The sources believe this effort may have the potential to avoid a full-blown government rescue.
The Wall Street Journal also reported that, amid U.S. investigations into allegations it helped American clients evade taxes, UBS AG (NYSE: UBS) said some Swiss-based private bankers will stop offering American clients Swiss bank accounts and other services.
Starbucks Corporation (NASDAQ: SBUX) will close store in 44 states plus the District of Columbia, including 88 closures in California, 59 in Florida and 57 in Texas, the Wall Street Journal reported.
Reuters noted that, according to a person with knowledge of the plans, Yahoo! Inc (NASDAQ: YHOO) could renew talks over News Corporation's (NYSE: NWS) Web properties if Microsoft Corporation (NASDAQ: MSFT) gets in the way of discussions with Time Warner Inc's (NYSE: TWX) AOL. Yahoo! is in contact with News Corp. about the assets, but the search engine's talks with Time Warner about AOL are more advanced, the source added.
After hitting a one-year high of $34.08 in October, the stock hit a one-year low of $18.58 in January. This morning, YHOO opened at $23.12. So far today the stock has hit a low of $22.22 and a high of $23.24. As of 1:25, YHOO is trading at $22.40, down $1.17 (-4.9%). The chart for YHOO looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider an August bear-call credit spread above the $27.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in five weeks as long as YHOO is below $27.50 at August expiration. Yahoo! would have to rise by more than 22% before we would start to lose money. Learn more about this type of trade here.
YHOO hasn't been above $27.50 since late May and has shown resistance around $24.50 recently. This trade could be risky if the company ends up agreeing to a deal with Microsoft in the coming month, but even if that happens, this position could be protected by resistance YHOO might find at its 200 day moving average, which is currently around $26.50 and falling.
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. At publication time, Brent neither owns nor controls positions in YHOO. He does own and control bullish hedged positions in MSFT.
The Wall Street Journal reported that worries are deepening among regulators, executives and consumers about the U.S. banking industry following the federal government's seizure of IndyMac Bancorp Inc (NYSE: IMB).
According to a person familiar with the situation, the Wall Street Journal reported that Banco Santander SA (NYSE: STD) is nearing an agreement to buy Alliance & Leicester for around $2.38B.
OTHER PAPERS:
Yahoo! Inc (NASDAQ: YHOO) chairman Roy Bostock called Microsoft Corporation's (NASDAQ: MSFT) proposal "ludicrous". Bostock said that "while this type of erratic and unpredictable behavior is consistent with what we have come to expect from Microsoft, we will not be bludgeoned into a transaction that is not in the best interests of our stockholders." Yahoo reaffirmed that it is open to a sale of the company for $33 a share, the New York Times reported.
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CNet reported that the price of the Xbox 360 Pro model with a 20GB hard drive was cut by Microsoft to $299 from $349. The company also introduced introduced a 60GB model to go on sale in the U.S. and Canada in August for $349.
The New York Times reports that Friday night Microsoft Corp. (NASDAQ: MSFT) and Carl Icahn made an offer for Yahoo! (NASDAQ: YHOO). The offer was for Microsoft to buy Yahoo's search business and for Icahn to buy the rest of Yahoo!
Icahn and Microsoft gave Yahoo! 24 hours to decide. But Yahoo! took "four or five hours" to reject the offer. The Times quotes Yahoo! chairman, Roy Bostock who said: "It is ludicrous to think that our board could accept such a proposal. While this type of erratic and unpredictable behavior is consistent with what we have come to expect from Microsoft, we will not be bludgeoned into a transaction that is not in the best interests of our stockholders."
I am not sure what the terms of this latest offer were. But it seems foolish of Microsoft and Icahn to make an offer and give Yahoo! only 24 hours on a weekend to decide. I wonder whether they're simply trying to annoy Yahoo! and expect that their tactics will encourage its board to resign in frustration so Icahn won't need to spend more money trying to throw them out.
Late Friday, Microsoft (NASDAQ: MSFT) and Carl Icahn made an offer to the Yahoo! (NASDAQ: YHOO) board. Microsoft would buy Yahoo!'s search business and Icahn would take the rest of the company. Yahoo! was given one day to respond.
The Yahoo! board rejected the offer.
According to Reuters, "This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo!'s stockholders in mind," Yahoo! Chairman Roy Bostock said in the statement.
Smart move. The offer from Microsoft and Icahn looks desperate. Many investors have indicated that they do not want to side with Icahn in his proxy fight against Yahoo!, unless he can guarantee a price at which the company will be bought. These shareholders probably think Icahn cannot operate Yahoo! as an independent company much better than the current management can.
Microsoft needs Yahoo!. Redmond is now a distant third in the search business. If Yahoo! wins the proxy battle, Microsoft will be back with an open wallet.
Douglas A. McIntyre is an editor at 247 wallst.com.
Rick Wagoner, the CEO of General Motors Corporation (NYSE: GM), hit out against allegations that the auto maker may soon file for bankruptcy and said he believes the company's financial position will "remain robust" for the rest of the year. Wagoner also said, the Wall Street Journal reported, that the company has no plans to sell or reduce more of its brands.
An independent Yahoo! Inc (NASDAQ: YHOO) would be better for the world, Google Inc (NASDAQ: GOOG) CEO Eric Schmidt said and the Financial Times reported. Yahoo! will be able to create more competition in the search market and other advertising markets if it stays independent, Schmidt contended.
OTHER PAPERS:
According to people briefed on the plan, the New York Times reported that senior Bush administration officials are weighing a plan to have the government take over either Federal National Mortgage Association (NYSE: FNM), or Fannie Mae, or Federal Home Loan Mortgage Corporation (NYSE: FRE), or Freddie Mac -- or both -- and place them in a conservatorship if their problems continue or worsen.
The New York Times also reported that people briefed on the matter said Anheuser-Busch Companies Inc (NYSE: BUD) is in active talks to sell itself to InBev in a friendly deal, despite previous hostility to the idea. One person said InBev indicated it may be willing to pay more than the $65 per share originally offered.
Stock options give investors a great tool to control risks or speculate on stocks. Call options give investors the right to buy the stock and are typically considered a bullish tool, while puts give investors the right to sell the stock and are typically considered a bearish bet on the future price movement of the stocks. I was interested in seeing what equities have the highest open interest or most outstanding options issued on them looking at all strikes and all months (excluding ETFs).
The top six stocks with most options issued are:
Citigroup (NYSE: C) has an open interest of 5,366,521 options, 2,751,255 are calls and 2,615,266 are puts. The stock has been trending down with the rest of the financials for the last year. Speculation now appears equal with about the same number of calls and puts traded.
Bank of America (NYSE: BAC) has an open interest of 5,204,313 options; 2,575,909 are calls and 2,628,404 are puts. Like Citigroup, this stock has seen its price cut in half over the last year.
General Electric (NYSE: GE) has an open interest of 3,877,635 options; 2,138,926 are calls and 1,738,709 are puts. With 23% more calls than puts outstanding, speculators look slightly bullish on GE.
In a bizarrely timed editorial in today's Wall Street Journal, Yahoo (NASDAQ: YHOO) director Gary Wilson offered his suggestion for improving corporate governance at public companies: separate the role of CEO and chairman.
It's a good idea that is also a big duh. The fact that the CEO also serves as chairman at 65% of S&P 500 companies is a travesty, but Mr. Wilson is hardly the first to observe that. He makes the standard argument: "This arrangement creates a conflict of interest, because the chairman is responsible for leading an independent board of directors. The board's primary responsibility, on behalf of the owners, is to hire, oversee and, if necessary, fire the CEO. If the CEO is also the chairman, then he leads a board that is responsible for evaluating, compensating and potentially firing himself."
There's nothing more lame than watching someone denounce wrongdoing in the strongest possible terms in an effort to look like a good Samaritan, thus diverting attention from his own lesser wrongdoings.
This editorial is such a transparent, and therefore pathetic, effort to demonstrate that Yahoo directors care about corporate governance and shareholder value. The fact that Microsoft (NASDAQ: MSFT) went from offering to buy the company to refusing to talk until the entire board is gone suggests otherwise.
Corporate advertisers are not flocking to YouTube despite the fact that the video sharing site attracts one billion views a day, upsetting Google Inc's (NASDAQ: GOOG) expectations for a strong revenue stream, according to the Wall Street Journal. Total ad revenue for Google this year will be about $200M from the site, where the company is counting on growth beyond its text ads from Web searches.
A day after Microsoft Corporation (NASDAQ: MSFT) said it would be interested in reopening talks to acquire some of all of Yahoo! Inc (NASDAQ: YHOO) if Carl Icahn's proxy battle succeeds, the Wall Street Journal reported that Yahoo! CEO Jerry Yang accused Microsoft of "trying to destabilize" the company "without a real desire to complete a deal".
OTHER PAPERS:
The Atlanta Journal Constitution reported that Comair, a subsidiary of Delta Air Lines Inc (NYSE: DAL), is set to cut 300 pilots and 220 flight attendants from its staff. The paper said the layoffs will go into effect in September when Comair cuts its flight schedule as part of Delta's capacity cuts and will affect crew members based at Cincinnati/Northern Kentucky International Airport and New York's John F. Kennedy International Airport.
WEB SITES:
Iran successfully test-launched a long-range version of its Shahab-3 missile, according to Iranian news service Al-Alam. The missile can reach U.S. military bases in the Persian Gulf and Israel.
There's no question that, at this point, Yahoo! (NASDAQ: YHOO) needs to partner up with some company. I didn't see the logic behind the Microsoft (NASDAQ: MSFT) interest in Yahoo! I thought then -- and still think now -- that Microsoft didn't need a big brand in the Internet portal space. It's doing fine with its own MSN.com, its operating-system monopoly and current portfolio of investments.
However, I see the merit in a deal between Yahoo! and Time Warner (NYSE: TWX). The following article discusses the possibility that Time Warner and Yahoo! are talking about a combination. Since Time Warner owns AOL, and since AOL has been transforming its business model over the last few years to capture a more advertising revenue, Time Warner would be wise to at least consider the transaction. Leveraging both brands would generate a lot of clout when it comes to advertisers, who would look at the platform as a must-buy to reach the surfing eyeballs.
There would be many other areas of synergy between the two companies and, of course, the potential to cut redundant costs. Or course, the deal would have to make financial sense and who knows if Yahoo! CEO Jerry Yang will be reasonable.
I think we'll be hearing more about Time Warner and Yahoo! in the coming weeks. However, I don't think anyone should place trades in these stocks based on deal speculation. Buy them for other reasons, but not for purposes of gambling on potential headline news.
Disclosure: I don't own any company mentioned; positions can change at any time.
The war of words between Yahoo (NASDAQ: YHOO) and dissident shareholder Carl Icahn is intensifying. Last week, Yahoo attached a PowerPoint-style presentation to an SEC filing, bizarrely raising questions about Icahn's track record as a stock picker.
Now Icahn is back with a new letter, issued as a press release titled Icahn Issues Open Letter to Shareholders of Yahoo. Icahn confirmed that he has been in frequent communication with Microsoft (NASDAQ: MSFT) CEO Steve Ballmer over the past week. Icahn wrote that "Steve made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo!, such as either a transaction to purchase the "Search" function with large financial guarantees or, in the alternative, purchasing the whole company. He stated that Microsoft would be willing to enter into discussion immediately if the new board that has been nominated were elected."
Lest you think Icahn is blowing smoke, Microsoft followed up with a response to Icahn's statement issued five minutes later, saying, "We confirm, however, that after the shareholder election Microsoft would be interested in discussing with a new board a major transaction with Yahoo!, such as either a transaction to purchase the "Search" function with large financial guarantees or, in the alternative, purchasing the whole company."
This should sway a lot of investors over to Icahn's side in the proxy fight. With its stock having been a weak performer over the past five years, the company is clearly in a position where it needs to be considering strategic alternatives. Microsoft has made it clear that it is not interested in working with the current board on a possible deal and it's in the best interests of shareholders that the company be represented by people who are willing to do what is right for them.
I think we can start the countdown to CEO Jerry Yang's departure to spend more time with his family and charitable endeavors. The market seems to agree, with the stock up nearly 10% MOnday.
According to people familiar with the situation, the Wall Street Journal reported that Yahoo! Inc (NASDAQ: YHOO) is again talking to Time Warner Inc (NYSE: TWX), this time about taking over AOL, with Time Warner taking a stake in the combined entity. News Corporation (NYSE: NWS) has its eye on any Yahoo moves. Meanwhile, Microsoft Corporation (NASDAQ: MSFT) is considering what its next move against Yahoo might be and is talking to News Corp.
The Wall Street Journal also reported that, as part of the company's plan to cut costs, Tribune Co's Los Angeles Times newspaper may look to cut about 250 jobs, including about 17% of its news staff.
The Financial Times reported that Chrysler, which has been searching for foreign partnerships, signed with China's Great Wall Motor a memorandum of understanding to explore long-term business ties in areas that include technology, distribution and components.
OTHER PAPERS:
According to the Dallas News, AMR Corporation's (NYSE: AMR) American Airlines informed its flight attendants' union that is may lay off 900 flight attendants on August 31.
WEB SITES:
Yonhap reported that LG Electronics will release "Dare," a new touch-screen mobile phone in the U.S. that will compete with Apple Inc's (NASDAQ: AAPL) latest iPhone models.
In a PowerPoint-style presentation intended to rebuke criticism of its commitment to enhancing shareholder value, Yahoo! Inc. (NASDAQ: YHOO) attacks Carl Icahn's recent track record as an investor.
One slide points out that 11 of Icahn's 15 most recent investments in public companies have declined in value since he took his position. But what exactly is Yahoo!'s point? That Icahn is a lousy investor and probably wrong for investing in Yahoo! too? If that's the case, then they'd better sell the company while they can before it turns into another Icahn dud!
According to people familiar with the discussions, the Wall Street Journal reported that Microsoft Corporation (NASDAQ: MSFT) has held discussions with Time Warner Inc (NYSE: TWX) and News Corporation (NYSE: NWS), among others, about joining it in a deal that could lead to the breakup of Yahoo! Inc (NASDAQ: YHOO). Some of the sources said the preliminary talks are unlikely to result in a deal with Yahoo!
Johnson & Johnson (NYSE: JNJ) is reportedly in exclusive talks to sell its wound-care business Ethicon to the private-equity arm of JP Morgan Chase & Co (NYSE: JPM), according to the Wall Street Journal. Terms of the potential deal were not disclosed.
OTHER PAPERS:
Sources familiar with the inquiry said that the Justice Department has opened a formal antitrust investigation into a deal that would allow Google Inc (NASDAQ: GOOG) to provide some search advertising for Yahoo!. The Washington Post reported that investigators will demand documents from Google and Yahoo!, as well as other large companies in the media and Internet industries.
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Reuters reported that regulators in the European Union are looking at the long-term effects of BHP Billiton Limited's (NYSE: BHP) $170B bid for Rio Tinto Group (NYSE: RTP). Sources familiar with the EU questionnaire said regulators have asked competitors and customers about effects of the deal on their businesses through 2015.
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Stock options give investors a great tool to control risks or speculate on stocks. Call options give investors the right to buy the stock and are typically considered a bullish tool, while puts give investors the right to sell the stock and are typically considered a bearish bet on the future price movement of the stocks. I was interested in seeing what equities have the highest open interest or most outstanding options issued on them looking at all strikes and all months (excluding ETFs).
In a 
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