MOST NOTEWORTHY: The environmental services sector, the machinery and capital goods sector and several bank holding companies were today's noteworthy initiations:

• Credit Suisse initiated shares of Allied Waste Industries Inc (NYSE: AW), Republic Services Inc (NYSE: RSG) and Waste Management Inc (NYSE: WMI) with Outperform ratings and a $16 target, $35 target and $45 target, respectively.
• Bernstein initiated the machinery and capital goods sector, initiating shares of Caterpillar Inc (NYSE: CAT) and Illinois Tool Works Inc (NYSE: ITW) with Outperform ratings and a $100 target and $68 target, respectively and Deere & Company (NYSE: DE), Eaton Corporation (NYSE: ETN), Ingersoll-Rand Company Ltd (NYSE: IR) and Parker-Hannifin Corporation (NYSE: PH) with Market Perform ratings.
• Sandler initiated shares of Preferred Bank Los Angeles CA (NASDAQ: PFBC) and UCBH Holdings, Inc (NASDAQ: UCBH) with Buy ratings and shares of Cathay General Bancorp (NASDAQ: CATY) and East West Bancorp, Inc (NASDAQ: EWBC) with Hold ratings.

OTHER INITIATIONS:

• Golfsmith International Holdings Inc (NASDAQ: GOLF) was initiated at Wedbush with a Buy rating and $8.75 target, as the firm believes the company is an attractive growth story and buyout candidate.
• Pharmasset Inc (NASDAQ: VRUS) was initiated with a Buy rating and $12 target at Banc of America, as the firm believes Clevudine has the potential to be best in class for the treatment of the hepatitis B virus.
• Ciena Corporation (NASDAQ: CIEN) was initiated with an Outperform rating and $40 target at Piper Jaffray.

Another week, another run through the rumor mill. And, as usual, it all surrounds possible takeovers/buyouts.

WENDY'S INTERNATIONAL INC (NYSE: WEN)

Up first is Wendy's, because since the company is exploring strategic alternatives, and shareholder Highfields Capital Management is pushing for a sale, the idea of a suitor isn't that farfetched. The rumor is that this mystery suitor has bid for the company. Will this Biggie-size Wendy's stock price? Only time will tell.

ARCHER DANIELS MIDLAND COMPANY (NYSE: ADM)

And in the earlier stages of the M&A cycle, the rumor with Archer Daniels Midland is that the company has hired a strategic adviser. This wouldn't be that mind-blowing, considering it follows an EPS miss when the company reported on May 1, and a downgrade by ThinkEquity on May 2 on margin weakness.

BEA SYSTEMS INC (NASDAQ: BEAS)

File this under "the boy that cried wolf." BEA Systems has long been the subject of takeover talk, and it has continued this week. This despite firms such as Bernstein saying a takeover is unlikely as the company's valuation is too high.

Yesterday I liveblogged the speech given by Microsoft CEO Steve Ballmer at the Sanford C. Bernstein Strategic Decisions Conference, and if you read that, you already know: Microsoft is planning to keep investing significant dollars in operating expense, despite the shock-and-awe felt by the Street.

But now that the transcript's available on Microsoft's web site, I'd like to point you to a couple of Ballmer's justifications for this expense. He says that it's important to be on the front end of innovation (not exactly the place Microsoft's been known to be these last several years) and that the hardest decision was, what to invest in? "   When I first talked to Bill Gates about this and some of our other senior technology guys, Ray Ozzie, they came back with a list of, I don't know, 70 things. I said, Bill, you can't have a list of 70 things. He said, but there's 70 things, Steve. And I said, you've got to pare it down. He said, no ... with an R&D budget that's going to come on $7 billion, we could probably afford to do 60 or 70 different things."

What are those 70 things, though? The one thing he talked about most: obliterating paper. You heard me right. Steve Ballmer told the investors gathered at his talk, "I look in this audience, and I see a lot of paper and pencil. Ten years from now, I won't see paper and pencil if we in the hardware industry do our jobs right. Pencil and paper will be replaced by superior technology that is digital." If he has anything to do with it, it will be Microsoft that profits from the death of paper and pencil.