MOST NOTEWORTHY: FormFactor, Inc (FORM), Graco Inc (GGG), China Telecom (CHA), Sempra Energy (SRE) and Unica Corp (UNCA) were today's noteworthy downgrades:

• JP Morgan cut FormFactor (NASDAQ: FORM) to Underweight from Neutral citing expected competition from Micronics Japan, which has successfully ramped up production at its new advanced probe card factory.

• CIBC's checks suggest that challenges still remain in Graco's (NYSE: GGG) contractor segment and is likely to impact results, downgrading shares to Sector Performer from Sector Outperformer.

• Deutsche Bank downgraded shares of China Telecom (NYSE: CHA) to Hold from Buy to reflect slower user growth as the company added 77% fewer fixed-line customers in the first five months of 2007.

• Sempra Energy (NYSE: SRE) was cut to Outperform from its Top Pick rating at RBC Capital following the company's JV announcement with the Royal Bank of Scotland (RBSPY).

• Jefferies downgraded shares of Unica (NASDAQ: UNCA) to Hold from Buy after the company reported lower than expected Q3 licenses to reflect too much variance in execution...

OTHER DOWNGRADES:

• Linear Technology (NASDAQ: LLTC) was downgraded to Accumulate from Buy at ThinkEquity.

• Rackable Systems (NASDAQ: RACK) was downgraded to Sector Outperform at RBC Capital.

• Stanford cut Dobson (NASDAQ: DCEL) to Hold from Buy.

• Lehman assumed coverage of Extreme Networks (NASDAQ: EXTR) with an Equal Weight rating, downgrading shares from Overweight.

• Lazard downgraded First Solar (NASDAQ: FSLR) to Hold from Buy.

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

MOST NOTEWORTHY: Ruth's Chris Steak House (RUTH), Hilton Hotels (HLT) and Champps Entertainment (CMPP) were today's noteworthy downgrades:

• Goldman cut shares of Ruth's Chris Steak House (NASDAQ: RUTH) to Sell from Neutral following the company's preliminary Q2 sales, as they expect relative underperformance over the near-term. Goldman believes macro headwinds could weigh on Ruth's client base and keep traffic negative for the rest of the year.

• Hilton Hotels (NYSE: HLT) was downgraded by a number of firms after the Blackstone Group (BX) takeout offer: Jefferies and Citigroup cut shares to Hold from Buy, Calyon downgraded shares to Neutral from Buy, Raymond James downgraded shares to Market Perform from Strong Buy, Suquehanna cut shares to Neutral from Positive and Bear Stearns downgraded Hilton Hotels to Peer Perform from Outperform.

• B. Riley downgraded shares of Champps Entertainment (NASDAQ: CMPP) to Neutral from Buy to reflect the buyout offer from F&H Acquisition Corp...

OTHER DOWNGRADES:

• B. Riley downgraded shares of ACR Group (AMEX: BRR) to reflect the company's merger agreement with Watsco Inc (WSO).

• Jefferies cut Dobson Communications Corp (NASDAQ: DCEL) to Hold from Buy.

• Piper Jaffrey downgraded Selective Insurance (NASDAQ: SIGI) to Market Perform from Outperform.

• Kaufman downgraded Parametric Technology (NASDAQ: PMTC) to Hold from Buy.

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

AT&T (NYSE: T) has bought Dobson Communication (NASDAQ: DCEL), a provider of wireless services to rural areas. The big telco spent $2.8 billion to reach the farmlands.

It is an odd deal. Telephone companies have been trying to pull away from offering landline service to remote areas because they have to keep up an infrastructure that reaches very few people over a large geographic area. It would seem that cellular service would have the same financial challenges. Since Dobson has over $2 billion in debt, the deal is very pricey.

But, viewed from two other angles, the deal looks smart. Dobson trades for about 1.5 times sales. AT&T trades for 3.3 times. On that basis, AT&T is getting a fairly large discount.

In addition, Dobson collects roaming fees from companies like AT&T and Verizon Wireless (NYSE: VZ) when their customers need service within the smaller company's service footprint. AT&T will no longer have to pay those fees for their subscribers.

If farmers buy a lot of iPhones, it becomes a very good deal.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Dobson Communications (NASDAQ: DCEL) sits in a strange little niche of the telecommunications industry. It provides wireless service to 1.7 million rural customers. And, it has put itself up for sale. The company has a market cap of about 1.7 billion.

Dobson makes almost a quarter of its income from collecting roaming fees from its larger competitors like Verizon Wireless. But, many of those companies are building their own infrastructure to reach consumers outside of urban areas.

It may be that Dobson's board saw the sales of Alltel (NYSE:AT) and figured that it is a good time to cash in by selling to private equity interests. But, Alltel has the fifth largest cellular customer base in the industry.

Dobson's share price is up almost 20% in the last three months, perhaps on speculation that the company will be sold.

But, Dobson may be too small and too dependent on FCC funding for rural phone service. There is conversation that these fees may be cut back or ended.

Some companies just can't find buyers, no matter how much cash is floating around the markets. Dobson may be one of those.

Douglas A. McIntyre is a partner at 24/7 Wall St.

A key driver for buyouts has been the seemingly endless liquidity from the junk bond market. And with default rates at rock-bottom, why not do a deal?

Well, there are some signs that junk bond liquidity may be tightening up a bit. One of Dobson Communications' (NASDAQ: DCEL) divisions, American Cellular, had to withdraw its $425 million junk bond offering. This is according to a report from Reuters.

Why? Apparently the pricing is not so good because of the recent volatility in the financial markets.

This does not mean that American Cellular will not be able to raise money. Instead, it will now go straight to the loan market.

It's too early to tell if this is a blip or trend. But for the most part, junk bond investors are showing that they are starting to worry about risk.

And that should certainly worry private equity players who need cheap cash.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.