The recession has taken a toll on the consulting business. Simply put, companies are being fairly tight with their expenditures -- and yes, consulting is certainly a discretionary item.

So, to deal with this, major consulting operators are consolidating. For example, Aon (AON) recently agreed to shell out $5 billion for Hewitt Associates.

Analyst upgrades:

• Merrill upgraded shares of General Motors (NYSE: GM) and Ford (NYSE: F) to Neutral from Underperform on expectations for fundamentals to improve in 2009.
  
• Citigroup upgraded Chubb (NYSE: CB) and Travelers Group (NYSE: TRV) to Buy from Hold as they expect the company to benefit from the AIG (NYSE: AIG) fallout. The firm raised Chubb's target to $57 from $56 and Travelers Group's target to $51.50 from $49.50.
  
• Credit Suisse upgraded shares of SAP AG (NYSE: SAP) to Outperform from Neutral as they believe margin expansion can drive higher profitability.
• JetBlue (NASDAQ: JBLU) was upgraded to Buy from Hold at Argus.
• Goldman raised Merrill Lynch (NYSE: MER) to Neutral from Sell.
  
• NetLogic (NASDAQ: NETL) was upgraded to Buy from Neutral at Piper.

Analyst downgrades:

• JP Morgan downgraded Eli Lilly (NYSE: LLY) to Underweight from Neutral citing the company's early stage pipeline and generic competition.
  
• Merrill downgraded Unilever (NYSE: UL) to Neutral from Buy as they believe the incoming CEO is unlikely to bring a major restructuring or split up the company.

MOST NOTEWORTHY: Exar, Diamond Management and Medivation were today's noteworthy initiations:

• B. Riley thinks shares of Exar Corp. (NYSE: EXAR) are near a bottom given the balance sheet support at $6.47/share and prospect for a return to positive EBITDA as early as the June quarter. The firm initiated coverage with a Buy rating and $10 target.
  
• B. Riley initiated Diamond Management & Technology (NASDAQ: DTPI) with a Buy rating and $10 target and expects the company's strong growth to continue. The firm also sees margin expansion opportunities.
• Roth Capital assumed coverage of Medivation (NASDAQ: MDVN) with a Buy rating and $21 target, as they believe the company's Dimebon for Alzheimer's is a persuasive story and that the company's pipeline has strong potential.

OTHER INITIATIONS:

• UBS started DuPont (NYSE: DD) and Monsanto (NYSE: MON) with Neutral ratings and targets of $48 and $125, respectively.
  
• Siemens (NYSE: SI) was initiated with an Overweight rating at Morgan Stanley.

MOST NOTEWORTHY: Granite Construction Inc (GVA), Sunterra Corp (SNRR), Halliburton Co (HAL) and Golfsmith International Holdings, Inc (GOLF) were today's notable downgrades:

• Matrix USA downgraded Granite Construction Inc (NYSE: GVA) to Sell from Buy on valuation.

• CL King cut Sunterra Corp (OTC: SNRR) to Neutral from Strong Buy.

• UBS removed Halliburton Co (NYSE: HAL) from its U.S. Strategic Stock Selections List.

• JP Morgan cut Golfsmith (NASDAQ: GOLF) to Neutral from Overweight, cutting risk to full-year guidance.

OTHER DOWNGRADES:

• Bank of America cut Spirit Finance Corp (NYSE: SFC) to Neutral from Buy following news that an Australia-based consortium led by Macquarie Bank Ltd will acquire Spirit for $14.50/share.

• Baird downgraded Diamond Management & Technology Consultants Inc (NASDAQ: DTPI) to Neutral from Outperform following its lowered Q4 outlook.

• Goldman cut Holly Energy Partners (NYSE: HEP) to Neutral from Buy on valuation.

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