Merrill Lynch & Co. (NYSE: MER) may wind up selling its 20% stake in Bloomberg L.P., the parent of Bloomberg News, to Mike Bloomberg.

Bloomberg, whose personal fortune is estimated by Forbes magazine at $5 billion, can easily afford the buy back the 20% stake in his company that he does not already own. Given its financial condition, Merrill better hope that the New York mayor is willing to open his check book. Other media companies are not going to shell out big bucks for a minority stake in the company where I worked for seven years. This is especially true given that many of Bloomberg's biggest customers in Wall Street are cutting spending given the uncertainties in the world's financial markets.

Maybe the private equity players would be willing to pay up provided that they could see an exit strategy through an IPO. I don't see that happening either. Bloomberg, which the Wall Street Journal says has the right of first refusal for the sale, likes being a private company because it enables it to march to the beat of its own drummer. That was especially true when Mike Bloomberg ran the show.

MOST NOTEWORTHY: Schering-Plough, Vodafone and Tibco were today's noteworthy downgrades:

• Goldman downgraded Schering-Plough (NYSE: SGP) to Neutral from Buy following the panel discussion suggestion that doctors cut use of Vytrorin, Zetia. Shares were also cut at Lehman to Equal Weight from Overweight and at Cowen to Neutral from Outperform.
  
• Morgan Stanley lowered Vodafone (NYSE: VOD) to Underweight from Overweight as they believe the European Commission will aggressively lower mobile termination rates to cost to improve competition.
  Jefferies downgraded shares of Tibco (NASDAQ: TIBX) to Underperform from Hold as they believe the economy will catch up with the company in the coming months.

OTHER DOWNGRADES:

• Goldman removed Ryanair (NASDAQ: RYAAY) from its Conviction Buy List.
  
• Thomson (NYSE: TOC) was cut to Hold from Buy at Deutsche Bank.
  
• Broadpoint downgraded Omniture (NASDAQ: OMTR) to Buy from Strong Buy.

MAJOR PAPERS:

• Next year Nestle USA will sell Jamba Inc's (NASDAQ: JMBA) Jamba Juice at stores in eight states in the western U.S., according to the Wall Street Journal.
• Last May Canadian information provider The Thomson Corporation (NYSE: TOC) bought Reuters Group Plc (NASDAQ: RTRSY) for GBP8.7B. While the deal was beneficial to Reuters, the credit crunch could have a severe impact on its bottom line over the next few years, the Wall Street Journal's "Heard on the Street" said.

OTHER PAPERS:

• The Detroit News reported that the United Auto Workers signed a new contract with Ford Motor Company (NYSE: F).

WEB SITES:

• Jeffrey Zucker, General Electric Company's (NYSE: GE) NBC Universal media unit would be interested in DreamWorks SKG if it were to become available, Bloomberg reported.
• According to 21st Century Business Herald's website, Baosteel Group's Chairman, Xu Lejiang, said the company is considering making a bid for Rio Tinto Plc (NYSE: RTP).

MOST NOTEWORTHY: Riverbed Technology (RVBD), Silicon Storage (SSTI), Regal Entertainment (RGC), Fannie Mae (FNM) and Freddy Mac (FRE) were today's more noteworthy initiations:

• CIBC initiated shares of Riverbed Technology (NASDAQ: RVBD) with a Sector Performer rating, citing valuation. The firm believes the mobile opportunity is a wild card, and cites increased Cisco Systems (CSCO) risk.

• Silicon Storage (NASDAQ: SSTI) as announced several new products in late 2006 and 1H07 with shipments expected to start in 2H07 along with significant revenues in 2008; Barrington initiated shares with a Market Perform rating.

• Ferris Baker Watts initiated Regal Entertainment (NYSE: RGC) with a Neutral rating, seeing annual top-line growth only in the low- to mid-single digits.

• Fox-Pitt Kelton believes both Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) are finally set to emerge from restatement issues with new accounting procedures and operating systems in place, initiating both companies with an Outperform rating...

OTHER INITIATIONS:

• Needham initiated Tennant (NYSE: TNC) with a Buy rating.

• Merrill Lynch started TriZetto Group (NASDAQ: TZIX) and Eclipsys (NASDAQ: ECLP) with Neutral ratings.

• CIBC started Centene (NYSE: CNC) with a Sector Performer rating.

• Deutsche initiated Thomson (NYSE: TOC) with a Buy rating.

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

Dow Jones & Company, Inc. (NYSE: DJ)'s Wall Street Journal (a.k.a., Rupert's Rag, a.k.a. The Towel) occupies a unique spot in the media firmament. As I pointed out earlier in the year, it changed its format and now looks to me like a Holiday Inn bath towel. And since it appears that News Corp (NYSE: NWS) has finally won over enough Bancrofts to take control, I am officially changing this column's name from Towel Talk to Rupert's Rag, which will continue to offer a perspective on its news and views.

Reuters reports on an internal memo at The Rag, which confirms that "The Bancroft family has accepted. Dow Jones will be part of News Corp."

Details of which Bancrofts accepted and which did not will no doubt be forthcoming. The New York Times (permalink) reports that family members and trusts representing about 32% of the shareholder vote indicated they would support Murdoch's offer.

In a sign of the increasing importance of high-end financial blogs, Reuters Group Plc (NASDAQ: RTRSY) is starting a new network of the sites. Or, it could be that the Reuters business development people have down time because of its upcoming purchase by Thomson Corp. (NYSE: TOC).

The offer that Reuters is making to a number of high-end blogs is that it will link to the participating sites from Reuters.com, offer free access to selected Reuters Headlines (RSS or Headline Wizard) and Reuters Video Player to publish Reuters News, and get 30% of an advertising program that the big financial services company will manage.

In return, each blog agrees to execute contracts with comScore and NetRatings to assign its traffic to Reuters.com. NetRatings ranks Reuters.com as the No.7 financial website with unique visitors of 6.1 million in May.

Reuters may be trying to match blog initiatives at media outlets including FT.com, WSJ.com, and AOL.com.

Either Reuters has a very high regard for financial blogs or it needs to pump up its audience ratings.

Disclosure: 24/7 Wall St. was approached by Reuters about this opportunity.

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

The Thomson Corp. (NYSE: TOC) locked up its deal to buy Reuters (NASDAQ: RTRSY) for $17.2 billion. The combination gives the new entity 34% of the global financial services information market. Bloomberg has 33%.

The Wall Street Journal said that the deal may face regulatory problems [subscription required]: "The agreement sets the stage for a long battle with regulators to win clearance for a combination that would unite the second- and third-largest providers of financial news and data, behind Bloomberg LP, of New York." Assuming that those can be overcome, one of the losers may be Dow Jones & Co., Inc. (NYSE: DJ). While it still has a tremendous presence in print with The Wall Street Journal, its Dow Jones Newswire terminals may have greater competition. So might the online WSJ.com, which already vies with Reuters online news service. Thomson has products that could improve a Reuters offerings.

Because Dow Jones is nowhere near as large as the new entity, it might find it difficult to match the resources of its competitors, including the number of journalists, sales forces, and completeness of content. Dow Jones had a financial terminal business in Telerate, but it sold that business a decade ago.

If Dow Jones does not take an offer from Rupert Murdoch, it is left with an operation that has relatively small margins that may get even smaller as the print business shrinks.

Little boat, big ocean.

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

Thomson Corp. (NYSE: TOC) and Reuters Group Plc. (NASDAQ: RTRSY) joining forces to fight a common enemy: Bloomberg Plc. LP

The company founded by New York Mayor Mike Bloomberg -- and my former employer -- is the 1,000 pound gorilla in the business data market. It has gained marketshare at the expense of both Reuters and Dow Jones & Co. (NYSE: DJ) for years.

Bloomberg and Thomson were on friendly terms until fairly recently. Then, Thompson wouldn't answer questions from Bloomberg reporters about the company's earnings estimates. Eventually, Bloomberg decided to do its own polls of analysts.

The combined company may be able to erode Bloomberg's pricing power. When I first started with Bloomberg, it was a mark of status on Wall Street to have your own Bloomberg terminal. Most users that I see now share a Bloomberg to save money.

Nonetheless, Thomson and Reuters have a tough challenge. In addition to Bloomberg, there's the potential that a Rupert Murdoch-owned Dow Jones can pour money into digital publishing products that compete against offerings of the merged company. The Bloomberg threat isn't theoretical.

Though the Bloomberg terminals aren't cheap and aren't very user friendly for the untrained, it's tough to beat their functionality. Many companies have tried and failed to develop a "Bloomberg killer" over the years. Bloomberg terminals even have survived the Internet age.

But it's going to take more than just data for the combined Thomson-Reuters to thrive. More and more financial data is available on the Internet for free. Most individual investors don't need the proprietary data that these companies offer. To survive, they will need compelling content, which in the old days was called news.

Stock futures are indicating a lower start for stocks today, falling ahead of the CPI report and after weak earnings from Dow components and retails giants Wal-Mart and Home Depot.

Yesterday, news of DaimlerChrysler (NYSE: DCX) selling 80% of Chrysler to a private equity firm Cerberus dominated the headlines. But sentiment seems to become more cautious and some investors may be seeking quality as once again the Dow Jones Industrial Average was up, the Nasdaq and S&P 500 down.

Today, earnings have already affected futures, but there is one very important piece of data coming out at 8:30 a.m., before the market opens -- CPI. Consumer Price Index, or prices at the consumer level, is a measure of inflation and will continue to give investors indications as to the Fed's possible future policy. So far, despite the apparent signs of slowing growth, inflation remained a concern and the Fed kept rates at the same level. Some still hope for a rate cuts by the end of the year as prices at the wholesale level seemed to have moderated, others believe inflationary pressures are still too strong.

• For April, CPI is expected to rise 0.5% after a 0.6% in March. Core CPI, which excludes the volatile food and energy prices is forecast to have risen 0.2% compared to a 0.1% increase the month before.
• At the same time, the NY Empire State manufacturing survey for May is due.
• Also today, the National Association of Home Builders will release its housing market index.

Corporate:
Wal-Mart Stores Inc. (NYSE: WMT) reported an 8% first-quarter net income increase to $2.83 billion, or 68 cents a share, with revenue up 8.5% to $86.41 billion. Analysts, on average, were expecting earnings of 68 cents a share on revenue of $86.94 billion, according to Thomson Financial. Going forward, Wal-Mart sees comparable-store sales improving and second-quarter earnings from continuing operations between 75 cents and 79 cents a share. WMT shares declined in Europe.

The Home Depot, Inc. (NYSE: HD) reported a 30% net income drop in first-quarter to $1.05 billion, or 53 cents a share. Sales rose 0.6% to $21.6 billion. Analysts had been expecting earnings of 59 cents a share and revenue of $21.83 billion, according to data complied by Thomson Financial. Home Depot said that the home improvement market is expected to remain soft in 2007 and for earnings to come in at the low end of its guidance range. HD shares are declining 3.9% in pre-market trading (7:25 a.m.).

Financial companies might continue to be under pressure today if the CPI report shows higher inflation and lower possibility of a rate cut this year.

The Thomson Corp. (NYSE: TOC) agreed to buy Reuters Group Plc (NASDAQ: RTRSY) for 8.7 billion pounds ($17.2 billion), creating the biggest financial news and information company.

Overseas, Asian markets closed lower and European stocks are also lower. Europe's economy expanded 0.6% in the first quarter, more than forecast as corporate investment offseting the effects of higher euro and a German sales- tax increase.

The British newspaper, The Independent, reports that Reuters is a heart beat from being sold to Thomson (NYSE: TOC). According to its report, the "Reuters Founders Share Company, the trust that acts as guardian to the editorial independence of Reuters Group Plc" is prepared to approve the deal. Reuters has been independent since it was founded in 1850.

Thomson's bid sent the Reuters (NYSE: RTRSY) ADRs from below $60 to over $77. While the premium is nowhere near the one that News Corp (NYSE: NWS) has offered for Dow Jones (NYSE: DJ), Thomson is family controlled, and the Reuters CEO would run the combined company.

A combined Thomson/Reuters would have a share of the financial news delivery business that would only be matched by privately-held Bloomberg.

The merger of the two financial news and information giants could put Dow Jones in a bit of a bind. Its revenue would be dwarfed by larger competitors, and a rejection of the News Corp. offer could end up looking short-sighted.

But Dow Jones's management has made mistakes before.

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

MOST NOTEWORTHY: Today's most noteworthy downgrades included Armor Holdings, Inc (AH), Alcan Inc (AL), Advance Auto Parts, Inc (AAP) and Reuters Group PLC (RTRSY):

• Armor Holdings Inc (NYSE: AH) was downgraded to Neutral from Overweight at JP Morgan based on the news that the company will be sold to BAE Systems PLC (BAESY) for $88 a share in cash. The firm expects the deal to close with no higher offers. Bear Stearns cut Armor Holdings to Peer Perform from Outperform and Friedman Billings cut shares of the vehicle armorer to Market Perform from Outperform.

• Alcan Inc (NYSE: AL) was cut to Neutral from Buy at Bank of America and DA Davidson following the Alcoa (AA) bid.

• Baird cut Advance Auto Parts (NYSE: AAP) to Neutral from Outperform following CEO Michael Coppola's resignation. Kevin Dann downgraded Advance to Hold from Buy to reflect an increased level of uncertainty following Mr. Coppola's departure.

• Lehman Brothers downgraded Reuters Group (NASDAQ: RTRSY) to Equal Weight from Overweight pending further information on the Thompson Corp (TOC) bid; Credit Suisse cut shares to Neutral from Outperform and Deutsche Bank cut shares to Hold from Buy.

OTHER DOWNGRADES:

• Matrix downgraded UST Inc (NYSE: UST) to Sell from Hold.

• Needham cut Entegris, Inc (NASDAQ: ENTG) to Hold from Buy.

• UBS downgraded shares of Golden Star Resources (AMEX: GSS) to Reduce from Neutral.

• Wachovia cut Rowan Cos (NYSE: RDC) to Market Perform from Outperform.

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

U.S. stocks seem posed to a lower opening as indicated by stock futures, taking a well-deserved breather from the recent rally that had the Dow closing at a new record almost daily and the S&P marking a six-year high and nearing its all-time high.

Yesterday, following Alcoa's $27 billion bid for Alcan, the Dow posted yet another gain, making it the 24th gain in 27 sessions and matching an 80-year (1927) record. The S&P was also up, but the Nasdaq nearly flat, down 0.05%, or 1.20 points.

No news is good news? Apparently, not today. With not much news on the economic front, earnings or other corporate news, futures seem to be taking a breather. Perhaps a much needed breather. The selloff overseas is undoubtedly contributing to this morning's sentiment.

Tomorrow, the Federal Reserve's Federal Open Market Committee will announce its decision on monetary policy, and is expected to leave interest rates unchanged. Today, at 10:00 a.m., the Commerce Department will report March wholesale inventories. Economists expect a 0.4% rise in March inventories, after a 0.5% increase in February.

Overseas, European stocks fell. Some analysts say that after Europe's Dow Jones Stoxx 600 Index, which has rallied 6.9% this year and closed yesterday at the highest since September 2000, so profit taking is in order. Asian markets closed mostly with declines as well.

Earnings: Cisco Systems Inc. (NASDAQ: CSCO) and Walt Disney Co. (NYSE: DIS) are due to report earnings after the close today.

Try as he might, Carl Icahn didn't succeed this time around to enforce his will. The billionaire investor failed to win a seat on the board of Motorola Inc. (NYSE: MOT). Final results will be available in three weeks, but MOT shares were down 2.2% in Europe.

After announcing Friday it was approached by an unnamed source, Reuters Group PLC (NASDAQ: RTRSY) confirmed that it and Thomson Corp. (NYSE: TOC) are discussing a combination of their businesses which values Reuters at $17.7 billion. Thomson would pay $7.03 per Reuters share in cash and 0.16 Thomson shares for each Reuters share. Reuters shares have gained over 4% in London.

Watching the flurry of information industry merger announcements in the last week or so, I am struck by a point that analysts seem to be missing -- it's important to know what kinds of information people are willing to pay for. In all the chatter about News Corp.'s (NYSE: NWS) bid for Dow Jones & Co. (NYSE: DJ), Microsoft Corp.'s (NASDAQ: MSFT) discussions with Yahoo Inc. (NASDAQ: YHOO), and The Thomson Corp.'s (NYSE: TOC) proposed acquisition of Reuters PLC (ADR) (NYSE: RTRSY), the important point that's been lost is that people will pay up for some kinds of information and expect other types to be free.

I first began thinking about this in 1984 when I worked on a consulting project for the New York Stock Exchange on the threat it faced from electronic stock quote providers. In 1986, I published an article based on this, Strategic Developments in Investment Information. The point of that article that's still relevant today is that people will pay good money for information if it satisfies three tests:

• It's proprietary;
• It helps minimize the risk associated with a big investment; and
• The price of the information is a small proportion of that investment.

What relevance does this have for all these information industry mergers?

Dow Jones & Company's (NYSE: DJ) Wall Street Journal (a.k.a., The Towel) occupies a unique spot in the media firmament. As I pointed out earlier in the year, it changed its footprint and now looks to me like a Holiday Inn bath towel. Towel Talk offers a perspective on its news and views.

News Corp.'s (NYSE: NWS) bid for The Towel has plunged a fiery torch into the viper's nest of conflict and ambition at the paper. And this conflict has opened up the possibility of numerous bidders and targets in the beleaguered newspaper business.

I come to this story with some conflicts of my own. I have done consulting work for News Corp.'s Chairman and CEO and have worked with several reporters from The Towel. But what I find most interesting about this takeover is that it plunges right to the heart of the conflict within The Towel between the Bancroft family, which I imagine backs the Towel's arch conservative editorial page, and the reporting side, whose union representatives have opposed the deal.