Intrigue at Yahoo! ahead of annual meeting; HP seen near Electronic Data Systems deal; EnCana to split

By Aaron Hochman-Zimmerman

New York, May 12 - Investors scrambled to keep up with the news on Monday of deals completing and progressing.

Yahoo! Inc. continued to put its name in the papers even as its price was dropping.

The search engine's shareholders squabbled over whether the stable and stern Microsoft Corp. or the free-spirited Google Inc. was the right match for Yahoo!

Without bringing the same level of drama to the computer world, Electronic Data Systems Corp. shares spiked at the end of the day as word got out that it was in serious merger talks with Hewlett-Packard Co.

Radyne Corp. shares almost doubled as it announced its deal with Comtech Telecommunications Corp.

Elsewhere in communications, Sprint Nextel Corp. shares were off slightly as the company stayed ahead of expectations, but still reported big losses during its first quarter earnings call.

Investors were happy to hear of advancing negotiations and a one-day litigation ceasefire between Clear Channel Communications Corp. and the team of banks scheduled to finance its merger with Bain Capital Partners and Thomas H. Lee Capital Partners.

Also over the airwaves, the break up of the Cumulus Media Inc. deal made for a gray day for investors.

For the airlines, share prices hit headwinds, but UAL Corp. and U.S. Airways Group Inc. were reportedly closer to an agreement.

In finance, Sovereign Bancorp. improved on its intention to raise $1 billion in new common stock as quarter-owner Banco Santander SA was already buying up shares.

In energy, Canada's EnCana Corp. gained after it announced that it would halve its operation to focus its oil and natural gas businesses separately.

Meanwhile, the major indexes all moved higher.

The Dow Jones Industrial Average ended better by 130.43, or 1.02%, at 12,876.31, while the Nasdaq Composite Index added 42.97, or 1.76%, to finish at 2,488.49.

The S&P 500 took on 15.30, or 1.10%, to close at 1,403.58.

Yahoo! wants peace not war

First the marriage of convenience between Yahoo! and Microsoft seemed a certainty, but a possible deal with Google may prove that love can conquer even Microsoft.

Some of Yahoo!'s shareholders initially showed themselves to be more the convenient type and threatened a civil proxy war within the company a market source said.

In recent days the rabble has quieted significantly ahead of Thursday's deadline to nominate new board members at the July 3 annual shareholder's meeting, the source said.

However, outspoken Yahoo! investor Eric Jackson is expected to hold "emergency talks" on Monday to plan the removal of chief executive officer Jerry Yang.

The larger sect within Yahoo! is less preparing for proxy war than cozying up with Google and some analysts expect to see a deal which may put 90% of the search world under Google's banner ads.

Wary consumer groups are beginning to speak up as Google eyes such a large slice of the search pie.

"Search advertising revenue will soon exceed that of the major television networks - a chilling fact which underscores the power of the search gatekeepers," said a letter from 16 consumer groups to the Justice Department on Saturday.

"In short, we face a possible future in which no content could be seamlessly accessed without Google's permission," the letter said.

Shares of Yahoo (Nasdaq: YHOO) slid $0.67, or 2.58%, to $25.26.

Shares of Microsoft (Nasdaq: MSFT) were better by $0.60, 2.04%, to $29.99.

Shares of Google (Nasdaq: GOOG) improved by $11.74, or 2.05%, to $584.94.

H-P looks to print deal with EDS

Hewlett-Packard may be just days away from dropping a merger offer of $12 to $13 billion - or $24 to $26 per share - on Electronic Data Systems, according to the Wall Street Journal.

Shares of Electronic Data Systems (NYSE: EDS) soared by $5.27, or 27.94%, to $24.13.

After the market close, a release from EDS confirmed that the two are in discussions.

Shares of Hewlett-Packard (NYSE: HPQ) dipped by $2.30, or 4.68%, to end at $46.83.

Sprint slides on earnings

During the first quarter, Sprint Nextel lost $505 million and over 1 million customers, but remained ahead of expectations.

Investors shunned shares of Sprint (NYSE: S) as the stock slipped by $0.14, or 1.49%, to $9.24.

"As expected, our wireless business delivered weak financial results. While the business will continue to face challenges in the short-term, we are making progress in methodically attacking the sources of our performance issues," said Dan Hesse, Sprint Nextel chief executive officer.

In recent sessions, the talk surrounding Sprint has been over whether or not it can molt out of its Nextel skin or if Deutsche Telekom AG will swoop in and carry off the whole struggling enterprise.

A market source warned the high flying parent of T-Mobile about the high debt and low growth potential Sprint carries.

Deutsche Telekom would be better served by investing in the expanding telecom sector in emerging markets, the source said.

Shares of Deutsche Telekom (NYSE: DT) were better by $0.13, or 0.71%, to end at $18.42.

Santander seeks Sovereign shares

Sovereign (NYSE: SOV) shares added $0.32, or 4.07%, to close at $8.18 after it announced a $1 billion stock offering through Lehman Brothers on Monday, according to a press release. The sale was upsized to $1.25 billion at pricing.

Lehman has the right to purchase $150 million of the shares, but a market source noted that another bank, Banco Santander, has already begun to buy stock.

Santander already holds 24.9% of Sovereign and has the option to buy the Wyomissing, Pa.-based bank outright.

Shares of Santander (NYSE: STD) took on $0.41, 1.89%, to end at $22.05.

Radyne launches on Comtech deal

Shares of Radyne (Nasdaq: RADN) screamed higher by $3.36, or 43.41%, to close at $11.10 after Comtech Telecom agreed to buy the Phoenix-based company at $11.50 per share; a 49% premium to Friday's close.

The $224 million will be paid in cash.

"We plan no interruptions in any scheduled or committed rollouts from either company, and we intend to continue to support all existing Comtech and Radyne products and services. We anticipate honoring all existing agreements with customers, VARs, distributors, OEMs and other strategic partners," the companies said in a joint statement.

Shares of Comtech Telecom (Nasdaq: CMTL) were also better by $2.16, or 5.23%, to finish the session at $43.45.

Airlines fly tight

United and U.S. Airways flew a tighter formation on Monday, as the Chicago Tribune reported that the two are as close to a deal, but the pair is not ready to drop an announcement.

United (Nasdaq: UAUA) shares added $0.29, or 2.12%, to close at $14.00.

U.S. Airway (NYSE: LCC) shares descended by $0.09, or 1.27%, to finish the session at $6.99.

The new entity will be headquartered in Chicago and led by Doug Parker, U.S. Airway's chief executive officer and president.

Cablevision scoops Newsday

Meanwhile, the enigmatic Dolan family bought Long Island's major newspaper, Newsday, from Sam Zell's Tribune Co.

The Dolan's Cablevision Systems Corp., which also owns New York icon Madison Square Garden, the Knicks and the Rangers, as well as the recently purchased Sundance Channel, will buy the paper for $650 million.

Rupert Murdoch's News Corp., owner of the New York Post, and Mort Zuckerman, owner of the New York Daily News, were also in the running for Newsday.

Many analysts speculated that more emotion than business savvy played a part in the purchase, but were not sure what that emotion may be.

Cablevision (NYSE: CVC) shares dropped $0.45, or 1.80%, to close the day at $24.52.

News Corp. (NYSE: NWS) shares improved by $0.22, or 1.14% , to end at $19.57.

EnCana split Sunday

On Sunday, Calgary, Alta.'s EnCana announced it will split into two "two highly focused energy companies," according to a press release.

Both the new oil company, IntegratedOilCo., and the new natural gas company, GasCo., will be located in Calgary.

Under the agreement, each EnCana share will be worth one share of each new company with the expectation that the combined dividend of the two companies will reach the current dividend of $1.60.

"Over the past five years, total shareholder return has been exceptional, providing a compound annual return of 24% on the TSX and 35% on the NYSE," said David O'Brien, EnCana chairman.

"Going forward, one outstanding energy company is dividing into two exciting energy enterprises, each highly specialized, each with the objective of being a leader in its specific business and both resolutely focused on continuing a tradition of sustainable shareholder value creation," he said.

EnCana (NYSE: ECA) shares tacked on $5.80, or 6.75%, to finish the session at $91.73.

Clear Channel calls for one-day truce

The largest radio conglomerate in the United States, Clear Channel Communications announced that it suspended its lawsuit against the banks financing its acquisition by Bain Capital Partners and Thomas H. Lee Capital Partners.

The suspension is only good until Tuesday morning, but will allow for talks which may lead to a settlement, according to a press release.

Still, Clear Channel makes no guarantee that a deal will be reached.

Shares of Clear Channel (NYSE: CCU) jumped $2.87, or 9.57%, to $32.87.

Storm clouds for Cumulus deal

Meanwhile, the second largest radio conglomerate in the United States, Atlanta-based Cumulus, announced that its deal to be acquired by an affiliate of Merrill Lynch Global Private Equity has been canceled.

The July 23, 2007 agreement stipulates that the equity group pay $15 million for breaking the deal.

"Our business remains fundamentally sound and we intend to continue to operate it aggressively and explore opportunities to create and deliver value for our shareholders," said Lew Dickey, chairman, president and chief executive officer of Cumulus, in a news release.

Shares of Cumulus (Nasdaq: CMLS) dumped $1.38, or 23.75%, to finish the day at $4.43.

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