Higher bid seen from Microsoft; airline dance continues; Electronic Arts unmoved by Grand Theft Auto 4

By Aaron Hochman-Zimmerman

New York, April 30 - Stocks gave up early gains after investors were left flat by a tepid statement accompanying the Federal Reserve's 25 basis point rate cut.

"They were looking for the Fed to say that this was the last ease so the U.S. dollar would rally, commodities sell off and U.S. stocks trade up ... They didn't," a market source said, adding that the deal front was showing end-of-the-month fatigue.

However, even though share prices were mostly unaffected, Yahoo! Inc. ended its day surrounded by chatter that Microsoft Corp. may produce a higher offer before Thursday's open.

Meanwhile, prices of the airlines' stock were also mostly flat as Delta Air Lines Inc. and Northwest Airlines Corp. continued to run up their engines in labor talks. UAL Corp., U.S. Airways Group Inc. and Continental Airlines Inc. flew daisy-chains around each other with the former two still in merger discussions.

In technology, the two sides awaited each other's move as Electronic Arts Inc. said it had already accounted for Grand Theft Auto 4 sales in its original offer for Take-Two Interactive Software Inc.

Elsewhere, internet provider United Online Inc. added to its share price as came to a merger agreement with FTD Group Inc.

In energy, Bois d'Arc Energy Inc. walked under the archway for its $1.8 billion marriage with Stone Energy Corp. and shares of both companies dropped.

The Dow Jones Industrial Average ended off by 11.81, or 0.09%, at 12,820.13, while the Nasdaq Composite Index gave up 13.30, or 0.55%, to finish at 2,412.80.

The S&P 500 lost 5.35, or 0.38% to close at 1,385.59.

Microsoft's better offer on the way?

Shares of Yahoo! (Nasdaq: YHOO) scratched higher by $0.05, or 0.18%, to $27.41 as the market closed without a word from Microsoft (Nasdaq: MSFT).

Some had expected Microsoft to finally make good on its threats of a proxy fight during the day on Wednesday, but the Wall Street Journal reported that Microsoft is holding meetings and may make an announcement, including a higher offer, Wednesday evening.

The new offer could be as high as $32 or $33 per share, compared to the $29.12 per share the current offer amounted to after Tuesday's bell, the Journal reported.

Also, Microsoft is thought to have earmarked $1.5 billion to retain Yahoo! employees in the event of a merger, a market source said.

Since the beginning of the merger dance on Feb. 1, many analysts have held that although Yahoo! did not have other serious suitors, chief executive officer Jerry Yang's insistence on a higher price would one day force the bid higher, even if just slightly.

Microsoft shares dipped by $0.12, or 0.42%, to finish the day at $28.52.

EA counted on Take-Two sales

Also from the technology sector, shares of Take-Two (Nasdaq: TTWO) gave up $0.39, or 1.46%, to $26.24 even as some have predicted that sales of Grand Theft Auto 4 may hit $400 million.

Suitor, Electronic Arts (Nasdaq: ERTS) has said that the impressive sales were already accounted for in its Feb. 24 offer of $26 per share or $2 billion.

Shares of Electronic Arts lost $0.21, or 0.41%, to end the session at $51.47.

Airlines 'ripe' for mergers, but no fruit yet

Meanwhile, shares of Delta (NYSE: DAL) tacked on $0.27, or 3.28%, to close at $8.51 as the Detroit News reported that the highly-unionized work force of Northwest (NYSE: NWA) will be difficult to integrate with the largely unrepresented work force of Delta.

Share of Northwest added $0.30, or 3.21%, to close at $9.66.

Still, Delta would be profitable in two years after a merger, chief executive officer Richard Anderson said in the report.

"I think the industry is ripe for consolidation," said Matthew Jacob, a Majestic Research analyst who follows the airline industry.

But, he added: "I haven't heard of any progress on the Northwest side.

"It's not a definite prerequisite to have [a labor] agreement to facilitate a merger," he said, but the lack of arrangements between labor forces has been a "tripping point" for past merger attempts.

Even without serious progress, "consolidation does create stronger competitors," Jacob said, as other airlines have square danced around looking for their own deals.

"Continental (NYSE: CAL) is planning to go it alone," he said after talks with United Airlines (Nasdaq: UAUA) never left the gate.

Talks are now ongoing between U.S. Airways (NYSE: LCC) and United.

Shares of Continental was better by $0.42, or 2.39%, to $17.98.

Shares of United slipped $0.03, or 0.20% to $14.90.

Shares of U.S. Airways gave back $0.37, or 4.13%, to $8.59.

Bois d'Arc toasts deal with Stone

In the world of energy, shares of Bois d'Arc Energy (NYSE: BDE) sank by $2.08, or 8.01%, to $23.90 after it announced it will be acquired by Stone Energy (NYSE: SGY) for $1.8 billion, according to a press release.

The $1.8 billion will be made up of $13.65 per share in cash and 0.165 shares of Stone's common stock for each Bois d'Arch share.

"Stone is a strong exploitation and development company and combined with Bois d'Arc's outstanding inventory of shelf exploration prospects, the combined company will be a leading Gulf of Mexico producer," said David Welch, Stone's chief executive officer.

Stone shares lost $6.91, or 10.18%, to close at $60.94.

Stone will finance the deal with a $700 million credit facility from Bank of America, as well as the upcoming issuance of 11.3 million shares of stock.

Under the terms of the deal, 49% owner of Bois d'Arc, Comstock Resources Inc. (NYSE: CRK) will own 13% of the new entity.

Comstock shares picked up $0.51, or 1.13%, to end at $45.49.

The deal is expected to close in the third quarter.

United Online picks FTD

Also, shares of FTD Group (NYSE: FTD) were better by $0.25, or 1.85%, to $13.75 as the florist was repotted under the tent of United Online (Nasdaq: UNTD), according to a press release.

Shares of United Online dropped $0.15, 1.39%, to $10.68.

The $15.08 per share deal is broken into $7.34 in cash, 0.4087 of a share of United Online common stock and $3.31 principal amount of United Online 13% senior secured notes due 2013.

United Online plans to finance the deal with $375 million in term loans, a $75 million revolver, cash on hand as well as stock and debt issuance.

FTD's 7.75% senior subordinated notes either will be defeased at closing or retired after a successful tender offer, the release said.

"We believe the acquisition provides an excellent opportunity to deploy our substantial cash resources and to leverage our strong cash flow to enhance stockholder value," said Mark Goldston, chairman, president, chief executive officer and spokesman of United Online.

The deal is expected to close in the third quarter. United Online expects to cut dividends to $0.10 per share from $0.20 per share after the close.

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