Yahoo!, Microsoft play chicken; WaMu gets $7 billion deposit; airlines try to fly; Point Blank hunts buyers

By Aaron Hochman-Zimmerman

New York, April 8 - Housing data and discouraging words from the Federal Reserve weakened the market Tuesday, while dealers saw "a pretty slow day," according to one market source who expects the same on Wednesday.

Yahoo! Inc. and Microsoft Corp. moved little in either stock price or in their positions concerning the deal which they have struggled over for more than two months.

Delta Air Lines Inc. and Northwest Airlines Corp. managed to add to their share values as the two continued talks over their problematic merger.

In finance, Washington Mutual Inc. slipped after it announced it will take a cash infusion from TPG Capital.

Also, Discover Financial Services agree traded higher on the news that it would buy Diners Club International from Citigroup Inc.

Meanwhile, shares of body armor manufacturers, Point Blank Solutions Inc. shot up as it said is exploring strategic options.

Elsewhere, CSK Auto Corp. and O'Reilly Automotive Inc. as well as LifeCell Corp. and Kinetic Concepts Inc. released details about their respective mergers.

The Dow Jones Industrial Average slipped by just 35.99, or 0.29%, to close at 12,576.44, while the Nasdaq Composite Index lost 16.07, or 0.68%, to finish at 2,348.76.

The S&P 500 fell 7.00, or 0.51%, to close at 1,365.54.

Yahoo!, Microsoft stand firm

Shares of Yahoo! (Nasdaq: YHOO) held unchanged at $27.70 as speculation continued over which internet all-star will come out on top in the battle over whether to merge or not.

Shares of Microsoft (Nasdaq: MSFT) dipped $0.41, or 1.41%, to $28.75.

Reports said that a likely outcome may be a readjustment of Microsoft's offer back to the original $31 per share.

The Jan. 31 offer totaling $44.6 billion worked out at $31 per share, but has since slipped with Microsoft's share price to $29.36.

Still, on Tuesday a market source noted that Yahoo! chairman Roy Bostock specifically made clear the board's disinterest in the $31 per share offer, rather than the current offer from Microsoft.

"Maybe I tend to read too much into things," the market source said.

However, there are no other offers for Yahoo!, the source said, adding that Microsoft may be under no time constraints at all.

The day before the initial offer Yahoo! traded at $19.48, he said.

WaMu to take on $7 billion

In finance, shares of Washington Mutual (NYSE: WM) gave back $1.34, or 10.19%, to finish at $11.81 after it announced it would raise $7 billion through a sale of equity to TPG Capital and other investors, according to a press release.

The deal also places TPG founder David Bonderman on Washington Mutual's board of directors.

Earlier reports anticipated a $5 billion capital infusion from TPG.

"This substantial new capital - along with the other steps we are announcing today - will position us for a return to profitability as these elevated credit costs subside. With the support of these investors, we have every confidence in our ability to deal with today's market conditions and restore shareholder value," said Washington Mutual chairman and chief executive officer Kerry Killinger in the release.

The other measures include a cut in the quarterly dividend to $0.01 from $0.15 which will allow the bank to retain $490 million annually.

WaMu announced also announced a preliminary first quarter loss of $1.1 billion.

Discover to accept Diners Club

Also, in the banking sphere, shares of Discover Financial (NYSE: DFS) added $0.28, or 1.55%, to close at $18.37 as it announced it has entered into an agreement with Citigroup (NYSE: C) to purchase Diners Club International for $165 million.

Shares of Citigroup sank $0.84, or 3.41%, to end the day at $23.76.

"Over the next two to three years, Discover expects to integrate both networks to allow Discover Network cardholders to use their cards at merchants that accept Diners Club cards around the world, and Diners Club cardholders to use their cards on the Discover Network in North America," according to a Discover press release.

"Our strategic decision to sell the Diners Club International payments network to Discover is consistent with Citi's efforts to streamline its businesses to focus on what Citi does best. For Citi, this means growing our card issuing businesses around the world," said Ed Eger, head of international cards for Citi in the release.

Airlines keep trying

Meanwhile, shares of Delta (NYSE: DAL) tacked on $0.05, or 0.54%, to end the day at $9.34 while shares of Northwest (NYSE: NWA) were better by $0.33, or 3.36% to close at $10.16.

The airlines are trying a window after the pilots closed the door on the original merger talks.

The two carriers will try to proceed with a deal which would allow them to operate separately, under one holding company, in order to avoid seniority battles between pilots, the Minneapolis Star Tribune reported.

Otherwise the airlines may ask the pilots to make another attempt at a compromise, according to the report.

Either option would require federal approval.

Point Blank aims for sale

Manufacturer Point Blank Solutions' (OTC: PBSO.PK) stock jumped $0.50, or 13.16%, to close at $4.30 as it announced it will seek strategic alternatives, including a possible sale of the company, a decision it believes is in the best interests of its shareholders, according to a release.

During recent meetings with shareholders, Steel Partners II LLP encouraged a sale, but for "no less than $5.50 per share in cash," the release said.

The annual shareholder meeting has also been postponed at Steel's request.

"Many of our major stockholders recommended postponement of the annual meeting to allow the current board and management to concentrate on managing the best possible process," Larry Ellis, president and chief executive officer said.

"Our platform for enhanced growth and profitability is in place. We are building momentum, and we fully intend to realize our true value through this process," Ellis added.

LifeCell to close in June

Elsewhere, shares of LifeCell (Nasdaq: LIFC) dropped just $0.05, or 0.10%, to close at $50.41 after Monday's gain of $7.31 in response to the announcement that it will sell to Kinetic Concepts for $51 per share.

Shares of Kinetic Concepts (NYSE: KCI) fell $1.27, to 2.56%, to finish the day at $48.30.

The deal is expected to close in June.

CSK Auto releases terms

Shares of CSK Auto (NYSE: CAO) slid $0.12, or 1.02%, to $11.64 after Monday's release of the terms of the $1 billion or $12 per share merger agreement, including a $22 million termination fee, a market source said.

The terms also noted an outside termination date in late September.

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