No safety net yet for Ambac, MBIA; Microsoft sights on Yahoo!; Icahn looks to join railcar makers

By Aaron Hochman-Zimmerman

New York, Feb. 4 - Stocks took a hit Monday as the Dow Jones Industrial Average was pushed down by over 100 points.

The blame for the selling may sit with what the markets are seeing as a half-hearted effort to bail out the monoline insurers, MBIA Inc. and Ambac Financial Group Inc., a market watcher said. The rescue effort was noticed by its absence as investors hoped to hear further details about a plan.

Microsoft Corp.'s bid for Yahoo! Inc. continued to prompt discussion around offices and coffee shops.

Google Inc. showed its determination to remain the biggest kid on internet street, but many felt that after many attempts against Yahoo!'s independence, Microsoft's determination may finally force Yahoo! to surrender.

Elsewhere, Carl Icahn is understatedly "interested in having discussions" about a rolling stock merger between his American Railcar Industries, Inc. and Greenbrier Cos. Inc. in which he recently acquired a 9.4% interest.

Microsoft still fishing for Yahoo!

Microsoft Corp. (Nasdaq: MSFT) stock was lower by $0.26 or 0.85% to finish at $30.19 as it continued its fishing expedition for Yahoo!, Inc. (Nasdaq: YHOO) which added $0.95 or 3.35% to end at $29.33.

The bait which came on Friday, in the form of a $44.6 billion offer, was not immediately snapped up by Yahoo!, which has seen buyout offers before.

According to what an analyst called "veiled allusions," by Microsoft's chief executive officer Steve Ballmer, the grand scheme is to use Yahoo! to carve out a healthy share of Google Inc.'s (Nasdaq: GOOG) internet search engine and advertising business.

Google's stock was down $20.47 or 3.97% to close at $495.93.

Yahoo! has a "very credible" search engine and advertising program which makes the acquisition easier now than a year ago, Ballmer said at a strategic meeting Monday morning.

Microsoft is willing to borrow money for the first time in its history in order to acquire Yahoo!, Ballmer added.

Google was not ready to be pushed aside without a fight, in the legal sense.

The internet giant's lawyers claim that the takeover will damage the "underlying principles of the internet," according to a market source.

"Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the internet that it did with the PC?" the lawyers asked, according to the market source.

As in the past, Yahoo! itself may not be ready to be swallowed by the big fish.

It has reportedly reached out to Comcast (Nasdaq: CMCSA) and News Corp. (NYSE: NWS) for help fending off Microsoft.

"It makes a lot of sense for Microsoft," a portfolio manager said.

And in the end, "Microsoft will get what they want," he said. "They've got deep pockets.

"The only issue might be the Department of Justice," although, "I think it will be kind of hard to make too much of an issue out of it," he said about legal issues arising from a lack of competition in the market sector.

Yahoo!'s search for help from Comcast Corp. and News Corp. may be solely a move to drive up Microsoft's offer, the portfolio manager suggested.

"It may result in a higher price ... That's an obvious move," he said.

Icahn looks to link up Greenbrier, American Railcar

Investor Carl Icahn's affiliate ARI Longtrain Inc. recently completed a $28 million purchase of 1.53 million or 9.4% of the shares of rail equipment maker Greenbrier Cos. Inc. (NYSE: GBX). Greenbrier shares leaped by $3.99 or 19.22% to $24.75 on the news.

Icahn is "interested in having discussions" about a possible business combination between Greenbrier and his American Railcar Ind. (Nasdaq: ARII) which owns ARI Longtrain, a market source said.

Stock of American Railcar was better by $2.94 or 16.63% to close at $20.62.

Icahn is likely thinking "that discussion about a recession is probably overblown" and the country will probably see a recovery in the transportation industry, a portfolio manager said.

No progress on monoline bailout

MBIA (NYSE: MBI) shares dropped off by $0.97 or 5.93% to $15.39 and Ambac Financial Group (NYSE: ABK) shares fell $1.81 or 13.71% to $11.39 as disappointed investors were forced to go without the good news they expected.

The dream team of banks which seemed to spell salvation for the monolines on Friday had nothing to say on Monday, a market source said.

And they may have been the cause of the 108.03 or 0.85% slip of the Dow to 12,635.16, he said.

"I think the market sell-off today is due to the lack of positive news regarding progress [with Ambac and MBIA]," he said Monday.

"Some version of support is going to happen within the next couple of weeks, I expect," he said.

"The investment banks already have the positions, it's just a matter of what name you call it ... Putting money into them gives you much better headlines," he said.

Freescale scoops up SigmaTel

Privately held Freescale Semiconductor Inc. finalized an agreement to acquire SigmaTel, Inc. (Nasdaq: SGTL) on Monday. SigmaTel stock found a good stride on the news adding $1.15 or 64.25% to end the day at $2.94.

Freescale has agreed to pay $3 per share of SigmaTel's outstanding stock which comes to a total sticker price of $110 million.

The deal is expected to close in the second quarter of 2008.

Each company's strengths complement the other's, according to Freescale's senior vice president and general manager Lynelle McKay.

"Freescale's proven strengths in the high- performance multimedia and general purpose markets are complemented by SigmaTel's strong analog and mixed-signal expertise in the portable media player and consumer audio markets," she said in a press release.

Austin, Texas-based Freescale registered $5.7 billion in sales in 2007.

"It's probably a good thing for the most part," a portfolio manager said.

"It's a good price for Freescale ... It should be beneficial for both companies," he said.

'Significant concerns' about 3Com, Congressmen say

Reps. Joe Barton and John Dingell have sent a letter to treasury secretary Henry Paulson regarding their "significant concerns" over national security raised by the potential buyout of Marlborough, Mass.-based 3Com (Nasdaq: COMS) by China's Huawei Technology.

On the news, 3Com stock was slightly lower by $0.16 or 3.95% to $3.89.

Some members of Congress are cautious over the deal which would give Huawei, with its reported ties to the Chinese military and government, a 16% stake in 3Com which provides data and security systems to the U.S. government.

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