Microsoft rebuffed by Logitech; Take-Two sued; private equity eyes Virgin; feds follow Countrywide

By Aaron Hochman-Zimmerman

New York, March 10 - Microsoft Corp. is having trouble keeping its gaze on just one target, according to the day's rumors.

Logitech International SA's chairman fired a preemptive salvo against Microsoft far before the final bell has rung in its match with Yahoo! Inc.

Meanwhile Countrywide Financial Corp. found itself under federal investigation for fraud. The Federal Bureau of Investigation and Treasury Department will determine if the company was honest in its disclosures to the Securities and Exchange Commission.

In other legal matters, a shareholder sued Take-Two Interactive Software Inc. in order to force its hand over the proposed merger with Electronic Arts Inc.

Meanwhile, Nationwide Financial Services Inc. found itself in the position to consider a bid from its parent company Nationwide Mutual to buy the remainder of its outstanding shares.

In the media world, a gang of U.S. private equity firms are rumored to be ready to ride out after Virgin Media Inc.

The financiers of Clear Channel Communications Inc.'s buyout parted ways in their search for buyers for the debt related to the buyout.

Hardware producer WJ Communications Inc. announced it will be bought by TriQuint Semiconductor Inc.

MoneyGram International, Inc. fell short of its contracted agreements which led to a restructuring of its recapitalization deal with Thomas H. Lee Partners LP and Goldman Sachs.

Delta Air Lines and Northwest Airlines pilots continued their talks, but with no more success than earlier meetings.

"It's pretty nasty actually," Paul Martin of Martin Capital said about the market in general.

"The market's reacting on fear, speculation and rumor," he said.

"The big thing for me is when the Fed and the Treasury are going to step in to put a bottom underneath these mortgages," he said.

"Further rate cuts are going to be somewhat helpful but they're not going to solve the freeze we're seeing in the credit markets," he said, predicting a 50 basis point cut on March 18.

Although, "I guess it wouldn't be a shock to see them do 75 [bps]," he said.

In trading Tuesday, the Dow Jones Industrial Average was kicked down by 153.54, or 1.29%, to 11,740.15, while the Nasdaq Composite Index lost 43.15, or 1.95%, to finish at 2,169.34.

The S&P 500 fell 20.00, or 1.55%, to close at 1,273.37.

Microsoft's eyes get wider

Microsoft (Nasdaq: MSFT) stock added $0.18, or 0.65%, to $28.05 after its chief software architect, Ray Ozzie said the company would not be hasty in its efforts to combine its software with Yahoo!'s (Nasdaq: YHOO) if the acquisition is successful.

Ozzie said he is optimistic about the merger's big picture, but will remain cautious about the details.

Yahoo! stock was down $0.52, or 1.79%, to $28.51.

Also, rumors concerning a Microsoft bid for Logitech (Nasdaq: LOGI) began turning the mill.

Logitech stock slipped $0.21, or 0.85%, to end at $24.62.

The rumors were enough to make Logitech's chairman, Guerrino De Luca, call any attempt by Microsoft "an operation without sense."

"Logitech has always been not-crazy about being taken over," Martin said.

Take-Two sued, announces change of control severance

Take-Two Interactive Software (Nasdaq: TTWO) stock lost $0.72, or 2.82%, to end at $24.85 as chairman Strauss Zelnick and chief executive officer Ben Feder informed the company of a new change of control employee severance plan, according to a market source.

Employees will be given half to one and a half times their current salary as well as a bonus.

Take-Two earlier fell under suspicion of a steep pay raise for Take-Two's management firm, ZelnickMedia, timed between the two bids from Electronic Arts (Nasdaq: ERTS).

Also, a Take-Two shareholder brought suit in Delaware in order to pressure the directors into accepting Electronic Arts' stands at $26 per share bid.

Stock of Electronic Arts dropped $1.63, or 3.52%, to $44.68.

Virgin flying after buyout rumors

Shares of Virgin Media (Nasdaq: VMED) tacked on $0.97, or 6.98% to finish the day at $14.86 after London's Observer reported a possible $6 billion to $7.5 billion offer from U.S. private equity firms Blackstone, Cinven, KKR and Providence Capital.

The Observer claims the potential bid is being discussed under the title "Project Coaxial."

Clear Channel banks go it alone

Also in the media sector, Clear Channel Communications (NYSE: CCU) stock slipped $0.18, or 0.53%, to close at $33.96 as the banks which are financing its buyout by Thomas H. Lee Partners and Bain Capital for $19.5 billion, have begun to look independently for buyers of the deal's debt.

RBS, Morgan Stanley and Credit Suisse have reportedly seen little interest in the $22 billion of financing need for the buyout.

G-men sniff around Countrywide

Shares of Countrywide Financial (NYSE: CFC) sank by $0.71, or 14.00%, to $4.36 as the FBI looks into possible securities fraud.

Investigators will determine if Countrywide misrepresented its financial condition in filings with the SEC.

Other lenders involved in the current mortgage crisis are also under federal scrutiny.

Shares of Bank of America (NYSE: BAC) also slipped $1.43, or 3.89%, to end the day at $35.31.

Nationwide keeps bid in the family

Nationwide Financial (NYSE: NFS) shares took a boost of $9.79, or 25.81%, to close at $47.72.

The Columbus, Ohio-based financial services company was offered $47.20 per share by its parent company Nationwide Mutual, according to a press release.

Nationwide Mutual already owns all of the outstanding B shares of Nationwide Financial which represents 66.3% of its equity.

MoneyGram comes up short

MoneyGram International (NYSE: MGI) shares were better by $0.24, or 9.30%, to close the session at $2.82 as it agreed to amend its recapitalization deal with Thomas H. Lee Partners LP and Goldman Sachs.

The revisions come as a result of MoneyGram's inability to meet conditions of the original agreement, including having "at least $150 million of unrestricted assets," according to a press release.

The new agreement stipulates that the investors will buy $760 million of series B and series B-1 preferred stock, which will initially be convertible into approximately 79% of the common equity.

The voting preferred stock will now be convertible into shares of common stock of MoneyGram at a price of $2.50 per share rather than $5.00 per share.

MoneyGram is also required to raise an additional $50 million in debt under conditions acceptable to its investors.

WJ, TriQuint on same frequency

WJ Communications (Nasdaq: WJCI) stock jumped $0.11, or 12.94%, to close at $0.96 after it announced a merger agreement with TriQuint Semiconductor (Nasdaq: TQNT).

Shares of TriQuint fell $0.07, or 1.50%, to end at $4.60.

TriQuint, a wireless communications hardware producer, will acquire WJ for $72 million or $1 per share.

WJ's board of directors unanimously approved the deal and recommended shareholders do the same.

"We are pleased to announce this agreement with TriQuint, which will provide our stockholders with a substantial cash premium over the recent trading price of our stock," said Bruce Diamond, president and chief executive officer of WJ Communications, in a press release.

"Additionally, we believe the combination will drive increased scale and efficiencies that will lead to a level of success commensurate with our innovation and product leadership," Diamond said.

The price is an 18% premium to WJ's close last Friday.

Headwinds persist for airlines

Shares of Delta Air Lines (NYSE: DAL) fell $0.91, or 7.06%, to $11.98 and shares of Northwest Airlines (NYSE: NWA) dropped $0.80, or 6.09%, to $12.33 as no progress was reported from meeting of the pilots of both airlines, a market source said.

Some of the major shareholders are beginning to petition Delta's management to preempt the pilots by signing a deal before the seniority ladders are blended, the source said.

Still, the issue of seniority may be enough to kill the deal, a market source said.

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