Microsoft, Yahoo! head into proxy fight; airlines send rumors flying; new moves to jam satellite radio deal

By Aaron Hochman-Zimmerman

New York, April 25 - After much fanfare and chaotic weigh-ins, the day before the title bout between Yahoo! Inc. and Microsoft Corp. came and went without either fighter backing down.

ExpressJet Holdings Inc. refused an offer by SkyWest Inc., but the skies were swarmed with rumors and questions about new airline combinations. Names mentioned included Continental Airlines Inc., AMR Corp., UAL Corp. and US Airways Group Inc.

Elsewhere, a new group of public sector and non-profit detractors emerged with attempts to garble the deal between XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc.

And in the retail sector, Charming Shoppes Inc. was out comparison shopping for deals.

The Dow Jones Industrial Average ended better by 42.91, or 0.33%, at 12,891.86, while the Nasdaq Composite Index slid by 5.99, or 0.25%, to finish at 2,422.93.

The S&P 500 took on 9.02, or 0.65%, to close at 1,397.84.

Saturday fight card: Microsoft vs. Yahoo!

On the day before the bell will ring to start the proxy fight for Yahoo! (Nasdaq: YHOO), its shares dropped $0.50, or 1.83%, to $26.80.

Microsoft has been lacing up its gloves to finish off struggling Yahoo!, but was still threatening to walk away during the past week.

"It's the scorched earth approach," said Paul Martin of Martin Capital Advisors.

"We'll just have to wait and see if Microsoft can mess up the whole deal, which it looks like they're trying to do," he said.

"Normally in negotiation, you see it all the time, there's an initial offer and everybody understands there's going to be another offer after that one," he said, "Yahoo! couldn't just accept the first offer."

"That's just how people's minds work ... I don't think they quite understand the psychology of deals," he said about Microsoft.

Even if Microsoft thought the offer was so big that it was prohibitive of competitive offers, "It's just amazing to me that they don't offer a couple more dollars per share and get on with it," he said.

Because they will likely lose Yahoo!'s staff, "as time goes by [the deal] gets less and less attractive for Microsoft."

Still, "I think the odds are still pretty high that they bump the price a little bit," he said.

On Friday, Microsoft shares gave up $1.97, or 6.19%, to $29.83.

ExpressJet shoots down SkyWest offer

Shares of ExpressJet Holdings (NYSE: XJT) soared by $1.16, or 55.50%, to end at $3.25 as it announced the unanimous rejection by a special board committee of the $3.50 per share offer from SkyWest (Nasdaq: SKYW), according to a press release.

SkyWest shares edged up $0.09, or 0.52% to $17.25.

"The ExpressJet Board and management are committed to taking all appropriate and necessary actions to enhance value for ExpressJet stockholders," said Pat Kelly, chairman of the special committee which was formed to evaluate the offer from SkyWest.

However, ExpressJet made no guarantee a deal would be forthcoming.

ExpressJet was formerly a major contractor of Continental Airlines (NYSE: CAL) and said it will consider purchase proposals from the Houston-based airline, the release said.

Continental shares sank $0.46, or 2.60%, to finish the session at $17.22.

More deals lining up for takeoff

Meanwhile, Continental posted an addition to their main web site which offers a "welcome to a portion of our web site designed specifically to provide Continental's perspective on airline industry consolidation."

"As we've said repeatedly for more than a year and a half, our preference has been to remain independent as long as the competitive landscape remained the same. However, the landscape is changing. We will review our strategic alternatives and make sure we remain a strong long-term competitor. As always, our goal is to do what is best for our co-workers, shareholders, customers and communities we serve," the web site continues.

Reuters also reported that American Airlines (NYSE: AMR) has been in merger talks with US Airways (NYSE: LCC) and in alliance talks with Continental.

Continental is also thought to be in talks with United Airlines (Nasdaq: UAUA).

Shares of American fell $0.18, or 2.37%, to $7.43.

Shares of US Airways added $0.10, or 1.42%, to $7.16.

Shares of United gave up $0.19, or 1.23%, to close at $15.21.

Static for satellite radio deal

Even after receiving the blessing of the Justice Department, the deal to put the satellite radio spectrum into one company's hands earned more detractors.

Shares of XM Satellite Radio (Nasdaq: XMSR) slipped $0.14, or 1.18%, to $11.72 as attorneys general from Connecticut, Maryland, Ohio, and Washington wrote to Federal Communications Commission chairman Kevin Martin asking the FCC to reject the deal as a threat to competition, a market source said.

Also, a non-profit, American Public Media, wrote to Martin asking for 20% of the bandwidth to be dedicated to non-commercial, educational use, a market source said.

Shares of Sirius Satellite Radio (Nasdaq: SIRI) lost $0.04, or 1.47%, to $2.69.

Charming Shoppes shops around

In retail, shares of Charming Shoppes (Nasdaq: CHRS) rose $0.30, or 6.19%, to close at $5.15 as it announced it is seeking strategic alternatives for its ladies' fashion lines Lane Bryant, Catherines and Fashion Bug, according to a press release.

"We have received a number of inquiries from qualified third parties and are evaluating several alternatives for our non-core apparel catalog titles which would allow us to focus exclusively on and accelerate the growth of our core plus apparel businesses, with the goal of enhancing shareholder value," said chairman and chief executive officer Dorrit Bern.

Bern also stated that conserving cash has become a strong priority.

The company will cut an addition $20 million in spending in 2008 on top of previously announced $43 million cut in 2009.

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