By Sarah Lacy

A few years ago, Max Levchin—of PayPal and Slide fame— told me there were two kinds of entrepreneurs in Silicon Valley: Those who work tirelessly and are great at execution, and those who are visionary and truly create new ideas—and sometimes new markets. Levchin put himself in the former category. Indeed, a lot of Slide’s success has just been the result of doing a better job ripping off ideas from competitors like RockYou. He put Evan Williams of Blogger and Twitter in the latter. At the time, Twitter was only a techy phenomenon, but Max noted that unlike a lot of other Web 2.0 companies, Twitter was one of the only ones doing something untested and new.

These data were collected during the last phase of the recent bull market, and I was wondering what, if any, differences there would be between M&A data collected in bear markets. To that end, I looked at 36 takeovers collected between the end of June through the end of last December. (I tried to collect every takeover that I saw, but I'm sure my list is probably not complete.) The data is summarized in the table below. (Click to enlarge.)

Much of the expected growth from emerging markets and technology has been scaled back in recent industry outlooks. Zacks senior technology analyst Abdul Saleh spoke with us recently to help reorganize our tech stock priorities.

Prior to the full-blown U.S. economic crisis, had the tech industry outlook been turning more positive?

The six stocks have market values between around $100M and $10B, market capitalizations less than two times their net cash and equivalents, and have boosted their net cash over four successive quarters.

During the chaos in the financial markets Monday, an M&A deal closed that had nothing to do with banks. Retailer Best Buy (BBY) is buying online music site Napster Inc (NAPS) for about $127 million in an all-cash deal ($121 million, plus unvested Napster stock options).

Best Buy is paying $2.65 per share--almost twice where Napster's stock ended the week last week--but it's still not a huge chunk of change for the retailer. And it's good news for Napster investors, getting a premium for the stock after reporting a $4.4 million loss last month.

It would probably be entirely reasonable if all the financial news published on Monday focused solely on the banking world: the bankruptcy of Lehman Brothers (LEH), the sale of Merrill Lynch (MER), the ongoing saga of Fannie Mae (FNM) and Freddie Mac (FRE). Books will be written about these events. Analysts and academics will probe the “whys” and “wheres” of what happened and try to lay out a map of how to avoid repetition. Policy makers may even push legislation to prevent recurrence (as was the case with Sarbanes-Oxley following the scandals at Enron, Tyco, Adelphia, Worldcom and others). 

Compared to these big headlines, the rest of Monday’s business news was small to the point of seeming irrelevance; still, there was plenty going on of merit within other markets. As one analyst’s comments suggested, the collapse of Lehman Brothers doesn’t stop Microsoft (MSFT) from selling software or consumers from shopping at Wal-mart (WMT). Life, and business, will adjust and move forward.

So Best Buy (BBY) is acquiring Napster (NAPS), the struggling music subscription service, for $121 million. That’s a nice premium for Napster’s shareholders — about 85 per cent over what the shares were trading for before the offer — but they are likely to be the only ones celebrating this deal, I predict (and even so, the stock has tumbled by more than 60 per cent in the past year).

The acquisition is obviously an attempt by Best Buy to branch out from the slow-growth electronics business, and there’s nothing wrong with that impulse. But buying Napster is a dumb way to go about it, in my view.

Best Buy (BBY) has offered a 95% premium to acquire Napster (NAPS). The rationale offered in public is that the two companies are an incredible fit with really great synergies. Best Buy has ruled the retail space for electronics and rightfully has developed respect from customers and investors. Napster's stock has dropped dramatically but people still listen to music. The company claims to have approximately 700,000 subscribers.

So from a marketing point of view this makes sense. No question.

Best Buy (BBY) is gobbling up Napster (NAPS) for $121 million, or $2.65 a share, double the online music service’s closing price on Friday.

In a statement Monday, Best Buy outlined its rationale:

Best Buy intends to use Napster’s capabilities and digital subscriber base to reach new customers with an enhanced experience for exploring and selecting music and other digital entertainment products over an increasing array of devices. Best Buy believes the combined capabilities of the two companies will allow it to build stronger relationships with customers, expand the number of subscribers, and capture recurring revenue by offering ongoing value over a mobile digital platform.

Napster (NAPS) this morning mailed a letter to shareholders advising them not to vote for three dissident investors - Perry H. Rod, Thomas Sailors and Kavan P. Singh - who are seeking seats on the company’s board, and to instead back the three incumbents seeking to keep their seats. Not a big surprise; did you think the board was going to say otherwise?

Still, the venom Napster spews in the direction of the dissident group is quite impressive. Napster notes that the dissidents have never served on a corporate board before “meaning they would require on-the-job training.” They also note that their work experiences “are irrelevant to a company in the highly competitive digital music business.” Napster says the dissidents have “selectively misrepresented facts and distorted statements.” (Grammar alert: they misrepresented distorted statements? They distorted the distortions?) The company says the dissidents have offered no specific business plan, and have no significant ownership in the stock.

Is Apple (AAPL) planning to start a subscription-based music streaming service for iTunes users?

In a Friday blog post, TheDeal.com wrote that rumors have cropped up about Apple doing exactly that sometime next month. The Deal pointed to a MacRumors.com post last week which noted that a number of Apple rumor sites have received an anonymous tip about a new service called iTunes Unlimited that would provide streaming music to Macs and iPhones for $129.99 a year, or $179.99 in a bundle with the MobileMe service.

F1Q09 Earnings Call

August 11, 2008 5:00 pm ET

• UBS posts Q2 loss, plans to restructure. Swiss banking giant UBS (UBS) reports a Q2 net loss of CHF358M ($329M), including $5.1B in writedowns. Looking ahead to the second half, UBS says it doesn't expect any improvement "in the adverse economic and financial market trends that affected this quarter's results," adding, "UBS will continue its program to reduce personnel levels, costs and risk." As anticipated, UBS said it will begin separating its troubled investment bank from its wealth-management unit - but said it has not plans to sell the I-bank. UBS continued to cut back on its exposure to toxic debt: Subprime holdings fell to $6.7B from $15.6B while Alt-A exposure dropped to $6.4B from $17.1B. Shares rose 2.8% in overseas trading.
• Cuomo drags three more banks into ARS melee. NY AG Cuomo sent letters to JPMorgan (JPM), Morgan Stanley (MS) and Wachovia (WB), warning them to get on board with auction-rate securities settlements.
• Morgan Stanley's $4.5B ARS offer fails to impress Cuomo. Morgan Stanley (MS) said it is willing to buy back $4.5B in auction-rate securities, following similar settlements by Citigroup (C), UBS (UBS), and Merrill Lynch (MER). NY Attorney General Andrew Cuomo called Morgan Stanley's (MS) buy back offer "too little, too late." Cuomo is expected to press for fines on top of a more substantive settlement.
After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.
• IEA breathes a bit easier. The IEA (International Energy Agency) says tight global oil supply that has seen crude rise to record heights this year is easing - but cautions that heavy China consumption and geopolitical tension still have the potential to send prices back up. "In terms of oil fundamentals, crude and product supply tightness has eased," it said. But "we continue to stress the supply uncertainty that's out there. The events over the past week in Georgia and Turkey have only reconfirmed that." The IEA dropped its global demand growth forcast by 100K barrels/day due to a major demand pullback in the U.S. (-3.1% this year and -2% next year). (.pdf)
• JPMorgan hit with $1.5B writedown. JPMorgan (JPM) warned that credit-market turbulance forced it to take a $1.5B writedown on mortgage-backed assets in July. The firm says mortgage market trading conditions have substantially deteriorated since the beginning of July. Bankers are saying July was the worst month for mortgage-backed bonds since the crisis began.
• Mitsubishi UFJ plans UnionBanCal buy out. Mitsubishi UFJ Financial Group (MTU) plans to spend $3B to buy out minority investors in U.S. commercial-banking unit UnionBanCal (UB). At $63 per share, Mitsubishi UFJ's offer represents an 8.3% premium on UnionBanCal's Monday closing price. Mitsubishi UFJ has made it clear that it wants a bigger presence in the U.S., and plans to take part in future consolidation of the U.S. banking industry. The bid is the latest in a series of multi-billion dollar deals in the U.S. by Japanese companies that have emerged relatively unscathed from the subprime crisis.
• Middleby buying TurboChef for $200M. Middleby Corp. (MIDD) announced an agreement to acquire TurboChef Technologies (OVEN) for approximately $200M. TurboChef shareholders, who need to approve the merger, will receive a cash-stock payout combination of $3.67 in cash and 0.0486 Middleby shares for each TurboChef share. TurboChef has greatly expanded its customer base in recent years and is a leader in speed cook technology, a field Middleby believes is in the beginning stages of gaining broader market acceptance.
• 3M iPhones in first month. After just one month, iPhone 3G (AAPL) sales reportedly top 3M - way ahead of expectations. "They are seeing unprecedented demand," Michael Cote of the Cote Collaborative says. While not commenting on Cote's estimates, Apple did disclose it sold 1 million iPhones during the first three days; it took Apple 74 days to hit the one million mark with the original iPhone.
• Germany mulls limiting foreign investment. The German government will vote on August 20 on a bill that could be used to prevent foreigners from buying 25% or more in German companies deemed crucial to the country's security. Opponents say it will deter foreign investment. (ETF: EWG)
• Airlines soon profitable? Airline stocks extended their rally Monday after Morgan Stanley said there's a chance the industry could return to profitability by 2009 if the price of oil stays down. The broker says recent moves by carriers to reduce seats and increase fees could ultimately be a positive for the battered sector. UAL +10%. AMR +8%. CAL +8%. UAUA +5.4%.
• Fed Survey on Bank Lending. 65% of banks said they tightened credit-card lending, car and consumer loans during the last quarter. 70% say they'll tighten standards on commercial real estate loans. Major loan categories were tighter across the board.
• Toyota mulls exporting us gas guzzlers. Trying to stay ahead of the auto industry downturn, Toyota (TM) said it is considering downsizing U.S. manufacturing jobs, and may start exporting U.S.-made U.S. pickups and SUVs abroad. Some analysts were puzzled by the proposal; the larger vehicles are not big sellers outside of U.S. borders.
• Precious metals plunge again. Gold, platinum, and silver hit 7-month lows on concerns of reduced demand for raw materials. Commodities descend Monday into bear territory, with S&P's GSCI index off 22% from its July 3 highs.
• Blue Chip economists sour on H2 and 2009. They now see Q3 GDP growth of 1.2%, down 0.1% from previous estimates, and Q4 growth of just 0.3% - down 0.3%. Year-end unemployment is seen at 6%. 56% think the U.S. economy is in recession.
• India production up 3.4%. India's production in six key industries, accounting for a quarter of the country's industrial production, grew 3.4% in June from a year earlier. (ETFs: INP, EPI)
• Inflation pulls back in China. China's inflation slows to a ten-month low, allowing the government a chance to focus on sustaining economic growth instead of fighting rising prices. (ETFs: FXI, PGJ)

Earnings: Tuesday Before Open

• Fossil (FOSL): Q2 EPS of $0.36 beats by $0.11. Revenue of $353M (+15.2%) vs. $347M. [PR]
• JA Solar (JASO): Q2 EPS of -$0.01 vs. consensus of $0.15. Revenue of $180M (+170.7%) vs. $170M. [PR]

Earnings: Monday After Close

• Fluor (FLR): Q2 EPS of $0.87 beats by $0.05. Revenue of $5.77B (+36.8%) vs. $5.18B. Sees full-year EPS of $3.39-3.54 vs. $3.29. Shares +3.9%. [PR]
• LDK Solar (LDK): Q2 EPS of $1.29 beats by $0.87. Revenue of $442M vs. $282M. Sees 2008 revenue of $1.65-1.75B vs. $1.16B. Shares +25.3%.[PR]
• Napster (NAPS): FQ1 EPS of -$0.10 misses by $0.01. Revenue of $30.3M (-6%) vs. $30.5M. Shares -1.1%. [PR]
• McDermott International (MDR): Q2 EPS of $0.77 in-line. Revenue of $1.79B (+26.4%) vs. $1.85B. Shares -8.1%. [PR]
• Safe Bulkers (SB): Q2 EPS of $0.82 beats by $0.21. Revenue of $51.4M (+48.1%) vs. $49.6M. Shares +3.6%. [PR]
• TravelCenters of America (TA): Q2 EPS of -$0.69 beats by $0.23. Revenue of $2.28B vs. $2.15B. [PR]
• TW Telecom (TWTC): Q2 EPS of $0.00 misses by $0.01. Revenue of $290M (+2.7%) in-line. [PR]
• Verasun Energy (VSE): Q2 EPS of $0.15 beats by $0.13. Revenue of $1.01B (+498.7%) vs. $925M. [PR]

Today's Markets

• Asian markets closed lower on Tuesday. Nikkei -0.95% to 13,304. Hang Seng -1.0% to 21,641. Shanghai -0.52% to 2,457. BSE -1.88% to 15,213.
• Europe at midday: London +0.2%. Paris +0.05%. Frankfurt -0.05%.
• U.S. futures at 7:10 AM: Dow -0.08%. S&P -0.04%. Nasdaq +0.15%. Crude -0.74% to $113.63. Gold -0.65% to $822.80.

Tuesday's economic calendar:

• 7:45 ICSC Retail Store Sales
  8:30 Trade Balance
  8:55 Redbook Chain Store Sales
  10:00 IBD/TIPP Economic Optimism
  10:00 Job Openings and Labor Turnover
  10:30 Fed's Gary Stern on CNBC
  2:00 PM Treasury Budget
  5:00 PM ABC Consumer Confidence Index
• Notable pre-open earnings: CNO, FOSL, GOL, JASO, TJX, UBS, VSE
• Notable post-close earnings: AMAT, BZP, CREE, DNDN, MELI, NVDA

Seeking Alpha editor Rachael Granby contributed to this post.

A few months ago I discussed how the real problem facing the music industry (artists, record companies and traditional music stores) was the changing economics of music sales, much more than their slowness in adopting digital music, lawsuits, etc. The idea is that consumers are actually purchasing just as much (if not more) music as the ever have, but the record companies aren't generating as much profit because the digital music revolution means that consumers can acquire significantly more music for a lot less money.

A perfect example is Real Network's (RNWK) Rhapsody service. With it, a consumer could spend $15.99/month and put hundreds (if not thousands) of songs on their Mp3 player that would cost them hundreds to thousands of dollars otherwise. Apple's (AAPL) iTunes improves the numbers somewhat, but there too, people can download the 2-3 songs they like the most from a particular album instead of paying the record company for the whole thing.

The big news here in the UK this morning (lead story in the FT and I just saw the minister of culture on the BBC) is the deal between the broadband ISPs in the UK and the music and film companies on downloading.

The ISPs have agreed to send warning letters to thousands of their customers who are the most active downloaders of music and films. The UK government will do their part by discussing legislating regulations on the ISPs if the warning letters don't work.

Let the speculation begin. According to Bloomberg, Napster Inc. (NAPS), Internet’s first peer-to-peer music sharing service - could potentially become a takeover target.

The Los Angeles-based company, which has seen its stock meltdown to 95% in six years - has become takeover bait for hedge funds as its cash on hand ($69.8 mln) exceeds company’s $66.5 mln market cap.

Three investors have disclosed in a lengthy filing with the SEC that they play to stage a proxy fight for three Napster (NAPS) board seats. The trio includes Perry Rod, who describes himself as an independent investor and president of Market Rap LLC, a company developing an investor community site, as well as chairman of The Paradise Project, “a non-profit religious organization;” Thomas Sailors, of investment firm Cloverdale Investments, and a former managing director at Bank of America Securities; and Kavan Singh, who owns 10 Cold Stone Creamery franchises and other business interests.

Where’s Carl Icahn when you need him?

• IEA sees crude crunch. "The world's premier energy monitor is preparing a sharp downward revision of its oil-supply forecast, a shift that reflects deepening pessimism over whether oil companies can keep abreast of booming demand." Previously, the IEA had forecast crude-and-equivalents supply rising to 116M barrels/day by 2030, up from a present 87M -- enough to meet demand forecasts. Now it is worried companies may struggle to hit 100M. "The oil investments required may be much, much higher than what people assume," IEA chief economist Fatih Birol says. "This is a dangerous situation." That, coupled with a 5.32M drop in U.S. inventories to 320.4M, saw oil top $135 in overnight trading. It's up 19% over the past month.
• BCE buyout stymied; could be biggest-ever deal to collapse. The Quebec Court of Appeal issued a surprise ruling allowing bondholders to challenge BCE's (BCE) $52.9B leveraged buyout because the company failed to consider their interests. Bondholders say the acquisition increases BCE's risk of debt default."The decision effectively terminates the proposed transaction," a lawyer for the bondholders says. The ruling comes amid reports the financing banks were trying to renegotiate terms. BCE and its buyers (Ontario Teachers' Pension Plan, Providence, and Merrill Lynch's (MER) private-equity arm) said they will seek leave to appeal to the Supreme Court of Quebec.
• UBS struggles to sell itself. UBS (UBS) revealed the pricing of its recent $15.5B rights issue: Investors received shares at a 31% discount to yesterday's close. Apparently UBS's offering failed to entice buyers; the price is considered an embarrassment for the firm. UBS also finalized its $15B debt sale to BlackRock (BLK) yesterday. Shares have gained 11% since the rights issue was announced on Apr. 1.
• NRG confirms Calpine bid. NRG Energy (NRG) made an unsolicited $9.6B offer for Calpine (CPN), a deal that would make it the #1 independent power company in the U.S. The all-stock offer of 0.534 share per Calpine share is a 6.7% premium. "Calpine is an almost pure play on gas-fired generation, so their carbon footprint would be attractive," as companies seek to limit their carbon-dioxide emissions, Calyon analyst Gordon Howald says. "It would be unparalleled. There is nothing like this in the competitive power generation industry," NRG CEO David Crane said. "It's really the ideal that people have talked about from time to time."
• AMR dives on dismal outlook. Shares of American Air parent AMR Corp. (AMR) plummeted 24.15% Wednesday after it announced significant reductions to its 2008 domestic flight schedule and outlined plans to retire at least 75 aircraft -- a response to record fuel prices, economic softness, and a difficult competitive environment. "The airline industry as it is constituted today was not built to withstand oil prices at $125 a barrel, and certainly not when record fuel expenses are coupled with a weak U.S. economy," CEO Gerard Arpey said. American yesterday introduced a $15 fee for the first checked bag.
• Fed likely to stay put. Minutes from the April 29-30 FOMC meeting revealed the Fed's decision to cut its target rate to 2% was a "close call" and that it would be reluctant to cut rates further, even in the face of continuing economic weakness. "The risks to growth were now thought to be more closely balanced by the risks to inflation. Accordingly, the Committee felt that it was no longer appropriate for the statement to emphasize the downside risks to growth," the minutes said.
• AIG under attack. The Jacksonville Police and Fire Pension Fund is suing American International Group (AIG) along with several of its executives for inflating its share price by understating its exposure to subprime mortgage losses. The lawsuit alleges AIG's Q1 loss of $7.8B shocked investors after the firm assured them any losses on credit insurance would be limited.
• AstraZeneca sued over drug marketing. The Arkansas AG is suing AstraZeneca (AZN) for falsely claiming its antipsychotic medicine Seroquel was safer than less-expensive drugs, and failing to warn patients of its risks. Seroquel produced over $4B in sales in 2007, second to Nexium among AZN's top sellers.
• Worse than smoking? Pfizer's (PFE) anti-smoking drug Chantix has been linked to more than 3,000 reports of serious side-effects including suicide and heart trouble, a new study says. The FAA Wednesday banned the pill for its pilots. "These data provide a strong signal that the risks have been underestimated, and show that a wide spectrum of serious injuries are being reported in large numbers," the nonprofit Institute for Safe Medication Practices said in its report.

Earnings: Wednesday After Close

• CITI Trends (CTRN): Q1 EPS of $0.36 beats consensus of $0.34. Revenue of $121M (+13.5%) in line. Comps +0.3%. Sees 2008 EPS of $1.10-1.15, short of consensus of $1.14 and full-year comps +2-3%.
• Computer Sciences (CSC): FQ4 EPS of $1.44 beats consensus of $1.40. Revenue of $4.48B (+10.9%) vs. consensus $4.43B. Sees 2009 EPS of $4.20-4.40 in-line.
• Gymboree (GYMB): Q1 EPS of $0.86 beats consensus of $0.84. Revenue of $242M (+15.7%) in-line. Sees Q2 EPS of $0.18-0.20, short of consensus of $0.21. Sees 2008 EPS of $3.10-3.15 in-line.
• Hot Topic (HOTT): Q1 EPS of -$0.03 beats consensus of -$0.04. Revenue of $159M (+1.1%) in-line. Sees Q2 EPS of -$0.02 to -$0.04 in-line.
• Jackson Hewitt (JTX): Says it prepared 3.45M tax returns in 2008, -5.3%. Sees full-year EPS of $1.34-1.39, short of previous guidance of $1.48-1.60, vs. consensus of $1.51. Sees full-year revenue of $282-292M vs. consensus of $278M.
• Limited (LTD): Q1 EPS of $0.11 beats consensus of $0.08. Revenue of $1.925B (-16.7%) in-line. Sees Q2 EPS of $0.16-0.20 in-line. Sees full-year EPS of $1.38-1.58, better than consensus of $1.41.
• Longs Drug Stores (LDG): Q1 EPS of $0.63 beats consensus of $0.60. Revenue of $1.41B (+8.5%) in-line. Sees full-year revenue +5-7% (= $5.5-6B vs. 5.53B consensus).
• Napster (NAPS): FQ4 EPS of -$0.10 beats consensus of -$0.13. Revenue of $30.8M in-line.
• NetApp (NTAP): FQ4 EPS of $0.38 beats consensus of $0.36. Revenue of $938M (+17.1%) in-line. Sees FQ1 EPS of $0.20-0.23, short of consensus of $0.27, and revenue of $845-875M vs. consensus of $871M. Sees 2009 EPS of $1.40-1.46 in-line.
• Netease.com (NTES): Q1 EPS of $0.30 misses consensus of $0.31. Revenue of $93M vs. consensus of $82M.
• Nordson (NDSN): FQ2 EPS of $0.97 beats consensus of $0.83. Revenue of $294M (+21.9%) vs. consensus of $280M. Sees Q3 EPS of $0.91-1.01, better than vs. consensus of $0.88.
• Perry Ellis (PERY): Q1 EPS of $0.60 beats consensus of $0.55. Revenue of $243.5M (+6.4%) vs. consensus of $234M. Sees full-year EPS of $1.95-$2.00, short of consensus of $1.99, and revenue of $910-925M vs. consensus of $922M.
• PetSmart (PETM): Q1 EPS of $0.32 just beats consensus of $0.31. Revenue of $1.20B (+9.1%) in-line. Comps +2.9%. Sees Q2 EPS of $0.26-0.30, short of consensus of $0.34, and comps growth in the low-single digits. Sees 2008 EPS of $1.51-1.59, better than consensus of $1.51.
• Salesforce.com (CRM): Q1 EPS of $0.08 beats consensus of $0.07. Revenue of $248M (+52.5%) vs. consensus of $236M. Net paying customers +2,600 to 43,600. Sees Q2 EPS of $0.07-0.08 in-line, and revenue of $258-259M vs. consensus of $251M. Raises full-year revenue guidance to $1.065B from $1.06B, vs. consensus of $1.05B.
• Semtech (SMTC): Q1 EPS of $0.22 beats consensus of $0.20. Revenue of $74.4M (+22.9%) vs. consensus of $72M. Sees Q2 EPS of $0.23-0.24, better than consensus of $0.22.
• Synopsys (SNPS): FQ2 EPS of $0.41 beats consensus of $0.38. Revenue of $325M (+10.8%) vs. consensus $321M. Sees FQ3 EPS of $0.38-0.40 in-line and revenue of $335-343M vs. consensus of $330M.

Earnings: Thursday Before Open

• Ann Taylor (ANN): Q1 EPS of $0.47 beats consensus of $0.46. Revenue of $592M in-line. Comps -4.3%. Sees Q2 EPS of $0.42-0.47, short of consensus of $0.47. Sees 2008 EPS of $1.80-1.90, short of consensus of $1.88. Sees 2008 comps slightly negative.
• Barnes & Noble (BKS): Q1 EPS of $0.04 misses consensus of $0.05. Revenue of $1.2B in-line. Full-year EPS of $1.70-1.90 in-line.
• Bon-Ton Stores (BONT): Q1 EPS of -$2.03 beats consensus of -$2.25. Revenue of $700M vs. consensus of $715M. Sees full-year EPS of $0.00-0.30, better than consensus of -$0.35.
• The Buckle (BKE): Q1 EPS of $0.61 beats consensus of $0.57. Revenue of $160M vs. consensus of $155M. Comps +25.6%.
• Casual Male Retail (CMRG): Q1 EPS of -$0.01 misses consensus of $0.02. Revenue of $107.6M vs. consensus of $110.15M. Sees 2008 EPS of $0.25-0.30, better than consensus of $0.24.
• Cato (CTR): Q1 EPS of $0.58 misses consensus of $0.60. Revenue of $229M in-line. Comps -2%. Sees Q2 EPS of $0.28-$0.33, better than consensus of $0.24. Sees 2008 EPS of $0.80-0.95, in-line.
• Dicks Sporting (DKS): Q1 EPS of $0.18 in-line. Revenue of $912M vs. consensus $926M. Sees Q2 EPS of $0.34-0.38, short of consensus $0.43. Comps are expected to decrease 4-7%.
• Flowers Foods (FLO): Q1 EPS of $0.39 beats consensus of $0.35. Revenue of $677M vs. consensus of $666.5M. Raises full-year EPS outlook to $1.15-$1.23 from $1.07-$.17, vs. consensus of $1.14.
• Frontline (FRO): Q1 EPS of $2.50 beats consensus of $2.38. Revenue of $393.5M (+44.1%) in-line.
• GameStop (GME): Q1 EPS of $0.37 beats consensus of $0.35. Revenue of $1.81B vs. consensus of $1.72B. Sees Q2 EPS of $0.26-0.28 vs. consensus of $0.26. Sees Q2 comps up 12-14%.
• Hormel Foods (HR): FQ2 EPS of $0.56 just beats consensus of $0.55. Revenue of $1.59B in-line. Sees full-year EPS of $2.30-2.40, short of consensus $2.37.
• Mentor Graphics (MENT): Q1 EPS of -$0.10 in-line. Revenue of $179M vs. consensus $170M. Sees full-year EPS of $1.05-1.10, better than vs. consensus of $1.03, and revenue of $915M vs. consensus of $901M.
• Patterson Companies (PDCO): FQ4 EPS of $0.51 in-line. Revenue of $778M vs. consensus of $800M. Sees FQ1 EPS of $0.38-0.40 vs. consensus of $0.40. Sees full-year EPS of $1.94-1.98 vs. consensus of $1.94.
• Sanderson Farms (SAFM): FQ2 EPS of $0.30 beats consensus of -$0.07. Revenue of $434M in-line.
• Stage Stores (SSI): Q1 EPS of $0.06 in-line. Revenue of $353.5M in-line. Sees Q2 EPS of $0.17-0.23, better than consensus of $0.15, and revenue of $360-368M vs. consensus of $368M, and comps down 3%-5%.
• Stein Mart (SMRT): Q1 EPS of $0.17 beats consensus of -$0.04. Revenue of $352M vs. consensus of $366M.
• Suntech Power (STP): Q1 EPS of $0.35 beats consensus of $0.27. Revenue of $434.5M (+76.1%) vs. consensus of $377M. Sees Q2 revenue of $430-440M vs. consensus of $428M. Sees full-year Revenue of $1.9-2.1B vs. consensus of $1.98B. Says it's virtually sold out for the year.
• Tech Data (TECD): Q1 EPS of $0.43 beats consensus of $0.42. Revenue of $6.07B vs. consensus of $5.74B. Sees Q2 revenue of $6-$6.2B vs. consensus of $5.66B.
• Zale (ZLC): FQ3 EPS of -$0.42 in-line. Revenue of $477M vs. consensus $458M. Comps +5.8%.

Today's Markets

• Asia: Nikkei +0.37% to 13,978. Hang Seng -1.64% to 25,043. Shanghai -1.65% to 3,486. BSE Sensex -1.93% to 16,911.
• Europe: FTSE +0.25% to 6,214. CAC -0.49% to 5,004. DAX -0.45% to 7,011.
• U.S. futures are up slightly at 7:10 AM. Dow +0.15% to 12,638. S&P +0.13% to 1,394.75. Nasdaq +0.08% to 1,966.
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Music subscription service Napster Inc. (NAPS) has announced the launch of an online store that will sell 6 million downloadable songs in the DRM-free MP3 format. For the first time Napster will offer a product playable on iPods and iPhones, as well as various other devices, priced competitively with Amazon.com Inc.'s (AMZN) downloads, which are also DRM-free. The Napster tool will also work with Apple Inc.'s (AAPL) iTunes store, which continues to sell some song files that are only compatible with a certain number of devices.

Napster's bread and butter remains its subscription service, in which users gain access to a large library of music for a basic monthly fee, starting at about $13 a month. The recurring-revenue model is relatively novel for the music business, but it hasn't proven popular enough to bring Napster remotely close to profitability--it lost $36.8 million on sales of $111 million in 2007, and its share price also has taken a beating.

Having ceded the file based music opportunity (mp3s and DRM’d file formats) to Apple (AAPL), the recorded labels are now getting hip to the much bigger opportunity - streaming music.

Yes, it’s true that listeners will still want to own files for a few more years. There are places and devices that can’t get high bandwidth wireless Internet access, like my Macbook Pro which I am using to write this on the plane ride home to NYC. I am listening to mp3s (no DRM for me) in iTunes all the way home.