Another big event that could change the course of events in the telecom sector might be Verizon Wireless (NYSE: VZ)'s acquisition of Alltel. This could lead to lower roaming costs and consolidation of back-office expenses. In addition, there is always enough room for other unexpected merger deals that could have a major impact on the sector.

On the negative side, telecom service providers have been facing challenges from wireless substitution and cable competition. However, Rosenbluth is confident that companies like AT&T and Verizon will be able to successfully surpass such obstacles by posting significant broadband and video gains.

So, the sector still has its risk, but according to S&P the time could be right to start to include the sector in your stock screens.

What are your thoughts on the overall sector? Have you been seeing some buying opportunities out there, or are you staying away all together? Let us hear your thoughts, we are curious what our readers think about this sector!

Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.

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22 Mid-Cap Marvels
These top-ranked dividend-paying stocks are also expected by S&P analysts to rise in price during the next 12 months.
Smart Dividend Plays: 22 Mid-Cap Marvels - BusinessWeek

The Rock Star of Money
The world's richest man is having an E.F. Hutton moment. Warren Buffett, dubbed the Oracle of Omaha by Wall Street, is making his voice heard these days. The billionaire investor is out talking to cable TV anchors. To magazines. To shareholders. To Congress. To foreign investors. To a former Wall Street analyst who is writing a book about him. He's even popped up in a CNBC documentary, The Billionaire Next Door: All Access, which delves into all things Buffett. Not to mention a recent guest appearance on the daytime soap opera All My Children. People are really listening to what Buffett has to say more than ever.
Warren Buffett hones rock-star status - USATODAY.com

Wal-Mart, Your Friendly Drugstore
The retailing juggernaut is set to move more aggressively into pharmaceuticals and health care, much as it did with groceries 20 years ago.
Wal-Mart, Your Friendly Drugstore - BusinessWeek

America's Most Time-Draining Airports
Flight delays are a summer travel nightmare. These airports have the worst waits. Topping the list is Chicago's O'Hare which is the nation's worst. In three categories: late aircraft, air traffic control and cancellations it ranked last out of 100 airports. To translate that into time lost, O'Hare flights in 2007 were delayed by a cumulative total of 2.5 million minutes due to a late aircraft.
America's Most Time-Draining Airports - Forbes.com
20 Worst Airports for Delays

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Despite all the rumors, the $24.7 billion buyout of Alltel (NYSE: AT) got done. With the credit crunch and botched deals, the stock definitely showed volatility. But, the private equity folks at Texas Pacific Group and Goldman Sachs (NYSE: GS) certainly didn't lose interest in the company. The stock price on the transaction was $71.50.

No doubt, Alltel made some key strategic moves to make itself attractive to private equity sponsors. Perhaps the most important initiative was the spin-off of its wireline business in 2006. Basically, this provided more focus for the company.

To get some more perspective on the deal, I checked out the proxy disclosures. Alltel took the approach of a quicker auction - so as to minimize leaks as well as try to get a better valuation.

Alltel had its financial advisors put together a summary LBO (leverage buyout) analysis. The estimates ranged from $59.75 to $70.50. This assumed that the company could fetch 6.5x to 8x multiples on EBITDA by 2012, which would produce a return ranging from 17.5% to 22.5% per year.

All in all, this looks like a textbook example of a quality deal. Yet, there are certainly risks. After all, Alltel will need to manage a debt load of $23 billion.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Research In Motion (NASDAQ: RIMM) is engaged in the design, manufacture and marketing of wireless devices for the mobile communications market. Its popular line of BlackBerry smart phones handle voice, email and text message communications, as well as internet access. The firm also makes radio-based modems that other manufacturers incorporate into portable devices. The company sells to corporations, resellers, and wireless carriers. BlackBerry units are offered by a variety of service providers, including Alltel (NYSE: AT) and Verizon Communications (NYSE: VZ).

The firm pleased investors last week when it reported Q2 EPS of 50 cents and revenues of $1.37 billion. Analysts had been expecting 49 cents and $1.36 billion. The CEO said that recent product and market initiatives are expected to extend business momentum through the remainder of the fiscal year. Management guided Q3 EPS to 59-63 cents (55 cent consensus) and Q3 revenues to $1.60-$1.67 billion ($1.52B consensus). Officials anticipate third quarter subscriber account additions of about 1.65 million. The stock popped on the news and has since passed into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

So far this year, brokers have recommended the shares with one "strong buy," nine "buys" and four "holds." Analysts see a 34% average annual growth rate, through the next five years. The stock's Sales Growth rate (26.84%), EPS Growth rate (100.00%), Operating Margin (27.07%), Net Profit Margin (20.70%), Return on Assets (26.94%), Return on Investment (33.09%), Return on Equity (33.82%) and Net Income per Employee ($140k) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 76% of the outstanding shares. The issue is one of those used to calculate the NASDAQ 100 Index. Over the past 52 weeks, it has traded between $36.00 and $118.80. A stop-loss of $99.00 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

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With higher interest rates and pushback in the debt markets, it's been tougher for the private equity folks to get deals done. Just look at the recent IPO of the Blackstone Group (NYSE: BX). The stock has been, well, like a stone.

But, according to this week's Barron's [a paid service], this may be an opportunity. That is, there may be a way to arbitrage returns.

Huh? Well, many deals have a spread between the buyout price and the current stock price. Why? Since a deal has not been closed, there's a risk of a deal falling through.

With the recent general problems in private equity, there's been a widening of spreads.

In fact, there are 10%+ spreads on such marquee companies like First Data Corp. (NYSE: FDC), Alltel Corp. (NYSE: AT), Alliance Data Systems Corp. (NYSE: ADS), and Harrah's Entertainment (NYSE: HET).

These firms have top-tier private equity sponsors. And, in terms of reputation, it would not be good for them to walk away. So while the financing costs may be higher, I still think private equity firms will work pretty hard to get these deals done.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

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Dobson Communications (NASDAQ: DCEL) sits in a strange little niche of the telecommunications industry. It provides wireless service to 1.7 million rural customers. And, it has put itself up for sale. The company has a market cap of about 1.7 billion.

Dobson makes almost a quarter of its income from collecting roaming fees from its larger competitors like Verizon Wireless. But, many of those companies are building their own infrastructure to reach consumers outside of urban areas.

It may be that Dobson's board saw the sales of Alltel (NYSE:AT) and figured that it is a good time to cash in by selling to private equity interests. But, Alltel has the fifth largest cellular customer base in the industry.

Dobson's share price is up almost 20% in the last three months, perhaps on speculation that the company will be sold.

But, Dobson may be too small and too dependent on FCC funding for rural phone service. There is conversation that these fees may be cut back or ended.

Some companies just can't find buyers, no matter how much cash is floating around the markets. Dobson may be one of those.

Douglas A. McIntyre is a partner at 24/7 Wall St.

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MOST NOTEWORTHY:

• Cheesecake Factory (NASDAQ: CAKE) was downgraded to Sector Perform from Outperform at CIBC, to Outperform from Strong Buy at Raymond James and to Peer Perform from Outperform at Bear Stearns after the company reduced its second quarter guidance.

• Buffalo Wild Wings (NASDAQ: BWLD) was cut to Neutral from Buy at Merriman on valuation.

• Lehman downgraded Alltel Corp (NYSE: AT) to Equal Weight from Overweight as the firm doesn't expect a competing bid for the company.

• Home Depot (NYSE: HD) was cut to Market Perform from Outperform following yesterday's rally and feels that with the HD sale out of the way, the focus will now turn to Home Depot's ability to grow in the challenging do-it-yourself retail market. Goldman cut Nokia to Neutral from Buy on valuation...

• JP Morgan cut Headwaters (NYSE: HW) to Underweight from Neutral.

• Citigroup downgraded Prudential Financial (NYSE: PRU) to Hold from Buy.

• Matrix USA cut Phototronics (NASDAQ: PLAB) to Sell from Hold.

• Ferris, Baker downgraded Gladstone Commercial Corp (NASDAQ: GOOD) to Neutral from Buy.

• Citigroup removed Office Depot (NYSE: ODP) from its Citi Recommended List.

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The trend of private equity firms buying out high tech companies continues. According to Bloomberg News, Silver Lake Partners and TPG will take Avaya Inc. (NYSE: AV) private for $8.2 billion -- the biggest LBO of a computer networking firm ever.

Investors will receive $17.50 a share. That's 4.7% more than yesterday's closing price and 28% more than before speculation about a purchase surfaced on May 29.

This is the latest in a string of high tech LBOs. Recent ones include:

• Acxiom Corp. (NASDAQ: ACXM), this computer and database services provider, said May 16 it's being bought by Silver Lake and ValueAct Capital Partners LP for about $2.24 billion.
• Alltel Corp. (NYSE: AT) this fifth-biggest U.S. wireless service, agreed May 21 to be bought by TPG and Goldman Sachs Group Inc. (NYSE: GS) for $27.5 billion.
• CDW Corp (NASDAQ: CDWC) agreed on May 30 to be acquired by Madison Dearborn Partners LLC for $7.3 billion.

I am not sold on the competitive advantages that will result from this deal. Maybe there's some overhead to be cut but I question how much private equity is willing to invest in R&D to jump start Avaya's product pipeline.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned in this post.

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Like other big businesses, most telecommunications firms find it cost effective to farm out development of their customer interface software systems. One of the best known developers of the specialty programs is headquartered in Chesterfield, Missouri.

Amdocs Limited (NYSE: DOX) provides customer relationship management, sales, and billing software used by telecommunications service providers. It also sells publishing software for generating print and online directories and offers a variety of outsourced communications facility management services. Clients include AT&T (NYSE: T), Alltel (NYSE: AT), Comcast (NASDAQ: CMCSA), Nortel Networks (NYSE: NT), Qwest Communications International (NYSE: Q), Sprint Nextel (NYSE: S) and Verizon Communications (NYSE: VZ).

The stock popped on Monday, powering through 50-day and 200-day moving average resistance levels, on rumors of the potential for a bid from private equity. There was clearly interest in June $40 calls that day, implying more than just idle chatter.

Analysts recommend the issue with six "strong buys", seven "buys" and six "holds". Analysts see a fifteen percent average annual growth rate, through the next five years. The DOX PEG ratio (1.58), Price to Sales (2.88), Price to Book ratio (3.23), Price to Cash Flow ratio (15.99) and Price to Free Cash Flow ratio (25.81) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 88% of the outstanding shares. Over the past 52 weeks, the stock has traded between $32.50 and $41.01. A stop-loss of $32.75 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

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MOST NOTEWORTHY:

• Deutsche Bank and ABN Amro cut GlaxoSmithKline (NYSE: GSK) to Hold from Buy following the New England Journal of Medicine warnings from Avandia.

• Merrill Lynch cut SanDisk (NASDAQ: SNDK) to Neutral from Buy due to concerns that oversupply in the industry will extend through next quarter.

• Cowen downgraded shares of Lockheed Martin (NYSE: LMT) to Neutral from Outperform based on slower 2007-2008 EPS growth and less cash redeployment upside than General Dynamics Corp (GD) and Raytheon Co (RTN).

• UBS downgraded aQuantive (NASDAQ: AQNT) to Neutral from Buy and RBC Capital cut shares to Sector Perform from Outperform after the Microsoft (MSFT) acquisition...

• Piper Jaffray downgraded Cytyc Corp (NASDAQ: CYTC) To Market Perform from Outperform.

• NetBank, Inc (NASDAQ: NTBK) was downgraded to Underperform from Market Perform at Friedman Billings.

• Merrill Lynch downgraded shares of Aeropostale, Inc (NYSE: ARO) to Neutral from Buy.

• AG Edwards downgraded BHP Billiton Ltd (NYSE: BHP) to Hold from Buy.

• Gabelli downgraded shares of Alltel Corp (NYSE: AT) to Hold from Buy.

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Although ending mixed, the markets continued higher setting new record highs in intraday action. Amazon.com (NASDAQ: AMZN) booked higher $5.00 (8%) to $68.30 after analyst comments and raised price targets. Alltel Corporation (NYSE: AT) rang higher $4.39 (7%) to $69.60 after two firms agreed to buy the firm. GlaxoSmithKline (NYSE: GSK) fell $4.53 (-8%) to $53.18 on drug data showing increased risk of side effects.

The NYSE had volume of 3.4 billion shares with 1,944 shares advancing while 1,318 declined for a gain of 3.72 points to close at 9,897.46. On the NASDAQ, 1.9 billion shares traded, 2,042 advanced and 1,027 declined for a gain of 20.34 to 2,578.79.

In options there were 5.1 million puts and 6.2 million calls traded for a put/call open interest ratio of 0.82. With the 8% move to the upside on Amazon.com (NASDAQ: AMZN) saw heavy volume on the June 65calls (ZQNFM) and June 70 calls (ZQNFN) with over 22,000 options trading on each. Put were active too with Amazon seeing 34,000 contacts of the June 60 puts (ZQNRL) trading. Other active strikes include QualComm's (NASDAQ: QCOM) June 45 calls (AAOFI) trading 24,000 contacts. Qualcomm also saw over 30,000 contacts on the January 35 and January 40 puts trading 30,000 contracts each. That volume may be related and represent a spread trade.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Do you have any deadwood in your portfolio? Check out the 18 Warning Signs That Tell You To Dump A Stock.

Disclosure note: Mr. Kersten owns and or controls a diversified portfolios of long and short positions that may include holdings in companies he writes about.

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Alltel Wireless will be far more competitive following the $27 billion buyout by divisions of Goldman Sachs Group Inc. (NYSE: GS) and Texas Pacific Group.

How fast will Alltel be able to scale its customer base and compete with the big four wireless companies? Much faster as a private company if you ask me.

Without quarterly numbers to hit, the company can pour capital into becoming what it has the potential to be and at some future time re-enter the market for the payoffs for GS Capital Partners and TPG Group. Until then, we'll all see what Alltel can do to compete with the larger carriers over time. With this buyout probably having been in the works for most of 2007, you can bet a solid plan is already in place.

With 12 million customers. Alltel is the fifth-largest wireless company behind AT&T Inc. (NYSE: T), Verizon Wireless, Sprint Nextel Corp. (NYSE: S) and T-Mobile USA. It owns wireless liceneses giving it coverage area bigger than the larger four carriers, which is a huge attraction for the private equity firms who already are drawn to the red-hot wireless industry.

The upside is great for this deal since people are dropping land line telephones and moving to the wireless and Internet telephony.

Now it's time to execute.

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Alltel (NYSE: AT) has been looking for a buyer since its CEO said that the company was exploring strategic alternatives on its first quarter conference call. The Wall Street Journal also mentioned that the company might be bought in an article that ran last December.

Well now it look it looks like a deal might actually get done. TPG Capital LLP and a division of Goldman Sachs (NYSE: GS) have offered $71.50 per share, a 10% premium over the stock's most recent closing price.

Alltel spun-off its landline business last year, which may make the company unusually attractive. While cellular businesses, now most of Alltel's revenue, are growing quickly, landline operations are losing subscribers to cable VoIP offerings.

Alltel currently has 12 million subscribers, making it the fifth largest cellular operator in the US.

Douglas A. McIntyre is a partner at 24/7 Wall St.

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When Is It Wise to Tap Your Home Equity?
Home equity is usually a person's biggest asset. Tap it with care. In this special Bankrate report check out the latest trends, the various loan options, pros and cons for tapping equity along with 4 strategies to tap your home equity.
Home equity loan strategies

Get Ready to Pay for Peanuts
You think Southwest Airlines is a low-cost airline? You ain't seen nothing yet. A new crop of low-cost airlines is taking "no-frills" to new heights by charging for everything from snacks and drinks to checked bags.
Get Ready to Pay for Peanuts - BusinessWeek


Millionaires in the Making
Both Jeanette Courts and Jerry & Lynn Moser are big savers and investors on their way to being millionaires. See how these hard-working ordinary people plan to lead the good life.
Millionaires in the Making Jeanette Courts « Millionaires in the Making Jerry and Lynn Moser «


Top Stock Pickers and Their Top Stock Picks
The world has changed for analysts since this survey began in 1993, and there are more opportunities for small independent research firms. While a number of winners have appeared in these rankings before, this year's top stock pickers include many newcomers.
Industry by Industry: The Stars and Their Stocks - WSJ.com


More Pop for Corporate Museums
Coca-Cola's new Atlanta museum shows how companies are becoming increasingly aggressive at using flashy exhibits and interactive technology to promote their corporate namesakes. In addition to the New World of Coca-Cola others like Hershey and Harley-Davidson have or are building museums that are part tourist attraction and party homage to what makes these companies great.
More Pop for Corporate Museums - WSJ.com


How Much Does It Cost to Lose 30 Pounds?
Getting smaller is a huge industry in America. Here are some of the big-name weight-loss programs and how much each will lighten your wallet.
How much does it cost to lose 30 pounds? - Bankrate.com


Hottest Frozen Treats
When it comes to ice cream, Americans have trouble saying no. In 2005 alone, total U.S. sales of ice cream and frozen desserts hit $21.6 billion, including $13.5 billion spent at scoop shops and restaurants. But not all ice cream has to be bad for you. Here are the coolest healthy desserts today. They include Ben & Jerry's Lighten Up yogurt, Maggie Moo's mango zoomer, Turkey Hill Duetto Gelati in Cherry Vanilla, Yogen Früz Non-Fat Frozen Yogurt, WholeSoy & Co. Crème Caramel Frozen Yogurt and much more.
Hottest Frozen Treats - Forbes.com

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MAJOR PAPERS:

• According to people familiar with the matter, at least three groups of private-equity companies have formed to attempt to purchase wireless carrier Alltel Corporation (NYSE: AT), reported the Wall Street Journal (subscription required).
• The Wall Street Journal's "Heard in Asia" column reported that in order for Sony Corporation's (NYSE: SNE) stock to rise when it reports next week, it is going to have to convince investors that its PlayStation unit is showing improvement.
• The Financial Times (subscription required) reported that almost half of the senior management at Citigroup Inc's (NYSE: C) consumer operations have quit in the last 18 months, as criticism of CEO Chuck Prince has grown.

• According to the Telegraph, Royal Dutch Shell (NYSE: RDS.A) and BP plc ADS's (NYSE: BP) Russian joint venture, TNK-BP, are expected to join the auction for the 537-petrol station network belonging to Yukos. The bidding is expected to start at GBP150M.
• GlaxoSmithKline plc ADR (NYSE: GSK) has begun to promote Alli, the first weight-loss drug to be approved by the FDA for over-the-counter sale, reported the New York Times.

• According to DigiTimes.com, citing industry insiders, Taiwan Semiconductor Manufacturing Company (NYSE: TSM) is looking to up production of Intel Corporation's (NADSAQ: INTC) 802.11n Wi-Fi chips at 0.13-micron in Q3, a sign of closer collaboration between the two companies.

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