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Closing Bell: Morningstar

Is Carl Icahn on the prowl again? There's talk on Wall Street that the corporate raider is rounding up hedge funds to shake up -- and possibly break up -- Time Warner (TWX). And no wonder. Since Icahn first bought a $98 million stake in the media giant at the end of 2004, its stock has fallen 7%, to $18. Time Warner and Icahn declined to comment.

Given his recent track record with investments in such companies as Kerr-McGee and Mylan Labs and his success in getting a slate of directors elected to Blockbuster Entertainment's board earlier this year, Icahn could try to push Time Warner CEO Richard Parsons to make drastic moves. These could include selling off publishing arm Time Inc. and spinning off America Online right away. Analysts say the breakup value of Time Warner ranges from $20 to $27 a share.

Still, Icahn has his work cut out for him. Wall Street doesn't appear to be a big fan of media breakups. Viacom (VIA) shares are off 7% since its plan to split in two was announced on Mar. 16.

Gilead Sciences (GILD) is struggling to turn one of its best ideas into reality. The Foster City (Calif.)-based biotech is trying to combine three HIV treatments into a single tablet -- a drug that could prove popular among patients who are tired of taking handfuls of pills every day. But on Aug. 9, Gilead announced that in clinical trials, the three drugs were absorbed differently in the body than when taken separately. Gilead will test three new formulations over the coming months, delaying plans to file for approval from the Food & Drug Administration. Glum investors nudged down the stock 2.6%, to $41.57, on Aug. 10.

The brain drain continues at Delta Air Lines (DAL), a development that many on Wall Street say could foreshadow a bankruptcy filing by the nation's third-largest carrier. After losing its general counsel and chief financial officer in July, Delta recently disclosed the departure of its treasurer and a top lobbyist. With just $2 billion in cash, and its losses expected to grow during the slower fall season, analysts think Delta may not want to draw reserves too much lower. Already, some creditors are starting to take a tougher stance: On Aug. 9, Delta disclosed that a credit-card processor was demanding a "substantial cash reserve" before it will handle the carrier's MasterCard and Visa transactions.

Aug. 9 was a red-letter day for Walt Disney (DIS). On the same day it reported strong third-quarter earnings, Disney got some good news from a Delaware state judge. Chancellor William Chandler dismissed an investor suit alleging Disney's board was negligent in its 1995 hiring of Michael Ovitz, who was briefly president. But he blasted longtime CEO Michael Eisner, who is retiring on Oct. 1 and being succeeded by President Robert Iger, for being "Machiavellian and imperial." Still, Eisner had lots to smile about. Boosted by a ratings revival at ABC and hefty affiliate and ad hikes by ESPN, third-quarter profits increased 41%, to $851 million. Eisner called the results "gratifying but not surprising."

No one ever said fixing the books was easy. Fannie Mae (FNM), engaged in a mammoth effort to restate all of its financial results going back to January, 2001, announced on Aug. 9 that it would spend more than $420 million this year on audits, investigations, new accounting systems, and litigation defense. That's just a downpayment, because the housing giant says it won't finish straightening out its numbers until the end of 2006. What's more, the bills don't include likely damages from shareholder suits. Fannie's accounting woes have also landed it in hot water with the New York Stock Exchange, which must consider by yearend whether to delist Fannie's shares.

-- American International Group (AIG) reported a 51% gain in second-quarter net income.

-- Federated Department Stores' (FD) second-quarter earnings rose 90%.

-- A special committee told Krispy Kreme (KKD) to restate its earnings by $25.6 million over the past several years.

The skies are sunny indeed at Morningstar (MORN). Its shares climbed 16%, to $31.55, on Aug. 10, after the Chicago research outfit reported a 631% gain in quarterly earnings. Morningstar is profiting from demand for independent securities research.

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