While Yahoo (and Microsoft) sharesholders await Carl Icahn's next move, tech M&A continues apace: CBS announced this morning it is buying CNET for $11.50 per share, a 44% premium over Tuesday's closing price.

The $1.8 billion deal for CNET, which runs sites such as CNET.com, ZDNet.com, and GameSpot.com, follows an intense fight over the firm between its management and activist shareholders, led by Jana Partners.

The activists, who have been waging a proxy fight intended to replace seven of CNET's eight board members, believe "CNET has not undertaken the ... type of fundamental strategic and operational changes needed to strengthen its core businesses and technology platform."

Jana's recent "white paper" on the subject criticized CNET's management and board as "lack[ing] the necessary sector experience and expertise" to bring CNET into the Web 2.0 world, noting their "backgrounds are primarily in traditional media or early-stage technology."

CBS, of course, is one of the ultimate traditional media companies, and "doesn't have much of a digital platform to date," writes Peter Kafka at Silicon Alley Insider.

Jana might not have gotten what it wanted in terms of management oversight of CNET, but a 44% premium is going to be hard to turn down on "principle."

Ahead of the Fed's rate decision Wednesday and Friday's jobs report, the market is taking a dip Tuesday amid data showing falling consumer confidence and rising foreclosures. (Hmm, you think there's a connection?)

Further testing the bulls' mettle is the latest setback for big pharma: Merck shares are tumbling after the FDA rejected its cholesterol drug Cordaptive, a decision that also weighed on shares of Eli Lilly, which has a similar product in its pipeline.

On the flipside, Watson Pharmaceuticals was rising sharply after the FDA completed an inspection of its Davie, Fla., manufacturing plant.

Further signs of optimism could be seen in Corning's better-than-expected results and guidance, while Visa was shaking off concerns about its guidance. Very strong results from Mastercard probably helped Visa's cause.

Microsoft and Yahoo remain at loggerheads, but it's a "Merger Monday" nonetheless.

With the week's big earnings, economic news, and Fed meeting yet to come, the broader market was relatively flat midday Monday. But merger activity (or lack thereof) has some individual stocks making big moves.

First, Warren Buffett and Mars are teaming up to acquire Wrigley for $23 billion in cash (!). The $80-per-share bid is a 28% premium to Wrigley's Friday closing price. No word yet if federal regulators are concerned about the potentially anti-competitive candy-gum monopoly that could result from the combination.

Second, Kirk Kerkorian's Tracinda Corp. has made a tender offer for 20 million shares of Ford at $8.50. The offer represents a 13% premium over Friday's closing price, and a near 40% premium from where the automaker's stock traded at the beginning of April.

Third, Barry Diller and John Malone are close to an agreement that will pave the way for a breakup of IAC/Interactive Corp., The NY Post reports. Malone unsuccessfully tried to get a court to stop Diller's plan to break up the Internet conglomerate. Malone now appears ready to swap his voting stake in IAC in exchange for one of its properties, most likely Home Shopping Network.

Finally, in de-merger news, Continental Airlines is exiting talks about a possible merger with United Airlines' parent UAL, although may yet pursue a deal with American Airlines.

The Microsoft-Yahoo drama is dominating the headlines -- and dragging down major averages -- but some smaller tech names are delivering for investors.

Shareholders of Baidu were winners Friday after the so-called "Google of China" reported better-than-expected results and raised guidance. Citigroup upgraded in reaction.

Still, some Baidu shareholders (like Henry) worry that Baidu is taking its eye off the prize (China) by focusing attention and resources on Japan.

CNET Networks would kill to have the kind of "problems" Baidu is facing; the interactive media company reported a loss of 4 cents per share, revenues below expectations, and disappointing guidance. But CNET shares were rising Friday after the firm inked a content agreement with Tech Ticker's parent. The three-year deal is unlikely to satisfy Jana Partners, activist investors who've been agitating for more dramatic change at CNET.

With most of this week's big earnings in the days ahead, it will be interesting to see how the market responds to Monday's early weakness. Don't be shocked if major averages are able to claw back because there has been a noticeable shift in the past week in terms of traders' willingness to focus on the positives and embrace riskier assets.

Then again, maybe Google's earnings and resulting stock jump on Friday will prove to be the peak of that trend, rather than a sign of it gaining momentum.

Traders also embraced Citigroup's $12 billion write-down as being less horrific than feared, which put further pressure on short sellers to cover (which means buying shares in the open market).

It's a little disconcerting how quickly the emotions can swing from panic to euphoria on Wall Street and there's still the matter of analysts expecting second-half earnings to surge, which will likely prove overly optimistic.

There's also the not-so-small matters of rising Libor rates, which effects adjustable-rate mortages even as Congress contemplates a bailout of the housing crisis (err, housing-related legislation).

But for the moment at least, the bulls are stampeding on Wall Street.

Major averages were treading water Tuesday as traders absorbed an unusually high amount of inputs, including a big deal in the airline industry and much stronger-than-expected headline PPI data.

The $3.63 billion Delta-Northwest Airlines deal is not spurring much excitement about additional M&A activity, in part because the airline industry, historically a graveyard for investors, is in such dire need of consolidation.

Also, earnings -- both reported and forthcoming -- are dominating traders' attention.

Stronger-than-expected earnings from Johnson & Johnson this morning provided a nice change of pace from last week's misses from GE, UPS, and Alcoa.

Following Friday's whitewash, this week got underway cautiously amid Wachovia's horrible first-quarter results, Blockbuster's highly curious bid for Circuit City, and not-as-bad-as-feared March retail sales data.

Wachovia's first-quarter loss, dividend cut, and subsequent $7 billion secondary offering is reminiscent of Washington Mutual's recent capital injection in that management was forced to raise capital under duress.

Still, Wachovia's deal is not nearly as egregiously dilutive to shareholders as WaMu's, and major averages were hovering near break-even at last check.

Also, overall volume is light, which is understandable given this week brings the first big batch of earnings, including those from Intel, IBM, eBay, JPMorgan, Google, Merrill Lynch, and Citigroup.

Beyond short-term considerations, the market's big problem is that analysts' expectations for the second half of 2008 remain wildly enthusiastic. If the awful results from GE and market reaction on Friday are any indication, the Street is in for a rude awakening if corporate earnings suffer the kind of decline typical in mild recessions, much less something worse.

Thursday's optimism about M&A, biotechs and chips was torpedoed early Friday by a shocking miss by General Electric.

GE posted first-quarter earnings from continuing operations of 44 cents per share, down 8% from a year ago and a whopping 7 cents below expectations.

Remember, this is the company that famously beat expectations by a penny (or 2) quarter after quarter during the Jack Welch era, so a 7 cent shortfall is jarring -- as reflected in GE's plummeting shares.

Critics said GE's ability in prior years to "manage earnings" was driven by its GE Capital unit (since split into separate divisions), which - because of its opaque nature -- allowed the company to "smooth out" the cyclicality of its industrial businesses.

GE, of course, denied such machinations. But the reality is company is now seeing that its growing dependence (nefarious or otherwise) on financial services in recent years is a double-edged sword.

GE said its finance units were responsible for 5 cents of the 7 cent miss because of mark-to-market losses, impairments and its difficulty (or inability) to sell assets.

"The financial services environment was very difficult and became even more difficult late in the quarter," CEO Jeffrey Immelt said on GE's conference call. "We had planned for an environment that was going to be challenging, but what I would say is kind of late in the quarter, particularly after the Bear Stearns event, we experienced an extraordinary disruption" in the financial arena.

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