Sara Lee offered to acquire Earthgrains Co. (EGR

) for $40.25 cash per share. The deal is valued at $2.8B, including debt assumption. Earthgrains sees better than expected $0.34 Q1 EPS. S&P downgraded.

Avanex (AVNX

) cut the Q4 revenue guidance to $18M, citing worse than expected deterioration in the domestic telecom capital spending.

UAL Group (UAL

) announced it has entered talks with US Airways (U

) to terminate its merger deal prior to the August 1 deadline. UAL doesn't think it would win antitrust approval on terms that make sense for the airline.

Prudential downgraded Federated Department Stores (FD

) to hold from buy.

Needham downgraded Commerce One (CMRC

) to hold from buy.

Lightbridge (LTBG

) expects Q2 revenues of $45M-$46M, about 8%-10% short of previous guidance, due largely to a decline in non-strategic hardware sales.

Morgan Stanley DW downgraded KPMG Consulting (KCIN

) to neutral from outperform.

Merrill upgraded Asyst Technology (ASYT

) to near-term buy from accumulate.

Merrill upgraded Siebel Systems (SEBL

) to near term accumulate from neutral, and maintains long term buy.

Needham downgraded Saba Software (SABA

) to hold from buy.

Navigant International (FLYR

) sees $0.38 Q2 EPS, about $0.08 below the consensus estimate, citing the sluggish economy, a decline in business travel, and an increase in shares outstanding.

Prudential downgraded Oak Technology (OAKT

) to hold from buy.

Prudential downgraded Walt Disney (DIS

) to hold from buy.

Walter Industries (WLT

) ups the Q2 EPS guidance to $0.29-$0.32, 23% higher than prior guidance.

Allied Capital (ALD

) says it has elected a cash option

to complete its previously announced acquisition of

Sunsource Inc. (SDP

). Allied will pay $10.375 per Sunsource share.

CIBC World reiterates buy on Astoria Financial's (ASFC

) price.

Turnstone System (TSTN

) sees a $12M-$13M Q2 net loss from operatins on revenue of about $4.5M. Turnstone will take a charge of $500,000-$600,000 in Q2 for a 20% workforce reduction, and about a $34M-$38M charge for excess inventory.

Pacific Growth believes Infocus 's (INFS

) Q2 results will come in lower than expected and cut the estimates to reflect lack of visibility.

Primus (PKSI

) sees a $0.30-$0.35 Q2 loss on revenues of about $6.5M, citing continued purchasing delays by current and prospective customers as IT capital spending has virtually come to halt.

Sipex Corp. (SIPX

) will cut its workforce by about 15%, and will shut down its manufacturing operations for some period during Q3.

Synquest Inc. (SYNQ

) sees a $0.22-$0.24 Q4 loss vs. a year ago's $0.15 loss. Synquest says current economic uncertainty has prolonged sales cycles, and delayed customer purchase decisions.

Minnesota Mining (MMM

) sees $1.10-$1.14 Q2 EPS from operations on a slight sales rise, citing continuing weakness in the U.S., an increasing slowdown in European and Asia Pacific economies, and negative impacts from a strong U.S. dollar. 3M will cut its workforce by 5,000.

TMP Worldwide (TMPW

) agreed to acquire Hotjobs.com (HOTJ

) in a deal valued at about $460M. Terms: 0.2195 TMP share per Hotjobs share.

Art Technology (ARTG

) cut the Q2 guidance to a $0.17-$0.19 Q2 loss from operations on $34M-$35M revenue, and set a reorganization including a workforce reduction of about 20%. CS First Boston cut estimates.

Captec Net Lease (CRRR

) agreed to be acquired by Commercial Net Lease Realty (NNN

).

Terms: 0.4575 Commercial Net Lease share for 0.21 shares of new class of Captec preferred stock, 9.0% Series A non-voting preferred stock, and $1.27 cash for each Captec share.

David Tice of Behind the Numbers thinks NVIDIA (NVDA

) is headed for a fall. Tice questioned how NVIDIA's pricey graphics chip ($399) will fare against cheaper alternatives, not to mention the massive slowdown in the PC market: Barron's.

Insight Health (IHSC

) agreed to be acquired by J.W. Childs Associates and Halifax Group (HFXNY

) in partnership with management for $18 cash per share.

Priority Health (PHCC

) sees Q2 EPS from operations $0.04-$0.06 below consensus estimates, citing the delay of key products, tightening gross margins and reduction in interest income.

The company sees several Q2 non-recurring charges.

Some investors suggest that short of a takeover of AG Edwards (AGE

) -- which

doesn't seem any more likely under non-Edwards family CEO -- there's little upside in stock: The Wall Street Journal

Benchmark Electronics (BHE

) revised its Q2 sales forecast to $315M-$320M, and revised its cash EPS to $0.12-$0.14 (exclusing restructuring charges). Benchmark sees Q3 revenues, and EPS comparable to Q2 , citing the continued slowdown in the technology marketplace.

Roche licensed the rights to ICN Pharmaceutical's (ICN

) developmental compound,

Levovirin, second-generation drug for the treatment of hepatitis C.

Infineon Technology (IFX

) says it will proceed with a public offering of up to 60M newly-issued shares.

Primedia (PRM

) will acquire EMAP USA from EMAP plc (EMAPF

) for $515M. Primedia will become the second largest U.S. consumer magazine publisher.