Everywhere you turn, you hear reports of an improving economy. Well, most everywhere. According to a survey released today by human resources folks Hewitt Associates and reported in USA Today, a full two-thirds of U.S. companies do not plan to pay out holiday bonuses this year. Dang.

CNN cites from a second study that in opting to withhold bonuses, businesses are "taking cues from the labor market," specifically a 6% jobless rate. Moreover, that if the recovery continues, most companies expect bonuses to be higher next year.

One wonders how many of those will accompany laments of a disloyal U.S. workforce. The dance continues.

In today's Motley Fool Take:

McData McDisappoints

Shares of data-storage company McData(Nasdaq: MCDTA) are off 10% today on management's so-so fourth-quarter guidance. McData released third-quarter earnings after the bell yesterday, and while they met lowered expectations, they weren't exactly blockbusting. This double dose of tepid news was enough to frustrate investors.

McData, which competes with firms like Brocade Communications(Nasdaq: BRCD) and Cisco Systems(Nasdaq: CSCO), has battled its own customers over pricing. Put plainly, customers want better prices, and McData's hesitant to meet their demands. It was a dispute with key customer EMC(NYSE: EMC), in fact, that prompted McData to lower expectations for its third quarter back in October.

As expected, McData lost $50 million for the third quarter, or $0.44 a share, including charges. Excluding charges, McData earned $2.1 million, or $0.02 a share, about what it earned on the same basis in last year's Q3. Revenues were up 17% to $94.7 million. Before it lowered its Q3 outlook, McData had anticipated revenues of $107-$112 million.

For its fourth quarter, McData anticipates earnings excluding charges to come in around breakeven, or $0.01 per share on revenues of $108 million-$116 million. Analysts had been expecting earnings of $0.03 a share on sales of $116 million.

Whether these expectations are realistic is anyone's guess, but investors looking for signs that McData has the pricing situation and competition under control can't be too optimistic.

Discussion Board of the Day: Video & PC Games

We're not getting any thinner. What's up with that? Might video games be to blame for our country's out-of-shape ways? Do you see traditional toys like bicycles gaining or losing market share to video games in the coming years? All this and more -- in the Video & PC Games discussion board. Only on Fool.com.

The New Power Couple

The old adage of 1+1 = 3 has certainly been overused and abused in the M&A game. But, there are exceptions, and yesterday's merger between Powerwave Technologies(Nasdaq: PWAV) and LGP Allgon looks to be a case in point.

In the deal, shareholders in LGP Allgon will receive 1.1 shares of Powerwave stock for each share they own. That values the deal at roughly $400 million. The net result: Powerwave shareholders wind up with 54% of the combined entity.

Both companies deal in the complex area of wireless infrastructure. Powerwave is a leader in power amplifier technologies; LGP Allgon, meanwhile, is a leader in tower-mounted amplifiers and site optimization.

OK, not very clear, huh? Essentially, the merger allows for a complete offering of technologies for wireless infrastructures. Moreover, this is vitally important as next-generation and 3G technologies start to roll out.

Enough of the techno jumbo. The financials of the deal also look attractive. The transaction is expected to generate at least $15 million in annual cost savings. There are revenue synergies as well. Combined revenues for 2004 could reach about $600 million, compared to $527 million for the past 12 months.

Powerwave has finished restructuring its business model. The company now outsources a large part of its manufacturing to Asia, thus boosting margins. It also has about $253 million in the bank.

There is little overlap in the product lines of both companies. Interestingly enough, according to a Morgan Stanley(NYSE: MWD) study, Powerwave's addressable market will go from under $2 billion in 2004 to about $17 billion.

In light of this, Powerwave sees immediate results. In fact, the company believes the merger will be accretive in its first quarter of completion -- yes, it's 1 + 1 = 3 transaction.

Quote of Note

"A people that values its privileges above its principles soon loses both." -- Dwight D. Eisenhower

Overstock Rocks

It started last Friday. Motley Fool Hidden Gems featured pick Overstock.com(Nasdaq: OSTK) jumped 11.5% to $15.85 after CEO Patrick Byrne appeared on CNBC. Byrne said that Overstock was approaching breakeven and likely wouldn't have to dilute shareholders to raise capital anytime soon.

Good feelings and holiday spirit spilled into Monday and a further small gain to $16.27.

That same night, Overstock came out and reported that Thanksgiving weekend's gross merchandise sales soared 156% year over year to $6.4 million. That news sent Overstock another 25% higher to $20.33 today.

Overstock is benefiting from both a general growth in online retail and a consumer thirst for value. According to Byrne, the company's "Books, Music, and Video department has become a serious force." He also said that the average book price beats Amazon(Nasdaq: AMZN) by 20% -- back in September, the company moved to price bestsellers at a flat 25% discount to Amazon.

In addition to books, music, and videos, Byrne reports that jewelry and apparel are also doing "exceptionally well," reflecting "the fact the [Overstock] customer base is two-thirds female." Overstock's flat $2.95 shipping rate certainly hasn't hurt.

But talk about volatility. Over the past year, Overstock has treated shareholders to a rollercoaster ride. The stock hit the high teens in February, before falling to the single digits in May. By September, it was back to the upper teens, before jitters over imperfect Tiffany(NYSE: TIF) pendants knocked the shares back.

To his credit, Patrick Byrne's response at the time was nothing less than forthright and worthy of laud.

As yet unprofitable and without much of an operating history, Overstock remains a difficult company to value. But one thing's for certain: Investors who have chosen to ride out the volatility have been well rewarded.

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More Fool News

For all today's stories, see Today's Headlines.

And Finally...

You want to remember the holidays for the good stuff, right? Not the seemingly endless parade of bills that follow you well into the summer. Need a hint? Dayana Yochim has a few to make this year different in Ready, Set, Shop! On a more serious note, investigators are making strides in the battle against a troubling and much-too-common disease. David Nierengarten and Amy Ary break it down in Hope for Diabetics -- and Investors.

Bob Bobala, Robert Brokamp, Paul Elliott, Mathew Emmert, Jeff Fischer, Jeff Hwang, Tom Jacobs, LouAnn Lofton, Alyce Lomax, Bill Mann, Selena Maranjian, Dave Marino-Nachison, Rex Moore, Rick Munarriz, Reggie Santiago, Tom Taulli, Dayana Yochim