The gap between Cendant's perceived value and the market's interpretation is baffling. Some Wall Street analysts are saying the stock price will rally at least 50% over the next year, once Cendant unlocks the supposed billions in hidden value. But traders who bet on such spreads haven't fully accepted that proposition.

Management hardly inspired confidence by issuing two earnings warnings since announcing the breakup. On releasing its fourth-quarter earnings in February, Cendant said it expected low-single-digit growth in earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2006, far less than the previous guidance of 10% to 12% growth.

The reason for the lowered forecast? Tough times at Cendant's travel distribution and vehicle services divisions. Cendant announced a $425 million charge in its travel distribution business, chiefly to write off its disastrous $350 million purchase in 2005 of Ebookers, Europe's No. 2 travel Web site. In December, management said it anticipated a charge in the range of $200 million to $300 million. Cendant also spent more than $1 billion apiece to buy out Orbitz and Gullivers Travel.

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