The Zacks Analyst Blog Highlights: Yahoo, Microsoft, Google, Facebook and Intel

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For Immediate Release

Chicago, IL – May 9, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Yahoo Inc. (YHOO), Microsoft Corp. (MSFT), Google Inc. (GOOG), Facebook (FB) and Intel Corp. (INTC).

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Here are highlights from Wednesday’s Analyst Blog:

Yahoo, Microsoft Extend Search Deal

Yahoo Inc. (YHOO) and Microsoft Corp. (MSFT) have renewed their search deal that guarantees revenue for each search made by a Yahoo user using Microsoft’s search engine, Bing. Following the news, shares of Yahoo rose more than 3.00%.

The U.S. revenue-per-search guarantee (:RPS) agreement was initially struck in late 2009, renewed in 2011 and expired on Mar 31 this year. Effective Apr 1, the deal has been extended for another year, according to recent SEC filings made by Yahoo. According to the latest agreement, Microsoft will pay Yahoo a minimum amount per search on Yahoo's website.

The partnership is intended to create a competitive front versus Google Inc. (GOOG), the world’s leading search engine. But the partnership did not turn out as well as expected and resulted in market share losses for Yahoo. The company's revenues declined for three consecutive years before registering a small gain last year.

The deal is Yahoo's first agreement with Microsoft since Marissa Mayer took over as the CEO of the company in July. The extended deal could help the company improve its search revenues going forward. Last quarter, the company’s search revenues were up sequentially due to improvements in the quality of ads, better user experience and new ad products.

Recently, Yahoo signed a global contextual advertising deal with Google, according to which Google ads will appear on various Yahoo properties and certain co-branded sites. This will further help the company improve its search ad revenues.

However, Yahoo still has much to prove, given the growing success of archrival Google and Facebook (FB). Facebook has become extremely popular with users, so much so that it is already the most popular social networking platform.

The extended deal could have some positive impact and help Yahoo to generate additional dollars as Mayer’s efforts indicate possible improvements in Yahoo’s search and Display business.

Currently, Yahoo has a Zacks Rank #1 (Strong Buy) while Microsoft carries a Zacks Rank #4 (Sell).

McAfee to Acquire Stonesoft

McAfee, a wholly-owned subsidiary of Intel Corp. (INTC), which is the world’s largest manufacturer of semiconductor products, plans to acquire Stonesoft, a network firewall solutions provider, for $389 million in cash.

Finnish company Stonesoft Corp. offers network security solutions. Its product portfolio includes Firewall/VPN, IDS/IPS, SSL VPN, Management Center (:SMC) and Virtualization Solutions. It is a global business and has 6,500 customers worldwide.

California-based McAfee, Inc. was acquired by Intel in Feb 28, 2011 for $7.68 billion and is now a wholly-owned subsidiary of the chip giant. The acquisition was Intel’s first step into the security segment, which has tremendous potential. As more individuals and businesses all over the world get connected, they are more susceptible to cyber attacks. Therefore, the growing number of connected devices (primarily tablets and smartphones), the bring-your-own-device (:BYOD) strategy adopted by many companies, the SaaS model being increasingly adopted by software companies and the increasing volume of business being carried out online (banking, e-commerce, academic, government) are secular drivers of security solution sales. Not only is security essential at the client device level (receiver/transmitter of data), but also at the network level (transport of data) and at the cloud level (transmitter/receiver of data).

The acquisition will strengthen Intel’s portfolio of security solutions. Intel’s growing interest in software and security is also borne out by the recent elevation of Renee James to the position of President. James was behind the McAfee acquisition and is also probably driving this one. The company is certainly devoting resources in the area ($7.7 billion for McAfee and nearly $400 million on this one). Intel has deep pockets and deeper strategy. While its mobile efforts were off to a slow start, Intel has whatever it takes to pursue opportunities in other growing markets as well.

Intel reported revenues of $12.58 billion, within the guidance range of $12.7 billion (+/-$500 million) in the first quarter of fiscal 2013, down 6.7% sequentially and 2.5% year over year. Weaker-than-expected PC demand stemming from tablet cannibalization and restrained consumer buying due to tighter budgets continued in the quarter.

 

 

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