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YHOO Rallies on False Hopes? Don't Assume MSFT Deal or Big GOOG Payday

Posted May 06, 2008 01:00pm EDT by Aaron Task in Investing, Internet, Venture Capital, M and A, IPOs
Related: MSFT, YHOO, GOOG

With Yahoo under pressure from major shareholders and senior management backpedaling, maybe a deal with Microsoft isn't dead after all.

At least, that's how many traders are seeing things: Yahoo shares closed well off their session lows Monday and are rallying Tuesday, while Microsoft stock struggles to get above $30.

But those betting Microsoft will come back to the table soon are assuming Steve Ballmer's "bye-bye" letter Saturday was a negotiating tactic vs. a true change of heart.

Yahoo's PR team is trying to paint Ballmer as having "suddenly" changed his mind about the Yahoo bid. But as Henry Blodget writes, the truth is his position evolved over the three months when Yahoo seemed to indicate it would prefer any alternative to a deal and Microsoft's own employees and shareholders expressed major reservations.

Meanwhile, one of Yahoo's best "alternatives" was the outsourcing deal with Google, which Citigroup's Mark Mahaney estimates could generate as much as $1 billion of additional cash flow to Yahoo annually.

Mahaney's $1 billion target has been widely quoted but Sue Decker says Yahoo isn't giving up on search or display, suggesting a more limited outsourcing agreement -- and, therefore, considerably less than a $1 billion bump for Tech Ticker's parent.

In other words, Yahoo bulls may be in for a rude awakening on two fronts.

Go to Tech Ticker

33 Comments

WilliamC
WilliamC - Tuesday May 06, 2008 02:44PM EDT

YHOO lucky to be worth $18/share . . . I see it more like a $10 stock myself & I've been in this game for a long time.

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Henry
Henry - Tuesday May 06, 2008 02:50PM EDT

It was a lot like Microsoft saying I want to be your lover and yahoo saying your too ugly for me...So they can walk away and say I may be ugly but I have a hell of a lot more cash than you're going to see from another lover....sometimes rich and ugly is better than poor and handsome when it comes to courting. especially when you only have to hold hands for a while

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Yahoo! Finance User
Yahoo! Finance User - Tuesday May 06, 2008 03:08PM EDT

Hey, YHOO, where does it go now regardless of (Deal or No Deal) MSN ? Will Panama float Y's boat or will it just be a logjam in investors trying to desert a sinking ship ??? What happens if all the funds sell at once...they know that they can't, so watch each day's volume...once it cools down & the funds are out & likewise the artificial support...then the free market will show Y's real value.

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bikewriter66
bikewriter66 - Tuesday May 06, 2008 03:13PM EDT

Apple has plenty of cash. They would know how to enhance Yahoo. Letting MSFT have Yahoo is like giving Hulk Hogan a rubics cube.

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geon
geon - Tuesday May 06, 2008 03:46PM EDT

Maybe it's rally because it doesn't have the msft lasso around its neck. These articles suck.

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jason
jason - Tuesday May 06, 2008 04:18PM EDT

I believe MSFT can buy Yahoo for less than what is worth now. But by then it may be too late. Yahoo has the second best web engineers. If these guys are gone to Google. There would be no catch up to google at any price. MSFT should buy at a price tha yahoo and msft agreed on. So that these engineers are happy so that they can continue to work for the 2 companies.

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ben
ben - Tuesday May 06, 2008 04:19PM EDT

mmx.ax, dsn.ax, fdl.ax

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Delmarc
Delmarc - Tuesday May 06, 2008 04:21PM EDT

hasn't anyone noticed the 'I love the smell of profits in the morning' apparently yahoo doesnt

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Yahoo! Finance User
Yahoo! Finance User - Tuesday May 06, 2008 04:22PM EDT

Its amusing to see the two empty suits discussing the" grave" situation after Fannie posted its losses this morning. Telling us, in their owqn campy style, how the financials rally is disappearing in the rear view mirror and doom and gloom will surely be the fate of Fannie and Freddie and all the financials. By close of day Fannie was up over 8% and Freddie was up over 7%...and financials led the market rally. The market is a leading indicator, not a trailing indicator...please let these two "expert" pontificators know this before embarrass themselves (and Yahoo) further.

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godzillaboy
godzillaboy - Tuesday May 06, 2008 05:20PM EDT

mr yangs poker bluff hand called by mr balmer. game over. seems like google rakes in more chips without even being at the table.

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PatR
PatR - Tuesday May 06, 2008 06:30PM EDT

Bunch of 'tards - all of you! There is nothing wrong with Yahoo! - the MOST VISITED SITE ON THE INTERNET. This is a perception issue, folks. You can't compare Yahoo! and Google - their models are different. MSFT is an evil company - the culture would corrupt Yahoo! and kill the golden goose.

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Fred
Fred - Tuesday May 06, 2008 07:52PM EDT

If it was worth doing yesterday for 40 billion its worth doing today for 40 billion.

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Yahoo! Finance User
Yahoo! Finance User - Wednesday May 07, 2008 02:36AM EDT

Yahoo is worth $17.50. Not a penny more.

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