Stay Away from Yahoo Despite Persistent Microsoft Merger Rumors

If you are a CEO and even thinking about hinting at some sort of merger or acquisition in this market, you had better be certain you know what you are doing.

Microsoft’s (NASDAQ: MSFT) chief, Steve Ballmer, learned the lesson the hard way today.

During a question-and-answer session in Florida, the CEO told an audience member that a deal between his company and Yahoo! (NASDAQ: YHOO) still makes “economic sense.”

Well, you would have thought he wrote a check right there on stage. Rumors were rampant and shares of Yahoo! soared by over ten percent. Apparently, there are some folks that still think Microsoft will shell out $33 per share for the company.

If you recall, earlier this year, Microsoft handed Yahoo! shareholders a buyout offer worth nearly $50 billion. It was not good enough for the Internet giant. Shareholders wanted more.

But Microsoft never came back to the table and shares of Yahoo! have dropped ever since. Right now, they are down by nearly 30% from their highs.

Don’t count on it

Today’s rumor certainly has its financial merits. I am sure Microsoft would love to get its hands on Yahoo! at today’s prices. But Yahoo! is not the same company it was back then. And neither is Microsoft. The nation is in the midst of a major financial crisis.

It is not business as usual, especially in the information game.

When Microsoft came out this afternoon and said it has no plans to re-negotiate with Yahoo!, I believe it. Both parties walked away and are not coming back anytime soon.

This is a tempting play for in-and-out traders. But in reality, it is another over-hyped market trap. Stay away from it. The share price of both companies is in line with the rest of the market. Their options are overpriced across the board. And Microsoft is too big to move from such minuscule rumors.

Stay away from this tempting play. There are better opportunities out there.

Disclosure: None

Comments

[User 281086:]

seems that whenever yahoo stock is doing the classic yahoo swan dive to lower prices, out of the blue comes the news flash that Microsoft is thinking about buying yahoo again, which sends yahoo stock prices up higher, then nothing ever comes out of this and yahoo still has a higher stock value then it did before these mysterious news announcements.

Makes me wonder if yahoo is doing this themselves to make the investors think that a merger with microsoft is right around the corner and you had better buy all the yahoo shares you can get your hands on before its too late and the deal closes.

When in reality, no such deal between the two companies will ever happen, this is just another way that CEO Yang likes to manipulate the stock market with false information. Is such a manuever legal according to the SEC? Think about it, I have!

2008 Oct 17 07:13 AM

[StrictNon-C...:]

User 281086, you're paranoid and plain stupid: it was Steve Ballmer's comments at a conference that set off this big flurry! Jerry Yang and Yahoo! employees had nothing to do with this: loose lips sink ships, or in this case, buoy them up artificially, only to be dashed against the rocks after the toying lines are cast aside from the lips of the bigger ships of rumors.

Pull your head out of your assets, and use it rationally and logically, and not some jerk-knee reaction where you're trying to kick someone in the crotch.

2008 Oct 17 01:59 PM

[User 281086:]

strict non conformist: Really! if you only knew what was really going on then you wouldn't be so quick with your sharp tongue, but obviously you have no idea!

I have been dealing with the yahoo employees for many months, and I know exactly what they are capable of doing, and what they will do in order to inflate their company stock, you, on the other hand, must be a new comer and ignorant of what is really happening, get a life, all these facts will soon be out in the open and then waht will you say then? "Gee, I am so sorry, I didn't know"

2008 Oct 17 10:41 PM

[BigKevin:]

"Right now, they are down by nearly 30% from their highs."

What kind of math is that? YHOO is now at $12.90 and their YTD closing high is $29.98, for a drop of 56%.

If by "their highs" you mean their 52 week high, then they are down 62% from that.

2008 Oct 18 03:01 PM

[techy:]

user 281086..

you do not have enough brain to comment on anything "Period".

2008 Oct 20 02:30 PM