Yahoo Could Fetch $53B from Microsoft -- Bear Analyst

Yahoo! Inc. was named a 'Top Pick' by Bear Stearns internet analyst Robert Peck Tuesday morning. Peck said Microsoft may still be interested in acquiring Yahoo, and that its shares could be worth $40/share in a buyout, a 76% premium over Yahoo's previous close of $22.73. The acquisition price stems from previous valuations in tech buyouts, including Microsoft's purchase of aQuantitive, in which Microsoft paid an 85% premium over the presale stock price. He noted, "Yahoo remains an attractive acquisition candidate for either traditional media companies seeking to deepen their exposure to the Internet or for technology companies like Microsoft." On Aug. 20, Microsoft CEO Steve Ballmer said Yahoo would be "an expensive acquisition for anyone to do," adding that Microsoft already works with Yahoo, and would seek additional ways to collaborate. Peck noted that Yahoo could create greater revenue with new partners, citing a June 20 report that Yahoo was in talks with Rupert Murdoch to trade a 25% stake in Yahoo for the social networking site MySpace.com. Yahoo also owns a 40% stake in its Chinese operator, Alibaba.com, and is expected to get a jump in earnings when Alibaba.com takes its wholesale e-commerce unit public. Peck said Yahoo's share price has been too deeply discounted over concerns over its online display advertising, online search and paid content. He forecasted $30/share for the end of 2008 and maintained his "outperform" rating for the company. Yahoo traded up 6% to $24.10 during midday trading on Tuesday.

Sources: MarketWatch, InformationWeek, Bloomberg
Commentary: Yahoo Reorganization Continues • Microsoft's Ballmer Starting Own Yahoo-Buying Rumor?
Stocks/ETFs to watch: YHOO, MSFT . Competitors: GOOG. ETFs: FDN, HHH

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