Wall Street Breakfast: Must-Know News

Today's Market

• In Asia Monday, the Hang Seng fell 3.64%. Japan and Shanghai were closed. In India, the BSE Sensex dropped 4.78%.
• In Europe, markets are flat. FTSE: -0.3%. CAC: +0.1%. DAX: 0.0%.
• U.S. futures are flat as of 7:45.

Must Know News

• Microsoft might go hostile to land Yahoo. Yahoo's (YHOO) board said Friday that Microsoft's (MSFT) $41.6 billion ($31/share) offer "massively undervalues" the company, and is not expected to consider any offers below $40/share. Microsoft has assembled a team of advisors that could assist it in launching a proxy fight intended to jettison Yahoo's current board at the shareholders' meeting in June -- a course it is reluctant to pursue, since it could send key Yahoo employees running for the exits.
• Yahoo turns to AOL. Yahoo (YHOO) is looking to restart merger talks with AOL after saying Microsoft's (MSFT) $46.1B bid undervalues the company. Yahoo and its advisors, Goldman Sachs (GS) and Lehman (LEH) are also considering potential tie-ups with Google (GOOG) or Disney (DIS).
• G7: Markets still at risk. G7 officials warn global financial markets may relapse into the turmoil sparked by last year's credit crunch amid fears of a U.S. recession and continued nervousness over financial stocks.
• Subprime losses could hit $400 billion. German finance minister Peer Steinbruck said at a meeting of the G7 finance leaders that writeoffs of securities losses connected to the collapsed U.S. subprime mortgage market could reach $400 billion, well beyond the Fed's estimate of subprime losses last year of $100-150 billion.
• Writers' strike near end, but Internet question remains. Film and television writers have reached a tentative deal with Hollywood studios to end their three-month strike, but the question of residual compensation to writers for dissemination of their work on the Internet has yet to be resolved.
• Nortel, Motorola in talks to join wireless gear. Motorola (MOT) and Nortel (NT) have been negotiating for the past month in an effort to combine their wireless-infrastructure units amid soft telecom-equipment growth. The proposed JV would have annual sales of about $10 billion. Nortel would retain a majority stake. The plan is separate from Motorola's pending divestiture of its handset unit.
• New phones for Sony Ericsson; no interest in Motorola. Sony Ericsson (SNE) (ERIC) unveiled numerous new phones, including a phone based on Microsoft (MSFT) software, and the G900, with a 5-megapixel camera and a 2.4" touchscreen that rivals Apple's (AAPL) iPhone. Sony Ericsson said an upgraded version of its PlayNow internet and mobile phone service will be available in 30 countries within the year. The service rivals Apple's iTunes and Nokia's Ovi. CEO Hideki Komiyama says Sony Ericsson is looking to bolster its weak presence in the U.S., but called a purchase of Motorola's (MOT) handset unit unattractive.
• Nokia unveils multimedia sharing. Nokia (NOK) announced a free media-sharing service, "Share on Ovi," that makes it easy for users to upload and share photos and music within an interactive social community. It is the company's latest attempt to address the multimedia handset market, the market for which it estimates will reach $145B by 2010. NOK also unveiled its new N96, a 16GB model that will launch in Q3.
• Northwest, Delta talks go to unions. Sources say Northwest (NWA) and Delta (DAL) have shared details of their pending merger with pilots unions, who are helping the airlines deal with seniority issues and job cuts. An announcement may come within weeks. The combined business would surpass AMR Corp. (AMR) as #1 U.S. airline.
• Credit Suisse to dodge subprime crisis. Credit Suisse (CS) remained profitable during Q4, earning about 1 billion francs, sources say. Credit Suisse is due to report on Tuesday. Analysts polled by Reuters forecast Q4 profits of 1.45 billion francs.
• Booksellers moving to web. Random House will begin selling books by the chapter for $2.99. News Corp.'s (NWS) HarperCollins is offering a select number of books available for free. Both moves highlight how publishers are examining different ways to market their content online.
• Chavez threatens to cut off oil supply -- again. Venezuelan President Hugo Chavez, responding to an ongoing clash between ExxonMobil (XOM) and the state-controlled oil company, said he would cut off oil sales to the U.S. It is a threat he has made before and one he is not expected to carry out, but it could further unsettle the already volatile oil market.
• Botox could be health hazard, says FDA. In an "early communication" of a substance under review, the FDA said Friday that Botox, a drug manufactured by Allergan (AGN), might be connected to cases of pediatric botulism in children who received the injections for cerebral palsy-associated limb spasticity. The outcomes ranged from respiratory compromise to death. The notice did not refer to dangers that might be associated with cosmetic use of the product.
• Blue Chip panel puts U.S. recession odds at 50%.
• HSBC poised to sell 400 French branches.

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Comments

[Tom B]

"Microsoft has assembled a team of advisors that could assist it in launching a proxy fight"

Man, they need to lay off the sauce in Redmond. Has a proxy fight EVER been successful?

[CrossProfit]

Thomas,
Suggest you read "Backfire": Carly Fiorina's High Stakes Battle for the Soul of Hewlett Packard

See
www.powells.com/biblio...

Also, a few lessons can be learned from other successful proxy fights, three very different types come to mind;
1) Airtran/Midwest Air 2007 (see blogs.law.harvard.edu/...)
2) Diamond Fields International Ltd. (TSX:DFI) 2002
3) Rentrak Corp. (Paul Rosenbaum) 2000

CrossProfit

[whidbey]

Aside from the takeover methods of MSFT, we need to know what they will "do" with Yahoo if they are successful. We know that they ran MSN 15 years and it never emerged from obscurity; what can they do different if Steve acquires Yahoo??? To put it simply: why not a nice big dividend ? We know that works well. Oh yes, dump Balmer is a great second move. We need to look past the short run. When the existing software becomes passe' MSFT ceases to exist. JWC