Yahoo / MSFT Deal at $31 Now "Inevitable" - Piper Jaffray

Is it game over for Yahoo (YHOO)?

Piper Jaffray’s Gene Munster thinks so. In a research note yesterday, he wrote that it now appears “inevitable” that the company will sell to Microsoft (MSFT) at the current $31 a share bid price. Reflecting that view, he cut his price target on YHOO shares to $31 from $33.

Munster says he talked to 20 YHOO institutional investors, and that the majority prefer the current deal to no deal. “We believe that Yahoo does not have alternative options to satisfy investors and that the deal fairly values Yahoo,” he says. “Microsoft’s suggestion that changes in the market may cause them to lower their bid lead us to believe the deal will be completed in the coming weeks at the current $31 bid price."

Munster makes an interesting comparison I had not seen before. He notes that Microsoft’s investment in Facebook came at a price which valued each unique Facebook user at around $165. The Yahoo bid, he figures, is paying $156 per Yahoo email user. (That actually seems like an odd comparison, since it only consider a slice of Yahoo’s business, but whatever.) He also notes that Microsoft’s bid is 56x his 2008 EPS estimate, well above his 40x P/E target for Google (GOOG). And noting the obvious, he points out that Google has a “commanding position” in online advertising. That kind of multiple for Yahoo, he concludes, “seems to be generous.”

Yahoo today is down 12 cents at $27.58 (as of 11:30 a.m. EDT).

Comments

[iBeleive:]

Take the DEAL NOW and let's move on folks!!!!!!! They will both benefit one another, quit playing hardball YANG you loser!!!!!!!!!!!!!!!!!...
Being a stockholder with a larger share of stock, I am ALL FOR IT!!!!!!!!!!!!!! YANG wake up and smell the coffee, don't be soooo arrogant, your not helping those with positions in the stock!!!!!!!!!!!

2008 Apr 08 01:07 PM

[Opinion:]

Yang knows how priceless YHOO is for MSFT, which has failed all attempts to enter the online world on it's own.

MSFT is sitting on old world money, MSFT has not shown any proven ability to make a cent in the new world, which they have no understanding about.

2008 Apr 08 01:58 PM

[hollowman:]

Watching the recent theatrics from the MSFT YHOO deal just seems to illustrate why MSFT is one of the most powerful corps on earth, and why YHOO can't find their way with a roadmap.

2008 Apr 08 04:55 PM

[buyforeclos...:]

I think both Yang and Micro reps are acting like Children. I think Microsoft should sweeten the deal slightly to close it! The sooner the better! Google is just laughing....... Yes Yhoo has struggled recently but is a solid company and Microsoft has not done much of anything in 5 years! Check the charts....been treading water basically .... and they are going to hagglle over pennies? Google spends a billion dollars on a company created in some guys garage (you tube) and didn't blink an eye. no risk no reward...get it done Microtoosoft

2008 Apr 09 08:41 AM

[kurt walter:]

MSFT shouldn't buy Yahoo. Microsoft is wasting money.

2008 Apr 09 05:00 PM