Wall Street Breakfast: Must-Know News

• Massive merger crumbles. Microsoft Saturday revoked its bid for Yahoo (YHOO) after the latter rebuffed an increased offer of $33/share. Microsoft says it will go at it on its own, while Yahoo hopes to enter a search-ad deal with Google (GOOG). Still to be seen: Is the move a ploy by Microsoft, which hopes to snatch up Yahoo for even cheaper down the road? Will Yahoo face massive shareholder lawsuits? Shares of Yahoo are down 23.7% in early pre-market trading.
• What to do with $46B. Sources say Microsoft (MSFT) is mulling over what to do with the $46B it saved. Options include acquiring a social networking site, and initiating a massive share repurchase.
• Deutsche Telecom mulls bid for Sprint. Deutsche Telekom (DT) may make a bid for Sprint Nextel (S). The move would catapult Deutsche Telecom's T-Mobile USA from #4 to the number-one wireless provider in the country, surpassing AT&T (T) and Verizon Wireless (VZ) (VOD). A deal may still be months off, and some insiders call it a longshot.
• Buffett pans Berkshire. "Anyone who expects us to come close to replicating the past should sell their stock. It's not gonna happen," Berkshire Hathaway (BRK.A) CEO Warren Buffett said at Saturday's annual shareholders' meeting. "You may have something better to do with your money than buy Berkshire." Buffett said the Fed's move to bailout Bear Stearns (BSC) prevented a major run on investment banks. "The idea of financial panic -- that has been pretty much taken care of," he said, but warned losses were not over "by a long shot." He predicted Wells Fargo (WFC), a major Berkshire holding, "will be earning a lot more money 10 years from now." (Detailed notes)
• Berkshire to consider RBS unit. Berkshire Hathaway (BRK.A) CEO Warren Buffett said Sunday he is close to buying a mid-sized UK firm, and that he will consider investing in Royal Bank of Scotland's (RBS) insurance unit, which it recently put up for sale.
• United, US Air in advanced talks. Merger talks between United (UAUA) and US Airways (LCC) have become more heated after Continental (CAL) unexpectedly dropped out of talks with United. An announcement could come "within weeks." United is the #2 U.S. carrier, and US Air is #7. Combined revenue is $31.8B. The two agreed to merge in 2000, but United backed out after the Justice Department threatened to sue to block the deal. US Air dropped a hostile bid for Delta (DAL) last year.
• Countrywide unlikely to fetch agreed price of $4B. Bank of America (BAC) is likely to either renegotiate its $4B acquisition of Countrywide Financial (CFC) down to the $0-2 range, or walk away, analyst Paul Miller of Friedman, Billings, Ramsey says. His supposition comes after BofA said last week it might not guarantee Countrywide's debt.
• Writedowns stimulate deeper probe of mortgage industry. The FBI and IRS are stepping up their criminal investigation of the mortgage industry, after financial companies disclosed billions of dollars in additional writedowns from toxic mortgage assets in recent weeks. "This is a look at the mortgage industry across the board, and it has gotten a lot more momentum in recent weeks because of the banks’ earnings shortfalls," an official said. The FBI is leading a separate probe into mortgage lenders.
• 8,000 may go at UBS. UBS (UBS) may slash up to 8,000 jobs following its massive Q1 writedown, including more than 10% of its investment banking division. Shareholders want UBS to focus on its core wealth-management business.
• Hovnanian triples cash flow outlook. Hovnanian (HOV) said FQ2 home deliveries fell 21% from a year ago to about 2,500. Cancellations fell to 29% from 32%. Backlog was off 54% to 3,577. Hovnanian said it reached positive cash flow in the quarter, and that it now expects F2008 cash flow of more than $300M, up from a previous forecast of $100M. HOV will take a $225-275M charge on land devaluations.
• Marvel Enterprises (MVL): Q1 EPS of $0.58 beats consensus of $0.43. Revenue of $113M was in-line. The character-based entertainment company boosted its full-year EPS guidance to $1.35-1.55 from $1.30-1.50, below consensus of $1.58.
• Pale recession. The U.S. has slipped into an "awfully pale recession" Former Fed chairman Alan Greenspan says. "We are clearly receding." He called continued stagflation for the remainder of 2008 the most benevolent, and perhaps the most likely scenario. A rebound in home prices, he says, will signal the end of the downturn. "Until there are stabilized prices of homes, and I think they have a good way to go down, you still have prospective losses." It's possible, though not probable, that prices could bottom by year end.
• Bankers grope in dark with food inflation. Food price inflation is one of the most serious global problems, yet central bankers meeting today in Switzerland say there's little they can do to address it. Global food prices are up a whopping 43% YTD.

Today's Markets

• Markets were mixed in Asia Monday. Hang Seng -0.22%. Shanghai +1.84%. BSE Sensex -0.62%. Nikkei was closed.
• In Europe markets are a notch lower at midday. CAC -0.22%. Dax -0.02%. London is closed.
• U.S. futures are down about 0.4% at 7:15 AM.
• Oil is up 0.54% to to $117. Gold is up 1.17% to $868.

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Comments

[stacked up]

Gee whiz, do you think that stupid BAC might actually be getting it ?
CFC that cauldron of ethically challenged, worthless managment and scamming employees might actually not be worth associating with, much less paying $4 billions for ?
The horrific debacle precipitated by the banks and brokers virtually decimated the country, thanks to pimps like Mozillo and his horrid company. If BAC cared at all, the bank would walk away from the association with the criminals at CFC .
Is this too tough for BAC to figure out ? Duh !!

[fg144331]

I'm glad it didn't go through. I use Yahoo and do NOT like MS! To bad ms can't make it on their own, sniff sniff.

[pickaroonwyo]

fg144331: my sentiments exactly! leggo my yahoo Mr. Balmer!

[thoroughbred]

I must commend Balmer for not buying Yahoo, it's about time someone realized they were spending shareholder money and not monopoly money and decided that price did matter. Too many CEO's would have raised their offer just to say they did a deal. I don't own either stock but it is good to see ego not get in the way for a change.

[jackooo]

stacked up
"ethically challenged, worthless managment" I thought you were talking about Bank of America.
My dealings with bac are the same as Countrywide. Seems to me as a very likely compatible pair.

[User 158204]

MSFT may want to take a look at Linkstorm linkstorms.com .