Filed under: Deals, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Stocks to Purchase

The soap opera known as Microsoft (NASDAQ: MSFT) and Yahoo! (NASDAQ: YHOO) looks enjoy it is going to continue as Yahoo!’s board of directors rejects Microsoft’s $44.6 billion bid. This is part of the game that investment bankers affectionately call “posturing”. There are no other bidders for Yahoo! currently, but Microsoft desperately wants Yahoo!. Actually, Microsoft desperately needs Yahoo!.

So, what in the heck is going on here? Yahoo! shares fell to $19.18 after it reported disappointing numbers for the December 2007 quarter and forward guidance was hideous. Yahoo! has been struggling for a few years as Google (NASDAQ: GOOG) has been eating its and all other competitors’ lunch.

I spent 16 years in the investment banking world and when it came to valuing IPO’s, mergers and / or acquisitions, the very first question all celebrations involved would ask is “what are the comparables?” If company A wants to offer its IPO, we valued the IPO based on current public values of competitors, including price-earnings ratio, price-to-book value, price-to-sales, operating margins vs. industry comps, etc. Picture yourself looking to purchase a home. The first thing you look at is the square footage comparison, neighborhood and other vital pieces of information of homes sold in your price range. It’s the comps. Same in the investing world.

So, why would Microsoft offer a price that is 67 times Yahoo!’s 2008 consensus earnings per share estimate for 2008? Consensus is for 2008 earnings per share of 46 cents. No one pays a 67 P/E ratio, especially for a company that has posted 5 straight declining quarters.Right? Wrong.

Google has blazed the trail in the search engine and on-line advertising/marketing sector. Google owns a market share of 76% and it’s a growing sector to boot. Get that important point down because it’s critical to Microsoft’s thinking: Google is TAKING MARKET SHARE IN A GROWING MARKET. That’s a double whammy. According to industry scorekeeper comScore, Yahoo!’s market share is 15%, and Microsoft’s at 3.9%, for a combined 19%, still one quarter the size of Google.

The sector is still posting growth rates of 40-45%, and international is even stronger. Microsoft knows it must act quickly and decisively if it intends to be any kind of player. Yahoo! also knows it and will act stubbornly, basically posturing for a better price than the $31 per share offer.

Microsoft realizes the sector is so profitable and so vast and IT WILL pay up for Yahoo!. if it has too. Heck, applying the same 67 multiple as a comp to Google’s consensus 2008 estimate of $20.15 per share, Microsoft clearly is stating that Google is worth $1,350 per share.

Sound far fetched? Just ask Microsoft and its investment bankers…I don’t think so…Just ask the management team of Microsoft’s current acquisition aQuantive…It is actively pushing and encouraging Microsoft’s senior management team to go hard after Yahoo!.

Think Google has some upside from here??? Just ask Microsoft…

Georges Yared writes about great growth stocks today in GameOn Investing

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Filed under: Major movement, Analyst reports, Deals, Rumors, Industry, Oracle Corp (ORCL), Options, salesforce.com inc (CRM)

Salesforce.com (NYSE: CRM) shares are higher today after a Piper Jaffray analyst reiterated his Purchase rating and $70 price target on the stock, citing increased user satisfaction and the potential of higher revenues with the company’s adoption of the AppExchange program. But the real excitement on the Street stems from rumors that the CRM has approached Oracle (NASDAQ: ORCL) with a $75 a share sale offer. If you think that the company won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CRM.

After hitting one-year low of $37.24 in August, the stock hit a one-year high of $65.52 in December. CRM opened this morning at $53.06. So far this day the stock has hit a low of $53.06 and a high of $55.90. As of 11:25, CRM is trading at $54.76, up $3.89 (7.7%). The chart for CRM looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would think about a March bull-put credit spread below the $40 range. A bull-put credit spread is an options position that combines the buy and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. This particular trade will make a 9.9% return in just six weeks as long as CRM is above $40 at March expiration. Salesforce.com would have to fall by more than 26% before we would start to lose money.

CRM hasn’t been below $40 since September and has shown support around $50 recently. This trade could be risky if the economy continues to worsen, but even if that happens, this position could be protected by the support the stock might find from its 200-day moving average, which is currently around $48 and rising.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in CRM. He does control bullish hedged positions in ORCL.

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Filed under: Before the bell, Earnings reports, Analyst upgrades and downgrades, Deals, Microsoft (MSFT), Apple Inc (AAPL), eBay (EBAY), Ford Motor (F), Research in Motion (RIMM), Hasbro Inc (HAS), Garmin Ltd (GRMN)

According to Ars Technica, Apple Inc. (NASDAQ: AAPL) has applied for trademark extension relating to gaming. While the folks at Engadget don’t want to read too much into it, they can’t help but wonder whether “the iPod, iPhone, and Apple Television will soon have even more friends among the company’s ever-expanding non-PC ecosystem.” Apple shares are up around 1.3% this morning after Citigroup added it to its “Top Picks” list.

Hasbro Inc. (NYSE: HAS)’s profit rose 24% to 84 cents per shareas it avoided the lead-paint related recalls that plagued many of its competitors. Wall Street expected the company to report 81 cents per share in the period. Sales climbed 16% to $1.3 billion.

The 2008 Mobile World Congress in Barcelona is underway and Garmin (NASDAQ: GRMN) the only working mock-up of its Nuviphone. In addition, eBay Inc. (NASDAQ: EBAY)’s Skype was showing its first Skype phone, which is a GSM model that contains new software allowing to make Skype calls over regular cell phone networks.

Bloomberg reports that Ford Motor Co. (NYSE: F) might eliminate as many as 9,000 more U.S. factory jobs through its latest buyout offers, a person with direct knowledge of the situation stated. This is in addition to the 33,600 union workers who left through buyouts and early retirements in 2006 and 2007.

Vodafone Group (NYSE: VOD) stated Monday that it has signed a collaboration deal with Research In Motion (NASDAQ: RIMM) to develop Vodafone consumer services for the BlackBerry platform.

Microsoft Corp. (NASDAQ: MSFT) has been downgraded from Outperform to Sector Perform at RBC Capital Markets according to Briefing.com.

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Filed under: Deals, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Stocks to Purchase

The soap opera known as Microsoft (NASDAQ: MSFT) and Yahoo! (NASDAQ: YHOO) looks enjoy it is going to continue as Yahoo!’s board of directors rejects Microsoft’s $44.6 billion bid. This is part of the game that investment bankers affectionately call “posturing”. There are no other bidders for Yahoo! currently, but Microsoft desperately wants Yahoo!. Actually, Microsoft desperately needs Yahoo!.

So, what in the heck is going on here? Yahoo! shares fell to $19.18 after it reported disappointing numbers for the December 2007 quarter and forward guidance was ugly. Yahoo! has been struggling for a few years as Google (NASDAQ: GOOG) has been eating its and all other competitors’ lunch.

I spent 16 years in the investment banking world and when it came to valuing IPO’s, mergers and / or acquisitions, the very first question all celebrations involved would ask is “what are the comparables?” If company A wants to offer its IPO, we valued the IPO based on current public values of competitors, including price-earnings ratio, price-to-book value, price-to-sales, operating margins vs. industry comps, etc. Picture yourself looking to buy a home. The first thing you look at is the square footage comparison, neighborhood and other vital pieces of information of homes sold in your price range. It’s the comps. Same in the investing world.

So, why would Microsoft offer a price that’s 67 times Yahoo!’s 2008 consensus earnings per share estimate for 2008? Consensus is for 2008 earnings per share of 46 cents. No one pays a 67 P/E ratio, especially for a company that has posted 5 straight declining quarters.Right? Wrong.

Google has blazed the trail in the search engine and on-line advertising/marketing sector. Google owns a market share of 76% and it’s a growing sector to boot. Get that important point down because it’s critical to Microsoft’s thinking: Google is TAKING MARKET SHARE IN A GROWING MARKET. That’s a double whammy. According to industry scorekeeper comScore, Yahoo!’s market share is 15%, and Microsoft’s at 3.9%, for a combined 19%, still one quarter the size of Google.

The sector is still posting growth rates of 40-45%, and international is even stronger. Microsoft knows it must act quickly and decisively if it intends to be any kind of player. Yahoo! also knows it and will act stubbornly, basically posturing for a better price than the $31 per share offer.

Microsoft realizes the sector is so profitable and so vast and IT WILL pay up for Yahoo!. if it has too. Heck, applying the same 67 multiple as a comp to Google’s consensus 2008 estimate of $20.15 per share, Microsoft clearly is stating that Google is worth $1,350 per share.

Sound far fetched? Just ask Microsoft and its investment bankers…I don’t think so…Just ask the management team of Microsoft’s current acquisition aQuantive…It is actively pushing and encouraging Microsoft’s senior management team to go hard after Yahoo!.

Think Google has some upside from here??? Just ask Microsoft…

Georges Yared writes about great growth stocks this day in GameOn Investing

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Filed under: Deals, Industry, Motorola (MOT), Nortel Networks (NT), Alcatel-LucentADS (ALU)

Do two weak operations combined make a strong one? Motorola (NYSE: MOT) and Nortel (NYSE: NT) are considering putting their wireless telecom equipment operations into a company that would have about $10 billion in annual sales. Motorola is already considering spinning off its largest unit — handset. According to The Wall Street Journal, “if Motorola completes a deal with Nortel and divests itself of its handset business, it would be a much smaller company.”

It is hard to see why the venture would work. In the same sector, the merger that created Alcatel-Lucent (NYSE: ALU) has been a first class disaster. The Nokia-Siemes telecom equipment operation states it has seen a slowdown.

Nortel’s shares have fallen from a 52-week high of $31.79 to $11.07. The company has long-term debt of almost $4 billion and had operating income of only $63 million last quarter.

Otherwise, it is a swell idea.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Before the bell, Earnings reports, Analyst upgrades and downgrades, Deals, Microsoft (MSFT), Apple Inc (AAPL), eBay (EBAY), Ford Motor (F), Research in Motion (RIMM), Hasbro Inc (HAS), Garmin Ltd (GRMN)

According to Ars Technica, Apple Inc. (NASDAQ: AAPL) has applied for trademark extension relating to gaming. While the folks at Engadget don’t want to read too much into it, they can’t help but wonder whether “the iPod, iPhone, and Apple TV will soon have even more friends among the company’s ever-expanding non-PC ecosystem.” Apple shares are up around 1.3% this morning after Citigroup added it to its “Top Picks” list.

Hasbro Inc. (NYSE: HAS)’s profit rose 24% to 84 cents per shareas it avoided the lead-paint related recalls that plagued many of its competitors. Wall Street expected the company to report 81 cents per share in the period. Sales climbed 16% to $1.3 billion.

The 2008 Mobile World Congress in Barcelona is underway and Garmin (NASDAQ: GRMN) the only working mock-up of its Nuviphone. In addition, eBay Inc. (NASDAQ: EBAY)’s Skype was showing its first Skype phone, which is a GSM model that contains new software allowing to make Skype calls over regular cell phone networks.

Bloomberg reports that Ford Motor Co. (NYSE: F) might eliminate as many as 9,000 more U.S. factory jobs through its latest buyout offers, a person with direct knowledge of the situation said. This is in addition to the 33,600 union workers who left through buyouts and early retirements in 2006 and 2007.

Vodafone Group (NYSE: VOD) stated Monday that it has signed a collaboration deal with Research In Motion (NASDAQ: RIMM) to develop Vodafone consumer services for the BlackBerry platform.

Microsoft Corp. (NASDAQ: MSFT) has been downgraded from Outperform to Sector Perform at RBC Capital Markets according to Briefing.com.

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Filed under: Deals, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Time Warner (TWX)

There are only four large web portals. Microsoft (NASDAQ: MSFT) has bid for one of them, Yahoo! (NASDAQ: YHOO). If that deal came through, then the total would drop to three. Yahoo! does not much like the bid Microsoft has made and says it is worth over $40 a share, not the $31 that Microsoft has offered.

According to the Times in the UK, Yahoo! will approach Time Warner (NYSE: TWX) about a tie-up with AOL. The newspaper writes: “It is also understood that one option being explored is to restart merger talks with AOL, the on the web business owned by Time Warner. “A combined portal business would have many more one-of-a-kind visitors than MSN or Google (NASDAQ: GOOG) have. Since Yahoo! is No. 2 in search, it could extend that franchise with AOL. It would have to work out the fact that AOL gets its search from Google now and that deal could not be broken immediately.

If Yahoo! wants to stay independent, tying up with AOL might be its ideal option. Time Warner is trying to improve value at the property and owning a stake in Yahoo! might accomplish that goal.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Deals, Industry, Motorola (MOT), Nortel Networks (NT), Alcatel-LucentADS (ALU)

Do two weak operations combined make a strong one? Motorola (NYSE: MOT) and Nortel (NYSE: NT) are considering putting their wireless telecom equipment operations into a company that would have about $10 billion in annual sales. Motorola is already considering spinning off its largest unit — handset. According to The Wall Street Journal, “if Motorola completes a deal with Nortel and divests itself of its handset business, it would be a much smaller company.”

It is hard to see why the venture would work. In the same sector, the merger that created Alcatel-Lucent (NYSE: ALU) has been a first class disaster. The Nokia-Siemes telecom equipment operation states it has seen a slowdown.

Nortel’s shares have fallen from a 52-week high of $31.79 to $11.07. The company has long-term debt of nearly $4 billion and had operating income of only $63 million last quarter.

Otherwise, it is a swell idea.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Deals, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Time Warner (TWX)

There are only four big web portals. Microsoft (NASDAQ: MSFT) has bid for one of them, Yahoo! (NASDAQ: YHOO). If that deal came through, then the total would drop to three. Yahoo! does not much like the bid Microsoft has made and says it is worth over $40 a share, not the $31 that Microsoft has offered.

According to the Times in the UK, Yahoo! will approach Time Warner (NYSE: TWX) about a tie-up with AOL. The newspaper writes: “It is also understood that one option being explored is to restart merger speaks with AOL, the on the web business owned by Time Warner. “A combined portal business would have many more one-of-a-kind visitors than MSN or Google (NASDAQ: GOOG) have. Since Yahoo! is No. 2 in search, it could extend that franchise with AOL. It would have to work out the fact that AOL gets its search from Google now and that deal could not be broken immediately.

If Yahoo! wants to stay independent, tying up with AOL might be its ideal option. Time Warner is trying to improve value at the property and owning a stake in Yahoo! might accomplish that goal.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Before the bell, International markets, Deals, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Time Warner (TWX), Motorola (MOT), Walt Disney (DIS), Countrywide Financial (CFC), Nortel Networks (NT), Recession

U.S. stock futures were mixed this morning to start the week, but now seem somewhere higher. As several economists think the U.S. is already in a recession, might also believe it will a short and shallow recession. According to Treasuries, the economy may recover within 6-9 months. Meanwhile, however, the euro region has been experiencing slowing growth, with many economists thinking that a euro region slowing will be harder to get out of. High inflation will make it difficult to implement an easing monetary policy. With all that in the background and ahead of a week full of economic data coming out, this morning investors will likely focus on a number of major corporate deals, and for now look for direction.

Last week, U.S. stocks closed with heavy losses following worries about the economy and credit crisis. Overseas, stocks have declined in Asia and Europe Monday.

Without any economic data due out today, investors will analyze Yahoo! Inc. (NASDAQ: YHOO)’s reaction to Microsoft Corp. (NASDAQ: MSFT)’s unsolicited bid to buy the portal giant for $31 a share or $44.6 billion. According to reports, Yahoo’s board is set to reject Microsoft’s offer with speculations about that Google Inc. (NASDAQ: GOOG) is somehow working behind the scene. Still, Microsoft could try and take its offer to shareholder. If the board claims Microsoft’s current bid undervalues the company, some analysts believe Microsoft is prepared to offer as much as $35 per share for Yahoo.

Other reports, specifically from The Times of London, recommend that as Yahoo! is looking to defend itself, it may look to hold merger talks with Time Warner (NYSE: TWX)’s AOL. Other possibilities include the afforementioned Google and Disney (NYSE: DIS).

Meanwhile, the Wall Street Journal is reporting that as the wireless industry has experienced slow growth, Motorola Inc. (NYSE: MOT) and Nortel Networks Corp. (NYSE: NT) are in talks to join their wireless-infrastructure units to create a venture with sales of about $10 billion. This is unrelated to Motorola’s separate evaluation about its handset division.

Also, Countrywide Financial Corp. (NYSE: CFC) states it will “expand programs to help borrowers manage their mortgage payments regardless of the type of subprime loan they’ve or whether they have already fallen behind on payments.”

Finally, oil prices were volatile Monday, pushed higher by Venezuelan President Hugo Chavez’s threat to cut off sales to the United Says, but weighed down by continued worries about a U.S. recession.

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