Analyst Sees Two More Steps Before A Microsoft/Yahoo Search Deal (MSFT, YHOO)
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Analysts at Collins Stewart commented on Yahoo! (Nasdaq: YHOO) this morning following refuted reports over the weekend that Microsoft (Nasdaq: MSFT) was near a deal to buy Yahoo!'s search business for $20 billion. Collins Stewart called this report just an unsubstantiated rumor and instead focused on the recent news that Carl Icahn raised his stake in Yahoo!, calling this news material. The firm said Icahn's move suggests a likely Microsoft proposal is in the pipeline.
The firm said there are two more steps that need to happen before a search deal: "1) YHOO needs to appoint a new CEO (MSFT is not likely to submit a search deal proposal to YHOO before a new CEO) and 2) MSFT needs to structure a search deal proposal, which they believe will be accepted by the Board and the new CEO. Looking at the developments since mid-September, we believe that it is now a matter of time before a search deal between MSFT/YHOO happens. We believe that a search deal can give YHOO shares a lift of $8 to $10."
The firm said that since late September there have been seven tangible events that suggest a likely MSFT/YHOO deal is brewing. "Tangible" events they cited include Microsoft's Ballmer commenting on its strong interest in a Yahoo! search deal and Yang's sudden decision to step down as a CEO.
The firm said a MSFT/YHOO deal may turn out to be a Q1 event. They are reiterating their Buy rating and $18 price target on Yahoo!
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