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Microhoo No More: What the Analysts are Saying

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Now that Microsoft finally withdrew their bid for Yahoo, it's a free-for-all for anyone claiming to be an analyst.

Mostly, there's a lot of nervousness about what will become of the Sunnyvale search engine. At least one investor is calling for shareholders to withhold their votes for the current directors. Eric Jackson, who represents 140 shareholders who collectively own 2 million shares of Yahoo stock, said that the board didn't negotiate in good faith. He expected Yahoo shares to be trading at $19-20 per share when the stock market opened this morning.

But Yahoo may have won over enough analysts. There's the cautious experts who think that a partnership with Google for search advertising could save Yahoo. (Some estimates have Yahoo's stock as being worth $35 as a result of such a deal.) Additionally, the optimists are hopeful over Yahoo's open source initiatives such as Search Monkey. Then there's the promise of a robust advertising platform, expected to arrive this fall.

Until then, Wall Street is punishing Yahoo for its rejection of Microsoft's offer, though not quite as severely as Mr. Jackson expected. RBC Capital Markets Internet analyst Ross Sandler dropped the price target on Yahoo to $27 from $32. Expect to see agreement on this valuation. Overseas, the stock price dropped, an action echoed at the Opening Bell on Wall Street this A.M. At the time of this post, YHOO stock was down to $23, after closing on Friday at $28.67.

Investors knew this would happen and some are none too thrilled, as you might imagine. Some still hold out hope for Microsoft to return (or Yahoo to go begging at MSFT's doorstep) or a separate deal to be developed with AOL or News Corp. Even though News Corp's Murdoch officially said that he's not interested in Yahoo, there has been speculation that talks have still occurred. Still, at least one report today says those talks have "cooled."

So what happens next? Most likely, a Yahoo-Google deal will be announced, as early as this week. And then we'll wait and see if that's enough to keep investors happy or bring Microsoft back to meet Yahoo's demands for a higher bid.


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