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Technology Stocks : Broadcast.com (Acquired by Yahoo)
YHOO 52.580.0%Jun 26 5:00 PM EST
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To: B. A. Marlow who wrote (1190)4/13/1999 2:24:00 AM
From: Sam Citron  Read Replies (1) of 1260
 
Marlow,

I doubt that a MSFT acquisition of YHOO makes much sense for either company. Yahoo at one time or another has probably spurned takeover offers from multitudes of companies. It has demonstrated that it wants to grow its own way through internal growth and through selective acquisitions using its stock currency (which is more valuable than MSFT's due to much higher P/E) as the exchange medium.

Usually it is the company with the high P/E that acquires the company with the lower P/E because it tends to get a nice earnings boost in the process. Yahoo's P/E is currently 1294 (according to Yahoo) while MSFT P/E is only 81.

Some might say that P/Es don't matter so much (especially for younger net companies). However, I believe that for the more conservative MSFT institutional investors P/Es probably do matter. I am not sure they would sign on to such a deal. I think they would much sooner endorse an acquisition of, say, CBS, DIS, NWS, or, even likelier, a collection of much smaller companies such as AXC. But I believe that any potential acquisition action by MSFT will be on the back burner until MSFT settles the antitrust action or until a judgment is rendered, which will not be before Y2K at the earliest.

Sam
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