Friday, May 04, 2007

Paperstand (MSFT and YHOO in talks)

The NY Post reports that stung by the loss of Internet ad firm DoubleClick to Google (GOOG) last month, Microsoft (MSFT) has intensified its pursuit of a deal with Yahoo! (YHOO), asking the co to re-enter formal negotiations. While Microsoft and Yahoo! have held informal deal talks over the years, sources say the latest approach signals an urgency on Microsoft's part that has up until now been lacking. The new approach follows an offer Microsoft made to acquire Yahoo! a few months ago, sources said. But Yahoo! spurned the advances. Wall St. sources put a roughly $50bn price tag on Yahoo!. "They're getting tired of being left at the altar," said one banking source who has recently had talks with Microsoft. "They now seem more willing to extend themselves via a transaction to get into the game."

The WSJ’s ”Heard on the Street” column out saying that Brilliance China Automotive (CBA) is looking like a smart way to play China's love affair with cars. In a packed field of more than 32 Chinese auto makers, the co has increased its share of the Chinese car mkt to 2.4% at the end of 1Q07. Brilliance is out to grab additional mkt share by cutting prices, importing parts and employing the cachet of Italian design. Although it posted a net loss last year of 398m yuan ($51.65m), the shortfall was 39% narrower than the 650m yuan loss of the year before. Brilliance reaped $1.3bn in rev in ‘06, a 92% increase, on an increase in unit sales of its minibuses and, in particular, its Zhonghua sedans. Car sales in China are booming, as the growing consumer class takes to the road, creating the world's 2nd-largest vehicle market after the US. China's sedan mkt grew 30% to 5.18m units last year. For decades, the local mkt was completely dominated by the big-name foreign makers. Now, China's domestic car manufacturers are cutting costs and mounting a serious challenge. Brilliance has good prospects in that scrimmage. Citigroup rates its stock a Strong Buy, with a 12mo price tgt of $38 per ADS.

Barron’s Online highlights IndyMac (IMB), whose shares have lost about a third of their value this year as investors fret about lower-income America's problems with paying back home loans. But this is one lender that doesn't deserve the subprime stain. The worst of the IndyMac's credit problems stemming from the subprime bust already seem to be baked into shares of a co that has a limited exposure to these risky loans in the first place. Trading at 1.2x book value, vs mortgage lender peers which trade at 1.6x, there doesn't seem to be much room for the stock to fall as the co's hybrid thrift and mortgage banking model gives it flexibility to maneuver through tough environments. And the stock's 6.5% dividend yield offers some margin of safety. Insiders are certainly buying into this story. As the stock skidded to its lowest level in nearly 4 years in March, IndyMac execs and directors stepped up to make their largest purchases of shares in co history. This activity triggered initial Victory Capital Mgmt portfolio manager Arvind Sachdeva to purchase shares at around $30 for the firm's "contrarian-minded" value fund: "We were already analyzing [IndyMac] but that got our attention."

“Inside Scoop” section reports that Netflix (NFLX) founder and recently appointed Microsfot (MSFT) director Reed Hastings has wasted no time in building up his holdings of the software giant with a $3m stock purchase. Hastings, who is also the CEO, Chmn and President of Netflix, bought 100K Microsoft shares for $30 each on May 1, his first purchase of the stock. Jonathan Moreland, of, says Hastings' purchase sends out a strong upbeat signal b/c it went so far above and beyond Microsoft's stock ownership requirement and b/c insider buys are rare at the co, while selling is overwhelmingly the norm.

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