Tuesday, February 05, 2008

Paperstand: YHOO mgmt believes MSFT bid too low

The Boston Globe reports that Yahoo (YHOO) mgmt is considering revisiting talks it held with Google several mo’s ago on an alliance as an alternative to Microsoft's bid, which, Yahoo mgmt believes undervalues the co, the source said. A second source close to Yahoo said it had received a procession of preliminary contacts by media, technology, telephone, and financial co’s.

The WSJ reports that there are signs that some of the biggest new places where consumers are flocking on the Web, social networking and video-sharing sites, are yielding ad rev slower than some Internet co’s had hoped. The latest warning that the hottest Web properties are proving difficult to make money from came from Google. While announcing disappointing 4Q earnings, Google execs said the co was having a harder time than it expected generating ad rev on social-networking sites and figuring out the best ad formats for YouTube. Facebook also has been publicly grappling with how to make money amid its massive spurt in usage. Microsoft, which owns a 1.6% stake in Facebook, has a long-term deal to sell ads that appear on the site, and analysts est that arrangement is losing money for Microsoft. "It's taken longer than I thought for us to find the right combinations" of ad formats, said Google CEO Eric Schmidt last wk, referring to advertising on YouTube. But, he said, he believed it "will ultimately be very, very successful for [Google] and the industry."

According to the WSJ, in an acknowledgment that the system it used to rate billions of dollars of mortgage-related securities was potentially flawed, Moody’s (MCO) said it is considering a new way of rating those and other sometimes-volatile structured finance vehicles. The credit-rating firm is considering an overhaul of its rating procedures that could include new labels to help investors distinguish collateralized debt obligations and other structured-finance investments from corporate bonds and Treasury securities. One of the most significant changes being considered by the parent of Moody's Investors Service: a new, 21-point numerical scale to rate structured securities. Moody's familiar letter grades, from triple-A to single-C, would continue to be used for corporate and govt bonds. More broadly, the ratings firm is trying to decide whether to add warning labels that essentially acknowledge the limitations of its ratings. "We've been taking a hard look at the things we do," said Richard Cantor, of Moody's.

“Heard on the Street” column out saying that at first glance, General Motors (GM) has gotten off to a relatively good start in ‘08. While other auto makers' sales slipped in Jan, GM bucked the trend and posted a gain. Fears have eased about a possible bailout for the mortgage arm of GMAC. Rather than hit the accelerator, however, investors would be wise to tap the brakes. GM still has serious kinks in its core automotive business in N-America, and, despite some big cost cuts, it may be challenged to come close to breaking even this yr. The rise in Jan sales in the US came in part as a result of a surge in rebates and incentives, which erode profit margins. GM may have to keep incentive levels high through the yr to lure buyers into showrooms. Sales of its most-profitable products, trucks and SUVs, are declining, while sales of cars, which generate less profit, are increasing. "To be an attractive stock, they've got to get N-America above break-even and in the 2% margin range," said Lehman analyst Brian Johnson.

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