Notable Calls

Jefferies comments on Yahoo (NASDAQ:YHOO) noting that over the week-end, Microsoft issued a press release stating that "it is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo!" Yahoo! quickly followed up with its own press release confirming the talks with Microsoft and stating that the board remains open to any and all transactions that maximize shareholder value.

This is clearly not what Mr. Icahn and other hedge fund managers who have been accumulating Yahoo! shares recently wanted to hear as it makes, in their opinion, an outright and imminent MSFT purchase of Yahoo! less likely (although not impossible!).

The obvious question is what kind of transaction could the two companies be contemplating? While they have kept silent on the issue, an agreement could be along the following two areas:

1. Yahoo! could outsource a piece of its search business to MSFT.

2. Yahoo! and Microsoft could combine their display ad businesses to create the #1 Player

Overall, MSFT/YHOO's statements over the week-end go against Mr. Icahn's plans as they make an outright and imminent MSFT purchase of Yahoo! less likely (although not impossible!). Jefferies believes Yahoo! shares are likely to trade lower on this news today.

Notablecalls: Can't believe YHOO is still trading above Friday's close in pre-mkt! Going lower.