Yahoo! Earnings Likely A Sideshow (YHOO, MSFT)

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Yahoo! Inc. (NASDAQ: YHOO) reports earnings today after the close, and hopefully we get one more glimpse of what is going on inside Jerry Yang’s head.  The search engine and content giant is expected to post earnings of $0.09 EPS on $1.32 Billion revenues (ex-TAC revenues).  For Q2, it is expected to post $0.11 EPS on revenues of $1.37 Billion; and for fiscal 2008 it is expected to see $0.44 EPS on $5.63 Billion.  Unfortunately, today isn’t about Yahoo!’s earnings….

Today is about the Microsoft Corp. (NASDAQ: MSFT) buyout.  Jerry Yang will have pulled all the stops possible for this quarter.  The problem is that iof the results are strong then the company should be bought.  If the results are weak, then it should be bought.  Steve Ballmer has supposedly noted that today doesn’t matter, although that old deadline for "come on board or jump ship for less money" is looming.  In fact, the only real issue about earnings that does matter is if Jerry Yang can somehow pull a miracle off and convince anyone the company is better off on its own. 

Steve Ballmer already put the heat on the company in his last written gesture after the buyout offer by noting Yahoo!’s core business has softened and the economy has softened, and he even warned that he’d make a lower offer if Microsoft has to go hostile.   Since a buyout is afoot, the chart doesn’t matter.  Options traders are braced for a move of up to about $2.00 in either direction.

Despite Ballmer’s comments that he doesn’t need to lower the bid, there just aren’t any natural bidders that seem to be present in any form that can really outbid Microsoft’s buyout.  If Microsoft walks away, then these share prices of just under $30.00 are toast.

Jon C. Ogg
April 22, 2008