Microsoft-Yahoo; Why the Deal will Succeed

There has been a lot of speculation on whether a deal with Yahoo/Microsoft will happen. I feel that this merger will happen and have outlined several reasons as to why this deal is almost a sure thing at this point.

Top 5 Reason Why the Yahoo/Microsoft Deal will Happen:

1) Microsoft needs Yahoo more than Yahoo needs Microsoft. To compete with the threat of Google and other Internet giants Microsoft would benefit huge from a deal like this. It would catapult them into the #1 Internet player ahead of Google instantaneously. Microsoft will pony up big to gain this status.

2) Yahoo is in fact a great deal at $31/share. If you look at comparable companies in their space they all trade at higher multiples. The potential of future earnings from yahoo also make it likely that a premium will be placed on the yahoo deal. I'd expect that Microsoft is willing to go up to $37/share to make this deal happen.

3) Yahoo shareholders have become frustrated with recent short term Yahoo performance and are thirsting for more future growth potential that will allow the stock price to appreciate the same way google's stock price has. Many view this as a way to grow more rapidly going forward.

4) Yahoo executives have already made it clear that they are in fact ready to make a deal happen. They only thing holding them back is price at this point. Price can always be negotiated and Microsoft has the ability to raise the bid. If this is the only sticking point rest assured that Microsoft will raise its bid to make this deal happen.

5) Yahoo has been trying to delay accepting this deal with the hope that a bidding war would start. The fact that no bidding war has started should indicate to Yahoo! that Microsoft's offer is near market value. I'm sure as soon as MS appeases the board with a $35-7 offer they will ultimately do what's best for shareholders.

Edsor

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