Bear Stearns analyst Bob Peck doesn't quite stick his neck out and say that mid-$30s is the right price for Microsoft to pay for Yahoo, but he does suggest that the original bid is way too low:
- Yahoo! was at a 52-week low when Microsoft announced its intentions, having recently touched $34 in October... The 2008 $1.85 billion EBITDA guidance midpoint is predicated on an investment year. We believe that investors must therefore normalize the multiple to get a true feeling of what Microsoft is paying. At $2.1-$2.2 billion of EBITDA, Microsoft’s multiple would only be paying 15x for one of the leading Internet properties and online advertising player.
We're glad to see someone invoke valuation when making this argument. (Yahoo didn't, when it declared that Microsoft's bid "significantly undervalued" the company).
Microsoft, Yahoo!, Bid, Corporate News