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Analyst Actions: Microsoft-Yahoo Deal, Motorola, CA

Posted on: Monday, 4 February 2008, 12:00 CST

STIFEL SEES 80%+ LIKELIHOOD FOR SUCCESS IN MICROSOFT-YAHOO DEAL

Stifel analyst George Askew notes hostile takeover acquisitions in the technology space are rarely successful as employees and management of the acquired company will often depart the combined entity following the acquisition. He notes, of course, Microsoft's (MSFT) acquisition offer for Yahoo (YHOO) is a bear hug -- and the two companies may well come to terms on a deal at modestly higher price than the $31/share offer.

Askew believes the likelihood of an acquisition of Yahoo by Microsoft is now over 80%, as Yahoo is now in play and Microsoft is clearly willing to be quite aggressive and pay up for the asset.

He keeps a hold opinion on Yahoo given the lack of material spread between pre-market trading price and the offer.

CITIGROUP UPGRADES MOTOROLA

Citigroup analyst Jim Suva tells salesforce he's upgrading Motorola (MOT) to buy from hold as the company is finally exploring a structural and strategic realignment of its businesses. He believes this will serve as a meaningful catalyst to Motorola stock as investors will look past the drag from the underperforming handset business.

Suva views the announcement as a direct result of the poor stock price performance [-28% year to date] and pressure from activist investor Carl Icahn, whose crusade for structural change at Motorola is gaining momentum. He says this may be just the beginning of change at Motorola.

He adds that his sum-of-the-parts analysis of Motorola indicates a value of $16-$17 per share, with fairly conservative assumptions.

RBC CAPITAL UPGRADES CA

RBC Capital analyst Thomas Curlin says CA (CA) posted $0.36 fourth quarter non-GAAP EPS on $1.10 billion in revenue, vs. consensus estimates of $0.25 and $1.04 billion, respectively. Also, CA increased its fiscal year 2008 outlook.

At yesterday's close, CA stock traded at 17 times his forward 12-month non-GAAP EPS estimate, in his view suggesting slightly negative execution sentiment, which is consistent with the general tone in his coverage group due to macroeconomic risks. He believes relative sentiment in the name should hold up well through calendar year 2008 given the company's stable operating profile.

Given the company's stable operating profile vs. his coverage list in the context of a tougher macro environment, Curlin upgrades CA to outperform from sector perform. Has $27 target.

Source: Business Week

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