Yesterday’s blog post about YAHOO/DJ combo is now fleshed out as a full column on Real Money:
"All things considered, a combination of Yahoo! and Dow Jones makes much more
sense than either a News Corp./DJ pairing or the recently rumored
The Microsoft/Yahoo! combination makes the least amount of strategic
sense. Mister Softee gets less than 5% of its revenue from its online
properties. As noted above, Office, various flavors of Windows and SQL generate
the lion’s share of both revenue and profits. Some analysts have even argued
that the entire Web side of the business has been a giant money-losing
distraction to the Redmond, Wash., behemoth.
If Microsoft CEO Bill Gates and Yahoo! CEO Terry Semel agree with that
assessment and Yahoo! grabs Dow Jones, (pardon the dirty word) the synergies
make a lot of sense. They get a primo media property that has a growing Web
presence that fits into Yahoo’s existing business model. And, it creates a
broader network to serve ads, both online and off. It’s a strong way to combine
the highly-sought-after, high-income demographic of the Dow Jones properties
with the high-volume Web traffic Yahoo! generates.
It also adds some bulk to an entity falling increasingly behind
archnemesis Google (GOOG) in the online advertising space. Yahoo! could
add another $1.783 billion per year in revenue — a nearly 30% bump for the
firm, which did $6.4 billion in total revenue in fiscal 2006 — and it also adds
another $386 million in profits, a number that almost doubles Yahoo!’s
Yahoo sports a trailing price-to-earnings ratio near 60, while Dow Jones
trailing P/E ratio is near 18. If Wall Street puts an online multiple on the
revenue, it raises the potential stock price of the combination dramatically."
The full piece is up on RealMoney.com. I’ll see if it will get moved to the free site . . .
Yahoo! Should Buy Dow Jones
RealMoney.com, 5/8/2007 9:40 AM EDT