Yahoo and Google Spike but in Different Directions
The technology world is abuzz with headlines today! Yahoo Inc (YHOO) may be acquired by Microsoft (MSFT), which sent shares soaring, while Google Inc (GOOG) missed earnings expectations and plummeted.
Before looking at the charts, let’s look at the headlines:
From Yahoo Finance: Microsoft makes $44.6 Billion Bid for Yahoo
Yahoo’s stock, like the up arrow in their logo shown here, is headed up, up, up (this morning at least).
Also, from Fortune Magazine this morning: “Putting Yahoo and Microsoft Together… Some Pieces Won’t Fit.”
As if this wasn’t enough to keep the technology world buzzing this morning, search engine giant Google announced yesterday that it missed earnings, but would have hit them if employee stock bonuses/options were not included.
From The Street.com: “Google, Microsoft, and Yahoo… Oh, My!”
Also from Fortune.com: “Google Misplaces $72 Billion” Oops! That’s what the author estimates was the loss from the earnings miss and the decline from the all time price high. An excerpt:
“Fortune’s Philip Elmer-DeWitt notes that Google stock has now dropped more than 230 points from its November high of $747 a share – wiping out more than $72 billion in market value. That’s more than half again as much as Microsoft (MSFT) is offering for Yahoo (YHOO), for instance.”
That really puts things into perspective, or at least tries to.
Now that you have the headlines, let’s glance at the charts:
Microsoft (MSFT):
Oops. Investors were not pleased. This is the traditional reaction, in that the offering company takes a hit to their stock price when the news is announced while the company being acquired experiences an expected stock pop.
Like what happened in Yahoo (YHOO):
Wow is the word of the day. The day is not finished yet, and already over 365 million shares have traded today. That is some massive volume! Notice the slight volume pick-up on the days prior to the announcement. Did someone know this was going to happen? I’ll look at the options later to see if there were clues.
Yahoo’s share price has appreciated 47% or just over $9.00 as of 2:30 EST.
Unfortunately, the news was not all good today. Google investors woke up to a massive decline which was exacerbated to the downside as the day continued:
As of 2:30 EST, Google’s share price has taken a 7.86% decline, which is $44.36.
For trivia’s sake, the 14 period (day) Average True Range (ATR) for Google is actually near $28, meaning that in one day, a $28 price fluctuation up or down would be normal.
With wild swings up and down like this in the stock charts, is anyone safe?
This is not only a good move…more to come
If you look at it from a layman’s perspective you have to consider that most of advertisement is aimed at the consumer. The consumer market is dominated by the Microsoft operating system. You Yale, Stanford, and Harvard graduates may be thinking “what does that matter?” Online buying happens from the PC (Personal Computer) which after a few years may mean something else…right?..the PC bit.
So, what is my point…Linux is not a popular consumer OS like Windows. Microsoft just combined the no. 2 and 3 player in on-line advertising behind Google, and they still (and will for a while) own the consumer OS. 99% of Google’s revenue comes from on-line advertising, yet Microsoft owns the OS at the consumer level (I am being repetitive with our Ivy and Palo Alto league graduates).
Google bangs their buck, to some degree, on Android. Who would ever buy their new 52″ LCD HD-ready flat-panel from their new Dell Andriod-based cell phone? Maybe in a few years.
My point is that Microsoft played a brilliant card, bought Yahoo at the right price, at the right time (when Google lost almost 30% of their value in less than 30 days) for the right reason, the Yahoo and Microsoft merger was bound to happen.
Medina Point in Winter is the right time to think straight.
BRILLIANT move Microsoft, brilliant move…they beat Google at their own game.