This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Forget Murdoch: Yahoo! Should Buy Dow Jones

This column was originally published on RealMoney on May 8 at 9:40 a.m. EDT. It's being republished as a bonus for readers. For more information about subscribing to RealMoney, please click here .

The media spent the weekend all abuzz over Rupert Murdoch's bold $5 billion bid for Dow Jones (DJ). The synergies between the Wall Street Journal and News Corp.'s (NWS - Get Report) pending Fox Business Channel makes obvious sense. And despite the pre-existing agreement between Dow Jones and General Electric's (GE - Get Report) CNBC unit, it would certainly rattle the execs at NBC Universal (GE's media division) -- something you suspect Murdoch might enjoy.

A parallel story line was the resurrection of the Microsoft (MSFT - Get Report) acquiring Yahoo! (YHOO - Get Report) rumor that has been around for years. I do not see that as a winning combination. The vast majority of Microsoft's profits come from Office and Windows (Vista), followed by Database SQL. The company's Web properties do not contribute a whole lot to the bottom line.

Then on Monday these two separate M&A stories serendipitously came together when a few subscription-only Barron's columns "accidentally" showed up on the free Yahoo! Finance section. Which got me thinking ...

The most natural acquirer for Dow Jones would be GE (more on this below). But if GE is not interested, then the next most intriguing buyer could be Yahoo!

Its market cap is more than $41 billion, so the company could easily absorb Dow Jones in an all-stock deal, matching Murdoch's $5 billion offer. They would also be a white knight much more acceptable to the major and minor family shareholder groups.

The Bancrofts, who own a majority of the controlling stock, have been rather equivocal in responding to Murdoch's offer. But nearly as important have been the minority shareholders, most prominently, the Ottaway family trust. They released a scathing statement saying that "a takeover by Rupert Murdoch's News Corporation would ruin Dow Jones and its crown jewel, The Wall Street Journal."

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 Microsoft/Yahoo! coupling.

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.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
GOOG $643.61 0.00%
GE $28.07 0.00%
NWS $14.11 0.00%
MSFT $47.11 0.00%
TWX $73.09 0.00%


Chart of I:DJI
DOW 17,084.49 +33.74 0.20%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,830.47 +19.6820 0.41%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs