Media Duped Again on 'MicroHoo' Rumor

The Bear Stearns note was released, the stock began to climb, and Barron's, for one, first reported on the note and the stock movement without mentioning the revival of the Microsoft rumor.

Could the rumor possibly be true? I haven't the vaguest idea, but Barron's redeemed itself by soon publishing again on the subject, mentioning its miss of the Microsoft mention and then being one of the few to put it in any sort of perspective.

Wrote Eric Savitz, savvily:

"So, this is all fun to think about, I would agree. But I would also point out that at $50 a share, Yahoo! would sell for $67 billion. As I noted in a post on last week's rumored Microsoft megadeal, which had them buying Research In Motion(RIMM) in another theoretical $60 billion deal, Microsoft has absolutely zero record of doing large acquisitions. Aside from the $6 billion aQuantive deal, which came amid a feeding frenzy for Web advertising plays, the company has never bought anything for more than $1 billion. Yahoo! might be cheap, but stocks are often cheap for a reason; Yahoo! has shaken up management, but the expected restructuring of the business has a long, long way to go. I'm also far from convinced that there is a media company out there that would undertake a $67 billion acquisition of Yahoo!. Possible, sure. A fun parlor game, sure. But a reason to buy the stock? I'm not convinced."

By sad comparison, MarketWatch from Dow Jones refers to the deal as "a possible merger that has been rumored for months now." MarketWatch mentions the rumors, but that proves legitimizing in a sense, because it doesn't give color on how thinly sourced the rumors were. Or, as in the case of Barron's, what a departure the deal would be for Microsoft.

Bloomberg provided another of the day's highlights, though I think this good effort at putting the talk in perspective should have come at the beginning of the article, to define it, not at the end, to cover their tushes. In any case, here it is:

"Microsoft chief executive officer Steve Ballmer said Aug. 20 that Yahoo! would be "an expensive acquisition for anyone to do." Ballmer, questioned by television host Charlie Rose at an event in New York, said Microsoft already works with Yahoo! and would look for more ways to collaborate.

Savvy investors -- cross this bridge to nowhere with great care.

>To order reprints of this article, click here: Reprints