Yahoo! Sags on Microsoft Scare

Yahoo! (YHOO Quote) sank 5% Thursday under the weight of an analyst downgrade and the prospect of a looming confrontation with big customer Microsoft (MSFT Quote).

The Sunnyvale, Calif., media giant saw its stock slip $1.77 to $34.63 after Smith Barney Citigroup analyst Lanny Baker cut his rating to hold from buy. Baker, citing the company's rich price-to-cash-flow estimate, said he made the move after the stock passed his price target. Yahoo! is up 63% in just three months.

Baker's decision to cut his rating on the stock stands in stark contrast to the mania that took hold of many analysts during the last Internet stock run-up, around the turn of the century. Then, many analysts raised their ratings and price targets and then raised them again as shares continued skyward, in spite of the apparent disconnect between stock action and investing fundamentals. ...