Street Broadcasts Its Kudos of Yahoo!-broadcast.com Deal

Merger talk swirls about Novellus and Lam, and Documentum falls short.
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SAN FRANCISCO -- With details at hand, analysts are chiming in on the announced merger between broadcast.com (BCST) and Yahoo! (YHOO) , saying the deal will be good for Yahoo! in the long term but that absorbing the acquisition could be challenging in the meantime.

While he's mostly positive on Yahoo!, Keith Benjamin, an analyst with

BancBoston Robertson Stephens

, said he expects the acquisition "to be dilutive to earnings for the first 12 months following its close and accretive beginning in Q3 2000."

"We continue to see value in Yahoo! stock but are unsure what the next big catalyst for the stock will be," he writes. "Therefore, we would recommend holding rather than accumulating positions at these levels."

Merrill Lynch

analyst Henry Blodget said the deal expands the gap between Yahoo! and its smaller competitors. "We also believe it establishes Yahoo! in a field with

America Online

(AOL)

and

Microsoft

(MSFT) - Get Report

," he writes.

And

J.P. Morgan

upgraded Yahoo! to buy from long-term buy, saying the acquisition "further diversifies Yahoo!'s revenues beyond advertising to include business services." Analyst Susan White set a 12-month price target of 250 on Yahoo!.

Around midsession, Yahoo! was up 7 7/8, or 5%, at 176 1/8, while broadcast.com was up 10 9/16, or 9%, at 128 3/4.

More Merger News

Also on the merger front,

Merrill Lynch

is stoking a fire that

Novellus Systems

(NVLS)

will be buying

Lam Research

(LRCX) - Get Report

. Lam Research was up 3 1/8, or 11%, at 32 1/8, but was off session highs of 36. Novellus Systems was up 2 11/16, or 5%, at 57 13/16.

In a research report today, Merrill Lynch analyst Mark Fitzgerald notes that the companies "have long courted each other and may finally reach the altar." Fitzgerald said a recent sequence of events, including a round of financing by Novellus, has led him to that conclusion. He said that he believes Lam is worth 35 to 40 a share, which is about two times sales.

Fitzgerald says both companies have come to the realization that "being together is clearly an advantage when competing against

Applied Materials

(AMAT) - Get Report

." He said that other investors he has spoken to say it is only a timing issue on when the merger would take place.

Documenting the Fall

Shares of document management software company

Documentum

(DCTM)

fell to a new low after it announced a revenue shortfall for the quarter ended March 31.

The company forecast a "significant" operating loss for the first quarter on revenue of between $23 million and $26 million. Final results are due after the market close on April 15.

Credit Suisse First Boston

analyst George Gilbert

downgraded the company to hold early last week while other Wall Street analysts kept their buy ratings on the stock. Although the company is starting to look cheap, with about $6 in cash per share, Gilbert expects the company to continue struggling most of this year as it moves into a new line of packaged products. "It'll take time to get traction and develop new market expertise," he says.

Documentum was down 6 15/16, or 40%, at 10 3/8 in heavy volume of more than 4.1 million shares.

-- Medora Lee