Shares of Yahoo have dropped in value on Wall Street today on fears that the new Microsoft MSN Search will draw in some of the Overture Sponsored Links revenue that Yahoo benefits from.
CBS MarketWatch Reports:
Smith Barney analyst Lanny Baker cut his rating on Yahoo to “hold” from “buy” on valuation concerns and said the company’s relationship with MSN — Yahoo provides it with both search and Web search advertising services — is the most obvious risk in the coming year.
At the close of trade, Yahoo shares were off 5.8 percent, or $2.10, to $34.30. The stock of smaller search provider Ask Jeeves lost 8.6 percent, or $3.35, to finish at $35.68. Microsoft shares gained 7 cents to close at $28.63. All three issues trade on the Nasdaq.
“Our primary area of concern remains Yahoo’s search relationship with Microsoft’s MSN property, although this risk has not changed recently and our downgrade stands separate from this factor,” Baker wrote in his note, in which he also raised his stock target for Yahoo to $36.50 from $33, reflecting strong Internet advertising trends.
Yahoo, which has seen its shares rise more than 50 percent so far this year, is due to issue second-quarter results on Wednesday.
Industry analysts have however, expected MSN to drop its partnership with Yahoo Technology and possibly Overture within the year. “It’s been pretty well known that MSN is going to leave Yahoo at some point. It should be priced into the stock,” said Avondale Partners analyst Frank Gristina.