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By Jason Stipp | 05-13-2011 03:00 PM

The Price Is Right?

Morningstar markets editor Jeremy Glaser looks at acquisition prices, pricing power, and attractive stock prices from the week's news.

Jason Stipp: I am Jason Stipp for Morningstar and welcome to the Friday Five.

With a nod to the classic game show, this week on the Friday Five, we'll be asking if the price is right. Joining me as always for the Friday Five is Morningstar markets editor, Jeremy Glaser.

Jeremy, thanks for comin' on down.

Jeremy Glaser: Jason, always glad to be here.

Stipp: So we're going to be talking about pricing this week, what do you have for the Friday Five?

Glaser: Well, we're going to see if the price is right for Skype, at Macy's, for Google's new laptops, at Disney, and finally for Cisco Investors.

Stipp: Microsoft had some M&A news with its purchase of Skype. It looks like it could be a little pricey, but do you think its right there?

Glaser: I think "a little pricey" might be the understatement of the day. $8.5 billion for Skype is really quite a lofty valuation. This follows a trend we've been following for a while now, which is that Tech Bubble 2.0, whatever you want to call it, really seems to be in full swing--that companies are willing to deploy their cash and pay huge valuations for businesses where they think there is a lot of growth, there is a lot of strategic potential.

Now, the exact strategic potential for Skype inside of Microsoft is not completely clear. Microsoft has a lot of these same video conferencing and audio conferencing and telephone tools that Skype is bringing to the table. Certainly, Skype has a better brand name. It's better known internationally. But still it could be difficult to see exactly how Skype is going to fit in there. It's being kept as its own independent business unit, not being put in with any other part of Microsoft, which also raises some interesting questions.

Certainly, Microsoft paid a hefty price, not really clear they're going to get a big return on it. They have the cash to waste, so it's not going to materially impact our view of Microsoft, but still it kind of leaves you scratching your head a little bit.

Stipp: So, Jeremy it sounds like Microsoft's bid might have been above the suggested acquisition price for Skype?

Glaser: Absolutely.

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