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Quarter-End Insights

Our Outlook for the Media Sector

Microsoft is making a bold move to catch Google in the search business.

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In our previous article about media stocks in December, we suggested that  Google's (GOOG) competitors would continue to look for potential acquisitions and partnerships to chip away at Google's dominance in the search business. As it turned out, the big story in the media sector in the first quarter was  Microsoft's (MSFT) hostile offer for  Yahoo (YHOO) of $31 per share, a 62% premium to Yahoo's previous closing price and a 19% premium to our $26 fair value estimate. Our take on the proposed tie-up is that it is great for Yahoo shareholders; however, we are skeptical that the acquisition will create value for Microsoft shareholders.

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Michael Corty does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.