Come Back,  Come Back, Come Back…

Those were the words that Kate Winslet spoke as she saw the rescue boats disappearing from her sight in the movie Titanic. Well, tonight the CEO of Yahoo is yelling the same thing. But in this case it is Microsoft that he is yelling "come back" to.

Jerry Yang may end up on the top 10 list of stupid CEO’s for his reluctance to take an offer that was put in front of him. His shareholders would have been able to get something that Jerry Yang could not give them, a healthy return for their investment. But Jerry Yang thought his company was worth much more, and in playing hard to get, Microsoft just said "go pound sand" and left Jerry having to answer to his shareholders. And they are not happy one bit. Shareholders are already calling on a complete dismissal of the top brass, including Jerry Yang. Shareholders want Jerry Yang’s head on a plate.

So, now that Jerry has his shareholders circling his house carrying torches, he is calling on Microsoft to "come back". But will they? If Microsoft is smart they won’t. Look, Microsoft and Yahoo are both bad companies. Each company has not been able to grow organically, they have been stagnant for years. Yahoo has a terrible business model with no solid growth potential, and Microsoft’s business model is one built on ‘upgrades’. Yep, keep updating software and selling upgrades year after year after year. Their latest operating system, Vista, is considered by many as one of their worst blunders. A poorly designed operating system that bogs down all but the most speedy computers. What would the joining of Microsoft and Yahoo brought to the world? An even bigger company that goes no where.

Yahoo’s search engine technology is far behind that of Google, and Yahoo has little in the way of any other revenue generating business, and relies on advertisement sales and ‘click through’ ads. Microsoft would have been buying a company with poor organic growth and ‘behind the times’ search technology. Just what an already stagnant company needs… to buy another stagnant company.

Jerry Yang had his chance to sell his company and give his shareholders something for their time of hanging on to the stock for so long. He thought there might be a bidding war for his company and could get a higher price. Mr. Yang, what on earth do you smoke everyday? Have you looked at your company lately? Bidding war indeed. So what are you going to do now Jerry? If I were you I would go to Disney World and see if you can get a job as ‘goofy’, for you are already VERY qualified.

And Microsoft, as long as they continue their ‘upgrade’ business model, then there is nothing worthy for people to want to buy shares of that company. For the past eight years Microsoft has not shown any material share price growth. Trading in a range for many years is not my idea of a good investment. Oh, the divended you say?  Stocks that pay dividends are of no value and should never be used to justify ANY stock purchase. Stock price growth potential alone is, and always should be, your criteria for choosing what to invest in, not because they pay a dividend. We wrote about this in the past, and we will cover this topic much more in the future.

So what happened today? More selling that was fairly broad based. The exception being that commodities are working their way up once again. Gold and oil were up today, the US Dollar has rolled over and has been heading back down again, and suddenly now the market is paying attention to corporate earnings. And to the markets surprise, earnings have not been so hot. Surprise, Surprise, Surprise! As of May 2nd (2058 companies have reported), earnings for this quarter are down 18% on continuing operations net, and down 19% on total net income compared to one year ago. And no, I’m not going to exclude the financial sector like they do on CNBC. They are part of the broad measurement of corporate health and they shall remain included. 

This morning we has the Non manufacturing ISM data. On the surface the number was higher than expected. But contained within the data we see that business activity declined from last month, exports are down (you know, exports, those things the Government say is keeping our economy afloat), and prices paid for goods continues to climb ever higher. As they say, the devil is in the details.

Not much in the way to show in charts tonight, the markets are still at a period of ‘indecision’. And it appears that fear is moving back to the front of the line once again. The battle wages on…