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Fingers crossed on Microsoft earnings

April 24, 2008

If you take Steve Ballmer at his word, the only way Yahoo shareholders may be able to squeeze a bit more money out of Microsoft Corp is to pray for a stellar earnings report from the software company Thursday afternoon.

microsoft-ceo-steve-ballmer.jpgThe Microsoft CEO has been talking tough all week from Morocco to Milan, saying he wouldn’t raise the company’s bid for Yahoo — now valued at $43.8 billion — even after the Web pioneer’s quarterly results came in a bit better than expected.

With 50 percent of the offer consisting of Microsoft shares (the rest is cash), Yahoo’s shareholders need a solid earnings report from Ballmer … or the value of the bid could fall further with Microsoft’s share price .

At Microsoft’s current stock price of $31.45, the deal values Yahoo at $30.45 per share (our math: [MSFT share price x share swap ratio of 0.9509] + $31 and divide the whole thing by 2). To get the bid back to $31 per share — the value when the offer was first made on Jan. 31 — Microsoft’s outlook needs to be strong enough to boost its shares to about $32.60, equivalent to a 3.7 percent rise.

But to get Yahoo shareholders a buck more to $32 per share, they’d need a blow-out quarterly report from Microsoft that would push its shares up 10.3 percent to $34.70.

The last time we remember Microsoft shares jumping that much was about six months ago on Oct. 25, when it reported fiscal first quarter earnings and lifted its full-year outlook on strong sales of Windows Vista and the “Halo 3″ video game.

Check out what Wall Street is expecting this quarter.

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