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Get Four
|  | MARCH 21, 2005
 S&P STOCK PICKS & PANS S&P Upgrades IAC Plus analysts' opinions on Ask Jeeves, Yahoo, and more IAC/InterActiveCorp (IACI ): Upgrades to 3 STARS (hold) from 2 STARS (sell) Analyst: Scott Kessler IAC agrees to acquire Ask Jeeves for $1.85 billion in stock. We expect the deal to be completed in September, pending necessary approvals, and IAC to then repurchase 60% of shares it issued for the deal through an existing buyback program. As a result, despite the notable premium to Friday's closing price, we believe this deal would enhance IACI's near-term and long-term growth and profitability. We believe Ask Jeeves would enable IAC to more effectively pursue the local online advertising market in conjunction with Citysearch. With IAC below our target price of $22, we are upgrading. Ask Jeeves (ASKJ ): Downgrades to 3 STARS (hold) from 4 STARS (buy) Analyst: Scott Kessler IAC/InterActiveCorp announced the proposed acquisition of Ask Jeeves for $1.85 billion in stock, constituting a 29% premium to Ask Jeeves's closing price on Friday. Ask Jeeves shareholders would receive 1.2668 shares of IAC for each Ask Jeeves share. We foresee the deal closing by September, 2005, pending necessary approvals. We are downgrading the stock of Ask Jeeves to reflect recent price appreciation and what we consider to be a less favorable risk-reward. Moreover, we now expect the stock of Ask Jeeves to track IAC shares, on which we have a hold recommendation. Our target price stays $29. Yahoo (YHOO ): Reiterates 4 STARS (buy) Analyst: Scott Kessler The Wall Street Journal and Reuters, among others, report that Yahoo has acquired Ludicorp Research and Development Ltd., developer and operator of popular photo-sharing website Flickr. This deal has been talked about for some time, and the Journal speculates it could be valued at some $50 million. We believe this transaction makes strategic sense, especially as Yahoo just last week announced a new service to bolster its community offerings around blogs and photo-sharing. We believe Flickr would help Yahoo better compete with Google, which acquired photo-sharing company Picasa in July, 2004. News Corp. (NWS.A ): Reiterates 5 STARS (strong buy) Analyst: Tuna Amobi, CPA, CFA News Corp. completes its tender offer for Fox Entertainment Group. The exchange ratio called for 2.04 of News Corp. (non-voting) shares for each Fox share. Approximately 415 million Fox shares were tendered and accepted, raising News Corp.'s stake to 98.8% from 82.1%. As previously announced, a short-form merger based on the fixed exchange ratio is expected shortly. We expected this outcome, despite class action litigation that sought to block transaction. We still believe that this deal will simplify News Corp.'s structure and facilitate integration of its global asset portfolio. Genentech (DNA ): Reiterates 5 STARS (strong buy) Analyst: Frank DiLorenzo, CFA Novartis's PTK787 experimental small molecule to treat colorectal cancer shows mixed results. The primary endpoint of progression-free survival did not meet statistical significance, but the trial will continue to assess overall survival. Potential filing for 787 is delayed by at least a year. We think Genentech's Avastin will continue to show an advantage over competing drugs. We are raising our 2005 earnings per share estimate to $1.08 from $1.07, and 2006's earnings per share estimate to $1.45 from $1.38. On net present value analysis (assuming peak Avastin sales exceeding $5B by 2011), our target price rises to $71 from $68. Inamed (IMDC ): Reiterates 4 STARS (buy) Analyst: Robert Gold Inamed has agreed to be acquired by Medicis in a cash and stock deal valued at $75 per IMDC share, based on Friday's closing price on Medicis shares. The timing of the deal strikes us as odd given that Inamed's silicone breast implants will be in front of an FDA advisory panel in mid-April. We also find the price quite modest based on our expectation of a favorable FDA panel decision and the potentially significant incremental sales opportunity in the U.S. breast augmentation market.  All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.
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