Markets & Finance

S&P Says Hold Yahoo


Yahoo (YHOO): Maintains 3 STARS (hold)

Analyst: Jonathn Rudy, CFA

Yahoo agreed to acquire Kelkoo S.A., a European online comparison-shopping service, for 475 million euros ($574 million) in cash. Kelkoo has operations in nine European countries reaching approximately 8.7% of all European Internet users. The transaction is expected to close during the second quarter of 2004, pending customary approvals, and Kelkoo is expected to become a subsidiary of Yahoo following the acquisition. S&P's 12-month target price for Yahoo remains $51, derived from a

discounted cash-flow analysis. S&P believes that shares are fairly valued at these levels.

Mylan Labs (MYL): Reiterates 5 STARS (buy) and Johnson & Johnson (JNJ): Reiterates 4 STARS (accumulate)

Analysts: Robert Gold, Herman Saftlas

Late yesterday, a Vermont court ruled Mylan's generic Duragesic patch violated a Johnson & Johnson patent, which S&P believes will prevent Mylan from launching before the original patent expires in July, 2004. However, S&P continues to think the company should be able to launch its product before the January, 2005 pediatric-exclusivity extension. The court ruling removes uncertainty regarding the validity of the J&J patent, but doesn't improve visibility on Mylan's launch date. Assuming a launch in August or September, S&P still sees Mylan's fiscal 2005 (Mar.) earnings per share at $1.35, and sees J&J's 2004 earnings per share at $2.96.

EchoStar Communications (DISH): Maintains 3 STARS (hold)

Analyst: Tuna Amobi, CPA, CFA

EchoStar posted December-quarter GAAP EPS of 1 cent, vs. a year-ago's 45 cents loss. Before non-recurring bond redemption charges and royalty reversals, S&P thinks the fourth-quarter results, which were significantly below S&P and the Street's estimates, were limited by promotional activity and higher subscriber acquisition costs. EchoStar had pre-announced 340,000 fourth-quarter net subscriber additions. It also filed a slightly delayed 10-K and, as requested by the SEC, is restating its 2002 results to reflect a $30 million (net 6 cents per share) reversal of accruals for smart-card replacement of leased set-top boxes.


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