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Yahoo-Google: Analysts: Yahoo Trading Relevance For Cash; No Regulatory Slam Dunk; MSFT-YHOO Still?

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image You already know how the market reacted to yesterday’s news: Shares of Yahoo got slammed, as an ad deal with Google (NSDQ: GOOG) was seen as a poor substitute to a full or partial sale to Microsoft (NSDQ: MSFT). Even after yesterday’s swoon, the stock is off another 4 percent today to around $22.50 — the lowest its been since Microsoft’s initial offer back in February. So as dreams of a sale fade, what does the Google deal mean for an independent Yahoo (NSDQ: YHOO). Analysts are busily sounding off this morning:

Ben Schachter, UBS: In the short term, yes, this is a boost to cash flow, so that’s good (Yahoo estimated yesterday it would contribute an incremental $250-$450 million to operating cash flow). But as Schachter asks: “At what long-term cost?” Despite insistence from Yang and Decker that Yahoo remains a “must buy” the agreement makes the company less relevant in terms of offering a full spate of advertising options. And if you thought that this was the end of the saga, Schachter disagrees: “We continue to believe that, at some point, MSFT will acquire all of YHOO. Unfortunately, for all of us that are beyond tired of the constant news flow and speculation around a possible MSFT/YHOO deal, this GOOG/YHOO agreement will not put us out of our misery as we still think MSFT needs YHOO.” He also wonders about a comment that Decker breezily made during the Q&A about helping Google with display stuff on their own properties: “Sue Decker

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