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Market Update

Yahoo Faces Questions on $1.1 Billion Tumblr Acqusition


Author: Nichole Harper
ticker.com
Last Update: 11:11 AM ET May 20 2013

11:10 AM New York – U.S. stocks traded near flat lines on merger Monday. Precious metals linked companies declined for the sixth day in a row as speculators exit commodities markets. Warner Chilcott agreed to a merger with Actavis for $8.5 billion. Yahoo raised questions after it agreed to acquire loss making Tumblr for $1.1 billion.

On merger Monday, U.S. stocks wavered after indexes jumped in a 4-week rally and broader indexes year-to-date advance crosses the gains of last year.

The S&P 500 index as of Friday jumped 16% in the year so far, crossing the 14% advance in 2012.

Yahoo agreed to acquire web blogger Tumblr for $1.1 billion, the largest acquisition under the recently appointed chief executive Marissa Mayer in less than a year.

The company promised to “not to screw it up” in a statement but the history is against the fading portal that has made more than $10 billion of acquisitions in the last 14 years with little to show for.

Yahoo purchased Broadcast.com for $5.7 billion and Geocities for $3.6 billion in 1999 and since the assumption of CEO position at Yahoo, Mayer has made at least ten smaller acquisitions that have not shown any material impact on the company financials.

Tumblr is headquartered in New York and hosts 108 million blogs and generated $13 million in 2012 and burned through $25 million in the year. The five-year old company has struggled to generate revenues and had previously targeted to increase sales to $100 million in 2013.

According to the Yahoo statement, the acquisition will increase Yahoo traffic by 50% to more than $1 billion and increase monthly traffic by 20%.

The web security and services provider jumped 29% after the company agreed to go private in a deal valued at $906 million.

Warner Chilcott gained 2% after the feminine hygiene drug maker agreed to be acquired for $8.5 billion.

European Markets

European markets advanced as bond yields of peripheral nations fell on the economic optimism.

FTSE 100 index in London increased 0.3% and the DAX index in Frankfurt gained 0.4%. Market index in Paris gained 0.2%. Also, markets in Switzerland, Iceland, Norway, Austria and Denmark were closed for Whit Monday.

Asian Markets

Nikkei index in Japan extended gains for the second day after the yen edged lower and the government estimated higher economic output. The weak yen lifted the benchmark Nikkei and Topix indexes to new 5-year highs.

Natural gas shipping companies were in focus after companies in Japan and U.S. inched closer to sealing agreements to ship shale gas to Japan.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc