U.S. Credit Crisis Will Extend Into 2009, Oppenheimer Says

The U.S. credit crisis will extend into and even beyond 2009 as banks will write off more than $170 billion of additional reserves by the end of next year, according to Oppenheimer & Co. estimates.
``The real harrowing days of credit crisis are still in front of us and will prove more widespread in effect than anything yet seen,'' analysts Meredith Whitney, Kaimon Chung and Joseph Mack wrote in a research note today.
The three lowered earnings estimates for the U.S. banking sector ``significantly'' due to ``strained liquidity resulting from shut down in the securitization market'' and on expectations that banks may take provisions of $88 billion in 2008 and $96 billion in 2009.
Banks and securities firms worldwide amassed almost $380 billion of writedowns and credit losses following the worst U.S. housing slump in a quarter century, according to data compiled by Bloomberg. At least $35 billion of additional writedowns included in their balance sheets weren't deducted from reported earnings, regulatory filings show.
Large U.S. banks have taken more than $73 billion in writedowns related to real estate securities investments and over $25 billion of reserves have been taken, Oppenheimer said.

Microsoft proposes to buy Yahoo search - source

Microsoft Corp has proposed to buy Yahoo Inc's search business and take a minority stake in the Web pioneer, stopping short of a full-out merger, a person familiar with the discussions said on Monday.
As part of the deal, Yahoo would sell its Asian assets including significant minority stakes in Yahoo Japan and China's Alibaba Group, while Microsoft would buy a chunk of what remains of the company, the source said.
The talks were revealed by the two companies on Sunday, but they declined to reveal the terms of the discussions. Earlier this month, Microsoft walked away from a proposal to acquire Yahoo for $47.5 billion, or $33 per share, after Yahoo rebuffed the offer, saying it would only settle for $37 a share.
The new deal, if completed, would forge an alliance between the two companies that would represent an alternative means of competing with rival Google Inc, whose ubiquitous search engine has made it an online advertising powerhouse.
The proposal represents an outline of Microsoft's current thinking and it does not yet put a value on Yahoo's search business, said the source, who was not authorized to speak on the record because the discussions are confidential.
Microsoft and Yahoo representatives declined to comment.
Shares of Yahoo fell as much as 0.87 percent on Monday, before closing up 2 cents at $27.68 on Nasdaq. Microsoft dropped 1.8 percent to $29.46.
Collins Stewart analyst Sandeep Aggarwal estimates Yahoo's search advertising business is worth about $21 billion, while putting the value of its its international assets at $9.25 billion, according to a research note he published on Monday.
"Microsoft is the most interested in Yahoo Search," said Aggarwal, who added that Microsoft may buy parts of Yahoo for a premium or buy all of Yahoo and then spin off certain assets.
Microsoft said on Sunday that it was talking with Yahoo about an alternative transaction that did not involve a full buyout after withdrawing its sweetened $47.5 billion bid for the company on May 3.
CHASING GOOGLE
Yahoo is a distant second to Google Inc in Web search in the United States, and Microsoft is third.
Combined, Yahoo and Microsoft would have around a 30 percent U.S. share, compared with Google's roughly 60 percent, according to figures from research firm comScore. Google's lead is even larger on a global basis, according to comScore.
The proposal from Microsoft would likely complicate ongoing discussions between Yahoo and Google. The two companies are still talking about a possible search advertising partnership, people familiar with those discussions have told Reuters.
Talks between Yahoo and Microsoft resumed after Microsoft insisted for two weeks that it had moved on from its pursuit of Yahoo, prompting shareholders of the Web company to criticize its board for mishandling negotiations.
Financier Carl Icahn launched a proxy fight last week to force Yahoo to reopen talks with Microsoft. Icahn, who owns nearly 10 million Yahoo shares as well as options to acquire another 49 million shares, formally filed on Monday the preliminary proxy to nominate 10 directors to Yahoo's board.
A person familiar with Icahn's thinking said on Sunday that an alternative deal for Yahoo, rather than a full acquisition, would prompt the investor to push Yahoo to do a deal with Google. Icahn did not comment on the talks between Microsoft and Yahoo in his filing on Monday.
For its part, Alibaba, the private holding company whose assets include Alibaba.com Ltd, has been lining up investors to help it buy back the Yahoo stake, sources told Reuters earlier.
Yahoo's core franchise stems from the roughly 500 million Web users who pass through its network of Internet media properties each month. Major attractions include Yahoo Mail, news, sports, entertainment and its Flickr.com photo site.
It generates most of its revenue through sales of display advertising to those visitors, as well as making an increasing push to sell ads on non-Yahoo sites. As the No. 2 provider of Web search services, Yahoo also sells ads alongside search results and on a variety of affiliated sites.

MARKET PREDICTION

MV1: Trade long at dips till Nifty holds above 5100 with a SL at 5080 and trade short only from higher levels if Nifty fails to hold 5200 with a SL at 5230.

MV2: Key supports: 5100/5050;Key resistances: 5200/5230;
Positive sector(s): Metals and Pharma;Negative sector: Auto.
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