MySpace is no place for Yahoo

Rupert Murdoch cuts an unlikely figure as a white knight and, sure enough, it is too easy to see why News Corp would want to shove some of its online assets into Yahoo. The prize for News Corp is securing a plum valuation for its MySpace business at a moment when media executives across the world are asking themselves whether last year's excitement over social networking sites may have been overdone - perhaps absurdly overdone.

Under the outline proposal, News Corp would bring more to the party than just MySpace, but the valuation of the site is the crucial number. The suggested figure is $10bn, which would represent smart business for News Corp, which paid $580m in 2005. MySpace's revenues are growing rapidly, but $10bn is about double the value that most News Corp analysts place on the site.

Even if Yahoo could swallow the price, the deal would bring a separate difficulty. MySpace's engine for attracting advertising revenue runs on Google technology. Yahoo is in play because of Google's success, so for it to embrace MySpace would be akin to running up the white flag.

In almost every way, the Microsoft solution is better for Yahoo and better for internet users. It delivers plenty of cash to shareholders, and offers the possibility that a deeper pool of research - in terms of cash and brains - will provide stronger competition for Google when the next generation of technology arrives.

There is no shame for Yahoo in flirting with Murdoch if the aim is to secure better terms from Microsoft. There is danger, however, if News Corp turns out to be the best idea that Yahoo can muster. Bill Gates would conclude that Yahoo's defences are as weak as he thought.

B&B brawl

Two views make a market, but rarely does a stock divide opinion as Bradford & Bingley has done. On day one of the B&B saga, the bank delivered £226m of write-offs and saw its shares plunge 23%. On day two, yesterday, the City squabbled about what it all meant.

In the bearish corner is Morgan Stanley's Michael Helsby. First, he threw a nasty jab by wondering whether B&B's £2bn borrowing facility will be renegotiated or withdrawn in the light of the bank's exposure to so-called "synthetic" collateralised debt obligations (CDOs).

Helsby followed with an almighty hook: "We would be concerned that events damage public confidence and hurt B&B's deposit-gathering capability. This has the potential to become self-fulfilling and makes us lean towards our bear case." After Northern Rock, that's brutal.

Helsby's bear case is that the shares - at 186p yesterday - could be worth 33p in a year's time. His official target is 150p, at which point the dividend yield would be 14%. Naturally, B&B now tops Helsby's "dividend threat list".

In the bulls' corner stands James Eden, once of Dresdner and now of Exane BNP Paribas. His analysis - titled The Truth! - is that his rival analysts should not have been surprised by B&B exposure to CDOs. The management, he says, was freely telling anybody who asked. "This was definitely not malicious or slippery behaviour by company management," he argues.

Eden reckons the shares are worth 400p and that B&B is a screaming buy. "Cows are for milk, bees are for honey and shares are for dividends," he says, and an 11% yield is good enough for him.

Heaven knows where this story is going next. Even Eden thinks the combination of misunderstanding and breakdown of trust in B&B's management is toxic. For B&B, the position is alarming: in the current climate for banks, credibility is a management's best friend.

The rest of us, however, can enjoy the fact that a wobbly stock market, and the example of Northern Rock, has emboldened City analysts to speak their minds. It's not only B&B's directors whose reputations are on the line.

Monoline writer

Eric Dinallo, originally billed as the saviour of the monoline bond insurers, now looks more like their executioner.

There will be no government bail-out, says New York's insurance supremo. Dinallo insists his priority is to protect the holders and issuers of municipal bonds - the healthy parts of the monolines' portfolios.

That means he is on the side of taxpayers and "millions of individual Americans" who own municipal bonds. If necessary, they will be saved in a rescue that separates the good insurance from the bad. Warren Buffett has demonstrated how it could be done.

The monoline insurers can protest that are still creditworthy, but they no longer look in charge of their own destinies. Dinallo is writing the script.

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