Wednesday, July 29, 2009

Quick Notes for Day - July 29

Microsoft and Yahoo Complete Search Deal - After a long road and numerous breaks, Microsoft and Yahoo finally came to an agreement on a 10-year deal that will use Microsoft's Bing search engine to power search queries on Yahoo's sites and Yahoo's sales force to sell premium advertising based on search terms for both companies.

Many analysts and investors had wanted Yahoo to receive a large upfront cash payment, but according to statements from Yahoo CEO Carol Bartz, the revenue share agreement in the Microsoft deal was more valuable to Yahoo than a one-time payment. "Having a big up-front cash payment doesn't really help us from an operating standpoint," Bartz said in a conference call with Microsoft CEO Steve Ballmer.

Microsoft will compensate Yahoo through a revenue-sharing agreement that pays Yahoo at an initial rate of 88% of search revenue generated on Yahoo sites in the first five years.

Yahoo estimated the deal will boost its annual operating income by about $500 million and yield capital expenditure savings of $200 million. Yahoo also expects the deal to boost annual operating cash flow by about $275 million.

Fed Buys Treasurys - The Federal Reserve Bank bought $2.999 billion in longer term Treasurys (maturing 2021-2026) on Wednesday. Dealers submitted $11.707 billion to the central bank to buy. The amount purchased was the same as at the Fed's last buyback in the same maturity range.

Oil Drops on Supply Data - Oil futures fell roughly 4% to around $64.50 a barrel Wednesday after the EIA reported crude supplies rose by 5.1 million barrels last week versus the estimated 1.1 million barrels expected by analysts. The EIA also reported that total motor gasoline inventories decreased by 2.3 million barrels last week and distillate supplies rose by 2.1 million barrels.

Gold Falls on Lack on Inflation - Gold fell Tuesday for the second day in a row as crude oil declined after data showed a rise in inventories thus reducing the fear of inflation and gold's appeal. A stronger dollar also weighed on dollar-denominated gold prices.

June Durable Goods Orders Fall - The Commerce Department reported on Wednesday that durable goods orders fell 2.5% on weaker demand for autos, airplanes, and computers. The drop was larger than expected and followed two months of gains. Excluding the 12.8% decrease in transportation goods, orders rose 1.1%. Orders in May were revised lower to a gain of 1.3% from the previous estimate of a rise of 1.8%. Inventories were down 0.9%.

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