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article imageIs MySpace Worth $12 billion?

By Chris V. Thangham     Jun 20, 2007 in Business
Michael Arrington of Techcrunch reports that Yahoo may buy MySpace for 25% of the stock in the combined entity, which values to $12 Billion dollars. He says it will be a great deal for Fox, but not so great deal for Yahoo.
TechCrunch reports that rumors are circulating that Yahoo may buy MySpace for 25% of the stock in the combined entity. Yahoo just fired Terry Semel recently and are planning to spur the Yahoo stock and investments with this purchase. Whether Fox will agree to this we have to wait and see. Arrington says the probability of the deal taking place is low.
If the transaction do takes place, then MySpace will be estimated at $12 billion based on the current value of Yahoo. Fox purchased MySpace for $580 million two years ago, so the return on their investment is incredible if the transaction is finalized between the two. With this purchase, Facebook will also see a high value for its property. Yahoo tried to purchase Facebook last year for $1.5 billion but its founder Mark Zuckerberg refused the offer.
Industry analysts have been pegging MySpace stock at north of $10 billion since late last year. The underlying financials and user numbers support the deal. But is it a good idea?
Arrington says it will be a great move for Fox and not so great move for Yahoo, which may or may not solve their current problems. MySpace won’t help Yahoo’s problems directly such as in Search and Web advertising.
Google has already a search deal with MySpace, but if Yahoo purchases MySpace, it may take over that deal, that might help them a little.
Yahoo should focus more on strategic acquisitions that will help its goals and objectives. Buying MySpace alone won’t solve their problems in one stroke, with MySpace popularity may not last forever. It is better for Yahoo if they are bought over by Microsoft or if they could buy Facebook, so they can blend in their Yahoo Mail, Flickr, and del.icio.us properties into Facebook.
What do you think about this transaction with Yahoo buying MySpace for $12 billion dollars, if it takes place as rumored.
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