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Citigroup puts faith in Microsoft upping its bid
But Yahoo! bides its Time…

By Reuters

Published: Tuesday 25 March 2008

Citigroup said it is likely Microsoft will raise its $31-per-share offer for Yahoo!, and upgraded Yahoo! shares to "buy" from "hold".

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The brokerage also raised its price target on Yahoo!'s stock to $34 from $31, saying it believed Microsoft remained committed to its offer and "is capable of and willing to" increase that bid to conclude the deal.

Analyst Mark Mahaney said in a note to clients: "While we continue to see no other competing bidders, we believe Yahoo! is aggressively pursuing strategic alternatives."

One possibility is a tie-up with Time Warner, whereby Time Warner would contribute its online content assets to Yahoo! in exchange for a stake, the analyst said.

Mahaney said: "We believe this could serve as a forcing function to a higher Microsoft bid."

Citigroup said it continues to view a Microsoft-Yahoo! deal as the most likely outcome.