Microsoft waits for Yahoo! response; MBIA issues $750 million in shares; Billiton targets Rio Tinto

By Aaron Hochman-Zimmerman

New York, Feb. 6 - Yahoo!, Inc. spent another day holding off Microsoft Corp.'s advance in the form of a $44.6 billion buyout offer.

The latest and what seems to be the most serious offer will likely be the one to finally hook Yahoo! as many believe only the federal regulators have the power or will to stop Microsoft.

Still, a Department of Justice challenge would have to be seen through the lens of the recent Google Inc. buy of DoubleClick Inc.

Meanwhile, when no one else seems willing to throw a life jacket to the monolines, MBIA Inc. made an attempt to swim on its own with a 50.3 million share, $750 million stock offer.

"That's really the big issue that's holding the market back," a portfolio manager said about the potential for mortgage foreclosures and municipal bond defaults if no help comes for MBIA and Ambac Financial Group Inc.

Otherwise, "there's potential for good upside here," he said about the market in general.

The Dow Jones Industrial Average still found its way up, then back down on Wednesday, ending lower by 65.03, or 0.53%, to close at 12,200.10. The S&P 500 followed the same arc to finish 10.19, or 0.76%, lower at 1,326.45.

Microsoft still trying to Yahoo!

As the news was heard that the Justice Department will be looking at Microsoft's (Nasdaq: MSFT) $44.6 billion offer for Yahoo! (Nasdaq: YHOO), Microsoft's stock slid lower by $0.55 or 1.89% to $28.52.

Yahoo! stock lost $0.41 or 1.41% to trade at $28.57.

The Justice Department will assume oversight duties from the Federal Trade Commission and will likely "retrace" the steps it took while on the trail of Google Inc.'s acquisition of DoubleClick Inc., a market source said.

With no bids forthcoming from the possible suitors which once included Comcast Corp. and News Corp., Microsoft has pulled into a comfortable lead in the race for the keys to Yahoo!'s executive washroom.

However, still officially defiant, Yahoo!'s chief executive officer Jerry Yang sent out a lowercase-only letter which assures his loyal "yahoos" that no decisions have been made about Microsoft and its $44.6 billion.

The cynics in the market feel that $31 per share will not be enough for Yahoo! and its hesitancy is more bargaining table posturing than a principled struggle for sovereignty.

"I guess they'll probably raise their bid," a portfolio manager said.

"To me that's probably a done deal," he said, adding that to save face Yahoo! may ask for a just a little bit more.

The only potential roadblocks for Microsoft are federal regulators, he said, but barring mental illness on the part of the regulators, it would be difficult to stop Microsoft after Google's purchace of DoubleClick was approved.

"The regulators could just go crazy," he said, "But I really think they would have to go off the deep end."

European regulators may put up more of a fight.

"The European regulators kind of have it in for Microsoft," he said, but Microsoft will not be so easily thrown off Yahoo!'s trail.

"This was a great move on their part and they've got to pursue it," he said.

MBIA issues $750 million in stock

With no help from outside in sight, MBIA (NYSE: MBI) took up its own cause late Wednesday in the form of 50.3 million new shares of stock worth $750 million, according to a press release. The stock price was lower by $0.62 or 4.16% to close at $14.28, but after hours trading looked positive.

"This may show the latest move is a step in the right direction," a market source said about the gains in after hours trading.

Earlier in the day, Warren Buffett reasserted that he will sail under his own flag, rather than invest in the stumbling monoline giants.

"Which makes sense, he has complete control," a portfolio manager said about the Berkshire Hathaway Assurance Corp.

Ambac Financial Group, Inc. (NYSE: ABK) was lower by $0.38, or 3.34%, to close at $11.01, but was also climbing in after hours trading.

Berkshire Hathaway Assurance is not individually traded, but Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK-A) was down 1,100.00 or 0.81% to $135,400.

3Com report due late February

3Com (Nasdaq: COMS) fell just $0.01 or 0.26% to $3.90 after its deal to offer a 16% stake to China's Huawei Technology fell under the scrutiny of the House Commerce and Energy Committee due to Huawei's connections with the Chinese military and government.

The deal for the Marlborough, Mass.-based data and security systems provider will be investigated by the Committee on Foreign Investment in the United States (CFIUS).

A report on the deal is due late in February from, which is consistent with the request of Reps. Joe Barton and John Dingell.

Rio Tinto in crosshairs

BHP Billiton Ltd. (NYSE: BHP) stock fell $3.38 or 4.86% to $66.10 as it announced its offer of 3.4 BHP Billiton shares for each Rio Tinto Ltd. (NYSE: RTP) share, according to a press release.

Rio Tinto stock slipped by $12.13 or 2.88% to $409.37.

If the offer is accepted, Billiton claims the unification of efforts and mineral resources would produce approximately another $3.7 billion each year within seven years after the acquisition, the press release said.

However, the move sparked heated speculation that China's Chinalco will make a counterbid, a market source said.

Any such move on Chinalco's part would have to receive approval from the Chinese government and would be subject to political opposition from Australia, the source said.

Even if approved, Billiton's chief executive officer Marius Kloppers said the near-100 antitrust filings may take nine months to a year, the market source said.

Still, Billiton is interested enough in Rio Tinto to discuss issuing $55 billion in debt in order to close the deal, the source said.

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