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Trading Microsoft Into Earnings

With shares up 31% over the past 3 months, what should you expect from Microsoft when they report earnings Thursday after the close?

Rumors that Microsoft and Yahoo were once again talking about an online advertising partnership persisted through the quarter with speculation really heating up just days before Thursday’s report.

The renewed chatter largely stems from a report in All Things Digital that says the deal could happen within one week!

So far, neither company has commented and no deal emerged.

As you may remember, Microsoft attempted to buy Yahoo last year to build a more formidable challenge to Web search leader Google but walked away after Yahoo spurned an offer worth $47.5 billion.

Since that time Microsoft relaunched its own search engine under a new brand, Bing. Estimates from researchers comScore Inc. indicate its market share increased slightly in June, but Microsoft is still far behindGoogle and Yahoo, the top two search providers.

Outside the merger speculation, investors are also keeping a close eye on the launch of Windows 7. The operating system is set to go on sale Oct. 22. Upgrading from Vista will cost most consumers $120 to $220.

What’s the trade?

I think Microsoft is a good long going into earnings, says Brendan Barnicle Of Pacific Crest Securities. I think we could see some decent upside.

After its big move I don’t see any reason to buy ahead of earnings, counters Tim Seymour.

I’ve added to my position every day over the last week, says Joe Terranova. I think mutual funds are underinvested in this stock.

I hate to throw water on your trade Joe, but I work with mutual funds every day, says Steve Grasso, and none of my clients have indicated wanting exposure to this stock.




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Trader disclosure: On July 22nd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman's Firm Owns (MSFT), (PBG), (TYC), (YUM), (NOK), (WMT), (TGT); Finerman's Firm And Finerman Own (BAC) Preferred Shares, Finerman Owns (BAC); Finerman's Firm And Finerman Own (WFC) Preferred Shares, Finerman's Firm Is Short (WFC); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (USO), (MCO); Seymour Owns (AAPL), (MSFT), (SBUX), (UNG); Grasso Owns (BAC); Terranova Owns (MCD), (QCOM), (AMZN), (AXP), (MSFT), (SUN), (FTO); Terranova Works For (VRTS); Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

For Steve Grasso:
Stuart Frankel Clients Own (V), Grasso Owns (V)
Stuart Frankel ClientsOwn (OXY), Grasso Owns (OXY)
Stuart Frankel Clients Own (WMT), Grasso Owns (WMT)
Stuart Frankel Clients Own (GS), Grasso Owns (CSCO)
Stuart Frankel Clients Own (UNH)
Stuart Frankel Clients Own (DD)
Stuart Frankel Clients Own (INTC)
Stuart Frankel Clients Own (JPM)
Stuart Frankel Clients Own (MS)
Stuart Frankel Clients Own (AXP)
Stuart Frankel Clients Own (MHP)

For Joe Terranova:
Virtus Investment Partners Owns More Than 1% Of (ABD)
Virtus Investment Partners Owns More Than 1% Of (CBL)
Virtus Investment Partners Owns More Than 1% Of (CAL)
Virtus Investment Partners Owns More Than 1% Of (CLB)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (MEE)
Virtus Investment Partners Owns More Than 1% Of (DBC)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (DBA)
Virtus Investment Partners Owns More Than 1% Of St Mary Land & Exploration Co
Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights
Virtus Investment Partners Owns More Than 1% Of (SKT)
Virtus Investment Partners Owns More Than 1% Of (TNB)
Virtus Investment Partners Owns More Than 1% Of (UA)
Virtus Investment Partners Owns More Than 1% Of (WBMD)

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