Yahoo Shares Up After Plan Calls for Strong Growth

By Reuters

Yahoo Tuesday disclosed a three-year plan that it says will keep it ahead of Wall Street forecasts and should convince investors that a takeover offer from Microsoft undervalues the company.

Exterior view of Yahoo Inc. headquarters in Sunnyvale, California.
Paul Sakuma

Yahoo shares rose nearly 4.5 percent to $27 in premarket trading on the Nasdaq.

According to the plan, which was first presented to its board in December 2007, Yahoo believes that by 2010 it can nearly double its operating cash flow to $3.7 billion and increase revenue, excluding payments to affiliates, to $8.8 billion.

The forecasts are based on revenue and cash flow growth rates that outpace median estimates from six analysts for both 2009 and 2010, Yahoo said.

Yahoo vs. Microsoft

Microsoft made its unsolicited takeover offer for Yahoo public on Feb. 1, initially valuing Yahoo at about $44.6 billion, or $31 per share.

Microsoft has shown no public sign of sweetening its bid, now worth closer to $42 billion, and a Reuters poll shows that most analysts expect the software maker to prevail in the Yahoo takeover.

"Yahoo is positioned for accelerated financial growth -- we have a powerful consumer brand, a huge global audience and a highly profitable operating model," Yahoo Chief Executive Jerry Yang said in a statement.

Yahoo said its board is continuing to evaluate all of its strategic alternatives.

Yahoo also reaffirmed its financial forecasts for the first quarter and full-year 2008.