Wall Street loves the Internet, and nothing gets the market's juices flowing like a whopping deal involving heavyweight online names. In the eyes of most investors, Yahoo's US$5.7 billion purchase of Broadcast.com has gotten the second quarter going on a suitably upbeat note.
Enthusiasm for this and a pair of other big-ticket mergers helped traders shake off another drop in bond prices (and fears of higher inflation), not to mention a lingering sense of fatigue from blue-chip stocks sprinting to a record close earlier in the week.
Share prices were cautiously heading north in mid-afternoon trading. The Dow Jones Industrial Average rose 7.22 points to 9793.38, and the Wired Index was 6.27 higher at 636.40. The Nasdaq Composite Index gained 15.10 to 2476.50, and the S&P 500 was up 2.39 at 1288.76.
Broadcast.com (BCST) advanced $10.06 to $128.25 as its acquisition, the object of much speculation in recent days, became official. Yahoo (YHOO) was $6.81 higher at $175.19.
The deal values Broadcast.com at about $130 a share, or a 10 percent premium over its closing price Wednesday. Broadcast.com shareholders will receive 0.77 of a Yahoo share for each Broadcast stock in their possession. The two companies expect the deal to close either this summer or fall.
"It certainly demonstrates that broadband is the wave of the future," said Art Russell, an analyst with the Edward Jones brokerage. "Yahoo is filling in the pieces."
That's putting it mildly. By scooping up Broadcast.com, Yahoo is positioning itself to be the leading provider of audio and video content on the Web. It's getting a head start on rivals as broadband Net access gradually makes it way out of the workplace and into homes.
"We consider the deal highly strategic," said Paul Noglows, an analyst with Hambrecht & Quist. He noted that purchasing Broadcast.com not only will make Yahoo "the leading aggregator and distributor of streaming audio and video on the Internet," but also will help it play "a defining role" in shaping future broadband content.
With streaming media in the spotlight, RealNetworks (RNWK) attracted considerable attention from traders, climbing 21 percent to $148.38. The force behind RealAudio and RealVideo received a boost as well from the "buy" rating handed out by Lehman Brothers and Thomas Weisel Partners.
In other market action, Atlantic Richfield (ARC) eased 75 cents to $72.38 after agreeing to be purchased by BP Amoco for nearly $27 billion, creating the largest oil producer in the United States. Arco's management now will fully relinquish control of the company to its new owner, which expects to cut about 2,000 jobs from the newly merged work force of 115,000. BP Amoco (BPA) was down $5.56 at $95.44.
Similarly, CBS (CBS) slid $1.31 to $39.50 after confirming it will acquire TV-syndication firm King World Productions (KWP) for more than $2.5 billion. King World, the producer of "Jeopardy," was 19 cents higher at $30.75.
A nasty cat-fight, meanwhile, over in telecom. Cable & Wireless is suing MCI WorldCom for allegedly having violated the terms of its agreement to sell C&W its complete Internet operations. MCI is charged with failing to "effectively" hand over its online customers, thus hindering C&W's ability to make full use of its acquisition.
C&W (CWP) slipped 19 cents to $36.75, while MCI (WCOM) was unchanged at $88.75.
