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Investing in the top 3 US technology stocks – Microsoft, Yahoo and Google

It is like in the star wars – Yahoo (the republicans) and Microsoft (the OS empire) battle together whilst Google sits idly and watches the game. Microsoft Corp and Yahoo Inc have been holding separate talks with other potential media partners after their negotiations with each other broke down, sources familiar with the companies’ thinking said on Wednesday according to Reuters.
Microsoft — rebuffed this year in efforts to buy all of Yahoo and then just its search business — is talking about alternative deals with Time Warner Inc, which owns AOL, and News Corp, parent of MySpace, a source close to Microsoft said, but any negotiations remain in preliminary stages. Of course, its reaction came out of the repeated Yahoo refusals to give in to Microsoft’s investment proposal, although the software giant offered them US$ 33/share, a premium of more than 65% on the average price share before the announcements.
Meanwhile, talks have continued for months between Yahoo and Time Warner over a potential merger of AOL with Yahoo to create a more formidable advertising and media player, but they are no closer to a deal, a source close to the matter said.
Shares of Yahoo jumped as much as 9 percent on Wednesday after the Wall Street Journal reported that Microsoft, positioning for a new run for Yahoo’s search business, had in recent days approached media companies to join together on a deal that would effectively lead to Yahoo’s breakup.
Wall Street analysts said the latest news revived flagging hopes among some investors that Microsoft was still interested in investing in Yahoo. “The hopes that Microsoft would come back were getting crushed over the last 10 trading days,” Collins Stewart analyst Sandeep Aggarwal said.
Yahoo stock ended the day up 3.4 percent at $20.88. The stock had traded as low as $19.58 on Tuesday, near its level in late January before Microsoft made its unsolicited takeover bid for Yahoo, sending the stock above $30 by mid-February.
Microsoft shares fell 3.7 percent to $25.88 on Wednesday. In the prior day’s trading, Microsoft fell to two-year lows of $23.19, intraday, before recovering.
In the meanwhile the partnership between Google and Yahoo, which would allow the first to include in its results the searches on the 2nd, is going ahead as forecasted. The U.S. Justice Department has opened a formal antitrust investigation into a deal between Google and Yahoo to share some advertising revenue, The Washington Post reported on Wednesday.
The major gainer of all these movements remains Yahoo, whose shares remained since February 2008 above the US$ 28 level, 8 dollars above the previous levels, except for the last month where the effect of the Google partnership (which effectively gives Google direct access to the remaining market share of the search engines) is kicking in:

On the other hand, Google and Microsoft had much more stable shares:

The Microsoft and Google look from the investment perspective slightly undervalued, this is why most analysts recommend buying them. However, one must appreciate that their projects are already overdue for a while (Google did not bring anything new on the market, Microsoft neither), which means they don’t have anything in the pipeline…
Investing in technology shares is always riskier than the bulk of the market…

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