Their search business is worth as much as GOOG and their display business is worth as much as they paid for RightMedia? Oh gee. I don't see anything wrong with those comparables... Isn't Bernstein a value shop?

This is a great post. I don't agree with the thesis, though. There is no way YHOO should be worth more than Disney. Disney has real assets like rides. Yahoo has pretend assets like the Internet.

It's funny how these analysts make dumb valuations using industry sales and don't take into account company execution or market standing at all. Is the bottom 20% of market share worth as much as the top 50%? Has Yahoo shown any competence at all in any of these segments, other than slapping display advertising on other people's content? YHOO is highly overvalued right now, forget about going higher.

As for Kent, what disarmingly blithe ignorance about the internet! Rest assured Kent, Yahoo owns giant data centers full of servers that are worth far more than your precious rides. In fact, the funniest part is that Disney's IP is worth far more than their rides. Too bad Yahoo can't say the same for their servers.

Is possible that have an annexation between Microsoft and Yahoo? then is right time to put money to buy some Yahoo's stock?

Ajay,

A Disney ride is tangible. One can see it. It is concrete and has an intrinsic worth. The physical assets have high scrap value, creating a valuation lower bound.

However, Yahoo!'s "giant data centers full of servers" only have value as long people keep using the Internet.

Wow Kent, when do you think people are going to stop using the internet? You do realize that those servers are worth much more than some old, junky rides? Also, do you know that Disney's IP, something largely intangible and with no scrap value, is worth far more than the servers and rides put together? Valuing Disney by its rides is like valuing Google by gmail, a largely inconsequential though well-known offshoot of the company.

Ajay,

You keep saying Disney's Internet operations are worth more than their rides. Please explain what basis you have for this assertion. I can be convinced either way, though didn't Disney take a huge write-off for Infoseek?

No Kent, IP refers to Intellectual Property, which consists of the legal rights over all their movies and trademarks. This is the intangible stuff I was referring to earlier. I could care less about Disney's internet operations and have never referred to them once. What I said is that the copyrights and trademarks that make up their IP are worth far more than Yahoo's servers or some dinky old rides.

Ajay,

Thank you for the clarification. I think we're just having a semantic disupte. By rides I was referring to the value of the brand as well. Disney has a lot of product lines for this brand value to manifest itself. Yahoo, though, is a second tier search engine that can more cheaply be replicated than a Disney ride could.

Well, the brand is a secondary effect of their IP and brands generally have less value in a world flooded with information, value which continues to fall every year. That doesn't bode well for Disney or Yahoo. Yahoo's search engine actually has a lot of value and their market share is not easily replicated (certainly rides/theme parks are much easier to build), there's just nobody at Yahoo who can make anything out of that unrealized value. Over the medium-term, both companies are doomed but Disney is more sustainable as they actually have some IP.

Ajay, Thanks much for your interesting and informative comments about DIS/YHOO.