Seven To Ten

Microsoft Corp is set to cut the price of its best-selling Xbox 360 Pro model with the 20 gigabyte hard drive to $299 from $349. This will happen over the weekend before the video game industry’s biggest trade show, E3.

A price cut has been widely reported by popular video game blogs and technology Web sites. Many posted snapshots of flyers from various retailers advertising the $299 price. Microsoft refused to comment on this issue.

Microsoft last cut the price of the Xbox Pro in August, from $399 to $349, prior to the release of “Halo 3″ the following month.

A cut to $299 makes the Xbox 360 Pro $100 less than Sony Corp’s PlayStation 3 with a 40 gigabyte hard drive. Microsoft is locked in a three-way competition with Nintendo’s Wii and the PlayStation 3, which comes with a high-definition Blu-ray video player.

Price cuts from Nintendo and Sony seem unlikely. Nintendo’s $249 Wii is still in short supply at many retailers, while Sony has said it aims to turn its video game business profitable this year, making a cut hard to swallow.

Microsoft Corp. Chief Executive Steve Ballmer said Wednesday that his company’s $44 billion offer for Yahoo Inc. reflects Yahoo’s worth and the software maker has no plan to raise it.

“We know what Yahoo’s worth. $44 billion is a lot of money,” Ballmer said at a conference in Milan.

Ballmer said Microsoft is “prepared to move forward alone without Yahoo” if the bid doesn’t succeed. The cash and stock bid — valued at $44.6 billion, or $31 per share, when it was first made — is now worth about $43 billion, or $29.88 per share.

Without specifying a precise price, Internet pioneer Yahoo has maintained it is worth more to Microsoft even though its shares had fallen below $20 before the bid.

Google’s fabulous quarter earnings eased slowdown fears. Fans enjoyed the biggest one-day Google stock rise — up $89.72, or 20%, to $539.26 — in the past two years as the Net search giant blew past earnings targets by avoiding a big drop in U.S. paid click traffic during the first quarter of 2008.

Wall Street had been a little pessimistic going into the earnings report Thursday, after ComScore (SCOR) surveys showed a third straight month of negligible advertising traffic growth related to domestic searches. The reports helped confirm suspicions that the drag of decreased consumer spending was starting to spread beyond retail and housing to the tech sector.

But the fears of a revenue slump at Google were overestimated as the company saw strong international paid click sales, and the effects of higher prices. Google reported 20% growth in overall paid click revenue over year-ago levels, which was down from the 30% pace in the prior quarter, but well above the 1.8% U.S. rate ComScore reported for March. ComScore flagged the U.S. slowdown but did not capture the bigger picture, namely Google’s expansion overseas, which accounted for 51% of total sales, up from 47% a year ago.

Analysts who had braced for a slowdown going into the earnings report quickly turned bullish after Google’s earnings were released.

One element of Google’s big performance may reflect well on rival Yahoo. Though Google gained market share in the first quarter at Yahoo’s expense, the health of the sector seems to be intact. This should give Yahoo some added sway in its standoff with Microsoft over the $42 billion proposed merger.

More of the predatory snaring in Wall Street. The situation with Microsoft’s bid on Yahoo seems to be locked in a stalemate.

The software giant has announced that it may rescind its offer to buy Yahoo at $31 a share. Both sides cannot arrive at an agreeable price but it is clear Microsoft execs will not paying the $40 per share that Yahoo demanded.

The offer is not likely to be revoked, this is more of a tactic to put pressure on Yahoo’s board using “market signaling.” The message is that Yahoo’s stock would become vulnerable if Microsoft withdraws its bid. They are confident Yahoo has little alternative but to accept the deal.

The problem for Yahoo is the current offer significantly undervalues the company and they have rejected Microsoft’s overture in February. The deal has since decreased in value from $44.6 billion offer on Jan. 31 to the current $42 billion.

I believe it is best Yahoo accept the offer, holding out will only push the prices of both companies downwards. Unless Yahoo comes up with ingenious methods to boost earnings as revenue from advertisers is not expected to do well this year. No other giants want to enter the fray too, either because they cannot compete with the financial muscle of Microsoft or because they do not find Yahoo attractive enough.