Money world

NEW YORK – Oil futures rose back above US$131 today, recovering from early losses as threats against Nigerian oil facilities led investors to at least temporarily set aside concerns about falling U.S. gas demand.

At the pump, meanwhile, gas prices in the United States rose to a new record over $3.94 a gallon.

Light, sweet crude for July delivery rose $2.18 to settle at $131.03 on the New York Mercantile Exchange, after spending the morning swinging between gains and losses. At its lows, oil was down nearly $3 a barrel, compounding a $3.34 drop in crude on Tuesday. It passed $135 for the first time last Thursday.

Although prices rebounded sharply today, investors are still contending with a growing belief that U.S. demand for gas is falling in response to prices that already average more than $4 in 11 states and the District of Columbia. The national average price of a gallon of regular gas in the United States rose 0.7 cent overnight to a new record of $3.944, according to AAA and the Oil Price Information Service.

Gas prices are likely to keep rising as long as crude prices don't collapse, analysts said. And that means prices will soon breach the psychologically important $4 level on a national basis.

"I can't see anything to stop it from going there," said Chip Hodge, energy portfolio manager at John Hancock Financial Securities in Boston.

Crude prices received a fresh boost from word that Nigerian rebel group the Movement for the Emancipation of the Niger Delta threatened attacks on oil installations beginning Thursday to mark the one-year anniversary of President Umaru Yar'Adua's inauguration. A weekend attack by the group on an oil facility cut about 130,000 barrels of the country's oil production, said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn., in a research note. News of disruptions in Nigeria, a major U.S. supplier, have helped push oil prices higher over the past year.

Oil investors also received mixed signals from the dollar, which rose against the euro, but fell against the Japanese yen and British pound. When the U.S. dollar declines, investors tend to buy commodities such as oil as a hedge against inflation faxless payday loans. But a stronger U.S. dollar makes oil more expensive to investors dealing in other currencies.

Many analysts believe the dollar's protracted decline has attracted an unprecedented level of speculative investing to the oil market, resulting in a doubling of oil prices in one year. When prices dip – as they did Tuesday and early this morning – many investors see a buying opportunity, rather than a weak market. The momentum generated by that buying can drive prices even higher.

Still, two new polls and revised U.S. Energy Department data added to the market's concerns that high prices are cutting American consumers' appetite for gasoline. Demand for gasoline fell 5.5 per cent last week compared to the same week last year, according to the weekly MasterCard SpendingPulse survey. On average, demand over the past four weeks is off 6.3 per cent compared to the same period last year, the survey found.

A separate CreditCards.com survey of about 1,000 people found that more than half have cut back on their driving due to high fuel prices. And the Energy Department numbers show demand for gasoline fell 1.1 per cent in March from a year ago, according to Olivier Jakob, an analyst with Petromatrix Gmbh in Switzerland; that's a change from preliminary data that suggested demand was roughly flat.

The findings jell with recent data from the Energy Department and Federal Highway Administration showing that American consumers are cutting back on driving, and with an AAA survey released before Memorial Day that found fewer people planned to drive over the long holiday weekend.

Data on Memorial Day weekend demand won't be available until next week.

Diesel also rose to a new record today, adding a cent to average $4.778 nationally, AAA and the Oil Price Information Service said. High diesel prices are pushing the prices of consumer goods and food higher.

In other Nymex trading, June gasoline futures rose 6.46 cents to settle at $3.4476 a gallon, and June heating oil futures rose 2.51 cents to settle at $3.8243 a gallon.

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LONDON–Belgian brewer InBev, the world's second-biggest by volume, is working on a $46 billion bid for Anheuser Busch, a Financial Times report said, boosting the U.S. brewer's stock price.

In the report on its Alphaville blog on the newspaper's website, the FT cited sources as saying the approach was expected to be pitched at $65 a share but while extensive work was being carried out InBev was "not about to push the button."

The report also said a financing package of $50 billion had been provisionally arranged through JPMorgan and Santander and that the bid had been discussed at an InBev board meeting on April 28 and at a meeting on Thursday.

InBev said it would not comment on the report. Anheuser-Busch was not immediately available but has a policy of not declining market rumours.

A JPMorgan spokeswoman declined to comment.

There have been recurrent rumours over a possible bid from InBev for its U.S. rival.

"Anheuser-Busch shares and options have been active throughout the week due to rumours of a takeover," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York.

Jan Meijer, a beverage sector analyst with Theodoor Gilissen in Amsterdam said the deal made sense.

"There is a clear takeover rationale and we've been waiting for this to happen," he said.

"InBev has had some problems in the United States and if there was a takeover they would be able to rely on the network of Anheuser-Busch guaranteed payday loans. It would fit in nicely with their exposure to emerging markets too."

InBev has a distribution deal wiyth Anheuser-Bush for its beers in the United States.

InBev was overtaken as the world's largest brewer by SAB Miller last year. Rivals Heineken and Carlsberg have also increased their size with their joint purchase of Scottish and Newcastle.

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OTTAWA–Bombardier Inc. has teamed up with Russia’s CJSC Transmashholding to develop a new high-tech locomotive that is more efficient and cheaper to operate, the companies said yesterday.

A new joint-venture company, to be located in Russia, will initially focus on Eastern European markets for the "new-generation" locomotives using asynchronous propulsion technology, they said.

The technology uses alternating current rather than direct current, which improves reliability and promotes dynamic brake regeneration, which puts energy back into the system, Bombardier said.

"This propulsion system is used elsewhere, but for Russia .. cash advance loans. this type of technology is an upgrade," Bombardier spokesperson David Slack said.

"These cars, typically rail cars, have a 30- to 40-year lifespan. So as operators replace these older cars, you’re seeing replacement typically from DC type of propulsion systems to AC."

Russia’s national railway expects to need 11,675 locomotive vehicles between 2008 and 2015.

It’s the third venture between Bombardier and Transmashholding, Russia’s top rolling stock firm.

Reuters, The Canadian Press

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OTTAWA – Foreign acquisitions of Canadian securities reached $5.3 billion in March, the highest level since March 2007.

Meanwhile, Canadian investors divested some foreign securities, all in debt instruments as Canadian holdings of foreign securities declined by $3.3 billion.

Non-resident investors added a net $5.9 billion of Canadian equities to their portfolios, the largest such outlay since May 2006.

Purchases of new Canadian equity were focused in the banking sector payday loans.

Sales of outstanding corporate shares reversed robust acquisitions over the last three months, and were concentrated in non-bank financial, energy and mining firms.

Canadian stock prices continued to show volatility in 2008, losing 1.7 per cent in March after a 3.3 per cent gain in February.

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Biovail Corp. is urging shareholders to spurn any slate of directors proposed by dissident founder and largest shareholder Eugene Melnyk and instead support the company’s new strategic plan.

The drug company has filed notice with securities regulators of an annual meeting June 25.

The document says shareholders should vote in favour of Biovail’s nominees, including newly appointed chief executive officer Bill Wells, because the company’s future is on the line.

Duncan Fulton, a spokesperson for Melnyk, said "all of his views will be clear in the circular that will be coming out shortly."

Meanwhile, a Biovail subsidiary, Biovail Pharmaceuticals Inc., has agreed to pay $24.6 million (U.S.) to settle criminal allegations in the United States related to the launch of the Cardizem LA heart drug in 2003.

The U.S. justice department had charged the unit made payments to induce purchasing or ordering of the drug, Reuters reported yesterday. If the settlement receives court approval, the subsidiary will plead guilty.

"Without this agreement, the company was at risk of being excluded from doing business with any health program sponsored by the U.S. federal government," parent Biovail said in a statement.

Meanwhile, Biovail also said its new plan, after a strategic review led by new CEO Wells, is to capitalize on the $70 billion global market for treatments targeting diseases such as Parkinson’s disease and multiple sclerosis.

The company, among many other woes, has been battling with Melnyk, the former chair and CEO, who disapproves of the company’s direction.

Last week, Melnyk wrote Biovail a letter blasting the hiring of Wells and the more than $3.4 million (Canadian) the company has promised Wells if Melnyk’s dissidents are elected and Wells is fired.

Melnyk, owner of the Ottawa Senators hockey team, holds an 11.7 per cent stake in the company and is involved in a family trust with about 7 per cent of the company freecreditreport. He stepped down at Biovail last year amid probes of accounting and reporting irregularities.

Yesterday, Biovail warned that, "if Mr. Melnyk does act and nominates dissident directors, Biovail shareholders will be faced with a crucial choice."

The choice is between "a return to a Melnyk-influenced company with all that entails, or a new way forward with a new, independent and experienced board, a new strategy driven by a proven business leader, and good prospects for sustainable long-term value for all shareholders … Your vote will determine the direction of Biovail."

Biovail has been mired in problems from 2002 and 2003, when investors filed a class action. That was settled for $138 million (U.S.) late last year.

Securities commissions in Canada and the United States are continuing their actions against Melnyk and other current and former executives.

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ST. LOUIS – Deere & Co., the world's biggest maker of farm machinery, said today its second-quarter profit rose 22 per cent, propelled by lofty crop prices that stoked global demand for its farm equipment despite a faltering U.S. economy.

But the Moline, Ill.-based company warned that rising costs of such raw materials as steel could cut into its earnings over coming months, sending its shares down eight per cent in morning trading. Deere also said it was seeing spot parts shortages "cropping up."

The maker of tractors and harvesting machinery said its profit for the period ended April 30 jumped to US$763.5 million, or $1.74 per share, up from $623.6 million, or $1.36 per share, during the same period last year. Deere's chief financial officer,

Deere said sales rose to $8.1 billion from $6.9 billion a year ago. The company said its sales outside North America soared 46 per cent during the quarter, dwarfing the six per cent jump of its sales in the U.S. and Canada.

Analysts surveyed by Thomson Financial had expected earnings of $1.75 per share on sales of $7.6 billion. The earnings estimates typically exclude one-time items.

Although Mike Mack, Deere's chief financial officer, told analysts during a conference call the sales and earnings were the company's highest ever for any quarter, Deere's shares slid as some analysts wondered aloud whether Deere had lost some momentum.

"Deere had really been leaping over earnings estimates for years, and that came to an end today," said Matt Collins, an analyst at St. Louis-based Edward Jones. "It was a good solid quarter, but investors were looking for more."

Deere has benefited from higher farm prices around the world that have been fuelled by increased ethanol production, and farmers benefiting from higher grain commodity prices are upgrading their equipment. Deere also is enjoying an export boom as the dollar's decline overseas makes its products cheaper in most markets beyond North America.

The company said it expects third-quarter and full-year sales to rise about 20 per cent, sticking with what some analysts consider its conservative forecast that earnings would be $550 million to $575 million during this quarter and about $2.2 billion for the full year free credit report instantly. Analysts surveyed by Thomson Financial were expecting earnings of $650 million for the third quarter, about $2.3 billion for the full year.

But Mack told analysts that the cost of raw materials were “racing ahead well beyond what we anticipated," and shortages of various parts and components "are cropping up from time to time" despite suppliers' best efforts.

For the first six months of the fiscal year, Deere said it earned $1.13 billion, or $2.56 per share, on $13.3 billion in sales. That compared with $862.3 million , or $1.88 per share, on $11.3 billion in sales a year earlier.

While crediting Deere with keeping its earnings guidance unchanged for the rest of the year, Collins said the company's tendency to be "pretty darn conservative here for the last couple of years" helped it consistently top Wall Street's estimates. Now, he said, "I think investors now are wondering if it's over."

Deere also makes construction and forestry equipment such as backhoes, excavators, riding mowers and leaf blowers.

"There's no doubt the ag business has the wind at its sales, but the rest of the company is fighting the housing recession here, a weakening U.S. economy that may or may not be in a recession," Collins said. "But the ag story is still very bullish globally, and everybody knows it. That's why (Deere's) stock had performed so well, and that's why expectations were running so high."

Deere's shares fell $7.53, or 8.4 per cent, to $82.66 in morning trading. They are still closer to the upper end of their 52-week range of $56.50 to $94.89.

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NEW YORK–Cablevision Systems Corp. is buying the Long Island-based newspaper Newsday from Tribune Co. in a deal valued at $650 million (all figures U.S.), the companies announced Monday.

Cablevision beat out media mogul Rupert Murdoch, CEO of News Corp., who withdrew his own $580 million bid on Saturday. New York Daily News owner Mortimer Zuckerman had also bid $580 million.

The deal brings Newsday back to local ownership on Long Island. Tribune had been seeking to sell Newsday to lighten an $8.2 billion debt load it took on last year when it went private in a deal orchestrated by real estate mogul Sam Zell.

Chicago-based Tribune will retain a three per cent stake in a joint venture to be formed containing Newsday as well as several related assets, including Newsday.com, some regional magazines and the free daily newspaper in New York City AmNewYork. Cablevision will hold the remaining 97 per cent.

The deal will be financed by $650 million in debt provided by Bank of America. Tribune will receive $612 million in cash, another $18 million in prepaid rent for leases of facilities that Newsday will continue to use, and its three per cent stake in the venture will be valued at $20 million.

Cablevision said owning Newsday will allow the company to better market the newspaper to the many households on Long Island that don't yet subscribe to it, while tapping Newsday's expertise in ad sales to help Cablevision's own cable TV advertising business.

Cablevision, which is controlled by the Dolan family, runs one of the most advanced cable TV operations in the industry and has about 3.1 million subscribers in the New York metro area. The company also owns Madison Square Garden, the NBA's New York Knicks, the NHL's New York Rangers.

"We admire Newsday's strong editorial voice and reputation for quality as well as its leadership in print and online journalism," Cablevision chairman Charles Dolan said in a statement.

"We are committed to maintaining Newsday's journalistic integrity and important position in the marketplace," Dolan said.

Some investors are concerned about Cablevision's entry into the newspaper business and its apparent appetite for acquisitions, particularly given the challenges facing newspapers as more advertisers go online.

Its shares fell 32 cents to $24.65 in early trading Monday.

Newsday is the second major acquisition in a week for Cablevision following its nearly $500 million purchase of Robert Redford's Sundance Channel cable network on May 7.

That deal didn't seem to ruffle investors as much given its fit into Cablevision's portfolio of cable networks including AMC, IFC, WE tv, and a local news cable channel called News 12.

Newsday is the 11-biggest newspaper in the United States, according to the latest figures from the Audit Bureau of Circulations, with 379,613 average paid weekday copies in the six-month period ending in March.

Tribune is a major newspaper company that also owns the Los Angeles Times and the Chicago Tribune pay day loans. It became an employee-owned company last year.

Zell had originally planned to keep the company's newspapers and TV stations largely intact while selling some other assets such as the Chicago Cubs baseball team.

He changed his mind about Newsday following a rapid deterioration in the company's newspaper business, which last week reported an 11 per cent decline in first-quarter revenues. It's not yet clear whether Zell intends to sell other Tribune media properties as well.

Cablevision said that with Newsday under its ownership it will be able to offer more diverse packages of advertising while also tapping Newsday's large variety of online content to offer interactive services to Cablevision's 2.3 million high-speed Internet customers.

Tribune had been the No. 2 newspaper publisher in the country prior to the Newsday sale, just head of the Sacramento, Calif.-based company McClatchy Co. With the Newsday sale McClatchy is sure to become No. 2, and Tribune No. 3, behind industry leader Gannett Co., which publishes USA Today.

Bank of America acted as the lead financial adviser to Cablevision while Citigroup advised Tribune.

16:29ET 12-05-08

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On Your Side is always up for a challenge, especially when a vulnerable consumer needs help.

The question: is a contract legal when it’s signed by an adult who can’t read and can barely print his name?

A mother wrote to us last January about her son, who is in his 30s and is developmentally delayed. He had leased a used car from a Toronto dealer in 2001.

Though he was illiterate, her son had gone to Young Drivers of Canada and tape-recorded the material. Then, he received his driver’s licence when allowed to complete the written test verbally.

He told his mother about the car lease only after he lost his job and couldn’t keep up the payments.

"As his legal guardian/ trustee, I would never have agreed to his entering into this transaction," she wrote to the car dealer in 2006, enclosing a letter from his doctor.

"This contract has been a financial hardship for my son. When I went through it with him, it became obvious to me that he did not understand what the commitment entailed.

"I realize he was able to use the car for five years, but this transaction should not have taken place. There was also a charge of $2,000 for a warranty he didn’t even know existed, therefore never used."

I sent the complaint to Stuart Schorr, a Chrysler Canada Inc. spokesperson in Windsor, who promised to investigate.

This led to a meeting between the mother and the manager of the dealership, which had ignored her previous appeals for help.

"He agreed to pay off the remainder of the loan, which was reduced to just under $1,000 if we paid within a specific period," she told me last month.

"Chrysler Canada has since stepped up to the plate and given my son a cheque that matched the amount the dealer gave to clear the debt.

"But more importantly, they wrote him an apology."

After two years, she’s glad to see this fight come to an end payday advance low fees. She signed a release form with the dealer, whose name is not being used.

"I’m positive it would not have happened without your intervention because you know the extensive, unsuccessful measures I have taken to get this resolved."

I thought MPPs could resolve such cases. But all she got from her Member of Provincial Parliament was a suggestion to go to the media.

The mother had gone to the Ontario Motor Vehicle Industry Council, which had told her to write to the dealer with evidence of her son’s disability.

When the dealer didn’t respond, she didn’t go back to vehicle council.

Deputy registrar Mary Jane South said she would make a note on the dealer’s file of what had happened.

The Consumer Protection Act can be used to rescind contracts that are considered "unconscionable," South added.

This means it’s against the law to make people sign contracts if they can’t reasonably protect their interests because of disability, ignorance, illiteracy or inability to understand the language.

The mother had consulted a lawyer, but felt she couldn’t afford a legal battle – especially when the cost would probably exceed the amount owing.

"Although the money is an issue, the atrocious treatment of my son is the real issue," she said in January.

"The finance company continues to hound him, making him fearful when the phone rings."

The collection calls have now stopped, thanks to a devoted mother who kept fighting for her son’s financial and emotional well-being.

You can reach Ellen Roseman at onyourside@thestar.ca.

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Frank Stronach’s saddle sores intensified at Magna Entertainment Corp. yesterday with another big loss, but he showed no sign of giving up on the debt-heavy horse-racing and gambling company.

Stronach, MEC’s hard-riding chair, chief executive officer, founder and controlling shareholder, told other shareholders that despite past mistakes, the company is on the right track with a focus on a debt reduction plan, and should pull away from its troubles in about two years.

"MEC is not a dead horse, I can assure you," Stronach said at the company’s annual meeting.

His confidence follows an earlier prediction that Aurora-based MEC would be debt-free by the end of 2006. He made the same promise for 2007 and 2008.

Instead, Magna Entertainment is still buckling under the weight of more than $500 million (U.S.) in debt and $60 million in annual interest payments despite major asset sales.

It got worse yesterday when the company reported a huge loss of $46.4 million in the first quarter, down from a profit of $2.4 million in the same period last year. The deep red ink in the first quarter is on top of a $306.5 million loss in the last three years.

In the latest quarter, MEC revenues tumbled 9 per cent to $230.9 million. The company attributed the loss and lower revenues to fewer racing days because of heavy rains, lower attendance and poor performance at the flagship Gulfstream operation in Florida.

The racing company repeated a familiar note from recent quarters that its "ability to continue as a going concern is in substantial doubt."

The first-quarter loss pulled down the firm’s sagging A shares on the Toronto Stock Exchange. The shares, which slipped into penny stock status a few months ago, dropped 8.5 cents (Canadian) to close at 39.5 cents.

Stronach told the meeting Magna Entertainment’s stock price is so low because some financial institutions believe the company won’t survive.

Although he shied away from predicting when the firm would post an annual profit, Stronach remained bullish about its prospects payday advance.

He noted his family invested $20 million in MEC last fall and could pump more into the company.

"Would I invest monies in a company which I think would fail?" Stronach asked later. "That wouldn’t make sense."

He also reminded investors that he has some experience in dealing with a company in serious trouble by recalling auto-parts giant Magna International’s brush with bankruptcy 18 years ago.

"A number of financial institutions thought we wouldn’t make it," said Stronach, who is still Magna’s chair. "Today, Magna is one of the premier companies in the global automobile industry with approximately $2 billion in cash on hand, no debt. So I know it can be done."

Stronach acknowledged the company’s drive to eliminate its onerous debt is slower than earlier predicted because of the downturn in the U.S. real estate market and a global credit crunch that’s lowering values and making borrowing more difficult.

"We’ve had offers (for racetracks and surrounding lands) but again there won’t be any fire sales," he insisted. The company is also considering joint ventures on developing racetrack projects, and chief financial officer Blake Tohana said it may have "announcements in the near future" about such arrangements or the sale of racetracks.

MEC is currently the largest owner of racetracks in North America, with 10 operations and accompanying gambling and broadcasting facilities. It wants to pare down the number of racetracks to five, Stronach says.

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SAN FRANCISCO – Yahoo shares fell more than 16 percent Monday as hopes for the once-dominant Internet icon dimmed following Microsoft’s withdrawal of a $47.5 billion (U.S.) takeover bid.

The sell-off wiped out nearly half the gain in Yahoo Inc.’s stock price since Microsoft Corp. made its initial offer on Jan. 31 in an effort to challenge online advertising and search leader Google Inc. The downturn left Yahoo’s market value about $14 billion below Microsoft’s last offer.

Last-ditch talks between Yahoo and Microsoft were fruitless, leading Microsoft to walk away from a deal Saturday.

In late-morning trading Monday, Yahoo shares shed $4.69, or 16.4 percent, to $23.98, below Friday’s close of $28.67, when investors were still hopeful about a deal.

Despite the backlash, analysts doubt Yahoo shares will fall back to their $19.18 pre-bid price, partly because some investors may still be holding out hope that the software maker will renew its takeover attempt if Yahoo continues to struggle.

Microsoft shares rose nearly 2 percent, or 57 cents, to $29.81. The shares had declined 10 percent to $29.24 since the bid, reflecting concerns that the proposed marriage would turn into a complicated mess that would enable Google to grow even stronger.

Shares in Google went up nearly 2 percent, or $11.15, to $592.44. The company not only averted a marriage it had fiercely objected but also began discussions that could lead to a long-term advertising partnership with Yahoo, a deal made more likely with Microsoft’s withdrawal. Any Google-Yahoo alliance, though, would likely face antitrust hurdles.

Yahoo Chief Executive Jerry Yang remained convinced that the company he started in a Silicon Valley trailer 14 years ago, was worth more than the money Microsoft had offered.

Now he may only have a few months to convince Wall Street that his rebuff of Microsoft’s takeover bid was a smart move – and if he can’t, analysts won’t be surprised if Yang is either replaced as CEO or forced to consider accepting a lower offer if Microsoft comes knocking at his door again.

"This squarely puts the pressure on Jerry Yang to deliver results and shareholder value," Standard & Poor’s equity analyst Scott Kessler said. "You are going to see a lot of shareholders just throwing in the towel because they are going to realize it’s going to take awhile for the stock to get back to where it was Friday.”

In a posting Sunday night on Yahoo’s blog, Yang welcomed the added pressure. "We know the spotlight will probably stay on us for a while," Yang wrote. "That’s fine – we have a clear path ahead and momentum to build on." He added the Microsoft saga had turned Yahoo into "a stronger, more focused company with an even greater sense of purpose.”

Yahoo shares finished last week at $28.67, slightly less than the $29.40 per share that Microsoft was offering before Chief Executive Steve Ballmer agreed to raise the offer to $33 per share in a last-ditch effort to get a deal done.

Disillusioned shareholders are bound to question whether the rejection of Microsoft’s sweetened offer was driven more by emotion and ego than sound business sense.

"Clearly there’s frustration," said Darren Chervitz, co-manager of the Jacob Internet Fund, which owns Yahoo stock. "I am not even sure if Yahoo cares about its shareholders because they didn’t show much regard for shareholders’ best interests in this process.”

In his blog posting, Yang defended the board’s handling of the Microsoft bid and branded some of the criticism as "a lot of nonsense and misinformation.”

"We clearly indicated to Microsoft that we were open to a transaction but only if it were on terms that fully recognized the value of Yahoo and was in the best interests of our stockholders,” Yang wrote.

Accompanied by fellow Yahoo co-founder David Filo, Yang flew to Seattle on Saturday to inform Ballmer that the company wouldn’t sell for less than $37 per share – a price that Yahoo’s stock hasn’t reached since January 2006.

To win the faith of shareholders, Yang will have to execute a turnaround plan that he began drawing up nearly a year ago after he replaced Terry Semel as CEO amid shareholder angst about the company’s financial malaise.

Ballmer also will be under the gun to prove he can come up with another way to challenge Google’s dominance of the Internet’s lucrative search and advertising markets.

The unsolicited bid was widely seen as Ballmer’s admission that Microsoft needed Yahoo’s help to upgrade its unprofitable Internet division.

Analysts now expect Ballmer to use the money he had earmarked for the Yahoo acquisition to explore other possible deals with large Internet companies like Time Warner Inc.’s AOL and News Corp.’s MySpace and promising startups like Facebook Inc faxless payday loan. and LinkedIn Corp. Microsoft already owns a 1.6 percent in Facebook, the second-largest social network behind MySpace.

But Ballmer is unlikely to be under as much duress as Yang, 39, who has promised that Yahoo’s development of a more sophisticated and far-flung Internet advertising platform will produce net revenue growth of at least 25 percent in 2009 and 2010.

That would be a dramatic improvement, considering that Yahoo’s revenue rose by 12 percent last year and is expected to grow at about the same pace this year.

Analysts, though, are skeptical about whether Yahoo will be able to hit those targets, raising the chances for a shareholder rebellion if the company stumbles in the next two quarters – a distinct possibility if advertisers curtail spending in a shaky U.S. economy, as many analysts fear.

To help boost its short-term profits and its stock price, Yahoo is widely expected to form a long-term advertising partnership with Google.

Although the final details are still being ironed out, Yahoo wants to hire Google to place some of the text-based ads that appear alongside the search results on its Web site. It’s a task that Google already handles for scores of Web sites, including AOL and Ask.com.

But turning to Google for help would be a humbling step for Yahoo after spending more than $2 billion to acquire and build its own technology.

An alliance between Google and Yahoo also would face antitrust hurdles because the two companies combined control more than 80 percent of the U.S. search advertising market.

Yahoo also has been exploring a possible merger with AOL’s Internet operations but may now have to contend with a competing offer from Microsoft.

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