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Expedia IPO suggests there's gold in an MS break-up

Go figure - if you can sell one bit for this much, how long can you keep the stockholders from wanting more?

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Microsoft's Expedia IPO closed at $53 yesterday, up from the $14 offer price which had been hiked from the original $10 to $12. It marks a rally in IPOs and shows underlying strength in the travel sector in particular. At the close, the gain was 277 per cent, but at one point, it reached 471 per cent. Microsoft sold just 15 per cent and made $72.8 million for Expedia. Expedia had a market value of $535 million when trading started yesterday, $1,482 million at the end of the day. Expedia has a cumulated loss of $92 million, with revenue in the last quarter being $15 million. There is already serious competition in the travel market leader, with Sabre Holdings/Travelocity (up 7.5 per cent yesterday, on the news) that is about to acquire Preview Travel, which itself rose 17 per cent yesterday. Travelocity is spending $100 million on its website. Sabre is a member of the ProComp anti-Microsoft lobby and has expressed concern about the association between IE and Expedia. There was no mention in the revised prospectus of the legal problems that Microsoft faces, but in view of the publicity, it is unlikely that any private action against Microsoft would be successful for not disclosing this. The success of the offer gives some pointers as to market enthusiasm for how pieces of Microsoft might be regarded, although the sheer scale of any Microsoft breakup would make such a premium most unlikely. Nevertheless, Microsoft investors would probably do very well on break-up, especially if Microsoft itself decided to do this without any compulsion from the courts. It would be a bold step, but it could avoid ignominy. The message from this IPO for Microsoft shareholders must be that there is more value in break-up than in Microsoft itself, especially in view of the drifting share price over recent months. Expedia CEO Richard Barton was allowed to convert his unvested Microsoft shares to Expedia shares, giving him a gain on the day of $40 million. Lucky for some. ®

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