Is the Tumblr Deal Enough to Turn Yahoo! Inc. (YHOO) Around?

Other stocks within the technology sector can offer more to investors looking to receive income from their stocks. For example, software king Microsoft Corporation (NASDAQ:MSFT) provides a compelling 2.6% dividend yield at recent prices, which compares favorably to the 2% yield available on the S&P 500. Moreover, Microsoft Corporation (NASDAQ:MSFT) is performing better than Yahoo!. Last year, Microsoft booked adjusted diluted earnings per share of $2.73, along with 5% revenue growth.

If income isn’t a requirement for your tech holdings, there still seem to be better alternatives available than Yahoo!. For example, Chinese company Baidu.com, Inc. (NASDAQ:BIDU) and Yahoo! have a similarity in that they are both heavily involved in search. Baidu.com, Inc. (NASDAQ:BIDU) is sometimes referred to as the Google of China, because it is the main search engine there.

Most importantly, Baidu is reporting high growth. Baidu recently reported its fiscal-first quarter earnings, and revealed that revenue had grown 40% from the same period one year ago. Baidu operates its namesake search engine in China, where it has the playing field all to itself. That means that a country of one billion people with a rapidly developing middle class is ripe for Baidu’s picking.

The Foolish bottom line

Yahoo!’s acquisition of Tumblr is certainly an exciting development, but whether the deal will prove beneficial to shareholders is another matter entirely. Technology firms have a long history of over-paying for promising acquisitions that don’t pan out, and Yahoo! is no exception (consider its acquisition of Flickr). Only time will tell if Yahoo!’s shareholders are better off from the deal.

As it stands today, it seems that investors have better technology companies to choose from than Yahoo!. Income investors would be better served considering Microsoft, while growth investors will find much more to like with Baidu’s recent operating results.

The article Is the Tumblr Deal Enough to Turn Yahoo! Around? originally appeared on Fool.com.

Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Baidu. The Motley Fool owns shares of Baidu and Microsoft. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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