Is Microsoft Corp. (NASDAQ: MSFT) still a good investment? After the ten-bagger days of the 1990s, it's hard to get excited about a 30 year-old software company that is getting upstaged in the media these days by more popular names like Google, Inc. (NASDAQ: GOOG) and Apple, Inc. (NASDAQ: AAPL). Microsoft has attempted to stay in the game this year (at least from a media perspective) by acquiring aQuantive, its largest-ever purchase.

Add to that the incredible sales of Halo 3 since its debut in late September and there are many bright spots on Microsoft's armor. However, Windows Vista uptake has been slower than some forecast, and that's not the whole negative story. Although its games division is peaking right now, there are years of hard work ahead to make that area consistently profitable and growing. So, again -- why buy Microsoft?

Microsoft's corporate products get little attention from the mainstream media these days, but its Office and Exchange software franchises continue to be the lifeblood of many global companies. Sure, Google is trying to nip away at those services with semi-comparable web-based offerings, but that effort will limit itself before becoming a large threat. As noted by 24/7 Wall St., newer products are on tap, and Goldman Sachs strongly hints at a bright future for the company, at least in the short term.

Time Warner Inc. (NYSE: TWX) has received the required clearance to acquire Tacoda Inc., a company that targets ads based on a web user's browsing habits. There is no issue with this deal clearing. Time Warner could acquire 100 companies like this and the Federal Trade Commission and Department of Justice would rubber stamp every single deal.

It is almost funny that the two recent big media and online buys -- Microsoft Corp. (NASDAQ: MSFT) has bought aQuantive and Google Inc. (NASDAQ: GOOG) has acquired DoubleClick -- are still being reviewed by some. Those purchases cannot be reversed.

Back to Time Warner and AOL: AOL has found itself in a predicament over backing away from prior estimates for "faster than market growth" for its search-related advertising sales. But if you look back at last month's comScore numbers, as we pointed out earlier, you will realize that AOL has a massive reach through its Advertising.com division. Any such deal that can incrementally ad both new advertising groups and that can reach more people will be an opportunity for incredible advertising leverage.

It's hard to cover a company like Time Warner one unit at a time. Many in the media still want to only cover negative aspects of the company, and considering it is a shot at bashing a competitor it is hard to blame them. Just last week, AOL launched Truveo. AOL may be its own entity next year if my thought process is accurate and the clouds drift the way they have historically. This will allow it to keep adding small strategic plays that can help grow both AOL and the other Time Warner brands. That will be a winning recipe for the company, and should be a winning recipe for shareholders.

Jon Ogg is a partner at 24/7 Wall St, LLC. He produces the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.

The wait is over -- Microsoft Corp. (NASDAQ: MSFT) has finally completed the purchase of advertising company aQuantive as of this week. Now that the $6 billion purchase is over and done, it's time for the results to be under the microscope: How long will it take Microsoft to use this new muscle against powerful foe Google (NASDAQ: GOOG)? Or let's rephrase that -- will it even matter?

As of Monday, aQuantive was officially a "Microsoft wholly-owned subsidiary" and the board disbanded. Oddly, this deal has received a fair amount of attention, but not really enough since it is the largest-ever acquisition by the world's largest software company. Is Redmond placing a bet on its future here outside of operating systems and office productivity software? That seems fairly clear.

Will internet advertising outside of Google's successful and unobtrusive model work wonders like all these recent advertising acquisitions make it appear? The further infiltration of advertising into our online lives will only spur many forms to obliterate it. Firefox, a worthy web browser alternative to Microsoft's Internet Explorer, already has tools like AdBlock Plus and FlashBlock that can almost completely eliminate online advertising. Will Google's DoubleClick purchase and Microsoft's aQuantive buy be busts due to consumer backlash against so much advertising on the internet? We'll check back in 2010.

In my book about Baby Boomer investing I highlight what I feel are the five major growth industries going forward. The industries are health care, alternative energy, technology, communications and lifestyle. I also mention 42 companies within those industries that could be the leaders, the game changers. Since the book has been published, five of the 42 stocks I wrote about are being acquired!

The latest one to go is Checkfree (NASDAQ: CKFR). Fiserve (NASDAQ: FISV) has announced its $4.4 billion bid. Checkfree made our banking-transactional life much easier. The other four that will be part of larger companies are Opsware (NASDAQ: OPSW), Color Kinetics (NASDAQ: CLRK), aQuantive (NASDAQ: AQNT) and Kyphon (NASDAQ: KYPH). Other than aQuantive, the other three were also part of my Top 25 stocks for the NEXT 25 years series.

As the 42 companies are down to 37, it causes some reflection for the future. Great, emerging companies will always be on the radar screen of larger, well-financed suitors. If growth cannot be internally generated through research and development efforts, larger companies will need to acquire growth and next generation products or technology. With interest rates still historically low, the borrowing necessary to buy these young, up-and-comers is not a significant issue. Investors will reward mature companies if they acquire intelligently and strategically.

Google's (NASDAQ: GOOG) deal to buy DoubleClick seemed certain to get a government review. Google is too dominant in text advertising and DoubeClick too big in display ad serving and targeting. Of course, competitors like Microsoft (NASDAQ: MSFT) said it would put too much online advertising power in one set of hands.

Now the eyes of the Federal Trade Commission have turned on Microsoft and Yahoo! (NASDAQ: YHOO). Their respective deals to buy aQuantive (NASDAQ: AQNT) and Right Media are going to get the antitrust once over, at the very least.

Right now, the FTC's review of the Google deal is more formal [subscription required] than the other two, but that could change. More than one industry association has asked that the government to take a close look at all three transactions.

Although the odds are that none of the M&A activity that is designed to bring advertising targeting under the umbrellas of big web portals will be stopped, perhaps the FTC work will be more than a formality. When these three transactions are added to AOL's ownership of Advertising.com, the concentration of private data about individual's web habits will be in very few corporate hands.

Perhaps there should be a divide between those that have the information and those who have the advertising inventory. But, that would be in a too perfect world.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Jim Cramer proposing on CNBC's Mad Money that Yahoo! (NASDAQ: YHOO) and eBay (NASDAQ: EBAY) should get together and merge. He is calling for this because the growth is slowing for both companies, and a merger could jump start it. Cramer contends that companies with slower growth have to do something to get their sizzle back. Cramer said that Microsoft (NASDAQ: MSFT) was reportedly in talks to buy Yahoo! and that the aQuantive (NASDAQ: AQNT) buyout signals it is willing to do deals. If these companies had better areas to invest in they wouldn't be propping shares up with buybacks. A merger would allow Yahoo!'s massive users to use Skype and PayPal to buy goods. Cramer thinks this would bring back growth, and would finally get Semel out of Yahoo!

This is just after Yahoo!'s chief technology officer bailed out of the company today. As Cramer is long Yahoo! in his charitable trust and as he's been touting ideas for something like this, this "call to merge" is hardly a surprise to me or to others. The market caps are very similar, although eBay is the larger company. You should know that if you are playing these stocks based only on Cramer's comments, then know that you are buying what is probably his third or fourth round of recommendations calling for this. This is the first time he made an entire segment on this would-be merger, but this is best defined as "re-information."

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Was Microsoft Corp. (NASDAQ: MSFT) looking for a complete toolkit to compete with Google Inc. (NASDAQ: GOOG) on the internet advertising front? The company doesn't need Yahoo! Inc. (NASDAQ: YHOO) to get there. As Doug noted earlier, Microsoft now says it has "all the pieces" it needs to build a successful ad business -- without even giving a shout out to Yahoo! This is true -- Microsoft has used a little of its war chest to make several acquisitions and partnerships that it will use as the basis for quite a large assault in the world of internet advertising (from the ground up, in a manner of speaking).

The purchase of aQuantive Inc. (NASDAQ: AQNT) was the final arrow in Microsoft's quiver that gives the software giant everything it needs to take on Google successfully -- and all of it was at a price premium to acquiring Yahoo! -- something Microsoft easily knows. Buying Yahoo! would have given it instant customers, but Yahoo!'s advertising strategy is still a little shaky -- and aQuantive's was not. In other words, Microsoft was looking for the bargain here. It found all the bargains it could.

Did Microsoft need the "instant scale" it would have received from an acquisition like Yahoo!? Some analysts still believe that, although perhaps Microsoft saw that its immense resources could be best used to grow its own scale organically, rather than just to buy it for instant gratification. This news, though, dampens the outlook for Yahoo! terribly, as the company now is on its own to compete against Google for ad dollars (which it has not being that successful at), as well as the immense capability of Microsoft -- which is its second-largest competitor. YHOO shareholders, get out that rabbit's foot and start rubbing now.

Microsoft (NASDAQ: MSFT) made it clear, once and for all, that it does not need Yahoo! (NASDAQ: YHOO) to be successful with its internet advertising strategy. Microsoft's Yusuf Mehdi, the head of ad strategy at the world's largest software company said that [subscription] its current internet products plus customers and tech it will get from buying aQuantive (NASDAQ: AQNT) round out the arsenal that it needs to compete for online advertising.

The announcement leaves Yahoo! in a a difficult position. With Google's (NASDAQ: GOOG) purchase of DoubleClick, Yahoo! does not have a large presence in the internet ad serving business. Its share of the search market is still dropping according to Hitwise, and there is still little evidence that the company's Panama advertising search product is bringing in a large slug of new revenue. Yahoo!'s top line only grew about 10% in the last quarter.

Yahoo!'s shares jumped from $28 to over $33 when the press published reports that Microsoft was interested in buying the web portal. But, the stock has sold off to $28.60 since then. Investors are likely to do very little with the shares until Yahoo!'s next quarterly earnings report. If it is weak, and Panama has not produced a quarter of solid results, it will be a long year for Yahoo! shareholders.

Douglas A. McIntyre is a partner at 24/7 Wall St.

I have been involved in the investment industry for almost 29 years. The first 13 I spent with Dean Witter Reynolds (now Morgan Stanley (NYSE: MS)) and the last 16 years as a senior partner with two investment banking-research boutique firms. I have worked with over 150 stock research analysts just on the sell-side and another 200 plus on the buy side. Categorically, the title research analyst does not make an analyst a rocket scientist. There are a few myths that need to be explored and more importantly, explained.

There are two and only two types of analysts in the stock research world. 1) those that "get it" and are ahead of their particular industry and can pretty accurately predict what is "going to happen" within the sector they follow, and 2) analysts that are strictly reporters of the news affecting their sectors and do not think outside the box.

Case in point: Stewart Barry of ThinkEquity Partners (my alma mater) has been absolutely brilliant in the internet services sector. Forward thinking, cutting edge research and the ability to separate the news from the noise. Stewart nailed the strong possibilities of Aquantive (NASDAQ: AQNT) and 24/7 Real Media (NASDAQ: TFSM) being acquired. Both are getting acquired. What Stewart nailed wasn't the rumor mill about these two -- he was dead-right on the fundamental issues affecting Microsoft (NASDAQ: MSFT) and Google (NASDAQ: GOOG) and how AQNT, TFSM, and DoubleClick could fill those needs. Stewart Barry is an all-star analyst because he is ahead of the curve and ahead of his peer group. Stewart has reiterated his buy rating on ValueClick (NASDAQ: VCLK) not because it may be acquired, but because the basic fundamentals are superior and the company's growth rate is accelerating.

As Tom reported on last week, Microsoft Corp.'s (NASDAQ: MSFT) purchase of aQuantive and Google Inc's (NASDAQ: GOOG) recent purchase of DoubleClick could make one think that the dot-com buying bubble is back.

Together, these two acquisitions represent a little over $9 billion in an advertising medium that has grown rapidly in the last five years. Online advertising has swelled to become a major medium that is, increasingly, taking ad dollars out of traditional media streams like television, print and radio.

Was Microsoft's aQuantive purchase a desperate effort for the software giant to play "catch up" to Google in the red-hot Internet advertising arena? While I doubt that it was a move of desperation, it does signal that Microsoft feels -- like Google -- that the ad world hasn't seen anything like the near-future potential of the Internet in terms of return on ad spend (ROAS). Unlike TV, radio and newspaper advertising, the sheer possibility of tracking customer purchases, tastes, clicks and finely-woven customer behavior detail has never before been as available as it is now.

Google saw the writing on the wall, so to speak, long before the others, and its vision has been rewarded by making it the major player in this new universe. Microsoft has professed that it will be concentrating more and more in this arena to supplement its income from software. In other words, it wants a piece of the pie Google is currently enjoying (along with Yahoo! and AOL). Although some MSFT shareholders fear that Microsoft overpaid for aQuantive (look at the company's fundamentals among other things -- and the share premium that was paid for the company), I'm not of that mind. Was the $6 billion purchase a chess move or a "me too" move from Ole' Softie? My guess? A chess move -- even though it does not appear that way to some.

(Disclosure: I own MSFT shares as of 5-22-07)

MOST NOTEWORTHY: GlaxoSmithKline plc (GSK), SanDisk Corp (SNDK), Lockheed Martin Corp (LMT) and aQuantive, Inc (AQNT) were today's noteworthy downgrades:

• Deutsche Bank and ABN Amro cut GlaxoSmithKline (NYSE: GSK) to Hold from Buy following the New England Journal of Medicine warnings from Avandia.

• Merrill Lynch cut SanDisk (NASDAQ: SNDK) to Neutral from Buy due to concerns that oversupply in the industry will extend through next quarter.

• Cowen downgraded shares of Lockheed Martin (NYSE: LMT) to Neutral from Outperform based on slower 2007-2008 EPS growth and less cash redeployment upside than General Dynamics Corp (GD) and Raytheon Co (RTN).

• UBS downgraded aQuantive (NASDAQ: AQNT) to Neutral from Buy and RBC Capital cut shares to Sector Perform from Outperform after the Microsoft (MSFT) acquisition...

OTHER DOWNGRADES:

• Piper Jaffray downgraded Cytyc Corp (NASDAQ: CYTC) To Market Perform from Outperform.

• NetBank, Inc (NASDAQ: NTBK) was downgraded to Underperform from Market Perform at Friedman Billings.

• Merrill Lynch downgraded shares of Aeropostale, Inc (NYSE: ARO) to Neutral from Buy.

• AG Edwards downgraded BHP Billiton Ltd (NYSE: BHP) to Hold from Buy.

• Gabelli downgraded shares of Alltel Corp (NYSE: AT) to Hold from Buy.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: ValueClick, Inc (VCLK), aQuantive, Inc (AQNT), Cigna Corp (CI), Warner Music Group (WMG), Clear Channel Communications, Inc (CCU) and Medtronic, Inc (MDT) were today's more notable downgrades:

• Baird cut ValueClick Inc (NASDAQ: VCLK) to Neutral from Outperform, citing the FTC inquiry.

• aQuantive (NASDAQ: AQNT) was downgraded to Sell from Buy after the company was acquired by Microsoft (MSFT) and because aQuantive no longer trades on fundamentals. Kaufman and Gabelli also cut aQuantive to Hold from Buy.

• Cigna (NYSE: CI) was downgraded at Prudential to Neutral from Overweight on valuation.

• Warner Music Group's (NYSE: WMG) downgrade to Sell from Neutral at Pali Research was based on the lower industry outlook, which Pali believes revenues are likely to fall at least 10% for the industry in 2007, along with the company's release schedule.

• Bear Stearns downgraded Clear Channel Communications (NYSE: CCU) to Peer Perform from Outperform on the acceptance of the higher bid.

• Medtronic Inc (NYSE: MDT) was downgraded to Underweight from Equal Weight at Morgan Stanley...

OTHER DOWNGRADES:

• Georgia Gulf Corp (NYSE: GGC) was downgraded to Sell from Hold at Matrix USA.

• Stifel cut Core Laboratories (NYSE: CLB) to Hold from Buy.

• UBS downgraded Intuit Inc (NASDAQ: INTU) to Neutral from Buy.

• Occidental Petroleum Corp (NYSE: OXY) was removed from Goldman's Conviction Buy list.

• Friedman Billings downgraded downgraded CapitalSource, Inc (NYSE: CSE) and Countrywide Financial Corp (NYSE: CFC) to Market Perform from Outperform.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: Microsoft (MSFT), Sony Corp (SNE), Adobe Systems Inc (ADBE) and the cable sector were today's noteworthy upgrades:

• DA Davidson upgraded Microsoft Corp (NASDAQ: MSFT) to Buy from Neutral, as the firm is no longer concerned the tech giant will acquire Yahoo! (YHOO) following the recent acquisition of aQuantive, Inc (AQNT).

• HSBC upgraded shares of Sony Corp (NYSE: SNE) to Overweight from Neutral to reflect improving profitability at Sony's electronics business.

• Pacific Crest upgraded Adobe Systems (NASDAQ: ADBE) to Outperform from Sector Perform to reflect the strong CS3 outlook and growth in new areas such as mobile.

• Citigroup upgraded their cable sector view as they continue believe cap ex will remain at elevated levels at a time when the marginal cable investor is likely more willing to forego near-term FCF growth to achieve robust EBITDA growth. Along with the raised sector view, Citigroup upgraded Time Warner Cable (NYSE: TWC) and Comcast Corp (NASDAQ: CMCSA) to Buy from Hold. The firm believes investors can benefit from owning both EchoStar Communications (DISH) and cable equities...

OTHER UPGRADES:

• Bear Stearns upgraded Tiffany & Co (NYSE: TIF) to Outperform from Peer Perform.

• RBC Capital raised American Eagle Outfitters (NYSE: AEO) to Outperform from Sector Perform.

• Sepracor Inc (NASDAQ: SEPR) was raised to Neutral from Underperform at Cowen.

• ING upgraded BP plc (NYSE: BP) to Buy from Hold.

• Valero Energy Corp (NYSE: VLO) was added to Goldman's Conviction Buy list.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Recent mergers between traditional and online advertising firms suggest a deep flaw in the advertising business -- a flaw exposed by Google Inc. (NASDAQ: GOOG)'s evidently unstoppable technology edge. How so? While traditional advertisers deliver open-loop systems, Google delivers a closed-loop solution.

The reason that online advertising is growing is because it offers a closed-loop solution -- a notion that I first described in Net Profit. By contrast, TV and newspaper advertising is an open-loop system -- one in which a company pays to reach a viewer without getting any specific feedback on whether the advertising money leads to increased sales.

By contrast, a closed-loop solution measures the specific response to the advertising dollar -- tracking whether a user clicks on an ad and whether that clicking leads to an online purchase. I call it a solution because it lets the advertiser measure the extent to which advertising expense leads to increased sales. The closed-loop solution's ability to measure return on advertising is an enormous breakthrough for advertisers.

As everybody knows, Google's algorithm for linking tiny text advertising to Internet search has boosted the online advertising business. According to the Wall Street Journal [subscription required], those search-related ads now account for 40% of the $20 billion U.S. internet ad market. And internet-ad sales overall have nearly tripled in the past five years -- to 7% of the $286 billion overall U.S. ad market -- up from 3% in 2002.

Moreover, Google's success is coming out of the hide of TV and newspaper advertisers. For example, in 2006 General Motors Corp. (NYSE: GM) cut its TV ad spending 15% to $1.38 billion and reduced its newspaper advertising 60% to $232.1 million. Meanwhile, GM's online spending rose 16% to $130 million.

Back in the 1990s, a group of online ad players -- like Mediaplex, DoubleClick and 24/7 -- sported multibillion dollar market caps. Of course, it did not take long for the bubble to burst.

Funny enough, the conventional wisdom was that we would never see these kinds of valuations again.

Well, never say never.

Microsoft Corp. (NASDAQ: MSFT) is going to pay $6 billion for aQuantive Inc. (NASDAQ: AQNT) and Google Inc. (NASDAQ: GOOG) is buying DoubleClick for $3.1 billion.

We are going back to the future. So what does this all mean?

I had a chance to interview Dana Ghavami, who is the CEO of CheckM8:

How about some background on your company?

CheckM8 has been in the business of online ad technologies for seven years. We service many leading online publishers and are backed by leading institutional investors, including SoftBank and CCI of Dentsu. The company is US-based, with offices in New York and R&D facilities in Israel, in addition to sales and support offices in the UK, Spain, and Sweden. Customers include leading online publishers: Business Week, Nielsen, Sports Illustrated, Terra Networks, Washington Post, amongst many others. Our first product, called the Rich Media Manager, released four years ago, allows publishers to produce and manage premium ad formats for maximum-CPM opportunities online. Our flagship AdVantage product released two years ago allows publishers to manage their end-to-end ad, inventory, rich media needs in a single platform.

Does the Microsoft deal for aQuantive make sense in light of the high valuation?

We're looking at an industry that's going to drive $60B of advertising by 2010 and be the future medium of consumers and advertisers. So, if I had a major stake (like Microsoft) and the competition (Google) was one step ahead, I'd pull that kind of trigger too in hopes of having one of the seats at the small and priceless roundtable in the not-so distant future. These companies are looking at making multiples of what they're paying today in the foreseeable future.

Do you think we'll see more consolidation in the space, such as with ValueClick and private companies?

Very likely. However, the big media companies are increasingly looking for integrity and independence with their digital ad infrastructure and rapidly running out of options. At some point, there won't be enough established
and proven solutions to manage their critical needs and building their own solutions is not a practical option. Therefore, the need for reputable and trustworthy independent solutions will continue to exist.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.