The Zacks Analyst Blog Highlights: Yahoo, Citigroup, Google, Lockheed Martin and Sony

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Aug 10, 2011, 09:30 ET

CHICAGO, Aug. 10, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Yahoo Inc. (Nasdaq: YHOO), Citigroup Inc. (NYSE: C) Google Inc. (Nasdaq: GOOG) Lockheed Martin Corp. (NYSE: LMT) and Sony Corp. (NYSE: SNE).

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Here are highlights from Tuesday's Analyst Blog:

Yahoo-Alipay Dispute Resolved

Yahoo Inc. (Nasdaq: YHOO) and Chinese e-commerce firm Alibaba Group Holding Ltd. have resolved their dispute over the abrupt transfer of Alibaba's online-payments business Alipay, to a new entity controlled by its chief executive, Jack Ma.

Earlier in May, Yahoo had accused Alibaba of transferring the ownership of Alipay to a company owned by Jack Ma without any intimation or board approval. As the owner of around 40% of Alibaba's stake, Yahoo found this move unacceptable. Alibaba countered the allegation citing the transfer of Alipay as a Chinese regulatory obligation that restricts foreign ownership in e-payment companies.

Yahoo, Alibaba and Japanese Internet company Softbank Corp., which is also a major investor in Alibaba, have now settled the issue unanimously. The trio announced a deal that guarantees Alibaba payment of at least $2 billion in the event of a public offering of Alipay or any other liquidity event. The deal was structured in part to preserve the value of Taobao, the Alibaba-owned e-commerce company that accounts for the vast share of Alipay's revenue. Under the agreement, Alipay will continue to provide payment-processing services to Taobao on preferential terms. Alibaba will also license patents and technology to Alipay, for which Alipay will pay royalties.

Though the agreement resolves a heated controversy, Yahoo's shares fell 3.0% to $13.10 on the Nasdaq Stock Exchange. Yahoo's stake in Alibaba, which controls several e-commerce sites, is considered as one of its most valuable assets, along with its 35% ownership in Yahoo Japan. But now, investors have realized that Yahoo's fate in Asia is completely in the hands of Jack Ma. They remain concerned that Alibaba's actions in the future would dilute the value of Yahoo's stake in the Asian company. Moreover, knowing China's strict regulatory environment, the analysts do not expect the deal to be as lucrative as Yahoo hoped.

Citi Card Data Heist in Japan

Citigroup Inc. (NYSE: C) has again hit the headlines again for a breach of security. Personal information of 92,408 of its credit card customers in Japan is said to have been stolen and illegally sold to a third party.

Information that were stolen include account numbers, names, addresses, phone numbers, date of birth, gender as well as the opening dates of accounts. However, Citi has assured that more crucial information such as personal identification numbers and card security codes were not fiddled with. Citi has already placed fraud alerts on these accounts. No suspicious transactions have been detected yet.

Earlier in June, credit card information of over 360,000 Citi accounts was hacked. Besides Citi, Google Inc. (Nasdaq: GOOG), Lockheed Martin Corp. (NYSE: LMT) and Sony Corp. (NYSE: SNE) have also reported cyber attacks in the recent past. This also questions the level of protection these companies are providing to their customers.

Our Take

Incidents like cyber attacks and the consequent loss incurred by customer dents Citi's reputation. It also may result in the company losing customers to its competitors who could now take advantage of this faulty system. The extent of client information that has been hacked could be used to gain further financial information by illicit ways.

In a competitive market, Wall Street biggies are not only making aggressive efforts but are also keeping no stone unturned to retain their brand names and customer base. Hence, such an incident is uncalled for.

Citi currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we are maintaining a long-term Neutral recommendation on the stock.

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