Over the last several months, I’ve explained why I like a number of big names in large-cap technology.

Today, perhaps, I need to make one addition to that list: Microsoft (MSFT). So kudos, Steve Ballmer: you stared down Jerry Yang - a man with no concept of the consequences of destroying shareholder value - and ultimately made the wise decision to walk away from a deal with Yahoo (YHOO) at the present.

As we’ve detailed at various points following the merger, your bid for Yahoo was very generous and clearly involved forecasts of billions in synergies - which Yahoo cannot hope to realize on their own, given how they’ve wasted away the value of their position these last handful of years.

Now it seems Yahoo’s choices, excluding a potential return to you, are either go it alone or kowtow to Google (GOOG) and their supremacy in online advertising. We’ve seen how capable Yahoo is at building destination sites on the internet (although I’m continually befuddled by their attempts to screw up Yahoo Finance), and likewise, we’ve seen from the financial results that they are equally incapable of creating shareholder value with their online properties. While I don’t believe in any sort of hard-core market efficiency, when your stock is cut in half over a multi-year time period, there are obviously people voting with their feet and wallets against you. In response, you further re-entrench management and do everything in your power to avoid change.

Then, when faced with almost certain upheaval via Microsoft, the course of change they select couldn’t be any worse - outsource your revenue stream to Google? It’s the business equivalent of Hillary Clinton outsourcing her campaign efforts to Barack Obama. It might sound appealing to bring in the hot momentum player, but ultimately they are working for themself, not you, and their interests run directly counter to your own.
If Yang & Co. possess some degree of intellectual honesty, they’ll start making huge share purchases with their own money. If you believe the market is undervaluing your company - which you should hypothetically know better than anyone else - by 50%, step up to the plate and show it.

At this point, however, Yahoo is dead to me. But Microsoft… that is a different story. Originally, I excluded Microsoft from my list of high-quality, large-cap tech names because there are few ways of more effectively ruining a company than overpaying for a mediocre-at-best acquisition. Now that specter is temporarily removed, and the potential remaining for a bid should be that of one taking place at a reduced price. So, it is with some slight hesitation that I add MSFT to the bottom of my tech buy list, accompanying Oracle (ORCL), Accenture (ACN), and others.

Still, be patient with these stocks, particularly MSFT – trading is likely to be quite volatile for a few days, if not the entire week. Further, my analysis suggests MSFT is right around its fair value, so consider looking for some weakness to pick up shares at a discount.

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