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Microsoft's $8.5 billion Skype deal lifts stocks

Tue, 05/10/2011 - 7:17am
STAN CHOE - AP Business Writer - Associated Press

Corporate deals and strong earnings have propelled stocks higher in recent months, and more of each came on Tuesday.

Microsoft Inc. said it would buy Internet telephone service Skype for $8.5 billion in cash. Companies have built up a record amount of cash since the recession, and they have begun to use it to purchase rivals, pay dividends and buy back their own stock. Microsoft had $50.15 billion in cash and short-term investments at the end of March.

Large companies want to put their cash stockpiles to work because they're getting minimal returns on them, said Oliver Pursche, president of Gary Goldberg Financial Services. "The crisis is behind us, where we don't need this much cash anymore."

The Skype purchase is Microsoft's largest in its 36-year history. It follows AT&T Inc.'s announcement in March that it would buy T-Mobile USA for $39 billion and Johnson & Johnson's $21.3 billion deal last month to acquire Synthes, a maker of orthopedic instruments.

Dairy producer Dean Foods Co. jumped 15.1 percent after its earnings came in above analysts' expectations. Dean had a stronger start to the year than it expected and raised its forecast for full-year earnings.

Medifast Inc. rose 15.1 percent. The weight-loss program operator reported earnings late Monday that came in above analysts' expectations.

International Flavors & Fragrances Inc., whose flavorings and scents go into candies, air fresheners and other products, said its income rose more than expected. The stock rose 3.6 percent.

The Dow Jones industrial average rose 45 points, or 0.4 percent, to 12,730 in morning trading.

The S&P 500 rose 6 points, or 0.5 percent, to 1,353. The Nasdaq composite index gained 20 points, or 0.7 percent, to 2,863.

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