Microsoft to launch a hostile bid: Reuters Poll

An overwhelming majority of Wall Street analysts see Microsoft Corp preparing shortly to launch a hostile bid at its current price of $31 per share in cash and stock, a Reuters poll found.

Most Wall Street analysts believe Microsoft now faces a drawn-out proxy campaign to win its unsolicited takeover of Yahoo!, according to the poll.

By contrast, the general view in February when Microsoft announced its offer was that Yahoo! would agree to a friendly merger if Microsoft only sweetened its bid. By mid-March a Reuters poll showed that Wall Street expected Microsoft to buy Yahoo! without raising its price.

Microsoft last week repeated chief executive Steve Ballmer’s three-week-old threat that his company will go hostile, or even call off its bid, if Yahoo! did not agree to a deal before this weekend. Microsoft executives said they will reveal their next move this week.

“I’m betting that Ballmer is bluffing with his ‘walk away’ comments and that he’s going hostile,” said Jefferies & Co analyst Youssef Squali, who believes Microsoft will stick with its current $31-per-share offer.

Nineteen brokerages now say they expect Microsoft in coming days to move forward with a hostile bid after being frustrated in a three-month effort to entice Yahoo! to reach a negotiated deal, the survey reveals.

Due to a drop in Microsoft stock, it is now worth $42.7 billion.

Another three Wall Street houses see Microsoft walking away rather than raising its offer. Many Microsoft shareholders fear a higher-priced deal would dilute the value of their shares and have an uncertain payback. Were Microsoft to walk away, Garrity estimates Yahoo!’s stock could drop around 14 per cent to $23 a share, while Microsoft’s stock might jump about 17 per cent to $35 a share.

Fourteen brokerages say they expect Microsoft to begin a campaign to unseat Yahoo!’s board and encourage the company’s shareholders to accept its current $31 bid. Another five brokerages expect Microsoft going hostile at a lower price.

To counter Microsoft, Yahoo! has held talks with Time Warner Inc on a deal to merge Yahoo! with Time Warner’s AOL unit in return for Time Warner taking a stake in Yahoo!, several sources familiar with the negotiations said earlier this month.

A Yahoo!-AOL tie-up would be part of a three-way deal in which Yahoo! may partner with rival Google Inc. to use Google’s advertising system to sell ads alongside Web search results Yahoo! serves up to its users, these sources said.

Yahoo! executives told investors on a quarterly conference call last week it was “premature” to discuss whether a trial run of the Google ad partnership will lead to a deal between the two companies, but declined to comment on progress Yahoo! is making on a deal with AOL or other alternatives to Microsoft.

AOL’s Internet media and advertising assets represent the closest thing to Yahoo! and would significantly enhance Microsoft’s Web audience, he said. Microsoft has reportedly talked with News Corp, owners of the MySpace social network, about a joint bid for Yahoo!, but Moran believes MySpace is less promising than Facebook, albeit one that is unlikely to sell at a price Microsoft would be ready to pay.

The Reuters poll drew responses from 17 Microsoft analysts and 15 Yahoo! analysts from 25 different Wall Street brokerages. It was conducted on Friday, a day before Microsoft’s three-week-old deadline expired for Yahoo! to reach a deal.

What will happen if Microsoft adopts a full hostile takeover strategy. There is a superb analysis done at pmrca.

The possible scenarios from here, in roughly decreasing order of probability, include:

• Hostile Takeover: Microsoft moves forward with a full-fledged hostile takeover — trying to replace Yahoo’s board and/or taking its offer directly to Yahoo’s shareholders.
• Higher Offer: Microsoft raises its offer or otherwise modifies its offer terms to make them more attractive — for example, Microsoft could shift to an all-cash offer — in an attempt to make the deal happen without going fully hostile.
• Walk Away: Microsoft drops its offer and walks away; Yahoo’s stock drops to its pre-offer level of $19.18, give or take. Lots of moves and countermoves could follow: Microsoft could come back later with a lower or higher offer; Yahoo could cut a Google advertising deal to boost its revenue and margins and make itself harder to buy; Microsoft could take its $44 billion and go buy virtually every new Internet company of any consequence founded in the last 10 years; etc.
• Yahoo Caves: Yahoo’s board caves and accepts the current Microsoft offer.
• White Knight: Another bidder enters and offers Yahoo a higher price.

Let’s assume the Hostile Takeover scenario, which seems to me to be the most likely given Microsoft’s strategy and explicit public statements. What happens then?

There are two primary hostile takeover tactics:

• A tender offer, which we can equivalently call an exchange offer since the offer includes Microsoft stock that would be exchanged for Yahoo stock. This would be an offer by Microsoft to acquire Yahoo shares from existing Yahoo shareholders directly. Note that this hasn’t happened yet; Microsoft’s offer up until now has been made to Yahoo the company — in a tender offer, the offer would be made directly to Yahoo’s shareholders.
• A proxy fight by Microsoft to take control of Yahoo’s board of directors — to put in place a new Yahoo board that would accept Microsoft’s current offer.

These two tactics could be used alone or in tandem.

In the case of a tender offer: if shareholders owning more than 50% of Yahoo’s shares agree to the offer, Microsoft gains control of Yahoo directly.

(Actually, Microsoft probably wouldn’t need to own a full 50% of Yahoo’s shares — it could own, say, 40% and then have effective control, because only one-sixth of Yahoo’s remaining shareholders would have to vote with Microsoft on any issue in order for Microsoft to exercise control.)

Yahoo’s best defense against a tender offer is its poison pill. The poison pill works like this: if Microsoft acquires more than 15% of Yahoo without Yahoo board approval, the poison pill kicks in and issues a flood of new Yahoo stock into the market in such a way that Yahoo becomes much more difficult and expensive to buy. Poison pills have been used as defensive mechanisms by public companies against hostile takeovers for years, and the dilution they cause is so huge that no poison pill of this type has ever been triggered.

Rather than trigger the poison pill, Microsoft would most likely condition its tender offer on Yahoo’s board cancelling its poison pill. If the Yahoo board refused to cancel the poison pill, Microsoft could sue in a Delaware court to force a cancellation of the pill. (Any and all litigation to force Yahoo to come to terms will be in Delaware, since that is where Yahoo is incorporated.)

Delaware courts give some deference to target boards in resisting hostile takeovers, especially in the early stages of a takeover fight, but in many cases the courts have been unwilling to allow targets to “just say no” in the face of a well-financed offer at a significant premium — which is the situation Yahoo is facing. It’s impossible to predict what a court will do, but Delaware courts are more likely to force a poison pill to be cancelled when a target board has had plenty of time to drum up alternatives to the hostile offer, and where the hostile offer is well-financed and represents a significant premium to the company. This gets even more likely if the bidder has raised its price during the process, which hasn’t happened here — yet.

In the case of a proxy fight, which Microsoft has overtly threatened: Microsoft would nominate an alternate slate of directors for election to the Yahoo board in place of the current directors. If Yahoo shareholders favor the Microsoft bid, they can vote for Microsoft’s alternate directors, who — if elected to Yahoo’s board — would approve the Microsoft bid.

A proxy fight may have special appeal for Microsoft for a couple of reasons.

First, it could work in one fell swoop.

Many public companies have a “staggered” board, where some directors are up for election or reelection each year, but the entire board is never up for reelection in a single year.

Yahoo, however, has its entire board standing for reelection each year.

In retrospect, this was not a good idea — whoever set this up at Yahoo made a serious mistake. In a proxy fight with a staggered board, target management can lose a proxy fight and still control two-thirds of the board. In Yahoo’s case, if Microsoft wins one proxy fight, it takes out the entire Yahoo board.

It would be practically impossible for Yahoo to change to a staggered board now — in fact, trying to do so would immediately give Microsoft its opportunity to nominate its slate of directors.

Second, Yahoo can’t block a proxy fight via a poison pill or any other mechanism. They can delay it — a bit — but they cannot block it.

Microsoft gets control of Yahoo if it puts up a slate of directors for election and they win at Yahoo’s 2008 annual meeting. All that is needed for Microsoft’s slate to win is to get more votes at the meeting than Yahoo’s incumbent directors. Since not all Yahoo shareholders will bother to vote, Microsoft doesn’t need a majority of all shares to win — it just needs more votes.

As it turns out, Microsoft has leaked to the press the fact that it has already assembled a slate of directors who have agreed to run against Yahoo’s board in the event Microsoft moves forward with a proxy fight. The Microsoft slate includes several former CEO’s, COO’s, and CFO’s — individuals certainly qualified to sit on a corporate board.

If Microsoft wins the proxy fight, then its acquisition of Yahoo is probably a foregone conclusion. Microsoft’s slate of directors would be expected to vote to cancel the Yahoo poison pill, allowing Microsoft to make its tender offer for Yahoo’s shares. However, the new Microsoft-installed board would still have to exercise its fiduciary duties and carefully assess whether the Microsoft offer is in the best interests of Yahoo shareholders — if the new board acted rashly to rubber-stamp the Microsoft takeover, it could theoretically be sued by pro-Yahoo shareholders, although that lawsuit would be an uphill battle. Further, Yahoo’s poison pill would throw some procedural hurdles Microsoft’s way: the pill says that for a 180-day period following a successful hostile proxy fight, the new board can only cancel the pill if it follows certain procedures, including getting an independent financial advisor to opine that cancelling the pill is in the shareholder’s best interests. All this would do is slow down Microsoft’s takeover — it would still happen.

Yahoo has taken other steps to respond to Microsoft’s unwanted advances.

In February, Yahoo adopted a takeover-related compensation plan covering every full-time employee. The plan would issue large cash payments and 100% accelerated stock option vesting to Yahoo employees who are terminated “without cause” or who quit “for good reason” in the two years following a takeover. The devil is in the details — if the definitions of “cause” and “good reason” are broad enough, the plan could give Yahoo’s entire employee base easy access to 100% option acceleration and large severance cash payments after a takeover. The plan has the effect of making a takeover of Yahoo more expensive — and Microsoft has responded by saying it might lower its offer price as a result.

Yahoo has also bought time by amending its bylaws to delay the deadline for making board nominations for this year’s board election, and could buy additional time by delaying the date of its 2008 annual shareholder meeting.

Previously, Yahoo board nominations had to be made by March 14. While searching for an alternate bidder, Yahoo did not want to face a proxy fight starting in March, so it amended its bylaws to require board nominations to be made within a 10 day window after Yahoo announces the date for its 2008 annual shareholder meeting.

Yahoo has not yet announced the date for its 2008 annual meeting. However, under Delaware law, Yahoo has to have its annual meeting by July 12 — the 13-month anniversary of its last annual meeting — or Microsoft can sue to force a prompt annual meeting. Microsoft would almost certainly win that lawsuit, and the court would probably force a meeting within 60 to 90 days. So Yahoo can at least delay its annual meeting and therefore the board election process until July, and perhaps as late as October if it is willing to force Microsoft to sue to schedule a meeting.

So this may yet come to remind you of the Democratic presidential primary season — it may last a while.

You should read the full story at pmrca.

This is also being discussed here: Microsoft Watch, Financial Times, Between the Lines, Scobleizer, TechCrunch, Tech Check with Jim Goldman, TECH.BLORGE.com, Tech Trader Daily, GMSV, Hacking Cough, Valleywag, mathewingram.com/work, rexblog.com, Marc’s Voice, franticindustries, Search Engine Land, Tech Ticker, MediaFile, WebProNews, Digital Daily, WebProBlog, Mashable!

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Daniel Terdiman wrote on the “geek gestalt” blog at CNET, “I’m sitting here, reading my morning e-mail and what pops up but a press release for a new dating site that purports to be ‘exclusively for intelligent people.’ Called, wonder of wonders, IntelligentPeople.com, the site says that to sign up you must first ‘pass the IQ test required for admission.’” Terdiman continued, “Well, snark aside, this is an interesting notion, this dating site for smarties. I suppose it’s no surprise. After all, there are plenty of affinity networks out there already, social networks for people who went to this college, or who play that game or who like to dress up as giraffes. So why not throw dating and high IQs into the exclusivity mix? Of course, as anyone who’s ever dated a smart person knows, intelligence isn’t any kind of guarantee of a good date. Sure, smart people generally prefer to date other smart people because it probably makes for better conversation, and the potential earning power is greater. On the other hand, would you really want to date someone who would be inclined to limit their partner trolling to a site that restricts anyone who doesn’t pass an IQ test? Perhaps this was actually someone’s clever notion of how to wall off a really annoying demographic from the rest of the dating pool.”

Quoting from itnews

“A new dating site caters exclusively for “intelligent” people and requires potential members to pass an IQ test in order to sign up.

Mensa restricts membership to the top two per cent of the IQ bracket, but IntelligentPeople.com will include the top 15 per cent.

The site’s developers said that people with an IQ in this range are “highly intelligent” and communicate and interact best with other intelligent people. IntelligentPeople.com hopes to give these people the opportunity to meet and form relationships with similar individuals, regardless of location, education and social status.
“Intelligent people usually want a partner who is also intelligent. Everyone wants someone they can talk to,” said Trine Jensen, founder of IntelligentPeople.com. At general dating sites you have to spend time and energy sorting profiles to find the ones that match your criteria. At IntelligentPeople.com we already make that sorting for you.”

The IQ test required for admission is a multiple choice, pattern recognition test consisting of black and white images and is designed to test intelligence while minimising cultural or educational biases. The site also has a more general community section designed to help members meet other people with high IQs, find a business partner or make new friends.”

AOL today revealed the logo for its Platform-A advertising division. Lynda Clarizio, President of Platform-A, said that the new logo “effectively communicates our distinct competitive advantage of scale and reach. And its bold and simple design fits with our mission of providing advertisers and publishers with effective, impactful and easy-to-use solutions to their digital advertising needs.” Complementary brand identities for companies owned by Platform-A will be rolled out in the coming weeks.

A quick question to Lynda, are you going to rebrand the name? It looks pretty half baked with the hyphen.

And why is the logo toppled? Get it up and running. It is high time.

This is interesting to note, in light of the new figures released by comScore show that AOL’s Platform A advertising network is the top advertising network in the United States by reach (unique visitors).

According to the figures, Platform A reaches 90.7% of all American internet users, ahead of Yahoo on 85.3% and Google on 80.9%. AOL’s figures include ads served from Advertising.com.

Here’s a neat poster to help you visualize all of the top-level domains in the world…

At the end of every URL and email address is a top-level domain (TLD). Although .com is the world’s most popular TLD, it is far from alone. There are more than 260 TLDs in use around the world, most of which are country code top-level domains (ccTLDs). The Country Codes of the World map includes 245 country codes, which encompasses all United Nations countries as well as numerous islands and territories. Each two-digit code is aligned over the country it represents and is color coded with the legend below for quick and easy reference

Link, they’re $30 each plus shipping

Source: BoingBoing

Nice image on NYT. That is pretty much all that is to absorb from this article. The NYT has gone on declare that iPhone is going to knock off the Blackberry (BusinessWeek’s been harping on this for months).

For people who need to be connected to their mails, there is nothing better than BlackBerry. RIM has gone through its ups and downs, and I am impressed how they have continuously improved on their devices.

And RIM is going to innovate. There are rumours of the touchscreen based (iPhone) Apple Killer phone that will take the wind out of iPhone. We have already seen such devices from other makers, so why will RIM not be able to do that.

Today, it is easy to copy designs, and the first moved advantage lasts only for about a year. While iPhone has its advantages, BlackBerry has its own. There will be some wins, some losses, but overall I have strong suspicions that NYT’s predictions (or fears) will be even close.

It’s going to be fun to watch the “Smartphone” battlefield though. Who will win? What do you think?

Apple Inc is in talks with Immersion Corporation to licence Haptic Technology for its iPhone. Immersion Corporation on Thursday announced that they have appointed former Apple executive Clent Richardson to the position of President and CEO.

A source (Apple Inc employee), who chose to remain anonymous, told us that senior executives of the two companies have already met once on Tuesday and the next meeting has been scheduled for Friday morning. The source confirmed that the executives will continue discussions over licencing and implementation issues of iPhone haptics.

Apple’s competitor Nokia - whose upcoming phone is likely to be called Tube 5800 - has also licenced haptic technology from Immersion Corporation that will enable it to incorporate a wide range of tactile feedback in it cellphones. Haptic technology refers to technology which interfaces the user via the sense of touch by applying forces, vibrations and/or motions to the user, but it should not to be confused with touch or tactile sensors that measure the pressure or force exerted by the user to the interface.

Apple’s on-screen keyboard has a major drawback as it lacks “haptic response.” In other words, users cannot feel the keys as there is no pressure back on the finger when a virtual key is released. Haptic technology allows users to use a touchscreen and receive feedback like they are pressing on real buttons through vibration technology.

Immersion Corporation develops haptic technologies that engage the sense of touch in the digital world for communicating, driving, designing, training, or just for fun.

Source:palluxo.com

Security researcher David Litchfield has released technical details of a new type of attack that could give a hacker access to an Oracle database.

Called a lateral SQL injection, the attack could be used to gain database administrator privileges on an Oracle server in order to change or delete data or even install software, Litchfield said in an interview on Thursday.

Litchfield first disclosed this type of attack at the Black Hat Washington conference last February, but on Thursday he published a paper with technical details.

In a SQL injection, attackers create specially crafted search terms that trick the database into running SQL commands. Previously, security experts thought that SQL injections would work only if the attacker was inputting character strings into the database, but Litchfield has shown that the attack can work using new types of data, known as date and number data types.

Litchfield’s attack targets the Procedural Language/SQL programming language used by Oracle developers.

A noted database hacker, Litchfield is best known as the researcher who published details on the bug used in the 2003 SQL Slammer worm, which targeted Microsoft’s SQL Server database.

Litchfield wasn’t sure how widespread lateral SQL injection vulnerabilities are, but he thinks the attack could cause real damage in some scenarios.

“If you happen to be using Oracle and you write your own applications on it, then yes, you could be writing vulnerable code,” he said. “The sky is not falling … but it’s certainly something that people should be made aware of.”

Database programmers should review their code to be sure it is checking to make sure that all of the data it is processing is legitimate, and not injected SQL commands, he said.

Source: Computerworld

Speaking at the Web 2.0 Expo here Thursday, Yahoo CTO Ari Balogh revealed how the company is transforming itself into an open and social platform from the ground up. It is opening its Web platform to developers and moving closer to a Facebook-style social networking concept. Ari Balogh also said that while Yahoo already has open APIs for some services, it will expand the open API concept to other areas and make it more consistent for developers, while boosting the ’social’ aspect of its services for its members.

“We are taking open to a whole other place,” Balogh said. “We are rewiring Yahoo from the inside out with a developer platform that will open up the assets of Yahoo in a way never done before, making the consumer experience social throughout and provide hooks to developers.” He noted that Yahoo has 10 billion latent connections across its properties, such as mail, messenger and fantasy sports.

Balogh discussed the technical architecture–known as YOS, or Yahoo Open Strategy–including an application platform that will allow developers to create apps for consumers to keep their data protected and to chose what data to share and with whom. In addition, Yahoo will unify all profiles for users and developers, which will allow the company to leverage the 10 billion relations and 500 million users to create the social graph of relationships and to manage the event stream.

“We are not creating another social network. We will rewire the entire experience to make it social. We don’t think of social as a destination but as a dimension,” Balogh said. Along with Google and MySpace, Yahoo is a member of the OpenSocial Foundation, which is developing a specification for building social applications.

The underpinnings of Yahoo’s effort include development tools, an application platform, a social platform that unifies all profiles throughout Yahoo (again, like Facebook or MySpace, this is a social graph that lets users make connections and view events) and the total rewiring of properties to make all this possible.

Yahoo’s new architecture, called YOS (Yahoo Open Strategy) proves that the Internet is made of tubes (Source: Yahoo)

The heady plans are smart but, quite likely, come too late.

The Wall Street Journal (4/25, Steel, B1, 2.06M) reports, “A yearlong effort by AOL to transform its content Web sites into crowd-pleasers is beginning to pay off.” The Journal continues, “Traffic to the sites — including AOL Money & Finance, entertainment, and the male-oriented Asylum — grew 15% to 56.5 million unique U.S. visitors in the first quarter from a year ago, according to comScore Media Metrix. Measured by traffic, some of the sites even top the charts for their categories.” AOL “still hasn’t translated the surge in visits into higher ad revenue. But the news is positive for the Time Warner Inc. unit, which has struggled with another initiative — building AOL into a major digital ad-sales firm.” The content push “is part of AOL’s bid to reinvent itself as an ad-supported Web company following its August 2006 decision to make its Internet-access service free. Visits to AOL’s Web sites slowed as a side-effect of that decision. … To draw visitors back, AOL redesigned sites in the news, sports and health categories. It also created a half-dozen new sites that don’t use the AOL name, such as a technology-focused site called Switched, a hip-hop site called BlackVoices, and a Web trend tracker called Urlesque.com, as well as Asylum. Dropping its name was an acknowledgement that the brand wasn’t hip enough for the consumers AOL was trying to attract.” AOL “also adopted some common tricks of the trade, such as making its sites appear higher in search-engine results.”
Time Warner To Announce Quarterly Results On Wednesday. MarketWatch (4/24, Wilkerson) reported, “Analysts will be anticipating higher profits at several large media conglomerates such as Time Warner Inc., Comcast Corp. and Viacom Inc. next week, but will also be on the lookout for signs that a shaky U.S. economy is having an adverse effect on spending by advertisers and consumers.” Time Warner announces its quarterly results Wednesday morning, and analysts see the company “earning 23 cents a share on revenue of $11.4 billion. In the year-earlier quarter, excluding discontinued operations and special items - including the effect of accounting changes — the company would have earned 22 cents a share on sales of $11.2 billion.” Time Warner CEO Jeff Bewkes “will surely have to field questions about speculation that AOL could hook up with Yahoo. … As usual, analysts will be monitoring advertising growth at AOL, which has been declining for several quarters.” Time Warner “has pointed out that AOL has discontinued several ‘nonprofitable’ sponsorships, and that ad demand is shifting to third-party networks.”