Yahoo
Yahoo Again Turns Down Microsoft Offer, Looking For Sweeter Bid
Your bookshelf is not complete without these books! Check out the Absolutely Must Have Books List Bloomberg News (4/7, Kercheval, Thomson) reported, “Microsoft hasn’t provided information on regulatory hurdles the combined company might face, Yahoo said in the letter. Yahoo said it submitted a request for the The AP (4/7, Liedtke) reported, “The increasingly tense struggle now appears to have reached a turning point after more than two months of mostly behind-the-scenes maneuvering.” The piece continued, “Most people The Financial Times (4/8, Nuttall), the San Jose Mercury News (4/7, Gomez, Ackerman, 231K), paidContent.org (4/7, Weisenthal), and the Hollywood Reporter (4/7, Bond) also reported this story. Henry Blodget wrote at Silicon Alley Insider (4/7), “In terms of being able to stave off Microsoft, time helps Yahoo here. If the company’s business is not deteriorating, more time gives it the chance to iron out a strong merger deal with AOL and, importantly, gives Microsoft shareholders and employees who hate the deal more time to be heard.” He remarked that the “only truly meaningful point here is the first one,” referring to Yahoo’s claim that its “business is in line with our previous forecasts.” He commented, “Yahoo is still negotiating seriously with AOL about a deal in which Time Warner spins AOL into Yahoo in exchange for 20% of
The New York Times (4/8, Helft, C3, 1.18M) reports, “After their top executives traded recriminations in an exchange of letters, Microsoft and Yahoo continued their stalemate, with Yahoo shareholders expected to play an increasingly large role in the takeover battle.” In a letter to Microsoft early Monday, Jerry Yang, the chief executive of Yahoo, and Roy Bostock, its chairman, “once again rejected Microsoft’s bid for their company, saying it undervalues Yahoo. But they made it clear that Yahoo remained open to a deal, as long as Microsoft sweetened its bid.” The two Yahoo officials “also said that the company was continuing to explore alternatives to Microsoft’s offer,” as Yahoo is “still in conversations with Time Warner about a deal to merge that company’s AOL unit” into the company. The Times notes, “With the threat of a proxy fight looming, the two companies are expected to increasingly court shareholders, whose views will prove decisive.”
The Washington Post (4/8, Hart, D03, 723K) reports, “The latest exchange intensifies the stalemate between the two technology companies and increases the likelihood of a contentious boardroom battle. If Yahoo ignores Microsoft’s ultimatum, Ballmer said he ‘will be compelled to take our case directly to your shareholders,’ including a proxy fight to elect an alternative slate of directors for Yahoo’s board. Such action, Yang and Bostock wrote, would be ‘counterproductive and inconsistent with your stated objective of a friendly transaction,’ adding that ‘we will not allow you or anyone else to acquire the company for anything less than its full value.’” Analysts say that the “fact that Yahoo has not found an alternative bidder or partner weakens its ability to negotiate.”
The Wall Street Journal (4/8, Delaney, Karnitschnig, B1, 2.06M) reports, “With Microsoft Corp. and Yahoo Inc. firing tense public missives at each other, the real question is whether Microsoft is willing to pay the additional premium Yahoo wants to get a deal done quickly.” The Journal continues, “Despite the sharp exchange, many analysts believe Yahoo will eventually fall into Microsoft’s grasp. It hasn’t revealed any serious alternative deals in the more than two months since Microsoft made its unsolicited offer public. Some investors also question whether Yahoo has lost its leverage to secure a higher price as time has dragged on.”
Analysts proposed two scenarios: “In the first, Microsoft would signal to Yahoo that it’s prepared to raise its offer and the two would enter friendly negotiations. In the second scenario, Microsoft would decide to wait it out and prepare a hostile effort, hoping that Yahoo will come to the table in the meantime.”
The Los Angeles Times (4/8, Menn, Guynn, 881K) reports, “Running out of time and options, Yahoo Inc. again rebuffed Microsoft Corp.’s buyout offer Monday and continued to seek refuge in the arms of Time Warner Inc. … Time Warner’s stake, if committed to support Yahoo’s management against Microsoft, would make it harder for the software giant to win a threatened proxy fight.” Several analysts “said they were skeptical that Yahoo could pull a rabbit out of its hat. ‘Yahoo is going to be sold to Microsoft,’ technology investment banker Ken Marlin said. ‘It’s inevitable now.’” The Times continues, “Although Yahoo’s letter struck a defiant tone, analysts said its main goal might have been to persuade Microsoft to make an all-cash offer instead of the current bid or to raise its offer slightly so that Yahoo could save face. ‘Raise the offer price and we will have something to talk about,’ said one person close to Yahoo who spoke on condition of anonymity because of the
sensitivity of the talks.”
information on March 28 after meeting with its legal advisers.” The U.S. Justice Department and the European Commission “have said they are interested in reviewing antitrust implications of the deal.”
following the saga still seem to think Microsoft — the world’s richest tech company — holds the upper hand over Yahoo, which has been mired in a two-year slump and unable so far to find an alternative deal that
would trump Microsoft’s original offer of $44.6 billion, or $31 per share. ‘They both have some leverage, but the greatest leverage still appears to rest with Microsoft,’ said Morton Pierce, a Washington,
D.C., lawyer who advises on corporate mergers and acquisitions.” The letter “didn’t specify how much Yahoo believes it’s worth, but some analysts have estimated that Microsoft could afford to pay as much as
$34 or $35 per share — about $50 billion — to end the impasse without further acrimony. ‘Microsoft will raise the offer in the end,’ predicted Friedman, Billings, Ramsey & Co. analyst David Hilal.
‘This deal is too important to Microsoft for it to fail.’ Other analysts doubt Microsoft will budge.”
Commentary.
Rick Munarriz wrote at the Motley Fool (4/7), “It’s a lifeline. Or it’s enough rope for Yahoo! (Nasdaq: YHOO)
to hang itself if it’s not careful. Microsoft’s
(Nasdaq: MSFT) pointed missive over the weekend — which puts Yahoo! on the clock to accept its buyout bid within three weeks — is a flare that some in the media have mistaken for a warning shot.” In Microsoft’s letter, the company wrote, “If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board.” Munarriz commented, “This is where suspense enters the chess game. Microsoft is giving Yahoo! three weeks to finalize a deal. The media is playing this out as a ticking clock — with a direct threat of replacing its current
bid with a lower bid in a proxy battle. But why three weeks? Yahoo! reports earnings in two weeks, so Microsoft is giving Yahoo! the freedom to fail miserably in its first-quarter report — something that may very well happen given the internal turmoil at Yahoo! and external relevance fade of Yahoo! — and still accept the original buyout offer if it acts immediately after the report.” He continued, “Despite the strong letter, Microsoft is going to great lengths to avoid ruffled feathers at Yahoo! It wants a peaceful resolution. It is still extending a hand down the flame-riddled fire escape, even as Yahoo! burns from the inside out. No one knows what the Yahoo! boardroom is thinking. Yahoo! as we know it died in January. Yahoo! isn’t on the clock now. That clock started ticking the moment Microsoft made its generous buyout offer. If Yahoo! lets Microsoft get away, its stock reverts back to somewhere in the mid-teens. There is no other suitor.
The companies that emerged as potential suitors, AOL and News Corp. (NYSE: NWS), were looking to be bought out at Yahoo!’s market premium, more than the other way around.”
Yahoo’s equity. This would make great sense, and the companies should have done it six months ago. The only way the move will help stave off Microsoft, however, is if Yahoo’s own performance is strong.”
Dave Methvin wrote at InformationWeek (4/7), “Steve Ballmer finally got tough with Yahoo (NSDQ: YHOO) after several weeks of playing nice. (My summary of the letter: ‘You understimate the power of the Dark Side!’) Yahoo fired back with a response that shows they’re ready to rumble. It seems to me that the
longer this goes on, the worse off Yahoo will be.” He continued, “This back-and-forth between Yahoo and Microsoft reminds me of another event that’s in the news lately: the collapse of the housing market. After a
decade of unsustainable price increases, the housing bubble burst. Now the unthinkable is happening: prices are going down. The problem is that sellers aren’t willing to accept that prices are going down. And so it is with Yahoo.” Methvin concluded, “The whole deal still seems like a train wreck to me, but if it’s going to go through the worst thing Microsoft could do would be to overpay for Yahoo. The longer this goes on, the clearer it will be that if anything, Microsoft’s offer is too generous. That will send Yahoo shareholders scrambling to make this deal happen as soon as possible, before Microsoft comes to its senses.”
R. Scott Raynovich wrote at Contentinople (4/7), “Silicon Valley is celebrated worldwide for its innovation, its
ability to produce massive success in a short amount of time, its incipient wealth — and all of the yacht-building jerks this entails. What we hear of less often is the sheer power of creative destruction.
Witness what has become of Yahoo.” He continued, “With its arrogant rebuff of Microsoft’s generous buyout offer, Yahoo now risks alienation of shareholders, an expanding employee brain-drain, and a potentially
protracted shareholder battle. What you are seeing is the early stage of a serious death spiral. Nice job, Yahoo!” Raynovich concluded, “What exactly does Yahoo have to gain by rebuffing Microsoft? A higher stock
price? Already missed that opportunity. Pride? Lost that a couple years ago, when it was passed by Google in market cap and Terry Semel’s grand ‘Hollywood’ vision unraveled. Integrity? Yahoo is getting rid of that by alienating shareholders and not taking on the fiduciary responsibility of a good-faith negotiation. Let’s face it: Yahoo is supremely arrogant. For what, I don’t know. It’s not like it has an ace in the pocket (What, Time Warner or News Corp.? You’ve got to be kidding me.) I think the Rubicon has already been crossed, and Yahoo is now well on its way to joining the gallery of once mighty, fallen tech giants.”
Analyst Says Microsoft Stronger Competitor Against Google In Web Ads.
Elinor Mills wrote on the NewsBlog at CNET (4/7), “Microsoft can give Google a better fight in online ads than
Google can compete against Redmond in enterprise software, a Gartner analyst concludes in a new research report.” The piece continued, “In one corner is Microsoft, the leader in enterprise software and PC-centric applications. Microsoft’s eye is on the prize–a bigger slice of the $75 billion in online ad revenue that is forecast by 2011…. Microsoft’s bid for Yahoo plays into this strategy, and would make the combined company the clear No. 2 in advertising. In the other corner is Google, the search engine that has turned pay-per-click ads into a cash cow. The company is looking to take advantage of (and promote) the move to cloud computing with its Google Apps, which are free for consumers but have a per-user yearly charge for the premier edition targeting businesses.” Gartner research vice president David Mitchell Smith “says he’s not convinced Google is trying to make much money off Google Apps, and he predicts that while the effort may be a distraction to Microsoft it won’t seriously threaten Microsoft’s enterprise business anytime soon.”
