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Yahoo Shareholders Aim To Reignite Microsoft Deal

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The Los Angeles Times reports, “Yahoo Inc. shareholders are so mad about the company’s failure to cut a deal with Microsoft Corp. that several said they would consider a proxy fight to oust Chief Executive Jerry Yang and Yahoo’s board of directors if that would bring the Seattle suitor back to the table.” An opposing board slate “would get ‘overwhelming’ support from shareholders, said Larry Haverty, portfolio manager with Gamco Investors Inc., whose funds own 1.2 million shares apiece in Yahoo and Microsoft.” The Times continues, “But time is not on their side. In an apparent effort to blunt the shareholder firestorm, Yahoo on Monday set its annual meeting for July 3, giving investors little time to nominate a slate.” On Tuesday, “several large Yahoo shareholders burned up the phone lines in a campaign to persuade Yahoo’s independent board members to reconsider Microsoft’s offer. They also made overtures to Microsoft, which withdrew its sweetened $47.5-billion offer over the weekend.”
The AP reported, “After fending off months of threats by Microsoft Corp., Yahoo Inc.’s directors still will have to fight for their jobs as the company’s own irate shareholders plot a mutiny. … ‘We are hoping to turn that (meeting) into ‘Independence Day’ for Yahoo’s shareholders,’ said Eric Jackson, president of Ironfire Capital.”
The Financial Times reports, “Hopes that Yahoo would be forced back to the negotiating table with Microsoft lifted its shares in heavy trading yesterday, with the stock rising 5.54 per cent by the close in New York.” The share price rebound “follows strong criticism of Yahoo from some of its biggest shareholders, who have argued that it was wrong to hold out so strongly for a price of $37 a share from Microsoft, which had offered $33 a share.”
The Christian Science Monitor reports, “After the collapse of Microsoft’s acquisition bid and the plunge in its stock Monday, Yahoo’s management is now under pressure to avert a shareholder revolt. Some shareholders simply decided to sell. One activist investor called for the overthrow of the current board. Others are pursuing shareholder lawsuit, with more expected.” The Monitor notes, “The possibility that disillusioned shareholders may sell or overturn the board, however, puts pressure on Yahoo’s CEO Jerry Yang to give them some hope of a turnaround. That might involve wooing a different buyer, like Rupert Murdoch’s News Corp. Or, Yahoo may continue to pursue a partnership with Google.”
James B. Stewart, a columnist for SmartMoney magazine, writes at the Wall Street Journal, “As a Yahoo shareholder, I was furious over its bungling of a potentially lucrative sale to Microsoft, especially after Yahoo shares plunged Monday on the news. Nothing in Yahoo’s official statement from Chairman Roy Bostock made me feel any better. It seemed especially disingenuous for Mr. Bostock to say ‘we are pleased that so many of our shareholders joined us’ in the view that Microsoft’s bid — its latest was $33 a share — had undervalued Yahoo. And just who might those supportive shareholders be? No names were mentioned. No one asked me.” He continues, “The droves of shareholders voting with their wallets on Monday, pushing Yahoo shares down to $24 and change, a 15% decline, would suggest that there weren’t all that many. At the very least, Yahoo owes its shareholders a detailed explanation why it believes Yahoo is worth perhaps $40 a share, or more.” Stewart comments, “It all depends on what Yahoo does now. In my view, the company has to abandon ideas like teaming up with Time Warner’s AOL and face up to some hard decisions. It should admit that its own search-advertising effort has failed and vigorously pursue a relationship with Google.”
Erick Schonfeld wrote at TechCrunch, “Here’s the latest Yahoo rumor that we’re chasing: The Yahoo board of directors met earlier today and authorized chairman Roy Bostock, not CEO Jerry Yang, to call Ballmer about re-starting negotiations. In fact, this rumor may have been behind the small rally in Yahoo’s stock today, which closed up 5.5 percent to $25.72 (still down from where it closed on Friday at $28.67). If this is true, it makes you wonder who is really in charge at Yahoo.” He continued, “Yang has been getting a lot of grief from angry shareholders for not taking Microsoft’s $33 a share offer, and instead holding out for $37 or $38. Now his story keeps changing on when he learned about the $33 bid. But when Ballmer balked and called off the deal, that may have been when Yang’s grip on power began to weaken. What happened next was curious. In Yahoo’s official press release on May 3 responding to Microsoft’s termination of negotiations, it was Bostock who issued the primary statement from Yahoo, not Yang.” Schonfeld noted, “Whether or not Yahoo’s board actually met today and authorized Bostock to restart negotiations is entirely speculation at this point, say our sources. But here’s one more interesting tidbit. Today, Yahoo board member Eric Hippeau was supposed to speak on a panel with me and others at the In-Call Media Summit in New York (where we both live). He didn’t show up. Another venture capitalist from Softbank took his place. When I asked around what happened to Hippeau, I was told by someone else at the conference who would have known that he is in Sunnyvale. So maybe the board did meet today after all.”
Microsoft’s Gates Says Ballmer To Make Decisions Regarding Yahoo Bid. The AP reported, “Microsoft Chairman Bill Gates said Tuesday that ‘key decisions’ following the company’s withdrawal of a $47.5 billion bid for Yahoo will be made by CEO Steve Ballmer.” Gates “was asked about the software maker’s plans after the Yahoo bid fell apart, including whether Microsoft would pursue another deal of the same size elsewhere. … ‘Well, the key decisions on that will be made by Microsoft CEO Steven Ballmer, who took a look at Yahoo and decided that on our own he likes the stuff that we’re doing,’ Gates said, according to a pool report. ‘We need to show the innovation and it’s a very competitive space,” he added. “I wouldn’t rule out some partnerships but we don’t have anything imminent there.’”
Blogger Says Microsoft Deal With AOL Is “Obvious Choice.” Erick Schonfeld wrote at TechCrunch, “With Microsoft walking away from the Yahoo deal, there’s been a lot of talk about what it’s next best option would be. Going after AOL is an obvious choice. It has the ad inventory (aka pageviews) Microsoft needs, has its own collection of growing online advertising businesses, and has a very willing seller in parent Time Warner. … And AOL isn’t exactly hitting on all cylinders right now, so it could be a much cheaper, cleaner purchase.” He continued, “Of course, Microsoft is still talking to everybody at this point, except maybe Yahoo. Whether it truly intends to set its sights on AOL is unclear because it needs to talk to AOL at the very least as a strategic ploy to try to thwart any possible deal between Yahoo and AOL (which has always been a possibility in the background). But at least Wall Street doesn’t seem to think that a deal is imminent. Yahoo’s shares are up 4 percent from yesterday to $25 a share right now, while Time Warner’s shares are pretty much flat at $16 after rising about 6 percent last week. Maybe Yahoo’s talks with Google are going better than Microsoft’s talks with AOL.
Collapse Of Microsoft-Yahoo Deal Affects Advertisers . The AP reported, “The collapse of Microsoft Corp.’s pursuit of Yahoo Inc. is leaving advertisers pining for other ways to reach mass audiences on the Web and to counteract Google Inc.’s dominance of the online ad market.” Advertisers “can still distribute ads across smaller Web sites through networks that all major Internet companies run, but such an approach doesn’t have the same appeal as reaching Yahoo’s massive audience all in one place, something that would have been even more compelling once Microsoft’s Web sites were thrown in, too. That’s because advertisers can’t negotiate premium placements and coordinate promotions across the network the same way they can with a single site.” The AP noted, “Without a powerful new portal to suck up advertising dollars, online advertising power could continue to shift to the hot areas of the moment, such as mobile phones and social-networking sites like Facebook.”