News Analysis

Microsoft still wants Yahoo, still for $31/share (and Error'd)

It's IT Blogwatch: in which the Microsoft bid for Yahoo rumbles on. Not to mention more Error'd...

Linda Rosencrance reports:

Microsoft Corp. isn't planning to raise its initial unsolicited $44.6 billion bid to buy Yahoo Inc., according to The Wall Street Journal. Although some have said Microsoft would up the ante for the company, people familiar with the deal [said] it was unlikely to happen. The sources said Microsoft was using the possibility of an increased bid to entice Yahoo to meet to discuss the offer. So far, the companies have only met once ... Microsoft's bid was initially worth $44.6 billion, however, a decline in Microsoft's shares means the offer is currently about $42 billion. Yahoo and Microsoft declined to comment on the report. Yahoo rejected Microsoft's offer on Feb. 10, saying it undervalued the company ... Microsoft believes it can wait because it doubts Yahoo investors were swayed by the company's recent presentation on its three-year financial plan. more
MG Siegler drives off with the story: [You're fired -Ed.]
After Yahoo rejected Microsoft’s offer in early February ... talk began to circulate that Microsoft would come back with a sweeter deal. While the initial offer was for $31-a-share, it was believed that Yahoo might consider a deal if that price were closer to $40-a-share. To many that seemed to be a simple negotiating tactic and the consensus was that the sides would meet somewhere in the middle and potentially agree upon a price in the mid-$30 range. Just a few days ago, a Citi financial analyst had Microsoft raising its bid to $34-a-share ... What we apparently have now, is an old fashioned stand-off. That said, this is very much a fluid process. If Microsoft were to hear tomorrow from Yahoo that adding some value to the deal would get it done quickly, does anyone doubt they would do it? more
Ron Haruni reminds us why we should care:
Both Microsoft and Yahoo have fallen far behind rival Google (GOOG) in the lucrative field of Internet search. Yahoo’s earnings and share of the online search market have badly trailed Google. A Microsoft-Yahoo combination would create a powerful number two player in the online search business, which Google commands. It would also be one of the biggest tech deals in years, on a par with Hewlett-Packard’s $25 billion acquisition of Compaq in 2002. more
Kara Swisher adds:
So, I was making the rounds again of my sources at Yahoo’s major institutional investors yesterday and here’s the overall 411: Frustration. Confusion. Impatience. And the bottom line from several of them–if Yahoo does not wise up and start seriously kibitzing with Microsoft over its takeover bid sooner than later, than some investors have signaled to the company’s top execs that they would likely back Microsoft if a proxy fight came to pass. I really don’t think such a battle should happen, of course, as such a fight seems like it would only benefit the party that the pair should be concentrating on fighting: Google. But it is interesting that such disgruntlement is coming from institutional investors, who are usually exceedingly and excessively polite to the brass in companies they hold stakes in. more
Andy Beal's not surprised:
Microsoft has no plans to raise its $44.6 billion bid for Yahoo ... Why would it? Since its original bid, Yahoo’s not found anyone to counter-offer and hasn’t shown any signs that it’s on the verge of a turnaround in fortunes. Microsoft’s like a deadly spider that’s caught an insect in its web. No need to be hasty, just let the insect tire itself out, then move in for the kill. more
Rob Hof huffs:
’m not sure why Microsoft feels the need to plant this signal now. Maybe it’s the prospect of watching Google, which just closed its DoubleClick acquisition, steal a march on online display ads while Steve Ballmer twiddles his thumbs waiting for a phone call from Jerry Yang. Maybe Microsoft figures Yahoo’s just-closed first quarter will be awful enough that $31 a share will start to look pretty good to Yahoo’s board. But I’m still betting some kind of sweetened offer—even an all-cash offer for the original $31—will do the trick eventually. more
Douglas McIntyre agrees:
Microsoft understands full well that it has Yahoo! in a corner and that there is no need to be generous. Yahoo!'s shares traded at $19 just two weeks before the buy-out letter. That means if it walks away, its stock could go down by a third. Its board is not going to stand by and be sued by large institutional shareholders. Yahoo! has shopped itself aggressively to News Corp (NYSE: NWS) and Time Warner (NYSE: TWX). Given that Mr. Murdoch is known as a man who never saw a risk he did not like, the fact that he made no bid speaks volumes. more
Ashkan Karbasfrooshan cuts to the chase:
Let’s face it: Yahoo! has messed up the handling of this offer almost as badly as it’s messed up operationally. I’ve been harsh on Yahoo!, but not as harsh as investors have been. Alas, I think a major issue for companies large and small is the difference between having a sense of urgency and being in panic mode. In life, sports, etc., being in panic mode is a sure fire recipe for disaster. You see it in sports all the time: company is sitting on a 3-0 lead, they give up a goal… then next thing you know, they start to worry and in goes a second goal. Before they know it, the game is tied 3-3… they go on to lose 5-3 with the fifth goal going in the empty net. By game’s end, the players ask: what happened?. more
And finally...

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Richi Jennings is an independent analyst/adviser/consultant, specializing in blogging, email, and spam. A 20 year, cross-functional IT veteran, he is also an analyst at Ferris Research. You too can pretend to be Richi's friend on Facebook, or just use boring old email: blogwatch@richi.co.uk.

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