Yahoo sees Microsoft deal price cheapen (and warningz)

In a hostile takeover of IT Blogwatch, investors in Yahoo! and Microsoft quake in their boots at things to come. Not to mention some rather odd warning triangles...

Peter Henderson reports

Skeptical investors are trading Yahoo Inc. shares at a 6.5% discount to Microsoft Corp.'s unofficial offer price, but some Wall Street analysts expect the software giant to raise its bid ... Microsoft shares have dropped about 12% since that offer was made, potentially cutting the value of the half-cash, half-stock offer ... Yahoo Chief Financial Officer Blake Jorgensen canceled a presentation, previously scheduled for [Wednesday], at a Thomas Weisel Partners Group Inc. technology investor conference in San Francisco. [more]

Todd Bishop adds:

In a new internal e-mail, Yahoo CEO Jerry Yang seeks to keep the company's employees focused on its strategy despite the uncertainty created by Microsoft's unsolicited acquisition bid. He also updates them on the status of the Yahoo board's deliberations, saying that it's "thoughtfully evaluating a wide range of potential strategic alternatives in what is a complex and evolving landscape" and that it is "going to take the time it needs to do it right." [more]

John Murrell quips:

Whatever conference room ... Yang and his lieutenants are huddling in these days ... is not a happy place to be. Yahoo’s hopes for rescue by a white knight are dwindling ... and the longer things drag out, the happier Google is. [more]

Cyril Kowaliski:

Microsoft's share price has dropped from $33 to $29 since the bid was announced, so Microsoft's offer now stands at an effective $29.50 per share. In the meantime, Yahoo's share price has climbed to almost exactly $29 since the offer was made. [more]

Henry Blodget:

Microsoft could soon find itself in a sticky situation: The more Microsoft's stock drops, the more expensive the deal gets--because the company will have to reset the exchange rate to get the take-out value back to $31 a share. In so doing, it will increase dilution, leaving its existing shareholders holding a smaller percent of the combined company. Microsoft shareholders are already unhappy with the proposal--and they're only going to get more unhappy as the deal gets more expensive. The more unhappy they get, the more the stock will drop, and the more the stock drops, the more expensive the deal will get, and so on. [more]

Michael Arrington:

There will almost certainly be no White Knight or other buyout offer coming to the table - the sorry state of the debt markets is assuring that. Yahoo was hoping for a competing bid, any competing bid, if only to boost Microsoft’s offer to the $40 range. With no competing offer, Microsoft has no need to increase what they’ve put on the table. That means it’s decision time ... Whatever happens, the salad days for Yahoo are long gone ... they did not execute the way Google did. [more]

Mark Evans offers a contrarian view:

If you believe the adage that anything is for sale at the right price, does that apply to Google? ... Google’s controlling shareholders, Larry Page and Sergey Brin, are committed for the long-term. Who knows, maybe a few bad quarters will suddenly make Google affordable to the point where Rupert Murdoch or Barry Diller become curious. [more]

Josh Kopelman has some interesting data:

In November ... I decided to test Facebook's targeting mechanism by running targeted ads to employees of ... Yahoo and Microsoft ... [last week] I wondered if YHOO/MSFT employees were indeed more likely to "look around" for new jobs -- and if so, how much more. Since I had baseline data from just 90 days ago, I decided to run the ads again ... On the Yahoo side, there was a 260% increase in clickthrough rate ... That is not surprising. But ... Microsoft's clickthrough rate increased from 0% to 1.19%. Maybe it's not just Microsoft's shareholders who are unhappy. [more]

And finally...

  • Danger! [you may find one or two of these a bit off-color]

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Richi Jennings is an independent analyst/adviser/consultant, specializing in blogging, email, and spam. A 22 year, cross-functional IT veteran, he is also an analyst at Ferris Research. You too can pretend to be Richi's friend...

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