Microsoft Withdraws Yahoo Bid

About three months ago, Microsoft made a bid for Yahoo of $29.40 a share at a time when Yahoo’s stock was trading at $19.20 a share. Yahoo hesitated, and after a time, Microsoft relented and upped its offer to $33 a share, for a total of $47.5 billion. Yahoo decided it wanted $37 a share, or about $53 billion. Microsoft has dropped the whole idea now, and Yahoo’s stock is likely to head back into the teens, a fine example of the Wall Street adage, “Bulls make money, bears make money, hogs get slaughtered.”

The idea behind the acquisition was to give Microsoft enough internet presence to take on Google. Without Yahoo, it remains a tough thing for Microsoft to achieve. Steve Ballmer, Microsoft’s CEO, said, “We have a talented team in place and a compelling plan to grow our business through innovative new services and strategic transactions with other business partners. While Yahoo would have accelerated our strategy, I am confident that we can continue to move forward toward our goals."

Mr. Yang is at odds with a great many analysts in claiming that Yahoo’s revenue is going up by 25% in 2009 and 2010. He thinks that internet ad revenue can rise if the company relies on more sophisticated tools for reaching the right audience for each ad. Yahoo Chairman Roy Bostock agrees, “Our solid results for the first quarter of 2008 and increased full year 2008 operating cash flow outlook reflect the progress the company is making.”

If they are wrong, and if the stock returns to the high teens over the summer, it wouldn’t be a surprise if Microsoft picked up its offer, but at the lower price of $29.40 or thereabouts. Messrs. Yang and Bostock now have to deliver, and they must deliver in the next two quarters, or their shareholders are going to rebel. Should that happen, they will likely wind up selling Yahoo for less than they could have had last week.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

Kensington Review Home