Microsoft bid for Yahoo makes no sense: Barron's
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Respected investment manager Joe  Rosenberg doesn't think much of Microsoft Corp's   unsolicited $42 billion bid for Yahoo Inc , nor the  financial savvy of its chief executive, Barron's reported in  its latest issue.
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Yahoo has not reached a decision about&#160;Microsoft&#39;s acquisition offer&#160;and is considering &quot;a wide range of potential strategic alternatives,&quot; Yahoo CEO Jerry Yang said in an e-mail to employees on Wednesday.In the e-mail, which was addressed to &quot;yahoos&quot; and filed with the U.S. Securities and Exchange Commission, Yang said the Yahoo board is still reviewing the deal and will &quot;take the time it needs to do it right.&quot;&quot;Our board is thoughtfully evaluating a wide range of potential strategic alternatives in what is a complex and evolving landscape,&quot; he wrote in the e-mail, typed in all lowercase letters.Microsoft made its unsolicited bid for Yahoo last Friday, offering to pay $44.6 billion for the company, or 62 percent over Yahoo&#39;s closing share price Thursday. The deal would greatly expand Microsoft&#39;s search and advertising business and could help it to compete better with Google online.Yahoo is understood to be lukewarm on the offer. The company hopes a rival suitor will emerge with a counteroffer or that it can forge a deal with Google that will allow it to remain independent, according to Wednesday&#39;s Wall Street Journal newspaper, which cited unnamed sources.However, analysts have said it is unlikely another company could match Microsoft&#39;s sizeable offer, and a business deal between Yahoo and Google could raise antitrust concerns because of Google&#39;s already dominant market position.In the e-mail, Yang thanked the Yahoo staff for staying focused on their work amid the turmoil. The company has hired &quot;top advisors&quot; to assist it through the process and is focused on maximizing value for its shareholders, he said.
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Microsoft plans to intensify its pursuit of Yahoo this week when it authorizes a proxy fight to oust Yahoo&#39;s board, meaning the 19-day old acquisition attempt will soon turn a darker shade of ugly, according to The New York Times.The proxy fight will cost Microsoft between $20 million and $30 million, much less than having to significantly up its offer for Yahoo, The Times reported Tuesday morning, quoting anonymous sources.The aggressive move would be consistent with Microsoft&#39;s statements hinting that it&#39;s willing to acquire Yahoo via hostile means if necessary.&#160;Yahoo&#39;s board rejected unanimously Microsoft&#39;s offer, calling it too low.Yahoo declined to comment about The Times&#39; article. Microsoft didn&#39;t immediately reply to requests for comment.On Feb. 1, Microsoft offered to pay $31 per share for half of Yahoo&#39;s outstanding shares in cash -- about $22.3 billion -- and 0.9509 of a Microsoft share for the other half. Microsoft&#39;s half-cash/half-stock offer to Yahoo was valued at about $44.6 billion at the time it was made; Yahoo&#39;s share price was $19.18 at the time.However, the bid&#39;s value has dropped to about $41 billion as the price of Microsoft&#39;s stock has fallen from $32.60 at the time the offer was made. It was trading at $28.77 on Tuesday morning. At the same time, Yahoo&#39;s stock has surged, erasing the bid&#39;s original premium. It was trading at $29.32 on Tuesday morning.In the proxy fight, Microsoft would hire a proxy solicitor to urge Yahoo investors to kick out board directors, The Times reported, adding that all Yahoo directors are up for nomination this year.After investing heavily in recent years in its Internet business and failing to achieve its desired goals, Microsoft is now convinced that it must acquire Yahoo in order to compete against common rival Google, especially in search advertising, the largest online advertising market pie, and one that Google dominates.As of the end of 2007&#39;s third quarter, Google had almost 25 percent of the U.S. Internet advertising market, up from almost 21 percent in 2006&#39;s third quarter, according to IDC. Meanwhile, Yahoo&#39;s share during this period dropped to 11.3 percent from 12.3 percent, while Microsoft&#39;s declined to 5.2 percent from 5.8 percent, according to IDC.In search usage, Google held a commanding 62.4 percent of queries worldwide, followed by Yahoo in a very distant second place with 12.8 percent, according to comScore. Microsoft ranked fourth with 2.9 percent, after Baidu (5.2 percent).Unquestionably, Yahoo would be a major win for Microsoft in the display ad market. In November, Yahoo ranked first in the U.S. in display ad impressions with a 19 percent share, while Microsoft came in third with 6.7 percent, after News Corp.&#39;s Fox Interactive (16.3 percent), according to comScore. Google took seventh place with 1 percent.However, skeptics question whether acquiring Yahoo will yield the expected benefits, considering the complexity of integrating the two businesses, cultures and technology platforms and the fact that Yahoo has had severe internal problems that have stumped its most seasoned executives. In addition, some aren&#39;t sure that a unified Microsoft/Yahoo will have a better chance to compete against Google.Yahoo co-founder and CEO Jerry Yang, who is also on the board of directors, has been urgently looking for and considering alternatives to a Microsoft acquisition soon after Ballmer and company made their bid.Reports -- all attributed to anonymous sources in various media outlets -- have emerged in the past two weeks that Yang has held conversations with Google, AOL and News Corp., exploring various deals that would allow him to reject Microsoft&#39;s offer.The key is that the shareholder value created by a competing deal would have to at least match the value of Microsoft&#39;s deal. Otherwise, Yahoo would make itself liable to shareholder lawsuits that alleged the board had failed to perform its fiduciary duty.So far, as experts have analyzed the potential value to Yahoo of outsourcing its search advertising to Google, merging with AOL or selling a 20 percent stake to News Corp. in exchange for MySpace, the consensus has been that none of those scenarios comes close to matching Microsoft&#39;s offer.
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What would Microsoft gain by swallowing Yahoo for a proposed $44.6 billion? CNET News.com contrasts combined stats with Google's.
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Fearful that software giant plans to "steal" company The Wall Street Journal is reporting that the board at Yahoo plans to reject Microsoft's unsolicited $44.6 billion takeover offer.â¦
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Yahoo Inc on Monday rejected Microsoft Corp's unsolicited takeover bid, currently valued at $42 billion, as too low, saying its board had unanimously concluded it was not in the best interests of shareholders.
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In a letter to Yahoo&#39;s board, Microsoft CEO Steve Ballmer&#160;offered to acquire the company&#160;for a per-share price of $31 in cash or 0.9509 of a share of Microsoft common stock -- a 62 percent premium above the Jan. 31, closing price of Yahoo -- and cited the broad range of ways in which the companies might work together to create a more effective competitor in the online marketplace. Below is the text of the letter that Microsoft sent to Yahoo&#39;s Board of Directors:January 31, 2008Board of DirectorsYahoo! Inc.701 First AvenueSunnyvale, CA 94089Attention: Roy Bostock, ChairmanAttention: Jerry Yang, Chief Executive OfficerDear Members of the Board:I am writing on behalf of the Board of Directors of Microsoft to make a proposal for a business combination of Microsoft and Yahoo!. Under our proposal, Microsoft would acquire all of the outstanding shares of Yahoo! common stock for per share consideration of $31 based on Microsoft&#39;s closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of Microsoft common stock. Microsoft would provide each Yahoo! shareholder with the ability to choose whether to receive the consideration in cash or Microsoft common stock, subject to pro-ration so that in the aggregate one-half of the Yahoo! common shares will be exchanged for shares of Microsoft common stock and one-half of the Yahoo! common shares will be converted into the right to receive cash. Our proposal is not subject to any financing condition.Our proposal represents a 62% premium above the closing price of Yahoo! common stock of $19.18 on January 31, 2008. The implied premium for the operating assets of the company clearly is considerably greater when adjusted for the minority, non-controlled assets and cash. By whatever financial measure you use - EBITDA, free cash flow, operating cash flow, net income, or analyst target prices - this proposal represents a compelling value realization event for your shareholders.We believe that Microsoft common stock represents a very attractive investment opportunity for Yahoo!&#39;s shareholders. Microsoft has generated revenue growth of 15%, earnings growth of 26%, and a return on equity of 35% on average for the last three years. Microsoft&#39;s share price has generated shareholder returns of 8% during the last one year period and 28% during the last three year period, significantly outperforming the S&amp;P 500. It is our view that Microsoft has significant potential upside given the continued solid growth in our core businesses, the recent launch of Windows Vista, and other strategic initiatives.Microsoft&#39;s consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers. In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that &quot;now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction.&quot; According to that letter, the principal reason for this view was the Yahoo! Board&#39;s confidence in the &quot;potential upside&quot; if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved.While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence. Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:Scale economics: This combination enables synergies related to scale economics of the advertising platform where today there is only one competitor at scale. This includes synergies across both search and non-search related advertising that will strengthen the value proposition to both advertisers and publishers. Additionally, the combination allows us to consolidate capital spending.Expanded R&amp;D capacity: The combined talent of our engineering resources can be focused on R&amp;D priorities such as a single search index and single advertising platform. Together we can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in search, and new advertising platform capabilities. Many of these breakthroughs are a function of an engineering scale that today neither of our companies has on its own.Operational efficiencies: Eliminating redundant infrastructure and duplicative operating costs will improve the financial performance of the combined entity.Emerging user experiences: Our combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms is greatly enhanced.We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company with exceptional display and search advertising capabilities. You should also be aware that we intend to offer significant retention packages to your engineers, key leaders and employees across all disciplines.We have dedicated considerable time and resources to an analysis of a potential transaction and are confident that the combination will receive all necessary regulatory approvals. We look forward to discussing this with you, and both our internal legal team and outside counsel are available to meet with your counsel at their earliest convenience.Our proposal is subject to the negotiation of a definitive merger agreement and our having the opportunity to conduct certain limited and confirmatory due diligence. In addition, because a portion of the aggregate merger consideration would consist of Microsoft common stock, we would provide Yahoo! the opportunity to conduct appropriate limited due diligence with respect to Microsoft. We are prepared to deliver a draft merger agreement to you and begin discussions immediately.In light of the significance of this proposal to your shareholders and ours, as well as the potential for selective disclosures, our intention is to publicly release the text of this letter tomorrow morning.Due to the importance of these discussions and the value represented by our proposal, we expect the Yahoo! Board to engage in a full review of our proposal. My leadership team and I would be happy to make ourselves available to meet with you and your Board at your earliest convenience. Depending on the nature of your response, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!&#39;s shareholders are provided with the opportunity to realize the value inherent in our proposal.We believe this proposal represents a unique opportunity to create significant value for Yahoo!&#39;s shareholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to users and advertisers. We hope that you and your Board share our enthusiasm, and we look forward to a prompt and favorable reply.Sincerely yours,/s/ Steven A. BallmerSteven A. BallmerChief Executive OfficerMicrosoft Corporation
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Google Inc  fired back on Sunday at Microsoft Corp's  $44.6 billion bid to acquire Yahoo Inc , accusing Microsoft of seeking to extend its computer software monopoly deeper into the Internet realm.
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Mike Arrington is doing a great job of laying out the options for Yahoo wrt Microsoft's offer to buy them out. He's written two pieces that helped put it together for me. Mike clearly has great sources in the investment banking community and among potential buyers of Yahoo, and is actively talking with them. He's got a business lawyer's mind and, as you know I'm sure, he's spent the last few years immersed in web applications.  Bottom-line: Yahoo's three choices are: 1. Tough it out alone. 2. Sell advertising rights to Google. 3. Accept Microsoft's offer.  Mike argues that option 1 would result in shareholder lawsuits and in the end would get Yahoo nowhere because they'd end up selling to Microsoft eventually. Option 2 would enable them to pay a major cash dividend to their shareholders, making up for the lost windfall coming from Microsoft's offer. Options 2 and 3 have the risk of being rejected by government regulators.  Now, as a member of Yahoo's developer community, and generally a respector of Yahoo (is that a word) -- I say take the deal. I don't think Yahoo has ever had leadership that has been up to navigating the treacherous waters of tech industry economics and politics. At least with the Microsoft acquisition they would get one -- Ray Ozzie. He's a guy you can sit across the table from and plot something out and he can deliver. I've had many good meetings with Yahoo people, but rarely have they resulted in action. From my own selfish point of view, Microsoft owning Yahoo might mean that Ray makes more trips to the Bay Area (figuratively) and when he sits down, we can talk about new open interfaces and developer programs for Yahoo properties. I've read most of the commentary on the Yahoo deal, and the other piece that made an impression was Mark Cuban's. He says that Yahoo should accept the Microsoft deal because it would give them the breathing room they need re Wall Street. He argues that the market has always allowed Microsoft to sink resources into developing markets, and that's exactly what Yahoo needs to become the organization that it has been trying to be. Instead, the market treats Yahoo as a comp to Google, but Yahoo doesn't have the economics of Google, so that's, long-term, a losing battle.  There's one more reason I think Yahoo should sell to Microsoft -- the fatigue of the people. The company has been wobbly too long. If they don't take the Microsoft offer it's going to be a long wobbly decline and the shareholders will be right to be angry. Here's their chance to get out, it's time, so just do it.
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Yahoo Inc's board of directors is to meet on Friday to discuss Microsoft Corp's $44.6 billion buyout offer, the TechCrunch blog said, citing unnamed sources.
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Microsoft's offer to buy Yahoo for $44.6 billion is adding more fuel to the merger craze fire. But such mega-mergers often have less than stellar results, as four examples show.
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BOSTON/SEATTLE  - Yahoo Inc's   second-biggest shareholder urged Microsoft Corp  to  raise its $42 billion bid for the Web pioneer and warned Yahoo  it has few options other than to accept, raising pressure for  them to seal a deal.
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SAN FRANCISCO -- Yahoo Inc. spurned Microsoft Corp.'s $44.6 billion takeover bid as inadequate Monday without explaining how its management will match the payoff that the slumping Internet icon's shareholders would have received had the unsolicited offer been accepted.
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Most of Yahoo Inc's  top  institutional shareholders may be more interested in making  sure Microsoft Corp  does not overpay for the Web  pioneer, because they have more money invested in the bigger  software maker, a research report said on Friday.
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NEW YORK/SAN FRANCISCO  - Yahoo Inc is reportedly in talks with News Corp to combine their Web properties, but Wall Street analysts rained scorn on the likelihood of a deal that can fend off Microsoft Corp's $42.1 billion bid for Yahoo.
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Microsoft Corp  on Friday said  it had offered to acquire Yahoo Inc  in a proposed cash  and stock deal valued at $44.6 billion.
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Skepticism about Microsoft Corp's   prospects of buying Yahoo Inc  may be waning,  as short sellers appear to have backed away in the last few  days from bets against Yahoo's stock rising.