Microsoft Bids for Yahoo: Do Two Losers Make a Winner?
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The key to Microsoft's proposed $44.6 billion acquisition of Yahoo is both companies' desire to build an advertising platform that can compete with Google's AdWords.
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SEATTLE/NEW YORK  - Yahoo Inc rejected Microsoft  Corp's unsolicited $41.6 billion takeover offer as too low on  Monday, forcing the software maker to either sweeten the bid or  adopt a hostile approach to clinch a deal.
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Microsoft may end up having to raise the amount it is willing to pay for Yahoo if the software company&#39;s stock continues to drop while Yahoo&#39;s continues to rise.In the week since&#160;Microsoft made its surprise bid for Yahoo, the price Microsoft is willing to offer the Internet company has dropped by nearly 7 percent as Microsoft&#39;s share price has fallen. In the meantime, Yahoo&#39;s shares have risen in value, trading at nearly the $31 per share Microsoft was willing to pay, making the company potentially worth a higher asking price and the offer vulnerable to higher bids.Microsoft announced its offer to acquire Yahoo on Feb. 1, saying it would pay $31 for half of Yahoo&#39;s outstanding shares 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.The stock half was based on the $32.60 Microsoft share price at the end of Thursday, the day before the deal was announced last Friday. Yahoo&#39;s share price at the close of market on Jan. 31 was $19.18. The cash half of the deal was $22.3 billion, which, when considering Microsoft agreed to pay $31 per share, is based on half of Yahoo&#39;s outstanding shares being 719,354,838.Microsoft has not publicly said what number of outstanding shares it has based its offer price on. In its form 10-Q filed Nov. 9, 2007, Yahoo&#39;s outstanding shares as of Oct. 31, 2007, were 1,336,444,034. However, cutting that number in half and multiplying it by Microsoft&#39;s $31 per-share offer adds up to $20.7 billion, not the $22.3 billion in cash Microsoft is offering.By Friday afternoon, Microsoft&#39;s share price was down about 12 percent at $28.40. Based on that price and assuming that 719,354,838 is the other half of Yahoo&#39;s outstanding shares -- and then factoring in the $22.3 billion cash offer -- the amount of the bid stands at $41.7 billion.Microsoft&#39;s stock is likely down due to its offer for a number of reasons, said a financial analyst who was interviewed Friday and asked not to be named. Investors may not be happy with the money Microsoft is willing to pay for Yahoo, and&#160;strategic questions surrounding how the companies will pull off a merger&#160;successfully also are driving the stock down.Moreover, the deal is expected to dilute Microsoft&#39;s earnings in fiscal 2009 and perhaps even in fiscal 2010, so the company&#39;s earnings predictions likely will come down, the analyst said.On the other hand, Yahoo&#39;s stock has been buoyed by speculation there could be other, higher bidders for the company now that Microsoft has shown its hand. Yahoo stock has risen nearly 34 percent since the deal was announced; on Friday afternoon it was trading at nearly $29, which is only slightly lower than the current per-share for the stock half of Microsoft&#39;s offer.Microsoft has declined to comment about whether it will adjust its offer so that the final amount of the deal will be the original $44.6 billion offered. The cash half for the time being remains the same, sources close to the company said Friday. However, this could change in last-minute dealings if Microsoft&#39;s stock continues to lose value while Yahoo&#39;s rises, and other companies offer competitive bids for Yahoo in the meantime.
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Out Googling Google on bespoke scale Comment Should Microsoft's bid for Yahoo! go through, the combined company would face one very major infrastructure question - how far is it willing to go in the war against Google?â¦Learn &amp; Contribute, Live &amp; Online - The Register Debates Green Computing
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Yahoo Inc is set to reject Microsoft Corp's unsolicited bid, now worth $42 billion, as too low, a source familiar with the situation told Reuters on Saturday -- the first clear signal the board might be prepared to negotiate and sell the Internet media giant.
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Microsoft Corp.'s $41 billion takeover bid appears to have backed Yahoo Inc. into a corner, leaving the struggling Internet pioneer with the unpleasant choice of selling to a detested rival or pursuing other agonizing alternatives likely to require the help of an even fiercer foe, Google Inc.
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Microsoft may pay more !!!!! Yahoo! shares are worth more than Microsoft offered to pay for them last week. Even though when Microsoft made its offer to buy Yahoo! it included a 62 per cent premium Yahoo! shareholders are now better off selling their shares on the open market.â¦
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Yahoo Inc  on Monday rejected  as too low Microsoft Corp's  unsolicited $41.4 billion  takeover offer, a move viewed by Wall Street as the first salvo  in an effort to get the software maker to raise its bid.
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Microsoft has offered to buy Yahoo for around $44.6 billion in cash and shares, to better compete with Google in the market for online services.The market for online advertising is increasingly dominated by one player, Microsoft said, and merging with Yahoo will allow it to offer a competitive alternative.Microsoft expects the market for online advertising to almost double in size over the next three years, from $40 billion in 2007 to $80 billion by 2010. A merger will allow it to realize economies of scale and reduce capital costs as it addresses this market, it said.&quot;The combination of these two great teams would enable us to jointly deliver a broad range of new experiences to our customers that neither of us would have achieved on our own,&quot; said Ray Ozzie, chief software architect at Microsoft, in a statement.Microsoft expects to cut costs by $1 billion a year by realizing synergies with Yahoo in four areas: obtaining economies of scale as its audience increases; combining its research and development efforts with Yahoo&#39;s to innovate faster; eliminating operational redundancy to cut costs, and pooling expertise to innovate in video and mobile.The companies will work together to develop the merger plan, Microsoft said.It intends to pay key Yahoo engineers and other staff to stay following the merger.The offer represents a 62 percent premium over Yahoo&#39;s closing price on Thursday. Microsoft expects to receive all necessary approvals in the second half of this year.
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Microsoft Corp   offered to buy Yahoo Inc  for $44.6 billion, in a bold  bid to transform two ailing Internet businesses into a worthy  competitor for market leader Google Inc .
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Yahoo looks for alternatives to Microsoft's unsolicited $44.6 billion takeover bid, according to a report in the Los Angeles Times.
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What Yahoo! can do for Microsoft--and what it can't.
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Microsoft Corp. has offered to buy struggling internet search provider Yahoo for $44.6 billion, a merger that would combine two of the technology world's most well-known names into a potentially potent competitor for Google in the lucrative Web search and advertising market.
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A combination of Microsoft and Yahoo could reshape the Internet landscape for millions of Web users: Would the two companies join their online portals? Could they rethink the desktop computer to integrate Web content more directly?
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Software giant goes public with $44.6 billion bid for the Net pioneer. Will Yahoo succumb to the advances or rebuff Microsoft as it has before?
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With Yahooâs shares up slightly on the news that its board has officially rejected the $31 a share bid from Microsoft, it appears investors are betting the company is looking for a better deal.
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Business & money: Online search firm Yahoo, subject to takeover interest from Microsoft, tells of rival offer from News Corp