Microsoftâs Yahoo Pitch: Tired Giant Seeks Help
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If the proposed acquisition of Yahoo signals anything, it serves as a confirmation that Microsoftâs glory days are in the past.
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While Microsoft's Yahoo bid could help big online advertisers, smaller firms could face a crunch.
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Here's the note Yahoo CEO Jerry Yang sent to his troops Monday morning explaining how Microsoft's bid "substantially undervalues Yahoo."
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Yahoo's reputation for being an edgy startup is years out of date, while Microsoft is stodgy, but not as ossified as many might think. So, should the two merge, reconciling the corporate cultures many not be that difficult.
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Software giant Microsoft urged Yahoo to accept its "generous" 44.6 billion dollar takeover offer, adding it hoped to get a quick response from the major Internet player.
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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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Yahoo's fiercest competitor, Google, has raised concerns about the possibility of Microsoft's takeover. Google's motives, of course, are hardly pure.
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Announcements by Yahoo and Google show that Microsoft faces challenges to its business software franchises.
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Internet giant Google has urged regulators to scrutinise Microsoft's proposed move to buy Yahoo.
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Yahoo! and Microsoft need each other -- to populate the world with Googlephobes.
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Yahoo Inc.'s  Jerry Yang, newly named as chief executive, was found wanting on Wednesday by investors who sought quicker answers on how the Web media company would combat weak advertising growth.
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Microsoft was urged to raise its $42 billion bid for the Internet company and warned Yahoo that it has few options left.
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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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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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They both are aiming at Google but sit in different places--literally. Microsoft's work just begins with having to win over Yahoo's board and shareholders.
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Software giant makes bid in an attempt to challenge growing might of Google
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Googleâs management team has an obsession with Microsoft, and that oversensitivity may well cloud their reaction to the prospect of Microsoft buying Yahoo.