Roundtable: Four experts dissect the Microsoft bid for Yahoo
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It may be among one of the historical milestones in the history of technology, and it may never actually become a done deal. Why is Microsoft risking so much, what could it gain even by losing, and what does it really think it would gain by winning?
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SAN FRANCISCO/NEW YORK  - Yahoo Inc  would  consider a business alliance with Google Inc  as one  way to rebuff a $44.6 billion takeover proposal by Microsoft, a  source familiar with Yahoo's strategy said on Sunday.
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Microsoft's proposal to buy Yahoo for $44.6 billion raises many questions. Will Yahoo accept the offer? Can Microsoft win the approval of antitrust authorities in the United States and the European Union? Can the company digest an acquisition this large without suffering an AOL-Time Warner-like...
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Yahoo&#39;s rejection of Microsoft&#39;s acquisition bid&#160;is likely a negotiating strategy to elicit a higher offer and shouldn&#39;t be seen as an attempt to resist a deal at all costs, according to analysts.Neither Microsoft nor Yahoo has many options to improve their position in online services and advertising, and combining forces is their best bet against common rival Google, analysts said.&quot;It&#39;s part of a larger negotiation that&#39;s occurring. Clearly, Yahoo should be and is seeking a higher bid, and this is part of that process,&quot; said Clayton Moran, a financial analyst with Stanford Group.Yahoo is unlikely to find a company willing to bid as much as Microsoft for it, while Microsoft will not be able to attain its Internet goals by acquiring a company other than Yahoo. &quot;While they need to negotiate and go through the process, at the end of the day this deal will happen,&quot; Moran said.On Monday, Yahoo rejected Microsoft&#39;s bid, saying it undervalues the company. Microsoft offered to pay $31 for half of Yahoo&#39;s outstanding shares and 0.9509 of a Microsoft share for the other half. At the time of the offer, Microsoft&#39;s stock stood at $32.60 and the bid was valued at $44.6 billion, a 62 percent premium over Yahoo&#39;s stock price at the time. However, the bid&#39;s value has dropped with Microsoft&#39;s sliding stock price, which at press time was $28.10. At the same time, Yahoo&#39;s stock price has risen from a close of $19.18 on the day before the bid to $29.75 at press time.Moran predicted that Microsoft will adjust its offer so that it ends up at $35 per share, probably increasing the fixed cash portion and reducing the variable stock portion so that value is less vulnerable to Microsoft stock fluctuations. A $35-per-share offer would be a midpoint between the original bid and the $40 per share Yahoo is reportedly seeking.&quot;We continue to view a Yahoo sale to Microsoft as the most likely outcome,&quot; Citigroup financial analysts wrote in a note published Sunday after press reports over the weekend that Yahoo would reject the Microsoft bid. The rejection isn&#39;t surprising but rather is consistent with Yahoo&#39;s board job to &quot;extract maximum value&quot; for shareholders, the Citigroup analysts wrote.Yahoo has reportedly held talks with Google and AOL to explore alternatives to a Microsoft acquisition. One scenario being floated would be for Yahoo to outsource its search advertising business to Google, while another, reported Monday by The Times of London, has Yahoo and Time Warner&#39;s AOL discussing a possible merger.However, neither option would match the potential benefits of an acquisition by Microsoft, Moran said. &quot;A combined Yahoo-AOL wouldn&#39;t be particularly strong, and Yahoo&#39;s stock wouldn&#39;t react favorably to that deal,&quot; Moran said. A search partnership with Google would boost Yahoo&#39;s revenue, but it wouldn&#39;t address larger problems within the company, he said.For Moran, if Yahoo has approached AOL, it has done so probably to send a message to Microsoft that it has other options and that Microsoft has to sweeten its offer. Meanwhile, Google&#39;s intervention is probably directed at complicating and lengthening the negotiation process between Microsoft and Yahoo and thus delaying the formation of a stronger rival, Moran said.While merging with AOL is unlikely to give Yahoo the boost it needs, such a deal would probably be more palatable to Yahoo&#39;s management because Yahoo would be the strongest party in the fusion, according to industry analyst Greg Sterling of Sterling Market Intelligence.&quot;Yahoo sees its own demise in a Microsoft acquisition. My sense is that Yahoo&#39;s management believes that Yahoo&#39;s soul wouldn&#39;t survive as part of Microsoft,&quot; Sterling said.At this point, the situation is very complicated for both Microsoft and Yahoo. If Yahoo is intent on fending off Microsoft&#39;s advances at all costs, Microsoft could opt to walk away empty-handed and face a public embarrassment, or attempt a hostile takeover, which could alienate and scare away Yahoo employees it would want to retain, Sterling said.At the same time, Yahoo can&#39;t simply wave away a generous Microsoft offer if it doesn&#39;t have an alternative to it, Sterling said. &quot;There is a great deal at stake for both sides, and it&#39;s very complicated,&quot; he said.Microsoft declined to comment about Yahoo&#39;s rejection. AOL didn&#39;t immediately reply to a request for comment about its reported merger talks with Yahoo.
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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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More competition courtesy of the proposed Microsoft-Yahoo! combo?
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Microsoft faces financial and legal hurdles in its unsolicited bid for Yahoo. CNET News.com walks you through the potential steps.
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With Yahooâs board rejecting Microsoftâs bid, it will fall to Christopher P. Liddell, an outsider to the software industry, to plot Microsoftâs next steps in the bitter battle.
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Yahooâs board decided that Microsoftâs $44.6 billion hostile bid undervalues Yahoo, a person familiar with the matter said.
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Privacy groups are promising a fight before U.S. regulatory agencies if&#160;Microsoft&#39;s offer to buy Yahoo&#160;for $44.6 billion is accepted, and the deal could face significant hurdles in Europe as well.Microsoft announced that it&#160;sent an offer to Yahoo&#39;s board of directors&#160;on Thursday, going public with the news Friday morning. Immediately, the executive directors of the Center for Digital Democracy (CDD) and the Electronic Privacy Information Center (EPIC) said the acquisition would raise serious privacy concerns.CDD will press the U.S. Department of Justice, the Federal Trade Commission and Congress to &quot;scrutinize this deal and impose the needed safeguards for it -- and the industry,&quot; said Jeffrey Chester, CDD&#39;s executive director. CDD and EPIC tried to stop Google&#39;s proposed acquisition of online ad service DoubleClick on privacy grounds before the FTC last year, but the FTC approved the deal in December.The Microsoft-Yahoo deal, if consummated, would &quot;create a powerful interactive Internet duopoly in online media,&quot; Chester said. &quot;Google and Microsoft will have inordinate power to shape the online communications marketplace, including journalism, entertainment and advertising. There are consequences to democratic societies everywhere, as two digital gatekeepers are likely to control how the Internet and other interactive media evolve.&quot;The proposed deal also underscores a need for new laws or regulations that protect consumer data, Chester added. &quot;In an era when individuals are increasingly conducting their personal, social and political lives online, the corporations that control the digital experience will have a far-reaching influence over every aspect of society,&quot; he said. &quot;Consumers will be more vulnerable to having their personal information become the property of the GoogleClick&#39;s and Microhoo&#39;s.&quot;But the DOJ and FTC may have little grounds to oppose a Microsoft/Yahoo merger, said Professor Keith Hylton, who specializes in antitrust issues at the Boston University law school. While Microsoft and Yahoo compete in some areas, Microsoft could argue this a &quot;vertical&quot; merger that largely expands its online services, but largely doesn&#39;t eliminate competition, he said.&quot;I think Microsoft is trying to ramp up in the online services/online ad revenue business,&quot; Hylton said. &quot;Microsoft is a small player in that area, and Google is a big player. This is a merger of two firms trying to compete against a big monster out there -- Google.&quot;But the deal could face more hurdles in Europe. If the deal allows Microsoft to take components of Windows online, and &quot;in the process increases Microsoft&#39;s dominance of the market for PC operating systems,&quot; then the European Commission would have to prohibit the deal, said an antitrust lawyer in Europe who asked not to be identified.European Union merger rules prohibit dominant companies from increasing their dominance, the lawyer said.The combined company would likely have sell off an instant-messaging service, added a European Commission official familiar with the competition department. &quot;I can&#39;t see how Microsoft/Yahoo would be allowed to keep both instant-messaging services,&quot; said the official, who also asked not to be identified.Microsoft campaigned for federal regulators to block the Google-DoubleClick deal, partly on antitrust grounds. But Google argued the acquisition would join two companies operating in different online markets.This week, Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of Columbia extended antitrust scrutiny of Microsoft for two years. But the U.S. government&#39;s antitrust case against Microsoft was based on its desktop and server operating systems, not online services. If anything, the old antitrust case could help Microsoft make the case for approval of its acquisition of Yahoo, Hylton said.&quot;I assume Microsoft people can say, &#39;Look, we&#39;re already under a microscope, doesn&#39;t this suggest we&#39;re less likely to do anticompetitive things?&#39;&quot; Hylton said.But a consolidating online market means users will have their data held by a small number of companies, said Professor Joseph Turow, at University of Pennsylvania school of communication.&quot;Microsoft&#39;s decision to buy Yahoo is a direct result of the decision by the FTC to allow Google to purchase DoubleClick,&quot; he said. &quot;It is further evidence that despite the appearance of unlimited choice in the new media environment, people&#39;s activities will be tracked and shaped by a very small number of companies who care far more about surveillance and targeted advertising than the public interest.&quot;The public needs to demand privacy scrutiny in the proposed deal, he said. &quot;The federal government, which should have been the guardian of the public interest, has dropped the ball.&quot;(Additional reporting by Paul Meller in Brussels.)
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Yahoo Inc  is  reportedly in talks with News Corp (NWSa.N) 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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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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If the massive deal does go through, Google will at last face a major threat to fend off. Technical integration between Microsoft and Yahoo could be a nightmare, according to some analysts. Yet customers might stand to gain.
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Yahoo&#39;s Chairman Roy Bostock is leading a group of the company&#39;s board members in favor of accepting&#160;Microsoft&#39;s unsolicited $44.6 billion takeover bid,&#160;according to a new report.The informal group headed by Bostock also includes other board members and billionaire investor Ron Burkle, according to the report in the New York Post, which quoted unnamed sources close to the situation. Board members Eric Hippeau, a managing partner at Softbank Capital, and Robert Kotick, CEO of Activision Publishing, are standing behind Yahoo CEO Jerry Yang, who does not want to accept Microsoft&#39;s offer.On Monday,&#160;Yahoo&#39;s board rejected Microsoft&#39;s offer,&#160;saying it undervalued the company.According to the Post, the discord revolves around Yang and his followers who are so opposed to selling the company to Microsoft that Bostock and his group fear they will act out of emotions rather than their fiduciary duty to Yahoo shareholders. Such an action could expose the board to lawsuits by shareholders.Yang sent a letter to shareholders&#160;Wednesday night, saying that Microsoft&#39;s bid substantially undervalues the company and that Yahoo is positioned to take advantage of growth in the online advertising market.Yahoo could not be reached for comment.Computerworld is an InfoWorld affililate.
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The US Congress Judiciary Committee will hold a hearing next week to scrutinize Microsoft's multi-billion-dollar bid to acquire Yahoo in order to take on Internet goliath Google.
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SAN FRANCISCO/NEW YORK  - Yahoo Inc would consider  a business alliance with Google Inc as one way to rebuff a  $44.6 billion takeover proposal by Microsoft, a source familiar  with Yahoo's strategy said on Sunday.
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Yahoo&#39;s board of directors plans to reject&#160;Microsoft&#39;s unsolicited $44.6 billion takeover bid,&#160;The Wall Street Journal reported Saturday, citing as its source &quot;a person familiar with the situation.&quot;According to the report, the source said the Yahoo board has determined that the $31-per-share offer &quot;massively&#160;undervalues&quot; the online services company. In addition, Microsoft&#39;s buyout bid doesn&#39;t take into consideration the business risks that Yahoo would be taking if it entered into an agreement that in the end might not be approved by government regulators, the source told the Journal.According to the Journal, Yahoo&#39;s board intends to send Microsoft a letter on Monday, detailing its position.A Yahoo spokeswoman declined to comment on the report today. &quot;We are not providing details on the board&#39;s review process,&quot; she wrote. &quot;Yahoo&#39;s board is carefully and thoroughly evaluating the Microsoft proposal in the context of all of the company&#39;s strategic alternatives, and will pursue the best course of action to maximize long-term value for shareholders.&quot;Microsoft, which announced its offer for Yahoo on Feb. 1, couldn&#39;t be reached for comment today. The offer is a combined cash-and-stock deal; in announcing the bid, Microsoft said Yahoo shareholders could choose to receive either cash or Microsoft stock, although it added that the total consideration would be equally split between the two forms of payment.Yesterday, published reports said that Yahoo&#39;s board was meeting to discuss the offer.Yahoo is still evaluating other options,&#160;including a search advertising partnership with Google, according to today&#39;s report by the Journal. It also may still be open to a longer negotiation with Microsoft: The Journal said it was told by the source that Yahoo would be unlikely to consider any offers below $40 per share.If so, that would require Microsoft to raise its original offer by at least 29 percent, or about $13 billion. In other words, the cost for Microsoft to become a more credible rival to Google in the search and online advertising markets could start at about $57.6 billion.Google has been doing what it can to scuttle the Microsoft takeover bid, including playing the antitrust card by asking, in a blog post by one of its executives last Monday, whether Microsoft might &quot;attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?&quot;Microsoft quickly shot back, issuing a statement saying that a combination of it and Yahoo merger would &quot;create a more competitive marketplace.&quot;(Eric Lai contributed to this story.)Computerworld is an InfoWorld affiliate.