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Microsoft plans to take its bid for Yahoo directly to shareholders

In the world of mergers, there are numerous levels of "hostility" which characterize bids.  There are unilateral talks, mutually agreed upon, which are typically labeled as more germane, even if one company ends up absorbing the other. 

Then there are unsolicited bids, such as Microsoft's initial offer to Yahoo, which are often labeled as "partially hostile".  On the far end of the spectrum are "fully hostile" bids, in which one company tries to bypass another company’s executive and board leadership by offering a buyout directly to shareholders.  Among the famous examples of takeovers considered "hostile" was the HP and Compaq merger, which passed by a meager 51% margin in a shareholder vote.

Having been rejected by Yahoo's board, Microsoft commented that it was "unfair" that Yahoo did not embrace its "full and fair proposal to combine" the companies.  Now, Microsoft indicates it is planning to bypass the board and take the issue directly to a shareholder vote.  Microsoft states, "We are offering shareholders superior value and the opportunity to participate in the upside of the combined company. The combination also offers an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market."

Microsoft's statement continues, "The Yahoo! response does not change our belief in the strategic and financial merits of our proposal. As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal."

The decision by Microsoft to pursue a fully hostile takeover is truly a sign of the times at Yahoo.  Yahoo despite promising big changes continues to lose ground to Google in search engine market share, which in turn leads to sinking advertising profits.  The company dismissed 1,000 employees recently.  Yahoo aggressively acquired companies throughout last year, but its investments left it with little to show for it.

The hostile bid by Microsoft may nix a future board-arranged merger with Yahoo, but at this point it may be a moot issue.  If Microsoft has to, it can simply wait out the company until it falls further towards its demise, though it would prefer a quick merger while the company still has some vitality.

Yahoo has a lot to offer Microsoft.  Despite its dropping search engine share, Yahoo still represents a significant portion of the market and a major market name.  An alliance with Microsoft could establish a strong competitor to Google.  Further, Yahoo has a wealth of intellectual property, domain names, and other assets that could come in handy to an ever-evolving Microsoft.

The board is left to ponder Microsoft's words, and their significant decision -- as it may be their last.



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Why?
By MooseMuffin on 2/12/2008 11:00:02 AM , Rating: 2
Yahoo isn't as good as google and neither is MSN. Combining them doesn't change anything. All they're buying here is market share, and they'll continue to lose that.

It was dumb of MS to try to buy them and it was dumb of the struggling yahoo to decline. MS is going to end up regretting this if the hostile takeover goes through.




RE: Why?
By TheDoc9 on 2/12/2008 11:36:30 AM , Rating: 2
I agree, for the price they're paying this buyout is a bad idea.


RE: Why?
By wordsworm on 2/12/2008 11:59:09 AM , Rating: 2
Yahoo is better than google and MSN. That's why it's the world's #1 website. They made a good profit. It's less profit than what they made last year. Nonetheless, they're still the most visited website in the world, followed by Google.

If MS gets Yahoo, it'll be thanking its lucky stars that it got it so cheap.


RE: Why?
By BMFPitt on 2/12/2008 12:38:39 PM , Rating: 5
I've never liked Yahoo! for anything. The only thing I use it for are fantasy football leagues I can't convince to switch over to CBS Sportsline. MSN is a website I see about once per installation of Windows, if it comes up faster than I can type in www.mozilla.org.

On the other hand, iGoogle has broken the decade long stranglehold that about:blank has had on my homepage. It is incredibly useful in more ways that I can bother listing here, and I don't know what I'd do without it.


RE: Why?
By wordsworm on 2/13/2008 6:53:22 AM , Rating: 4
You never tried Yahoo chess, hearts, or any of the other games that they have? Yahoo Messenger, imo, is the best. Google's is interesting, but a far cry from the equivalent.

Until MSN put restrictions on their encyclopedia, I used it more than any other search engine. I don't use Yahoo's search engine, but that's a matter of habit. It seems to be every bit as good as Google's. Google's news page is kind of a joke. In fact, this whole thing has inspired me to take a second look at Yahoo's search and I've noticed some innovations that weren't there before. In fact, I'm a little bit surprised. I emailed them awhile ago a suggestion to create search subscriptions: example, I would like to get a certain notification of new websites that have been found by the search engine to do with specific subjects such as Vista 64 gaming. Unfortunately, I haven't heard back from them, and I don't expect I will. But for other things, I've found them to be surprisingly innovative and superior in quality to what I've become used to with Google. When's the last last time you really explored Yahoo's search engine? Check it out, it might convert you back to them.

The only thing that Yahoo doesn't do nearly as well is advertising. But as far as the end user is concerned, Yahoo has so much more value it's hard to imagine that Google has managed to compete.

As some have said, correctly, it's also about growth. Google is still growing, and Yahoo's growth is slower. A part of the reason for that is Yahoo's complex service. They're many things, and Google is very simple: it's just good at one thing - searching and in particular, advertising.

If you're on dialup, then Google is clearly the way to go. If you've got high-speed Internet, then Yahoo has much more to offer. You might say that this is the reason why it makes so much money. It doesn't 'clutter' its space with 20 ads.

If MS wins this bid, the entire net will be worse for it. I wish the anti-Scientologists were as active against this hostile takeover.

If MS wins, I think it will be a big loss in the long run for them. I don't mean it in the way some of you have - that Yahoo isn't worth anything, and that it might prove to be a liability - I mean that many people might hate MS more for taking their beloved Yahoo and ruining it. It will make MS look more like Borg than ever before. Maybe it would be enough to make more people turn their backs on them. I know I would be irate, and I'm already tempted to turn my back on MS. Also, their dominance on the OS market is starting to slip, and I can't help but think that slipping will accelerate regardless of Yahoo, but their actions could possibly make that acceleration occur even faster. This could very well be the kind of massive mistake that could bring a juggernaut like MS down to size. Of course, this could be wishful thinking on my part.


RE: Why?
By frobizzle on 2/12/2008 1:24:32 PM , Rating: 1
quote:
Nonetheless, they're still the most visited website in the world, followed by Google.

Where did you pull this bit of information from? Sources, please?


RE: Why?
By Trogdor on 2/12/2008 1:46:08 PM , Rating: 3
Take a gander on the right.

http://www.alexa.com/site/ds/top_500


RE: Why?
By borismkv on 2/12/2008 4:42:13 PM , Rating: 4
And then take a gander at the individual countries list. In the US, UK, and many, many, many more, Google is #1.

That said, I can't stand Yahoo. Their IM is a resource hog, and their search page is positively heaped with useless fecal matter.


RE: Why?
By Sazar on 2/12/2008 8:05:13 PM , Rating: 2
Um, who cares what rank something is in any given country?

The point is, GLOBALLY, Yahoo is the number 1 site.

The value of the company is what is key here from that standpoint and a re-vitalised focus where instead of Microsoft and Yahoo competing against each other, they combine forces, will perhaps allow them to come up with a more efficient model for online revenue gathering services.

Google is top dog in revenue generated. Yahoo and MS come behind and advertisers may like the fact that they have a larger canvas on which to display their fare.

Google has had a minor hiccup this past quarter, the first in it's history. Maybe just a sign of the times but it shows that it is not invincible. MS on the other hand handily beat forecasts.


RE: Why?
By borismkv on 2/13/2008 2:30:02 AM , Rating: 3
Oh...by the way. I did a little more digging on that site. Seems that the only reason Yahoo is on top is because they don't have as many regional versions as google does. Here's a cool trick. Open up the full top 500 list. Do a find for Yahoo. You'll find two listings for Yahoo in the top 100 web sites. Yahoo.com (#1) and Yahoo.co.jp(#18). Do another find for google. You'll find 24 regional versions of Google in the Alexa top 100 web sites. 24!!! What this means is that GLOBALLY Google is king, my friend. Yahoo is *not* the most popular website on earth. It just seems that way according to your source because, well, your source kinda sucks and has a misleading presentation.


RE: Why?
By nunya on 2/13/2008 3:46:08 PM , Rating: 2
quote:
their search page is positively heaped with useless fecal matter


http://search.yahoo.com


RE: Why?
By mindless1 on 2/12/2008 5:35:09 PM , Rating: 2
Geeze, are we really getting so anal about posts that now everything YOU write has to be backed by sources too? Take a pill, do a Google search, etc.


RE: Why?
By nothingtoseehere on 2/12/2008 5:56:05 PM , Rating: 2
You suggest people do a Google search to see if the poster is correct in saying that Yahoo gets more page views than Google ???

Talk about excessive superfluous unneeded unnecessary repeating additional extra spare reduncancy that is not necessary, because it is redundant, which means that it adds no information, as in nothing new, what was said earlier, but of course we already knew that.


RE: Why?
By borismkv on 2/13/2008 2:30:41 AM , Rating: 2
Mooo joooo jojo.


RE: Why?
By borismkv on 2/13/2008 2:32:06 AM , Rating: 2
(Haha! Mojo Jojo...from the powerpuf...yeah. Sorry. Bad joke)


RE: Why?
By mindless1 on 2/13/2008 3:34:15 AM , Rating: 2
Take a deep breath and step away from the keyboard.


Yahoo Board
By Trisagion on 2/12/2008 10:57:26 AM , Rating: 4
That's what happens when you get greedy. It's ok if the board decided that they didn't want to be taken over by Microsoft, but saying the offer 'undervalued' the company, whose shares hadn't seen such value in years, tells me that they were more keen in seeing how much they could milk out of Microsoft than their shareholders interests.




RE: Yahoo Board
By UzairH on 2/12/2008 11:49:10 AM , Rating: 4
Greed is human nature. Too bad most board execs can't separate their base human natures from their rational, professionally trained selves.


RE: Yahoo Board
By amanojaku on 2/12/2008 11:55:50 AM , Rating: 2
I agree that Yahoo! isn't worth $44.6B, but I also think Yahoo! is desperate to keep the company as is, even if the board and executives are forced to relinquish control. That might be the reason for the outrageous bid, to turn Microsoft off, which clearly backfired.

quote:
Having been rejected by Yahoo's board, Microsoft commented that it was "unfair" that Yahoo did not embrace its "full and fair proposal to combine" the companies.


Combine? We all know this is BS. If Microsoft buys Yahoo! there will be no more Yahoo! MS, like most companies, has a history of buying things to phase them out. Hotmail is one of the few exceptions.

Not that Yahoo! doesn't deserve to be phased out. The only things of value that I am aware of are the search (I never use MSN search, so I can't compare,) the messenger, the email, and Yahoo! music. I could be writing out of ignorance, but I just don't see where there is any value in that company.


RE: Yahoo Board
By wordsworm on 2/12/2008 12:05:42 PM , Rating: 2
So, what does MS have that Yahoo doesn't do better?


RE: Yahoo Board
By amanojaku on 2/12/2008 12:11:38 PM , Rating: 1
Nothing. I'd say they're both on equal levels of suckiness when comparing search, email, and IM. And I use the email and IM of both. If I didn't have a pre-MS Hotmail account and a pre-Yahoo! Geocities account I wouldn't be on either service.


RE: Yahoo Board
By djcameron on 2/13/2008 9:40:07 AM , Rating: 2
Well... Hotmail is way better than Yahoo! mail, and MSN Messenger is better than Yahoo! Messenger. Let's see, oh yeah, MSN homepage is better than the Yahoo! homepage. That pretty much sums it up.


RE: Yahoo Board
By Donkeyshins on 2/12/2008 12:56:02 PM , Rating: 2
Actually, this doesn't make sense if MS rebadges Yahoo and gets rid of the current Yahoo staff. If Yahoo remains an independent entity within the general MS collective (like Bungie did while it was owned by MS) then it may possibly turn out the way that Ballmer envisions it in his mescaline-fueled dreams.


RE: Yahoo Board
By crimson117 on 2/12/2008 1:21:26 PM , Rating: 2
They'd never phase out the yahoo name - it's too valuable.


RE: Yahoo Board
By ImSpartacus on 2/12/2008 2:05:36 PM , Rating: 2
I agree, Yahoo will never die. Microsoft understands that Yahoo is a huge name on the internet. Yahoo will stay.


RE: Yahoo Board
By imperator3733 on 2/12/2008 2:25:02 PM , Rating: 2
Yeah. I think that if this happens, Microsoft should merge MSN and Windows Live into Yahoo and use the Yahoo name. They should then keep Yahoo separate from the Windows division (as well as the other divisions) and let them take care of the online stuff. It might take a while to combine all the products, but once they were done they would have a well known brand to challenge Google with.


RE: Yahoo Board
By DigitalFreak on 2/13/2008 7:19:00 PM , Rating: 2
Microhoo!


RE: Yahoo Board
By borowki on 2/13/2008 3:27:06 AM , Rating: 2
Your comment makes zero sense. For whom is the Yahoo board trying to get more money? The shareholders, of course. As the Economist noted, shareholders would probably have taken board members to court had they accepted the first bid.


A thought
By Ringold on 2/12/2008 10:47:37 AM , Rating: 2
If Yahoo's executives had scrambled and worked as hard as they have to avoid Microsoft's offer instead to make their last quarter better then perhaps they wouldn't be in this situation. Where was all the furious work when their shareholders lost 40% of their investment? Now Microsoft is offering shareholders what their company has failed to do. I think I know how they would vote if it were put to one.

All that said, I don't see in the link a definitive statement in the betanews link that Microsoft is pursuing a hostile take over; the word on CNBC this morning seems to be that everyone is still waiting for another bid from Microsoft. They all seem to doubt MS will offer anything beyond the low to mid $30s, but they seem to think an offer is on its way.




RE: A thought
By Master Kenobi (blog) on 2/12/2008 10:58:09 AM , Rating: 3
Not likely. Microsoft knows what it is doing. Yahoo's board said no, so Microsoft will simply bypass them. It's highly unlikely Microsoft will bother making another offer to Yahoo's board. They had their chance, they blew it, time to suffer the consequences.


RE: A thought
By BZDTemp on 2/12/2008 7:57:45 PM , Rating: 2
LOL

Like you know anything about what is going on at Yahoo.

It is amazing how smart people is in this place being able to know the solutions to everything. Microsoft should .... Yahoo needs to... and so on and so on.

Face it without detailed knowledge of the Yahoo balance sheets to name just one factor making a real guess at the right value of Yahoo is moot. Plus lets not forget that A+B sometimes equals more than A+B.


forced buyout?
By skateordie on 2/12/2008 5:29:00 PM , Rating: 2
This sounds messed up to me. So its saying any company that gets big enough to have stock can have its shareholders convinced to sell off its company at a price, no matter what the real owners want?




RE: forced buyout?
By spookynutz on 2/12/2008 8:56:05 PM , Rating: 5
I think you're confused. The shareholders *are* the real owners. When a privately owned company decides to issue publicly traded stock, the owners of that stock become the owners of the company. A share/stock is just a unit of ownership in a corporation.

Board members for most companies are shareholders themselves, or elected by the shareholders, and are there to make decisions on behalf, and for the benefit, of the shareholders. By bypassing that board, Microsoft is going directly to the "owners" with this offer. If I owned shares of Yahoo!, I would welcome this takeover.


Still to much...
By Marlin1975 on 2/12/2008 10:36:40 AM , Rating: 2
With TW trying to get rid of AOL, I think Microsoft is offering to much for yahoo and yahoo thinks it is worth more then it is. At $30 a share its P/E ratio is in the 60's!!!

If I had MS stock I get out as I think they will be wasting money. I hope MS already had a lot of shares when it was in the teens price range.




RE: Still to much...
By Ringold on 2/12/2008 10:48:48 AM , Rating: 2
I noticed that PE multiple too; that's a Googlicious multiple, with none of the Google growth!


By Emryse on 2/12/2008 11:54:28 AM , Rating: 2
That's what it's about: core competency. At this stage in the game, with Google hot on their heels, MS should be slightly paranoid and take every opportunity to ensure they're steps ahead of the program.

Core competency is defined as the unique bundle of resources and capabilities that allows a business to offer a relatively rare value to their customers. Microsoft has maintained a competitive advantage over the years by ensuring that their products are penetrating as many facets of the technological universe as possible and those MS products are the universally accepted standard for compatibility and familiarity. Advertising real estate is where the money is at, and at the core all of Microsoft’s products provide this capability. So really, MS strategy is two-fold:

1.) Developers, developers, developers, developers (I couldn't resist)!
2.) Location, location, location!

1st prong provides resources; 2nd prong provides capability.

To sum it up, when you're king, you have to be mildly paranoid all the time: paranoid that no one else can do what you do, and paranoid that no one else can replace what you do. Google has the potential to do both; as such MS is playing the hardest and best strategies they possibly can to keep Google away from their competitive advantage. Conversely, Google knows that if MS gets Yahoo! whether by unsolicited bid or hostile takeover, it spells major problems.

Even if Google has superior products delivered to their users, remember: users of Google's search engine are NOT the customer. Paying advertisers are the customers; they will go to where their product will get the most exposure to the optimal audience.

Although I'm extremely interested to see how this plays out between MS and Yahoo!, I'm even more interested to see how the aftermath plays out with MS competition.




By TerranMagistrate on 2/12/2008 2:16:16 PM , Rating: 2
Of course, Microsoft is most certainly paranoid about competition and about the prospect of losing their monopolistic position to a competitor. They hate competition, there is no doubt about that.

This hostile bid is the same of story with Microsoft: If you aren't able to beat them, buy them out. Microsoft's ultimate goal here is to leverage their uncontested OS and Office software power to eventually gain a monopoly on the online services market too. Now that would be a nightmare.

What sets Google apart from MS is that Google embraces open source and promotes it. Microsoft will forever cling to their proprietary products to make sure those billions per quarter flows steady and increase.

Hopefully, this whole ordeal will the single most regrettable mistake that Microsoft has ever made. I'd rather not see the internet become proprietary courtesy of Microsoft.


MS will try again.
By cyyc009 on 2/12/2008 4:20:31 PM , Rating: 2
I personally think that Microsoft will try buying Yahoo again sometime in the future, probably around the time Yahoo is on the verge of going bankrupt. Which, from the looks of it, will be soon.




RE: MS will try again.
By Sazar on 2/12/2008 8:07:37 PM , Rating: 2
Yahoo is still generating decent profits.

It's not like GM which has losses in the tens of billions per year.


Business 101
By Shoal07 on 2/12/2008 10:46:24 AM , Rating: 3
This is normal in business and MS should have done it this way originally. MS will offer a share price to the shareholders, and likely increase that price, until they have the amount needed to take control (usually 51%). If the price per share gets too expensive for what MS is willing to pay, then they can back out if they have fewer shares offered then the amount needed to take control. In the end, the stock holders get more then what the stock is worth at the time (because the offer price is usually above the market value) and the board all get massive severance checks. So even if they loose this, the players win.

Short of selling the critical aspects of yahoo to someone else, like Google, and then leasing them back to use, thus making the company undesirable to buy - they’re likely to be bought. I know I’d sell at a premium, especially in this market.




RE: Business 101
By Shoal07 on 2/12/2008 10:47:42 AM , Rating: 1
Damn lack of edit, replace "share" with "stock" in that message... a shareholder is a much broader category then a stock holder, the one MS is after.


RE: Business 101
By johnnywyld on 2/12/08, Rating: -1
RE: Business 101
By JustKidding on 2/12/08, Rating: 0
By ElFenix on 2/12/2008 11:28:09 AM , Rating: 3
Compaq's board and executive leadership approved of the deal. Compaq's shareholders approved it 100%.

It was HP's own shareholders that were hostile to Carly Fiorina's crappy deal.




Give in to the dark side Yahoo!
By Proteusza on 2/13/2008 5:20:24 AM , Rating: 3
As you can see, my young apprentice, your friends have failed. Now witness the firepower of this fully ARMED and OPERATIONAL battle station!




By napalmjack on 2/12/2008 11:47:23 AM , Rating: 2
"You broke my heart, Yahoo!"




Well.
By gochichi on 2/13/2008 12:53:59 AM , Rating: 2
I think that MS should drop the issue. Better yet, MS should take the issue to its own shareholders first.

What I don't get is why MS doesn't just come up with another brand name to compete with Google.

MS likes to copy, they're all about it, and it's worked well and they should continue to do so.

This is what I suggest.

MS took Widgets and copycatted them but changed the name to Gadgets.

Wi to Ga. That's it.

So this time they need to go from Goo to Wee or Wuu... not sure which.

That would leave them with:

Weegle or Wuugle.

I like Wuugle, it sounds closer to the real company, so that's what they should go with. I understand that it's not as powerful a name as Yahoo! just yet, so I'll take $500,000 for Wuugle. Microsoft, you there? That's a deal, and I won't even call it hostile at all. Hell it could be an all share deal, and I wouldn't even sell the shares.




By Donkeyshins on 2/12/2008 12:59:47 PM , Rating: 2
I believe that may be the scariest thing I've ever read on DT.


By Joz on 2/12/2008 2:32:02 PM , Rating: 2
No the scariest thing on DT was when they wanted to appoint a saint for the internet.

THAT was scary, Godgle is the future; and what a glorius freeware future it will be.

JOIN THE TEMPLE OF GODGLE!!!!!

ToG ToG ToG ToG ToG

(Anyone know a good word, starts with a P, synynom for "Place of worship."?)


“We do believe we have a moral responsibility to keep porn off the iPhone.” -- Steve Jobs

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