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Internet Microsoft Withdraws Bid For Yahoo
Brandon Hill (Blog) - May 4, 2008 2:26 PM
Print E-mail del.icio.us 48 comment(s) - last by Funksultan.. on May 6 at 7:57 AM

"I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table," said Microsoft CEO Steve Ballmer.
After a long and bitter courting period, Microsoft drop its offer to buy Yahoo.

There has been a long and tumultuous battle of words between Microsoft and Yahoo ever since the Redmond-based software giant decided to make a bid for Yahoo in early February. Microsoft offered to buy the search giant for $44.6B which included a 66 percent premium on Yahoo's stock price at the time.

Shortly after the offer was made, Yahoo chairman Terry Semel resigned. A week later, Yahoo rejected Microsoft's offer. The back and forth between the two companies for over three months and last week, Microsoft gave Yahoo an ultimatum with regards to coming to a deal for the proposed buyout.

The two companies were unable to come to an agreement and Microsoft CEO Steve Ballmer announced yesterday that his company withdrew its offer to buy Yahoo. "We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo! and the market as a whole, said Ballmer. “Our goal in pursuing a combination with Yahoo! was to provide greater choice and innovation in the marketplace and create real value for our respective stockholders and employees."

"Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo! has not moved toward accepting our offer. After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal," Ballmer added.

Ballmer went on to say that taking the matter directly to Yahoo shareholders would have been a futile effort and would have resulted in a drawn out proxy battle. Ballmer also took the time to take a jab at the budding relationship between Yahoo and Google.

"It would fundamentally undermine Yahoo!’s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system," quipped Ballmer. "This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth."

While Ballmer offered a long, wordy letter to Yahoo CEO Jerry Yang regarding his decision to withdraw the offer, Yahoo Chairman Roy Bostock kept his commentary to a minimum.

"From the beginning of this process, our independent board and our management have been steadfast in our belief that Microsoft’s offer undervalued the company and we are pleased that so many of our shareholders joined us in expressing that view," said Bostock. "Yahoo! is profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market. Our solid results for the first quarter of 2008 and increased full year 2008 operating cash flow outlook reflect the progress the company is making."

Yang offered his own thoughts and expressed his annoyance with the entire process. "This process has underscored our unique and valuable strategic position," remarked Yang. "With the distraction of Microsoft’s unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history so that we can maximize our potential to the benefit of our shareholders, employees, partners and users."

Where this will leave Yahoo is anyone's guess, but it's not every day that someone says no to Microsoft. Yahoo may see this is a victory against the 800-pound gorilla in the room, but it remains to be seen how shareholders will react to the Microsoft's move.

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Finally it is over.
By lightfoot on 5/4/2008 2:53:19 PM , Rating: 5
Microsoft stock will get back to where it belongs, and Yahoo will return to the toilet. After this battle, no company will dare touch Yahoo. Yahoo has made clear that they would rather commit suicide than lose their independence - for better or worse. With $46 billion dollars still in their pocket, Microsoft can undercut all of Yahoo's revenue streams for a decade and take Yahoo's place as #2 in search.

In the long run, a hostile takeover was probably the least hostile thing MS could do.




RE: Finally it is over.
By Master Kenobi (blog) on 5/4/2008 3:02:14 PM , Rating: 4
True. Yahoo's stock was heavily inflated because people wanted to get in on the buyout, now that won't happen and Yahoo's stock will be worth very little again. Yahoo is going to be the next AOL, that slowly but surely dies each year. Oh well, good riddance. Yahoo has never impressed me and their home page is a cluttered piece of crap.


RE: Finally it is over.
By ZimZum on 5/4/2008 8:25:59 PM , Rating: 2
I have to admit though I <3 Yahoo games, in particular Yahoo chess. Rest of the site is ass though.


RE: Finally it is over.
By Regs on 5/5/2008 6:24:25 AM , Rating: 2
That's ok, some one will buy out the games. Remember Excite java games? Bought out by Pogo, then EA!


RE: Finally it is over.
By PrinceGaz on 5/4/2008 10:14:49 PM , Rating: 3
MS know Yahoo's value will now steadily fall which is almost certainly why they've withdrawn their offer. In a few months time, maybe a year or two, they'll be able to buy it for a fraction of what they were recently offering.

It was pointless for them to offer more and more for Yahoo if it was never going to be accepted by the shareholders, so it is easier to now sit back and watch the value of the company plummet. The head of Yahoo may look smug now, but he won't be so happy when the company is bought for a fraction of what MS were offering at some point in the future.

Yahoo was once big, and are still sizeable, but their influence has been slipping steadily and by rejecting the MS bid, I think they are ensuring their own demise. It will only be a matter of time now until Google or MS decide they can throw a little money at it to buy what is left of the Yahoo brand.


RE: Finally it is over.
By paydirt on 5/4/2008 11:12:48 PM , Rating: 2
What is scary is what if YHOO had said yes...! I think YHOO would have been a terrible investment for MSFT (risk vs reward). If this isn't a ploy by MSFT, I think YHOO's ego and hubris saved MSFT by rejecting the offer.


RE: Finally it is over.
By TheDoc9 on 5/5/2008 3:04:04 PM , Rating: 2
I agree with this completely, it's ironic but it's probably the best thing to happen to microsoft. Now if Google and microsoft join, that would be worth something.


RE: Finally it is over.
By akugami on 5/4/2008 11:34:47 PM , Rating: 5
I felt a great disturbance in the Force, as if millions of stockholders suddenly cried out in terror and were suddenly silenced. I fear something terrible has happened.


RE: Finally it is over.
By Funksultan on 5/6/2008 7:57:49 AM , Rating: 2
ROFL! For the love of God and Yoda, someone give that a 6.


RE: Finally it is over.
By DeepBlue1975 on 5/5/2008 4:01:10 PM , Rating: 2
Said and done.

Yahoo's stock has dropped around 17% after MS's withdrawal annoucement.


RE: Finally it is over.
By phxfreddy on 5/5/2008 8:38:38 AM , Rating: 3
This probably is not over yet. Its a time issue. I rather think he has it all planned. RE: take a quick read of James J. Cramers account of playing poker with Ballmer at Harvard. Cramers extremely competitive and it got to a point he could not beat Ballmer. In regards the whole situation I can’t help imagining Steve Ballmer wrestling one of those stone idols on Easter Island. You know how imposing they look?….and how they just sit there not budging?……. Yahoo’s only option was the delay tactic. Delaying is pretty effective considering Microsoft’s need to get on with it if they want to compete with the Goog in the propaganda. Yahoo/Yang sat there like the stone heads. Thus when Yang did not budge Ballmers only recourse was to pull the stone idol down on its stony stationery nose. Now that he’s done that the stock price will drop like a rock on its face. Yang will now get an earful from just about everyone and their grandmother. At which point Yang will be forced back to MS. “how about that 33 bucks a share?” will be the line. Ballmer will most likely go with the 33 or 31 bucks per sheet and get on with the job.

I hope Ballmer chimps out and does another monkey boy dance when victorious. The world needs this sort of joy!


RE: Finally it is over.
By 16nm on 5/5/2008 8:42:15 AM , Rating: 2
Just wait. After a while, I think Microsoft will have the opportunity to swoop in and buy Yahoo! for next to nothing (relative to the $47B offer).


You'll see
By EntreHoras on 5/4/2008 3:52:51 PM , Rating: 2
Monday the stocks of Yahoo will fell down and then, MS silently will start buying Yahoo stocks. When the directive of Yahoo finds out, MS will have the control of the company.




RE: You'll see
By chiguy2891 on 5/4/2008 5:15:02 PM , Rating: 2
Yahoo has a couple poison pills in their charter. We talked briefly about this in my securities class but they have a clause where they can issue more stock to dilute the percent owned by any entity. If I'm not mistaken they also have staggered terms for their board members so only a couple seats would be up for election at any given time and would make a hostile takeover a longer process. Honestly, I think Yahoo is stupid for rejecting the offer and the board could face a possible lawsuit by the shareholders. You are right though, just because they've withdrawn their bid doesn't mean that this is over.


RE: You'll see
By Master Kenobi (blog) on 5/4/2008 7:08:53 PM , Rating: 3
The shareholders will out their current board and replace it. They will then go back to Microsoft, and get a good deal, but Microsoft will be paying a lot less. Probably only around 30-35 Billion. It will also take about 2 years for all of that to happen.

Expect to see this in Business classes in the next 4-5 years as a textbook case that the board works for its shareholders, not themselves.


RE: You'll see
By rubbahbandman on 5/4/2008 9:34:32 PM , Rating: 2
lol, I like the prediction, I'll be keeping an eye on Yahoo to see if you called it. On another note, it will be fairly entertaining watching Yahoo's stock freefall tomorrow (at least 25% is my guess). Textbook case of a good time to short a stock.


RE: You'll see
By paydirt on 5/5/2008 7:59:16 AM , Rating: 2
Duh. However, the stock will ALREADY be down when it opens, so your "short price" will be the lower price. Shorting the stock at a lower price is a bad thing compared to shorting at a higher price. IF you were to short at the lower price, you are essentially taking a big risk for no reason.


RE: You'll see
By AlphaVirus on 5/5/2008 12:20:50 PM , Rating: 2
http://finance.yahoo.com/q/bc?s=YHOO&t=5d
Yep, yahoos stock on Friday around $28, today $24.


RE: You'll see
By lexluthermiester on 5/4/2008 11:22:32 PM , Rating: 4
"The shareholders will out their current board and replace it. They will then go back to Microsoft, and get a good deal, but Microsoft will be paying a lot less. Probably only around 30-35 Billion. It will also take about 2 years for all of that to happen."

Due respect to you Master Kenobi, but that isn't likely. Microsoft's takeover was viewed as a bad thing by many, and personally I would have voted against the takeover. Not worried as much about the stock price as I am about Microsoft getting their grubby hands on something I have a vested interest in... And that is a view shared by many...

Yang did his job when he listened to the shareholders telling him not to let the buyout proceed. That is why Microsoft likely backed off, they have become aware how the majority of shareholders feel...


RE: You'll see
By Master Kenobi (blog) on 5/5/2008 8:43:18 AM , Rating: 2
quote:
Microsoft's takeover was viewed as a bad thing by many, and personally I would have voted against the takeover. Not worried as much about the stock price as I am about Microsoft getting their grubby hands on something I have a vested interest in... And that is a view shared by many...

Not as many as you might think. The majority of the large share holders want to see a return on investment. Currently Yahoo is not able to provide such a return. The Microsoft buyout would have given most of these share holders a 30% or greater price which is a nice ROI. The free fall this morning has only demonstrated that Yahoo's price was inflated by people who were hoping to get in on the buyout.