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"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.


RE: You'll see
By lexluthermiester on 5/5/2008 1:55:50 PM , Rating: 2
Again, with respect to you, Master Kenobi, The reality is that many feel that the buy-out was a poor idea. My shares in Yahoo have tripled from the time i originally bought them and I am quite happy with the steady growth the Yahoo has gained. I couldn't care less about the short term gains. Yahoo is performing company and it's "free fall" in stock price only dropped back to a level that it was near before the deal was proposed. It will rebound. I[like most other shareholders] are in it for the long term and I have every confidence that Mr. Yang will deliver on his promises, as he has in the past. That is the difference between Yahoo and Microsoft. Yahoo delivers, Microsoft doesn't...


RE: You'll see
By Master Kenobi (blog) on 5/5/2008 4:50:22 PM , Rating: 2
I'm curious as to what Yahoo has delivered on in the past few years. In fact the direction Yang is heading leads me to believe they are abandoning the current business model in favor of a different one that relies on third parties (See: Google).


RE: You'll see
By just4U on 5/5/2008 5:20:47 AM , Rating: 2
Now Im really interested in this story.. Will DT do a followup in the coming days as Yahoo stock does it's possible freefall?


Too bad so sad...
By daftrok on 5/4/2008 2:33:04 PM , Rating: 5
Technically speaking Microsoft doesn't really NEED Yahoo. Microsoft's Live Search is actually pretty good, their maps are better than Google and Live Hotmail and Outlook have been set in stone years ago. Methinks they were trying to monopolize the market and cut down Google's dominion. It didn't work.




RE: Too bad so sad...
By Pandamonium on 5/4/2008 3:47:44 PM , Rating: 5
Hotmail's Outlook-esque look is nice, but Gmail's interface seems more utilitarian. Google gained ground because it was trendy, efficient, and clutter-free. MS's offerings are pretty efficient, but they're a bit more cluttered and MS is hardly a trendy company. It'll take years to shift that image.


RE: Too bad so sad...
By Tamale on 5/4/2008 6:10:11 PM , Rating: 2
google stuff is indeed efficient, but some of microsoft's services are incredibly impressive.. check out skydrive :)


RE: Too bad so sad...
By semo on 5/5/2008 6:46:12 AM , Rating: 2
great. where was this and adrive when i was a student, didn't have easy access to email and my word files were too big for a floppy disk.


All your Yahoo belong to us
By dmcowen674 on 5/4/2008 4:05:49 PM , Rating: 4
Microsoft gets the last laugh anyway




RE: All your Yahoo belong to us
By lexluthermiester on 5/4/2008 11:12:03 PM , Rating: 2
And how is that?


RE: All your Yahoo belong to us
By semo on 5/5/2008 6:51:13 AM , Rating: 2
maybe because ms hasn't stopped laughing (all the way to the bank) since it was founded. when other companies crash and burn, ms keeps on laughing


Thank heavens...
By lexluthermiester on 5/4/2008 11:10:18 PM , Rating: 1
I'm well aware that in this Microsoft worshiping site I'm going to get rated down for this, but I am very glad this buy out DIDN'T happen. I like Yahoo just the way it is, and the idea of MS getting their hands on Yahoo is not a pleasant one. I could care less if Yahoo stock takes a dive, it's still better than Yahoo being gobbled up by the over-grown self-righteous beast of the computer industry...




RE: Thank heavens...
By noirsoft on 5/5/2008 2:39:26 AM , Rating: 2
quote:
Yahoo being gobbled up by the over-grown self-righteous beast of the computer industry...


As far as I know, neither Apple nor Google have made offers to buy out Yahoo.


RE: Thank heavens...
By wordsworm on 5/5/2008 8:08:26 AM , Rating: 2
quote:
As far as I know, neither Apple nor Google have made offers to buy out Yahoo.


Google would never make a bid for it for the simple fact that regulators would never allow it. It's pretty obvious.


RE: Thank heavens...
By Dasickninja on 5/5/2008 11:54:08 AM , Rating: 2
The joke, you miss it.


Nothing is over
By wordsworm on 5/4/08, Rating: 0
RE: Nothing is over
By FXi on 5/5/2008 12:03:54 AM , Rating: 2
Oh yes it is. Any web page can have links. Remember the days when AOL listed it's many pages of reading material? How it showed hundreds of newsprint pages and 1000's of forums and chatrooms?

Yahoo isn't a player. They are the kitty. You probably own stock in AMD... Mouse fighting the tiger and winning? How nostalgic...


RE: Nothing is over
By wordsworm on 5/5/2008 5:14:53 AM , Rating: 2
Actually, I never went to AOL's webpage. I always hated them and their customers. AOL going down was a boon to the web.

Yahoo isn't just links to places on the Internet. It's got a ton of links to its own services.

I don't own AMD stock. But now would probably be a reasonable time to get some. I do believe they have their long term goals in mind and that they might very well achieve them. The fusion project is really brilliant, and I anticipate seeing something from it in 2-3 years, which was a part of the whole point behind the acquisition.


RE: Nothing is over
By robinthakur on 5/6/2008 7:29:15 AM , Rating: 2
Nothing is more endearing than reading a post from a small world simpleton intent on 'educating' everybody else. Not to mention that he uses the word 'folks' so often he sounds like that twit you call a president. I'm not sure what 'secrets' you were alluding to, but having read your entire post i'm at a loss. If business is a poker game, Yahoo have little left to play.

Its no secret that MS wanted in on Yahoo's search technology to add it several of their existing products (next version of SharePoint etc) as well as gaining temporal posession of many of Yahoo's great brains. Its presence in the web advertising is candy frosting but not the main reason.

Looking at Yahoo's stock prices in the last 5 years, the fact that its the world's most visited website and offers such a wide range of pointless services has not helped it, as analysts expect that it will submit its most-visited status pretty soon to a website beginning with G. The reality is that Yahoo is shrinking because it has not innovated in such a opportune way as Google , they are not perceived as being 'where the action is' and are perceived mostly as being reminiscent of the web from '95 by a good number of people. Yahoo still operates like they can come up with all these zany ideas without considering how they can ensure revenue which is a little...out of vogue...these days. The problem with revamping Yahoo is convincing people to go back to a platform which they've abandoned in the past. It generally doesn't happen on the web unless something revolutionary comes out, or there's a significant amount of favourable press, or if one of their competitors seriously drops the ball.

If you're a bottom-fisher the stock is likely to go down from here on in until there are more takeover rumours; So its a reasonable speculative long-term buy but not just yet in my opinion.

MS dodged a bullet here in my belief, as any tangible benefit which Yahoo could bring them wouldn't be worth the buy in cost, alot of which MS would have to borrow at this very financially dodgy time. It also was widely interpretted that MS wanting to buy Yahoo was indicative that they are scrabbling around desperately after Vista's lack of success, their inability to establish a significant web portal market share and a sign of their eventual downfall. Yahoo is similarly mortally wounded at the moment and will die within the next 10 years unless drastic changes are made.

AMD is not a good speculative buy currently as the opinion within the industry is that they've ceded thir lead which they held for a long time in GPU and CPU technology to Intel and now they're pretty much finished for the next couple generations in both. Its sad, but it is true. And I used to buy AMD/ATI...


Greater choice?
By PrinceGaz on 5/4/2008 2:53:47 PM , Rating: 1
quote:
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."


How exactly would MS buying Yahoo provide greater choice? Surely there'd be less choice as the services they each currently seperately provide would eventually be merged.




RE: Greater choice?
By lightfoot on 5/5/2008 1:33:21 AM , Rating: 3
The current market share is approximately:
70% Google
20% Yahoo
10% MSN

There is a very real risk that Google will do to online search and advertising what MS did with PC Operating Systems. In that scenario the market share would be 100% Google, and that would indeed be less choice. The buyout offer of Yahoo by Microsoft was the only foreseeable merger that could reasonably compete with the behemoth that is Google. Yahoo seems to think that they can go it alone by surrendering their advertising to Google in hopes of some alliance. However any "alliance" between Google and Yahoo is doomed to fail due to the anti-trust laws of the United States. In any case a market share of 70% Google and 30% MSN/Yahoo could very well provide greater choice, and greater innovation than a unrivaled Google could provide.


Yahoos a proud company
By Nik00117 on 5/4/2008 3:26:49 PM , Rating: 2
Yahoo isn't 46 billion, hell i'd be shocked if it was worth 10. If I had a company that was worth 10 bucks, and failing and another company came along and said hers 46 bucks i'll take it i'd go "here ya go" and head for the hills. Yahoo are a proud company, some may say too proud.




RE: Yahoos a proud company
By SiliconJon on 5/4/2008 3:29:02 PM , Rating: 2
Freeeeeedommmmmm!


Brillaint poker by Steve and Microsoft!
By ChipDude on 5/5/2008 1:20:16 AM , Rating: 2
Did Microsoft play a great game of poker or what.
Jerry Yang with his ego decided to raise the pot and then Balmer folds and walks away.

Yahoo stock will drop like a rock on Monday, there will be a lot of really pissed stock holders

When you look at what the road ahead looks like their will be tons of second guessing at Yahoo that will eat it away from the insides

It was brilliant what Balmer did, completed distracted Yahoo for a while then have it run circles around itself for months if not years to come.

If Yahoo stock doesn't get to 28 bucks again soon, Jerry and the executive team will have big moral problems. Nothing will undermine a company faster then poor moral.

Briliant Steve, simply Brilliant!




By phxfreddy on 5/5/2008 3:29:18 PM , Rating: 2
I want to see another Ballmer chimp out dance !


YaHooooo!
By shraz on 5/4/2008 5:37:20 PM , Rating: 2
I like Yahoo, I use it a lot. I like the my.yahoo.com page where I can put almost anything I want on it. You guys forgot that Yahoo still has the most visitors.




Amusing
By Ringold on 5/4/2008 8:21:04 PM , Rating: 2
Yahoo Finance's own headline at the moment: Yahoo CEO on hot seat after rebuffing Microsoft's $47.5B Bid

http://biz.yahoo.com/ap/080504/microsoft_yahoo.htm...

I especially like the last part:

quote:
"Jerry Yang really needs to put his money where his mouth is," Kessler said. "If he really thinks Yahoo is worth $37 (per share), then he needs to step up and buy some shares when they are in the low $20."


Indeed, Yang. If YHOO is really going to be undervalued when it finally settles probably back in the teens, shut up, be a man, and have the board authorize a share buyback! Not just a fake buyback that gets approved, but one that is approved and actually results in stock being gobbled up. I mean, if YHOO is worth $37, it's a sure-fire bet, right? ;)




Reading the cards
By FXi on 5/4/2008 11:57:40 PM , Rating: 2
This is just a strategy really but Yahoo isn't the a player in the game, it's just a card...

Yep, Yahoo isn't worth that much, unless you are trying to keep it out of someone else's hands. So MS made an offer that "should" have been easy for Yahoo to accept. But that didn't happen, probably because they were hoping for a bidding war between MS and other parties, probably Google at the foremost.

Yahoo shareholders who rejected the offer are going to rue this day for a multitude of reasons. The stock is on the way down, and if you watched AOL over the past couple of years, you know exactly where it's headed. The season of big dollar buyouts is reaching a close. The economy won't bear it any longer, and banks and businesses are souring on the sometimes huge premiums being paid, many that never, ever repay their value, even if they do keep a competitor at bay.

Yahoo will lose tons of money just defending itself from infuriated shareholders if it doesn't find a new deal in days, probably a week or two at most. By the end of this next quarter they will either be in bed with someone else, or in a legal battle that will take years and cost millions, even if they win most of the battles.

Meanwhile they'll be a poison egg. Few will be bold enough to risk the wrath of MS to do deals with them. They will wither in a tech supported world, and their labor pool will dwindle. After all the legal troubles are settled and with business solidly in the tank for a year or two, MS might come back if they even care enough an purchase the remains for less than 1/10th the price offered if even that much.

Companies that wanted deals did them last year. This year the weather forecast in the money market is "hold on to what you got, this one's gonna be rough".

Proud, greedy, or outright foolish, call it what you will. Yahoo shareholders will regret this choice if they care about the amounts they have invested. The small holders probably won't care much, but the big ones, will care a lot. And they have lawyers to help companies understand why they have to care as well.




Thought MS was gonna fight
By Belard on 5/6/2008 4:47:47 AM , Rating: 2
But Ballmer said MS was going to get Yahoo, no matter what... now they shrug and go "oh well?"...

Perhaps this is a tactic anyways.




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