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Yahoo CEO Jerry Yang
Yahoo searches for answers as it runs out of options, makes deal with Google

Yahoo announced grimly on Friday that talks with Microsoft were over.  According to Yahoo at a secret Sunday meeting Microsoft "unequivocally" rejected the idea of buying the whole company and tried instead to push for Yahoo to sell it just its search portal.  Interestingly, Microsoft appears to believe the search portal is worth more than the company as a whole, at least to its interests.  Yahoo, however, clung to the belief that its search portal, second on the internet to rival Google, was too valuable to sell piecemeal. 

The news of talks ending sent shares sinking like a stone in the sea, down over two and a half dollars to finish at $23.52.  To put this in context, Microsoft publicly offered Yahoo $33 a share.  Yahoo demanded $37 a share, saying Microsoft proposal "significantly undervalued" it. 

It has since come out that the faceoff occurred at a Seattle airport on May 3, between Yahoo CEO Jerry Yang and Microsoft CEO Steve Ballmer.  Yang allegedly demanded more money and Ballmer balked at the demand.  This exchange reiterated Yahoo's penchant for a rather vainglorious vision of self-worth, which it has held throughout much of the talks while showing little ability to justify it.

Standard and Poor's equity analyst Scott Kessler puts it aptly, saying, "If you are a Yahoo! shareholder, you just have to be scratching your head right now."

Perhaps more shocking, according to a recent lawsuit filed by shareholders Ballmer later would go on to make an offer of $40 a share -- nearly a hundred percent premium at the current share price.  According to the lawsuit, Yang and Yahoo Board Chairman Roy Bostock intentionally sabotaged the deal, and were not interested in selling the company at any price.  These claims have yet to be proved or disproved in a court of law.

The end of talks and Yahoo's failing stock is especially bad news for Yang and Bostock, as it puts investor Carl Icahn in prime position to sway already malcontent shareholders to his side when he attempts a takeover in the company's annual shareholder meeting, which Yahoo's management has pushed back to August.  If successful, Icahn is going to do a little late summer cleaning, ousting not only all the board, but also Yang, who he feels has been especially damaging to the company and its ability to deal.

A small hope still lies for Yahoo's top leadership in that Microsoft's complete rejection may bring into question whether Icahn's attempt to sell would have any more success.  Many analysts think that a great deal of whether the takeover bid succeeds depends on what kind of plan Icahn can bring to the table.  An optimal scenario for him would be if he came having already advanced in preliminary informal negotiations with Microsoft, while a not as promising scenario would be if he merely said talks would commence after the switch.

Icahn remained silent on the latest developments for the time being.

In yet another sign of slippage, Yahoo is trying to regain composure after the failure by announcing a deal with Google.  After a test run with Google showed that using Google advertising next to Yahoo search results would significantly up revenue, Yahoo is eager to make a deal with Google.  The deal, if it passes antitrust scrutiny is estimated to bring in about $800M USD extra revenue for Yahoo in the next 12 months.

Google's top executives were quick to praise the deal.  Cofounder Sergey Brin said, "I am happy to be helping them to stay independent."

And his fellow cofounder Larry Page added, "Having more money is a good thing."

However, beneath the rhetoric, the fact remains that coming to Google is a major concession, and will likely forever put Yahoo at second place, at best, in a critical element of the search engine business -- advertising.  While a Microsoft-Yahoo conglomeration, might have dreamed of taking on Google, the Yahoo of today, selling parts of its business to Google, has little chance of holding such hopes.  The latest developments only bring more uncertainty and drama to the unfolding story of the struggling company that was once the internet's top search engine.

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RE: Love it.
By Nik00117 on 6/13/2008 11:53:33 AM , Rating: 4
Business is business, you do not put personal matters and pride ahead of it. Its something which has been the downfall of many.

He fucked up, he knows it, hes still fucked

RE: Love it.
By paydirt on 6/13/2008 12:23:23 PM , Rating: 4
The big winners are both Google & MSFT since this whole takeover attempt undermines Jerry Yang's authority. An undermining of authority weakens YHOO and strengthens GOOG.

RE: Love it.
By gyranthir on 6/13/08, Rating: -1
RE: Love it.
By DanoruX on 6/13/2008 1:06:20 PM , Rating: 5
In terms of business, I'd sell to the highest bidder.

RE: Love it.
By masher2 on 6/13/2008 1:29:29 PM , Rating: 5
They'd never get antitrust approval to sell to Google; the market share of the combined company would dominate the entire industry.

RE: Love it.
By BruceLeet on 6/14/2008 7:32:59 PM , Rating: 4
GOOG market share already dominates the entire industry.

RE: Love it.
By killerroach on 6/16/2008 9:37:02 AM , Rating: 2
GOOG market share already dominates the entire industry.

Yes, but increasing market share through acquisitions is extremely difficult for a dominant player in a field, especially when it's one of your main competitors. In certain areas of the Internet search and advertising space, a Google/Yahoo chimera would make up a 90+% market share with an HHI (measure of market concentration) of around 9,100 (usually regulators get squeamish about any merger that raises this number if it's above 1,800 to start).

Regulators won't necessarily step in if you build a dominant market position (so long as you aren't doing anything to deliberately disadvantage competition with your power), but they don't much care for buying a dominant position.

RE: Love it.
By Locutus465 on 6/13/2008 1:52:12 PM , Rating: 1
Why would you care? What does google have to offer you that microsoft doesn't?

RE: Love it.
By Oobu on 6/14/2008 1:40:24 AM , Rating: 5
A decent search engine.

RE: Love it.
By seamonkey79 on 6/13/08, Rating: -1
RE: Love it.
By RealFiend on 6/15/08, Rating: -1
RE: Love it.
By callmeroy on 6/13/2008 1:18:48 PM , Rating: 5
Business is business, you do not put personal matters and pride ahead of it. Its something which has been the downfall of many.

As true as that may be in theory and on paper I think what the pervious posting was stating is the fact that regardless we are still human.

You can say war is war, or love is love doesn't mean how you aren't going to react a certain way even if you know the possible circumstances -- in other words nothing over powers the human factor.

In short easier said than done.

All we can do is be the best we can be based on how we were brought up, experience, education, etc. has taught us.

But there is still no guarantee human feelings or emotions won't get the best of us regardless from time to time.

RE: Love it.
By The0ne on 6/13/2008 2:09:49 PM , Rating: 2
I think he desperately wants to be a robot that only follows. He doesn't care if he likes his job or anyone, he doesn't care for anything or anyone. Why should he when it's business. Well, most of us will come to realize this is just pure BS.

If you don't have any emotions tied to your work what are you doing working in the first place? For your personal gain and happiness? Wait, happiness? Isn't that a human emotion. You're working to provide for your family? Hmm...You're working to be able to help others? Hmm...No matter what he may be thinking "business is business" apparently he hasn't considered what it actually means.

Maybe shoot him a copy of Pretty Woman :)

RE: Love it.
By IMADingBat on 6/13/08, Rating: -1
"Let's face it, we're not changing the world. We're building a product that helps people buy more crap - and watch porn." -- Seagate CEO Bill Watkins

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