AOL and Yahoo star in “Spawn of the Ugly Ducklings”


After Yahoo turned down Microsoft’s offer of over $31 per share there has not been much good news for a troubled Yahoo, with a price now right about *half* what Microsoft offered.   However it does appear that Yahoo will merge with another struggling internet empire:  AOL.    Time Warner’s merger with AOL years ago will probably go down as one of the most misguided corporate marriages in history leading as it did to nothing but heartaches and lowered TW values, but the Yahoo deal actually seems to make a lot of sense to me if Yahoo can get it’s management act in gear.   With AOL Yahoo will control even more valuable internet items such as about half of all the email accounts in the world.     Some reports suggest that Microsoft may have even more interest in a combined Yahoo AOL. In today’s challenged fiscal environment it seems unlikely Yahoo could refuse another MS takeover even at a reduced cost per share.

TechCrunch Reports

Disclosure:  Long on YHOO

32 thoughts on “AOL and Yahoo star in “Spawn of the Ugly Ducklings”

  1. Ha – Glenn I should have followed your advice and sold the YHOO ….as long as I had cashed out. If I’d bought some other tech stocks I might be down even more after the recent market.

    Am I foolish to remain optimistic that YHOO will *eventually* have to parlay it’s super gigantic internet footprint into…better profitability?

  2. (2) Here is an idea: double up your position and sell in 31 days (to avoid wash sale rule) to harvest the loss for tax purposes.

  3. I think YHOO is in for a very rough ride. In fact I think it is going to be even tougher now.

    I don’t think the YHOO-GOOG deal will remain in place either.

    YHOO needs to come up with a new angle on how to maximize its infrasture and capability. Shame is YHOO has some pretty good core technology but with Yang at the top he has poisoned the well. As long as he stays there it will be radioactive. People won’t say that but that is what it is.

    I stand that the MSOFT deal was the best thing to ever come across YHOO but once again greed trumps good sound business judgment.

  4. (3) The dollar cost averaging is something I would have considered in a normal market however we seriously could see the DOW go down another 3,000 points. Some people think that is crazy but they just need to look back a short while ago and we have already lost 3,000 points.

    Either you are in for the long haul Joe and pray it makes it or…cut your loses and dump now or if you are ahead book what profit you can – there is never any shame in booking profit.

    Pigs get fat – hogs get slaughtered

  5. (7) Possibility – yes; probability – low. I don’t profess to know where the bottom is, but various metrics are very close, and in some cases, beyond, the lows associated with past bear markets. While this time is certainly different, and more serious, some of the attributes are the same.
    There is a tendency during the worst phases of a bear market to extrapolate the malaise forward into perpetuity. The history of where major market bottoms have occurred suggests this is a mistake.

  6. (10) I was going to suggest that the government bail them out…lol

    However I am sure Jerry Yang would want to hold out for a better deal from the Fed…

    ba ha ha ha

  7. Lots of cash / no debt / trading at 2X book – cheap for a tech company. Someone else would buy them before they would actually go under…it could be the buy of the century at this price, who knows.

  8. Paul I do think it’s a good buy. Likely scenario now is a merge with AOL and aquistion by Microsoft which Yang won’t be allowed to fight again.

    But I’ve obviously been wrong about Yahoo so far. (or perhaps fairer to say I underestimated how stubbornly Jerry Yang and the board would fight Microsoft’s great offer months ago).

    My tentative plan is to start buying more this week. I think MS won’t pay anything like the 31-34 they offered before, but probably 20+ is likely. MS has lots of cash. Picking up Yahoo would not even be a risky deal for them in my view.

  9. Joe don’t feel so bad the amount of layoffs that are going to hit during Q4 are going to be monumental.

    I think there will be lots of good deals you are just going to have wait a decade or so before they return for you.

    I had two calls today where layoffs are coming and coming fast. Most of the talk right now is a preemptive move to hoard as much cash as possible as they are expecting a minimum 25% reduction in revenues based on the economic mess.

    This is going to get kind of ugly before the end of the year.

    If we have a major crisis first half of next year it will only further drive it down.

    BTW…wild speculation that Iran will possess a nuke by Feb. this world is really screwed up.

    Maybe Murtha will change his comments from rednecks to yahoos now…who knows it could boost Yahoo stock price.

    • I was wondering if you ever considered changing the
      structure of your website? Its very well written; I love what
      youve got to say. But maybe you could a little more inn
      the way of contrnt so people could connect with iit better.
      Youve got an awfful lot of tdxt foor only having 1 or two pictures.

      Maybe you coulld space it out better?

  10. Glenn I think this may go down as the most costly case of CEO “stubbornness” in history. However if MS tries to pay too little I think many shareholders – me included – will balk. I’m looking to Icahn’s average share price as a guide to the eventual sale price. I think he’d rather work to rebuild Yahoo than sell at a loss.

  11. I think Microsoft is going to strip what it wants out of Yahoo! It is an unfortunate reality with this economy and they will end up with some amazing IP for pennies on the dollar and they will be able to pick the cream of the crop out of Yahoo!

    We are about to witness as massive amount of job loss here in the last two months of the year. I think we could see some major players shave as much as 20-25% of their workforce very soon.

  12. Glenn I agree the job losses are going to be significant. Tomorrow the jobs report is supposed to have bad news but I don’t think we’ve seen the end of this. In fact I think we’ll see another 1-2 years of the economy shrinking, though with all the Govt is pouring in we’ll eventually get relief having pushed the massive debt problems forward another decade or so by continued reckless spending.

  13. Microsoft CEO Steve Ballmer said Friday that Microsoft is “not interested” in making a new offer for internet company Yahoo, despite Yahoo’s share price currently sitting at less than half what Microsoft initially offered.

    Speaking at a Committee for Economic Development of Australia lunch in Sydney on Friday, Ballmer said: “Look, we made an offer, we made another offer. It was clear that Yahoo didn’t want to sell the business to us, and we moved on.”

    Ballmer said other deals with Yahoo had also been unsuccessful. “We tried at one point to do a partnership around search, not advertising. That didn’t work either, so we moved on, and they moved on.”

    “We are not interested in going back and re-looking at an acquisition,” he said. “I don’t know why they would be either, frankly.”

    More here…
    http://news.cnet.com/8301-10805_3-10085104-75.html?part=rss&subj=news&tag=2547-1_3-0-20

    Yesterday Yahoo! kind of held its own on the market probably because of Yang’s comments…now with Ballmer’s comments I would expect Yahoo! to drop today.

  14. Joe some more disturbing news about job loss…it seems ADP has been understating private sector job losses by an average of 104,000 per month.

    Jobless rate is now at least 6.5%.

  15. Yahoo CEO Yang to Step Down.

    Yahoo is hunting for a new CEO after Jerry Yang announced plans to step down due to public pressure

    Yahoo has confirmed that co-founder and CEO Jerry Yang will step down, and the search for a replacement has begun.

    They should actually toss him from the company and Yang and the executives that ran their stock down because of the arrogance should surrender a major chunk of stock back to the company.

    http://www.dailytech.com/Yahoo+CEO+Yang+to+Step+Down/article13453.htm

    The stock might actually gain a little from this but I think they will break through the $10 line of resistance soon and then it will be too tempting for Microsoft to resist.

  16. Joe,

    Now Yahoo has moved into an interesting area. I still think Microsoft will fire sale Yahoo but it really is a shame what Yang has done to his loyal shareholders…can you say “class action”…?

  17. (29) If Microsoft keeps up their tough talk you could Yahoo a lot lower than $9…be careful.

    Dollar cost averaging is great as long as you can buy enough when it is really low.

  18. Pingback: AOL and Yahoo star in “Spawn of the Ugly Ducklings” | aCatalog Blog

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