Tag Archives: merger

Microsoft to Aquire Yahoo Search for 20 Billion… or not?

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While the Times of London is reporting that Microsoft is close to announcing a Yahoo search aquisition at 20 billion with a slew of details suggesting they have a lot of inside information, Venture Beat is suggesting this might be a bogus report as they’ve been told by a key player in the deal, Ross Levinsohn, that he knows nothing of this.   Although it’s possible Levinsohn is … covering for the deal it seems odd he’d issue a flat denial if there was something to the rumors.

My wild guess is that the Times had a hot tip about one of the dozens of potential deals that are surely percolating around Yahoo as the stock (and thus buyout value) dips to very low levels, and that they ran with it rather than spend much time researching.   This has become a major pitfall of “real time” media, where there is increasing pressure to shoot first and hope your story is correct later.   Another possibility is that this is a carefully contrived rumor to pump and dump the stock on Monday – without more denials this is likely to spike Yahoo a few bucks or even more Monday morning.

Disclosure:  Long on Yahoo

Yahoo Microsoft Boxing Match

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Yahoo and Microsoft haven’t been able to agree on very much over the last few months so it now appears fairly likely the battle will head into the shareholder meeting on August 1st.

Microsoft hasn’t lost many of these matches and the smart money remains on them to “win” this battle and take over Yahoo.   My take is that there is now enough ego investment on all sides that you can expect Microsoft to be pretty ruthless in their efforts to replace the board and overhaul the company.  Of course with with management leaving Yahoo at a record pace anyway, Microsoft is likely to inherit more of a management skeleton than a burden, and they are probably fine with this.

How poison will Yahoo make the pill?     As a shareholder I’m concerned about this but comforted that the current board and Jerry Yang have a huge financial stake in this outcome.    To Bostock and Yang’s huge credit they has been playing this game with their own money, though I’d argue they have not been playing it very well or with anybody’s best interests in mind (including their own).    My take is that Yahoo simply could not readjust their expectations from the dramatic success story they enjoyed early on and the belief they could see that kind of success again.     This gave them a perception of the current value of Yahoo that was completely out of line with the market perception, which by definition is the real value of a company.    The $33 sale price has come from the desparate realization by Yahoo that they are going to lose the battle and possibly be forced to sell well below this price, though I think it’ll be in Microsoft’s interest to keep the tensions to a minimum and keep their new “post Yahoo merger” shareholders marginally happy with an offer above $30.

That said, Ballmer is clearly smelling the blood in the water and could probably force an eventual sale of Yahoo in mid to high twenties by jerking the strings for a few more months to soften up Icahn and other major shareholders who are clearly looking for something above the $31 offer Yahoo rejected a short time ago.  Without Microsoft Yahoo’s share price would be well under $20 and this is now clear to everybody.

So the boxing match moves into the final rounds.   It’s pretty much a corporate death match between Jerry “the Yahoo” Yang and Steve “the Basher” Ballmer.    Although my money is invested with Jerry right now, I’d be betting on Ballmer to win this fight.

Disclosure:  Long on YHOO

Showdown at the Yahoo Corral Coming August 1

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Carl Icahn and Microsoft appear to be coordinating an attack on the current Yahoo board with today’s joint announcements by Icahn and a Microsoft stating they are ready to do a major deal with Yahoo.    The animosity towards Microsoft is conspicuous given that one can reasonably argue (I would) that Microsoft remains pretty generous all things considered.   They appear to comfortable with a share price in the same neighborhood of the $33 that Yahoo rejected months ago, despite the fact that shareholder discontent with Yahoo’s price and board combined with continued US economic concerns would arguably support a somewhat lower valuation.

In this corporate showdown at the Yahoo Corral  I think Jerry Yang and David Filo have drawn the unfortunate roles of Billy Clanton and Frank McLaury

I got a huge kick out of Kara Swisher’s disturbing picture of the corporate death match:

… another boost today with a classic wrestling double-body slam that Icahn and Microsoft CEO Steve Ballmer perpetrated on Yang today by unveiling their own dysfunctional love match–united in hatred of current Yahoo leadership.

I think however that Kara is very wrong to suggest that Icahn toppling the Yahoo board is “unlikely”.   Most of the small shareholders do not have the vested interest in the company of a Yang or Filo and are likely to support Icahn.   More importantly, I think that Yang has lost what appeared to be a sort of hypnotic impact  on some of the existing board members and large shareholders and even if they are not stating this publicly I’m fairly confident they’ll be voting for Icahn in August.    For small investors it is painful to turn away a 50%+ boost in share value – for big investors it could spell their eventual ruin.     With billions at stake I think the predictive model here is fairly simple:   Yahoo will be sold either in part or whole to Microsoft at a share price of about $34.     I’ve been saying this for some time and see nothing to suggest it’s not going to happen in August- just a bit later than a rational market model would have suggested because egos and exaggerations, and the legendary Silicon Valley v. Microsoft animosity got in the way.

Disclosure: I’m Long on Yahoo

Yahoo adds an 8 billion dollar insult to the Microsoft Merger Madness

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Yahoo’s not just turning down an internet king’s ransom for a Microsoft merger, but they even rejected a partial buyout from Microsoft that would have given them 35 per share for several of MY SHARES and also woud have added a cool billion or so to the bottom line in an MS advertising deal.

Kara Swisher has more details, and is looking great with a hip new hairdoo!

My guess is that rejecting this modifed Microsoft Merger offer will put a nail in the Yahoo board’s coffin. They had a case – albeit a weak one – that Yahoo unfettered with MS could have dug themselves out of a hole, but this makes it even more crystal clear that they weren’t even willing to do *anything* with Microsoft. I think that would suggest a level of corporate indifference to shareholders that is going to leave a lot of folks….well…..ticked.

Disclosure: long on YHOO

Ballmer has left the Building

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Talks between Microsoft and Yahoo have stalled and may be over.   33 vs 37 per share.    I still think Microsoft is just calling what better be a bluff by Yahoo, because if they don’t take this MS offer the stock is going back to the sub 20’s and Yahoo is looking at a huge number of shareholder lawsuits asking why they sabotaged the offer of $33 when they are only worth $19 without Microsoft.

Here is my view at Webguild with the letter to Yang from Ballmer

YaFoxHoo? Now that makes some sense…

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The rumors of a potential offer from News Corp for Yahoo are interesting and CNBC claims they’ll have some new news from news corp in a few minutes, though I’ll be surprised if this is more than rehasing the rumors swirling around that appear more as linkbait for blogs than substantial information.    

CNBC is referencing Jessica Vascellaro’s story at WSJ:

The deal would allow Yahoo to remain independent while giving News Corp. substantial control over a huge array of Internet properties and advertising opportunities.

News Corp, already a key internet player because they own Myspace and many Fox properties that have huge online visitation, could leverage the Yahoo aquisition to some advantage, perhaps through monetization optimizing, cross promotion, and such.    However I would not want to try to make the case to Murdoch that Yahoo is worth *more* than MS already generous offer.   As employees run for the door and the board is more interested in fighting than switching, I’m not clear Yahoo should be playing hard to get right now with anybody.

Disclosure:   Long on Yahoo

Yahoo Executives – kudos for true believing, but sell the place anyway!

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A lot of folks have been very hard on the Yahoo board and Jerry Yang in particular for fighting the Microsoft takeover bid, but it should be noted that almost more than anybody these folks are playing with their own money, and the stakes are huge.

As Fortune reports Jerry Yang’s got more than a few Yahoo shares, and this he’s effectively “gambling” with his own money as he powerfully resists the fat Microsoft offer.    If Yahoo stock tanks – as it certainly will if Microsoft backs out – I won’t be all that much worse for the wear but Jerry would be taking something like a *half billion* hit to his net worth.   That’s real money, and you’ve got to admire Jerry and the board for believing so strongly in their “new” vision for the company that they are willing to bet they can regain their former glory.  

Of course, maybe they *can* regain their former glory, but that’s a bird in the wild and wooly internet bush and Microsoft’s offer is *billions of birds* in the greedy little hands of investors.    This is not a tech issue – billions of Microsoft birds in hands are better than a few Yahoo birds in the bushes.   

Disclosure:  I have some YHOO, though fewer than Jerry Yang.

Hostilities erupt between Yahoo and Microsoft

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Hey, looks like now it’s an official *hostile takeover* attempt from Microsoft in the battle for the internet giant Yahoo.

Yahoo declined Microsoft’s offer of last week and in this press release Microsoft basically declares their intention to duke it out.    I’m surprised they have not upped the ante yet, but perhaps they are waiting for more drama and information before making a “final” offer to the Yahoo board before taking this directly to Yahoo shareholders.    Although I think most shareholders would take the MS offer it’s clear the *big* shareholders like Jerry Yang don’t want to, so perhaps Yahoo can win a proxy battle for the company.    I have a hunch however that the institutional investors, and the legions of small time folks like me, would jump at a 34+ offer and probably even take the current one unless Yahoo shows a lot more signs of life than screaming out the current rallying cry “We are fighting Microsoft!”

Microsoft v. Yahoo. They can’t seem to make an offer Yahoo can’t refuse.

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The big tech story remains the Microsoft offer to buy Yahoo, and on Wednesday a meeting at the Yahoo’s HQ in Sunnyvale, CA may seal the deal, though it’s more likely that negotiations will continue for some time after that meeting.

Microsoft may be wondering about the wisdom of the aquisition given how hard the market appears to have punished them for the offer.   Although other tech stocks were down last week, Microsoft’s 13% drop amounted to a loss in capitalization equal to almost the entire value of the Yahoo deal.   ie you could argue that even if Yahoo sold themselves to Microsoft for $1 on Wednesday, the boost in the merged company value would not make the two any more valuable than *Microsoft along* was worth before all this began.     That’s a lot of financial simplification but Microsoft must have at least somewhat more skepticism about all this than they did as they made this offer.

So, what are the likely strategies here?     It is clear Yahoo will reject the current Microsoft Offer which amounts to about $30 per share, and they are strongly rumored to be asking Microsoft for $40 per share.   I’ll eat my keyboard if Microsoft agrees to $40, but I do think they may immediately counter offer at about $34 per share.     Of course unless the inclinations of the Yahoo board change they’ll reject this as well.    I’m growing somewhat suspicous that the unreasonable $40 amount is not really an attempt to boost the sales price – it may be the best way for the Yahoo board to send negative signals, try to wait things out, and give Microsoft more chances to back out.   If Microsoft gets cold feet from the share price drops or Yahoo’s chilly reception of the merger idea, and then backs out of the deal, shareholder lawsuits against the Yahoo board are less likely and weaker.  The Yahoo board will simply say the $40 was a negotiating tactic that went wrong rather than a tactic to kill a good deal.

However I don’t think Microsoft is going to go softly into the night on this, and that will make all this very interesting.    They’ll offer more, and at even $34 per share Yahoo would be getting an amount approaching a 100% premium over their recent 52 week low of about $18 per share.  This is the price YHOO traded at following the bad guidance from the recent earnings call.  

It strains the credulity of this shareholder to see how the Yahoo board can argue that Yahoo has a realistic shot at being “twice as valuable” as they were last week in a reasonable time frame.   In short, we all know they can’t.    This may be a defect of market forces or employee attrition or lazy management or low morale or Google defections or whatever, but left to her own devices Yahoo is pretty much going nowhere fast.   I’ve been bullish on Yahoo for several years now and remain convinced that the company can eventually turn things around.  However I think this aquisition may be 1) part of that turnaround process and  2) presents an offer far too good to refuse without risking a share price meltdown.

So, looks to me that on Wednesday the Yahoo board will turn down the current offer, Microsoft will up the offer to about $34, and Yahoo board will turn that down too (probably the following week).  This will lead to nothing short of a Yahoo shareholder revolt as anxious investors watch a company throw away tens of billions of birds in the hand arguing they are seeking a few more birds in the internet bush.

Ha – even Mini Microsoft hates the deal.   An interesting salary debate over there along with the normal absurd whining from developers over their already very large salaries. 

Disclosure:  Long on Yahoo (but not for long!?)

YahoOliver Twist to Microsoft “Can I have more please, sir?”

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Ina is reporting over at CNET that Yahoo is going to reject Microsoft’s current offer of about $30 per share and ask Microsoft for $40 per share at the Wednesday meeting.    I’m still in the camp that says Yahoo is not in a good negotiating position to make this demand, though contrary to what better connected folks than I suggest I’m guessing Microsoft will up the offer to seal this deal next week.   I say they’ll offer $34-35 at current MS pricing.   This is more than any reasonable definition of “fair market price”, and Yahoo’s board could only reject this at their huge legal peril. 

 I’m not a fan of class action lawsuits but Yahoo can probably expect a gigantic one if they turn down MS and then Yahoo tanks again.   This would probably  be resolved quickly by a board decision to go ahead and sell. 

I’d love to be a fly on Eric Schmidt’s office wall right now as Google’s role in all this is really intriguing.   They can let the merger go and assume MicroHoo can’t be competitive with Google, they can help Yahoo with monetization in a bold way to prop up Yahoo’s stock but effectively keep their one true competitor alive, or they can just sit and wait for it all to shake out.   Most analysts seem to think Google’s in fine shape competitively regardless of their decision and I’d agree with that.   In fact Yahoo’s stubborn refusal to look for the winning Microsoft combination here may be yet another nail in their corporate coffin.    I can’t help but think this is ego-centric thinking rather than the broad, practical, and innovative thinking that built Yahoo in the first place.    

Given that YHOO was trading well under $20 last week I just can’t see how they can make a strong case to Microsoft (or shareholders) that MS needs to pay a premium of over 100% on this deal.    That said, I do think Yahoo is undervalued in the technological sense – they have much of what Google has and have much of the potential Google has, yet they are capitalized at about 1/4 Google even with the recent Google stock meltdown and Yahoo stock upswing from the MS offer.   Yahoo’s a great company. Unfortunately they have failed dramatically for many years to use this greatness to be profitable and they have failed to make the case to Wall Street.  

What is the right answer in all this?     It’s simple:

1.   Microsoft should counter the $40 request with an offer of $34 per share at Wednesday’s MS stock price.

2.   Microsoft will keep Yahoo intact largely in current form for six months.   Yang and the Yahoo board will be given SIX MONTHS to kick whatever asses need kicking to make Yahoo more profitable.   If Yahoo’s looking healthy in six months they’ll stay on this course, but if they can’t fix in six, send them to the sticks and MS will take over in heavy handed form.

3.  Reorganize the languishing publisher programs at MS and Yahoo to compete more effectively with Google Adsense, which has a virtual monopoly in this space and accounts for over 40% of Google revenue.

Disclosure:  Long on Yahoo