Yahoo Microsoft – the Sequel?


TechCrunch is reporting that Microsoft has “excused” the proposed slate of new Yahoo board members telling them that they won’t be needed anymore.    I don’t think this tells us much if anything about the status of a new deal which rumors suggest may come from the Yahoo board’s concern over losing…billions of dollars.

I think MS is just playing this very smart.  These little measures are designed to get the current Yahoo board to rethink their folly.   I think only Jerry was dead set against the merger and the rest of the board would have settled for 35 or even 34 per share.   Why wouldn’t they?   Yahoo has been languishing for years, and the chance of getting back to 34 *without Microsoft* is fairly slim in the coming lean advertising years, not to mention the fact that low morale, challenges at the company, and the declining prospects with Microsoft may take the stock even lower.

Yahoo should have sold at 33 and I think they will almost certainly sell at 35 due to pressure from Shareholders and (more importantly) heavily vested board members who are “losing”, collectively, several billion dollars by sticking to their guns in this.

Ballmer has left the Building


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

Yahoo Microsoft: Is the fat lady almost singing at $34?


Henry Blodget is whining that the Yahoo Microsoft deal is back to where it started, but I think Henry’s wrong … again!     

I’m glad Henry was wrong about the rumor that Yahoo’s Q4 would beat expectations because it was part of the reason I bought YHOO then, and even though the stock dipped due to a bad Q4, it surged on Microsoft’s offer of $31 per share so I’m well in the black.   But now he’s wrong to say the deal is not almost done.  I think this Yahoo Microsoft merger is coming very soon to an internet near you.

Citibank Analyst Maheney upgraded Yahoo this morning, anticipating a boost in the MS bid to $34.   Hey, maybe he read my blog post of about 6 weeks ago where I suggested Microsoft raise their bid to $34?    

Unlike Henry, I think this is not back to where it all started at all!

Yang didn’t want to merge, now he sees it as almost inevitable.  Yahoo board wanted more, now they know anything past initial offer is gravy.  Part of the show was probably the board protecting itself against lawsuits from the unlucky minions who bought their Yahoo at $35+, some at over $100.

Barring a Q1 miracle that would recalibrate Yahoo prices without help of MS bids, I think the fat lady is now almost done singing on this deal.

 Disclosure:  long on YHOO

Microsoft Fined 1.4 billion by European Union – market yawns


Despite a record fine of 1.4 billion dollars by the EU for failing to share code, Microsoft’s stock price dropped just a tiny bit today – a drop not even clearly associated with the ruling.     Given that the fine represents only a fraction of a percent of Microsoft’s capitalization and that it removes some uncertainty from the always massive MS legal equation it is probably reasonable to assume the market had pretty much fully incorporated the EU instability into the price of Microsoft.

The BBC Reports

Yang to Yahoos: Keep the Faith


Blodget has a good summary of Jerry Yang’s Yahoo note to the troops articulating the reasons for the rejection of Microsoft’s offer and the company’s future plans.    He gives Yang an A- but I think this might be generous.  

I’m wondering if Yahoo didn’t fail recently, rather years ago when many lines of separation were drawn between technologists and most of the company management.  I assume there were official lines drawn, but I’m talking more in terms of culture here.     My bullishness about Yahoo has rested on the assumption that the technologists would eventually have their day and as with Google would create the tools necessary to keep Yahoo competitive and interface with the broader developer community as Google has done so effectively to bring more awareness and use of Yahoo tools, effectively widening their footprint over the internet landscape.  

I no longer thing there is enough technological empowerment at Yahoo to make this likely anytime soon.   It will take a LOT more than peppy emails and a combative stance here.  Recent defections from Yahoo suggest that even internally Yahoos are more bullish on Google than their own company.   

So, if we assume Yahoo’s got to do something really big is Microsoft or News Corp the best fit.    From Yahoo’s perspective clearly they’d love it if News Corp was willing to pony up as much as MS, and frankly this seems like a more likely winning combination than MS and Yahoo which would have a lot of initial, and perhaps long term, contentiousness.   Fox Interactive is run brilliantly, and applying these management principles to Yahoo could do a world of good to the bottom line of the combined company.    As a Yahoo shareholder I’m rooting for that option though I’d predict MS will win this battle because of the difficulties News Corp will have showing how valuing Yahoo at 50 billion+  is justified given how difficult it may be to make a lot more money from the combined company in anything short of many years.

disclosure:  Long on Yahoo

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


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.

Yahoo + Microsoft? Heck yes says Legg Mason, with 6% of Yahoo


Larry Dignan is reporting that major Yahoo Shareholder Legg Mason is insisting that Yahoo make a Microsoft deal, though they hope and may expect MS to up the offer past 31 and up to 40, which Fund manager Miller stated appears to have been MS’s highest previous offer over the past year of flirting with Yahoo about a merger.

Miller says about Legg Mason’s position:

 We think this deal is a strategic imperative for MSFT, and that YHOO is in a tough spot if it wishes to remain independent.

Strategic imperative or not, Yahoo can’t expect investors to sit back and wait for something to happen when this much money is on the table.   In fact I think investors are already upset that Yahoo is basically suggesting this is their course of action – waiting for prosperity to fall upon them but not in the form of Microsoft.

I should say that given the market’s horrible reaction to the aquisition I’m not at all clear this is good for *Microsoft*.  If they screw up managing Yahoo and/or Yahoo can’t revived it’s sagging profitability fast this could go down as a Time Warner AOL fiasco kind of move for Microsoft.  However, if they want Yahoo I think Microsoft’s strategy from this point on can be very simple:

1.  Offer $34 per share publicly and loudly.
2. Call Legg Mason and other big holders, and tell them this is *OFF* if Yahoo keeps waffling.
3. Bring in fat lady to sing       ….         it’s over.

 Disclosed:  Long on Yahoo. 

Hostilities erupt between Yahoo and Microsoft


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 PE=16, forward PE=13!


Wow.    As Yahoo rebuffs them and Microsoft shares continue to take a beating from  what appears to be Yahoo aquisition unhappiness, the PE of this mega company is looking nothing short of spectacular.    Some would argue that Microsoft is slowly dying due to the massive changes in the way people and businesses use software, but it’s foolish to think Microsoft’s prospects are dim under the current conditions.   In my view they are simply making too much money, and remain a key player in a key industry, to deserve this low market valuation.  

If the Yahoo merger happens the PE at MSFT will take a hit, but it would clearly remain well under 20, a very modest PE for a company that still has significant growth potential.

But, I guess like other investors I’m a herd animal and fearful, so I won’t be buying MSFT….quite yet.

Disclosure:  Long on Yahoo, no Microsoft position.

YaAOLhoo? Are you kidding?


The Times of London is, I think, exaggerating a rumor that Yahoo and AOL might merge in an effort to find off the Microsoft takeover of Yahoo.      I don’t even think this is necessarily a bad idea if you made sure the management of both companies had the necessary shakeups to turn *both* companies around from what seem like desparate corporate positions.  However it just doesn’t ring likely to me at all, and begs the question of how the Yahoo board could make all this work *and* avoid the wrath of the market which probably will view the Microsoft offer as far more favorable than a pie in the sky possible AOL deal.    That said, I’m open to this possibility.    The main thing I’m *against* is more of the same from Yahoo.    Profits and share price matter more than any anti-Microsoft sensibilities, and the board should keep that top of mind at all times. 

Disclosure:  Long on Yahoo