News: Is Microsoft Really Walking?
Posted on 03. May, 2008 by Benjamin Patton in News
You have to admit this is a really big surprise at this point in the game. All things considered you would think based on past actions that Microsoft would not have backed down so close to the kill. Just like with Hot Mail for those of us that can remember when Microsoft wants something… It gets it.
Microsoft insisted that it would acquire Yahoo only on its own terms. Now its said that it will withdraw its offer, after the Internet giant rebuffed a sweetened $33-a-share bid. This is big time good news for Microsoft should they wish to re bid on Yahoo after the sure to be seen stock price plummets to the low 20′s. I would not count the hostile takeover out as of yet, but they may know something we don’t.
The company has never denied that it would take a hard line in its negotiations with its target. In fact, Microsoft’s chief executive, Steven A. Ballmer, has regularly talked tough — and may now be adopting perhaps the toughest tactic of all.
The possibility of walking away was always present. Even in February, Christopher P. Liddell, Microsoft’s chief financial officer and an architect of its Yahoo offer, has told The Times that he’s willing to play hardball. “You have to be disciplined and ruthless,†he said. “You have to be willing to walk away.â€
More recently, Mr. Ballmer reiterated that dropping its bid was a possible strategy.
In recent weeks, many had expected Microsoft to escalate the fight by beginning a proxy fight. Mr. Ballmer has never shied away from brandishing that club, coupled with a tender offer.
But in a recent town hall with Microsoft employees, Mr. Ballmer seemed to suggest that a proxy fight was a relatively unpalatable option. “There’s a lot of downsides and some upsides associated with that,†he said.
Mr. Ballmer’s letter to Jerry Yang of Yahoo suggests that he didn’t have the appetite for that kind of fight. He acknowledged that the Internet company would fight hard against such a move, and might take steps like linking up with Google.
Microsoft’s chief acknowledged in the letter that his company had indeed raised its bid, by about $5 billion. Given its recent disappointing quarter, the software giant already felt pressured to boost its cash-and-stock bid to win over the recalcitrant Yahoo. The latest offer apparently wasn’t enough to placate Yahoo’s board, which reportedly wanted $37 a share.
Perhaps Mr. Ballmer really feels that he could not in good conscience raise Microsoft’s offer significantly without doing harm to his company. But even back when Microsoft first publicly unveiled its bid, analysts said that the company could afford to pay as much as $35 a share, given its ample horde of cash.
Mr. Ballmer is under a lot of pressure to clinch a deal. Failure to do so would be seen as a major management blunder, and shareholders could raise questions about his leadership.
One sure effect of Microsoft’s move is that, absent a deal agreement by Monday morning, Yahoo’s stock will take a steep plunge. (Silicon Alley Insider’s Henry Blodget estimated that its shares may fall to the low $20s, potentially a 30 percent drop.) That threat has always hung over Yahoo’s board, who would then have to face a legion of angry shareholders — and potentially lawsuits as well.
Of course, Microsoft could later try to reach a negotiated, lower deal at a later point. And that may have been the objective all along.
Parts of this article taken from nytimes.com
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I sure hope they walk away and stay away. Yahoo does not really need Microsoft. It may need Google to help with search revenue, but if Yahoo keeps doing what they started doing after Google and opening up services by delivering API to anyone who wants basically then they will see an increase in users. Basically Google crowd sources it’s users by building simple tools that programmers or tweakers can take the open API that Google provides and create applications that are even more rich and useful then Google originally provided. Then things happen traffic comes and ads get clicked and money is made. Yahoo needs to open up and I think they’ll pull out of the downward spiral they were in.
EcoJason’s last blog post..Jay Leno’s green garage
@EcoJason
Funny comment you made there “Yahoo does not really need Microsoft”
its not like the one thats being bought can say they dont need the buyer
I would love to see Microsoft and Yahoo fight for ages, and Google making its way through both of them and flourishing more! When Yahoo isn’t interested to be sold off, why MS is really caring about them!
Chetan’s last blog post..AT&T to sell 3G iPhone at discount of $200
@Patrick, Well really Yahoo was on the way down in revenue and they’re on a super high right now stock wise because of the Microsoft bidding. That’s what I was talking about. Yahoo’s over crowded landing page and giving people the ability to buy their way to the top of search engine responses is played out and people are tired of it. Yahoo was feeling that bite which is why they even let the bidding happen. I think they’ll figure something out they’re a smart bunch of people.
EcoJason’s last blog post..Jay Leno’s green garage
Honestly its within Microsofts best interest to corner yahoo, and the best way is to drive up the interest and stock prices via news of a takeover, and then walk away indefinitely until yahoo shareholders are left with stock thats worth considerably less than before. This is where Microsoft walks back in and makes a very casual offer at a much more discounted price.
Microsoft needs Yahoo to really have a chance to compete with google in my opinion. Honestly I don’t think even Microsoft can compete in the realm of google. But then life would be boring if no one tried.
Only time will tell.