Microsoft-Yahoo: Not to be, microsoft abandons bid, walks
5-3-08: After three months of haggling, the Microsoft and Yahoo saga finally came to an end with Microsoft opting to walk. Microsoft was willing to pay $33, but Yahoo wanted $37. You would think they could simply decide to go with $35 and call it a deal, but we’re talking about a lot of big egos here. While we don’t know what actually caused the negotiation to fall through, the biggest concern for most is what will happen to their stock price when the market opens.
Monday will indeed be an interesting day for shareholders of both companies. There are no real winners here. Microsoft will continue to struggle in trying to become a major online player. Yahoo will continue to struggle against losing its search market share to Google. If there is a winner in all of this, it is Google who will continue to eat away at both Yahoo and Microsoft lunch. In our view, the biggest loser is Microsoft as these episodes has provided the world a glimpse of the company’s desperation to get into the online game. Overall, both companies lost valuable time and gained nothing in return.
We suspect Yahoo will drop significantly on Monday. However, we doubt it will go back down to $19 per share. Chances are it will drop to around $22-$24. Investors will be expecting Yahoo to unveil their plan B (it better be a good one!). The alternative plan, when revealed, should help stop the bleeding that is about to begin Monday morning. We also believed investors will continued to believed that Microsoft will return if the circumstances permit, similar to Oracle and BEA consummation. There’s always the hope some other form of a deal could be announced.
Being a Yahoo and Microsoft shareholder, it is important to not overact and unload everything. If Yahoo announces an advertising partnership with Google, it could mean an additional billion to the company’s cash flow (that’s what some analyst said, sorry can’t recall which one). There is also the chance a deal will be worked out with AOL. We realized AOL brings bad memories, but it can actually work if the deal is structured properly. A combination of AOL and Yahoo would account for over 65% of the world’s Internet traffic. That’s a commanding number in terms of advertising.
In our view, all is not doom and gloom for Yahoo. Ask yourself this; if you’re a user of Yahoo services, will you continue to use them? If the answer to this question is yes, then there is always the hope this company can find a way to grow and remain an attractive channel for advertisers. Amidst of all the rubble, we believed one good thing did came out of all this; everyone at Yahoo now knows it is living on borrowed time. If Yahoo wants to remain independent, they better get their act together and we mean pronto!
Update 5/4/08: A day after Microsfot abandons its bid, our sources indicates Yahoo will announce a deal with Google early next week. There is even a chance of a change in management. We believed Yang might be on his way out as the board is looking to bring in a new CEO. Let see if Yahoo will seal the deal with Google and become best friends. We say it is very possible given Yahoo is going to be bombarded with shareholder lawsuits in the coming weeks.
