Microsoft Offers $44.6B for Yahoo

danger boy

SAN FRANCISCO (AP) - Microsoft Corp. (MSFT) (MSFT) has pounced on slumping Internet icon Yahoo Inc. (YHOO) (YHOO) with an unsolicited takeover offer of $44.6 billion in its boldest bid yet to challenge Google Inc. (GOOG)'s dominance of the lucrative online search and advertising markets.

The surprise offer of $31 per share, made late Thursday and announced Friday, comes with Sunnyvale-based Yahoo in a vulnerable position.

In a statement Friday, Yahoo said it will "carefully and promptly" study Microsoft's bid.

With its profits steadily sliding, Yahoo's stock slipped to a four-year low earlier this week and a new management team has been trying to steer a turnaround but sees more turbulence through 2008.

The announcement sent Yahoo's share price up 60 percent in premarket trading, while Google fell 8 percent, weighted down by a fourth-quarter earnings report that missed Wall Street expectations.

In a letter to Yahoo's board of directors, Microsoft Chief Executive Steve Ballmer indicated the world's largest software maker is determined to bring the two companies together.

To underscore its resolve, Microsoft is offering a 62 percent premium to Yahoo's closing stock price Thursday.

Since reaching a 52-week high of $34.08 in October, Yahoo shares have fallen 46 percent. Yahoo climbed $10.40 a share, or 54 percent, to $29.58 in premarket trading. Microsoft shares fell $1.40, or 4.3 percent, to $31.20.

Ballmer revealed in the letter that Yahoo had rebuffed a previous overture a year ago, saying it had a turnaround in the works. But he pointedly noted Yahoo has instead deteriorated significantly.

(AP) The Yahoo headquarters in Sunnyvale, Calif. is seen Tuesday, Jan. 22, 2008. Microsoft Corp. offered...
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"A year has gone by, and the competitive situation has not improved," Ballmer added.

Microsoft's previous offer was rebuffed by Terry Semel, who stepped aside last year as chief executive under shareholder pressure.

Microsoft sent its latest takeover offer to Yahoo late Thursday, shortly after Semel resigned as the company's chairman. The letter is addressed to Semel's successors, new Chairman Roy Bostock and the current CEO, co-founder Jerry Yang, who is one of Yahoo's largest shareholders.

"Microsoft's consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers," Ballmer wrote.

In a prepared statement, Yahoo said its board "will evaluate this proposal carefully and promptly in the context of Yahoo's strategic plans and pursue the best course of action to maximize long-term value for shareholders."

Under terms of the proposed deal, Yahoo shareholders could choose to receive cash or Microsoft common shares, with the total purchase consisting of 50 percent cash and 50 percent stock.

Microsoft said it sees at least $1 billion in cost savings generated by the combination, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees. The software giant said it believes the takeover would receive regulatory clearance and close in the second half of 2008.

Signaling Microsoft doesn't intend to take no for an answer, Ballmer wrote that the company "reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders are provided with the opportunity to realize the value inherent in our proposal."

Google shares fell $46.55, or 8.3 percent, to $517.95 in premarket trading after the Mountain View-based company reported fourth-quarter earnings that missed analyst estimates.

While Yahoo is struggling, Microsoft is thriving. The Redmond, Wash.-based company last week forecast a rosy 2008 - despite broader economic worries - after it blew by Wall Street's expectations for a second consecutive quarter.

exalted512

Thats going to hurt Google's stock for a while.
-Cody

shack

I've had a yahoo email account for 10+ years. I'm going to hate to have to change it.

exalted512

lmao. gmail is where its at!
-Cody

Kris Siegel

shack wrote: »

I've had a yahoo email account for 10+ years. I'm going to hate to have to change it.

Why would you have to change it?

Danny Tse

:mad:

Last night at dinner, I was just telling my mom and my sister that they should get some Yahoo stocks @ $19.05/share. I just checked and it went up 45% in one night.

:mad:

I also told them about the Jet Blue and Google IPO and they blew me off as well.

shack

Kris Siegel wrote:

Why would you have to change it?

I can tolerate MS software and operating systems...I don't like MSN, Hotmail and Outlook. I would assume Yahoo email would gravitate in those directions.

jwhitakr

Interesting ... I know that a lot of rumors / predictions about this have been going on for a long time, so I'm glad it's finally out there as a firm offer.

What predicitions does everyone have about the decision by Yahoo? Yea or Nay? I think they will stay as an independent company unless Micro$oft increases their offer.

Danny Tse

jwhitakr wrote: »

What predicitions does everyone have about the decision by Yahoo? Yea or Nay? I think they will stay as an independent company unless Micro$oft increases their offer.

That's what I'd think as well. Bill Gates need to pony up the $$ if he's serious about getting Yahoo. I hereby predict Yahoo stock will trade at or above $30.00/share by early next week.

bruss

yahoo sucks IMO

Shizelbs

I've never known anyone that uses Yahoo.

shack

Shizelbs wrote:

I've never known anyone that uses Yahoo.

I yahoo.

Demiurge

Microsoft is making waaaaay too much money.

Shizelbs

Demiurge wrote: »

Microsoft is making waaaaay too much money.

I know you're joking, but it still pisses me off.

I'm no economist, but I am sure I could adequately illustrate how Microsoft's presence in the region is both the reason I have both my house and my totally unrelated-to-software job. I like Microsoft.

Kris Siegel

shack wrote: »

I can tolerate MS software and operating systems...I don't like MSN, Hotmail and Outlook. I would assume Yahoo email would gravitate in those directions.

Well, your e-mail address wouldn't change but have you checked out the new Hotmail/Live mail? It's actually quite good and it has attracted users from GMail.

It's 5GB of space, decent spam filters, and the UI is much better than GMail (it's very much like Web Outlook). You can also setup your machine to sync your e-mail, calender and contacts over the web from anywhere. It's pretty cool, actually.

I never liked the old Hotmail but I also never liked Yahoo mail. The new Live mail (sometimes still referenced as Hotmail) is neat.

danger boy

let me read that again... $44.6B :eek:

jwhitakr

Seems that my guess was correct ... Yahoo is holding out for mo' money:

http://money.cnn.com/2008/02/11/technology/yahoo_microsoft/index.htm?postversion=2008021110

shack

It only gets worse...now Yahoo is talking with AOL.

danger boy

Feb 11, 10:38 PM (ET)

SAN FRANCISCO (AP) - Yahoo Inc. (YHOO) (YHOO)'s rejection of Microsoft Corp. (MSFT) (MSFT)'s unsolicited takeover bid left investors guessing the next move in a tense mating dance that may hatch a more imposing challenger to Google Inc. (GOOG) (GOOG) or disintegrate into a bruising brawl.

The rebuff, formally announced early Monday, wasn't a surprise because Yahoo had leaked its intention over the weekend.

As expected, Yahoo's board unanimously decided to spurn Microsoft after concluding the offer - originally worth $44.6 billion or $31 per share - "substantially undervalues" one of the Internet's prized franchises. The cash-and stock deal is now valued at about $40 billion, or $28.91 per share, because of a drop in Microsoft's market value.

But Yahoo didn't raise antitrust concerns about the proposed deal and included language that seemed to invite a higher offer from Microsoft, the world's largest software maker.

"The board of directors is continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders," Yahoo said in a statement.

Microsoft, though, didn't seem inclined to raise the bid Monday, releasing a statement describing its current bid as "full and fair."

Calling Yahoo's decision "unfortunate," Microsoft didn't back off from its quest either. "Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties," the Redmond, Wash.-based company said.

Microsoft also emphasized it's prepared to "pursue all necessary steps" to get the deal done, raising the prospect that it could take the bid directly to Yahoo shareholders with a so-called "exchange offer" or escalate the acrimony even further by trying to oust Yahoo's 10-member board later this year.

While assessing its response to Microsoft, Yahoo's board also examined a wide range of alternatives that included forging an ad partnership with Google, which paid nearly $5 billion in marketing commissions to thousands of Web sites last year.

Without identifying its sources, the Times of London also reported Yahoo is exploring a merger with Time Warner Inc. (TWX)'s AOL, another popular Internet property that has been struggling in recent years. A Yahoo spokesman declined to comment on the report.

Investors appear convinced Microsoft's bid remains Yahoo's best bet, given the Sunnyvale-based company's profits have been steadily declining despite a management shake up eight months ago and repeated promises of a turnaround extending back to 2006.

Reflecting Wall Street's belief that Microsoft will raise its bid, Yahoo shares climbed 67 cents Monday to close at $29.87. On the flip side, Microsoft's shares dropped 35 cents to finish at $28.21 as its shareholders continued to fret that a Yahoo acquisition could turn into more trouble than its worth.

Microsoft's advisers are believed to be working behind the scenes to rally support among Yahoo shareholders and determine how much more the bid needs to be increased to force Yahoo's board to negotiate a friendly deal.

"You would assume that their first offer isn't the best and final offer," said Morton Pierce, an attorney who advises on mergers and acquisitions for the law firm Dewey & LeBouef. "The question now is how do you get to the end game?"

To further complicate matters, some of Yahoo's major shareholders might not want Microsoft to bid much more because they also own large stakes in Microsoft. The overlapping holdings mean any gain that these big shareholders might realize from a sweetened Microsoft offer might be erased if a higher bid diminishes Microsoft's market value, which has already slid about $40 billion, or 13 percent, since the takeover saga began.

Capital Research & Management Co., Barclays Global Investors, Vanguard Group Inc. and State Street Global Advisers rank among the five largest shareholders for both Yahoo and Microsoft, according to FactSet Research Systems Inc.

Most analysts still seem to think Microsoft will raise its bid because it needs to buy Yahoo quickly to close Google's widening lead in the lucrative online search and advertising markets that are rapidly reshaping the technology and media industries.

Meanwhile, Yahoo finds itself in a bind because its stock was near a four-year low before the Microsoft bid surfaced and its management already has said things are unlikely to get significantly better until 2009.

"Both companies seem to have limited options to achieve their goals, so it appears they really do need each other," said Stanford Group Co. analyst Clayton Moran.

(AP) Graphic compares unique Internet traffic to Google, Microsoft and Yahoo since 2002; 1c x 3 5/8...
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Although its profits have been dwindling during the past two years, Yahoo still possesses one of the Internet's biggest audiences and largest ad networks.

Still, those assets haven't been compelling enough to persuade other potential suits to counter Microsoft's bid, despite Yahoo's best efforts to drum up interest in the past week.

That could lessen the incentive for Microsoft to raise its bid. But Yahoo wouldn't have had any chance of extracting more money unless its board spurned the initial offer.

"This was a logical move by Yahoo's board, but I still think this deal is going to get done," said Ryan Jacob, a money manager who owns Yahoo shares in an Internet investment fund bearing his name. "I think most shareholders will be ready to accept if the bid is raised to the mid-$30 (per share)."

Yahoo's stock price had dropped by more than 40 percent in the three months leading up to Microsoft's bid, which was announced Feb. 1. The offer was 62 percent above Yahoo's market value at the time.

(AP) This set of flagpoles sits at one of the entrances to Microsoft Corporation in Redmond, Wash.,...
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Microsoft was prepared to pay at least $40 per share for Yahoo a year ago, according to a person familiar with the earlier talks between the two companies. Yahoo wasn't interested then because it was confident in its own strategy, said the person, who didn't want to be identified because Microsoft's 2007 offer was never publicly disclosed.

If Microsoft doesn't want to pay more money, it will probably have to assume a more hostile stance that risks creating hard feelings at Yahoo and making it more difficult to cobble the two businesses together if a deal is consummated.

Analysts doubt either side wants to become locked into a divisive struggle that could distract both management teams for months while Google tried to capitalize on the impasse.

If Yahoo isn't sold, Chief Executive Jerry Yang assured employees in a Monday e-mail that the company is poised to rebound on its own and become a "must buy" in the $45 billion online advertising market.

"We have accomplished a great deal in a very short time," wrote Yang, a company co-founder and board member who promised better times after he became CEO eight months ago. "Yahoo is a faster-moving, better organized, more nimble company well on its way to transforming the experiences of its users, advertisers, publishers and developers."

Just two days before Microsoft made its bid, Yang warned Yahoo faced "headwinds" in 2008 and laid out plans to eliminate 1,000 jobs, or about 7 percent of the company's work force, to boost profits.

danger boy

I would not want to be a Yahoo suit come July 3rd :eek:

When Yahoo Inc. (YHOO) holds its annual meeting July 3, expect fireworks from irate shareholders seeking retribution for the company's decision to remain independent instead of accepting a $47.5 billion takeover offer from Microsoft Corp. (MSFT)

The first signs of outrage flared Monday as Yahoo's stock plunged 15 percent in reaction to Microsoft withdrawal of its sweetened $33-per-share bid and two lawyers already suing the company's board vowed to amend their complaint to account for a "massive loss in shareholder value."

The breaking point in the 3-month standoff occurred over the weekend when Yahoo co-founders Jerry Yang and David Filo met with Microsoft Chief Executive Steve Ballmer after he had agreed to raise the software maker's bid by about $5 billion, or more than $3 per share. Yang and Filo said Yahoo's board wanted $37 per share - a price the company's stock hasn't reached in more than two years.

In response, Ballmer pulled his offer off the table.

shack

There is nothing wrong with what the Yahoo BOD did. If they believe the long term value of the company is more that $33 per share...then they have a responsibilty to decline the offer. You do not want to be selling your company in a down market. Of course the stock is going to decline 15% when the offer is rejected. There are a bunch of speculators that bought the stock for no other reason than to cash in on the MS bid if it happened. Now that it is gone they dump their posititons. If Yahoo is a viable company with long term growth potential...then when the economy turns around the stock should go well beyond the $37 they wanted. Stockholders are often short sighted...and institutional stockholders (pension funds, mutual funds, insurance companies, etc.) are the ones that wanted this sale are the worst. They could care less about the long term viability of Yahoo...they wanted a nice hit for their portfolios so they don't look like they are sucking as bad as they are.

shack

Here is another perspective that I read after my intitial post. Have been part of a couple of mergers that should have never occured ...this article makes a lot sense to me.

By BRIAN BERGSTEIN, Associated Press
Tuesday, May 6, 2008


Sure things look rough for Yahoo Inc. and Microsoft Corp. now that they couldn't agree on a deal. Yahoo's stock has cratered, and Microsoft has to figure out another way to catch up in the online ad market, a flaw so big it was willing to pay $47.5 billion to fix it.

But in the long run, Yahoo's rejection of Microsoft's acquisition offer could turn out to be brilliant for both companies. Sometimes the best deals are the ones you don't make, especially in technology, where big mergers and acquisitions are notoriously difficult.

Instead of turning into the next AOL Time Warner - a deal regretted enough that the acquirer's name, AOL, eventually was dropped from the corporate title - perhaps Yahoo and Microsoft will be like other companies that were better off after their proposed linkage got scuttled.

Take, say, Comcast Corp. and Walt Disney Co. When Comcast spent two months of 2004 pursuing Disney in a bid originally valued at $54 billion, the cable company was chasing the notion that it needed to be an owner of entertainment content, not just a distributor.

After Disney sought to stay independent (like Yahoo) and Comcast's shareholders were dubious about the high price (like Microsoft's), Comcast dropped the bid, saying that focusing on distribution wasn't so bad after all.

Disney ended up revitalizing itself by making its own acquisition, of a more natural partner, Pixar Animation Studios Inc. Meanwhile, Comcast settled for a slice of the MGM studio and ownership of smaller content producers like the E! entertainment cable channel, and it has been able to concentrate on competition from telecommunications companies encroaching on the cable business.

Considering the wild swings of the entertainment industry, Comcast should be happy "not to have that rocking horse to ride at the same time," said analyst Charles King of Pund-IT Research.

Given that Microsoft sought the gigantic tie-up with Yahoo in hopes of better challenging Google Inc. in online search and advertising, Microsoft should be glad it stepped away from buying business software maker SAP AG as the companies discussed in 2004. That wouldn't have prevented Microsoft's Internet problem, and it likely would have caused regulatory and operational headaches.

For its part, by pursuing a separate path - including smaller acquisitions of its own - SAP has its shares higher now than they were at any point in 2004.

Of course, it's difficult to know how differently things would have turned out if these and other unfruitful tech merger talks had succeeded.

Maybe Sun Microsystems Inc. would have been able to save Apple Inc. as well as Apple turned itself around after the companies decided against combining in the 1990s. Perhaps Yahoo wouldn't need to worry about Google now if it had bought eBay Inc., as the two sides discussed in 2000. Certainly Yahoo might like to own Google, which was a possibility in 2002 talks before Google went public and saw its value multiply.

But quite often, the particular cultures or product lines of tech companies are so hard to combine that the perceived advantages of large mergers and acquisitions dry up quickly. That's one reason why Forrester Research CEO George Colony went so far as to say a Microsoft-Yahoo deal would have been "a disaster."

At the very least, if Yahoo and Microsoft aren't better off apart, then they may be no worse off. Emery Trahan, a professor of finance at Northeastern University, pointed out that General Electric Co. and Honeywell International Inc. generally have done fine despite dropping their acquisition plans under regulatory pressure in 2001.

"It's not necessarily a failure to walk away," Trahan said. "It might be more of a failure to push for a deal under terms that don't make sense."

It remains to be seen, however, whether Microsoft and Yahoo will fall into this category. If Yahoo management fails to improve the company's fortunes, or no other suitor emerges, Microsoft and Yahoo still could end up mating after all.

danger boy

just saying things could go either way for Yahoo in the future.... they are no Google.