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"A penny for your thoughts"

Saturday, February 2, 2008

Microsoft Corp bid for Yahoo

Updates July 07, 2008: Microsoft Corp. said it may revive takeover talks with Yahoo! Inc., the second most popular U.S. search engine, if investors back Carl Icahn's attempt to oust the board and Chief Executive Officer Jerry Yang. Yahoo shares rose the most since Feb. 1, when Microsoft disclosed its initial offer. The software maker said it might try to buy the search business or the whole company. Microsoft has been in talks in the past week with Icahn, the billionaire who controls about 69 million Yahoo shares. VIA

Updates June 24, 2008:Microsoft official comment is “no comment,” which actually contains more information than it appears to. For well over a month, Microsoft has officially been saying they’re no longer interested in Yahoo. They didn’t say that today. One source is saying that Microsoft is talking a price lower than the $33 they were offering when the talks disintegrated in May. Given Yahoo’s recent share price (it’s below $21 today), and the fact that just about everyone other than their board and top execs are publicly screaming for a deal,not surprising.VIA


Microsoft press on at Yahoo takeover bid! 04.05.08

Microsoft has given Yahoo three weeks to accept its buyout bid before it launches a proxy fight and possibly lowers its offer price. Microsoft Chief Executive Steve Ballmer threatened to take their case directly to Yahoo's shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board. If an offer is taken directly to Yahoo's shareholders it would likely lead to Microsoft lowering its offer price. Yahoo! reportedly had wanted Microsoft to come up to $40 a share. Analysts also had expected the software giant to increase its bid, but said $40 was too high and considered a bid of $35 more appropriate.

Since Microsoft launched its takeover, Yahoo! has been scrambling to try to conjure up a deal with Google that would let it remain an independent.

Microsoft Ballmer forwarded that their proposal is the only alternative put forward that offers Yahoo's shareholders full and fair value for their shares plus the combination of the two companies would create an Internet powerhouse, able to take on that most formidable Internet titan Google.

Yahoo!'s founder and chief executive, Jerry Yang is running out of time to figure out how to create an independent future.

5:46 PM 10-Feb-08

Yahoo Board to Reject Takeover Bid From MicrosoftPublished: February 9, 2008
Yahoo Inc.'s board will reject Microsoft Corp.'s $44.6 billion takeover bid after concluding the unsolicited offer undervalues the slumping Internet pioneer, according to a person familiar with the situation. The decision could provoke a showdown between two of the world's most prominent technology companies. If the world's largest software maker wants Yahoo badly enough, Microsoft could try to override Yahoo's board by taking its offer - originally valued at $31 per share - directly to the shareholders. Alternatively, Microsoft could sweeten its bid. Many analysts believe Microsoft is prepared to offer as much as $35 per share for Yahoo, which still boasts one of the Internet's largest audiences and most powerful advertising vehicles despite a prolonged slump that has hammered its stock. Microsoft and Yahoo declined to comment Saturday on the decision.Yahoo's board believes that Microsoft's is trying to take advantage of the recent weakness in the company's share price to "steal" the company. The decision to reject the offer signals that Yahoo's board is digging in its heels for what could be a long takeover battle. The company is unlikely to consider any offer below $40 per share.

The board was also presented with various options for maintaining Yahoo’s independence, including an advertising partnership with Google that could improve Yahoo’s bottom line.Yahoo could give an immediate lift to its revenue and profit by outsourcing its search-related ad business to Google, because Google’s advertising technology generates far more cash for every search query, on average. This option had long been recommended by some Yahoo investors and analysts, but Yahoo executives had said that search ads were an integral part of the company’s business.

In recent years, Yahoo has invested millions in a new search advertising system, called Panama, in an effort to close the gap with Google. The technology, which Yahoo began to roll out early last year, has helped increase search advertising revenue, but Google’s technology remains more efficient, according to analysts. For Yahoo executives, replacing Panama, or other parts of its search system, with Google’s technology would be an admission of defeat.

Nevertheless, the board has considered the idea, after a call last week by Google’s chief executive, Eric E. Schmidt, to his Yahoo counterpart, Jerry Yang, offering his company’s help in fending off the Microsoft bid.

Yahoo's board appears to be betting that Microsoft doesn't want to "go hostile" and try to acquire the company against the wishes of management and the board. Such a course could cause deep resentment among the rank-and-file engineers whose cooperation is crucial to the company's success. A hostile takeover could also make it more difficult to get the deal past regulators if Yahoo management tries to convince authorities that the deal is anticompetitive.

Yahoo has taken "poison pill" provisions to prevent an unwanted takeover. Microsoft would likely have to oust the board in order to overturn them.

Acquisitions can also happen through a hostile takeover by purchasing the majority of outstanding shares of a company in the open market against the wishes of the target's board. In the United States, business laws vary from state to state whereby some companies have limited protection against hostile takeovers. One form of protection against a hostile takeover is the shareholder rights plan, otherwise known as the "poison pill".

Poison pill
Corporate raid
Mergers and acquisitions

In a bid to compete compete in the online-services market with Google which commands over 58% of the U.S. search market, Microsoft Corp made an unsolicited $44.6 billion cash and stock bid for Yahoo on Friday, setting the stage for a deal that would shake up the competitive and lucrative market for online advertising.

Yahoo said in a responding statement that 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."

The combined forces of Microsoft and Yahoo would also make a stronger force in online display advertising - the type of targeted banner ads that Yahoo is known for.A Microsoft-Yahoo team would create a powerful player in the online search business, which Google commands. It would also be one of the biggest tech deals in years, on a par with Hewlett-Packard's $25 billion acquisition of Compaq in 2002.The move would be by far the largest acquisition ever for Microsoft. Its largest prior deal, also in the online-advertising space, was last year's $6 billion deal to acquire Aquantive. Microsoft suffers in that they are conflicted over two different brands, and now they're going to have to be conflicted over three'

Imran Khan of J.P. Morgan Securities thinks that regulators will approve the deal.
"A combination of Yahoo's relationships (with DSL providers), and Microsoft's applications and devices, could create a very well positioned potential competitor," Khan wrote.

Microsoft's offer amounts to $31 a share and represents a 62 percent premium over Yahoo's closing price on Thursday. Microsoft said it will offer shareholders the option of cash or stock.Although at one time, Microsoft was open to other kinds of partnerships with Yahoo, the company says now it just wants to own Yahoo outright.

Microsoft and Yahoo can offer a credible alternative though t wouldn't unseat Google as the top search provider, and it would take some time to convince advertisers that they would do better on a Microsoft-Yahoo platform over Google's highly successful ad business.

Microsoft hopes to close the deal by the end of the year and projects the online advertising market to grow from over $40 billion in 2007 to nearly $80 billion by 2010.
Microsoft said a tie-up would achieve economics of scale while allowing combined research and development efforts to achieve breakthrough products, particularly in the growing areas of online video and mobile Internet connections.

Immediately after the announcement, a U.S. Justice Department spokesperson said that its "antitrust division is interested in looking at the competitive effects of the [Microsoft and Yahoo] transaction." But with Google's strong lead in the search industry, analysts said it is highly unlikely Microsoft's proposed deal would violate antitrust laws.

It could not be easy to materialize the integration of the two companies. For a difficult one, Microsoft and Yahoo use different platforms to run their search engines, and they would have to decide which one to use. Microsoft and its Live brands have a lot of overlap with Yahoo, including e-mail, portal, advertising, and search.

Related Posts:
Yahoo Inc. has rejected Microsoft bid on its online search operations
Yahoo Climbs as Fourth-Quarter Earnings Top Estimates

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