Yahoo! Rejects Microsoft's Offer, Says 'Still An Option'

mikkl666 writes "In response to an open letter from Steve Ballmer, Yahoo! posted a press release claiming that Microsoft's offer 'substantially undervalues Yahoo!' and is therefore not in the best interest of the company. They also bemoan that the letter 'mischaracterizes the nature of our discussions' and that the threat to make an offer directly to the shareholders is 'counterproductive and inconsistent with the stated objective of a friendly transaction'. Nevertheless, they explicitly point out that a transaction with Microsoft is still an option, but only if they are willing to pay 'a price that fully recognizes the value of Yahoo!'"

Comments

crack smoker

[timmarhy]

MS are offering 2x the going share price. what secret pot of gold does yahoo managment think they have that's worth so much?

oh and he must be pretty dense to think "friendly negotiations" are still an option if MS goes to the shareholders directly.

Re:crack smoker

[ozmanjusri]

MS are offering 2x the going share price. what secret pot of gold does yahoo managment think they have that's worth so much?

For a start, it's nowhere near 2x, since the value of MS shares, and hence the offer have dropped since the initial approach.

Microsoft have some interesting times ahead too, and Yahoo shareholders might be considering the risk of turning their Y. shares into MS ones.

Microsoft's stock buybacks, for example, are being used to counteract stock options paid to executive employees. That's drawing down their cash reserve rapidly without generating much growth.

The net number of shares in circulation is roughly the same as in 2005, likewise, MS share price remains around the same $29 mark it averaged in '05 despite $50 billion worth being bought back.

Add to that the failure of their flagship OS on the market and the threats to their Office monopoly, both statutory and in the market, and there's good reason for Yahoo investors to hope for a better suitor.

Re:crack smoker

[Mongoose Disciple]

Microsoft only wants the userbase and the brand, not the products. If Microsoft were to acquire Yahoo!, all their technology (Apache, Oracle, MySQL, PHP, Java, etc running on top of Linux and BSD) would be replaced by Windows servers running IIS. That would make most of the Yahoo! engineers redundant.


Ok, so devil's advocate / tinfoil hat time.

I'm not exactly going to predict this because, come on, Microsoft, but I could sort of see them leaving Yahoo! alone technologically, at least in the short term.

Let's assume there's some viable evil reason for Microsoft to want expertise with PHP/MySQL/etc. in their stable. Microsoft basically cannot grow something like that organically from within. You can't create Microsoft MySQL without essentially admitting there's something wrong with SQL Server, etc.

But you could plausibly buy Yahoo, point to the past migration nightmares of Hotmail, and say that you were wisely letting Yahoo continue with their current technologies due to those experiences.

Re:crack smoker

[dedazo]

That's drawing down their cash reserve rapidly without generating much growth.

That's an interesting soundbyte. Can you explain how stock options paid to executives (which executives?) are actually eating into a $30 billion dollar cash reserve? Those must be some pretty large stock grants.

Add to that the failure of their flagship OS on the market

Looks like someone is connecting all those Vista machines that are not being sold to the internet. I'd like to have me a few of those failures every decade or so.

Re:crack smoker

[DECS]

It's the stock buybacks that are eating up MS' cash reserve. Buying back your own stock is an admission you have nothing better to do with your money that give it back to your shareholders

Remember the words of Michael Dell wrt Apple? Apple isn't buying back its stock, it's buying new campuses, data centers, retail outlets, investing in building products to serve new markets, all of which are selling off the charts.

Microsoft is failing in every consumer electronics arena it enters. It's brightest star is the xbox, which has only made a few million in the last quarter after billions of losses. Sales have now plateaued, forcing the company back to release a new xbox generation and start spending again.

Video Game Consoles 2007: Wii, PS3 and the Death of Microsoftâ(TM)s Xbox 360

Vista might be shipping on some new PCs, but remember that nobody ever questioned Windows' ability to sell. It's a monopoly! Everyone expected MS to sell Vista without any hiccups. It was the consumer business and Windows Media/PlaysForSure, Zune, WinCE/Windows Mobile, Windows Embedded that were all on fire and sustaining deep losses. Microsoft can't sustain mild sales on Vista after spending billions to develop it over the last 6 years and having nothing really to show for all that.

Windows 7 won't show up for another three years, so Vista has to generate cash across that whole time period, not just ship on some new PCs. What's happening though, is that cheap PCs like the EEE and OLPC are running Linux, premium PC sales are getting eaten into by sales of Macs that are outpacing PC sales by 4x, and major vendors are begging to ship XP.

Microsoft's flat stock has been placid for a decade during record earnings boosted by automatic OEM PC sales in a period where the PC-box was the only game in town and there was no effective competition. MS is now being hit by competition at the low end and the high end, while also finding the PC market itself coasting along statically. Sales volumes are shifting toward mobile devices.

MS hasn't successfully delivered mobile devices anyone wants. UMPC was a huge failure, Windows Mobile is a joke. Now its facing the iPhone/iPod Touch and an array of smartphones from other vendors, without any viable game plan.

At some point, you can't say MS will survive on its good looks and personality alone, because its business is facing several points of failures. Yahoo knows that. It also knows that a MS takeover would gut the company and destroy shareholder value.

Why Does Microsoft Really Want Yahoo?

The real question is why?

[Whuffo]

What does Yahoo! have that Microsoft prizes so highly? Anything that Yahoo! has done successfully (although not often profitably) has already been "independently reinvented" by Microsoft.

The most likely result of such a purchase would be that they'd try to turn Yahoo! into another Microsoft division and destroy what they were after in the first place.

Seems a strange purchase to be chasing after so hard...

Re:The real question is why?

[Enderandrew]

Yahoo's web-services run on Apache servers, and are often developed with open source software in mind.

I can't imagine that would continue if Microsoft bought them out. And most of the in-house developers would have to learn asp real quick, or be out of jobs.

What's Microsoft gonna do with no cash?

[geoffrobinson]

When Microsoft burns through all of their cash buying Yahoo, they might be in a whole bunch of trouble. No more ability to absorb losses in business areas when trying to break into a market.

So for this reason. I hope Yahoo accepts the deal.

Yahoo trying to force the issue?

[s0litaire]

It sounds to me like Yahoo is trying to force Microsoft to start a "Hostile Takeover" bid. Yahoo probably does not want to be part of the Microsoft hegemony and has probably got it's lawyers on the case. I bet within a few hours of Microsoft announcing it's started hostile takeover bid Yahoo will have lawyers in the American and EU courts blocking the Bid due to Competition/Monopoly rules. And we all know how he court's just love Microsoft's antics.... :D MS will get loads of bad press (share prices drop) Yahoo get good press (there shares prices level out above the original value when this started). then Google comes along and snap up the two of them....... :D:D