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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!'"
I thought Yahoo wanted more money, not less.
I think that it's just another nice way of refusing.
I think that the Yahoo! folks realize that Yahoo! and Microsoft don't really mix together.
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.
I am pretty sure that they would just add the missing features to their Live products, and rebrand them as Yahoo! The Yahoo! products will start a short (i.e.: 1-2 years) death as soon as Microsoft buys them, to make room for Yahoo! branded MSN/Live ones.
Imagine a .NET/Mono based Zimbra.
Furthermore, I assume that at that level all negociations are 'friendly'. Unless they fail, when they become friendly only for the winning side.
Finally, I do believe that Yahoo! is worth more than that ammount, because there are countries where no competition exists (see Romania). In a blog from one of the Fedora Art Group members, the blogger said that over 90% of the email addresses in Romania were Yahoo! ones. I can confirm this with the Messenger part. I've never seen anyone giveout a GTalk or MSN id in Romania, only Yahoo!.
UNIX was not designed to stop you from doing stupid things, because that would also stop you from doing clever ones.
Yahoo is ahead of Microsoft in a few areas... Yahoo's search is worse that Google (IMO), but Microsoft search is worse. Yahoo has Flickr and the social network 43Things, neither of which have a Microsoft equivalent. There's Yahoo Mail and Yahoo Groups, both of which are superior to what Microsoft has. But I agree... Microsoft has a tendency to be heavy-handed with new acquisitions, not to mention the ones it drowns in the bathtub on purpose.
I still can't even figure out why Microsoft would want them other than to just make them go away.
Bingo!
The only motive here is the elimination of a competitor. Price is no matter; Microsoft wants Yahoo! destroyed because it's one of the two barriers in the way of Microsoft owning the search business.
It's similar to back when Microsoft decided that Netscape had to die. It rapidly became clear that the leaks were true: Bill and Steve had decided that they would lose whatever money they had to lose to own the browser market. They succeeded, and although they've made no money from IE at all (i.e., they've sunk the entire cost of developing it), they are now firmly in control of what the majority of eyes see on the Web. Sinking a few hundred million into IE was a small price to pay for that power.
Their goal now is to control what all those eyes see when they search the Web. Their problem is that most people think either "google" or "yahoo" is what you type to do a search. Not even MS fanboys like MS's search. They understand that they can't compete in the search arena on quality. So they're going to use their huge pile of money to destroy their remaining competitors. Yahoo is the easiest target, so they're going after it first. And they'll lose whatever they have to lose to kill it.
Then it'll be google's turn in the crosshairs.
Those who do study history are doomed to stand helplessly by while everyone else repeats it.
Comment removed based on user account deletion
PE isn't the be all end all of valuing companies. In Yahoo's case, it has particular problems because Yahoo has substantial unconsolidated holdings in other companies such as Yahoo Japan and Alibaba. The value of these companies shows up in the P part of the ratio, but the earnings aren't counted in the E part. The value of these holdings alone would put the value of the company close to the $10 billion number you propose.
If we believe Yahoo's forecasts, their stock price has a fair value closer to $40/share, but even coming up short of this doesn't make them very overpriced. They are in a rapidly growing industry and have had double digit revenue growth for many years, so I think they still qualify as a growth company.