Shareholder Backs Yahoo!, Supports Independence

mikkl666 writes "In a follow-up to yesterday's story about the struggle between Microsoft and Yahoo!, major Yahoo! shareholder Legg Mason has announced that they are ready to back the company in their effort to keep out of Microsoft's grip. According to portfolio manager Bill Miller, 'the problem is Microsoft blundered with the letter this weekend. Telling the shareholders you're going to take something away from them is not a way to get their support'. Nevertheless, he believes Microsoft will end up paying what it takes to own Yahoo."

Comments

Bummer

[garett_spencley]

So no Yahoo! logo dressed up as a borg then ? :(

Re:Bummer

[morgan_greywolf]

I was kinda looking forward to their new slogan:

"Where do you want to Yahoo today?"

What is MS hoping to gain exactly?

[jfbilodeau]

Is it just me, or is there only chaos and mayhem in store if MS tries to merge with Yahoo? They are two incompatible business and I can't see what MS would gain from their multi-billion dollars 'investment'. Why does IBM & Lotus come to mind right now?

Re:What is MS hoping to gain exactly?

[Amouth]

i doubt i would consider it a "merge" of the compaines.. i doubht MS would ever really merge.. they would buy and then partion it out and let it rot..

unless MS is don't noting but tasking a couple of spare MS people to throw out crazy offers at yahoo to cause PR and basicly make yahoo lose concentration as a company on what it is they should be doing..

trust me when you work for a large company and there is a rummor of a buyout no one gets anything done really..

i could see MS doing this.. why i don't know.. but it makes more sence then them wanting any IP yahoo has..

Re:What is MS hoping to gain exactly?

[explosivejared]

Is it just me, or is there only chaos and mayhem in store if MS tries to merge with Yahoo?

Well that's what everyone around here is hoping. As for the other part of your post, this has nothing to do with technology. It has to do with market positioning and mind share. Microsoft wants to consolidate the online Yahoo! brand, which has a big following, with the MSN brand, which has had mixed results. This consolidation, in Microsoft's mind, will prime them for competition with Google.

If Microsoft aquires yahoo, then you can be sure that all of yahoo's open source stuff will be buried unceremoniously. So from a technical standpoint, it probably is a nightmare for yahoo, but, again, this isn't about technology. It's all about marketing.

Re:What is MS hoping to gain exactly?

[ColdWetDog]

What MS is hoping to gain has been extensively reported. Mostly it's an attempt to compete with Ballmer's Worst Nightmare - Google. What I find interesting is that a major stock holder who is presumably emotionally unattached from all the yapping and barking doesn't think it's such a good idea.

(Legg Mason is a large Asset Management Firm).

Methinks the world in general would be better served if Mr. Ballmer upped his medication dose.

Re:What is MS hoping to gain exactly?

[peragrin]

That's the point actually MSFT has a horrible track record when it comes to actually using purchases. MSFT will abuse Yahoo until it no longer exists, change it, mold it until it looks like Windows Live and Hotmail.

The only thing Yahoo has that MSFT wants is customers for their online services. If MSFT wants customers it should try competing for them in an open market place instead of just trying to buy them.

Re:What is MS hoping to gain exactly?

[zappepcs]

1 - embrace, extend
2 - send threatening letter
3 - lose shareholder support
4 - throw chairs
5 - remove legislator funding to pay off shareholders
6 - merge companies
7 - lay off good workers who have not yet left
8 - pay millions to change logos, make announcements
9 - pay off MSN staff
10 ...
11 profit!^H^H^H^H^H Watch Google grow exponentially

Re:What is MS hoping to gain exactly?

[UnknowingFool]

Yes there will be chaos. Many people like myself can see major problems in the merger.

The first being the technologies. Yahoo tries to be platform agnostic. They use whatever works best and is cheapest. Right now they support a lot of BSD projects. Microsoft mandates Windows. The conversion of hotmail years back was a major hassle for MS. That was just one system. Yahoo is much larger than that. That conversion will take lots of time and effort.

The second issue is the cultures. I offer no opinion on which culture is "better", but they are different. Now MS is coming in as a hostile takeover. That is not going to sit well with Yahoo employees. On the other side, MS people may not want to bring in Yahoo people.

Third, large scale mergers like this almost never work. AOL-Time Warner. Daimer-Chrylser. Recent history has shown that failure happens more often than naught. And those mergers were approved by both companies involved.

Re:What is MS hoping to gain exactly?

[Captain Splendid]

Many people will live on principle alone.

That sure is some good crack you're smoking. I would have accepted some, but many? Many is the amount of people who won't even notice when MS buys out Yahoo.

Re:What is MS hoping to gain exactly?

[Captain Nitpick]

Third, large scale mergers like this almost never work. AOL-Time Warner. Daimer-Chrylser. Recent history has shown that failure happens more often than naught. And those mergers were approved by both companies involved.

Counterexample: ExxonMobil. Although the old Mobil employees still complain about the Exxon corporate culture.

I'm confused...

[Anonymous Coward]

Does Yahoo have really aerodynamic chairs or something?

Re:I'm confused...

[BrentH]

The real question is whether Yahoo has lavadynamic chairs. Ballmer is Satan after all, and I suspect most of Microsofts chairs have turned to ashes in the lava surrounding Ballmers Altar. And the helperdevils apprently havn't come up with a good solid chair that can stand the heat yet, and I think the reasoning is that, because of all the red in Yahoos brandname, Yahoos chairs may be more resilient to the lava. Thus it makes real good business sense to take over Yahoo, because, you know, then you get all the chairs and stuff.

For god's sake, think of the games

[peipas]

I've said it before, if Microsoft eliminates Yahoo Cribbage I will kill myself.

Do you want that blood on your hands, Microsoft?

Re:For god's sake, think of the games

[explosivejared]

You clearly aren't familiar with the Great Netscape Mass Suicide Event. 100,000 dead in minutes. I hear Ballmer watches it every Christmas.

Microsoft gains nothing except reduced competition

[Bryansix]

Microsoft will gain no synergy from this acquisition. If anything they are just gaining redundancies. This is just the extinguish part of their business.

ob Star Wars

[albeit unknown]

The more you tighten your grip, Tarkin....

Typical MS Arrogance

[amplt1337]

They're approaching a Yahoo! acquisition with all the grace of the Mongols taking over a medieval village -- "If you let us in, you'll get a rough deal; if you resist, you'll get an even rougher one."

All it takes is for a couple more major shareholders to insist that Yahoo! is worth more than MS wants to pay, and the bluff will be very effectively called; you can't do a hostile takeover if you can't find shareholders willing to sell a controlling interest, and the shareholders are ultimately the ones who would suffer from an overly low valuation. Sure, maybe the Board is holding out for an unduly high valuation, but more likely MS is mis-valuing Yahoo! -- though I'm sure Yahoo!'s value would drop to whatever MS paid for it pretty quickly, if Ballmer really wants to get this far out of the company's core business.

All the more reason for major shareholders to turn their noses to the deal.

Re:Microsoft gains nothing except reduced competit

[hkgroove]

I don't think so. Google consolidated redundancies if anything (even with keeping Google Video) and possibly created a better bargaining chip for the future of the video market when dealing with networks and the like.

Whether or not it worked for the better is a different matter altogether.

Go for it Bill!

[pegr]

While I would hate to see Yahoo! bite the dust (more for historical reasons), it would be great for MS to flush a stack of cash, as I can see MS doing nothing but destroying what little is left of them.

Yes, MS, cash out everyone still hanging on to that sinking tub! The faster MS runs out of cash, the sooner we get to enjoy a world without them.

As for Yahoo!, I remember when you all didn't suck. Yep, you and HP...

Re:Go for it Bill!

[maxume]

Microsoft is awash in not just cash, but income:

http://finance.yahoo.com/q/is?s=MSFT

The make a net income in excess of $1 billion a month. They would recover from a disastrous deal in less than two years(because they have $19 billion in cash; 19+24=43, close enough to the offer of $45 billion)

They are trying to acquire Yahoo because they think it is a cheap way to gain revenue and they think they can operate Yahoo more effectively than Yahoo is currently operating Yahoo. Maybe they can't improve Yahoo all that much, but they still wouldn't lose all of the $45 billion asking price, so they are willing to try.

Yahoo is still trying to poison the deal:

http://news.google.com/news?q=yahoo+google+ad+deal

(this is fresh news, get it while it's hot)

Re:Go for it Bill!

[Anonymous Coward]

What little is left of them?? A world without them? Are you kidding? If you're expecting this deal to cripple them AND you're arguing that this would be a Good Thing, you're wrong on both counts.

A quick perusal of their investor relations site ( e.g. http://www.microsoft.com/msft/earnings/FY08/earn_rel_q1_08.mspx ) would tell you that they're experiencing phenomenal growth and that they have a profit margin enjoyed by very few large companies. To argue that MS is somehow on it's last legs is ridiculous. They can tank this deal and still be more or less fine. They could literally burn the $40bn in cash and still be more or less fine (of course, their investors might get a little jittery if they started doing that...).

And to argue that the complete meltdown of a company that employs 80,000 people worldwide - most of whom are IT workers - would somehow be good for the rest of us is equally ludicrous.

You might as well have said "Spending $40bn on a risky deal is totally going to kill MS because there's no way one of the fastest growing modern companies can spend one year of income on an acquisition. And this is great because I want to get paid less."

What is Yahoo Worth?

[RobBebop]

Yahoo! is currently maintaining a $36 Billion dollar market cap. It goes without saying that deciding what an internet company is worth is somewhat shaky ground, but they are profitable by $0.47 per share in the last year and they have a set of managers who are clamoring that they have a lot of new revenue streams that are going to materialize in the next year or two.

So, what is Yahoo! actually worth if Microsoft's offer isn't good enough? $40 Billion? $50 Billion? $60 Billion? $100 Billion?

Can anybody defend their valuation with some finite analysis that goes beyond pulling numbers out of thin air? Furthermore, can somebody figure out how much Microsoft would be willing to pay based on the benefits that merging Yahoo's customers and properties into their own would produce?

If you look at the 5-year chart for MSFT, it is pretty clear that they have done a good job of maintaining the status quo... while the only real marketable success that they have enjoyed during that time has been the introduction of a competitive video game system.

On the other hand, the 6 month chart for Google is suggestive that the future value of internet based ad revenue isn't worth nearly as much as it used to be.

So, what gives?

Re:What is Yahoo Worth?

[RobBebop]

Better still, it is expected to double in just four years to about $40 billion. Better than a sharp stick in the eye.

So they think they can capture 50% of the $40 Billion revenue per year in 2012 (assuming they can split it with the other major competitor), instead of 20% (if they are fighting against both Google and an independent Yahoo!).

I like it. Your reason gets a gold star. Yahoo! will help MSFT capture revenues of $20 Billion per year of internet advertising revenues instead of $8 Billion per year in only a matter of several years. Subtract out the costs, and owning Yahoo! might generate an extra $30 Billion dollars in 7 years time... which certainly makes them worth at least $40 Billion now.

Integration = death march for MSFT

[Fastball]

Two very divergent cultures. I think it is a lose-lose for MSFT. Get the deal done, and they become mired in a prolonged integration while adding significant debt to their balance sheet. The deal falls through and they are still left with an eroding cash flow (Windows) and problems with execution in virtually everything else they are in.

It is fascinating. You have two dinosaurs from two different periods. The Windows OS boom during the late 80s to mid 90s for MSFT and the internet boom during the mid 90s to early 00s.

I'm not expecting the best of times for either company, but unlike most folks, I'd bet on Yahoo for an appreciation 5-10 years out from now. MSFT is almost like a energy MLP. Everyone gets paid...until the resource runs out.

Re:It's a start

[RobBebop]

I have no idea who Legg Mason is, or what influence he has

Legg Mason is an investment firm that owns a 6% stake of Yahoo.

This is actually 83,843,501 votes AGAINST the current MSFT offer.

Re:How to clean out your Yahoo Mail account

[Anonymous Coward]

Seems a little dumb to pay $20 to purge the account when you can easily use FetchYahoo! located at http://fetchyahoo.twizzler.org/ or http://sourceforge.net/projects/fetchyahoo

-eg

Not that strong of a no

[rayzat]

It's really not a resounding no to the merger, the basicly said we won't support any sort of deal if MSFT lowers the offer. They also said if you pay an extra $1 a share we'll support your takeover 100%.

Could spell trouble...

[imstanny]

The same thing happened to Cablivision, when the Dolan family wanted to buy them out for $36/share. Some major shareholders like ClearBridge Advisors, who owned 31.4 million shares at the time, or 13.6 percent of Cablevision voted against the buyout. When the buyout didn't go through, price fell to $30, and is now ~$23/share.

Remember, Yahoo was trading at ~$19/share, before Microsoft's offer inflated the price to ~$31. Microsoft, essentially, bid up the price. If the merger is voted against, the price will likely fall back toward $19 (I say this because aside from Microsoft's offer, nothing materially changed with Yahoo. In fact, they are projected to miss their quarter numbers which they will be reporting in a couple of weeks).

Also, Microsoft can start buying up Yahoo shares on the open market in a hostile bid (from Shareholders willing to sell their shares), which are currently trading below $31/share. So I wouldn't be surprised if Microsoft will get Yahoo below their current offer...

Control of Yahoo's board, *without* buying them???

[RexDevious]

There's good argument that MS is only after market share, primarily in email where the acquisition would give them a monopoly - less so in search and web properties where it would only slow their loss. And there's no argument that MS is after technology - as Yahoo's stuff is run on open source platforms MS could leave in place for awhile; but certainly not publicly develop further.

However... consider this scenario:

1. Microsoft makes a huge bid for Yahoo that, while not clearly being in it's own best interests, clearly *is* in the best interest of Yahoo shareholders, and is far too large to be matched by anyone.
2. Yahoo predictably resists the offer, to the point where it's arguably *not* acting in the best interests of it's shareholders.
3. Microsoft uses this behaviour to wage a proxy fight to get Yahoo's whole board of directors fired and replaced with people it favours.
4. Microsoft now essentially controls the board of a competitor, without ever having actually bought them.

Now... however you feel about an actual acquisition of Yahoo by Microsoft - can we all agree it would make perfect sense for Microsoft to wrest control of Yahoo's board of directors - even if they had no intention of buying them?

Can anyone shed any light on whether it would be possible for Microsoft to win a proxy fight without an iron-clad guarantee they'd buy Yahoo under the terms of their current offer; or if Yahoo could do something that would force them to should the offer be a whole or partial bluff to win a proxy fight?

Former Yahooligans?

[zentinal]

I would assume that since the takeover has been announced, that Yahoo! has been bleeding talented folks who don't want to be assimilated.

Have any of these folks started new companies? Any high profile defections to the Googleplex? Or would that be prevented by non-compete clauses in their contracts?

Breaking news: Yahoo Google Aliance...

[AHTuttle]

Seems interesting given the timing...

http://news.yahoo.com/s/nm/20080409/bs_nm/yahoo_google_dc;_ylt=At1ZbJEnb.d8l6sncqqoLY6s0NUE

  Yahoo in talks to use Google search ads: source

  SAN FRANCISCO/NEW YORK (Reuters) - Yahoo Inc (YHOO.O) is in advanced talks to carry Web search advertising from Google Inc (GOOG.O) as part of a search for potential alternatives to being bought by Microsoft Corp (MSFT.O), a source familiar with the discussions said on Wednesday.

Yahoo also is still in talks with Time Warner Inc's (TWX.N) AOL about a potential tie-up, the person said.

I'm not sure which I'd rather have them be in bed with. But somehow I think this is better than MS.