Falling Microsoft Income Endangers Yahoo Bid

Dionysius, God of Wine and Leaf, points out a new wrinkle to Microsoft's pursuit of Yahoo. The most recent quarterly results, which saw Microsoft's earnings drop by 6% from the previous year (revenue from Windows alone was down 24%), have caused the stock to dip. This has reduced the value of the cash-and-stock offer from its original $44B to something nearer $40B. Yahoo, of course, has maintained all along that the original offer was lowball. A business professor is quoted: "Whatever leverage [Microsoft] built up in the last few days could be slipping away."

Comments

Re:The Offer is NOT LOWBALL

[Solandri]

If you think that Yahoo which is trading over 40 to 50 PE as lowball well then YAHOO is crazy.

Look at the earnings growth of Yahoo for the past five years. IT IS pitiful. Yahoo is being too arrogant for its own good.

Over 5 years, Yahoo stock has outperformed Microsoft stock. If a Yahoo stockholder were basing his decision solely on the 5-year history, he would have to be crazy to want to trade his Yahoo shares for Microsoft shares.

Yahoo has only run into problems during the last 2 years, which is kinda short to declare the company dead. And their current P/E (with a price based on Microsoft's offer) is 35, which seems about average for most tech stocks. The day prior to Microsoft's bid, YHOO had dropped so low I was considering picking some up. I'm still kicking myself for putting off the research for a day so I could watch a movie.